9911796707
TMI Blog2022 (11) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... enial of carry forwarding claim of Closing Work in Progress (WIP) of Rs. 2,99,40,000/- by the Id. A.O. without properly appreciating the facts of the case & law. The Appellant prays that disallowance of closing WIP & denial of carry forward claim of the same being wrong on facts & bad in law therefore same may kindly be deleted. 3. Briefly stated facts of the case are that the assessee company was incorporated on 03/02/2011 with two shareholders i.e. Sh Ashwin L. Shah and Smt Kalpana Shah, with the main purpose of redevelopment of a Property namely "Kirti Chambers", located at Fort, Mumbai. The assessee failed to file his regular return of income for the assessment year under consideration i.e. AY 2011-12, therefore the Assessing Officer issued a notice under section 148 of the Income-tax Act, 1961 (in short 'the Act') on 29/10/2013, which was duly served upon the assessee. In response, the assessee filed return of income on 18/02/2014 declaring Nil income. Subsequently, statutory notices under the Act were issued and complied with. In the assessment completed on 31/03/2015 under section 147 read with section 143(3) of Act, the Assessing Officer though assessed the total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Phoolchand N. Patel & Others 95,40,000/- 1,70,00,000/- 9,00,000/- 25,00,000/- 2,99,40,000/- Stamp Duty/Regn. Charges etc. 5,93,250/- Grant Total 3,05,33,250/- 4.1 It was claimed by the assessee that M/s Vedang Builders LLP made payments of Rs.2,99,40,000/- on behalf of the assessee company for purchase of tenancy rights of shop/offices in Kirti Chambers from above mentioned persons, though owner of the said property were still Mr Ashwin L Shah and Smt Kalpana Shah (i.e. prior to incorporation of the assessee company). 4.2 The Assessing Officer observed that M/s Vedang Builders LLP had purchased tenancy rights of shop (Old No. 1 and New No. 3) admeasuring 304 ft² in Kirti Chambers from M/s Asian machinery at nil cost vide registered agreement dated 30/12/2010. Similarly, vide registered agreement dated 12/01/2011, M/s Vedang Builders LLP had purchased rights of the office admeasuring 405 square fit in "Kirty Chambers" from m/s Zuber Investments at Nil cost. 4.3 Whereas, the assessee company also submitted a nonregistered (document) dated 27/03/2013 relating to surrender of tenement, wherein it was mentioned that M/s Vedang builders LLP had paid Rs.95,40,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n books of Ms Vedaang Builders LLP for the period from 01.04.2010 to 31.03.2015 [Page 89 of Paper Book). The said account does not show any transaction during FY 2010-11. The alleged payments on behalf of the appellant of Rs. 95,40,000/-, Rs. 1,70,00,000/-, Rs. 9,00,000/-, & Rs. 25,00,000/-are debited to appellant's account by journal entry only on 01.04.2014, i.e. after a long period of more than 3 years since close of FY 2010-11 in which entries are passed in appellant's books. Also, it is observed that the date of corresponding entry passed in books of Vedaang Builders LLP, i.e. 01.04.2014, falls soon after the date of filing return by the appellant in response to notice us 148, i.e. 28.03.2014. It cannot be ruled out that the fear of reconciliation issue arising in said assessment proceedings would have prompted the appellant to get passed said entry in books of Vedaang Builders LLP. 7.9 It is clear that the appellant had not made any direct payment to parties for vacating the tenancy rights of land owned by Shri Ashwin Shah/ Smt. Kalpana Shah, the two shareholders of the appellant company. Neither, the said shareholders had made payment on behalf of the appellant com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- by Vedaang Builders LLP to Zuber Investments [Page 37 to 40 of Paper Book]. I find that the said documents are executed on stamp paper of Rs. 100/- each, on same date on which respective "registered" agreements were executed by these parties showing Nil consideration for transfer of tenancy rights. The reason given by the AR in written submissions for not disclosing respective consideration in registered agreements is that the said consideration exceeded stamp duty value. Therefore "to save the stamp duty as Prudent businessman" actual consideration agreed and paid at the time registration of the purchase documents of tenancy rights transferred from the above referred parties were not incorporated in the said transfer documents which was not required to be disclosed mandatorily. I find such practice not only to be highly unethical, but also having used as a tool to evade stamp duty payment. If such practice is permitted. then there would be no sanctity of law and everyone would resort to such dubious practices. Also, in my opinion, an unregistered agreement cannot supersede the terms of a registered agreement on very same subject matter. Therefore, any payment by Vedaang Builde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dismissed." 5. The main reasons cited by the lower authorities for disallowance are as under: (i) The unregistered document submitted by the assessee did not bear any signature/confirmation of the alleged recipient of the proceeds of transfer of tenancy rights. It was not having any legal or evidentiary value and was merely self-serving document, prepared to inflate the amount of work in progress. (ii) The cost of acquisition of tenancy right which had been mentioned as nil in the registered document for transfer of tenancy rights, had been duly confirmed by the owner of said premises. (iii) The entries in books of accounts of the assessee company in respect of work in progress are for the period when the company was not in existence itself. Corresponding entries in the books of accounts of M/s Vedang Builders LLP were not passed on given dates as evident from the confirmation of accounts of the assessee in the books of M/s Vedang Builders LLP and entries have been passed on 01/04/2014 by way of a journal entry which is after the issue of notice under section 148 to the assessee on 28/03/2014. (iv) Copy of the unregistered document was not submitted before the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The lower authorities has mainly rejected the genuineness of the expenditure incurred against payment to tenanted authorized/unauthorized dwellers (i.e. which has been acclaimed as work-in-progress) mainly on the ground that in the registered deed of transfer, purchase value was recorded at nil as compared to the value recorded in unregistered agreements and declaration of seller parties. In our opinion, the registered or unregistered sale agreement are in the nature of the agreement between the parties and in law those agreements can we challenged by the parties and it is not within the powers or authority of the Income-tax Authority to challenge or dispute the terms and condition mentioned in those agreements. The Income-tax authorities are authorized to examine the expenditure incurred from the angle of section 37(1) of the Act so as to verify whether the expenditure has been incurred wholly and exclusively for the purpose of the business of the assessee. The onus was on the assessee to establish that expenditure was incurred wholly and exclusively for the purpose of the business of the assessee. In the case, the Assessing Officer was required to verify two things. Firstly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
