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TMI Blog2014 (7) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... completeness of the accounts of the assessee as necessary evidences as required by the Assessing Officer were not produced by the assessee during the course of assessment proceedings, hence the application of Section 145(3) of the IT Act, may kindly be upheld." 4. Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of CIT(A). 5. We have considered the rival submissions. This issue was decided by CIT(A) in favour of the assessee by making the following observations: "The 2nd ground of appeal is related to application of Section 145(3) and to make assessee U/s 144 of the Act. The A.O, mentioned in the assessment order that "During the course of assessment proceedings the assessee had filed the details of various expenses under the head purchase, direct expenses, selling and distribution expenses, administrative expenses, etc. On a perusal of sub-head of these expenses it was seen that the assessee had debited expenses under the head Commission and Brokerage, broker incentive, advertisement expenses, business promotion expenses. When the assessee was asked specifically to give detailed working of brokerage and commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 279 ITR 457 (Cal) 2. Assistant Commissioner of Income Tax ITAT, Chandigarh Bench, ITA Nos. 94 & 1432/Chd/1990; Asst. yrs. 1986-87 & 1987-88 3. Shree Gautam Textiles ITAT, Jodhpur Bench, ITA No, 226/Jd/1999; Asst. yr. 1994-95." The reason recorded by the A.O., for applying Section 145(3), was that the assessee did not furnish complete details of expenses debited under the heads of brokerage and commission, incentive, advertisement, business promotion etc. The contents of the assessment order reveal that the assessee produced books of account and attended proceedings from time to time. It was also mentioned that the assessee received advances from customers and made payments to the parties for purchase of land through cheques and drafts and these transaction were made through bank accounts, In Para 4 of the order, it was mentioned that the assessee furnished details of various expenses under the heads of purchase, direct expenses, selling and distribution, administrative charges etc. In Para 5 of the order, it was further mentioned that the consideration for sale of plots and discount, which was directly allowed to the buyers, were verified from some of the parties. Thus, the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed." 6. We find that a clear finding is given by the CIT(A) that as per the observation of the Assessing Officer in the assessment order, it is noted that no specific defect was detected by the Assessing Officer in the books and there was no dispute that the assessee was maintaining books of account. He also noted that the Assessing Officer was satisfied about the correctness and completeness of books and method of accounting regularly employed by the assessee. The provisions of section 145(3) could be invoked if the Assessing Officer is not satisfied about the correctness and completeness of the accounts and method of accounting followed. The CIT(A) has followed various judgments wherein it was held that when the Assessing Officer did not point out any specific defects in the books of account maintained by the assessee, the books cannot be rejected by invoking the provisions of section 145(3) of the Act. Moreover, even after rejecting the books of account, the Assessing Officer has not proceeded to estimate the income of the assessee and he has made disallowance out of various expenses debited by the assessee in the books of account. Hence, in our considered opinion, under these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is evident that the assessee had started booking of flat and for that he had started developing the land. The assessee had not furnished the details of part of these expenses related to the development of flats and it had not transferred part of expenses in WIP project expenses. In these circumstances, on the analogy of accounting policy followed by the assessee, I would disallow 10% of the direct expenses by estimate to be apportioned in WIP project expenses. In these circumstances, I disallow 10% of direct expenses of Rs. 16,94,50,896/- amounting to Rs. 1,69,45,090/- and add it towards the assessee's total income. Penalty notice u/s 271(1)(c) is being issued separately." The A.R. of the assessee submitted that "That the Learned Addl. Commissioner of Income Tax Range-I, Bareilly has wrongly disallowed a sum Rs. 1,69,45,090/- on estimate basis being 10% of total direct expenses claimed at Rs. 16,94,50,896/-. Your Honour would appreciate that assessee is engaged in the business of housing development and it has started its first project named and styled as CITYONE which is an integrated township project. As per the scheme 25 units of Villas, 1054 units of Bunglows & 668 uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other details along with nature of work done at page 122 to 275 of the paper book. The assessing officer examined these details and furnished remand report. The relevant extract of the report dated 28.7.2010 is reproduced as under: "The Assessing Officer further observed that the assessee has debited direct expenses of Rs. 16,94,50,896/-. To ascertain the genuineness of the expenses debited by the assessee in various heads the assessee was required to furnish the full and complete details including vouchers as well as the work in progress. In response of above query the assessee furnished some material and on examination of this material it was observed by the Assessing Officer that the assessee has not developed the flats whereas the assessee has sold Plots during the period under consideration. It is further observed by the Assessing Officer that maximum expenses re fetes to sale of plots. However the assessee had failed to produce the full details about the plots sold and the flats developed during the period under consideration. In absence of proper evidences in the shape of vouchers and details as well as name and complete addresses to whom an amount of Rs. 16,94,50,896/- ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer has not pointed out a single instance as to what details were asked for by him in remand proceedings, which has not been submitted by the assessee. Under these facts, we do not find any infirmity in the order of CIT(A) on this issue where it is held by him that the Assessing Officer made the addition without having any material on record. Therefore, we decline to interfere in the order of CIT(A) on this issue. This ground of Revenue is rejected. 10. Ground No. 3 of the Revenue's appeal is as under: "3. Whether on the facts and circumstances of the case, the CIT(A) was justified in deleting the addition of Rs. 3,36,87,110/- ignoring the very basis on which the addition was made. The Assessing Officer had made the addition on account of the fact that apportionment of expenses on commission and brokerage to work-in- progress (WIP) in P&L a/c was not correct as the payment of commission and brokerage was specific to sale of plot and booking of plot and hence, had to be debited to the P&L a/c on specific basis and since the assessee had failed to give the details at the time of assessment proceedings and also during the course of appeal proceedings, the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge ratio of 6% and on that basis the commission on sale of Rs. 39,17,37,450/- (sales after discount) would work out at Rs. 2,35,04,247/-. The assessee had claimed brokerage and commission of Rs. 5,71,91,357/- in its P&L account. I would, therefore, allow expenses on account of brokerage and commission at Rs. 2,35,04,247/- and the difference of Rs. 3,36,87,110/- would be disallowed and added towards the assessee's total income." The A.R. of the assessee submitted that "It may kindly be submitted that complete details of payment of commission and brokerage to various booking agents were furnished along with their PAN and details of TDS deducted thereon and copy of bills raised by brokers were also produced by reply submitted on 27- 08-2009, dt. 14-08-2009, dt. 13-10-2009 and dt 23-10-2009. From the details of commission paid during the year 2006-2007, it is very much clear that an amount of Rs. 5,71,91,357/- was paid on sales of plots and the balance commission of Rs. 2,45,10,581/- has rightly been carried forward as work in progress. Name wise details of brokers with their addresses, date wise details of payment and TDS thereon and plot wise details of commission are being furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings the Assessing Officer has not made disallowances on the basis of confirmation given by the assessee are broker/commission agent by or obtained by the Assessing Officer, The disallowances has been worked out by the Assessing Officer against the sales which had been claimed by the commission agents and brokers in their bills submitted before the Assessing Officer The claim of the commission and brokerage was made before the Assessing Officer in some cases 5%, in some cases 6% and in some cases 7%. Considering the claim of percentage the Assessing Officer taken average rate 6% against the sales of Rs. 39,17,37,450/- which comes Rs. 2,35,04,247/-, however the commission and brokerage claimed by the assessee of Rs. 5,71,91,357/-. After giving effect of Rs. 2,35,04,247/- the excess claimed of Rs. 3,36,87,110/- has been disallowed. However, as discussed in my remand report dated 28.07,2010 submitted to your good self the notice u/s 133(6) were issued to the Company's to whom commission, brokerage and incentives were paid by the assessee. In response to above notices the maximum companies have sent their confirmation till date which are placed on record and same are verified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue expenditure and that of work-in-progress out of commission and brokerage paid to the brokers and agents for booking of plots and flats, it was noticed that the assessee furnished separate details of payment of commission and brokerage in page 99 to 120 of the paper book for sale of plots. The assessing officer carried out verification U/s 133(6) from 23 parties and on that basis furnished remand report on 28.7.2010 and 17.8.2010. He attended appeal proceedings along with case records and also furnished written submission dated 23.8.2010. The A.O. admittedly, did not report any discrepancy regarding claim of commission and brokerage. After taking into account the contention of the appellant and the remand report of the A.O., it is my considered view that the genuineness of the claim has been established. Therefore, this ground of appeal is allowed." 12.1 From the above Paras from the order of CIT(A), we find that it is noted by CIT(A) that the assessee has filed confirmation from certain brokers. As per the details of commission payment available on page No. 107 to 127 of the paper book, total commission expenses debited in the profit & loss account of Rs. 5,71,91,357/- is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions, a fact which has been ignored by the Ld appellate authority. 4. The Ld Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of deduction u/s 80IB with total disregard to the facts and circumstances of the case. 5. The assessee reserves it's right to add, amend, alter or delete any ground of appeal at the time of hearing." 14. Regarding ground No. 1, nothing specific was submitted by Learned A.R. of the assessee in course of hearing before us and he simply argued on merit of various disallowances/additions made by the Assessing Officer and hence, we decline to interfere in the order of CIT(A) on this issue. Accordingly, ground No. 1 is rejected. 15. Regarding ground No. 2, it was submitted by him that it is noted by the CIT(A) on page No. 11 that this includes Rs. 21,000/- being expenses incurred by the assessee in respect of Kushti Dangal and Rs. 1.50 lac in respect of Sikh Club, Rudrapur. He submitted that Kushti Dangal was organized in Rudrapur and it was sponsored by the assessee company and it was purely a business expenditure as by sponsoring any sports or cultural events, company gets publicity and builds it brand image. Regarding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has been submitted by the Assessing Officer that out of total disallowance under this head of Rs. 26,60,505/-, confirmation was called for and was received for Rs. 22,29,5632/- and for the balance amount of Rs. 4,30,873/- disallowance was confirmed by CIT(A). Under these facts, we find that the disallowance was confirmed by CIT(A) merely on the basis that reply was not received from some payees. It is also noted by CIT(A) that in the assessment order, the disallowance was made by the Assessing Officer to the extent of 30% for the reason that the assessee did not furnish bifurcation of incentive on sale of flats and advance booking of flats. As per the written submissions filed by the Assessing Officer before the CIT(A) on 23/08/2010, it is not the case of the Assessing Officer that even a single person has intimated that the incentive was paid to him in respect of work in progress. The entire amount for which reply was received by the Assessing Officer for Rs. 22,29,632/- has been allowed by CIT(A) and the only basis for making the disallowance is that for the balance amount of Rs. 4,30,873/-, no reply was received in reply to notice u/s 133(6) of the Act. When the initial obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. We also find that a clear finding is given by the CIT(A) on page No. 12 that the Assessing Officer did not find any defect in the books of account or supporting bills and vouchers. He has also noted that the books are audited by the auditors without giving any qualifying remark. He has also noted that the Assessing Officer did not notice any defect in the method of accounting. He further noted that the Assessing Officer did not bring any material on record to establish that there was any inflation of expenses. After giving these findings, it was held by CIT(A) that the Assessing Officer was not having any factual or legal basis to estimate addition out of direct and indirect expenses u/s 145(3) of the Act. This finding of CIT(A) could not be controverted by Learned D.R. of the Revenue. This is also not brought on record by Learned D.R. of the Revenue that the change in accounting policy adopted by the assessee in the present year has not been consistently followed by the assessee in subsequent years and therefore, the change is not justified. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this isue. This ground is rejected. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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