TMI Blog2014 (9) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness purposes and therefore the interest was allowable - CIT(A) has also accepted the submission of Assessee that the deposits were carried forward from earlier years and in earlier years no disallowance on account of business purpose was made - Revenue has not brought any contrary material in its support to contradict the findings of CIT(A) – the order of the CIT(A) upheld – Decided against revenue. Confirmation of long term gain on sale of land - Held that:- Assessee contended that it has incurred loss on sale of land and at the same time has earned gains on the sale of building (which is a depreciable asset) - During the course of hearing a specific query was put to the assessee and he was asked about the basis of bifurcation of the value of land and building - assessee could not satisfactorily explain the basis of bifurcation and thus the basis of bifurcation appears to the arbitrary - AO has arrived at a conclusion that by adopting a most consecutive approach the annual appreciation of land was 20% on year to year basis - AO has not brought any material on record to support its conclusion - an estimated addition to cover the revenue loss due to arbitrary bifurcation in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 77,76,487. 3.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the sale price of land as worked out by AO at ₹ 77,76,487. 3.3 The ld. CIT(A) has grievously failed to appreciate that none of the provisions of the Act except for Sec. 50C , empowered the AO to either estimate fair market value or substitute the apparent sale consideration of any immovable property so that the entire action on part of AO to that extent was wholly illegal unlawful and without jurisdiction. We first take up Revenue s appeal in ITA No. 1156/AHD/2011 1st ground is with respect to deletion of addition of ₹ 38,21,394/-. 6. During the course of assessment proceedings, A.O noticed that Assessee had made addition to factory building and on the basis of details filed it was noticed that construction of new factory building had continued from immediately preceding year up to the year end of the current accounting year. He also noticed that based on the Occupancy Certificate issued by Associate Town Planner, Dadra and Nagar Haveli, the building was completed and it was further stated in the Occupancy Certificate that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.67 sq.mtr., loft-floor-159.62 sq.mtr. The total construction cost as per ledger a/c. enclosed herewith was of ₹ 8i,96,730/- which is ₹ 10346;- (approx.) per sq.mtr. However, AO has considered the cost of ₹ 29,87,3O9/- and the cost comes to ₹ 3770/- per sq.mtr. Further, even by referring to the CPWD rates of construction cost relating to this period, as applicable to the Village, Athal, Silvassa will be more than what the AO had adopted. iii. the appellant had also obtained report from a Registered Valuer, M/s. Parth Consultant estimating FMV as on 1.4.2008 showing as ₹ 81,37,000/- (excluding land cost). iv. The reliance placed by AO on the occupancy certificate dated 7.7.06 to contend that construction work had completed by this date is wholly misplaced. The AO has failed to appreciate that issuance of such certificate does not mean that the entire work has been finished and neither any plaster or colour work etc, would be carried out by the assessee. Even, in the present case, say for example, works like brick walls, marble frame door in office (See Bill No.27 dated 21.2.2007) were carried out after that date. The AO has also failed to appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of works done and the payments made thereon. It is also a fact that the payments made to M/s. Pioneer Enterprises were in cheques as seen from the ledger a/c. For disallowing expenses, the requirement is that evidences should be brought on records why such expenses are not for the business purpose or are bogus in nature. In the instant case no such finding was brought on record by the AO. Even the figure adopted by the AO is not correct. In this circumstances and considering the facts of the case. I am inclined to grant relief to the appellant. The AO is directed to delete the addition made in this count. This ground of appeal is allowed. 7. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 8. Before us ld. D.R. took us through the findings of A.O and supported the order of A.O. On the other hand the ld. A.R. reiterated the submissions made before CIT(A) and supported his order. 9. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has given a finding that A.O has not doubted the source of payments and further the payments have been made through bank and TDS has also been deducted w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld with earned forward balance. There is no finding in earlier year that these borrowings were utilized for non-business purposes. The copy of Asstt. order for A.Y.2006-07 Dt,....is enclosed. The only change is the capital introduced by the incoming partner which has been utilized for payment to the retiring partner. 9.2 Decision : 1 have carefully considered the finding of the AO and the submissions made by the ld. All. There is a force in the arguments of the ld. AR. 1 have also perused the ledger a/c. and the loan a/c. The amount borrowed was used for the business purposes and therefore, the interest accrued thereon is allowable expenses. thus, this ground of appeal is allowed. 11. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 12. Before us ld. D.R. relied on the order of A.O on the other hand ld. A.R. reiterated the submissions made before ld. CIT(A) and supported the order of ld. CIT(A). 13. We have heard the rival submissions and perused the material on record. We find that CIT(A) after considering the submissions of the Assessee and perusing the ledger account and the loan account has given a finding borrowed amount was used for the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal of the Sale Deeds the following facts are emerged; the appellant had purchased the property i.e. land admeasuring 8545 Sq. Mt. together with construction of 1136.34 Sq. Mt. thereon from M/s. Patel Plast International Ltd. by sale deed dated. 8. 05. 2003. An Agreement for Sale was executed by and between them on 24.10.2005 for a of ₹ 86 lacs. The purchaser paid ₹ 11 lacs on 24.10.2005 towards part payment incompliance to the said Sale Agreements. That means the appellant had sold the property at a value existed on 24.10.2005. The appellant had created an Equitable Mortgage Charge with UBI by availing loan. No Due cum No Charge Certificate was issued by the UBI on 27.04.2006. Perhaps the appellant wanted to clear all encumbrances which took few months and finally the property was registered to the Purchaser on 28.4.2006. The records before me do not suggest that the appellant had made any additions to the said land and building during the period from8.05.2003 and 28.4.2006. Therefore, the appellant had ownership of the said property was for a period of about 3 years. In the interest of justice, the value of the land to be adopted was as 24.10.2005, the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . and the Factory Shed at ₹ 650/Sq.Mts. Before me the ld. AR did not furnish the cost of the structure. The AO has maintained the consistency to the extent that no value of the structure was assigned both at the time of purchase and sale. The AO calculated the cost of the land @ ₹ 526.59/ Sq. Mts,(Rs.45,00,000 78545 - 526.59). in the same analogy, the sale value of the land would be ₹ 1000.43 per Sq. Mts. (Rs.86,00,000/8545 = ₹ 1000.43). Considering the prevailing situation, the AO made independent enquiry and arrived at a conclusion that there has been steep rise of land price at that time. So he adopted a reasonable rate of ₹ 910/ Sq. Mts. for the value of the land. Though the appellant wanted to rely on the decision in the case of K.P.Varghese [131 ITR 597] (SC) but in the said decision the Hon'ble SC held that the burden of proof lies with the Revenue for understatement of consideration but once understatement is proved Revenue may adopt fair market value as actual consideration received. The AO has rightly adopted the FMV in this case. In this circumstances, I am inclined to upheld the findings of the A.O and the addition made in this ground i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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