ITA No. 1051 and 1707/Mum/2011, (Assessment Year: 2007-08). Case: 1. ACIT, 2. Shri Anthony Joseph Pattathu Vs 1. Shri Anthony Joseph Pattathu, 2. ACIT. ITAT (Income Tax Appellate Tribunal)

Case NumberITA No. 1051 and 1707/Mum/2011, (Assessment Year: 2007-08)
CounselFor Appellant: DR. Shivaram and Shri Ajay R. Singh and For Respondents: Shri O.P. Singh
JudgesB. Ramakotaiah, Member (A) and Amit Shukla, Member (J)
IssueIncome Tax Act, 1961 - Sections 143(3)
Judgement DateAugust 14, 2013
CourtITAT (Income Tax Appellate Tribunal)


B. Ramakotaiah, Member (A), (ITAT Mumbai 'I' Bench)

  1. These two are cross appeals by assessee and revenue against orders of CIT(A)-30, Mumbai dated 26.11.2010. The issue in these appeals is with reference to the disallowance of expenses claimed by the assessee. Briefly stated, the assessee is a proprietor of M/s. Pattathu Brothers engaged in the business as builder, developer and contractor. The assessee started a project 'Aishwarya' on 01.12.1992 and completed it on 06.06.2003. As on Oct. 2003, 25 flats were unsold and assessee could sell 20 flats as a block to M/s. Federal Bank. During the year the assessee has shown receipts to an extent of Rs. 9.23 crores and after reducing work-in-progress and other expenditures, offered income of Rs. 1.21 crores. The AO was of the opinion that the assessee having completed the project in October, 2003 can not claim any expenditure on the sale of Aishwarya project and after discussion allowed only an amount of Rs. 9,12,042/- expenditure and balance amount of Rs. 71,72,185/- was disallowed. The assessee contested before CIT(A) submitting that even though the project was completed in October 2003 the flats which remained unsold were offered to Federal Bank and ultimately bank purchased only 20 flats and as per the provisions of Maharashtra Ownership Flats Act, 1963, it is the duty of the developer to incur expenses for maintenance of property and further assessee also undertook to carry out substantial repairs, renovation and addition of amenities while offering the flats to Federal Bank. It was further submitted that the assessee has claimed similar expenditure in earlier years which the AO has allowed and therefore, the disallowance of the expenditure was not warranted, as the assessee has maintained books of account and AO has not found out any mistakes in the same.

  2. Ld. CIT(A) after considering the arguments has allowed the amount of Rs. 57,37,748/- restricting the disallowance of amount to Rs. 14,34,437/- i.e. to an extent of 20% of the expenditure. His order on the issue is as under:-

  3. I have carefully gone through the assessment order, the factual matrix of the case and the submissions of the appellant. The learned AR of the appellant has submitted that as per provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of construction, Sale Management and Transfer) Act., 1963 it is the duty of the developer to incur expenses on maintenance of property and pay municipal...

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