TMI Blog2014 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ing partial relief to Assessee has given a finding that there was nexus between expenditure incurred and interest bearing funds, the expenses incurred by Assessee on behalf of society in the previous year was much less and Assessee had also charged interest an advance granted to 2 parties - Revenue could not controvert the finding of CIT(A) – thus, there is no reason to interfere with the order of CIT(A) – Decided against Revenue. Penalty u/s 271(1)(c) of the Act – Held that:- While deciding the quantum appeal the addition is restricted on the basis of 30% of the receipts - quantum proceedings and penalty proceeds are distinct and separate and therefore the fact that addition has been made in quantum proceedings will not automatically justify the imposition of penalty - a penalty cannot be imposed automatically or mechanically after an addition has been made - Even the material on which the additions were made have to be again given a fresh look from the point of view of levying penalty - all the necessary facts were furnished by Assessee and the fact that the addition has been substantially reduced and the addition has been sustained only on estimate basis – thus, the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. erred in assessing the income at Rs. 1,40,33,890/-. 2. The ld. CIT(A) has erred in confirming the notional interest disallowance at Rs. 12,000/- as per his order page 3 and 4 para. 6 thereof. It is respectfully submitted that the addition made by the A.O. of Rs. 4,71,392/- as per his order para. 3.2 ought to have been deleted in toto in view of the written submission made before the A.O. dated 15.12.2006. 3. The ld. CIT(A) has erred in confirming the disallowance at Rs. 14,00,000/- as per his order page 12, para. 13.1 and 13.2 out of addition made by the A.O. at Rs. 1,34,40,147/- as per A.O's order page 5 to 11 para. 6 to 6.3. In nutshell it is prayed that the whole addition in respect of so called undisclosed income ought to have been deleted by the Hon'ble CIT(A). 4. The ld. CIT(A) has erred in confirming the addition of Rs. 1,91,223/- as per A.O.'s order page 11 to 12, para. 7, CIT(A)'s finding as per page 13, para. 14. It is prayed that the whole addition made of Rs. 1,91,223/- on account of so called undisclosed income from extra work receipt is required to be deleted. 4. The grounds raised by the Revenue reads as under:- 1. The Ld.CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions of sale of bunglow and construction receipts were recorded in its books of accounts. Assessee interalia submitted that land in question was owned by M.Aajara Coop Housing society, sale deed was executed by M.Aajara Coop Housing society with the members and the Assessee was only a contractor and not owning any land. It was further submitted that the consideration of land is accounted for in the books of society. It was further submitted that the impounded register was prepared by the site supervisor and was not authenticated by any partner and the names of the persons were not mentioned in the impounded register. It was further submitted that Assessee was working as building contractor and had entered into construction agreement with 8 members for Rs 14 lac each. In case of some of the members, extra work was done by the assessee. The total amount of contracted amount and the extra work amounting to Rs 1,18,29,149/- (details given on page 7 of AO's order) was accounted as contract receipts in the books of accounts. It was further submitted that the construction amount charged to the 8 members was as per the prevailing market rates. With respect to Rs 1,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that it was the M. Ajara Co-op. Housing Society (registration No. GH-21020) which had purchased land from land owners vide registered sale deeds. The appellant firm was apparently engaged as developer and consultant and carried out development work, in terms of the agreement dated 14/12/2004 with the Society, in respect of the land of the society, being FT No.37/TPS No.l, Thaltej, Ahmedabad, admeasuring 7864 sq.mtrs. It also involved seeking/obtaining approvals of legal authorities, providing amenities, facilities, services, arranging finances, etc.. The expenses on such development, borne by the appellant firm are stated to have been reimbursed subsequently. It is stated that the cost of the land per sq. mtr. was determined after keeping in account the fact that approximately 40% of the land was to be kept for reads/facilities. The Society has allotted plots to the members as per individual sale deed executed with the allottee members. The members had, in turn, entered into agreement for construction of their residence, with the appellant firm. The A.O. felt that the assessee was under no obligation to develop common amenities/construct compound wall and that the society was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot owners i.e. Rs.6,200/- per sq. yard, was correct. It therefore, stands to reason that the construction receipts have been understated by the appellant firm to the extent, calculated by the A.O. in his chart, on page 10 of the assessment order. The differential amount of receipts from construction of residence i.e. Rs.l,75,000/- from each of the 8 bungalows constructed during the previous year, a total of Rs. 14,00,000/- therefore constitutes undisclosed income of the appellant. 13.2 It has been pleaded before me during the course of hearing that if it was held so, then only the profit element i.e. about 8% of the receipts, should be considered for addition. This plea however is not substantiated by the appellant with requisite evidence of there being undebited expenses/cost etc. It is therefore not acceptable. As such, over all addition of Rs. 1,34,40,147/- made by the A.O. is restricted to Rs. 14,00,000/- and the balance is deleted. The related ground of appeal is decided accordingly. 7. Aggrieved by the order of CIT(A), Assessee and Revenue are now in appeal before us. 8. Before us, Ld A.R. reiterated the submissions made before AO and CIT(A). It was further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and has also been confirmed by Mr. Jani in his statement and had accordingly confirmed the addition of Rs 14,00,000 (Rs 1,75,000 x 8 bunglows). The submission of the Assessee that society had entered into a project development and consultant agreement with Assessee and the members of the society had entered into construction agreement for bunglows on their plots with the Assessee has not been controverted by Revenue by bringing any tangible evidence in its support and thus the fact that Assessee is contractor is not controverted. We find that Assessee had received Rs. 1,75,000/- from 8 bunglows aggregating to Rs. 14 lacs which is stated to have been recovered towards maintenance, registration electricity etc. Before us no material has been brought on record by Assessee to show the extent of expenses incurred by Assessee on those count. It is also a fact that the entire receipts of Rs. 14 lacs cannot be considered to be income. The submission of the Assessee that it is a contractor for carrying out civil work could not be disproved by Revenue with any tangible evidence. We also find that as per the provisions of Section 44 AD as was applicable at the relevant time to an assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate to disallow proportionate interest @ 12% in respect of the interest free advance of Rs. 1 lakh i.e. Rs. 12,000/- and to delete the balance disallowance of interest. The related grounds of appeal are decided accordingly. 13. Before us, ld. D.R. supported the order of A.O. and on the other hand ld. A.R. reiterated the submissions before CIT(A) and supported his order. 14. We have heard the rival submissions and perused the material on record. CIT(A) while granting partial relief to Assessee has given a finding that there was nexus between expenditure incurred and interest bearing funds, the expenses incurred by Assessee on behalf of society in the previous year was much less and Assessee had also charged interest an advance granted to 2 parties. Before us, Revenue could not controvert the finding of CIT(A) and therefore we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. 15. In the result, the appeal of Assessee and Revenue are partly allowed. ITA No.2262/AHD/2009 (Assessee's appeal) and ITA No. 2645/AHD/2009 (Revenue's appeal) for A.Y. 06-07. 16. The ground raised by Assessee reads as under;- 1. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are also similar to that of A.Y. 05-06. We therefore for the similar reasons given while disposing the appeals for A.Y. 05-06, also dispose of the present appeals. 19. Thus the appeals of Assessee and Revenue are partly allowed. ITA No. 309/AHD/2011 (A.Y. 07-08) 20. The ground raised by the Assessee reads as under:- 1. The ld. Assessing Officer has erred in making addition of Rs. 1,54,44,720/- in respect of so-called undisclosed income in respect of construction of bungalows and allotment of plot (Assessing Officer's order page 5). In view of the facts and circumstances of the case, learned CIT(A) has also erred in not appreciating the facts and submissions made before him, as reproduced by him in his appeal order page 3 to 11 para 6.2 inter alia erred in not appreciating the facts mentioned in the said submission and came to the wrong conclusion in his appeal order page 11 to 13 para 7 to 8 thereof. It is prayed that the whole addition made is directed to be deleted with consequential relief. 21. Before us, both the parties submitted that the ground raised in the present appeal of Assessee is identical to that of A.Y. 05-06 and further the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the levy of penalty on account of unaccounted receipts from the construction of bungalows, it is seen that the addition has been made on the basis of documents seized which clearly indicate the receipt of on money by the appellant. The CIT(A) has examined these documents and the explanation of the appellant in respect of these documents in detail in the appellate order. It is also seen that the appellant has also indirectly accepted the receipt of on money before CIT(A) which is evident from the fact that in para 13.2 of the appellate order the CIT(A) mentions as under: It has been pleaded before me during the course of hearing that if it was held so, then only the profit element i.e. about 8 of the receipts, should be considered for addition. This plea however is not substantiated by the appellant with requisite evidence of there being undebited expenses/ cost etc. 3.3 It is clear that the above on money receipts were not accounted which has led the CIT(A) to hold that the average rate of receipt of on money was Rs. 6000/- per sq. yard. This fact was also confirmed by two plot owners. In view of the above it is clear that the appellant had on money receipts which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Others reported in 306 ITR 277 (SC) to hold that penalty was leviable on this ground. 3.8 In view of the above, penalty u/s.271(l)(c) of the I.T. Act levied by the Assessing Officer to the extent of that on the unaccounted receipts and that charged for extra work in the construction of the bungalows is confirmed. 26. Aggrieved by the order of CIT(A), Assessee is now in appeal before us. 27. Before us, ld. A.R. submitted that the penalty were levied mainly on the addition and disallowance made by A.O. which were partly confirmed by CIT(A). He submitted that Assessee had disclosed all the necessary facts while filing the return of income and during the assessment proceedings. He further submitted that Assessee has not concealed particulars of income or furnished inaccurate particulars of income. He therefore submitted that it is a settled law that mere disallowance could not be a ground for levy of penalty. He thus submitted that penalty be deleted. Ld. D.R. on the other hand supported the order of A.O. and CIT(A). 28. We have heard the rival submissions and perused the material on record. The factual position is that against the returned income of Rs. 88,150/- the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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