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TMI Blog2010 (12) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in law in deleting the addition of Rs. 3,82,94,536/- on account of registration and electrification charges received from clients on the ground that such expenditure are revenue in nature whereas AO held such payments as capital expenditure. 4. On the facts and circumstances of the case, the ld. CIT(A) has erred in law in deleting the addition of Rs. 28,21,000/- on the basis of percentage completion method as against project completion method adopted by the assessee whereas the method of project completion method is not in accordance with mercantile method of accounting adopted by the assessee in maintaining books of accounts and by way of following incorrect method the assessee intended to postpone chargeability of profits in his construction business. 5. On the facts and in the circumstances of the case, the order of the ld. CIT(A) has erred in law in deleting the addition of Rs. 1,61,67,600/- towards unexplained cash credits u/s 68 of Income Tax Act, 1961 whereas the assessee failed to substantiate genuineness and creditworthiness of depositors and genuineness of transactions. 6. On the facts and circumstances of the case, the order of the ld. CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In the assessee's case though there was cancellations of booked flat the assessee had not shown any income by way of forfeiture of earnest money consequent to such cancellation. During the course of search in the associate concern M/s K.K. Enterprises in case of a cancellation by Mr. Kailash Khandelwal earnest money was forfeited. Assessee contended that it was policy of the company to insure that customers do not cancel the flats. However, in such event it was the discretion of the company to go for forfeiture of earnest money. This was in order to maintain good customer relations and market reputation, since is no cancellation amount has been received by the assessee the notional addition should not be made. The AO made the addition holding that assessee ought to have forfeited the 25% of the amount in respect of cancellation of booking out of a flat booked for Rs. 4391400/-. In first appeal CIT(A) deleted the addition by holding as under: "As regards the statement of Mr. Manish Aggarwal given in the legal suit filed by one Mr. Kailash Chand Khandelwal, it was stated that the same was given in the case of M/s K.K. Enterprises which is a separate assessee. However, further on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overable from the buyers of the space in the mall over and above the sale price but only at the time of handing over the possession or execution of sale agreement whichever is earlier. Therefore, the amounts paid were shown independently in the balance sheet as recoverable for a proper monitoring and computation of recovery from each buyer. These amounts were not included in the work in progress nor debited in the profit and loss account in any manner. This amount was not the capital expenses for the appellant as it was to be defrayed on behalf of customers. It was further submitted that whatever surplus would be available from the recoveries would be offered as income in the year of receipt. Nothing was recovered from the buyers on this account till 31.3.05 as neither any possession nor any agreement of sale of any space was given or executed till then. Thus, the same was shown as receivable. AO considered the same as income of the appellant though the said amount was spent but not claimed as an expense. Further even if it is held that the said amount recoverable should be shown as income of the year yet no addition could be made as neither any amount for the expenses incurred was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. Further, no amount towards these charges has been recovered in the year under consideration nor it is case wherever such amounts were recovered but were not shown in the profit and loss account. Thus, the amount so paid and shown as recoverable has not been adjusted against any revenue receipt as has been alleged in the assessment order but without any basis. In view of the above findings, no addition for the registration and electrification charges can be made in the hands of the appellant and the addition of Rs. 3,82,94,536/- stands deleted." 7. Ground no. 4, the facts are though assessee has been following a consistent method based on project completion method i.e. to recognize the revenue on the completion of project. The AO however, held that the assesee in this year should pay tax on percentage of completion method and made the addition of Rs. 28,21,000/-. Aggrieved, the assessee preferred first appeal, where the addition was deleted by CIT(A) by following observations: - CIT(A) held that (i) the assessee is consistently following project completion method for revenue recognition and it has been allowed to assessee in earlier years as well as associate concern cases. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving details of advances received against bookings. The assessee submitted details. It was noticed that in many of the cases there were a number of customers who have booked flats/spaces against which sales have still not been shown. The assessee was asked to submit confirmations from these customers to confirm that the advances were actually given by them. However, he was not able to produce confirmations in respect of many of the parties. Since the assessee has not produced many of the confirmations he has not discharged the burden placed on him under the provisions of sec. 68 of the Act. Accordingly, all such advances are held to be unexplained cash credits and added back to the income of the assessee as below: - 1) Shaily Singla, 2) Arun Moga, 3) Manju Paliwal, 4) Raminder Singh, 5) Rubina Wadhwa, 6) Onkar Lal Aggarwal, 7) S. Sunpreet Singh and S. Gurcharan Singh, 8) Tatheget Jain, 9) Tathgset Jain, 10) Om Prakash, 11) B.M. Builders, 12) L.K. Jain & Vipin Dang, 13) Kamal Kishore Kain, 14) Ajay Kumar Kain, 15) Archana Saini, 16) Manju Bala, 17) Indovest Financial Service Ltd., 18) Shahi Goel, 19) Mukesh Kumar, 20) Inder Sain Arora, 21) Raj Chopra, 22) Ashish Comboj, 23) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d details of advance received against sale of property otherwise than through account payee cheques and giving complete details and confirmations from such buyers/parties. The appellant submitted those and no addition has been made for the said advances received. Thus, it is clear that the AO never desired to submit any confirmation for the advances received against sale through account payee cheques and, therefore, correctly the same were not submitted by the appellant. However, the confirmations along with copies of ledger accounts of the said buyers in the books of the assessee were filed by the assessee during the course of appellate proceedings. The same technically is fresh evidence to attract rule 46A as the AO never called for the said confirmations. However, even if those are treated so yet the appellant was prevented from filing the said evidences which are relevant to the ground of appeal. I hereby admit the said evidence as the assessee has fulfilled the condition prescribed u/s 46A. On perusal of the confirmations on record, it would be seen that the complete details like names, addresses, cheque number, bank details and PAN of the buyers have been duly mentioned there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for such information. The assessee in first appeal before CIT(A) has raised a specific ground of appeal no. 5 as under: - "The Assessing Authority erred in law and on facts in making an addition of Rs. 1,61,67,600/- u/s 68 as unexplained cash credit for advances received from some customers mentioned in the assessment order alleging that confirmations from those customers were not filed by the appellant; whereas the appellant was never asked to file such confirmations and without issuing summons u/s 131 to those persons even when their complete addresses with PAN numbers had been furnished in writing by the appellant. Thus, the addition so made on surmises and conjectures must be deleted." 15. CIT(A) on perusal of the entire record has held that AO during the course of assessment did not require the assessee to submit confirmations of advances received by account payee cheques. As a matter of caution assessee filed the copies of confirmations and ledger accounts before CIT(A). CIT(A) held that it is only technically fresh evidence and assessee was prevented by a sufficient reason from filing it as it was not asked for. Since the AO did not ask for confirmations and made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the last issue about deletion of addition u/s 68 i.e. ground 5, 6 & 7 we have gone through the entire material on record in this aspect and the notice issued by AO u/s 142(1). The requirement of confirmations was in respect of advances received in cash and not by account payee cheques. It is peculiar that AO has made no addition in respect of cash advances received by assessee and the same has been made in respect of advances received by account payee cheques. Be that as it may, revenue has questioned the violation of Rule 46A. In our view, assessee supplied addresses and permanent account numbers of the customers with books of accounts before AO, which is not disputed. The basis of addition i.e. non furnishing of confirmations has not been specifically insisted by AO and addition was made ignoring addresses and PAN nos.. Assessee filed a specific ground of appeal before CIT(A) challenging the AO's finding for asking such confirmations. In the circumstances, assessee produced before CIT(A) the relevant confirmations from the same customers and their ledger accounts in their books of account claiming that 19 customers have been already sold the flats by the time of first appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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