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2016 (8) TMI 994 - AT - Income TaxAllowability of expenditure - Held that:- From the very nature of expenditure it makes clear that all the expenses are related to project itself and none of the expenditures can be presumed to be non-related one. The assessee before us produced bills and vouchers which include bills raised by the contractor and details are available in the ledger account which proves the genuineness of the expenditure related to the project “Rajkamal Heights”. We also find from the bills and vouchers that the expenditure is related to project which was incurred after taking completion certificate. It appears that the plumbing work, gardening expenses, BMC water connection charges, work related to amenities, beautification, repair, minor reconstruction, redevelopment, replacement of various items, remodeling, misc. repair of completed works incurred by assessee after completion of the building, which is very much allowable. We have seen that the assessee is able to produce bills and vouchers to the extent of ₹ 1,67,48,172/- out of total expenditure claimed by assessee at ₹ 1,84,32,204/-. To this extent the assessee‟s expenditure can be allowed and the balance sum of ₹ 16,84,032/- can be disallowed. Accordingly, we allow the claim of the assessee to the extent of ₹ 1,67,48,172/- and retain the addition in respect to disallowance of expenses in the absence of the vouchers at ₹ 16,84,032/-. This issue of Revenue's appeal is partly allowed. Estimation of cash component - Held that:- The survey party has accepted the average sale price rate @ 3750, which includes the sale price as per the sale agreement of ₹ 2,500/- and cash component of ₹ 1,250/- in the earlier year relevant to assessment year 2006-07. Even otherwise, the average PSF rate of 7 flats @ ₹ 4020/- which is almost corroborating with the statement of Shri Kamlesh Savla admitting the average rate of ₹ 4000/- PSF (per sq.feet). Even otherwise, there is no evidence relating to the assessment year 2006-07. This is merely an exploration of rate by the AO without any evidence based on earlier year evidences. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has wrongly estimated the cash component at ₹ 30 lakhs in respect of 7 flats on estimation basis. There is no basis for CIT (A) to estimate cash component in these 7 flats at ₹ 30 lakhs by taking the selling price of flat @ ₹ 3750/- per sq. ft. Accordingly, we delete the addition confirmed by CIT (A) amounting to ₹ 30 lakhs. The issue of assessee's appeal is allowed and that of the Revenue is dismissed. Disallowance of expenses of telephone, vehicle expenses and conveyance expenses - Held that:- We find that the AO has disallowed these expenses on the basis of personal element involved in the same. We also find that the assessee has also paid FBT on these expenses @ 20%. We find that the AO has made addition on ad hoc basis without any finding of personal user of these expenses. We also find that these expenses are related to assessee‟s business and there is no element of personal user particularly when the assessee has already paid FBT on such expenses. There is no reason for making disallowance of these expenses. Hence, we confirm the order of the CIT (A) deleting these additions. This issue of Revenue‟s appeal is dismissed. Genuineness of the salary paid to these employees - Held that:- We find that the AO disallowed salary of ₹ 3,45,000/- claimed by assessee to paid to four employees for supervision work. According to AO the assessee has not paid the salary on monthly basis but it was one time yearly payment. Accordingly, the AO disallowed the salary paid to the four persons mentioned in Assessment Order at page 13. Accordingly, he made disallowance of ₹ 3,45,000/-. The CIT (A) sustained the addition on the basis that salary expenditure was debited as on 31st March, 2007, i. e. at the end of the year. The assessee before CIT (A) claimed that these persons were hired to supervise the project during the year, since the work of the garden as well as club house was under progress. The CIT (A) observed that, “had any such truth been there, there would have been regular debit and receipt of the salary by these persons whereas, Appellant has only shown debit by voucher dated 22.03,2007, which is apparently unbelievable. Therefore, disallowance of salary of ₹ 3,45,000/- out of the total claim of ₹ 7,64,975/- is sustained”. We are of the view that the assessee is unable to prove the genuineness of the salary paid to these employees and CIT (A) has confirmed the disallowance with reasons. We also confirm the orders of the lower authorities. This issue of assessee's appeal is dismissed. Levy of penalty u/s 271 (1)(c) - Held that:- We find from the orders of the lower authorities that both the authorities below have assumed concealment in respect to on money received for the post survey period. The on money was received by the assessee for the assessment year 2006-07, being the date of survey on 21-02-2006, for the reason that some papers for the financial year 2005-06 were found. But, no paper relating to financial year 2006-07 relevant to this assessment year 2007-08 was found. On this basis only the Tribunal has deleted the addition of on money addition and once addition is deleted, penalty will not survive. Accordingly, we delete the penalty and allow the appeal of the assessee.
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