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TMI Blog2011 (3) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) has erred in maintaining disallowance/addition of payments of work contract out of payments to Shri Shyam Sunder Ahuja, Shri Kamal Ahuja and Mrs. Archana Ahuja of ₹ 14,88,218/- @ 25% at 3,72,055/- arbitrarily. 4. The ld. CIT(A) has erred in maintaining addition of creditors of ₹ 6,72,500/- arbitrarily. 5. The order of ld. CIT(A) is unjustified, improper and warranted." In ITA No. 269/Ind/2010 the revenue has taken the following grounds of appeal :- 1. On the facts and circumstances of the case the ld. CIT(A) erred in deleting the addition of ₹ 56,75,350/- made by the A.O. being trade advance u/s 68 of the IT Act. 2. On the facts and circumstances of the case the ld. CIT(A) erred in deleting the addition of ₹ 1,13,500/- made by the A.O. being the capital introduced by a partner in the firm to be added in his hands u/s 69 of the IT Act. 3. On the facts and circumstances of the case the ld. CIT(A) erred in deleting the addition of ₹ 34,000/- made by the A.O. being the capital introduced by a partner in the firm to be added in his hands u/s 69 of the IT Act. 3. Rival contentions have been heard and records perused. 4. The facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of quantum of work carried out by them in sq. ft. was given to him. However, observing that the assessee must have incurred expenditure on contract, the AO disallowed on ad hoc basis a sum of 25% of such expenditure, total amounting to ₹ 37,91,070/- and thus disallowance of ₹ 9,47,767/- was made. 8. By the impugned order, the ld. CIT(A) deleted the disallowance of ₹ 5,75,712/- against the total payment of ₹ 9,47,767 made to three contractors. Thus, he has confirmed the disallowance of ₹ 3,72,055/-. Against this order of ld. CIT(A), the assessee and Revenue both are in appeal before us. 9. We have carefully considered the rival contentions and found that the assessee has furnished the full details of work done by individual contractors duly incorporating the rates of construction as per copies of bills filed by the assessee. The AO has not objected the authenticity and correctness of such bills nor the rates of such work in the bills raised by the Contractors. There is no finding of AO that for similar contracts, prevailing market rate was lower than what the assessee has paid. On estimation, the AO has disallowed 30 % of the contract amount, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition. 14. Next grievance of the Revenue relates to CIT(A)'s action for retaining addition of ₹ 6,72,500/- out of total addition of ₹ 63,47,850/- made by the Assessing Officer u/s 68 in respect of the creditors. Revenue is aggrieved for deleting addition of ₹ 56,75,350/- and the assessee is aggrieved for sustaining addition of ₹ 6,72,500/-. In this regard, it was observed by the AO that the assessee had shown liability of ₹ 62,51,500/- on account of advances from the prospective buyers. It was noticed by him that the so called buyers have made the payments in cash and cheques. To prove their genuineness, the assessee was given opportunity to produce them for examination. It is observed that out of 28 parties pointed out by the AO in the assessment order, only 14 parties appeared before the AO. On examination of the same it was noticed that such prospective buyers could not explain the source of deposits made with the assessee to the satisfaction of the AO. By stating that the assessee could not prove the creditworthiness of the buyers who paid installment/advance payment, the AO made addition of ₹ 63,47,850/- as unexplained cash credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee from page 24 to 32 of written submissions, in some cases the registered sale deed has been executed and in remaining cases the agreement to sale has been undertaken. By observing that in respect of some of the buyers even though advances initially for the said plot. Such refunded amounts were through bearer cheques in many of the cases and therefore, the genuineness of such advances and their refund was not reliable. In such circumstances it would be justified and appropriate to consider only those cases as non genuine in agreement of sale has been executed but the assessee failed to produce such persons before the AO. From the list, submitted by the assessee, the following persons come in this category. S.N Name Reference No. of W.S. Page No./ S.No. Amount 01 Smt. Neelkamal Pramod Kumar Gupta 24/13 35,000/- 02 Smt. Sarika Manish Jain 25/34 50,000/- 03 Satishchandra Balkishan TiwariTiwari 28/41 60,000/- 04 Dr. L.R. Chouuhan Shanker Rao 26/48 84,500/- 05 Shri Kailashchandra Shivnaravan Goyal 27/49 41,000/- 06 Smt. Mangla Kailashchandra Kambli 27/60 40,000/- 07. Smt. Rangbhari Prafullji 27/61 13,000/- 08 Shri Rameshchandra Chouhan 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, but was received in 2-3 years as per the terms of installment payment. This detailed chart also indicated plot number/flat number, total area of plot/flat and the total amount of advance received in respective years. The assessee has also indicated the respective years in which the registry was executed in favour of the customer after receipt of entire amount. In view of these details, the ld. Authorized Representative contended that most of the advances were converted in to income as soon as the registry is got done, thus, the advance so received was not in the nature of cash credit but was actually in the nature of advance for sale of plot/flat. The ld. Authorized Representative also invited our attention to the detailed chart submitted before lower authorities alongwith agreement/sale deeds, duly establishing all the three ingredients of cash credit which have been discharged by assessee. 20. On the other hand, the contention of the ld. Senior D.R. was that the money received in advance for booking of plot/flat by the assessee was in the nature of cash credit, therefore, he was required to fulfil all the ingredients of cash credit including the creditworthiness of custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount not received in 2005-06, the ld. CIT(A) observed that no addition can be made during the year under consideration and for the relevant assessment year under consideration, the AO should confine his inquiry only towards the amount received during this year. As per the ld. CIT(A), the AO was free to take necessary action in respect of advance received in earlier years, in the respective years in which such advance was received by the assessee. With respect to the amount of ₹ 26,77,500/- received by the assessee during the year as per the detailed chart furnished before him and which was placed in paper book at pages 24 - 32, the ld. CIT(A) observed that in some cases registered sale deed has been executed and in remaining cases the agreement to sale has been undertaken. We also found that the details of complete advance, which was submitted before the CIT(A), was handed over by the ld. CIT(A) vide office letter dated 27.6.2008 to the AO calling the remand report under rule 46A of Income Tax Rules, 1962. It was specifically asked to the AO that since adequate time was not given to the assessee during the assessment proceedings for producing certain creditors personally, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedure adopted by the assessee, he used to execute agreement for the amount of installments and booking of flats so received. The sale deed was got registered only after final installment of booking is paid by the prospective customers. Thus, the agreement continues till the final installment is paid and sale deed is registered after receipt of entire installments. The assessee has furnished before the lower authorities, details of all such buyers, who had made advance payments for purchase of plots, in the form of installments, giving full particulars of amount paid, date of payment, mode of payment, date of agreement/sale deed so executed. As per our considered view, keeping into the view the nature of payment and the nature of assessee's business of selling the plots in installments the amount so paid through installments used to convert into income, when the sale deed was got registered after payments of all the installments. Thus, the installment so received were ultimately converted into income except few exceptions where the customers could not pay the installments and was refunded money. Even for such refunds, the assessee has got executed refund agreements with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls from bank were shown on 06.11.03 in respect of ₹ 4,000/-. Regarding the genuineness of ₹ 26,000/- deposited by Shri Kesarimal, the same was stated to be received from his family members. On verification it was found that ₹ 4,000/- has been considered by the AO twice and therefore ₹ 30,000/- only (Rs. 4000 + ₹ 26000) should have been treated as unexplained. The CIT(A) deleted the addition by relying on the decision of Hon'ble M.P. High Court in the case of CIT Vs Metachem Industries (2000) 245 ITR 160. 28. We have carefully considered the rival contentions and found that for deleting the addition, the ld. CIT(A) has relied on the decision of Jurisdictional High Court in the case of Mcman Industries, 245 ITR 160. The proposition laid down in the case of Mcman Industries (supra) is applicable in the case of deposit by a partner in his firm, who bring his capital in the business. The Hon'ble High Court has held that if the partner is produced before the AO, who confirms the factum of contributing capital, no addition should be made in the hands of the firm. However, it was observed that in such cases, addition can be considered in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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