TaxTMI 
TaxTMI 
2024 (9) TMI 1834
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.... 3. The ld. CIT (A) erred in confirming the disallowance of fiancé charges of Rs. 24,09,170/- out of Rs. 2,31,41,088/- debited to the development expenditure without properly considering the fact that the expenditure was incurred in connection with and in relation to the business activity carried on by the appellant." 3. The brief facts of the case are that the assessee, is a Kapil Group of company engaged in the business of real estate development. The assessee filed its return of income for AY 2014-15 on 28.09.2014, declaring a total income of Rs. 5,54,961/-. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted on 07-04-2017 on the group of Kapil Consultancy Services Ltd and in which, the assessee was also covered. The assessment has been subsequently re-opened under Section 147 of the Income Tax Act, 1961 for the reasons recorded, as per which income chargeable to tax has escaped the assessment. Accordingly, a notice under Section 148 of the Act, dated 30-02-2019 was issued. In response to the notice under Section 148 of the Act, the appellant requested for reasons recorded for reopening the assessment. The reason....
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..../s. Indur Developers and Agencies Pvt. Ltd., for the assessment year 2016-17 and made a sweeping observation that the Kapil group of companies were resorting to uniform practice for sale of flats from the buyers and diverting funds for non-business purpose to advance loans to other group companies, without being there any specific observation with regard to the appellant and escapement of income for that assessment year. Therefore, he submitted that the re-opening of assessment is invalid and needs to be quashed. 8. The ld.DR, Ms. Reema Yadav, on the other hand, supporting the order of the ld. CIT (A) submitted that the assessment has been reopened on the basis of fresh tangible material which came to the possession of the Assessing Officer, during the search proceedings, in the cases of the Kapil Group of Companies, where the modus operandi of the assessee was unearthed, which reveals that the assessee is collecting advances from customers and paying interest, whereas diverting funds for non-business purpose. Based on specific information, the AO reopened the assessment, and thus, there is no merit in the argument of the counsel for the assessee that the reopening of the assess....
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....ssessment. The reason to believe by the AO should be based on fresh material which suggests escapement of income, and further, there should be a live nexus between the formation of belief and the material in the possession of the AO. In the present case, if we go by the reasons recorded by the AO, we find that the Assessing Officer formed his opinion of escapement of income of the assessee for AY 2013-14 on the basis of material found in the case of M/s. Indur Developers Pvt. Ltd for the assessment year 2016-17, though there is no material with the AO pertaining to the assessee for AY 2013-14. This legal principle is supported by the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd reported in (2010) 320 ITR 561 (SC) wherein it has been clearly held that the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment and further reasons must have a live link for formation of belief. A similar view has been taken by the Hon'ble Delhi High Court in the case of DCIT Vs. Rolls Royce Industrial Power India Ltd and Hon'ble Gujarat High Court in the case of....
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....r Section 143(3) r.w.s. 147 of the Act dated 28-12-2019 is invalid and liable to be quashed. Thus, we quash the assessment order passed by the AO. 12. The second issue that came up for our consideration from ground no.2 of assessee's appeal is relating to the reopening of assessment u/s 147 of the Act, 1961. Since we have quashed assessment on legal ground, other grounds taken by the assessee relating to the issue of addition towards finance costs becomes infructuous and thus, the ground of appeal taken by the assessee has been dismissed as infructuous. 13. In the result, the appeal filed by the assessee is allowed. ITA No. 676/Hyd/2020 for A.Y. 2017-18 14. The brief facts of the case are that the appellant is a private limited company engaged in the business of construction and sale of residential and commercial flats. The assessee has filed its return of income for the assessment year 2017-18 on 25.10.2017 declaring total income of Rs. 29,39,340/-. A search and seizure operation under Section 132 of the Act was conducted on 07-04-2017 on the assessee, as part of the search conducted on M/s.Kapil Consultancy Services Pvt. Ltd. and others. Consequent to the se....
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.... before the advance PUT option period ended. If the potential customer withdraws the advance amount earlier to advance PUT option, he will be given much lesser interest than the promised interest. The AO observed that as per Schedule 17 annexed to the Profit and Loss Account filed by the assessee, an amount of Rs. 5,48,12,296/- has been claimed as interest charges under the head Revenue Expenses and added to work-in-progress. The AO called upon the assessee to file necessary evidence and also justification for the interest debited under the head Revenue Expenses added to work-in-progress. In response, the assessee submitted that it has paid interest amounting to Rs. 5,48,12,296/- to customers on advance paid by them in light of MOUs and as the same was incidental to the business, it has debited to the Profit and Loss Account. However, the said amount was taken to the balance sheet under the head work-in-progress for claiming the same proportionately against the revenue from sale of flats in the future. The assessee further submitted that since the customer has paid an advance amount of about 80% of the sale value, as per the agreement with the customers, the appellant has....
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....ee. The learned counsel for the assessee further submitted that the assessee is into the business of real estate development, collects advances from customers for sale of residential flats and commercial space. The customers pay 80% of consideration in advance in terms of MOU. The MOU provides for payment of interest @ of 10% to 14% in case of delay in delivery of flats. As per the agreement between customers, the appellant has paid interest on customers' advance and the same has been debited under the head finance charges. The ld. CIT (A) without appreciating the relevant facts, confirmed the addition to an extent of Rs. 1,33,94,799/- out of the total disallowance of Rs. 5,48,12,296/- and their order should be set aside. 21. The ld.DR Ms. Reema Yadav, on the other hand, supporting the order of ld. CIT(A), submitted that the assessee has received advance from customers and also diverted funds to various group companies in the form of share capital and loans and advances. The assessee has not filed any evidence to prove utilization of advances received from the customers for the purpose of business of the assessee. Therefore, the AO has rightly disallowed interest e....