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2016 (6) TMI 883 - ITAT CHANDIGARH

2016 (6) TMI 883 - ITAT CHANDIGARH - TMI - Unexplained expenditure u/s 69C - whether addition is unwarranted and not sustainable in the eyes of law as the profit from the execution of works contract @8% had been returned by the appellant under section 44AD? - From an analysis of section 44AD of the Act contained hereinabove, we have already held that the assessee had not incurred the expenses to the extent of 92 % of the gross receipts. Therefore, in the present case, the provisions of section 6 .....

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m of all the businesses, the Assessing Officer could have made the addition under section 69C of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case - Decided in favour of assessee - Addition on account of unexplained cash credits - Held that:- It is a fact on record that inspite of stating the donor to be a close relation, the assessee did not file any evidence other .....

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he assessee. We observe that even in cases of properties acquired through gifts, etc. the cost of acquisition as incurred by the previous owner is given to the assessee. The fact of acquiring the plot from Dr.Rajan Sushant is evident from the office order of Himachal Pradesh Housing & Urban Development Authority dated 8.1.2003. The Assessing Officer as well as the CIT (Appeals) asked for Sale Deed, however, we see that this order is as good as a Sale Deed. However, the amount of purchase conside .....

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ars, while adjudicating another issue, the Assessing Officer himself has accepted the cost of construction in very clean terms. In the Assessing Officer's order for assessment year 2006-07, an amount at ₹ 4 lacs as cost of construction has been accepted at page 4. Similarly, in assessment year 2007-08, and in assessment year 2008-09 the cost of construction at ₹ 16 lacs and ₹ 4 lacs respectively have been accepted by the Assessing Officer. Since the Assessing Officer himself ha .....

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President And Ms. Rano Jain, Accountant Member For the Appellant : Shri Vishal Mohan For the Respondent : Shri Sushil Kumar, DR ORDER Per Rano Jain, A. M. These two appeals appeal filed by the assessee are directed against the separate orders of learned Commissioner of Income Tax (Appeals)(Central), Gurgaon, both dated 25.11.2013, relating to assessment years 2007-08 and 2009-10. 2. Since the facts and circumstances are identical in both the appeals, the same were heard together and are being d .....

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me Tax Act, 1961 . The said addition is unwarranted and not sustainable in the eyes of law as the profit from the execution of works contract @ 8% had been returned by the appellant under section 44 AD of the Income Tax Act, 1961. 5. Briefly, the facts are that the assessee is a civil contractor and had declared its profits under section 44AD of the Income Tax Act, 1961 (in short 'the Act') amounting to ₹ 3,02,050/- against the gross receipts of ₹ 37,75,444/-. The Assessing O .....

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these payments were towards contract work, the Assessing Officer made an addition of ₹ 32,24,130/- (Rs.34,73,394 - ₹ 2,49,264/-). 6. Before the CIT (Appeals), the assessee stated that the profits were declared as per the scheme of presumptive taxation @ 8% which the Assessing Officer cannot disturb. The CIT (Appeals) dismissed this ground of appeal raised by the assessee stating that the assessee could not substantiate that the payments made through bank were all related to his contr .....

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tive taxation under section 44AD of the Act, the Assessing Officer was not right in asking him to substantiate the expenditure incurred by him. Reliance was placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Surinder Pal Anand in ITA No.156 of the Act 2010 dated 29.6.2010 and also on the order of the Jodhpur Bench of the I.T.A.T. in the case of Kangiri Contractor Vs. ITO in ITA No.428/JU/2010 dated 30.9.2010. 8. The learned D.R. relied on the order of th .....

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books of accounts which reported a higher turnover, which deliberately was not considered by the assessee and which was taken at an amount below ₹ 40 lacs so as to be covered under section 44AD of the Act. Further, it was stated that the provisions of section 69C of the Act are very clear that wherever the assessee fails to explain about the source of certain expenditure incurred during the year, the same may be deemed to be the income of the assessee. 9. We have heard the learned represen .....

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withstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and .....

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; shall be deemed to be @ 8% or any higher amount. The first important term here is 'deemed to be', which proves that in such cases there is no income to the extent of such percentage, however, to that extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of something which actually is not. Therefore, it it quite clear that though for the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual inco .....

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to be so. To take it further, it can be said that the expenditure may be less than 92% or it may also be more than 92% of gross receipts. 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross receipts. In that case, the provisions of sub-section (5) of the said section will be applicable to it, which reads as under : "44AD (5) Notwit .....

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t as required under section 44AB." 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get then audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts. 14. Now, applying the above to the facts of the present case, we observe that the Assessing Officer, for making the impugned addition has started with the presumption that an amount to the extent of 92% of .....

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make further addition under section 69C of the Act. The argument of the learned D.R. that the turnover of the assessee has been doubted by the Assessing Officer is totally ill-found, in view of the same. 15. Further, it is a fact on record that the assessee had not maintained books of account that is why he opted for 8% income as per section 44AD of the Act. The section also does not put obligation on the assessee to maintain books of account, more so, in view of the fact that his income has bee .....

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the same. The only fetter provided under section 44ASD of the Act are the applicability of provisions of section 30 to 38 of the Act. The provisions of section 69C of the Act reads as under : "69C. Unexplained expenditure, etc.- Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amou .....

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ed any expenditure'. But can we say on the facts & circumstances of the present case that the assessee has 'incurred' any expenses. From an analysis of section 44AD of the Act contained hereinabove, we have already held that the assessee had not incurred the expenses to the extent of 92 % of the gross receipts. Therefore, in the present case, the provisions of section 69C of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the .....

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e had carved out the case out of the glitches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case. Before parting we would like to deal with the case law relied on by the learned D.R. 18. The only case law relied on by the learned D.R. is that of Ahmedabad Bench of the Tribunal in the case of Shivani Builders (supra). On perusal of the said order, we observe that the basis of finding given in this order is mainly the fact that the as .....

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d circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in upholding the addition of ₹ 1,00,000/- on account of unexplained cash credits ." 20. The facts of the case are that an amount of ₹ 50,000/- each on 24.8.2006 and 16.9.2006 were found credited in assessee''s bank account, which as per the assessee, was amount of loan received back. The Assessing Officer made addition under section 68 of the Act as further corroborations by way of b .....

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wa. Further she stated that considering the close relationship, there is no reason not to supplement the confirmation with more supporting documents. In this way, the ground was dismissed by the CIT (Appeals). 22. Aggrieved by this, the assessee is in appeal before us. The learned counsel for the assessee reiterated the fact that the confirmation was duly filed before the Assessing Officer. Still the addition was made and was confirmed by the CIT (Appeals). 23. The learned D.R. relied on the ord .....

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as under : "On a perusal of the confirmation copy filed at page 24 of the PB, it is seen that it is has no date. The assessee is stated to be the uncle of the wife of Shri Vijay Wadwa. Considering the close relationship, there is no reason not to have supplemented the confirmation with more supporting documents at the time of filing written submissions in appeal, as categorically called for by the AO. Hence, 1 am afraid the assessee cannot be said to have discharged the onus of proving he .....

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the assessee is as under : "1. That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the adding back of the sum of ₹ 17,04,706/- as an unexplained expenditure under section 69 C of the Income Tax Act, 1961 . The said addition is unwarranted and not sustainable in the eyes of law as the profit from the execution of works contract @8% had been returned by the appellant under section 44 AD of the Income Tax Act, 1961.&q .....

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s." 30. Briefly, the facts are that the assessee had shown Long Term Capital Gain on sale of house No.B- 419/2 at New Shimla. During the assessment proceedings, the assessee was asked to file copy of Sale Deed and documentary evidence in respect of cost of acquisition and cost of improvement as claimed in the return of income. The assessee filed a copy of office order dated 3.10.2008 issued by the Himachal Pradesh Housing & Urban Development Authority had revealed that the plot was orig .....

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nce was brought in this regard. Therefore, the Assessing Officer considered the cost of acquisition as well as the cost of improvement of the said plot being nil and taxed the entire sale proceed of ₹ 40 lacs in the hands of the assessee as Long Term Capital Gain. Since the assessee had already sown capital gain at ₹ 12,852/- in his return, the difference of ₹ 39,87,148/- was added in the hands o the assessee as undisclosed income. 31. Before the CIT (Appeals), it was stated th .....

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lease holder imposing penalty by SADA and copy of Completion Certificate was placed on record as additional evidence before the CIT (Appeals). The CIT (Appeals) after considering the submissions of the assessee observed that no document in support of his contention, be it cost of acquisition or improvement or construction of building or sale consideration has been produced. Further, the CIT (Appeals) dismissed the ground of assessee holding as under: "Copy of statement of Prithvi Vikram Sen .....

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Shimla is not found reflected in the bank narration filed on pages 29-30 of the PB. Infact what is narrated is dated 11.8.2008 for ₹ 77,856/-as paid. Assessee's attempt at corroboration to prove his case is found wanting. In such a backdrop, I am afraid the natural conclusion is that the assessee has not placed all the primary facts before the tax authorities, which if done would lead to drawing of adverse inferences. Thus, I have no reason not to confirm the action of the AO in treati .....

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y cost. Some value for cost of acquisition has to be given to the assessee. We observe that even in cases of properties acquired through gifts, etc. the cost of acquisition as incurred by the previous owner is given to the assessee. The fact of acquiring the plot from Dr.Rajan Sushant is evident from the office order of Himachal Pradesh Housing & Urban Development Authority dated 8.1.2003. The Assessing Officer as well as the CIT (Appeals) asked for Sale Deed, however, we see that this order .....

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