TMI Blog2016 (8) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... d picked up the cash payment upto 20/02/2007 from the audited books of account submitted by the assessee during the assessment proceedings, which he had himself rejected as being incomplete. He has further given a finding that the additions made by the AO was without any basis. Before us, Revenue has not placed any material on record to controvert the findings of the ld.CIT(A). - Decided against revenue - ITA No. 2656/Ahd/2011 & CO No. 22/Ahd/12 , 2663/Ahd/11 & CO No. 23/Ahd/12, 1694/Ahd/12, 2251/Ahd/2011 & CO No. 208/Ahd/11 - - - Dated:- 18-8-2016 - R. P. Tolani (Judicial Member) And Anil Chaturvedi (Accountant Member) For the Revenue by : Shri Sanjay Kumar, Sr.DR For the Assessee by : Shri S.N. Soparkar, AR ORDER Anil Chaturvedi (Accountant Member) All these appeals by the Revenue and Assessee are directed against the separate orders of the ld.Commissioner of Income Tax(Appeals)Valsad dated 29/07/2011 and 30/06/2011 for Assessment Years (AYs) 2007-08 2008-09 and dated 23/05/2012 for AY 2009-10 pertaining to assessee of the same group but different Assessment Years (AYs) and some of the issues are common. The Assessees have also filed Cross Objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular, we are of the view that the monetary limit prescribed by the instructions of the aforesaid CBDT Circular would be applicable to the present appeal of the Department and therefore the present appeal is not maintainable on account of low tax effect. In such circumstances, we dismiss the appeal of Revenue without expressing any opinion on merits of the case. However, in case there is any error in the computation of the tax effect involved or if for any reason, the aforesaid CBDT Circular is not applicable, it would be open to the Revenue to seek revival of the appeal. 5. In the result, the appeal of the Revenue in ITA No.1694/Ahd/2012 for AY 2009-10 is dismissed. 6. Now we take up the Revenue s appeal in ITA No.2656/Ahd/2011 for AY 2007-08 and Assessee s Cross Objection No.22/Ahd/2012 for AY 2007-08. 6.1. The relevant facts as culled out from the materials on record are as under:- 6.2. Assessee is a partnership-firm stated to be engaged in the business of construction. Assessee electronically filed its return of income for AY 2007-08 on 08/11/2007. The return of income was initially processed u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found from the premises of the assessee and it cannot be rejected as incomplete books. He thereafter considered the book results shown as per impounded books to be original and rejected the audited book results presented during the assessment proceedings. AO was of the view that since no proper explanation was offered for cash of ₹ 1,24,88,240/-, he considered the same to be unexplained cash credit and made addition u/s.68 of the Act. Aggrieved by the order of AO, assessee carried the matter before ld.CIT(A) who after considering the submissions of the assessee deleted the addition by holding as under:- 6.3 DECISION:- I have considered carefully the observations of the AO in the assessment order as well as the contentions raised by the AR of the appellant. From the assessment order what is clear is the AO relied on the uncompleted sets of account ignoring the audited account. At the same time the appellant pleaded before the AO that the audited account be verified/examined to determine or detect any defects in the books of a/c and concealment thereof. The appellant explained under what circumstances the A/c for the A.Y.2007-08 in the computer was incomplete? The observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, I am convinced that the AO has taken absurd steps for making such huge addition. It is not comprehendible how can such addition be made ignoring the glaring details before the AO. Thus, the AO is directed to delete the addition. This ground is allowed. 6.6. Aggrieved by the order of ld.CIT(A) Revenue is now in appeal before us. 6.7. Before us, ld.Sr.DR supported the order of AO. Ld.AR, on the other hand, reiterated the submissions made before the AO and ld.CIT(A) and supported the order of ld.CIT(A) 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to addition u/s.68 of the Act. We find that ld.CIT(A) while deciding the issue in favour of assessee has given a finding that AO had relied on the incomplete set of accounts by ignoring the audited accounts. He has also noted that assessee had electronically filed its return of income on 31/10/2007 and thereafter order u/s.154 of the Act was passed on 25/06/2009 and survey was conducted on 19/03/2008 and thereafter the case was reopened u/s.147 of the Act which means that assessee had got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order, merely stated that as impounded book result are considered to be original and proper books of result, the book result presented during the assessment proceeding by the Authorised Representative which are different from the books result as per impounded book result are therefore, rejected completely ignoring the submissions made by the Id. AP, during the assessment proceeding. First of all, the facts needed to be set straight. The appellant filed E-Return on 31.10.2007 ITR-V was filled on 08.11.2007 and thereafter order u/s. 154 was passed on 25.06.2009 assessing total income at ₹ 19,69,278/-. The Survey u/s. 133A was conducted on 19.03.2008. Thereafter, the case was re-opened u/s. 147 of the Act. That means, the appellant had audited its account much before the survey was conducted. Even while passing the rectification order u/s.154 on 25.06.2009, the AO has considered the book result submitted along with the E-R/I for the A.Y.2007-08. In other words, the AO has accepted the audited book result for the same period. Can the book result be rejected by the AO without assigning the reasons or justification? In my humble opinion, the AO cannot reject the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd or any intention to evade the tax All the individual payments made in cash were genuine and the cash book and other records were produced during the assessment proceedings u/s. 143(3) of the Act before the AO. It is a fact that cash payment is involved in purchase of sand, stone, getti, bricks etc. The appellant has followed the same for purchasing sand, The appellant failed to demonstrate before me that all such payments are below the prescribed limit as per the provisions u/s.40A(3). In this circumstances, I am inclined to agree with the finding of the AO for attracting provisions u/s.40A(3). However, the AO had added the entire amount of ₹ 8,00,000/- paid to Shri Khatri. The Finance Act, 1995 w.e.f. 1st April, 1996, the mandate of the provisions is that twenty percent of such expenditure shall not be allowed as deducted as explained in the CBDT Circular No.717, dt. 14 Aug 1996. In view of the above, the AO is directed to disallow 20% of ₹ 8,00,000/- as per section 40A(3) of the Act. As regards the payments made to Balabhai Bachubhai Prajapti of ₹ 29,50,000/- the appellant argued that only ₹ 4,25,000/- was raised in his case and the same was pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of its claim. Thus, this ground of Assessee s CO is allowed for statistical purposes. 11. In the result, Assessee s CO No.22/Ahd/2012 is allowed for statistical purposes. 12. Now we take up the Revenue s appeal in ITA No.2663/Ahd/2011 for AY 2008-09 and Assessee s Cross Objection No.23/Ahd/2012 for AY 2008-09. 12.1. Revenue has raised the following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in Allowing the suppression of sales to ₹ 90,04,081/- shown in the books. 2. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in Allowing the disallowance made u/s.40A(3) of ₹ 14,74954/-. 12.2. Assessee has raised the following grounds in its CO:- 1. Ld.CIT(A) erred in law and on facts in confirming disallowance of legitimate business expenses of ₹ 16,66,815/- incurred by the appellant that is supported by third party evidence. Ld.CIT(A) despite having accepted the audited accounts of the appellant confirmed disallowance on the basis of conjecture, surmises and suspicion. Ld.CIT(A) ought to have deleted such disallowance of expenses incurred for completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n raised by the AR of the appellant. Like the previous year assessment in this year too the AO relied on the incomplete sets of books of a/c instead of audited a/c. The issue contemplated by the AO in the assessment order was of Sales suppression during the year. The factum of the case is that the appellant is engaged in the construction business. A Survey u/s. 133A of the Act was carried out on 19.03.2008 at the business premises of the Firm. Statement u/s. 131 of the Act of one of the partners Shri Mohmad Yakub Saiyed was recorded on 24.03.2008 and concluded on 25.03.2008. The appellant has E-filled its return of income on 30.09.2008. During the assessment proceeding, the AO asked the appellant to justify the why book audited book result should be adopted instead of the book result as per impounded books. The appellant submitted before the AO that the impounded books are incomplete and the R/I was filed after the account was statutorily audited u/s.44AB of the Act. The appellant filed an affidavit on 31.12.2010 declaring that the books of a/c was audited and the results are correct. Further, the appellant filed an affidavit from Auditor certifying that the A/c was audited by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced the books of a/c including B/S and P L A/c. Further, the appellant was asked to justify which are the expenditure incurred before the date of survey and yet to be entered in the books of a/c. The appellant submitted 3 months expenses from January 2008 to March 2008 were yet to be entered in the books of A/c. During the appellate proceeding the Id. AR was asked to submit P L A/c. and Trial Balance for the period from January 2008 to March 2008. The Id. AR also was asked to explain details of expenditure incurred with evidences during these three months. The appellant submitted that the appellant took project [Green Park Enterprise] for construction of 4 buildings consisting of 80 flats. The appellant also construct factory shed of Alok Industries Ltd. as and when the part of the construction completed, the appellant raised the bills to the party. During period from January, 2008 to March, 2008 work was under the progress. Therefore, the cost was continued to be incurred in the same period and the cost of construction includes purchase of materials (including wages and direct expenses). Further, it is submitted further that during the month of April, 2008, appellant raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der in Ather Yakub Saiyed case. My decision in that case was I have considered the observation of the AO in the assessment order as well as the submission made by the AR of the appellant carefully. The facts of the case needed to be clarified here is that a survey action was conducted in the business premise of M/s. Zayba Construction Co. and certain documents impounded wherein it was noted that an amount of ₹ 65,00,000/- was returned to Shri Surendrabhai Jiwrajkar, who is one of director of Alok Industries Ltd. The AO observed that the amount of ₹ 65,00,000/- paid to Shri. Surendrabhai Jiwrajkar was out of books of a/c. Accordingly, the AO made addition of ₹ 65,00,000/- u/s. 69 of the Act. The appellant has is a group concerns of M/s. Zayba Construction Co. The impounded documents are related to the all group concerns including the appellant. I have also perused the documents relied upon by the AO in this case. Although the Id. AR disputed that the said amount was not paid to Shri. Surendrabhai Jiwrajkar, but the document clearly indicates that the amount was paid. Close scrutiny of the document revealed that it contained the details of transactions of thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales as per the audited accounts and the impounded figure and during the course of assessment, audit report, was submitted and the Auditor had not been pointed any deficiency in the books of accounts. He therefore submitted that no addition was called for. 15. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that ld.CIT(A) while deciding the issue has noted that AO had summarily and without giving any reasons rejected the audited accounts of the assessee. He has further noted that for rejection of the audited accounts AO has not given any finding in the assessment order. We further find that the ld.CIT(A) after considering the submissions of the assessee and after conducting the necessary verification of the evidences furnished before him and by a detailed and well-reasoned has decided the issue. Before us, neither assessee nor Revenue has placed any material on record to controvert the findings of the ld.CIT(A). In view of these facts, we see no reason to interfere with the order of the ld.CIT(A). Thus, this ground of Revenue is dismissed. 16. Next ground in the Revenue s appeal is wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investment. 19.2. Assessee has raised the following ground in its Cross-Objection:- This cross objection is filed against the appeal filed by ACIT, Vapi, in respect of order passed by the Hon ble CIT(Appeals), Valsad, who is with a view that the appellant made unexplained investment of ₹ 65,00,000/- in the name of Shri Surendrabhai Jiwarajkar, one of the directors of Alok Industries Ltd. 20. Before us, ld.AR submitted that grounds raised by assessee and Revenue being inter-connected with the grounds raised in the appeals relating to M/s.Zayba Construction(supra) and the issues raised in the present appeals are already considered while deciding the appeal in the case of Zayba Construction Co. (supra), no separate adjudication is required as the grounds are consequential in nature. Ld.Sr.DR did not object the aforesaid submission of the ld.AR. 20.1. We have heard the rival submissions and perused the material on record. In view of the aforesaid submissions of both the parties, the Revenue s appeal and Assessee s cross objection are dismissed. 22. We summarize the result as under:- (i) Revenue s appeal in ITA No.2656/Ahd/11 for AY 2007-08 is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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