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TMI Blog2013 (6) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of 10% of unverifiable construction expenses, disregarding the fact that the assessee did not maintain regular books of account and could not produce complete supporting document for claim of expenditure during the assessment proceedings. 2. That Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,41,601/- made on account of disallowance of 10% of unverifiable construction expenses, erroneously accepting the net profit ra e of more than 8% of the assessee's business, whereas the net profit rate is only 7.27% which is less than the net profit rate of 8% as envisaged in section 44 AD of the I.T. Act, 1961. 3. That Ld. CIT(A) has erred in law and on facts in restricting the addition of Rs. 43,42,669/- to Rs. 36,50,000/- on account of unexplained expenditure disregarding the fact that as per seized document the expenditure incurred on construction was Rs. 26,57,331/- only, as against consideration of Rs. 70,00,000/- agreed for purchase of the land as per seized document, thereby justifying the A.O. to make addition of balance amount of Rs. 43,42,669/- as unexplained investment. 4. That Ld. CIT(A) has erred in law and on facts in restricting the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He would, of course, be justified in making further addition if he can marshal any evidence suggesting that the actual income earned by the assessee was more than what was disclosed by the latter in course of the search and subsequently in the returns of income. In this case, no such evidence is there. The addition was made simply because the assessee had not maintained regular books of account and required documents in respect of such income. It is settled law that an estimate of income should be cogent and should not be capricious or whimsical. The assessee has claimed to have furnished his income and expenditure account as well as statement of his assets and liability year after year, incorporating the findings relating to undisclosed income and assets during the search. He has shown that the additional income actually offered in the returns furnished by him and his son pursuant to search exceeded the additional income disclosed by them during the search. In view of this, there is no justification for making ad hoc isallowance of 10% out of the expenditure claimed to have been incurred by the assessee in his construction business. The debate whether he was a builderideveloper o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions on cash basis, the income, by strict standards of accounting and law, could be added in the assessment at hand only if it could be shown that the amount had been paid during the previous year under consideration. By those standards, the impugned addition is not justified. At the best, it can be said that the amount of Rs. 36,50,000/- represented a liability. This position could have been accepted if the assessee came up with such a plea. But, as noted above, he has denied the liability altogether. That cannot be accepted. Even though there is nothing on record to show that the amount of Rs. 36,50,000/- was actually paid during the previous year under consideration, it is assumed that the same happened because it was payable and there is nothing to suggest that it was not paid actually. I view of the foregoing discussion, the addition is confirmed in principle but the quantum of the same is reduced to Rs. 36,50,000/-. 2.8 There is another aspect of the matter. What is expenditure for the assessee is receipt for the seller of the land. Even though the AO made addition of Rs.43,42,669/ in this case as unexplained expenditure, it is not clear whether he did the needful to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,50,000/-. Consequently the balance amount of Rs.36,50,000/- must have been paid outside the books of accounts. The assessee demonstrated that the plot was purchased for Rs.25,65,000/- i.e. at the registered price and not at Rs.70,00,000/-as alleged by both Ld. AO and Ld. CIT(A). CIT(A), however, gave only partial relief. 4.5. The seized document found in search and referred to as A-39 placed at PB - 17 contains these details relating to the construction business of AA. The total expenditure in the construction of the house of Mr. Pawar incurred by son AA was Rs.34,91,831/- which was adjusted as under:- Purchase of house Rs.25,65,000/- Given By Mr. Pawar to son Rs. 1,41,500/- From Account of the son of the assessee Rs. 7,85,331/- Rs.34,91,831/- 4.6. Thus the claim of the assessee that documents which belong to his sons business, have been wrongly added in the hands of father i.e. assessee. In this behalf following corroborative documents are relied which are placed on the paper book: 4.7. PB 1-2 are submission filed by the son of the assessee before lower authorities confirming the assesses version and explaining his construction business, the break up of the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly stated that though initially the agreement was for Rs.70,00,000/- but as there was steep fall in the property prices in that area, the price was renegotiated at Rs.33,50,000/- which is supported by the statement on oath and letters of Mr. Pawar before lower authorities, (ii) That the figure of Rs.70,00,000/- out of which figure of Rs.33,50,000/- has been reduced shows that balance of Rs.36,50,000/- was paid. - In reply it is submitted that PB -17 does not say Rs.36,50,000/- was paid either in the year under appeal or by the appellant. It only implies the difference between the original agreed price and the renegotiated price and thus the working of notional difference. In any case no other evidence has been seized suggesting any further payment made by the assessee in the year under appeal. Besides Mr. Pawar also in his statement has denied having received any other payment. Moreover, document A 39 does not pertains to assessee but the son AA for his construction business, which is evident from the noting in the said document. (iii) That the relevant page contains signature of Mr. Pawar and that there is a presumption u/s 292C. - In reply it is submitted that the presum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions between assesses family members and Mr. Pawar, the additions have been made on the basis of documents found from assessees premises for which no proper explanation was given. The explanation of fall in property prices, construction of house of Mr Pawar and comparable instances is self serving evidence filed by the assessee which has no evidentiary value. Presumption u/s 292(C) is not rebutted by assessee which has been rightly applied by assessing officer. CIT(A) erred in allowing partial relief, therefore, AOs order deserves to be upheld. 6. In reply, apropos first revenue ground, ld. Counsel contends that CIT(A) has rightly deleted this ad hoc addition. 7. We have heard the rival contentions and perused the material avail able on record. Since the issues in both appeals filed by revenue and assessee are common they are decided together. 7.1. Apropos the first revenue ground of deletion of Rs. 2,41,601/- in our considered view AO made the addition on an estimate and adhoc basis, there is no finding, observation or material to justify such estimate which is purely an adhoc guess work. CIT(A) has rightly deleted the same, his order on this issue is upheld. 7.2. Apropos th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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