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M/s Vijay Infrastructure Limited Versus A.C.I.T., Central Circle-I, Lucknow. and Vica-Versa

2015 (12) TMI 897 - ITAT LUCKNOW

Unaccounted cash transactions shown in seized material - CIT(A) conformed the addition - Held that:- The reply furnished by the assessee is not satisfactory inasmuch as it lacks evidence and tries to disown the facts of the impugned document. This categorical finding of CIT(A) could not be controverted by Learned A. R. of the assessee before us and therefore, we do not find any reason to interfere in the order of CIT(A) on this issue. When the assessee could not bring evidence to establish that .....

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ct in the vouchers or books of accounts, ad hoc disallowance made by Assessing Officer is not justifiable and the same was rightly deleted by CIT(A). Hence, on this issue, we decline to interfere in the order of learned CIT(A) - Decided in favour of assessee.

Deduction claimed by the assessee u/s 80IA(4) disallowed - deduction u/s 80IA(4) is not allowable in case of a contractor and the assessee is a contractor and therefore, this deduction claimed by the assessee is not allowable to .....

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is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his order, as reproduced above. Considering this factual and legal position, we find no infirmity that the order of CIT (A) on this aspect that in the facts of the present case, it cannot be said that the assessee company was mere a contractor and not a developer.

Non allowability of claim of the assessee u/s 8 .....

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ssment year 2010-11, time available for revising the return was up to 31/03/2012 and the return u/s 133A was filed on 31/03/2012 i.e. within the time available for filing the revised return of income and till the date of search, due date of filing the return has not expired. Considering these facts that in these two years i.e. A.Y. 2007 – 08 & 08 – 09, where the time available for filing the revised return has expired before the date of search, CIT(A) has held that the claim made for deduction u .....

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fore, on this issue also, we find no infirmity in the order of CIT(A) and therefore, this issue is decided in favour of the assessee in two assessment years i.e. assessment year 2009-10 and 2010-11 whereas in the earlier two years in which this issue has been raised by the assessee in its C.O. in assessment year 2007-08 and 2008-09, this issue is being decided against the assessee.

Addition on the basis of valuation report of D.V.O - Held that:- In the present case reference was made .....

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tra investment over and above the declared amount. His report is only an estimate of the fair market value and not an estimate of investment. He has given a finding that the DVO’s valuation report is based on fair market value and this fair market value is relevant for Wealth Tax purposes but under section 69, the term used is unexplained investment in the property. He has given example that if investment is made of ₹ 1,00,000 in April, 2003 and the fair market value of the same building i .....

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al earning of dividend income is not necessary for the purpose of allowing interest expenditure incurred for borrowing for making investment in shares. We have held that on the same analogy, for the purpose of making disallowance u/s 14A also, actual earning of dividend income is not necessary and if it is seen that the expenditure was incurred for earning dividend income, disallowance has to be made u/s 14A of the Act. Accordingly, on this issue, we reverse the order of CIT (A) and restore that .....

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terial was recorded in books of accounts or that the same was paid out of known sources of fund, addition has to be made u/s 69C and deduction for corresponding expenditure is not allowable. Since the assessee could not establish by bringing evidence on record before us or before lower authorities that the expenditure noted in the seized material was in fact recorded in the books of accounts or was paid out of known sources of fund, the addition made by the Assessing Officer is to be considered .....

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(3) of the I.T. Act and the total amount of ₹ 69,83,015/- alleged as paid in cash exceeding ₹ 20,000/- was disallowed. When the assessee carried the matter in appeal before the CIT(A), he deleted the disallowance. It is noted by CIT(A) on page No. 31 of his order that part of expenses are related to assessment year 2008-09 and in that year, when the A. O. asked the assessee to explain, it was submitted by the assessee before the Assessing Officer that cash payments were not made to o .....

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t this is not a single payment to one party but is being paid to various parties and in support, copies of accounts are enclosed. Similarly payment of ₹ 1,10,000/- and ₹ 10,01,420/- was made but it was stated the same is duly recorded in the books of accounts being paid to various persons as per books of accounts produced. Considering these facts that the cash payment in excess of ₹ 20,000/- was not made to a single person on single date, we decline to interfere in the order of .....

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jections are filed by the assessee and remaining seven appeals are filed by the Revenue for various assessment years. Out of these appeals and Cross Objections, seven were heard on 19/08/2015 and balance three on 10/09/2015 and all are being disposed of by way of this common order for the sake of convenience. 2. We find that in these total 10 appeals and Cross Objections, only eight issues are involved. Hence, we decide these appeals and Cross Objections on issue basis. 3. The first issue is reg .....

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rned D. R. of the Revenue supported the orders of the authorities below. 5. We have considered the rival submissions. We find that the contentions raised by the assessee on this issue before CIT(A) are noted by CIT(A) in Para 6 to 6.6 of his order, which are reproduced below for the sake of ready reference: 6. GROUND NO. 1 - ADDITION OF ₹ 1,16,50,863/- Your kind attention is invited towards the seized paper, on the basis of which the above mentioned addition has been made. The page no 95 o .....

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rent dates and the amount of bank commission is ₹ 24,963/-. The total of these two figures comes to ₹ 80,12,863/- In this regards it was submitted that the said paper was prepared by the accountant for the reconciliation purposes. Cash is being remitted from head office to meet the day to day expenses at the site, as the assessee is not having signing authorities at all the sites. In order to make the payments to various persons, drafts were got prepared by the cashier in the name of .....

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o it could not be verified from the books. The Ld AO has not disputed these facts. 6.3 Again on page no. 97 of the seized paper we find that the cashier had stated details of DD and cheques of different amounts, which represent the payments being made to various parties and cash being received. These are rough reconciliation working done by the cashier and do not represent any unaccounted entries. These types of papers are working papers for reconciliation purposes and no addition on the basis o .....

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ctions mentioned on this page are related to the assessee company as the document was found from a premises belonging to the brother of Shri Nausad Ahmad. He further states that from the entries recorded on these pages it can easily be inferred that the demand drafts were bought by the assessee by paying cash of equal amount. 6.5 It is true that the drafts were got prepared by the assessee out of cash but were used to pay the suppliers and as far as the source of such cash is concerned the same .....

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d details of transactions indicated therein in regard to money-lending business, Assessing Officer made addition of entire borrowings received from certain persons even though confirmation letters were produced by them - Whether since said loose papers did not indicate name of assessee, from list of persons given in loose papers it could not be inferred that either any loan or any advance was given to or received from those persons, and since total amount on those loose sheets indicated a very s .....

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ame of assessee, it could not be assumed or presumed as to when and by whom noting were recorded: no addition could be made on basis of such dumb documents [In favour of assessee] Neither any enquiry report nor any document procured either before or after the search can be considered while computing the undisclosed income. Similarly, it is also settled law that any document found during the course of search has to be interpreted literally and nothing can be added or subtracted. Where the documen .....

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g to any other transaction not recorded in the documents CIT v Girish Chaudhary [2007] 163 TAXMAN 608 (DELHI) Section 158B of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income - Block period 1990-91 to 1999-2000 - During search at premises of company in which assessee was a director, document containing, entry 48 was seized - As assessee failed to explain said entry, Assessing Officer treated ₹ 48 lakhs as assessee s undisclosed income and made addition - Whe .....

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ages 9 to 11 of his order, which are also reproduced below for the sake of ready reference: I have perused the facts stated in the assessment order as well as facts stated in the assessee s submission. The Assessing Officer has made the addition of ₹ 1,16,50,863/- by observing that :During the course of search u/s 132 a register inventoried cm Annexure B-10 was found from the residence of Shri Abusad Ahmad at 4.202, Vishal Khand, Gomti Nagar, Lucknow and seized. The seized documents is a r .....

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4.1 From the above entries, it is clear that these are entries relating to receipts through DDs against cash payments. On page 95, first entry dated 7/3/2005 reveals that demand draft of ₹ 7,85,000/- was arranged from Sultanpur through one Jhaji for which Jhaji was paid ₹ 7,87,639/- which included commission of ₹ 2639/- (probably charged by the bank). Similar facts also emerge from other entries also. Vide questionnaire dated 08-02-2013 and subsequent queries, that assessee was .....

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5 lacs so it is not possible to get it reconciled with the books. However, the other two entries are duly recorded in books. It is a general practice that cash was being transferred from HO to branches to meet the expenses and the said page is a rough reconciliation of the same. 4.2 The reply furnished by the assessee is not satisfactory inasmuch as it lacks evidence and tries to disown the facts of the impugned document. The nature and detail of entries show that the purpose of transactions men .....

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of the assessee company routed though demand drafts/cheques mentioned in the said document. The transactions mentioned on this page are related to the assessee company as the document was found from a premises belonging to the brother of Shri Naushad Ahmad, a promoter and chief managing director of the company and the impugned page itself mentions name of Shri S.S. Singh, another promoter and director of the company. The relationship of the document with (the assessee company is further establis .....

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, 95, total expenses on demand drafts are worked out at ₹ 80,12,863/- and at the lower portion of the same page equal amount is paid in cash to Jhaji apparently for this purpose. Similar is the positions for entries on page 97 also. The total of receipts through demand drafts/cheques, as mentioned on pages 95 & 97 is at ₹ 1,16,50,863/- (Rs.80,12,863/- being total of page 95+Rs. 36,38,000/-, being total of page 97), which is added to the assessee s total income in view of the abov .....

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fice at Lucknow which is being sourced out of cash available in the books of the assessee but it is seen that the assessee has not been able to demonstrate from his books of account as from where the cash has been withdrawn i.e. from which bank A/cs and to whom draft was given i.e. which parties and for which work site, the assessee has not establish any link of these papers. These documents found during search are not dumb paper these are speaking papers and reflect all the details about the tr .....

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with the findings of Assessing Officer. The total receipts through demand drafts/cheques, as mentioned on pages 95 & 97, is at ₹ 1,16,50,863/- (Rs. 80,12,863/-, being total of page 95 + ₹ 36,38,000/- being total of page 97), which is treated as undisclosed/unaccounted income of the assessee, the Assessing Officer has rightly made the addition, hence, the addition of ₹ 1,16,50,863/- is hereby upheld and this ground of appeal is being confirmed/dismissed. 5.2 From the observ .....

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included commission of ₹ 2639/- (probably charged by the bank). Thereafter, it is further noted by learned CIT(A) that similar facts emerged from other entries also and vide questionnaire dated 08/02/2013 and subsequent queries, the assessee was required to explain nature and detail of such entries and how the same are recorded in the books of accounts. In reply, it was submitted by the assessee that, this is working paper made by the cashier of Sultanpur to reconcile the cash received by .....

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d material is duly recorded in books of the assessee, it has to be accepted that unaccounted cash was channelized in books by showing bank draft receipts. Hence, there is no infirmity in the order of CIT (A) on this issue. Accordingly, this issue is decided against the assessee. Ground No. 1 for assessment year 2005-06 is rejected. 6. The second issue is regarding disallowance made by the Assessing Officer on ad hoc basis to the extent of 1% of total expenses debited by the assessee in profit &a .....

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ear 2010-11 this issue has been raised as per ground No. 7 and in assessment year 2011-12 as per ground No. 5. 7. On this issue, Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT(A). 8. We have considered the rival submissions. We find that in Para 6 of the assessment order for assessment year 2005-06, it is observed by the Assessing Officer that the assessee has debited various expenses under constructi .....

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xpenses of ₹ 5945.48 lac and in this manner, he made disallowance of ₹ 59,45,488/-. When the assessee carried the matter in appeal before CIT(A), he deleted the disallowance on the basis that the Assessing Officer did not give any finding that the expenditure incurred and claimed by the assessee is either capital in nature or personal in nature or wholly and exclusively not incurred for the purpose of business and this disallowance is made on the basis that the vouchers produced are .....

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pecific defect, no ad hoc disallowance can be made. He has also held that the general observation of the A.O. that the vouchers are self-made cannot be a basis for addition. At best, it can be a starting point for enquiry but if the vouchers were defective, the Assessing Officer should have pointed out the defects and should have asked the assessee for a reasonable explanation. 9. So is the case in assessment year 2006-07. In this year also, the Assessing Officer made similar disallowance of  .....

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.01 lac with same observations and in this year also, this disallowance was deleted by CIT(A) on the same basis. 11. In the remaining years also, the facts are identical. After considering the facts of the present case on this issue and the orders of the authorities below on this issue, we find no infirmity in the order of CIT(A) because on the basis of general observations, without pointing out even a single specific defect in the vouchers or books of accounts, ad hoc disallowance made by Asses .....

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serted by Finance (No. 2) Act, 2009 with retrospective effect from 01/04/2000, the deduction u/s 80IA(4) is not allowable in case of a contractor and the assessee is a contractor and therefore, this deduction claimed by the assessee is not allowable to the assessee. This is issue No. 3 and it is raised by the Revenue in assessment year 2009-10, 2010-11 and 2011-12 as per ground No. 1 & 2 in all these years. The second aspect of this matter is non allowability of claim of the assessee u/s 80I .....

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use in these two years, the decision of CIT(A) is against the assessee. 13. On issue No. 3, Learned DR of the revenue supported the assessment order and learned AR of the assessee supported the order of CIT (A). Reliance was placed on the tribunal order rendered in the case of Koya and Co. Construction (P) Ltd. vs. ACIT as reported in 32 CCH 43 (Hyderabad). On issue No. 4, Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the or .....

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sions. Regarding issue No. 3, we find that the decision of CIT(A) in assessment year 2009-10 is contained on page Nos. 36 to 44 of his order, which are reproduced below for the sake of ready reference: For this year also the appellant had entered into contracts agreements with the NHA1 and UPPWD, and the facts are same therefore, I follow my order for A.Y. 2010-11 and A.Y. 2011-12 in which I had allowed the assessee s claim because the Assessing Officer failed to consider the amendment made by t .....

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ther construction work, done by the assessee, for one year referred to as Defect Liability Period , during which period any defect was to be removed by the assessee as per the need. My attention was drawn to the March 2012 case of Hon ble ITAT Hyderabad Bench case of Koya & Co. Construction (P)Ltd. vs. Asstt, Commissioner of Income Tax wherein they have discussed in detail about the 801A deduction which is as below: ... Section 80-lA of the Income-tax Act, 1961 - Deductions - Profits and / g .....

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no -Whether where from an undeveloped area, infrastructure is developed and handed over to Government, such activity is eligible for deduction under section 80-IA(4) - Held, yes - Whether if contract entered into by assessee with Government involves design, development, operating & maintenance, financial involvement, defect correction and liability period, then such contracts cannot be called as simple works contract to deny deduction under section 80-IA - Held, yes - Assessee claimed deduc .....

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such material; that assessee utilized its funds, its expertise, its employees and took responsibility of developing infrastructure facility; and that assessee handed over developed infrastructure facility to Government on completion of development - Whether, on facts, assessee was a developer and not a works contractor and, therefore, was entitled to deduction under section 80-IA - Held, yes [In favour of assessee] Words & Phrases : Owned as occurring in clause (1)(a) of section 80-1A(4) of .....

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r authorities were of the opinion that the assessee had not undertaken the infrastructure activities and it did not own the infrastructure itself. According to them the assessee was only a contractor carrying on construction of the infrastructure and, therefore, was not eligible for deduction under section 80-IA(4). Accordingly, deduction under section 80-1A(4) was denied by the lower authorities to the assessee. On second appeal: HELD The provisions of section 80-IA(4), when introduced afresh b .....

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on. Therefore, there is no ambiguity in the Income-tax Act. Where an assessee incurred expenditure for purchase of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, an assessee, who enters into a contract with another person including the Government or an undertaking or enterprise referred to in section 80-IA for executing works contract, will not be eligible for the ta .....

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prise carrying on the business which would mean that only companies are eligible for deduction under section 80-IA(4) and not any other person like individual, HUF, Firm, etc. [Para 21] According to sub-clause (a), clause (i) of sub-section (4) of section 80-IA the word it denotes the enterprise carrying on the business. The word it cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatmen .....

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and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. In the instant case, the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee s responsibi .....

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ure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee s duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The ass .....

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by the Government or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during (his period, the entire infrastructure shall have to be main .....

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r as presumed by the revenue. The circular issued by the Board, relied on by the assessee, clearly indicates that the assessee is eligible for deduction under section 80-IA(4). The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. [Para 23] As per the provision of the section 80-IA, a person being a company has to enter into an agreement with the Government or government undertakings. Such an agreement is a contract and for the purpose o .....

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be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. [Para 24] The decision in the case of Laxmi Civil Engineering (P.) Ltd. v. Addl. CIT [IT Appeal No. 766 (Pn) of 2009, dated 8-6-2011] squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction und .....

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ued by the CBDT. To avoid misuse of the aforesaid amendment, an Explanation was inserted in section 80-IA, in the Finance Act 2007 and 2009, to clarify that mere works contract would not be eligible for deduction under section 80-IA. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the parliament would have simply reversed the amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the ta .....

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ion 80-IA is available to developers who undertake entrepreneurial and investment risk and not for the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that the assessee has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources. Therefore, if the contracts involve design, development, operation & maintenance, financial involvement, and defect correction .....

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volvement, and defect correction and liability period is to be computed by the Assessing Officer on pro-rata basis of turnover. The Assessing Officer is directed to examine the records, accordingly, and grant deduction on eligible turnover, [Para 25] I also place reliance on Hon ble ITAT Pune Bench A case of Rohan & Rajdeep Infrastructure. The Reverie, 1st Floor, 805, Bhandarkar Institute Road, Pune-411004 Vs. Assistant Commissioner of Income Tax, Cir.-3, Pune, ITA No.1214/PN/2010 A.Y. 2006- .....

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as filed the Paper Book and a copy of agreement/contract with the Gov. of Rajasthan dated 15.12.2000 which is placed at page no. 70 to 79. As per the title to the Agreement, it is mentioned that - IMPROVEMENT AND STREGTHENING OF HANUMANGARH-SURATGARH ROAD VIA PILIGANGA KM. 0/0 TO 26/0 ON BOT BASIS . The said Agreement is in the form of lease of land as mentioned in the recital. It is asserted that lessor Govt. of Rajasthan is desirous to entrust Improvement and strengthening of Hanumangarh-Surat .....

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ness of 37 cm. The exiting width of carriage way was 7.00M (page no. 84 of the P/B). After considering the project report which is the part of the Agreement/ Contract is appears that Government has made the estimation of cost as well as the revenue collection by authorizing the toll collection to the private parties. As per the terms of agreement, the height of the road has been increased by 12 cm. It is mentioned in the specification that the road is to be widened by 1 mtr. vide shoulders by us .....

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ng but the drawing specifications are necessary to understand what exact work is done by the assessee on said road. Assessee has given a drawing in this page.............. ……………………… ……………………… The above drawings (part of Bid Document) shows Existing Road (A) and New Road (B) which support the contention of the assessee that the thickness as well as the width of the road ha .....

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widening of existing road by constructing additional lane as a part of the highway project is a new infrastructure facility. So far as the Hanumangarh -Suratgarh Road is concerned, the width is also increased as one additional lane is developed. In addition to increasing the thickness of the road, it is pertinent to note here that the project report which is the part of the agreement clearly suggest that the existing road was not capable of taking the increased load of the vehicles and hence, th .....

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t it was a new plant. As per the provisions of law Development Rebate was allowable on a new plant. When the matter reached before Hon ble High Court, the issue was decided in favour of the assessee and Hon ble High Court held that the assessee incurred a huge expenditure which resulted into increasing the life of the existing dam and it was the work of the creation of new plant and the assessee was entitled for the Development Rebate. It is true that the parameters for the development rebate ar .....

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ture facilities... ....12. It is true that each case is to be examined on it s own facts. So far as the present case is concerned, we do not agree with the authorities below that it is merely work of the maintenance and repairs but in fact it is a work of bringing into existence new infrastructure facility which is in the nature of road. We, therefore, allow the ground taken by the assessee and hold that the assessee is entitled for deduction U/s 80IA(4) of the Act and direct the Assessing Offic .....

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erences have been received by the Board as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-lA(4)(i) of the Income-tax Act, 1961. Section 80-IA(4)(i) provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of the conditions laid down in the section. The Explanation to section 80-IA(4)(i) states .....

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80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. This circular has been issued after the Finance Act 2009 and has clarified that the widening of an existing road in an infrastructure facility by an enterprise entitles the enterprise for deduction U/S 80IA(4)(i). It is a settled position in Law that the CBDT circulars are binding on the Assessing Officer reference is invited to the case of [Azadi Bacchao Andolan .....

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e of agreement with NHAI and at the same time constructed bridges, culverts, drainage, junctions, footpaths, traffic signals etc which shows that assessee company is a developer and not a mere contractor. Similarly, agreement with UP PWD assessee had increased the road length and widened it, the works consisted of the up gradation of the existing road, including the provision of an asphaltic overlay, GSB and WMM with DBM and BC and the widening of carriageway as shoulders (hard and soft). The wo .....

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consumed in the of roads and bridges was provided by the NHAI and UP PWD. This fact is duly referred to in the copies of agreement as well as in the payment advices, where in no amount was deducted by the agencies on account of material. The maintenance of the existing facility during the period of development also was of the appellant company and so also was the risk during the period to maintain the infrastructure and after the completion of development of road and its handing over to the Gove .....

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icer relating to this. Therefore, after considering all the facts the appellant company fulfills all the criteria of a developer as per section 80IA(4)(i) and by his works a new infrastructure facility in the nature of road has come into existence and is eligible for tax benefit under section 80IA(4)(i) of the Act. After considering the above stated facts, the assessee is entitled for the deduction u/s 80IA(4), therefore the addition of ₹ 10,34,06,532/ is hereby deleted and this ground of .....

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ds and bridges were provided by the NHAI and UP PWD. This is also noted by CIT(A) that the maintenance of the existing facility during the period of development also was of the assessee company and so also was the risk during this period to maintain the infrastructure and after the completion of development of road and its handing over to the Government, the risk period of the assessee company was of 12 months for maintenance of the road. As per explanation below sub section (4) of section 80IA, .....

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t case, the relevant paras of the Tribunal Order are Para No. 21 to 28 and the same are reproduced below for ready reference:- 21. We have considered the elaborate submissions made by both the parties and also perused the materials available on record. We have also gone through all the case laws cited by both the parties. We find that the provisions of Section 80IA (4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 80IA (4A) of the Act were deleted from .....

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ssessee incurred expenditure for purchase of materials himself and executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act. We find tha .....

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nly to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc. 22. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word it denotes the enterprise carrying on the business. The word it cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, High .....

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at the activity undertaken by the assessee is akin to works contract and he is not eligible for deduction under section 80IA (4) of the Act. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works cont .....

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nto infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullo .....

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st of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the .....

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ned by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80 .....

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n entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word contractor is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the .....

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The case of ABG is not the pure developer whereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80IA of the Act, which .....

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eveloper; otherwise, the parliament would have simply reversed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contact or subcontract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage .....

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ent of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. Further, the order of Tribunal in the case of B.T.Patil cited supra is prior to amendment to sec 80IA(4), after the amendment the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the or between three activities was not there, after the amendment or has been inserted w.e.f. 1-4- .....

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nted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turn .....

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e clarified as providing a tax benefit because modernisation requires a massive expansion and qualitative improvement in infrastructures like expressways, highways, airports, ports and rapid urban rail transport systems. For that purpose, private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other work contract has been encouraged by giving tax benefits. Thus the provisions of se .....

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he same assessee. 27. Further in the case of R.R. Constructions, the Chennai Bench of Tribunal in I.T.A. No. 2061/Mds/2010 for assessment year 2007-08 vide order dated 3.10.2011 held as follows: 28. Being so, we are inclined to partly allow the ground relating to claiming of deduction u/s. 80IA. 4.2 From the above Para of this tribunal order, it comes out that if the contracts involves design, development, operating & maintenance, financial involvement and defect correction and liability per .....

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a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not be controverted by learned DR of the revenue and therefore, this tribunal order rendered in the case of Koya & Co. (Supra) is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his or .....

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ed by it u/s 153A and not in return of income filed by it u/s 139(1). In this regard, it was the submission of Learned D. R. of the revenue that the provisions of section 80AC are relevant and therefore, we reproduce the provisions of section 80AC herein below: Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible u/s 80IA or s. 80IAB or s.80IB .....

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sion. For this Assessment year 2009-10 due date for filing of Income Tax Return was 30-09-2009 and the appellant had filed the Income Tax Return on 25-09-2009 vide acknowledgement Number 91215411250909 without claiming deduction u/s 801A. Later on in response to notice u/s 153A dt 07-02-2012,which was received by the appellant on 03-03-2012 the appellant had filed return of ₹ 3,79,90,641/- and the appellant had also claimed 80IA deduction for ₹ 103406532/-, The time limit to revise t .....

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wing observations: I have perused the facts stated in the assessment order as well as assessee s submission. For this Assessment year 2007-08 due date for filing of Income Tax Return was 15.11.2007 but the appellant had filed the Income Tax Return before i.e. on 27.10.2007 vide acknowledge no. 3583111271007 and no claim of 80IA was made. Later on in response to notice u/s 153A (dated 17.02.2012 which was received by the appellant on 03.03.2012), the appellant had filed return of ₹ 3,54,95, .....

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rch i.e. 14/09/2010 and similarly in assessment year 2008-09 also, the time limit to revise the return has expired on 31/03/2010 i.e. much before the date of search i.e. 14/09/2010 and therefore, the claim made by the assessee for the first time in these two years in the return of income filed u/s 153A cannot be considered as claim made in a return filed u/s 139(1) as required by section 80AC. Moreover as per the judgment of Hon ble Apex Court rendered in the case of Sun Engg. As reported in 198 .....

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sessment year 2009-10, the time available for filing revised return of income to revise the return filed u/s 139 (1) had not expired on the date of search on 14.09.2010 as it was available up to 31/03/2011 and for assessment year 2010-11, the due date for filing return u/s 139 (1) was up to 31.10.2010 and for revising the return up to 31/03/2012 and the search has taken place before this i.e. on 14/09/2010. He has also noted that in both these years i.e. assessment year 2009-10 and 2010-11, the .....

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ncome and till the date of search, due date of filing the return has not expired. Considering these facts that in these two years i.e. A.Y. 2007 - 08 & 08 - 09, where the time available for filing the revised return has expired before the date of search, CIT(A) has held that the claim made for deduction u/s 80IA(4) in the return filed by the assessee u/s 153A is not acceptable but in the later two years i.e. assessment year 2009-10 and 2010-11, since the time was available for filing the rev .....

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2010-11 whereas in the earlier two years in which this issue has been raised by the assessee in its C.O. in assessment year 2007-08 and 2008-09, this issue is being decided against the assessee. Our decision is on this basis that where time was available for revising the return of income to revise the return originally filed u/s 139 (1) as in A. Y. 2009 - 10 or to file the return u/s 139 (1) as in A. Y. 2010 - 11, the return filed u/s 153A should be considered as a return filed u/s 139 (1) and h .....

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Assessing Officer on the basis of valuation report of D.V.O. 18. Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT(A). 19. We have considered the rival submissions. We find that this issue has been decided by CIT(A) in favour of the assessee by making following observations on pages 44 to 52 of his order, which are reproduced below for the sake of ready reference: I have perused the facts stated in the .....

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n Officer(DVO), Accordingly, vide this office letter dated 08-012-2013, reference was made u/s 142A to the DVO to elucidate correct cost of construction (reconstruction/furnishing as claimed by the assessee). The Valuation Officer submitted his report dated 16-03-2013 estimating the cost of construction in the aforesaid house property at ₹ 2,10,61,200/- which was confronted to the assessee. The assessee submitted his comments on 18-03-29013 by raising the following objections to the valuat .....

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y investment referred to in section 69 or section 69B or the values of any bullion, jewellery or other valuable article referred to in section 69A or section 689B (or fair market value of any property referred to in sub section (2) of section 56] is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. Your honour will appreciate that the property under reference does not fall within the provisions of section 69 .....

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h the following judicial pronouncements in support. In the case of Prahalad Kukmar Jindal v. Assistant Commissioner of Income tax, Central Circle, Agra. Section 142A, read with section 145 of the Incometax Act, 1961 - Valuation officer - Estimate by, in certain cases - Reference to DVO - Assessment year 2004-05 - Assessing Officer without rejecting books of account maintained by assessee made a reference under section 142A to DVO for valuation of factory building of assessee- Assessing Officer f .....

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particularly when Assessing Officer made reference to DVO without rejecting books of account - Held, yes [Paras 7 and 10]. I.T.A.T. Agra Bench [2012] 27 taxmann.com 17 (Agra). Without prejudice to legal position as stated above we would like to submit regarding the valuation report of the DVO as under: 2. That the assessee had purchased land and building vide purchase deed dated 13-05-2008, which included a land and constructed building area of 511 sq.mts as stated in the deed (copy enclosed). A .....

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and building for the purpose of section 50C of the I.T. Act, by the revenue authority was determined at ₹ 57,94,600/-. However, the assessee had purchased the same for ₹ 58,00,000/- which was more than the value taken by the Stamp Authorities for the purpose of section 50C of the I.T. Act. Thus the cost of land and building purchased earlier stands fully disclosed in the books of accounts. Therefore, this cost of land and building cannot be disputed before any authority functioning .....

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as on dated Feb.2013=8947,887.00 . But as the construction was carried out in between September, 2008 and March, 2009, the index taken by the DVO is incorrect. The same may kindly be substituted with correct figures. 4. That the assessee is engaged in the construction business and the entire construction was done by themselves and under their own supervision and the in construction business effect has not been considered by the DVO. No cost towards architect expenditure was incurred by the asse .....

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alth tax purposes as the rate for index had been taken for February, 2013 instead of average rare for the periods from September 2008 and March, 2009 the period of actual construction. 7. That the Ld. DVO has stated in his report that no details were provided. Since the reference was not as per the provisions of section 142A(i) of I.T. Act 1961 so no details were provided. However, all the required details were filed before your honour. 8. That the assessee had shown and investment in the buildi .....

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7; 35,82,400/- should be taken and not at the value worked as per CPWD rates. The areas of construction and its photo at the time of purchase are being enclosed as slated above. b. The base rate have been taken as 2007 rates and additions of 83% have been added to the value worked out by the DVO which is the index rate for February 2013. However, as the construction had taken place between September 2008 and March 2009 so the average rate for this period should be taken. As per the CPWD circular .....

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ent of ₹ 95,96,116/-. In view of above the valuation done by the DVO is not correct and should not be relied upon. The aforesaid objections were forwarded to the Valuation Officer vide this office letter dated 22.03.2013. The valuation officer in his comments vide his letter dated 26.03,2013 reiterated his findings in the valuation report and rejected the objections raised by the assessee stating as under:- Parawise reply on Assessee s objections dated 22.03.2013 are as following:- 1. No c .....

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g structure whereas the present structure is purely a R.C.C. framed structure. The present structure is having basement plus three additional storeyed purely supported on R.C.C. columns & beams. Thus the present structure is not possible without dismantling entirely the old structure. Assessee has tried to escape this vital point. Present structure is totally new in entirely. Only addition of 377.49 sqm. averment is thus baseless. Total area of 884.49 sqm. has been constructed by assessee on .....

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mpetitive rates has been given hence claim is untenable. 5. The enclosed working of rates is untenable as the areas has been reduced which is contrary to what is existing. 6. In absence of period of construction the valuation is prepared as per existing norms of value as on date of inspection. 7. No comments. 8. Already replied under Para 2. 9. (a) Areas as per deed is inadmissible in light of averments under Para 2. (b)Already replied under Para 3. Cost index enclosed by assessee is for Delhi a .....

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basis of his inspection of the property on 19.02.2013. So far as assessee s claim of construction of the property in financial year 2008-09 i.e. the year under consideration is concerned the same is accepted and the value estimated the DVO i.e. ₹ 2,20,62,200/- taken as correct cost of investment in the house property. As observed by the Ld. DVO the present structure is not possible without dismantling entirely the old structure, the whole building is taken as constructed during the year in .....

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0/-, the undisclosed investment in the construction of the said building was worked out at ₹ 2,30,23,020/-. From the above stated facts it is seen that the assessee purchased a house property bearing number -B-5/21, Vishal Khand, Gomti Nagar, Lucknow on 13-05-2008, during the financial year 2008-09 and carried out certain renovation/alteration during the financial year. It is a fact the assessee did only some cosmic changes in the building is a factual matter and is supported by photograph .....

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s property has been purchased and then renovation was carried out in a fully constructed state as being floor space in a commercial building. Moreover, this is a search case hence in the absence of any incriminating material found/seized during search, no addition can be made. Further, books of accounts have not been rejected. In this regard my attention is also drawn to the Supreme Court Case Law in the case of Sargam Cinema. In this regard, reliance is placed on the following judgments: (1) Sa .....

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t.. 1 Valuation report has been considered to be only an opinion, so that it cannot form a firm basis either for assessment or for assumption of jurisdiction for reassessment . It has been so seceded in various contests, some of which are available even in the present volume. Where the assessee s expenditure on construction of property was supported by the assessee s books, the question of getting valuation report cannot possibly arise. It was so held by the Supreme Court in Sargam Cinema v. CIT .....

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LUATION OFFICER- NO EVIDENCE SUGGESTING ASSESSEE MADE ANY PAYMENT ABOVE CONSIDERATION MENTIONED IN RETURNBOOKS OF ACCOUNT NOT REJECTED-ADDITION NOT PERMISSIBLE-INCOME TAX ACT,1961,s.69B A search was conducted at the assessee s residence by the Department and unexplained cash and fixed deposit receipts were found. During the search, no evidence was found suggesting a higher valuation for the property. However, the Assessing Officer solely on the basis of the report of the District Valuation Offic .....

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of the District Valuation Officer, per se, was not an information and could not be relied upon without the books of account being rejected which had not been done in the assessee s case. Moreover, there was no evidence found as a result of the search to suggest that the assessee has made any payment over and above the consideration mentioned in the return of the assessee. Cases referred to : CIT (Assessment) v. Dhariya Construction Co. [2010] 328 ITR 515 (SC) (Para 7) (2) DVO Valuation : THE HIG .....

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s also, on facts, held that the DVO s valuation was based on incomparable sales, which is not permissible in law. (3) CIT vs. SMT. SURAJ DEVI [2011] 64 DTR (Del) 372; 2010 328 ITR 604 Income from undisclosed sources-Addition under s.69BUndisclosed investment in property vis-a-vis report of DVO-Primary burden of proof to prove understatement or concealment of income is on the Revenue-Opinion of the DVO, per se, is not information and cannot be relied upon without the books of account being reject .....

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the opinion of the DVO, per se, is not an information and cannot be relied upon without the books of account being rejected which has not been done in the present case. Moreover, in the present case, no evidence much less incriminating evidence was found as a result of the search to suggest that the assessee had made any payment over and above the consideration mentioned in the registered purchase deed. A reading of the AO s order does not disclosed that the assessee had made any admission in he .....

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ma vs CIT (2011) 241 CTR (SC) 179 and Asstt. CIT vs. Dhariya Construction Co. (2010) 236 CTR (SC) 226; (2010) 47 DTR (SC) 288 followed. (3)CIT vs. Lahsa Construction Pvt. Ltd. [2013] 357 ITR 0671-(Del) HC Addition cannot be justified solely relying upon the valuation report by the departmental Valuation Officer-CIT v. S.K. Construction Co. [2008] 167 Taxman 171 (Delhi), CIT v. Naveen Gera (2010) 328 ITR 516 (Delhi), CIT v. Suraj Devi (2010) 328 ITR 604 (0) and CIT v. Bajrang Lal Bansal [2011] 33 .....

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In the assessee s case , the Departmental Valuation Officer opined that the value of the property at the time of purchases was ₹ 2,84,72,600 and this became the basis of addition made by the Assessing Officer. The Tribunal held in favour of the assessee. On appeal;(Held) dismissing the appeal, that no addition could be made solely on the basis of the report of the Departmental Valuation Officer. CIT v. S.K. Construction Co. {2008} 167 Taxman 171 (Del.)-followed, Commissioner of Income Tax .....

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d). (ii)ITO Versus Dr. Mahendra Kumar Agarwal 2007 (9) MTC 97 (Trib. Alld) Headnote: Income-tax Act, 1961- Section 69A- investment in construction of building- Department valuer estimating cost at higher amount-No evidence that cost shown was not correct-Books of account not held incomplete or incorrect-Addition of difference as unexplained investment- Not justified. (iii) ACIT v. CITY Associates 2009 (13) MTC 926 (Trib. Lko) Headnote: Income-tax Act, 1961-Sections 69 and 145- Construction of co .....

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ssessing Officer. He has simply relied on DVO s technical expertise. Had this been so legislature would not have provided further opportunity to the assessee granted by the Assessing Officer to give comments. He has not considered that this property was directly purchased by the assessee and then renovated and photograph of the building before renovation and after renovation was submitted before the authorities and the said investment was duly disclosed by the assesses in their income tax return .....

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e added not the fair market valuation for eg. If the investment in the building was ₹ 1,00,000 in April, 2003 and now the fair market valuation of the same building in December, 2003 becomes ₹ 1,45,000/-, then no addition can be made of ₹ 45,000/-. After considering the above facts and the various case laws the appeal of the appellant is allowed and the addition of ₹ 1,30,23,020/- is hereby deleted. 19.1 From the above observations of CIT (A), it is seen that as per the j .....

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ted and photograph of the building before renovation and after renovation was submitted before the Assessing Officer and the said investment was duly disclosed by the assessee in its income tax returns but the DVO report does not say that there is an extra investment over and above the declared amount. His report is only an estimate of the fair market value and not an estimate of investment. He has given a finding that the DVO s valuation report is based on fair market value and this fair market .....

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n this finding of CIT (A) on merit also and considering the totality of facts, we find no infirmity in the order of CIT (A) on this issue also. This issue is decided in favour of the assessee. 20. The issue No. 6 is regarding disallowance u/s 14A, which has been deleted by CIT (A). This issue has been raised by the Revenue vide ground No. 8 in assessment year 2009-10 and 2010-11. 21. Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee suppo .....

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No.17/Lkw/2012. We have taken a view in various judgments after considering this judgment of Hon ble Allahabad High Court in the case of Shivam Motors (supra) on this basis that since the judgment of Hon ble Apex Court rendered in the case of Rajendra Prasad Moody 115 ITR 519 was not cited before Hon ble Allahabad High Court in Shivam Motors and therefore, we have to follow the judgment of Hon ble Apex Court in the case of Rajendra Prasad Moody (Supra). As per the judgment of Hon ble Apex Court .....

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isallowance has to be made u/s 14A of the Act. Accordingly, on this issue, we reverse the order of CIT (A) and restore that of the Assessing Officer. This issue is decided against the assessee. 23. The issue No. 7 is regarding vehicle expenses. This issue has been raised by the Revenue in its appeal for assessment year 2011-12 as per ground No. 5, which is reproduced below: 5. That the learned CIT(A) has erred in law and on facts in deleting the addition of ₹ 2,91,000/- made by the Assessi .....

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ourse of search, a document inventorized as on page No. 195 of Annexure A-11, there was payment of ₹ 2,91,000/-against repair of three vehicles. The Assessing Officer asked the assessee to explain as to how this payment was recorded in the books of accounts and also prove its genuineness and business purpose. In reply, it was submitted by the assessee before the Assessing Officer that the transaction is duly recorded in the books of accounts but the Assessing Officer did not accept the con .....

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comes out from the language of Para 7 of the assessment order that the assessee could not explain as to how this payment found recorded in the seized paper was recorded in the books of accounts. If the assessee fails to establish by bringing evidence that the entry of expenses found in seized material was recorded in books of accounts or that the same was paid out of known sources of fund, addition has to be made u/s 69C and deduction for corresponding expenditure is not allowable. Since the as .....

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letion of addition by CIT(A) is not proper. Therefore, we reverse the order of CIT (A) on this issue and restore that of the Assessing Officer. This issue is decided against the assessee. 26. The last issue being issue No. 8 is raised by Revenue in assessment year 2011-12 as per ground No. 6, which is reproduced below: 6. That the learned CIT(A) has erred in law and on facts in deleting the addition of ₹ 69,83,015/- made by the Assessing Officer on account of cash payment exceeding ₹ .....

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on examination, it was found that the documents inventorized as page No. 20 to 26 and 33 to 34 of Annexure A-24, contained details of cash payments exceeding ₹ 20,000/- made by the assessee in respect of certain expenditure in violation of provisions of section 40A(3) of the Act. The Assessing Officer has made summary of these pages and the total amount has been worked out at ₹ 69,83,015/-. As per Para 8.1 of the assessment order, the Assessing Officer asked the assessee to explain .....

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