TMI Blog2012 (1) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case the Ld. CIT(A) was justified in holding that under section 153A, expenses not recorded in the books of account or not noted in seized material can be allowed on presumptive basis. 3) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in directing the AO to tax the on money receipts and advances in the year of transfer of shops instead of in the year of receipt of the money. 4) Whether on the facts and in the circumstances of the case the ld. CIT(A) was justified in relying on the decision of the Tribunal in the case of Golani Bros Vs. ACIT 75 ITD 1 ignoring the fact that the facts of the present case and that of the Golani Bros are not identical and the decision of the Tribunal is under litigation before the High Court, Bombay. A.Y. 2003-04 1) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in deleting the addition of ₹ 9,93,000/- on a/c of advances and ₹ 3,00,000/- on account of on-money during the transfer of shops directing the A.O. that the advances should be taxed in the year of transfer and not in the year of receipt of the money. 2) Whether on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case the Ld. CIT(A) was justified in relying on the decision of the Tribunal in the case of Golani Bros Vs. ACIT 75 ITD 1 ignoring the fact that the facts of the present case and that of the Golani Bros are not identical and the decision of the Tribunal is under litigation before the High Court, Bombay. 3) Whether on the facts and in the circumstances of the case the ld. CIT(A) was justified in deleting the addition of ₹ 45,600/- on a/c of disallowance of watchman s salary and of ₹ 40,150/- on account of supervision charges and ₹ 8,804/- on account of disallowance of dismantling expenses which were not supported by any evidence or seized material holding that expenses not recorded in the books of account or not noted in seized material can be allowed on presumptive basis. 4) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in restricting the addition u/s 69C from ₹ 2,14,663/- to ₹ 1,72,663/-, allowing relief of ₹ 42,000/- ignoring the fact that source of such expenditure was unexplained and would be deemed to be the income of the assessee for the relevant financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) in para nos. 3 to 35 of the first appellate order are as under : 3. Brief facts of the case are that search and seizure action was conducted against the Agrawal group at Chalisgaon onI 03/11/2004. The appellant is a partnership firm engaged in the business of builders and contractors for construction work. During the course of action u/s.132 diaries were seized at Annexure A-I to A-3 containing notings in respect of business transactions of the appellant firm in respect of amounts received by Agrawal Group from customers of the two municipal development projects undertaken by M/s.Tejas Constructions at S.No.4016 and F.P.48 of Chalisgaon. The notings in seized diaries revealed that the cash received from the customers of shop at the said projects at C.S.No.4016 and F.P. 48 Chalisgaon was to the tune of ₹ 10,25,000/- and ₹ 75,48,OOO/- respectively totalling to Rs..85,73,OOO/-. Further advances received from the said projects noted in the diaries from project at FP 48 and S.No. 4016 were to the tune of ₹ 33,28,000/- and ₹ 32,54,000/- respectively, totalling to ₹ 65,82,000/-. The partners of the appellant firm therefore declared additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,48,000 S.No.4016 Proiect a a a 4,35,000 3,05,000 2,85,000 10,25,000 Total (A) 1.70.000 3.20.000 490000 27.35000 34.48.000 1410 000 85.73.000 Advances F.P.48 Project 68,000 60,000 2,50,00 8,73,000 5,00,000 18,02,000 33,28,000 S.No.4016 Project 73,000 1,50,000 0 1,20,000 7,03,000 22,08,000 32,54,000 Total (B) 1,41,000 2.10.000 25000 993000 12,03.000 4010000 65.82.000 Total Cash Receipts (A+B) 3,11,000 5,30,000 5,15,000 37,28,000 46,51,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income AY. 2005 06 AY. 2004-05 AY. 2003 04 Total Premium Received Project FP 48 Prolect CIS No.4016 49,23,600 28,20,000 . 77,43,600 Rukmini N allar 1,85500 1,38.900 4,03,230 727,630 Total Expenditure 51,09,100 29,58900 4,03,230 84,71,230 Commission 745000 6.45,000 2,42,000 1632,000 Supervision Charges 1,35000 1,50,000 - 2,85,000 Watchman's Salary 45.600 1,53,600 124,800 324,000 Demolition Expenses (Proportionate to area sold) 27,246 12,021 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -36430 - - - - -6160963 Expenses allowed by the A.O.(-) ** -408083 -232550 - -249000 - - . -889633 Income assessed 12866636 10563138 9881930 8368044 9219372 7133930 47852224 62818274 * Other Addition in A.Y.1999-2000 Disallowance u/s.40A(3) ₹ 10,688/- Credit Notes not accounted ₹ 9,202/- ₹ 19,890/- ** Expenses allowed by the A.O.(-) Particulars A.Y. 2005-2006 A.Y. 2004-2005 A.Y. 2002-2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Ranade Dighe and Associates Vs. ITO, ITA No. 466/PN/ 2010 (A.Y. 1999- 2000) order dated 26.8.2011 and Pradeep Ashok Raheja Vs. ACIT and Ors. ITA Nos. 327 316/PN/2004 (B.P.ending 29.6.99), order dated 31st December 2008-09. He Ld. A.R. also placed reliance on the decision of Mumbai Bench of the Tribunal in the case of ACIT Vs. Shri Mehul J. Somaiah, ITA No. 7118/Mum/2008, A.Y. 2002-03, order dated 10th December 2008. 10. The issue before us, is as to what would be the year of taxability of the on money against the sale of the shops. The contention of the ld. AR. Remained that a consideration received in respect of proposed sale of shops cannot be taxed in the year of its receipt ignoring the amount of expenditure incurred and to be incurred in respect of construction of shops and other business expenses. The ld. A.R. argued that different treatment can not be given to the on money receipt than the advances received from customers against proposed sale of shops which are recorded in the books for the purpose of recognizing revenue. The assessee has recognized the receipt of on money in the year of transfer of shops and handing over its possession to the customers. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the concerned year. 12. The Tribunal approved the approach adopted by the A.O in the sixth step wherein the A.O has considered the sale of shops in the year in which possession was handed over to the vendee. In the case of Dhanvarsha Builders Developers (P) Ltd., (Supra) the Tribunal has held that conduct of search and seizure operation in a particular year does not lead to a inference that undisclosed income detected as a consequence thereof in A.Y. relevant to previous year in which search was conducted. Accounting of profits has to be made on the basis of method of accounting followed by the assessee. In other words, method of recognizing revenue is to be considered for taxing the amounts received in cash as well as amounts received by way of cheques. The Pune Bench of the Tribunal in the cases of Pradeep Ashok Raheja Vs/ ACIT (Supra) and M/s. Ranade Dighe and Associates Vs. ITO (Supra) has followed its earlier decision in the case of Shri. D.J. Hanswani, ITA Nos. 894/PN/97, 453/PN/98 and C.O No. 17/PN/99, order dated 29.6.2005. Relevant para No. 3.1 of the order of the Tribunal in the case of Shri D.J. Hanswani is being reproduced for ready reference : 3.1. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration to be integral part of sale proceeds and recognized as income when sale took place by way of transfer u/s 2(47) of the I.T. Act. In this view of the matter, we agree with the findings of the learned CIT(A) in all respects. The Mumbai Bench of Tribunal in the case of ACIT V/s. Shri Mehul J. Somaiya ( Supra) in para No. 7 of its order has held as under : 7. Section 145 as applicable prior to A.Y. 1997-98 provided that income chargeable under the head profits and gains of business or profession or income from other sources shall be computed in accordance with the method of accounting regularly employed by the assessee. Under the law as it applies to assessment prior to A.Y. 1997 98, an assessee can follow either (a) the cash system of accounting or (b) mercantile system of accounting or (c) mixed or hybrid system of accounting. An assessee may have different sources of income which is chargeable to tax under the head income from business or profession or income from other sources . For example an assessee may be doing (a) manufacturing and sale of cements (b) dealing in shares and securities as trader and (c) acting as commission agent. He was free to follow either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m u/s. 153A of the Act. The Ld CIT(A) has accepted the contention of the assessee that addition made in assessment concluded u/s. 143(3) of the Act, which is not pending cannot be again made while assessing income of the assessee u/s. 153A read with Section 143(3) of the Act. In this regard, reliance was placed on the decision of Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarayanan (India) Ltd. Vs. DCIT, 304 ITR (AT) 271 (Delhi). The Ld CIT(A) has also followed the scope of new Scheme effected for search u/s. 132 explained in the memorandum accompanying the Finance Bill, 2003. 17. In support of the ground, the Ld. D.R. has basically placed reliance on the assessment order. The Ld. A.R., on the other hand, has reiterated the submissions made before the authorities below. 18. Having gone through the above cited decision of Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarayanan (India) Ltd. Vs. DCIT (Supra), we find that the Delhi Bench in that case on an identical issue has held that no income which was already subjected to assessment u/s. 143(3) or u/s. 143(3)/147 of the Act completed prior to search in respect of those assessment years referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in A.Y. 2004-05 and 2005-06 at ₹ 27,246/- and ₹ 12,021/- respectively. As the expenditure incurred was allowed at ₹ 2,49,000 as against claimed by assessee firm at ₹ 3,40,000/- the expenditure claimed by the assessee already to be disallowed in such proportion, observed Ld. CIT(A). He has accordingly directed the A.O to disallow the dismantling expenditure claimed by the assessee to the extent of ₹ 7,292/- and ₹ 3,217/- in A.Ys. 2004-05 and 2005-06 respectively. Therefore, the ld. CIT(A) held that the dismantling expenditure amounting to ₹ 2,49,000/- granted by him while assessing income of the A.Y. 2002-03. 21. As discussed above, we find that the first appellate order on the issue of disallowance of dismantling expenses is reasoned one, hence we are not inclined to interfere therewith. The same is upheld. The issue no. 1 in A.Y. 2002-03 and issue no. 3 in A.Y. 2004-05 relating to the deletion of addition of ₹ 2,49,000/- and ₹ 19,954/- respectively made on account of dismantling expenses are decided against the revenue. First appellate order in this regard is upheld. Commission Expenses 22. The relevant facts are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e search assessment proceedings to be fully on material seized and no notings about such expenditure was found in seized material. The assessee, however, contended that in respect of search after 1.6.2003 provisions of Sec. 153A, 153B 153 C would become applicable to the search assessments and as per new scheme of search assessments, there is no requirement for an assessment 153A to be based on any material seized in the course of search. In support, the assessee placed reliance on the decision of Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarayanan (India) Ltd. Vs. DCIT (Supra). The Ld CIT(A) has agreed with the submission of the assessee that Sri KB Chhajed , an employee of the assessee firm must have been paid salary/ commission also for A.Ys. 2004-05 and 2003-004 as he was paid salary/commission during A.Y. 2005-06 at Rs/ 2,50,000/- as found noted in seized material and allowed by the A.O as against claimed ₹ 4,60,0o00/-. The A.O had allowed 55% of salary/commission claimed by the assessee as paid to its employee Shri K.B. Chhajed. Under these facts, the Ld CIT(A) found it reasonable that 55% of the salary claimed by the assessee in A.Ys. 2004-05 and 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is upheld. Issue no. 3 relating to watchman salary in A.Ys. 2003- 04, 2004-05 and 2005-06 is thus decided against the revenue. Supervision Charges 28. In the A.Y. 2005-06, in issue No.3, the revenue has also questioned the action of the Ld CIT(A) in deleting the disallowance of ₹ 40,150/- on account of supervision charges. We find that A.O made disallowance on this account of ₹ 10,450/- and ₹ 40,150/- in the assessment years 2004-05 and 2005-06 respectively. 29. The assessee claimed the expenditure on account of supervision charges as under : Name of the Payee A.Y. 2005-06 A.Y. 2004-05 Total S.B. Kale 90,000 80,000 1,70,000 G.P.Khaparde 45,000 70,000 1,15,000 Total 1,35,000 1,50,000 2,85,000 30. The A.O. allowed supervision charges of ₹ 1,39,530/- for A.Y. 2004-05 at 3% of on money receipt of 46,51,000/- in respect of A.Y. 2005-06, the A.O has also worked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of disallowance of unexplained expenditure in A.Y. 2005-06 amounting to ₹ 2,14,663/- the appellant claimed that, the disallowance u/s. 69C is to be telescoped against the disallowances of expenses such as commission, supervision charges etc.., claimed by the appellant out of unaccounted on-money receipts. The appellant further contended that the A.O. as taxed unexplained receipt of ₹ 42,000/- as unexplained expenditure while making addition u/s. 69C amounting to ₹ 2,14,663/- instead of telescoping the said unrecorded receipt against unrecorded expenditure. The contention of the appellant about telescoping of expenses disallowed against the expenses incurred out of books is rejected as the telescoping claim is not proved by the appellant. However, the second contention of the appellant about telescoping of undisclosed receipt of 42,000/- against the undisclosed expenditure added ₹ 2.14,663/- is accepted. The addition of ₹ 2,14,663/- u/s. 69C is therefore reduced to ₹ 1,72,663/-. The appellant gets relief of ₹ 42,000/- in A.Y. 2005-2006 on this count. 35. We find that the first appellate order on the issue is comprehensive and rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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