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2016 (8) TMI 994 - ITAT MUMBAI

2016 (8) TMI 994 - ITAT MUMBAI - TMI - Allowability of expenditure - Held that:- From the very nature of expenditure it makes clear that all the expenses are related to project itself and none of the expenditures can be presumed to be non-related one. The assessee before us produced bills and vouchers which include bills raised by the contractor and details are available in the ledger account which proves the genuineness of the expenditure related to the project “Rajkamal Heights”. We also find .....

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produce bills and vouchers to the extent of ₹ 1,67,48,172/- out of total expenditure claimed by assessee at ₹ 1,84,32,204/-. To this extent the assessee‟s expenditure can be allowed and the balance sum of ₹ 16,84,032/- can be disallowed. Accordingly, we allow the claim of the assessee to the extent of ₹ 1,67,48,172/- and retain the addition in respect to disallowance of expenses in the absence of the vouchers at ₹ 16,84,032/-. This issue of Revenue's appeal i .....

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). Even otherwise, there is no evidence relating to the assessment year 2006-07. This is merely an exploration of rate by the AO without any evidence based on earlier year evidences. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has wrongly estimated the cash component at ₹ 30 lakhs in respect of 7 flats on estimation basis. There is no basis for CIT (A) to estimate cash component in these 7 flats at ₹ 30 lakhs by taking the selling pric .....

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he AO has made addition on ad hoc basis without any finding of personal user of these expenses. We also find that these expenses are related to assessee‟s business and there is no element of personal user particularly when the assessee has already paid FBT on such expenses. There is no reason for making disallowance of these expenses. Hence, we confirm the order of the CIT (A) deleting these additions. This issue of Revenue‟s appeal is dismissed. - Genuineness of the salary paid .....

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ture was debited as on 31st March, 2007, i. e. at the end of the year. The assessee before CIT (A) claimed that these persons were hired to supervise the project during the year, since the work of the garden as well as club house was under progress. The CIT (A) observed that, “had any such truth been there, there would have been regular debit and receipt of the salary by these persons whereas, Appellant has only shown debit by voucher dated 22.03,2007, which is apparently unbelievable. Therefore .....

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elow have assumed concealment in respect to on money received for the post survey period. The on money was received by the assessee for the assessment year 2006-07, being the date of survey on 21-02-2006, for the reason that some papers for the financial year 2005-06 were found. But, no paper relating to financial year 2006-07 relevant to this assessment year 2007-08 was found. On this basis only the Tribunal has deleted the addition of on money addition and once addition is deleted, penalty wil .....

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in appeal No.CIT (A)-26/IT-145/Dy.CIT 15(1)/09-10 dated 16-03-2010. Assessment was framed by the DCIT, Circle-15(1), Mumbai for assessment year 2007-08 vide his order dated 24-12-2009 passed u/s 143(3)(ii) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). The other appeal by the assessee is arising out of the order of the CIT (A)-26, Mumbai dated 26-02-2014 passed in appeal No.CIT (A)-26/IT-21/JCIT.15(1)/12-13 confirming the penalty levied by the JCIT(OSD), Circle-15(1), Mumbai .....

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₹ 1,84,32,304/- even though these were incurred after the date of issue of Completion Certificate by the Architect . 3. Briefly stated the facts are that the assessee is a builder and property developer. The assessee firm acquired land at Parel and constructed a building project known as Raj kamal Heights‟. This project constructed two residential wings. A survey u/s. 133A of the Act was carried out on the said construction site on 16-02-2006. During the course of survey, the departm .....

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8223; etc. Further, he noted that the assessee does not maintain stock register/consumption register. According to the AO, the rate given by the assessee to the contractor for construction @900/sq. ft. was more than the market rate. According to him, another firm, Build Well Developer has shown rate per sq. ft @ ₹ 300. M/s Darshan Construction has also shown the cost of construction at ₹ 799 per sq. ft. The AO has not accepted the architect‟s certificate submitted with the exec .....

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4/- Aggrieved, against rejection of book results and disallowance of expenses, the assessee preferred appeal before the CIT (A), who deleted the addition after considering the explanation of the assessee. Aggrieved, now the revenue is in appeal before the Tribunal. 4. We have heard the rival contentions and gone through the facts of the case. The CIT (A) vide Para 7 of his order deleted the disallowance of expenses by observing as under:- 7. I have considered the rival submissions of the Assesse .....

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received. The completion of the building does not necessarily mean that project is completed in all respects. In reality obtaining of an occupation certificate only means that building is fit to be occupied subject to the condition laid down by MCGM granting such certificate. It can be seen from the nature of the expenditure itself that all the expenses are related with the project itself and none of the expenditure can be presumed to be non-related one. One can see that payment to contractor is .....

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work, which is on going work even required to be done after obtainment of occupation certificate. Further, even after obtainment of occupation certificate, garden can be developed or process of garden would be made in progress. There is no bar of any such project under consideration. It appears from the finding of the Assessing Officer that vital issue of the matter has not been appreciated properly by him as there is payment to BMC for Water Connection charges which cannot be disallowed merely .....

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orks ₹ 75,000/- 6. Rabbit removing ₹ 37,400/- 7. Intercom Rs.1,12,000/- 8. Pipes Rs.5,40,042/- 9. Tiles Rs.9,30,803/- 10. Sand Rs.2,17,818/- 11. Laminated Glass ₹ 19,425/- Total Rs.38,24,782/- 7.2 All these expenses cannot be presumed to be irrelevant to the cost of project as even after receipt of occupation certificate, various work related with amenities, beautification, repair, minor reconstruction, redevelopment, replacement of various items, re-modification, miscellaneous .....

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roving that these expenditure are not related to the project and has been diverted to any other project. Here in this case it is argued by the Ld. AR that assessee has got any other project and there is no diversion of material to any other site. As regards cost of construction @ ₹ 900/-, I find substance and fairness in the argument of the Ld. AR that the rate of construction of the project is a real-one and the contractor is not at all a related person and all the payments are made as pe .....

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ess of contractual payment made by the assessee. The arguments of the Ld. AO about the expenditure of construction of the building as it was complete and there was no reason whatsoever with the assessee to incur such expenditure, is not convincing or tenable argument. The work carried out by the contractor was mainly related with the finishing work, segmental work and other works and further the plan of construction of Clun-House was approved in May, 2007 which is after receipt of occupation cer .....

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xpenditure incurred by the assessee and proved the same before him. The points raised by Ld. AO may be relevant for further investigation but certainly not the ground for rejecting the genuine expenditure. Hence disallowance of such expenses of ₹ 1,84,32,204/- is directed to be deleted from the assessment. 5. We have heard the rival contentions and gone through the facts & circumstances of the case. From the very nature of expenditure it makes clear that all the expenses are related to .....

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ng expenses, BMC water connection charges, work related to amenities, beautification, repair, minor reconstruction, redevelopment, replacement of various items, remodeling, misc. repair of completed works incurred by assessee after completion of the building, which is very much allowable. We have seen that the assessee is able to produce bills and vouchers to the extent of ₹ 1,67,48,172/- out of total expenditure claimed by assessee at ₹ 1,84,32,204/-. To this extent the assesseeR .....

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ipt to ₹ 30,00,000/- as against ₹ 2,20,57,111/- made by the AO. For this, the Revenue has raised the following ground No.2:- 02. On the facts and circumstances of the case as well as in law, the Ld. CIT (A) has directed to restrict the addition on account Alleged Cash Component to ₹ 30,00,000/- as against ₹ 2,20,57,111/- made by the AO. After having accepted the factum of receiving on money on one side and ignoring evidence of statement of Broker and assessee recorded at .....

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survey operation 133A of the Act on the business premise of the assessee on 16-02-2006 the survey party papers relating to transactions of on money/cash component transactions recorded. The AO made the addition of on money i.e. cash component on account of sale of flats of ₹ 2,20,57,111/-. According to the AO, the partner of the assessee firm during the course of survey proceedings admitted the cash component in sale of these flats. The AO referred to Question Nos. 21 & 23 of the state .....

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ent in respect of 17 flats at ₹ 2,20,57,111/- and added the same to the returned income of the assessee. Assessee preferred appeal before the CIT(A), who restricted the addition at ₹ 30 lakhs by observing in paras 9, 9.2, 9.3 and 9.4 as under:- 9. I have considered the rival submission of the assessee and has also circumspected the entire spectrum of facts and circumstances of the case with reference to result of survey proceeding and finding of Assessing Officer. It is the very evid .....

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rvey authority, the average rate was accepted @ ₹ 3,750/-, which includes selling price as per agreement of ₹ 2,500/- and on money @ 1,250/- this acceptance by the department during the course of survey proceeding strengthen the contention of the Ld. AR that selling price of the flat was not more than ₹ 3,750/- in the normal course and only in cases where sales were executed later on, selling price was more than ₹ 5,000/-. Therefore, the specific evidence referred to duri .....

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or addition. These 9 flats are as under:- S No Flat Number Cash Component Offered In AY 2006-07 A Wing Amount (Rs) 1 703 7,98,000 2 802 9,00,000 3 1103 7,98,000 B Wing 4 302 9,80,000 5 601 7,77,000 6 802 17,50,000 7 1001 13,87,500 8 1102 17,50,000 9 1103 14,25,000 Further, out of the rest of 8 flats, flat No. 103 was sold out @ ₹ 4,603/- hence it was over and above general selling price included in on money receipt, therefore, only following flats are remained to be considered for receipt .....

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the flats, there is less sale price shown in respect of 7 flats therefore, the difference of the same is worked out to ₹ 30 Lakhs. These 30 Lakhs is worked out from submission of the Ld. AR dated 04.03.2010 itself as mentioned earlier. Therefore, instead of making of double addition, addition is confined to ₹ 30 Lakhs, which is well supported with the finding of the survey authority duly accepted by the assessee. Here it is also relevant to mention that after survey the Ld. Assessin .....

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has shown profit from sale of flat in its project Rajkamal Heights . In the profit and loss account the assessee has duly incorporated the amount of ₹ 5.16 crores disclosed on this project during survey conducted at assessee s premises on 02.12.2006, over and above regular profit. The assessee has also furnished all the relevant details called for. After going through the details/documents filed, the returned income of the assessee is accepted. 9.4 thus selling rate, on the basis of which .....

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Aggrieved, against the restriction of addition of ₹ 30 lakhs as against the addition made by the AO at ₹ 2,20,57,111/-, the assessee as well as the revenue both in cross appeals before the Tribunal. 8. We have heard the rival contentions and gone through the facts and circumstances of the case. First of all the assessee submitted that out of 17 flats 9 flats have been already considered while disclosing the money receipts at ₹ 5.16 crores in the assessment year 2006-07 and the .....

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in both A Wing and B Wing. The details of which are as under:- When a query was raised by the bench to the learned CIT/Sr. DR whether 9 flats out of 17 flats were only flats, which were part of which cash component was already taken and already disclosed in the declaration made by the assessee. The learned CIT/Sr. DR stated that loose sheets found during the survey are part of survey reports. These loose sheets indicate that in some cases sale of flats Rajkamal Heights there was a receipt of cas .....

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s. We find that a survey action on the business premise of the assessee u/s. 133A of the Act and consequent action on a real estate broker, Shri Kamlesh Savla was conducted during the FY 2005-06 relevant to Asst. Year 2006-07. It is fact that out of these 17 flats 9 flats were sold during the assessment year 2006-07 and cash component was offered in that very year, which is included in the declaration made for ₹ 5,16,00,000/- and assessment made therein u/s. 143(3) of the Act. 9. As regard .....

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the cash component involved in this quotation? Ans: At that time the cash component was between 15 to 20%. However, the flats were not sold at this price but the actual price was around 4000 per square feet . We also find that the survey party has accepted the average sale price rate @ 3750, which includes the sale price as per the sale agreement of ₹ 2,500/- and cash component of ₹ 1,250/- in the earlier year relevant to assessment year 2006-07. Even otherwise, the average PSF rate .....

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respect of 7 flats on estimation basis. There is no basis for CIT (A) to estimate cash component in these 7 flats at ₹ 30 lakhs by taking the selling price of flat @ ₹ 3750/- per sq. ft. Accordingly, we delete the addition confirmed by CIT (A) amounting to ₹ 30 lakhs. The issue of assessee‟s appeal is allowed and that of the Revenue is dismissed. 10. The nest issue in the Revenue‟s appeal is against the order of the CIT (A) deleting the disallowance of expenses of .....

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he pretext of payment of FBT, which is not supported by law . 11. We have heard rival contentions and gone through the facts and circumstances of the case. We find that the AO has disallowed these expenses on the basis of personal element involved in the same. We also find that the assessee has also paid FBT on these expenses @ 20%. We find that the AO has made addition on ad hoc basis without any finding of personal user of these expenses. We also find that these expenses are related to assesse .....

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No.2:- 2. The Learned Commissioner of Income Tax Appeals erred in confirming addition of ₹ 3,45,000/- payment of Salary on the ground that payment were made on One time basis & not periodically 13. We have heard the rival contentions and gone through the facts and circumstances. We find that the AO disallowed salary of ₹ 3,45,000/- claimed by assessee to paid to four employees for supervision work. According to AO the assessee has not paid the salary on monthly basis but it was o .....

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gress. The CIT (A) observed that, had any such truth been there, there would have been regular debit and receipt of the salary by these persons whereas, Appellant has only shown debit by voucher dated 22.03,2007, which is apparently unbelievable. Therefore, disallowance of salary of ₹ 3,45,000/- out of the total claim of ₹ 7,64,975/- is sustained . We are of the view that the assessee is unable to prove the genuineness of the salary paid to these employees and CIT (A) has confirmed t .....

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ed Commissioner of Income Tax Appeals has grossly erred in confirming Penalty u/s 271 (1) (c) r. w. s. 274 of the Income Tax Act, 1961 amounting ₹ 11,25,927/- on account of alleged receipt of on money and salary payment amounting ₹ 33,45,000/-. 15. First of all we have gone through the Order of CIT (A) and noted that the CIT (A) has confirmed the penalty in respect to on money addition of ₹ 30 lakhs confirmed by CIT (A) in respect to 7 flats which were sold at a price lower tha .....

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s ₹ 3,750/- per sq. ft. This material facts, evidences and background of the case gives basis for selling price of the flats is to be taken @ 3750/- which booking were made in earlier years, accordingly, on money element or more selling price of flats worked at ₹ 30,00,000/- in respect of 7 flats as narrated above is sustained against the addition of ₹ 2,20,57,111/-. Therefore, assessee gets relief of ₹ 1,90,57,111/-. On these observations, the AO levied the penalty on th .....

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