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2014 (7) TMI 963 - AT - Income TaxApplication of section 145(3) – Correctness and completeness of accounts – Held that:- CIT(A) rightly was of the view that as per the observation of the AO in the assessment order, it is noted that no specific defect was detected by the AO in the books and there the assessee was maintaining books of account - the AO was satisfied about the correctness and completeness of books and method of accounting regularly employed by the assessee - The provisions of section 145(3) could be invoked if the AO is not satisfied about the correctness and completeness of the accounts and method of accounting followed - when the AO did not point out any specific defects in the books of account maintained by the assessee, the books cannot be rejected by invoking the provisions of section 145(3) of the Act - even after rejecting the books of account, the AO has not proceeded to estimate the income of the assessee and he has made disallowance out of various expenses debited by the assessee in the books of account - rejection of books of account is not proper and when the AO is making specific additions/disallowance, there is no impact on the assessable income of the assessee even if the books are not rejected and on this aspect, there was no reason to interfere in the order of CIT(A) – Decided against Revenue. Direct expenses disallowed – Details not furnished related to development of flats – Held that:- CIT(A) noted that the assessee had to incur major expenditure on infrastructural development such as leveling of land, landscaping, construction of roads, erection of street light polls, construction of overhead water tank etc. for 1st phase of the project - assessee furnished copy of bills and other details along with nature of work done in the paper book filed before him – the AO’s objection is that the assessee has not developed the flats because the assessee has sold plots in the present year - In the details of the expenses incurred by the assessee, reproduced by the CIT(A), it is not coming out that these expenses are not in relation to development of plots and the same are for construction of flats – AO is making a general observation that in absence of proper evidence in the shape of vouchers and details as well as name and complete address to whom this amount has been paid, the token disallowance of 10% is justified but the AO has not pointed out a single instance as to what details were asked for by him in remand proceedings, which has not been submitted by the assessee – order of the CIT(A) is upheld – Decided against Revenue. Apportionment of expenses on commission and brokerage to work-in- progress (WIP) in P&L A/c – Held that:- CIT(A) noted that the assessee has filed confirmation from certain brokers - assessee contended that in the profit & loss account, total sales is shown at the same figure of ₹ 50,04,22.750/- from which a discount of ₹ 10,86,85,300/- was reduced and in this manner, net sale income was considered in the P & L Account at ₹ 39,17,37,450/- but while furnishing the details of brokerage and commission, gross sales figure was shown because gross sale figure was the basis for making payment of commission and discount was allowed to the buyers for certain early payment etc. and this discount is not in dispute - it comes out that whatever sales was accounted for by the assessee, the commission expenditure claimed by the assessee is in respect of sale only and not in respect of sale which is not considered – there was no reason to interfere in the order of CIT(A) – Decided against Revenue. Business expenses added – Expenses properly vouched and supported – Held that:- The decision of CIT(A) is on the basis that the nature of expenses were charity and donation - But, sponsoring Kushti Dangal and making some payment to a club for sponsoring cultural events on the occasion of Baishakhi Mela, cannot be considered as charity and donation - It is not the objection that the business of the assessee was not being conducted at Rudrapur - Their objection is mainly that these expenses are in the nature of charity and donation - the expenses are not in the nature of charity and donation, this disallowance is not justified – Decided in favour of Assessee. Incentives paid to brokers – Complete disclosures made – Held that:- The disallowance was confirmed by CIT(A) merely on the basis that reply was not received from some payees - the disallowance was made by the AO to the extent of 30% for the reason that the assessee did not furnish bifurcation of incentive on sale of flats and advance booking of flats - The entire amount for which reply was received by the AO has been allowed by CIT(A) and the only basis for making the disallowance is that for the balance amount, no reply was received in reply to notice u/s 133(6) of the Act - making disallowance on the basis of the fact alone that some parties did reply, is not justified – Decided in favour of Assessee. Deduction u/s 80IB – Held that:- The assessee did not construct the residential units in the plots and these plots were sold after basic infrastructural development of the project - the plots were sold to the buyers and it was not the concern of the assessee whether the construction had to be carried out or not by the buyers - the assessee did not obtain completion certificate of construction of the housing project from the competent local authority as required in the explanation to section 80IB(10)(a) of the Act – there merit in the claim of the assessee that the assessee is eligible for deduction u/s 80IB(10) of the Act – Decided against Assessee.
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