9911796707
TMI Blog2014 (2) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... the business premises of the assessee. Proceedings under S.153C were initiated against the assessee and in the course of assessment, the assessing officer disallowed expenditure in various years varying from 20% to 60% in the following manner- Assessment year Total Expenditure claimed Disallowance made 2005-06 24,28,599 13,39,729 2006-07 22,72,799 13,63,679 2007-08 1,04,75,702 26,18,925 2008-09 89,65,951 17,93,190 The reasons stated for disallowance of part of site development expenses and construction expensed by the Assessing Officer, adopting varying percentages, are that the purchases by the assessee are from unorganized real estate sector such as sand, metal, labour, with the result the assessee firm could not obtain proper bills and vouchers are mostly self made. The Assessing Officer while framing the assessment for the years under appeal, selected some of the items of purchases and other expenditure and disallowed part of such expenditure adopting various percentages, ranging from 20% to 60%. 3. The CIT(A), after considering the explanation of the assessee reduced the disallowance to 25% of the expenditure in assessment years 2004-05, 2005-06, 2006-07 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing been subjected to search and seizure proceedings in the course of which there was declaration of higher income. The law on this aspect is made very clear by the decisions of various authorities, as may be seen from the commentary of Chaturvedi & Pithisaria's Income-tax Law(Fifth Edition), relevant portion of which appearing at page 7635 of Vol.5 thereof, reproduced below- "Not merely the filing of appeal but the payment of admitted tax, should ordinarily be within the period of limitation- In the context of the sales tax statute the words "no appeal....shall be entertained" in the proviso to section 9 of the U.P. Sales Tax Act, 1948, were held to denote not the filing of the memorandum of appeal but refer to the first occasion on which the appellate authority takes up the matter for consideration. It may be at the admission stage or if by the relevant rules the appeals are automatically admitted, it will be the time of hearing the appeal. Therefore, even though the memorandum of appeal filed within time was not accompanied by the challan showing payment of tax admitted by the appellant, if on the first occasion when the appellate authority took up the matter for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the issue in favour of the assessee. Therefore, the question to be decided is whether there is sufficient cause for the delay, as held by the Hon'ble Supreme Court in the case of CIT V/s. Filmistan Ltd. (42 ITR 163). 7. There is no dispute with reference to the judgment of the Hon'ble Madras High Court relied on by the learned CIT(A), viz. the decision of the Madras High Court in the case of Alagarswamy (supra). In that case, the facts are that the assessee did not prefer any appeal on the dismissal of the appeal by the CIT(A) vide order dated 28.8.2001, received on 5th September, 2001, but preferred Writ Petition during December, 2003. Further, there was no evidence that the assessee paid the taxes. In that circumstance, the Hon'ble Maras High Court held that there was no illegality or irregularity or arbitrary exercise of power by the CIT(A) in dismissing the appeal. However, in the present case, the appeal was preferred within the limitation time and the assessee did pay the taxes within 31 days after filing the appeal, and sought condonation of delay with a proper affidavit before CIT(A). Therefore, in our view, the CIT(A) should have considered the appeal, having been filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07, the dispute is with reference to quantum of disallowance and not the disallowance per se. 12. While admitting that the assessee has maintained self-made vouchers for various payments, it was the contention of the learned counsel that the assessing officer has considered the entire expenditure, whereas there were cheque payments also made by the assessee out of the expenditure considered for disallowance. It was submitted that there were cheque payments to the extent of Rs.7,20,088 out of Rs.24,28,599 for the assessment year 2005-066 and Rs.7,08,621 out of Rs.22,72,799 for the assessment year 2006-07, which should be excluded from the scope of disallowance. It was submission that even with regard to other payments, the disallowance applying a rate of 25% is on higher side. The Ld. Counsel referred to the business of assessee and need to make payments in cash. 13. The Learned Departmental Representative relied on the orders of the assessing officer and the CIT(A) and pointed out that in assessment year 2004-05, the CIT(A) restricted the disallowance of similar expenditure to 25%, on which the assessee has not preferred appeal. 14. In reply, the learned counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepting the disallowance so confirmed by the CIT(A), the contention of the assessee is that the amount disallowed should not be added to the income returned, but it should be reduced from the closing work-in-progress, since the project was not complete. Thus, the issue arising in this appeal is peculiar, in a way. 18. The assessee was doing site development in earlier years and during the year under consideration, it has constructed flats and sold the same partly. It has offered income to the extent of sale of flats during the year. It was the contention of the assessee that most of the expenditure was on development and construction work amounting to Rs.1.25 crore whereas sale of flats during the year was about Rs.1.59 crores, that too out of the construction work completed in the earlier year mostly. Therefore, it is the contention that whatever expenditure was disallowed, it should be adjusted in work-in-progress, but should not be adjusted in income computation, as it has no bearing on the income working. In support, the assessee placed the Profit & Loss Account and computation of income filed before the assessing officer. The learned counsel reiterated the same arguments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was taken to Profit & Loss Account. Therefore, in a way, part of the opening work-in-progress could have resulted in sale of flats, whereas part of the expenditure claimed in this year under various head could have gone into the construction work-in-progress of Rs.1.25 crores. In the absence of clear cut demarcation given by the assessee, it may be presumed that 50% of the expenditure claimed in this year would have gone into the closing work-in-progress, being mainly construction of houses, (as there was no sale of open plots of land as in earlier years), and therefore, in view of this, out of the disallowance of Rs.8,96,595 sustained by the CIT(A), we consider that 50% should be added to the income of the year and the balance amount should be adjusted in the closing work-in progress. We direct accordingly. 21. In the result, assessee's appeal for the assessment year 2008-09, being ITA No.1421/Hyd./2012, is partly allowed. 22. To sum up- (a) Assessee's appeals for assessment years 2005-06 and 2006-07, being ITA Nos.1418 and 1419/Hyd/2012 are partly allowed; (b) Assessee's appeal for assessment year 2007-08, being ITA No.1420/Hyd/2012, is allowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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