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2015 (6) TMI 421 - ITAT AHMEDABAD

2015 (6) TMI 421 - ITAT AHMEDABAD - TMI - Suppression of profit - impounded material during the course of survey u/s 133A from the assessee premises - Whether the income from the project is to be assessed in the year under consideration? - CIT(A) delete the addition - Held that:- Out of the actual sale consideration of flats at ₹ 5,63,27,300/-, the amount received by the assessee till the end of the accounting year relevant to assessment year under consideration was only ₹ 52,95,000/ .....

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the question of determination of quantum of income from the said project is only academic. - Decided against revenue.

Unexplained labour expenditure u/s 69C - CIT(A) delete the addition - Held that:- the profit and loss accounts found at the time of survey is only an estimated profit and loss account in which projected profit is worked out which the assessee expected to earn on the completion of the project. From the profit & loss account found at the time of survey, we find that on .....

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, we are of the opinion that the CIT(A) was fully justified in holding that in the absence of any corroborative evidences indicating the fact that assessee actually incurred more expenditure than what was shown in the books of accounts, no addition u/s 69C can be made. We, therefore, uphold the order of the CIT(A) with regard - Decided against revenue.

Disallowance of the transportation exp. - CIT(A) deleted the addition - Held that:- CIT(A) has recorded the finding that the assessee .....

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nexplained investment in land - CIT(A) deleted the addition - Held that:- The issue whether the purchase price shown by the assessee at ₹ 7,31,000/- is the correct purchase price or not is not relevant in the year under consideration. The year under appeal before us is Assessment Year 2007-08 and the relevant previous year would be 01.04.2006 to 31.03.2007. Admittedly, the assessee purchased the said plot of land on 16.02.2006 which would fall in the Assessment Year 2006-07. We, therefore, .....

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- CIT(A) deleted the addition - Held that:- The CIT(A) has treated this ground as infructuous as additions made to the income of assessee stand deleted and did not give any finding on merit. Thus, the Ground of the Revenue’s appeal is misconceived and the same is rejected being misconceived.- Decided against revenue. - ITA No. 3389/Ahd/2010 - Dated:- 12-6-2015 - Shri G. D. Agrawal And Shri S. S. Godara,JJ. For the Petitioner : Shri O.P. Vaishnav, CIT-DR For the Respondent : Shri Mehul R. Shah, A .....

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he fact that the said addition was made on the basis of the impounded material impounded during the course of survey u/s 133A from the assessee premises. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 29,70,895/- made by the A.O. u/ 69C on account of labour charges despite the fact that the said addition was made on the basis of the impounded material impounded during the course of survey u/s 133A from the assessee pr .....

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e, they are being taken-up and considered together. 4. The facts of the case are that the assessee derives income from construction and sale of flats. During the accounting year relevant to assessment year under consideration, there was survey at the assessee s premises on 28.03.2007. During the course of survey, certain papers were found and impounded. One of the papers, i.e. page 110, there was a Trading and Profit & Loss account for the year ended on 28.03.2007; as per which, the net prof .....

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; 2,94,17,251/-, treating the same as business income of the assessee for the year under consideration. On appeal, the CIT(A) deleted the same. The Revenue aggrieved with the order of the CIT(A) is in appeal before us vide Ground No.1 of the Revenue s appeal. 5. As per trading and profit & loss account found at the time of survey, the labour payment was ₹ 98,19,829/-, but as per audited balance-sheet and profit & loss account filed alongwith the return of income, the labour payment .....

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r was found which was Trading and Profit & Loss account in respect of assessee s business for the period from 01.04.2006 to 28.03.2007. The said paper is at page No.14 of the assessee s paper-book and from the said paper, it is evident that the figures are odd figures and therefore, it cannot be accepted that this was only an estimated profit & loss account as claimed by the assessee before the Assessing Officer as well as CIT(A). He also stated that on the said paper, it is nowhere ment .....

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fficer as per Profit & Loss account found at the time of survey was rightly made by the Assessing Officer and the same should be sustained. The ld. Departmental Representative further pointed out that as per Profit & Loss account found at the time of survey, the labour payment was ₹ 98,19,829/- while in the audited Profit & Loss account filed alongwith return of income, the labour payment disclosed was only ₹ 68,48,934/-. Obviously, the balance labour payment was not reco .....

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ofit & Loss account. He pointed out that the land for the project was purchased in the preceding year and the construction work was also started in the preceding year and has been shown as closing work-inprogress in the last year. That the Profit & Loss account found at the time of survey does not disclose either the opening work-in-progress or the land cost. That the correct trading and P&L account cannot be prepared without considering value of land or opening work-in-progress. He .....

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which have been booked till 28.03.2007. That from the flats booked till 28.03.2007, the consideration actually received by the assessee up to 31.03.2007 was only ₹ 52,95,000/-, which was even less than the 10% of the sale consideration which was to be actually received. That not a single sale deed was executed and even the construction work was not completed. Therefore, the total expenditure incurred by the assessee was disclosed in the audited Profit & Loss account and balancesheet a .....

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e during the year under consideration, the project was in progress, the question of determination of income from the said project could not arose. Therefore, the Profit & Loss account prepared till a particular date was only rough/estimated/projected Profit & Loss account. The figure of the profit in the said Profit & Loss account is near about the profit which was actually earned by the assessee from this project. He, therefore, submitted that merely because the assessee prepared so .....

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what was debited in the books of account. That the labour payment debited in the books of accounts is duly supported by bills and vouchers of the petty labour contractors. The complete details of the labour payment made by the assessee alongwith necessary bills and vouchers were produced before the Assessing Officer during the assessment proceedings. The regular books of accounts are duly audited by the Chartered Accountant. The auditor has not pointed out any discrepancy in the maintenance of t .....

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ssessed in the year under consideration, then only the question of determination of income from the said project would arise. There are two recognized methods for determination of income in the case of contractor or builder. One is percentage completion method and the second is project completion method . In the first method, the income is recognized on the basis of percentage of completion of the project, but in the second case, the income is recognized only after completion of the project. Adm .....

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the sale deed was executed. It was pointed out by the ld. Counsel that the amount credited in the loose paper as contract work income was only projected sale proceeds which assessee was to receive on the sale of the flats which were booked till the date of survey. That out of the actual sale consideration of flats at ₹ 5,63,27,300/-, the amount received by the assessee till the end of the accounting year relevant to assessment year under consideration was only ₹ 52,95,000/-. Thus, th .....

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sessment for Assessment Year 2009-10 is completed u/s 143(3) and copy of the assessment order is placed on record. These facts, stated by the ld. Counsel, have not been controverted before us at the time of hearing. Considering the totality of these facts, we have no hesitation to hold that the income from the project under consideration during the year under consideration was not assessable in this year, because the project was not completed. Once the income is not assessable, the question of d .....

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e that the amount of ₹ 98,19,829/- appearing in the impounded Trading & P&L a/c has been actually paid as no material evidencing the payment of labour charges to that extent has been brought on record. As complete details of labour parties have been filed during the course of assessment proceedings, Assessing Officer could have verified the actual facts by making independent inquiry from the labour contractors. As details relating to PAN and address are already on record, Assessing .....

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absence of any corroborative evidences indicating the fact that assessee actually incurred more expenditure than what is shown in the audited accounts, no addition u/s 69C could be made. Hence, addition made by Assessing Officer is directed to be deleted and the appeal on this count is allowed. 12. The above finding of fact recorded by the CIT(A) has not been controverted before us. During the course of survey, the Revenue has seized various papers and the books of accounts. However, there is no .....

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expected to earn on the completion of the project. From the profit & loss account found at the time of survey, we find that on income side there was a credit of ₹ 5,63,27,300/- with the narration contract work income . The assessee is not doing any contract work, but this amount was the sale consideration which the assessee was expected to receive on the execution of sale deed of the flats booked till the date of survey. At the expenditure side, there is no debit for the value of the .....

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appeal and thus, these grounds of Revenue are rejected. 13. Ground No.4 of the Revenue s appeal reads as under:- 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 2,57,358/- made by the A.O. after disallowing the transportation exp. despite the fact that the assessee failed to produce any substantive evidence in support of these exp. and thus failed to discharge the onus to prove genuineness of the exp. before the A.O. .....

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he parties to whom payment of transportation charges have been made. The assessee has also made TDS from payment of transportation charges. Since, assessee has filed all the relevant invoices, the nature of expenditure stands clearly explained and addition cannot be made on the ground that month-wise details of such expenditure has not been filed. Here, also Assessing Officer has failed to bring any evidence on record by making independent inquiry from the parties to whom transportation charges .....

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rted by the Revenue at the time of hearing. In the ground of appeal, the Revenue has contended that the assessee failed to produce substantive evidence in support of these expenses. However, the CIT(A) has recorded the finding that the assessee had filed the relevant invoices issued by the parties to whom the payment of transportation charges have been made. The assessee has also deducted TDS from the payment of transportation charges. Thus, the CIT(A) was of the opinion that from these evidence .....

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. on account of unexplained investment in land despite the fact that the addition was made on the basis of the loan documents in possession of State Bank of Mysore and the valuation made by the bank was very well accepted by the assessee to avail the loan facility. 17. The relevant facts relating to Ground No.5, as given by the Assessing Officer in his order, read as under:- 6.1 The bank has mortgaged the open plot of land and as per their valuation, the value of the open plot of land is of S .....

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Surat, 2006. The land on which residential towers/complex constructed, worked out at ₹ 112.06 per sq. Mtrs, which is prima facie very low rate. You are hereby issued show cause and required to produce the Valuation Report of the approved Registered Valuer. 5.1 It is also noticed that as per medium term long term agreement with State Bank of Mysore dated 28.02.2007 under the head "security and margin", it is contended that the equitable mortgage of open land at SY No. 112/2, TPS .....

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uer. The assessee was also issued show cause notice as to why the value of the land should not be considered as per the agreement with State Bank of Mysore, Surat. The assessee reply on this issue is reproduced as under: "We have purchase land on 16/2/2006 admeasuring 6523 sq.mtrs & after the gap of 12 months the assessee had obtained loan from state bank of mysore on 28/02/2007. In between this period of 12 months assessee firm has developed the land by doing leveling, fencing etc as a .....

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the various dates on which loan was disbursed by the bank." 6.3 On careful examining the assessee's reply, it is ascertained that the land was purchased at the total cost of ₹ 7,31,000/- which is as per jantri rate prevailed at that time, but the copy of jantri is not enclosed by the assessee in the show cause reply. 6.4 it is worthwhile to mention here that in the fastest developing like Surat, purchasing of land admeasuring 6523 sq. rnt on 16.2.2006 for ₹ 7,31,000/- is no .....

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py of so called jantri as per the jantri rate of the land which was purchased by it for mere consideration of ₹ 7,31,000/-. ii) The assessee did not furnish the valuation report of approved registered valuer. iii)The assessee has not adduced any document to prove that the work of leveling, fencing etc. was carried out by them. Even if it is assumed that the work of leveling, fencing etc. was carried out by the assessee, it is difficult to believe that the market value of the open plot of l .....

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,000/-). 6.6 Therefore, the amount of ₹ 4,41,28,000/- is treated as unexplained investment of the assessee u/s 69 of the I.T. Act. 18. The CIT(A) deleted the addition; hence, this ground of appeal by the Revenue. 19. We have heard both the parties and perused the material placed before us. The assessee had purchased an open plot of land on 16.02.2006 for a sum of ₹ 7,31,000/-. Subsequently, in the year 2007, the assessee mortgaged this plot of land for obtaining the loan from State .....

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that the loan was not obtained merely on the mortgage of the plot but on the mortgage of the entire project, i.e., plot as well as flats to be constructed on the said plot. The ld. Departmental Representative, on the other hand, supported the order of the Assessing Officer and pointed out that the value of the plot only was shown at ₹ 448.59 lacs and it is impossible that the value of the plot would increase about 60 times in a year s period. He, therefore, submitted that the addition as m .....

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