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2016 (3) TMI 1157 - AT - Income TaxAddition of expenses incurred on the development of land of the project done - Held that:- It is the settled proposition of law that when any addition is made on the basis of some seized paper/impounded document, then the same has to be read as a whole. The department cannot accept a part of the same as true and the balance part of the same as untrue. Admittedly in the instant case the impounded document shows “expenditure incurred upto plane passing”. As already mentioned earlier, the final approval of the plan was given to the assessee on 29-03-2006. Even the Annexure 1 found during the course of survey, copies of which are placed at pages 1 to 5 of the paper book only shows expenditure to the tune of ₹ 24,21,963/- for the period from 11-03-2006 till 30-07-2007, i.e. during the period of 3 financial years 2005-06, 2006-07 and 2007-08. Therefore in absence of any contrary material brought to our notice it has to be held that the expenditure has been incurred prior to A.Y. 2007-08. In this view of the matter and in view of the detailed reasoning given by the CIT(A) we do not find any infirmity in his order deleting the addition of ₹ 1,13,75,605/- from the hands of the assessee firm and suggesting the AO to take remedial measures in the hands of the partners. We accordingly uphold the same and the ground raised by the revenue on this issue is dismissed. Addition on account of suppression of work-in-progress - Held that:- From the copy of the assessment order, we find that although the AO has discussed the valuation of closing WIP/suppression of profits while making the addition, however, the order does not show any query raised by the AO during the course of assessment proceedings on this issue. The AO has simply proceeded on the basis of the booming market at Panvel during the period when the survey was conducted and came to the conclusion on his own. It is the settled proposition of law that addition cannot be made on the whims of the AO based on some surmises and presumptions without putting any query to the assessee. An opportunity must be given to the assessee while making or proposing any addition. The assessee must be given a reasonable opportunity to make his submission. In absence of the same, there is clear violation of principle of natural justice and no addition can be made. In this view of the matter and in view of the reasoning given by the CIT(A) while deleting the addition we do not find any infirmity in the order of the CIT(A). Accordingly, the same is upheld and the ground raised by the revenue on this issue is dismissed. Disallowance partly written off, payment made to retiring partner as goodwill/ compensation, accounted in the books of account - Held that:- We find during the course of survey certain papers were impounded according to which 6 shops and 3 office premises were allotted to the partners belonging to Haresh Shah group. As per the said documents as well as the subsequent reply given by the assessee during the course of assessment proceedings it was found that the outgoing partners were allotted such shops and office premises at concessional rates of ₹ 47,80,000/- as against the market rate of ₹ 1,05,03,400/-. Thus, the difference of ₹ 57,23,400/- should have been offered to tax. Although the assessee has credited the amount of ₹ 57,23,400/- under the head miscellaneous income., however, the assessee has debited an amount of ₹ 11,44,680/- being 1/5th of the above amount as goodwill. It is also a fact that in the retirement deed there is no mention of any goodwill to be paid to the outgoing partners. Therefore, while disclosure of ₹ 57,23,400/- is justified debiting the amount of ₹ 11,44,680/- in our opinion is not justified under the facts and circumstances of the case. Further despite admission during the course of recording of statement that such income will be disclosed in the hands of the partners, nothing was brought to our notice that any of the partners had disclosed such amount in his hands. Under these circumstances we hold that the AO was fully justified in bringing to tax an amount of ₹ 11,44,680/-. In view of the above and the detailed reasoning given by the Ld. CIT(A) we do not find any infirmity in the order of CIT(A). Accordingly, we uphold the order of the CIT(A) on this issue and the grounds raised by the assessee are dismissed.
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