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2018 (4) TMI 710

nference on the said count could have validly be drawn in the hands of the assessee. We are of the view that it is not the case of the A.O that on verification got done from the forensic laboratory, it was proved that the said two signatures were not of the same person/persons. We, thus, are of the view that as the assessee had placed on record substantial documentary evidence to substantiate the authenticity of his claim of expenses towards labour charges, which we are afraid had not been thoroughly verified by the lower authorities, who rather adopting a half hearted approach had hushed through the matter and on the basis of premature observations have drawn adverse inferences in the hands of the assessee, therefore, are unable to persuade ourselves to sustain the addition of ₹ 8.45 lac sustained by the CIT(A) in respect of payments made by the assessee to the aforesaid five parties. Thus, 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 nec .....

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in law, the learned CIT(A)-53 Mumbai has erred in disallowing Labour expenses of ₹ 8,45,000/- on the ground of non furnishing of the details of site where the work was executed and mismatch of signature with reference to the return of income and PAN no. of the contractors. The Learned CIT (Appeal) overlook the fact that in the case of the appellate proceedings, the appellant has submitted copy of the ledger accounts, bills and PAN of the labour contractors along with the bank statements highlighting the payment made to them. 1b The Learned CIT (Appeal) went about finding the fault in low net profit / gross profit declared by the appellant in disallowing the claim instead of rebutting or refuting the evidences produced in appellate proceedings. 1c The learned CIT (Appeal ) has allowed Labour charges of ₹ 4 lacs to Maa Durga Constructions on following 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 .....

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the facts of the case are that the assessee, who is engaged in the business of civil construction, had filed his return of income for A.Y 2010-11 on 15/10/2010, declaring a total income of ₹ 6,54,286/-. The case of the assessee was taken up for scrutiny assessment under section 143(2) of the Act. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had made total labour payments of ₹ 19,87,546/- to various parties. The bifurcated details of the payments along with the addresses of the parties were placed on record by the assessee during the course of assessment proceedings. The Assessing Officer in order to verify the genuineness of the payments, issued notices under section 133(6) to the following parties:- Sr.No. Name 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 .....

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d already started, which in itself was evident from the fact that the assessee had claimed to be working as a contractor at the site of redevelopment, which proved the said fact to the hilt. That on the basis of the aforesaid observations, the Assessing Officer concluded that though the assessee was in receipt of redevelopment allowance, but however, the same was not reflected by him in his return of income for the year under consideration. 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 28/0 .....

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of the bank statements and returns of income of the aforesaid six parties, who were claimed to have received labour charges from him. The CIT(A) was of the view that merely furnishing of the copies of ledger accounts, PAN cards and jurisdiction details of the said respective persons as gathered from the e-filing portal of the department would not lead to discharge of onus cast upon the assessee to prove the genuineness of 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 .....

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ssessee submitted before him that the huts under consideration after being demolished were under construction, therefore, as there was no question of earning any income there from, thus, the Assessing Officer had erred in estimating an income of ₹ 2.30 lakhs under the head income from other sources in his hands. It was submitted by the assessee that the additions made by the Assessing Officer were merely backed by his whimsical 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 .....

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ich clearly evidenced the factum of making of payments towards labour expenses to the said respective parties. It was further submitted by the ld. A.R that the genuineness of the aforesaid payments could be well gathered from the fact that the same were made vide account payee cheques, and as and where an obligation was so cast, necessary tax was deducted at source while making the payments as per the mandate of law. The ld. A.R 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. .....

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lar addition of ₹ 2.30 lakhs which was made in the hands of the assessee in the immediately preceding year, viz. A.Y. 2009-10 was upheld in appeal by the CIT(A), having not been carried in further appeal, thus, had attained finality. It was submitted by the ld. D.R that as the appeal of the assessee was devoid of any force, therefore, the same may be dismissed. 8. We have heard the ld. authorised representatives for both 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 .....

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onus to the revenue, but however, are of the view that in case such material details in respect of income tax credentials of the said parties were furnished with the Assessing Officer and the assessee was in no position to obtain the copies of the returns of income of the aforesaid parties, for any reason, therefore, to some extent an obligation was cast upon the Revenue to have verified the actual position by calling for and 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 .....

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the value of redevelopment allowances @10% of the value of the property, leading to a consequential addition of the aforesaid amount of ₹ 2.30 lakhs in the hands of the assessee. The Assessing Officer while making the aforesaid addition had further observed that in case the addition on account of redevelopment allowance does not survive, then the addition would be called for in the hands of the assessee towards deemed 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 .....

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ment order as well as appellate order does not state about the nature of tangible material and therefore the finding of the CIT(A) in the absence of verification of the tangible material is bad in law. And therefore, the reopening of the assessment is invalid. 2. On the facts and circumstances of the case and in law, the CIT(A) -53 Mumbai has erred in disallowing Labour expenses of ₹ 1,58,271/- on lumpsum basis 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 produ .....

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who vide his order dated 21/04/2015 dismissed the appeal. 14. Aggrieved, the assessee assailing the aforesaid additions/ disallowances sustained by the CIT(A), had carried the matter in appeal before us. The assessee had assailed before us the validity of the reopening of the assessment under section 147 of the Act, for the reason that there was no tangible material 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 all .....

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