TMI Blog2018 (4) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the addition of ₹ 8.45 lac sustained by the CIT(A) is deleted. Addition on account of redevelopment/deemed rental income - Held that:- In case the CIT(A) had any doubts as regards the veracity of the said documents, he could have directed the Assessing Officer to have made necessary verifications from the said respective builders, so that the truth may have surfaced. We are further of the view that as the assessee had claimed that the huts under consideration were demolished, therefore, the alternative view of the Assessing Officer that in case the addition made towards redevelopment allowance does not survive, the addition would be called for in the hands of the assessee on account of deemed rental income also cannot be accepted. We are of the view that as claimed by the A.R, now when the huts in itself were demolished and were no more in existence, therefore, the aforesaid alternative contention of the department cannot be sustained. Nothing has been placed on our record or canvassed before us by the ld. D.R to controvert the aforesaid contention of the A.R. In terms of our aforesaid observations, delete the addition of ₹ 2.30 lakhs made by the AO on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng one sets of principle whereas disallowed labour charges to remaining five parties on the different principle which is not only self contradictory but also untenable in the eyes of law. 1 d The confirmation of addition of ₹ 8,45,000/- by the CIT (Appeal) requires to be deleted / quashed and the relief may be granted to the appellant. 2a The Learned CIT (Appeal) has erred in confirming an addition of ₹ 2,30,000/- made by the AO on imaginary and estimated basis on account of non existing redevelopment allowance. 2b While confirming the disallowance, the learned CIT (Appeal) observed that existence of assets in the form of room / cottage not established and there was no contractual agreement for the payment or otherwise of redevelopment allowance, overlooking the fact that in the body of the assessment order itself the A O has specifically mention about existence of assets in the form of room at Three different places, moreover a confirmatory letters was produced from builders and contractors confirming fact that no redevelopments allowance or alternative accommodation rent has been paid to the appellant. 2c The learned CIT ( Appeal ) while confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame Address Amount Rs. 1. Shri Arun B. Tank B/32, Shradha Apartments Co-op Housing Society Ltd. Shakti Nagar, Marve Road,Malad (W), Mumbai 400 064 2,00,000/- 2. M/s.GuduKanu Enterprises Room No. 187 Samart Ashok Nagar, Chakkala Vile Parle (E), Mumbai 400 009 70,000/- 3. M/s. Kuber Enterprises H-Plot No.3, Govind Nagar Malad (E), Mumbai 400097 2,00,000/- 4. M/s. Shyam Arts Flat No. 14 D. Wing, Govardhan Nagar, Barsopada Road, Behind Kandiwali (W), Mumbai 400 067 75,000/- 5. M/s. S.L. Construction Shivaji Nagar, Gate No.2, Madh Village, Madh island,Via Versova, Andheri (W), Mumbai -400 061 3,00,000/- However, all the aforesaid notices were returned unserved. The Assessing Officer in the backdrop of the aforesaid facts, called upon the assessee to explain as to why the payments made to the aforementioned parties may not be treated as bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration. The Assessing Officer on the basis of the aforesaid conviction estimated the value of redevelopment allowance @10% of the value of the property and made an addition of ₹ 2,30,000/- to the total income of the assessee under the head income from other sources . The Assessing Officer while making the aforesaid contentions also observed that a similar addition was made in the case of the assessee for A.Y. 2009-10, which though was pending in appeal before the CIT(A), but however, as there was no change in the facts of the case during the year under consideration, therefore, made the addition in the hands of the assessee for the year under consideration. The Assessing Officer inter-alia made certain other additions and vide his order dated 28/02/2013, assessed the income at ₹ 21,92,880/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). During the course of the appellate proceedings the assessee submitted copies of ledger accounts, bills and PAN nos. of labour contractors along with their bank statements highlighting the payments made to them. The assessee taking support of the aforesaid documentary evidence claimed that the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his aforesaid claim of labour expenses. The CIT(A) further observing that as the copies of all the bills furnished by the assessee (except that in the case of M/s. Shyam Arts), which were purportedly raised by the aforesaid six parties on the assessee were prepared on computer, and neither of them (except for in the case of M/s. Maa Durga Construction) did make any mention of the site at which the civil work was carried out, therefore, the same did not inspire much of confidence to support the claim of the assessee. The CIT(A) further after carrying out a comparative analysis of the bills raised by the aforementioned parties as against their respective PAN cards, recorded his observations as regards the discrepancies emerging therefrom, as under:- The bill of Shri Arun Tank is found to be signed by him in English while his PAN card bears his signature in Gujarati. The signatures of Shri Guddu Kanu (Prop. M/s.Gudu Kanu Enterprises) and Shri Shalikram Yadav (Prop. M/s.S.L.Construction) on the bills are totally different from the ones on the respective PAN cards. Shri Govind Tiwari, Prop. Kuber Enterprises is seen to have signed the bill in English as G.Tiwari w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himsical presumption that the builder might have made payments, without verifying the factual position from the said builder, neither of whom as a matter of fact had made any such payments to the assessee. The assessee in order to drive home his aforesaid contention that no payment was received from the builder, placed on record the confirmation letter, dated 05/01/2016 received from the redevelopers, viz. M/s. Hubtown Ltd. for Mayanagar Project and M/s. Aarti Projects Constructions for Rajivnagar Project, wherein both the said respective builders had clearly stated that no redevelopment allowance or alternate accommodation rent was paid by them to the assessee. However, the CIT(A) being of the view that as the assessee had failed to produce the relevant redevelopment agreements either during the course of assessment proceedings or before him, therefore, the Assessing Officer had rightly drawn adverse inference in the matter of estimation of annual redevelopment allowance to the best of his judgment. The CIT(A) was further of the view that as the assessee himself was working as a contractor at the Rajivnagar (redevelopment site), therefore, the confirmation letters obtained by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the main reasons which had weighed in the mind of the CIT(A) while upholding the order of the Assessing Officer were, viz. (i) the profit of the assessee was less as in comparison to that prevailing in the trade line of contractors; and (ii) the signatures of the respective parties as appearing on the bills did not match with those borne on their PAN cards. The ld. A.R further in order to drive home his contention that no adverse inference as regards the veracity of the payments made to the aforementioned five parties was liable to be drawn, submitted that the assessee in order to remove any scope of doubt, had placed on record of the lower authorities the copies of the bank statements evidencing the making of the aforesaid payments. The ld. A.R adverting to the addition of ₹ 2.30 lac made by the Assessing Officer on account of redevelopment allowance/deemed rental income, submitted that the said addition was merely backed and supported by whimsical presumptions of the Assessing Officer, and there was no basis for making of such addition. That as regards the ground of appeal No.3 raised by the assessee in respect of disallowance of ₹ 25,746/- made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought for adjudication of two issues, viz. (i) the validity of disallowance of labour expenses of ₹ 8.45 lac sustained by the CIT(A); and (ii) the sustainability of the addition of ₹ 2.30 lakhs made by the Assessing Officer on account of redevelopment allowance/deemed rental income, which thereafter had been sustained as such by the CIT(A). We shall first take up the issue as regards the disallowance of ₹ 8.45 lakhs made by the Assessing Officer in respect of labour expenses which was claimed by the assessee to have been paid to the aforementioned five parties. We find that it remains as a matter of fact that the assessee in order to fortify his claim as regards the genuineness of the payments made to the aforementioned parties, had placed on record copies of ledger accounts, bills and PAN numbers of the labour contractors along with the bank statements which duly evidenced the factum of making of respective payments by the assessee to the said parties. We further find that the assessee, who was directed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d looking into its own records pertaining to the said parties, before hushing through the matter and jumping to drawing of adverse inferences in the hands of the assessee. We further find it beyond our comprehension that as to how the exercise carried out by the CIT(A) by making a comparative analysis of the signatures of the aforesaid parties as appearing on the bills, as against those borne on their respective PAN cards could form a basis for drawing of adverse inference as regards the genuineness of the claim of the assessee. We find that the CIT(A) had observed certain discrepancies in the signatures, for the reason that either the signatures in certain cases as appearing on the bills were in English, while for those on the PAN cards were in Gujarati or/and in certain situations signatures on the bills did not tally with those borne on the respective PAN cards. We however, are unable to persuade ourselves to justify drawing of adverse inferences on the basis of the aforesaid reasoning, for the reason that now when the said respective parties were holding the PAN cards issued by the department and the complete income tax credentials of the said respective parties along with thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed house property income. We are unable to persuade ourselves to accept the aforesaid observations of the lower authorities. We find that not only it remains as a matter of fact that the addition towards redevelopment allowance of ₹ 2.30 lakhs was made by the Assessing Officer on an estimate basis, but rather, very surprisingly though the assessee in order to dispel any such doubts on the part of the lower authorities had placed on record the confirmation letters dated 05/01/2016 from the redevelopers, viz. (i) M/s.Hubtown Ltd. for Mayanagar Project; and (ii) M/s. Aarti Projects Constructions for Rajivnagar Project, wherein the said respective redevelopers had categorically stated that no redevelopment allowance or alternate accommodation rent was paid to the assessee, but however, the said material documentary evidence which seized the issue under consideration was discarded by the CIT(A) for the reason that as the assessee was himself working as a contractor at the Rajivnagar site, therefore, confirmation letters submitted by him from M/s. Hubtown Ltd. and M/s. Aarti Projects Constructions during the course of appellate proceedings, wherein the said respective parties h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis being 30% of the cash labour expenses of ₹ 5,27,569/- disregarding the provision of section 40(A)(3) read with rule 6DD of the Act. 3a The Learned CIT (Appeal) has erred in confirming an addition of ₹ 2,30,000/- made by the AO on imaginary and estimated basis on account of non existing redevelopment allowance. 3b While confirming the disallowance, the learned CIT (Appeal) observed that existence of assets in the form of room / cottage not established and there was no contractual agreement for the payment or otherwise of redevelopment allowance, overlooking the fact that in the body of the assessment order itself the A O has specifically mention about existence of assets in the form of room at Three different places, moreover a confirmatory letters was produced from builders and contractors confirming fact that no redevelopments allowance or alternative accommodation rent has been paid to the appellant. 3c The learned CIT ( Appeal ) while confirming an estimated addition on account of redevelopment allowance has merely acted on surmises, suspicion, presumption and preceding assessment order overlooking the documentary evidences produced / available be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial available on record which could have justified the formation of belief on the part of the Assessing Officer for reopening the case. However, during the course of hearing of the appeal, no contention was advanced by the ld. A.R to support the challenge thrown to the validity of the reassessment proceedings before us. We, thus, in absence of any contention having been raised by the ld. A.R on the issue under consideration, are unable to find any infirmity in the order of the CIT(A) upholding the validity of the reopening of the assessment made by the Assessing Officer under section 147 of the Act. 15. The assessee had further assailed before us the validity of the confirming of the disallowance of labour expenses of ₹ 1,58,271/- and an addition of ₹ 2.30 lac on an estimate basis in respect of redevelopment allowances by the CIT(A). We find that as the facts and the issues pertaining to both the aforesaid additions/disallowances remain the same, as were there before us in the appeal of the assessee for A.Y. 2010-11, viz. ITA No. 2020/MUM/2017, therefore, our observations recorded therein shall apply mutatis mutandis for disposal of the respective grounds of appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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