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TMI Blog2015 (12) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the CIT (Appeals) had himself admitted in his order that the assessee was not maintaining adequate books of account, and further that the assessee's case was not covered under the provisions of Section 44AD of the Act as the turnover of the business exceeded Rs. 40.00 lacs, therefore, accepting profit equivalent to 10% of the gross receipt was perverse application of law in the assessee's case. 2. The Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 1,00,000/- made by the A.O. u/s 40(A)(3) of the Act on account of cash expenditure exceeding Rs. 20,000/- without appreciating the fact that the payment of stamp duty were not covered under the exception provided in Rule 6DD of the I.T. Rules and neither the expenditure made on account of sellers was covered under the exception of Rule 6DD of the I.T. Rules." 3. Ground no.1 is against the deletion of addition of Rs. 11,35,949/-made on account of unverifiable construction expenses. 4. A search under section 132 of the Income-tax Act, 1961 (hereinafter 'the Act') was initiated and took place in the business and residential premises of the assessee on 04.03.2009. A notice under section 153A (1)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search also suggested that he had been earning unaccounted income in the same. In this connection, the assessee was required to furnish complete details of the disclosure made u/s 132(4) of the I.T. Act and the additional income actually disclosed in the returns of income furnished pursuant to the search. The following information was furnished by the assessee :- Shri Ashish Mohan Agarwal: Original filed u/s 139 Filed after search u/s 153A Additional income 50,000 1,05,000 55,000 59,500 1,24,290 64,790 1,05,600 7,22,600 6,17,000 1,40,000 36,07,830 34,67,830 2,92,280 37,71,920 34,79,640 9,95,230 36,32,100 26,36,870 Not due 5,31,800 45,31,800 Shri Devendra Mohan Agarwal: Original filed u/s 139 Filed after search u/s 153A Additional income 50,000 3,35,380 2,85,380 67,500 3,73,890 3,06,390 1,07,000 3,07,770 2,00,770 1,20,000 31,66,890 30,46,890 3,60,850 5,79,030 2,18,180 44,363 15,55,410 15,11,047 Not due 4,29,050 4,29,050 The group consists of the assessee and his son Shri Ashish Mohan Agarwal. It was also submitted that, together, they had made disclosure of additional income of Rs. 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exceeded Rs. 40,00,000/). On the other hand, even if he were just a builder/developer, his net profit had still to be estimated at a reasonable figure. The rate of 8% given in section 44AD is taken only as a benchmark for purposes of estimation of net profit in such cases. The assessee has submitted that the net profit shown by him was a healthy 10% of his gross receipt. In view of this, there is no justification for any separate disallowance out of expenditure. The addition is deleted." 6. Ld. DR relied on the order of the AO and submitted that the ld. CIT (A) deleted the addition made by the AO on account of unverifiable construction expenses without appreciating the fact that the assessee was not maintaining adequate books of account and further the assessee's case was not covered under the provisions of Section 44AD of the Act as the turnover of the business exceeded Rs. 40 lakhs, therefore accepting profit equivalent to 10% of the gross profit was perverse application of law in assessee's case. So, she pleaded that the order of the Ld. CIT(A) be reversed and the order of AO be restored on this addition. 7. Ld. AR for the assessee reiterated his submissions made before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if the AO has material/evidence unearthed during search suggesting that the actual income earned by the assessee was more than what was disclosed by the latter in course of the search and subsequently in his returns, however, we find that no such evidence was brought on record by the AO to justify the ad hoc disallowance. We agree with the ld. CIT (A) that the addition was made simply because the assessee had not maintained regular books of account and the required documents in respect of such income. Estimation of income should not be capricious or whimsical as held by the Hon'ble Apex Court and High Courts in Plethora of judgments. Before the AO, the assessee has claimed to have furnished his income and expenditure account as well as statement of his assets and liability year after year, incorporating the findings relating to undisclosed income and assets during the search. We also take note of the fact that the assessee had shown the additional income in the returns furnished by him and his son and the AO had not recorded any finding that there was any evidence of any unexplained expenditure/ investment or any income which was not covered in the additional income disclosed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land in question. Consequently, the ld. CIT (A) deleted the addition. 12. Ld. DR, while relying on the order of the AO, submitted that the ld. CIT (A) deleted the addition without appreciating the fact that the payment of stamp duty was not covered under the exception provided in Rule 6DD of the Incometax Rules, 1962 (hereinafter 'the Rules') and neither the expenditure made on account of sellers was covered under the exception of Rule 6DD of the Rules. He accordingly pleaded to set aside the order of the ld. CIT (A) and restore the order of the AO on this issue. 13. Ld. AR reiterated the submissions made before the ld. CIT (A) and submitted that the assessee had incurred total expenditure of Rs. 84,04,300/- on purchase of land which included cost of land (Rs.77,10,000/-), payment of stamp duty (Rs.6,21,000/-) and registration expenses (Rs.73,300/-). He submitted that the expenditure incurred in cash referred to by the AO was incurred on payment of stamp duty and registration expenses. He further submitted that the stamp duty had been paid to the government authority through the stamp vendors and the registration expenses were paid to advocate's head clerk which accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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