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2016 (1) TMI 360 - ITAT KOLKATA

2016 (1) TMI 360 - ITAT KOLKATA - TMI - Addition towards undisclosed sale of two flats - Held that:- There is no case for making any addition towards undisclosed sale of two flats and profits derived thereon on an estimated basis as the contention of the assessee with regard to the gifts given by him to the widow of his younger brother has been accepted as genuine by the Learned AO in Asst Year 2005-06. Hence we find no infirmity in the order of the Learned CITA in this regard. - Decided in favo .....

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ned AO to delete the same in Asst Year 2009-10 in order to avoid double taxation of the same amount - Decided in favour of assessee

Addition on account of labour charges - non deduction of tds - Held that:- TDS provisions are applicable to the assessee for Asst Year 2006-07 and hence section 40(a)(ia) of the Act has been rightly invoked on the assessee for Asst Year 2006-07. However, we find that the second proviso to section 40(a)(ia) of the Act which is introduced in the statute wit .....

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ance with law. The assessee is also directed to provide necessary evidences and documents to prove that the payee had duly disclosed the subject mentioned receipt of labour charges in their respective returns and paid the due taxes thereon. - Decided in favour of revenue for statistical purposes.

Addition being the difference between the deposits and withdrawals - Held that:- We find that the entire books of accounts have been produced by the assessee before the Learned AO which fact .....

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44AB of the Act by an independent chartered accountant and books of accounts were not rejected by the Learned AO. Hence there is no case for making any independent addition in this regard.- Decided in favour of assessee

Addition towards interest on bank loan - Held that:- We find from the balance sheet of the assesssee, the break up of loans and advances (asset) as reflected in the balance sheet is not available on records. We also find that assessee is also having some own funds whic .....

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own funds available with the assessee, then no disallowance of interest should be made.- Decided in favour of revenue for statistical purposes.

Addition on account of various expenditures - Held that:- The assessee had reported transportation income in his return and hence the aforesaid expenditures are allowable even against that income - Decided in favour of assessee - I.T.A No. 106/Kol/2012 A.Y 2006-07 - Dated:- 18-11-2015 - Shri M. Balaganesh, Accountant Member, and Shri S.S. Visw .....

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t ). 2. Md.GhyasUddin,JCIT,learnedSr.DR argued on behalf of the revenue and Shri Manoj Kr. Tiwari, FCA, learned AR argued on behalf of the assessee. 3. The first and second issue to be decided in this appeal is that whether an addition of ₹ 1,76,113/- and an addition of ₹ 24,240/- could be made on an estimated basis in the facts and circumstances of the case. 3.1. The brief facts of this issue is that the assessee is a promoter and developer of real estate and runs the business under .....

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d maintained the books of accounts such as cash book, ledger, purchase and sales register and bank book for the financial year 2005-06 relevant to Asst Year 2006-07 and the same were produced before the Learned AO during the course of assessment proceedings. The assessee pleaded before the Learned AO that the assessee is not a contractor and hence the Accounting Standard 7 (AS-7) issued by the Institute of Chartered Accountants of India (ICAI) on Construction Contracts is not applicable to the a .....

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ead given as gift in reality to the widow of his younger brother. The Learned AO did not accept this argument and disputed the fact of flats given as gift by the assessee and found that no closing stock was shown in the financials submitted by him. Accordingly, he proceeded to determine the sale proceeds of two flats and made an addition at the rate of 8% thereon amounting to ₹ 1,76,113/- as profits derived by the assessee in respect of the sale. 3.2. With regard to the alleged sale of two .....

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he additions. Aggrieved, the revenue is in appeal before us on the following grounds:- 1. Ld. CIT(A) has erred in law as well as on fact in deleting the addition of ₹ 1,76,113/- on account of estimated profit. 2. Ld. CIT(A) has erred in law as well as on fact in deleting the addition of rs.24,240/- on account of estimated profits. 3.4. The Learned AR reiterated the facts stated by him before the lower authorities. The Learned AR argued that the books of accounts submitted by the assessee h .....

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his business purposes have been duly accepted by the Learned AO in the reopened proceedings for Asst Year 2005-06 and placed the copy of the assessment order on record. He also fairly stated that the said order copy was also placed before the Learned CITA by the assessee. In response to this, the Learned DR vehemently supported the order of the Learned AO. 3.5. We have heard the rival submissions and perused the materials available on record. We find that the assessee is engaged in building prom .....

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projects in Asst Year 2006-07 by declaring sales in respect of 10 flats and car parking space to the tune of ₹ 1,08,79,800/- and declaring profit thereon to the tune of ₹ 6,78,561/-. According to assessee, Asst Year 2006-07 was the year in which the completion certificate for the project was obtained by the assessee and hence the profits declared thereon is correct. It is observed that the assessee had furnished the consolidated financial statements of profit and loss account and ba .....

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is correct in view of the fact that the assessee had not disclosed the cost of closing stock of flats and car parking spaces in the books of accounts which according to the Learned AO had been allegedly sold during Asst Year 2006-07. In this scenario, the only possibility left to the Learned AO is to make a fair estimation of profits. In fact, it is seen from the assessment order that the Learned AO had even reduced the profit declared by the assessee in the sum of ₹ 6,78,561/- as he had .....

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ns before the Learned CITA which are reproduced in Learned CITA order at page 2 para 3, that the Learned AO had accepted the factum of gift of two flats to the widow of younger brother of the assessee as genuine in Asst Year 2005-06. A copy of the assessment order for Asst Year 2005-06 is already on record. The finding given by the Learned AO in this regard in the reopened Asst Year 2005-06 is reproduced hereunder:- Page 3 of the written submissions: In the Assessment Order passed on 09.12.2010, .....

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vour of Smt. Mithu Kundu who is wife of the late brother. …………….. In retrospect, my predecessor reopen the case inter alia on the ground that two flats and two garages were not shown in the closing stock and hence the amount pertaining to the sale value of the flats is believed to have escaped assessment. It is gathered by now that there is sale. The WIP does not, therefore, give any undisclosed sales. This goes to prove that there is no case for making any add .....

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#8377; 24,240/- , the Learned AO had stated suitable remedial action would be taken in Asst Year 2005-06 for not disclosing the cost of two car parking spaces as closing stock of work in progress. A copy of the assessment order for Asst Year 2005-06 is already on record. It is also observed that the Learned AO in the reopened assessment for the Asst Year 2005-06 had stated as below:- Page 3 of the written submission Para 6- in retrospect my predecessors reopen the case inter alia on the ground t .....

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A in this regard. Hence the ground no.2 raised by the revenue is dismissed. 4. The next issue to be decided in this appeal is that whether an addition in the sum of ₹ 11,00,000/- towards advance received on sale of flat could be added in the facts and circumstances of the case. 4.1. The brief facts of this issue is that the assessee as a promoter and developer of real estate had obtained approval for construction of 12 flats only. But without approval he had sought to construct one more fl .....

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q.ft. for ₹ 11,00,000/- and the said flat was completed in all respects and possession handed over to Sri Kripa Sindhu Panja. However, the registration of the said flat was not executed in favour of Sri Kripa Sindhu Panja by the assessee during Asst Year 2006-07. The Learned AO also found that the cost of construction of the said flat was not reflected as closing stock of work in progress by the assessee in the balance sheet as on 31.3.2006. The Learned AO further found that the labour cha .....

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e Learned CIT(A) that the registration deed of flat was executed on 17.7.2008 and capital gains offered to tax in Asst Year 2009-10 by the assessee. The assessee pleaded that the advance of ₹ 11,00,000/- was received only by account payee cheque by the assessee. The Learned CITA appreciated the contentions of the assessee and deleted the addition. Aggrieved, the revenue is in appeal before us on the following ground:- 3. Ld. CIT(A) has erred in law as well as on fact in deleting the additi .....

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ted beyond the approval of the sanctioned building plan and the assessee had claimed the cost of construction in his profit and loss account as deduction but had not deliberately chosen to treat the sale consideration as an advance received for flats in the liability thereby trying to postpone the recognition of revenue. 4.3. We have heard the rival submissions and perused the materials available on record. We find that the assessee without approval of building plan had sought to construct one m .....

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on the basis of registration of sale deed does not hold water as the entire work has been completed on the said flat and possession handed over to Sri Kripa Sindhu Panja and on the basis of agreement deed , entire sale consideration of Rs .11,00,000/- has been received by the assessee in Asst year 2006-07. We hold that the registration of the property is not essential as possession is already handed over to the buyer and consideration fully received from buyer in Asst Year 2006-07 and hence tran .....

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was held that :- Pages 725,726 of 259 ITR 724(Raj.) The Tribunal has decided the issue only an the basis of nonregistration of the transfer deed. The Tribunal has taken the view that in the absence of the registration of the sale deed, there is no transfer and no capital gain tax is attracted. Now this controversy has been resolved by their Lordships in the case of CIT v. Poddar Cement Pvt. Ltd [1997] 226 ITR 625. At pages 653, their Lordships observed as under: We are conscious of the settled p .....

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ight. Following the view taken by their Lordships, we are of the view that for taxing the capital gain, registration of the sale deed is not necessary under the provisions of the Income-tax Act. In the result, we answer the question in the negative i.e. in favour of the Revenue and against the assessee. However, we find from the statement of the Learned AR that the said sum is offered to tax by the assessee in Asst Year 2009-10. Hence we direct the Learned AO to delete the same in Asst Year 2009 .....

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0 Sri Gobinda Biswas 23.5.2005 1,00,000 Sri Aloke Chakraborty 25.5.2005 50,000 Das Enterprises 10.6.2005 26,538 Sri Ashutosh Chowdhury 14.6.2005 1,00,000 Sri Aloke Chakraborty 30.6.2005 30,000 3,76,538 The Learned AO found that the assessee s gross receips in the previous year 2004-05 relevant to Asst Year 2005-06 had exceeded ₹ 40 lacs and hence is liable for tax audit and accordingly the provisions of Chapter XVII B of the Act containing TDS compliance provisions are applicable to him in .....

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ounts and hence there is no obligation for him to deduct tax at source in Asst Year 2006-07 and accordingly deleted the addition made u/s 40(a)(ia) of the Act. Aggrieved, the revenue is in appeal before us on the following ground:- 4. Ld. CIT(A) has erred in law as well as on fact in deleting the addition of ₹ 3,21,845/- on account of labour charges. 5.2. The Learned AR relied on the order of the Learned CITA. In response to this, the Learned DR relied on the order of the Learned AO. 5.3. .....

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rightly invoked on the assessee for Asst Year 2006-07. However, we find that the second proviso to section 40(a)(ia) of the Act which is introduced in the statute with effect from 1.4.2013 has been held to be retrospective in operation by the recent decision of Hon ble Delhi High Court in the case of CIT vs Ansal Land Mark Township P Ltd reported in 61 taxmann.com 45 (Delhi HC) wherein it was held that :- Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expendi .....

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enalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(ia) isn t attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue. The Agra Tribunal in the case of Rajiv Kumar Agarwal -vs- ACIT [2014] 45 taxmann.com 555(Agra- Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the .....

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e of the Learned AO to examine the issue in the light of the decision rendered by the Hon ble Delhi High Court as stated supra and decide the issue in accordance with law. The assessee is also directed to provide necessary evidences and documents to prove that the payee had duly disclosed the subject mentioned receipt of labour charges in their respective returns and paid the due taxes thereon. If the same is proved, the assessee should be given relief. Accordingly, the ground no. 4 raised by th .....

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but however the assessee has shown receipts of ₹ 10,00,000/- from Sri K S Panja against a flat although through account payee cheques. The Learned AR asked the assessee regarding the explanation for deposits in the said bank accounts to the tune of ₹ 21,84,240/- being more than the withdrawals to the tune of ₹ 18,62,395/- and the assessee failed to offer any explanation before the Learned AO regarding the same. Hence the Learned AO added the difference as unexplained cash depo .....

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ence in deposit and withdrawal from bank. 6.2. The Learned AR argued that the cash book, bank book and other books of accounts were duly produced before the Learned AO which contains the transactions in the aforesaid two bank accounts and hence there is no need to make separate addition towards the difference between deposits and withdrawals. In response to this, the Learned DR vehemently supported the order of the Learned AO. 6.3. We have heard the rival submissions and we find that the entire .....

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transactions with the said two bank accounts and accounts have been duly audited u/s 44AB of the Act by an independent chartered accountant and books of accounts were not rejected by the Learned AO. Hence there is no case for making any independent addition in this regard. Hence we find no infirmity in the order of the Learned CIT(A) in this regard. Hence the ground no. 5 raised by the revenue is dismissed. 7. The next issue to be decided in this appeal is as to whether an addition of ₹ 1 .....

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0/-. Hence he concluded that the borrowed funds were diverted for non business purposes and disallowed the interest of ₹ 1,37,692/- . On first appeal, the Learned CITA found that the assessee has made advances to M/s Kundu Refinery Works (partnership firm of assessee) and Kundu Associates (partnership firm of assessee) and found that assessee is having his own capital of ₹ 28,69,669/- and bank loan of ₹ 16,40,000/-. The advances given including the trade advances are to the ext .....

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est and income from share trading and income from tanker. He gave a finding that the nexus between borrowed funds and interest free advances to sister concerns were not established by the Learned AO and hence no disallowance of interest could be made. Aggrieved, the revenue is in appeal before us on the following ground:- 6. Ld. CIT(A)has erred in law as well as on fact in deleting the addition of ₹ 1,37,692/- on account of interest on bank loan. 7.2. The Learned AR reiterated the submissi .....

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s given to Kundu Associates and Kundu Refinery Works which are partnership firm of the assesee an incomes received therefrom are duly offered to tax by the assessee. Hence the business interest on the said advances is proved beyond doubt. Hence no disallowance of interest could be made in respect of advances made to these two parties on a proportionate basis. We find from the balance sheet of the assesssee, the break up of loans and advances (asset) as reflected in the balance sheet is not avail .....

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t very clear that if the advances made to these two parties are less than the own funds available with the assessee, then no disallowance of interest should be made. Accordingly, the ground no. 6 raised by the revenue is allowed for statistical purposes. 8. The next issue to be decided in this appeal is as to whether an addition of ₹ 37,173/- could be made on account of various expenditures in the facts and circumstances of the case. 8.1. The brief facts of this issue is that the assessee .....

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