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Central Warehousing Corporation vs Cit-I on 25 January, 2008

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Income Tax Appellate Tribunal - Delhi
Pacl India Ltd., New Delhi vs Department Of Income Tax
            IN THE INCOME TAX APPELLATE TRIBUNAL
                  (DELHI BENCH "F" NEW DELHI)

          BEFORE SHRI R. P. TOLANI : JUDICIAL MEMBER
                               And
            SHRI B.C. MEENA : ACCOUNTANT MEMBER

                 ITA Nos. 2638, 2639 & 3693/Del/ 2010
                  Asstt. Yrs: 2004-05, 2005-06 & 2006-07
ACIT, Central Cir.-4,          Vs. M/s PACL India Ltd.,
New Delhi.                           22, 3rd Floor, Amber Tower,
                                     Sansar Chand Road, Jaipur (Raj.)
                                     PAN: AAACP 4032 A


                 C.O. Nos: 215, 216 & 278/Del/2010)
                ITA Nos. 2638, 2639 & 3693/Del/ 2010
                 Asstt. Yrs: 2004-05, 2005-06 & 2006-07
M/s PACL India Ltd.,                Vs. ACIT, Central Cir.-4,
     rd
22, 3 Floor, Amber Tower,                 New Delhi.
Sansar Chand Road, Jaipur
(Appellant )                              (Respondent)

            Revenue By :       Ms. Vibha Bhalla CIT(DR)
            Assessee By :      Shri D.C. Aggarwal Adv. &
                               Ms. Sudha Gupta Adv.

                         ORDER

PER BENCH:

The Revenue is in appeal and the assessee has filed cross-objections against separate orders of CIT(A) relating to A.Y. 2003-04, 2004-05 & 2006-07. All these matters are heard together and disposed of by this consolidated order for the sake of convenience.

2. In all the three appeals filed by the Revenue, the issue involved is common, wherein CIT(A) has deleted the disallowance made out of land ITA nos. 2638, 2639 & 3693/Del/2010 2 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

development expenditure. The effective grounds in all these three appeals are common except the difference in amount of disallowance. The grounds of appeal in ITA no. 2638/Del/2010 for A.Y. 2003-04, read as under:

"1. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 2,91,61,000/- made by the AO against the land development expenditure claim of the company? (The amount for AY 2005-06 Rs. 9,21,70,536; and for A.Y. 2006-07 Rs. 39,80,13,009/-)
2. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in brushing aside the findings of the enquiries conducted by the Department?
3. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the expenditure relating to these contractors/ concerns were not debited to the P&L Account despite the fact that no such plea was taken by the assessee during the course of assessment proceedings.
4. The order of the CIT(A) is perverse and not tenable in law and on facts.
5. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal."

2.1. Ground nos. 1,2 and 3 in ITA no. 2639 & 3693/Del/2010 are also the same except the difference in the figure. Ground nos. 4 & 5 in ITA no. 2638/Del/2010, 2639/Del/2010 and ground no. 4 in ITA no. 2693/Del/2010 are general in nature and do not require any adjudication and the same are dismissed accordingly.

3. At the time of hearing, the ld. AR submitted an application that he wanted to withdraw the cross-objections filed in all these three assessment ITA nos. 2638, 2639 & 3693/Del/2010 3 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

years. After haring, we allowed to withdraw the cross-objections and the same are dismissed as withdrawn.

4. In all these appeals, the revenue has come into appeal against the deletion of the above additions made by the assessing officer out of the land development expenses on the ground that impugned amounts are not genuine and were not debited in the P&L A/c.

5. The brief facts of the case are: The assessee is engaged in the business of development of agricultural land and sale thereof. The assessee purchases land in rural areas and develops the same and then it is sold out in developed plots. There were search operations on the assessee on 22-9-2005 and thereafter on 25-8-2006. Notices were issued u/s 153A in consequence of search operation on 22-9-2005 to file the block returns. Since show cause notice got abated, in view of the second proviso to section 153A, proceedings were initiated as a result of notice issued u/s 153A in consequence of search on 25-8-2006 survived.

5.1. After purchasing the land, the assessee undertakes extensive works of leveling, bush cutting, boulder removing, providing irrigation facility and fencing etc. on various sites all over the country in the various state. This extensive work is executed by the assessee through various contractors. The assessee is not debiting whole of the amount incurred during the year in the P&L A/c. The assessee claims only the expenses relating to the land sold in the respective years only in P&L A/c the balance is debited to land a/c. Thus the remaining expenses on unsold plots are included in the land cost which is the stock in trade of the assessee and the same is directly shown in the balance sheet. When ever the land is sold, development expenses corresponding to that land are debited to the P&L A/c subsequently under the head 'Land Cost', which includes the cost price of the respective land ITA nos. 2638, 2639 & 3693/Del/2010 4 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

and the land development expenses. This practice, which is in conformity with ICAI guidelines is being followed by the assessee regularly. At the time of hearing the ld. AR submitted a chart which narrates the details of total land development expenses incurred during the particular financial year relating to the assessment years; cost of land sold during the year; land development expenses in respect of land sold during the year; total land cost + land development expenses debited in the P&L A/c; and also the details of disallowance made by the assessing officer which has been deleted by the CIT(A).

5.2. In the assessment year 2004-05 total expenses on the land development were incurred of Rs. 19,14,56,997/-; cost of land sold during the year was Rs. 15,04,97,135/-; the corresponding land development expenses debited in the P&L A/c were to the tune of Rs. 3,73,76,573/-. Thus the total land cost debited to the P&L A/c was of Rs. 18,78,73,708/-. 5.3. Similarly, in A.Y. 2005-06 total expenses on the land development incurred by the assessee were Rs. 1,16,12,92,292/-; cost of land sold during the year was Rs. 26,96,76,847/-; the corresponding land development expenses debited in the P&L A/c for the year was to the tune of Rs. 27,66,81,14/- and the total land cost debited to the P&L A/c was of Rs. 54,63,57,981/-.

5.4. In A.Y. 2006-07 total expenses on the land development incurred by the assessee were Rs. 4,67,16,38,588/-; cost of land sold during the year was Rs. 10,02,64,370/-; the corresponding land development expenses debited in the P&L A/c for the year was to the tune of Rs. 64,40,63,331/- and the total land cost debited to the P&L A/c was of Rs.74,43,27,701/-. 5.5. During the course of assessment proceedings on the issue of genuineness of expenditure incurred through contractors for development of ITA nos. 2638, 2639 & 3693/Del/2010 5 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

land, assessee duly submitted their PAN numbers, bank a/c details, TDS deducted which was paid in govt. treasury and other documents. Assessing officer however, deputed one inspector to verify addresses of certain contractors. According to assessing officer such inspector submitted a report that no such certain contractors were found at the given addresses. 5.6. According to assessing officer, five contractors at Rohtak denied having done any work. Similarly, one Shiv Bharat Ram also denied the work. Further Shri Pradip Kumar Jindal in an statement recorded u/s 131 on 13-12-2008 stated that no work was done and only bills were raised, cheques were received and paid in cash.

5.7. On these observations, assessing officer disallowed entire development expenditure by following findings:

"5.9. In view of the above detailed inquiries conducted by the Department, the claim of the assessee that the Land Development Expenses made to the above parties are genuine are devoid of any substance. In fact, each of the enquiries conducted by the Department has at least left a shadow of doubt in the genuineness of these expenses. Either it has been categorically established that the party is not genuine or the persons are not available at the addresses given by the assessee company. Under such circumstances, any of the plea taken by the assessee does not hold water. The fact that payments have been made by account payee cheques is not conclusive evidence of the existence of the party and/ or services having been rendered by it and/ or the genuineness of the payment.
5.10. In view of the above, I hold that the above amount of Rs. 2,91,61,000/- shown as expenses incurred through above twenty parties are not genuine and therefore the same is disallowed and added to the income of the assessee. I am satisfied that the assessee has furnished wrong particulars of his income for concealing his income. Therefore penalty proceedings u/s 271(1)(c) are also initiated o this account."
ITA nos. 2638, 2639 & 3693/Del/2010 6 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.
5.8. CIT(A) however deleted the addition by holding that:
"3.2. I have carefully considered the facts of the case and submissions of the appellant. It is noted that the exhaustive details were filed before the A.O. during the assessment proceedings. The copies of the submissions filed during the assessment proceedings were submitted to demonstrate the accounting system regularly followed by the appellant. It is perused that the barren agricultural land in the interior parts of the Country is purchased by the company. This land is developed with the help of various facilities and made worthy of agricultural activity. The expenditure incurred in connection with the development of land is capitalized to the land account and it is debited to profit and loss account only in the eya of sale of that particular land. It is noted from the assessment order that the appellant had incurred land development expenditure of Rs. 19,14,56,997/- during the year. This expenditure has been capitalized to the land account. The Assessing officer while scrutinizing the accounts raised the query regarding the land development expenditure of Rs. 3,73,76,573/- debited to the profit & loss account. It was explained to him that the expenditure of Rs. 1,42,70,180/- was incurred by the appellant in the year when the land was purchased and capitalized to the land account and during the year further expenditure of Rs. 2,31,06,393/- has been incurred in connection with the development of land. This has been claimed as deduction u/s 37(1) in the year when the land has been sold. The Assessing officer deputed the Inspectors to make the inquiries about the expenditure incurred during the year. The expenditure of Rs. 2,91,61,000/- was disallowed by the assessing officer on account of not being found genuine on the basis of the report of the Inspector out of the total expenditure of Rs. 19,14,56,997/-. It is categorically explained by the counsel of the appellant that the expenditure of Rs. 3,73,76,573/- debited to profit & loss account is nowhere related to the parties mentioned by the assessing officer in the assessment order. The complete detail of the expenditure made in connection with the development of land was submitted to the assessing officer during the assessment proceedings. The copies of the submissions made before the assessing officer ITA nos. 2638, 2639 & 3693/Del/2010 7 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.
were filed during the appellate proceedings. It is perused that the land development expenditure is being incurred by the appellant for leveling of the earth, removal of bushes and bowlers, providing irrigation facilities and fencing etc. The copies of the work contracts, the bills raised by the parties and the confirmations for the execution of work etc. were filed before the Assessing officer.

...........

From the analysis of the provisions, the following conditions are required to be fulfilled before allowability of deduction under this point:

1. There should be business & profession.

2. The business should be in existence.

3. The payment should be in nature of expenditure.

4. The expenditure should be laid out or expended.

5. The purpose should be wholly and exclusively for the business.

The expenditure should be for the purpose of business. The reading of the Section makes it clear that any disallowance of expenditure can only be made out of the expenditure which is debited to the profit and loss account. The expenditure which is capitalized does not come into the purview of section 37(1) of the Act. In the instant case, it is perused that the expenditure of Rs. 2,91,61,000/- does not form part of the expenditure which has been debited to the profit & loss account, rather the same has been capitalized to the land development account. In view of the statutory provisions of section 37(1) of the Act, no disallowance could be made out of the expenditure which is not debited to the profit & loss account. It has been verified that the appellant ahs claimed development expenditure of Rs. 3,73,76,573/- and this expenditure has no connection whatsoever with the parties mentioned by the A.O. in the assessment order. The payment ahs been made to the number of parties for the development work. The copies of the contract notes, the details of the TDS deducted for the payment made, copies of the sample bills, copies of the work contracts, the confirmations from the creditors, PAN, copies of the bank statement, copies of the return of income etc. have been filed. Further, it is noted that search u/s 132 of the Act was conducted ITA nos. 2638, 2639 & 3693/Del/2010 8 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

in the case of the appellant on two occasions 22-09-2005 and 25-08-2006 and no incriminating documents in this regard have been found or seized. The appellant had made the disclosure of Rs. 40 crores to avoid litigation and to buy peace of mind and paid the taxes. It is clear from the order of the A.O. that no reference has been made to any seized documents while making the disallowance out of the development expenses."

5.8.1. Reliance is placed by CIT(A) on:

The only ground of the A.O. for the disallowance of the land development expenditure is that the parties were not found on the given addresses and it created the shadow of doubt in mind of the assessing officer that the expenditure is not genuine and no other material or evidence is gathered or found during the search to show that the claim of the expenditure is not genuine. It is held by the Hon'ble Supreme Court in the case of Lalchand Bhagat reported in 37 ITR 288 that the suspicion however great cannot take the place of evidence. It is a mater of record that two searches were conducted at the premises of the appellant on 22-09-2005 and 25-08-2006 and no incriminating documents, books of accounts etc. were found or seized to indicate that the appellant had claimed any bogus expenditure to reduce the burden of the tax liability. One should not forget that it is a search assessment in which the search party is supposed and expected to find out all incriminating documents, material and also undisclosed assets. The search assessment, therefore, stand on a footing different than a normal assessment. No evidence or other material despite the extreme step of search which amounts to a serious invasion of the rights of the tax payer and which is perhaps the last weapon in the arsenal of the Department were found/ seized, which could be attributed to patently hypothetical addition made during the assessment proceedings. In view of the totality of facts and circumstances, the addition of Rs. 2,91,61,000/- made by the assessing officer on account of disallowance of land development expenditure is deleted.
                                                            ITA nos. 2638, 2639 & 3693/Del/2010
                                       9                            CO 215,216 & 278/Del/2010
                                                                           M/s PACL India Ltd.


5.9. While pleading on behalf of the revenue, the ld. DR relied mainly on the order of assessing officer and submitted that to verify the genuineness of the land development expenses the assessee furnished the details of the contracts to whom the contracts for land development were awarded. The assessee furnished the same. Assessing officer deputed inspectors to verify the addresses of certain contractors. The Inspectors reported that there were no such concerns or persons at the given addresses. The list of such persons which the Inspectors have reported not found at the addresses given, are given at respective pages 3 & 4 of CIT(A)'s for A.Y. 2004-05 & 2005-06.

5.10. In the year 2006-07, on the basis of statement recorded of Shri Pradeep Kumar Jindal, who has admitted in the statement that no work was done and only bills were raised and cheques were received in respect of following five companies, wherein amount involved was Rs. 14,62,11,899/-:

Sr.No.   Name of the Company                   Amount
1.       M/s Anchal Contractors Pvt. Ltd.      30467500
2.       M/s Anchal Township Pvt. Ltd.         27911699

3. M/s Anchal Infrastructure Pvt. Ltd. 28393500

4. M/s Anchal Projects Pvt. Ltd. 28227000

5. M/s Anchal Buildcon Pvt. Ltd. 31212200 Total 14,62,11,899 5.11. Further, on the basis of Inspector's report assessing officer worked out the expenses paid to 84 parties listed in the annexure to the assessment order, amounting to Rs. 25,18,01,200/-. Thus, the aggregate disallowance was made at Rs. 39,80,13,098 (Rs. 25,18,01,200 + 14,62,11,899).

6. Ld. DR submitted that the CIT(A) was not justified in deleting the addition, observations and findings of assessing officer are relied on..

7. Ld. AR of the assessee relied on the order of CIT(A) and submitted that assessee was engaged in the purchase of land and in the process ITA nos. 2638, 2639 & 3693/Del/2010 10 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

purchases large chunks of barren and undeveloped land, develops them and sells smaller sizes of developed land. In the development of land series of operations are involved like removal of bushes, weeds and boulders, levelling, providing roads, creating infrastructure relating to drip water irrigation, digging of bore wells and making available the facility of natural reservoirs of water. The assessee submitted details in the form of photographs and DVD were duly filed before the assessing officer to establish that the transformation from barren to the developed farm land require huge amount of execution of relevant work of development & incurring of expenses thereon.

7.1. The assessee is carrying out the work through the work contracts awarded to various persons. The assessee is following uniform accounting policy and procedure from year to year. The assessee acquires land from the owners directly or through the intermediation which is shown as stock in trade. This land after development is transferred to the customers through execution of sale-deeds. The assessee is debiting the land cost to the P&L A/c by taking into account the opening stock + purchases (cost of land + development expenditure)-closing stock.

7.2. The sales are recognized as per the accounting standard-IX issued by the Institute of Chartered Accountants of India, where the transaction of sale is complete on transfer by seller to the buyer, the property in goods, for a price without retaining any effective control over the goods. When the assessee was confronted that certain parties are non-existent as reported by the local inquiries conducted by the inspector and some of them denied having rendered any service, the assessee submitted that all the parties to whom such payment have been made are genuine, the work contracts are duly allotted. All these persons were having PAN numbers which have been ITA nos. 2638, 2639 & 3693/Del/2010 11 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

issued by the income-tax authorities. All the payments have been made through a/c payee cheques. The necessary TDS has been deducted from the payments made to these persons and the same has been deposited in the government treasury.

7.3. The income-tax department has assessed these persons and in many of the cases even the refunds have been granted. These persons were operating bank accounts. After submitting so many documentary evidence, the assessing officer simply relied on the Inspector's report and denial of work by 5 Rohtak contracts and Shri Bhagatram of Delhi and reached to the conclusion that parties are not in existence. Ld. AR submitted that only on the basis of report by Inspector the other clinching evidence submitted by the assessee cannot be brushed aside. Thus the fact of full fledged development of barren land, sale of developed plots, photographs & DVD demonstrating development and plethora of other evidence has been discarded without inquiry and verification of evidence filed by the assessee. 7.4. The ld. AR further submitted that all these persons to whom the payment for land development expenses was made after completion of the work, were maintaining bank accounts. All the payments were through a/c payee cheques. This amount has been credited in their accounts; all were assessed to tax. There is no iota of evidence collected by conducting two searches within a period of one year which could put any doubt in respect of these expenditures incurred by the assessee. There is no evidence collected and found during the search that money has traveled back to the assessee from these persons which has been held as non-genuine by the assessing officer. The Inspector has inspected these premises after a lapse of many years and if these persons had shifted or left to other places then no adverse inference can be drawn against the assessee.

                                                            ITA nos. 2638, 2639 & 3693/Del/2010
                                      12                            CO 215,216 & 278/Del/2010
                                                                           M/s PACL India Ltd.


7.5. The assessing officer was fully empowered to bring the inquiries to the logical conclusion by way of collecting further information from the banks or from the income-tax authorities who are assessing these persons. By submitting the documents, the assessee after discharging its onus by above compliance and evidence has shifted the onus to the revenue which the revenue has failed to shift back to the assessee. The ld. AR also relied on the decisions in the cases of Sarogi Credit Corporation v. CIT (1976) 103 ITR 344 (Patna); and CIT V. Mehrotra Brothers (2004) 270 ITR 157. 7.6. Ld. Counsel pleaded that assessee vide letter dated 12-11-2008 requested the assessing officer that before drawing any adverse inference against the assessee, on the basis of statements or Inspector's report, the assessee should have been allowed an opportunity for cross-examination, which the assessing officer has failed to offer. Thus assessing officer except relying on piecemeal evidence which may at the best create suspicion brushed aside the realties which were demonstrated i.e. the development work of huge magnitude was executed on various sites all over India, developed plots were sold and expenses were incurred.

8. After hearing both the sides we decide these issues as under:

(i) It is undisputed fact that assessee was engaged in the business of development of agriculture land. The assessee was purchasing land in rural areas and developing the same selling in small pieces to various customers. It is also a fact that in the two searches conducted on 22-9-2005 and 25-8-2006, within a span of one year, no incriminating documents were found or seized in respect of the land development expenses incurred by the assessee suggesting any non genuineness. It is also a fact that assessee is following a method of accounting where the land development expenses are added to the cost ITA nos. 2638, 2639 & 3693/Del/2010 13 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

of land purchased and only the expenditure relatable to the land sold during the year are debited in the P&L A/c. Balance remains embeded in the stock in trade.

(ii) As per the CIT(A)'s finding, the expenditure which has been added by the assessing officer is not forming part of the expenditure debited during these relevant assessment years. Further, the assessee has submitted the evidence where the respective contracts were awarded through proper work contract orders. The payments have been made by a/c payee cheques. The necessary TDS has been deducted and paid to the government. The persons were assessed to income-tax. Assessee demonstrated by DVD and photographs that barren lands were developed and sold.

(iii) Assessing officer has made no effort to verify all these details filed by the assessee and proceeded to inquire about the identity of these contractors by an inspector. The fact about various contractors being assessed with the income-tax department is belied on the basis of 4 Rohtak contractors. Instead of verifying documentary record, the Inspector was deputed to carry out inquiries after a long gap, after the works were executed. In such a circumstance, in our view the assessee has discharged the onus cast on it which is effectively not rebutted by the department. Further, the expenditure claimed is allowable u/s 37(1) of the I.T. Act when the land i.e. stock in trade was sold and revenue is recognized. The adverse report of 4 contractors to whom the payments were made and the Inspector has adversely reported, cannot over ride the evidence filed by the assessee. In such a situation, we find that the CIT(A) was justified in deleting the additions which ITA nos. 2638, 2639 & 3693/Del/2010 14 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

have been made only on the basis of a doubt created or suspicion in the mind of the assessing officer by the Inspector's report or 4 Rohtak contractors which cannot be held to be conclusive. The department has failed to collect any effective evidence in the two searches conducted within a span of one year for giving any adverse inference regarding the expenditure debited in the books of accounts for the A.Y. 2004-05 to 2006-07. We have to keep in mind that in search operation the search party is supposed and expected to find out all the incriminating documents, materials. Nothing has been found and unearthed by search operation with regard to land development expenses. Assessing officer had also not taken post search inquiries to the logical end. He had even not cared to verify whether the disallowances made were debited in P&L A/c or not. Therefore, in our considered view, the CIT(A) has rightly deleted the additions by relying on the decision of Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram Vs. CIT Bihar & Orissa 37 ITR 288, wherein the Hon'ble Supreme Court has held as under: "When a court of fact arrives at its decision by considering material which is irrelevant to the enquiry, or acts on material, partly relevant and partly irrelevant, and it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its decision, a question of law arises: whether the finding of the court of fact is not vitiated by reason of its having relied upon conjectures, surmises and suspicions not supported by any evidence on record or partly upon evidence and partly upon inadmissible material.

An assessment made without disclosing to the assessee the information supplied by the departmental representative and without giving any opportunity to the assessee to rebut the ITA nos. 2638, 2639 & 3693/Del/2010 15 CO 215,216 & 278/Del/2010 M/s PACL India Ltd.

information so supplied and declining to take into consideration all materials which the assessee want to produce in support of the case constitutes a violation of the fundamental rules of justice and calls for interference by the court. Conclusions based on facts proved or admitted may be conclusions of fact but whether a particular inference can legitimately be drawn from such conclusions may be a question of law. Where, however, the fact finding authority has acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law could have found, the court is entitled to interfere.

The Income-tax Appellate Tribunal is a fact finding tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it the court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence before it. The conclusion reached by the Tribunal should not be coloured by any irrelevant considerations or maters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises, nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions; conjectures and surmises, and if it does anything of the sort, its findings even though on question of fact will be liable to be set aside by the court."

8.1.1. In our view the assessing officer as a quasi judicial authority is obliged to follow these guidelines, which are missing in these assessments.

                                                          ITA nos. 2638, 2639 & 3693/Del/2010
                                     16                           CO 215,216 & 278/Del/2010
                                                                         M/s PACL India Ltd.


8.2. With regard to the issue raised in ground no. 3 by the revenue that expenditure which has been disallowed, is not debited to the P&L A/c in that particular year, was not taken before the assessing officer during the assessment proceedings. With regard to this, we find that assessing officer himself has recorded in para 5 of the assessment order that whole of the expenses incurred by the assessee are not claimed in the P&L A/c and expenses are claimed in respect of land sold in the respective year only. The remaining expenses are included in the land cost which is the stock in trade of the assessee and this stock was directly shown in the balance-sheet. This is a recognized accounting practice, ICAI guidelines and law. When-ever the land is sold development expenses corresponding to the land are debited to the P&L A/c under the head "Land cost", which includes cost price of the respective land and the development expenses and the assessee was following this practice regularly. Therefore, this ground of the revenue has no merit that the assessee has not taken the stand before the assessing officer. The CIT(A) has given proper finding that the expenditure debited during the assessment year is not out of the expenditure incurred by the assessee which has been capitalized by adding to the closing stock. Further, the disallowance can be made only from the expenditure debited to the P&L A/c. When there is no expenditure debited in the P&L A/c, then there cannot be any disallowance as held by ITAT in the cases of :

- Tikola Sugar Mills Ltd. Vs. CIT 2010 006 ITR (Trib) 583 ITAT Delhi 'C' Bench;

- Galaxy Saws Pvt. Ltd. (2011) 13 Taxman.com Mumbai ITAT. and the Hon'ble Calcutta High Court in the case of Ashok Marketing Ltd. 74 Taxman 126 (Cal.).

                                                           ITA nos. 2638, 2639 & 3693/Del/2010
                                      17                           CO 215,216 & 278/Del/2010
                                                                          M/s PACL India Ltd.


8.3. Considering all these facts we sustain the order of CIT(A) and dismiss all the three appeals filed by the Revenue.

9. In the result, revenue's appeals as well as assessee's cross-objections stand dismissed accordingly.

Order pronounced in open court on 18 /06/ 2013.

      Sd/-                                       Sd/-
(R.P. TOLANI)                              (B.C. MEENA )
JUDICIAL MEMBER                        ACCOUNTANT MEMBER
Dated the 18th day of June, 2013
*MP*

       Copy forwarded to
         1. APPELLANT
         2. RESPONDENT
         3. CIT
         4. CIT (A)
         5. CIT (ITAT), New Delhi.
                                                                      AR,ITAT
                                                                   NEW DELHI.