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2019 (10) TMI 198

..... ssee, on examination of the alleged contractor, who performed the work of the assessee coupled with the statement of the assessee, it is not clear that all these expenses were exclusively laid out for the purpose of business. Some element of incompleteness in the details submitted by the assessee is involved. CIT(A) estimated the expenditure incurred by the assessee at ₹ 3.00 lakhs per acre, but that estimation is also not supported with any surrounding circumstances. Photography taken during the course of search by the Revenue would indicate that grass was cut, trees were uprooted. All these evidences collected after one year of the transaction. The question is how to work out that the work which has been got done by the assessee, and accepted by the CIT(A) could be achieved in ₹ 3 lakhs and not ₹ 4,45,000/-. The disallowance at ₹ 1,44,000/- per acre out of expenditure claimed at ₹ 4,44,000/- is almost more than 30% of the expenditure claimed by the assessee. To our mind, even if there are lacunae in maintaining details at the end of the assessee, and he has claimed some inflated expenditure, that should be around 8% to 10% of the total and not 30%, b .....

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..... as debited a sum of ₹ 1,95,35,000/- at the rate of ₹ 4,44,786/- per acre towards such development expenditure. The AO conducted an inquiry and recorded statement of four persons who have carried out this development on behalf of the assessee. He summarized his observation emerging out of examination of these four persons on page no.12 of the assessment order, which reads as under: During the course of examination of these parties the following facts emerged. 1. All though all the parties claimed that they were in the line of construction work from 2 or 3 years earlier before doing the job of the land development work for the assessee none of them could produce any documentary evidence In support of their claim. 2. None of them had filed their return of income for earlier period or for the period after A. Y. 2006-07. 3. All the persons had filed only one return of income for A.Y. 2006- 07 showing income from earth work contract. 4. All the persons in their statement quoted the same rate for the work done. 5. All the persons stated that the work started from the month of July 2005 to December 2005 or January 2006. 6. All the persons had very common answer that they had de .....

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..... ₹ 1,95,35,000/-. 6. Revenue in its appeal is impugning deletion of disallowance of ₹ 1,31,76,000/-. Certain administrative expenditure of ₹ 2,52,031/- were claimed out of which ₹ 2,16,574/- has been deleted by the ld.CIT(A). This deletion has been challenged in ground no.2. The amount has been confirmed by the ld.CIT(A) are being challenged in the CO by the assessee. 7. As far as the appeal of the Revenue is concerned, relief granted by the CIT(A) by way of deletion of the above addition, tax effect involved would be less than ₹ 50.00 lakhs. Therefore, when we pointed out applicability of recent CBDT Circular bearing no.17 of 2019 dated 8.8.2019, vide which CBDT restricted the department not to file appeal before the Tribunal where tax effect is below ₹ 50 lakhs, the ld.DR did not dispute the same, and left to the Tribunal to pass appropriate order in accordance with law. 8. After hearing the both the sides, we are of the view that the present appeal of the Revenue falls within the purview of the CBDT Instruction cited (supra). It is not disputed by the Revenue that tax effect on the disputed addition is not more than ₹ 50 lakhs, and there .....

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..... 0-acre area. According to the clause no 4 of the agreement, M/s Sahara India has agreed to purchase land at average rate of ₹ 13,00,000/- per acre, which shall include the cost of land and development expenses etc. Before Assessing officer, appellant-has produced copy of this MOU, which is updated and unsigned. Before me in the paper book, it is dated and signed by both the parties. Appellant also made prayer for admission of this agreement as additional evidence. Copy of the paper book is also sent to Assessing Officer for verification of this agreement and Assessing Officer has obtained copy of the agreement from M/S Sahara India, which is the same as produced by the appellant in appeal. Therefore, I admit additional evidence submitted by the appellant. (iii) Now on admission of this evidence main objection of assessing officer regarding the memorandum of Understanding that as it was undated and unsigned does not survive. Further, appellant has also stated before me that as the documents is just a memorandum of understanding between two parties , it is not compulsorily required to be registered u/s 17 of The Indian Registration Act 1908. Therefore, non-registration cannot o .....

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..... worked, how the labour payments have been made, they have employed supervisors and chowkindars. They have also entered in to contract with the appellant for carrying out this work which includes land filling, water sprinkling, grass and babool cutting, jungle cutting, rolling of land after all these work etc. They have also produced their books of accounts on which they have been examined and specific questions were raised, however no defects have, been found in those books also. It is also pertinent to note that all the payments have been made through cheques and all those payments are prior to the date of search (Search has taken place on 4.8.2006 i.e. after the close of the accounting year). Regarding withdrawal of the money within 2-3 days of deposit of cheque, it is natural that all the payments to be made by these contractors are in the nature of labour payments, tractors charges, JCB charges, supervisor charges. Most of these payments are made in cash because of the reason that labours, tractor walas and JCB drivers work on hourly basis, trip basis and they are paid in cash. During the course of examination, the contractors have produced the vouchers etc before assessing of .....

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..... llant to hand it over to his supervisor for onward payments to be made. However, only because of isolated sum of ₹ 3,00,000/- where the explanation of contractor as well as appellant was not found satisfactory By assessing officer, whole amount of ₹ 1.95,35,000- cannot be disallowed. Further, some of the payments have also been made by the appellant after the date of executing sale deed in favour of M/s Sahara India. Generally, such small contractors who carries work and makes cash payments on weekly basis cannot keep outstanding for two to three months. It also defies logic and business prudence because these contractors withdraw sums within 2-3 days of deposit of cheques. Certain payments to contractors have been made two to three months after executing sale deed in favour of M/s Sahara India. Such payments made by appellant to Sh'ri Jayantilal Ravji Bhanderi is ₹ 10,75,000/- and to Shri Keval Kamlesh Joshi of ₹ 15,50,000/-. Amounting in all to ₹ 26,25,000/-. Appellant has not given any justification for payments of the amount after executing sale deed to M/s Sahara India. This also does not inspire confidence. Further, such expenses shown by the .....

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..... of the CIT(A) one fact is clear that the assessee has incurred certain expenditure towards development of this land i.e. cutting of trees, leveling, filling, demarcation of boundaries etc. The question now is, how to quantify it. As per the assessee, he has maintained details of all the persons who have performed this activity. He has made payment through account payee cheque. All the contractors are assessed to tax. They have filed their return of income in this year. The profit and loss account & balance sheet etc. were produced before the AO exhibiting hiring of equipment. One factor which weighed with the AO that one of the contractors replied about return of money to the assessee is concerned, the assessee has reimbursed this money, and on account of certain exigencies, it was required. The assessee has explained this aspect also To our mind, a perusal of the fact observed by the assessee, on examination of the alleged contractor, who performed the work of the assessee coupled with the statement of the assessee, it is not clear that all these expenses were exclusively laid out for the purpose of business. Some element of incompleteness in the details submitted by the asses .....

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