IN INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, AM AND SHRI AMARJIT SINGH, JM I.T.A. No. 1133/Mum/2014 (Assessment Year: 2007-08) Hitesh Construction Co. ITO-20(1)(3), 501, Prime Plaza, Next to Asha Parekh Mumbai Hospital, S. V. Road, Santacruz (W), Mumbai-400 054 Vs. PAN/GIR No. AACFH 2238 K (Appellant) : ( Respondent) Appellant by : Shri Mahendra G. Vashi Respondent by : Shri M. Rajan : 06.06.2016 Date of Hearing 22.09.2016 Date of Pronouncement O R D E R Per Sanjay Arora, A. M.: This is Appeal by Assessee directed against Order by Commissioner of Income Tax (Appeals)-31, Mumbai ( CIT(A) for short) dated 20.12.2013, dismissing Assessee s appeal contesting its assessment u/s.143(3) of Income Tax Act, 1961 ( Act hereinafter) for assessment year (A.Y.) 2007- 08 vide order dated 30.10.2009. 2. In present case, assessment was framed by disallowing assessee s claim in respect of interest expenditure u/s. 36(1)(iii) of Act at Rs.5,26,737/-. 2 ITA No. 1133/Mum/2014 (A.Y. 2007-08) Hitesh Construction Co. vs. ITO assessee, firm in business of civil construction, carried matter in appeal, whereat it was observed that assessee had received sum of Rs.39,86,300/- from its sister concern, Jaycee Construction Company (JCC), during relevant year, even as no such debt appeared in assessee s audited final accounts. On contrary, sum of Rs.15,92,860/- stood reflected as receivable from JCC as on 31.3.2006 in books of assessee-firm, so that assessee s books ought to have reflected outstanding of Rs.23,93,440/- (Rs.39,86,300 Rs.15,92,860) as on 31.3.2007. matter was accordingly restored to file of Assessing Officer (A.O.), whereat it was found that assessee had in fact made payment of Rs.25 lacs to one, Bhagtani Heights Co-operative Housing Society (BHCHS), during year, for and on behalf of JCC. On basis of explanations furnished by assessee in remand and appellate proceedings, it was further found that assessee-firm had constructed building (by name Bhagtani Heights) in Versova, Andheri, and that co- operative housing society of said building was obstructing construction of road to another building (by name Shiv Bhagtani Towers) being developed by JCC. Accordingly, JCC filed suit in Civil Court against said society (Defendant No. 1), which assessee-appellant agreed to join (as Defendant No. 2) on settlement arrived at between parties. Per consent terms, BHCHS agreed not to cause any hindrance to development of property (Shiv Bhagtani Towers) and to demolish compound wall, allowing erection of sliding gate. Vide clause (f) of said agreement, assessee (Defendant No.2) would pay Rs.25 lacs to BHCHS in full and final settlement against 27 month s advance maintenance taken by assessee as builder from residents of BHCHS. assessee- appellant had thus sought to explain receipt from JCC as on account of payments to be made by it (assessee) to BHCHS, while no such payment is due to assessee from JCC as per its accounts. payment due to BHCHS is against amount of maintenance for 27 months, already collected by assessee in advance from residents of society, who do not owe anything to JCC, which is clear 3 ITA No. 1133/Mum/2014 (A.Y. 2007-08) Hitesh Construction Co. vs. ITO from consent terms drawn up. There is, accordingly, no question of said payment, as described, being made on and behalf of JCC. It was also not clear as to why would JCC pay Rs.23.93 lacs to assessee in excess, or as to why would assessee pay BHCHS for and on behalf of JCC (refer paras 5 and 5.1 of impugned order). said receipt of Rs.23,93,440/- was, thus, not satisfactorily explained and, accordingly, added as assessee s income for year. Aggrieved, assessee is second appeal. 3. We have heard parties, and perused material on record. We find Revenue to have based its case without considering and de hors accounts of assessee-firm and JCC, which are self explanatory. ledger account of these two entities, in books of each other (PB pgs. 16-17, 21-22), together with account of BHCHS in books of both (PB pgs. 18-19, 20), fully explain assessee s case. assessee has received total of Rs.44.36 lacs from JCC during year. Of same, Rs.39.99 lacs is through bank transfers, duly credited therefore to account of said payee-firm. balance Rs.4.37 lacs is by way of three adjustment entries, each qua different party, which stand correspondingly debited (in assessee s accounts). There is no mention or whisper about these three adjustments in orders of Revenue authorities and, accordingly, no explanation by assessee in respect thereof. same must therefore be regarded as in order. entire credit (of Rs.44.36 lacs) stands adjusted against opening receivable of Rs.16.60 lacs and receivable of Rs.27,67,657/- by assessee from BHCHS, and repayment of Rs.8,000/- (vide cheque no. 517116 dated 28.9.2006). What, then, is dispute about? payment of Rs.25 lacs by assessee to BHCHS during year, together with opening receivable of Rs.2.68 lacs, stands thus recovered by assessee-firm from JCC in full. How can then JCC be said to have paid assessee in excess stated to be at Rs.23.93 lacs, or of said receipt being not explained? two - JCC and BHCHS, being in dispute, 4 ITA No. 1133/Mum/2014 (A.Y. 2007-08) Hitesh Construction Co. vs. ITO entire amount paid by assessee to (or receivable from) BHCHS stands, thus, borne by JCC. If, anything, assessee has also recovered (through JCC) Rs.2.68 lacs due from BHCHS as on 31.3.2006. We could understand issue if assessee had claimed Rs.25 lacs paid to BHCHS as expenditure. That entire amount paid by it to (or receivable from) BHCHS (Rs.27.68 lacs) stands transferred to JCC, which, together with amount paid thereto (BHCHS) or on its behalf (Rs.1.83 lacs), i.e., at total of Rs.29.51 lacs, stands in turn transferred by JCC to account head infrastructure cost , is something we are not concerned about. It is in fact clear that as per BHCHS, assessee-firm owed it 27 month s maintenance, collected in advance, which it bargained for receipt in view of it allowing access (right of way) to JCC for its new building. settlement was arrived at under aegis of Court. This also explains assessee s joining suit filed by JCC (against BHCHS) as Defendant and payment to latter by it, which though stands finally borne by JCC. Revenue s case is without merit and substance. We decide accordingly. 4. In result, assessee s appeal is allowed. Order pronounced in open court on September 22, 2016 Sd/- Sd/- (Amarjit Singh) (Sanjay Arora) Judicial Member Accountant Member Mumbai; Dated : 22.09.2016 . Roshani, Sr. PS 5 ITA No. 1133/Mum/2014 (A.Y. 2007-08) Hitesh Construction Co. vs. ITO Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Hitesh Construction Co. v. ITO-20(1)(3), Mumbai