By Jagdish T. Punjabi | Prachi Parekh | Chartered Accountants
Devendra Jain | Advocate
4. TS-48-ITAT-2021 (Mum) DCIT vs. Tanna Builders Ltd. ITA No. 2816 (Mum) of 2016 A.Y.: 2011-12 Date of order: 19th January, 2021
Sections 250, 251 – The appellate authorities are obligated to dispose of all the grounds of appeal raised before them so that multiplicity of litigation may be avoided – There can be no escape on the part of the CIT(A) from discharging the statutory obligation cast upon him to deal with and dispose of all the grounds of appeal on the basis of which the impugned order has been contested by the assessee before him
FACTS
For A.Y. 2011-12, the assessee company, engaged in the business of builder, masonry and general construction contractor, filed its return of income declaring a total income of Rs. 26,41,130. The assessee had constructed two buildings, viz. Tanna Residency (Phase I) and Raheja Empress. The assessee had made buyers of units / houses shareholders of the company and allotted shares of Rs. 10 each to them. The assessee had issued debentures to those purchasers / shareholders equivalent to the value of the sale consideration of the units / houses sold. Debentures with a face value of Rs. 1,00,000 each were issued and an amount of Rs. 99,990 was collected on each debenture and shown as a liability in the Balance Sheet of the company. This was the case for all the 27 allottees / purchasers of the houses / units in the two buildings on the date of commencement of the respective projects.
During the year under consideration the assessee issued debentures of Rs. 4.20 crores towards the sale of certain units / spaces. The A.O. held that the assessee had been accounting the sale proceeds of its stock as a liability in its Balance Sheet instead of as sales in the P&L account. He called upon the assessee to explain why the amounts received on issuing the debentures during the year under consideration may not be taxed as sales and be subjected to tax. The assessee submitted that it continued to own the buildings and the construction cost had been raised through the shareholders by issuing unsecured redeemable debentures to them. It was also submitted that issuing of debentures by the company and raising money therefrom was neither held as sale of units nor sale of parking spaces by the Department while framing its assessments of preceding years. It was submitted that the assessee has issued 60 debentures to International Export and Estate Agency (IEEA) on the basis of holding 180 shares of the assessee company. On the basis of this holding, the assessee company had given IEEA the right to use, possess and occupy 60 basement parking spaces in its building. Debentures were issued pursuant to a resolution passed in the Board of Directors meeting held on 4th October, 2010 and the resolution passed by the shareholders in the Extraordinary General Meeting held on 29th October, 2010.
The A.O. held that the assessee has sold the units / houses in the aforesaid buildings to the shareholders / debenture holders who were the actual owners of the said properties and the claim of the assessee that it was the owner of the buildings and the debentures / shares were issued for raising funds was clearly a sham transaction that was carried out with an intent to evade taxes. The A.O. also held that the amount received by the assessee company by issuing shares / debentures to the purchasers of the houses / units / spaces was supposed to have been accounted by it as its income in its P&L account. He treated the amount of Rs. 4.20 crores received by the assessee on issuing debentures / shares during the year as the sales income of the assessee company.
Aggrieved, the assessee preferred an appeal to the CIT(A) who found favour with the contentions advanced by the assessee and vacated the addition.
Aggrieved, the Revenue preferred an appeal to the Tribunal.
HELD
The Tribunal observed that the assessee had, in the course of appellate proceedings before the CIT(A), raised an alternative claim that the A.O. erred in not allowing cost of construction against the amount of Rs. 4.20 crores treated by him as business income. The assessee had filed additional evidence in respect of corresponding cost of parking space. In view of the fact that the CIT(A) had deleted the addition of Rs. 4.20 crores made by the A.O., he would have felt that adjudicating the alternative claim would not be necessary. The Tribunal held that in its opinion piecemeal disposal of the appeal by the first Appellate Authority cannot be accepted.
The Tribunal held that as per the settled position of law the appellate authorities are obligated to dispose of all the grounds of appeal raised by the appellant before them so that multiplicity of litigation may be avoided. For this view it placed reliance on the decision of the Madras High Court in the case of CIT vs. Ramdas Pharmacy [(1970) 77 ITR 276 (Mad)] that the Tribunal should adjudicate all the issues raised before it.
The Tribunal restored the matter to the file of the CIT(A) with a direction to dispose of the alternative ground of appeal that was raised by the assessee before him.
