TMI Blog2021 (3) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... that out of disallowance of ₹ 1,16,715/- made by the ld AO, expenditure to the tune of ₹ 41,715/- was not liable for deduction of tax at source for which necessary documentary evidences were duly furnished before the ld AO in remand proceedings and assessee accepted for confirmation of disallowance of remaining ₹ 75,000/-.Accordingly, we find that the ld CITA had rightly deleted the disallowance in the sum of ₹ 41,715/- and rightly sustained the disallowance for ₹ 75,000/- u/s 40(a)(ia) of the Act. Testing and Surveying Charges (labour contract charges), we find that the ld AO observed that the assessee had not deducted tax at source on payment made to Kuber Trading Co. to the tune of ₹ 10,00,000/- in respect of interior work. We find that the ld AO in the remand proceedings verified the fact that assessee had purchased material from Kuber Trading Co. for ₹ 14,36,045/- plus MVAT of ₹ 57,442/- thereon, which is not liable for deduction of tax at source u/s 194C of the Act. It was proved before the ld AO that only a sum of ₹ 1,17,476/-was debited to interior work labour charges for which due TDS compliance was made by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts for the payment and relevant pages of the bank statements reflecting the payments made together with the copy of ledger accounts were duly furnished by the assessee in the remand proceedings. As stated that the BMC raised the bill in the name of original landlord even though the original landlord sold the property or entered into development agreement. As per the agreement, the buyer is liable to pay all the BMC charges for the property purchased. This explanation was practically accepted by the ld AO in the remand proceedings by not making any adverse comments on the evidences submitted by the assessee. Hence when the ld CIT-A grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Madras High Court in the case of B Jayalakshmi vs ACIT [ 2018 (8) TMI 208 - MADRAS HIGH COURT] - Accordingly, the Ground No. 2 raised by the revenue is dismissed. Disallowance on account of SRA Project expenses - HELD THAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s absolutely no concealment of income or furnishing of inaccurate particulars of income by the assessee in the return of income as every detail thereon could be deciphered easily from the return itself. Reliance in this regard is placed on the decision of the Hon ble Supreme Court in the case of Pricewaterhouse Coopers [ 2012 (9) TMI 775 - SUPREME COURT] - no hesitation in directing the ld AO to delete the penalty levied u/s 271(1)(c ) of the Act in respect of this addition. Addition of Cash Payment to the retiring partner - addition based on loose papers - HELD THAT:- As the name of the brokers and the details of the property in respect of which brokerage paid was nowhere mentioned on the said impounded loose paper. We find that the ld. CIT(A) had categorically observed that the said impounded paper does not have any acceptable narration and do not bear the certificate of the assessee or any authorised person and they are merely in the nature of dumb documents having no evidentiary value and hence, cannot be taken as the sole basis for making the addition in the hands of the assessee. He has also recorded a finding that the ld. AO had neither in the assessment proceedings no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the order by the ld. Commissioner of Income Tax (Appeals)-37, Mumbai in appeal No.CIT(A)-37/IT-139/ACIT-25(3)/2017-18 dated 16/07/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/03/2013 by the ld. Dy. Commissioner of Income Tax, Central Circle 3, Mumbai (hereinafter referred to as ld. AO). 2. The first issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance of ₹ 62,94,857/- u/s 40(a)(ia) of the Act in the facts and circumstances of the instant case. 2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a builder cum developer and had filed his return of income for the Asst Year 2010-11 on 15.10.2010 declaring total income of ₹ 11,96,630/-. During the course of assessment proceedings, the assessee had revised his total income by filing revised computation of total income of ₹ 13,45,280/-. We find that the ld. AO called for details of Legal Professional fees, Consultancy Charges, Testing Surveying fees, Sub-contractor (Labour) Charges and Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 28,388/- by following the CBDT Circular No. 4/2008 dated 28.4.2008 in that regard. We find that the ld CITA had rightly appreciated the same and directed the ld AO to delete the disallowance made u/s 40(a)(ia) of the Act in the sum of ₹ 28,388/-. 2.4. With regard to Sub-contractor (labour charges), we find that the assessee had during the remand proceedings explained that he had deducted tax at source in respect of expenditure to the tune of ₹ 1,12,32,333/-. With regard to the remaining sum of ₹ 11,290/-, it was proved by the assessee before the ld AO that he was not required to deduct tax at source. We find that the ld CITA had rightly appreciated these facts and the same was also confirmed by the ld AO in the remand report. Accordingly the ld CITA rightly directed the ld AO to delete the disallowance u/s 40(a)(ia) of the Act to the tune of ₹ 48,16,981/-. 2.5. With regard to Legal and Professional fees, we find that the assessee had explained that out of disallowance of ₹ 1,16,715/- made by the ld AO, expenditure to the tune of ₹ 41,715/- was not liable for deduction of tax at source for which necessary documentary evidences were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were practically accepted by the ld AO in the remand proceedings by not making any adverse comments on the evidences submitted by the assessee. Hence when the ld CITA grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Madras High Court in the case of B Jayalakshmi vs ACIT reported in 407 ITR 212 (Mad). 2.9. In view of the aforesaid observations in the facts and circumstances of the case and also by respectfully following the judicial precedent relied upon hereinabove, the ground No. 1 raised by the revenue is dismissed. 3. The second issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance made on account of BMC expenses of ₹ 61,67,802/- on the ground that on verification of the ledger account of those expenses and bills submitted by the assessee, some of the bills were not in the name of the assessee nor in any of its project name. 3.1. We have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable as per Mercantile system of accounting. Accordingly, the ld AO proceeded to disallow this sum of ₹ 1,26,37,560/- in the assessment. 4.3.We find that the assessee submitted evidences to prove the fact these expenses are included in the closing stock of work in progress of ₹ 25,56,10,614/- and therefore addition made by the ld AO would result in double addition. We find that the ld CITA had given a categorical finding that the SRA project expenses are duly substantiated and supported by proper documents which was not controverted by the ld DR before us. We find that the ld CITA had duly appreciated the fact that this disallowance made by the ld AO would only result in double addition, on which we find no infirmity and accordingly order of the ld CITA is not interfered with. Hence the Ground No. 3 raised by the revenue is dismissed. 5. The Ground Nos. 4 5 raised by the revenue are general in nature and does not require any specific adjudication. 6. In the result, the appeal of the revenue in ITA No. 5505/Mum/2018 for the Asst Year 2010-11 in quantum proceedings is dismissed. ITA No. 6708/Mum/2018 Asst Year 2010-11 Revenue Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses on an estimated basis ₹ 50,000/- c) Shifting of head of income i.e from income from house property shown by the assessee to income from business by not allowing 30% flat deduction for repairs among others ₹ 4,30,800/- 9.3. With regard to disallowance of genuine expenditure incurred for the purpose of business u/s 40(a)(ia) of the Act to the tune of ₹ 6,36,800/-, we find that the assessee had paid a sum of ₹ 5,61,800/- by account payee cheque to National Institute of Oceanography (Government company) without deduction of tax at source. We find that the assessee had duly furnished the copy of receipt issued by the said organization. We find that the assessee had explained that he was under the bonafide belief that since payment was made to a Government company, no tax is required to be deducted at source. This explanation given by the assessee was not found to be false. Moreover any case, the genuineness of expenditure was never disputed by the revenue. Similarly, a sum of ₹ 75,000/- was paid by the assessee to Chandrakant S Sawant towards legal and professional fees without deduction of tax at source. The nature of services rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CITA on the ground that quantum addition made thereon had been upheld by him and no further appeal has been preferred by the assessee before the tribunal. We find that the ld CITA had gone by the premise that the levy of penalty is automatic since the quantum addition is confirmed and had attained finality. We find that the assessee in the instant case had duly disclosed the rental income under the head income from house property in the return of income, which was sought to be shifted by the revenue under the head income from business . Hence there cannot be any concealment of income or furnishing of inaccurate particulars of income that could be attributed on the assessee. We hold that there was absolutely no concealment of income or furnishing of inaccurate particulars of income by the assessee in the return of income as every detail thereon could be deciphered easily from the return itself. Reliance in this regard is placed on the decision of the Hon ble Supreme Court in the case of Pricewaterhouse Coopers reported in 348 ITR 306 (SC). Hence we have no hesitation in directing the ld AO to delete the penalty levied u/s 271(1)(c ) of the Act in respect of this addition of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the addition of ₹ 25,00,000/- was made on verification of the impounded loose paper (Annexure A-2 Page 43), are handwritten noting of modus operandi of creation of cash by booking bogus expenses/ loans etc. from the noting it is seen that 25 cheques of ₹ 1,00,000/-are to be issued on Wednesday and cash to be received on Friday after deducting commission @2%. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that as per the return filed in response to notice u/s.148, the total income is declared at ₹ 20,54,721/- and the net profit shown in P L account seen during the survey proceeding is 28,90,850/-. Further, the assessee not furnished any details nor reconcile nor offered any explanation to fall in net profit by ₹ 8,35,871/-. Hence, the difference of net profit was added to the total income of the assessee. 6. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 7. The appellant craves leave to amend or to alter any gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the project at Jogeshwari which is noted to have been completed in the previous year relevant to Assessment Year 2013 - 2014, (Annexure A2, Page No. 15). Further, as per the Assessing Officer, the last flat was sold in the year 2013 and therefore, the project reached its completion stage. Since, the assessee offered no explanation and submission on the said relevant impounded papers, the amount of ₹ 14,58,14,389/- is held as income from the Jogeshwari Project based on the impounded materials and the same was added to the Total Income by the Assessing Officer. 6.2.Contention of the Assessee: During the Remand proceedings, the Assessee stated the following as detailed below: a. The Impounded loose paper is just estimated project report dated 11.19.2011 and was prepared by Ketan Vaidya and Associate which was never signed. b. The loose paper is not related to the project carried out by the Assessee and the same was not executed by the Assessee. c. The paper found is just an estimate prepared by the Architect and assessee has not carried out any construction activity on the said plot during the year under consideration. d. The Learned Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have prepared for one of property located at Jogeshwari East, Mumbai, CTS No.l54(pt), 155(pt). The area of plot is 2799 Sq. Mtr. and approx. Project cost is ₹ 11.45 Cr. and Net profit estimated was ₹ 14.58 Cr. but Shri Pravin Satra didn't shown his interest to develop the said project. Q.8. Do you want to say anything else ? A.s. No. 6.4. In the present case, the submissions made in the course of remand proceedings, the details filed by the Assessee in course of Appellant proceedings by way of additional evidence and Statement of Ketul-Vaidya recorded u/s.131 on oath in course of Remand proceedings are taken on records and also the explanation of the assessee on the said impounded paper is taken on record. Considering the above facts, this ground of appeal of. the assessee may be decided on merits. 14.2. From the aforesaid remand report, it could be safely concluded that the assessee had not carried out any project in Jogeshwari which had yielded him profit of ₹ 14.58 crores. We find that the ld AO had not chosen to further confront Mr Ketul Vaidya (Architect) on the reply given by him in response to Question No. 7 during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report left by broker and that the said project never took place. The assessee also gave the name of the broker Mr. Arun(Dadar) together with the mobile number whose name was mentioned in the said impounded documents. The assessee submitted that the ld. AO had mentioned in his assessment order that the said loose paper belong to Hari Darshan society, Vile parle, which was controverted by the assessee stating that the said paper does not belong to Hari Darshan society project. The assessee further pleaded that he had shown sale of flat for the year ended 31/03/2013 at ₹ 5,63,58,000/- which admittedly included sale of flat from Hari Darshan society of ₹ 5,54,06,000/-. The ld. CIT(A) remanded the matter back to the ld. AO for verification. In the remand proceedings, the ld. AO recorded a statement of Shri Sunil Gopal Pawar, associate of Mr. Arun Jaitly, on oath u/s. 131 of the Act wherein he explained that the said loose papers are related to the project located at Kabutarkhana, Dadar (W) and it was never executed as the related documents asked by the assessee were never brought by Mr. Arun Jaitly. In this regard, the relevant operative portion of the remand report pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above that the development of the said project was never carried out by the Assessee, and the content of the said impounded paper is not relating to the project of the Hari Darshan Society, he submitted the following in respect of the said project at Hari Darshan, Vile Parle during Remand proceedings vide letter dated 20.03.2018: a. The Impounded loose paper was brought by Mr. Arun (Estate Agent) for re-development of property of 1865 Sq. Mts and the profitability of the project was worked on the paper was ₹ 49,38,84,500/- but he failed to provide the required documents like property title, owners details, etc so the redevelopment of the said project was rejected. b. Further,.attention was drawn to the project of Hari Darshan at Vile Parle bearing plot area of 511.71 sq. mts which was re-developed by him vide conveyance deed 08.12.2008. A copy of conveyance deed dated 08.12.2008 is submitted in the course of remand proceedings. c. The total sale of flats and shops is ₹ 5,54,06,000/- and the total area of flats and shops constructed was 11,995 sq. ft Carpet, a detail list of which is on record. 7.3. Counter Comments of the Assessing Officer: Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... near Kabaturkhana, Dadar(W). The proposal was bought by Arun Jaitely to me. Thereafter,! arranged a meeting between Pravin Satra and Arun. This page contains the details of the same project which was submitted by me and Arun to Shri Pravin Satra. Q.9 Please give the complete details about the above stated project ? Ans. Madam, since the proposal was bought by the Arun Jaitly, I don't have complete details of the project. After submitting the proposal to Shri Pravin Satra,! was requested by Shri Pravin Satra to visit the site. Madam, I had Visited that site on his request. Since it mas long back in 2010 Or 2011, which I don't remember exactly. All I remember is that ft was near Kabootarkhana, Dadar(W). Q.10. In the above stated question, you have mentioned that you don't remember exactly the project details of Dadar(W) project since it was in 2010 or 2011. However, when I showed you the impounded page, with page number 192. You seemed to have recognized it at the same instant even though this page containing the proposal was submitted in 2010 or 2011 i.e 7 years back. Please explain? Ans Madam, whatever you are saying is true. Madam, I just want ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated documents that were called for by the assessee were never provided by Mr. Arun to the assessee and hence, the project never took off. Hence, it could be safely concluded that the loose paper becomes mere dumb document which stands totally uncorroborated with any evidence detrimental to the assessee. On the contrary, corroboration comes in the form of a statement recorded from Shri Sunil Gopal Pawar who had stated the facts pertaining to the said loose papers by proper explanation thereon. Hence, the denial of the fact by the assessee about the loose paper gets strengthened by the statement of Shri Sunil Gopal Pawar. We find that the ld. CIT(A) had placed reliance on these facts and on the remand report of the ld. AO while granting relief. We find that the ld. AO had indeed accepted the contentions of the assessee in the remand proceedings. Moreover, when the ld CITA grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessee has paid ₹ 25,00,000/-each to the three partners, aggregating to ₹ 75,00,000/-. (Annexure A2, Page 89 to 91). The name of the partners are Shri Ajay H Gosalia, Shri Shantanoo V Rane, Shri Prabhakar Shetty Since, the assessee offered no explanation and submission on the said relevant impounded papers, the amount of ₹ 75,00,000/- is held as income from based on the impounded materials and the same was added to the Total Income by the Assessing Officer. 8.2. Contention of the Assessee: During the- Remand proceedings, the Assessee stated the following as detailed below; a. The said impounded papers are unsigned and undated and do not contain any date wise detail regarding the payment made to so called retiring partners and the assessee did not make any such payments to the partners. Therefore, they are the dumb documents. b. There is no detail about the date on which the said payment is made. c. The project of Sai Darshan Co-operative Society as stated in the impounded papers is not carried out by the Assessee. d. No partners retired from the firm till date. 8.3. Counter Comments of the Assessing Officer: F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership deed/ amendments/dissolution deed. Ans A copy of deed of partnership dated 29th March, 2006 and a copy of admission cum partnership dated 04 July, 2009 are submitted herewith. Q.11 Please provide the copy of all the returns filed by M/s. Kenstro Island since it was formed. Ans The firm has not filed any return of income for AY 2013-14 and other years as there was no activity carried out by the firm. PAN of the Firm: AAJFK7626F and there was no income of the firm for AY 2013-14. Q.12 I am showing you a page marked as page number 89 which was impounded during Survey action conducted on Shri Pravin VSatra, what do you have to say about it? Ans. I am not at all aware of this paper, nor have I retired from the partnership firm. as mentioned in this loose unsigned paper and I have not received any amount from Shri Pravin VSatra. Q.13 Please give the complete details about the project of Kandivali mention in the given page? Ans. The Kandivali project was under SRA scheme we have tried to acquire and develop the same but it did not materialized. Q. 14 Please provide the address of the provide the address of the proposed kandivali site. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai-400068, My contact is 7715000744. Q.2 Can you read write English ? Ans. Yes, I/We can read write English. Q.3 Are you filing your return of Income regularly, if yes what is your PAN ? Ans. Yes, I am filling my return of Income regularly and my PAN is AIWPS3270 Q. Q.4 Describe about M/s. Kenstro Island ? Ans. It is a Registered Partnership firm, since 29.03.2006, wherein at the time of inception we were 3 partners later added 2 more partners vide partnership deed dated 04.07.2009. Q.5 What was the object of the firm M/s. Kentro Island ? Ans. The main object of the firm was to carry on the Business of Development and Constructions of Residential/ Commercial/ Industrial units for sale or lease. Q.6 How do you know Shri Prawn Satra ? Ans. Shri Pravin Satra, is an established Builder Developers I had planned a construction.business with him, under partnership, wherein we added Shri Pravin Satra another Shri Girish Gada, also as the Partner wef. Dated 04.07.2009. Q. 7 How many projects have been developed by M/s. Kenstro Island ? Ans. NONE. Till this date, we had tried to negotiate with the societies mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remand report of the Assessing Officer that the loose papers comprising of pages 89-91 of Annexure A-2 are not in the form of executed documents or books of accounts or certificates which can prove conclusively that assessee had earned undisclosed or unaccounted income. Further this impounded paper does not have any acceptable narration and do not bear the certificate of the assessee or any authorised person and that they are in the nature of dumb documents having no evidentiary value. Accordingly, it was held that the said documents may not be the sole basis for determination of the income of the assessee. We find that this finding of the ld. CIT(A) has not been controverted by the ld. DR before us. Moreover, we find that the ld. CIT(A) while granting relief to the assessee had also placed reliance on the remand report of the ld. AO and that the ld. AO has also not given any adverse amount in his remand report in view of the statements given on oath by three partners u/s.131 of the Act categorically denying any payment received in cash from assessee and also categorically denying the fact that they have retired from Kenstro Island. Hence, it could be safely concluded that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort with regard to this addition and the operative portion of the said report is reproduced hereunder:- f 10. Addition of Brokerage Expenses of ₹ 25,00,000/-: 10.1. Background: The impounded loose paper shows the handwriting noting of modus operand! of creation of cash by booking bogus expenses / loans, etc wherein 25 cheques of ₹ 1,00,000/- to be issued on Wednesday and cash to be received on Friday after deducting commission @ 2%. (Annexure Al - Page 43) In respect of the above, the Assessee during the course of assessment proceedings, the assessee denied the occurrence of such transactions and stated that it was only a discussion relating to payment instruction to brokers for sale of flats to get 25 cheques of Rs, 1 lac each in advance aggregating to ₹ 25,00,000/- and his commission is 2%. Since, the Assessee was not able to substantiate the above by any cogent evidences to prove that it pertains to brokerage expenses and not submitted the details of brokers to enable cross verification and therefore, he failed to explain the said impounded loose papers, the same was added to the total income of the assessee by the Assessing Officer. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contentions of the assessee and that is the reason he had not drawn any adverse inference on the explanation furnished by the assessee in the remand proceedings. Hence, it could be safely concluded that the ld. AO had indeed accepted to the contentions of the assessee in the remand report. Moreover, when the ld CIT(A) grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Madras High Court in the case of B Jayalakshmi vs ACIT reported in 407 ITR 212 (Mad). Accordingly, the ground No.4 raised by the Revenue is dismissed. 17. The last issue to be decided in this appeal of the Revenue is whether the ld. CIT(A) was justified in deleting the addition made on account of differential net profit of ₹ 8,35,871/-. 17.1. We have heard rival submissions and perused the materials available on record. We find that the total income disclosed by the assessee in the return of income filed in response to notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Net Profit for the year ended 31st March, 2013 of M/s. Darshan Developers as per audited accounts is ₹ 59,63,620/-. (Refer Page No. 16 of the Paperbook No. II) Even in the Computation of Total Income, the business income from M/s. Darshan Developers is shown by taking the Net Profit as per Profit and Loss Account of ₹ 59,63,619/- for the year ended 31st March, 2013. (Refer Page No. 1 - 3 of the Paperbook No. II). The same is prepared from the regular books of accounts maintained in computerized accounting software. c. The Profit and Loss Account for the period up to 7th and 8th March, 2013 as per the impounded papers is ₹ 28,90,721/- (Refer Page No. 63 of the Paperbook No. II) and as per the Audited Accounts it is ₹ 59,63,620/-. Therefore/there is no short fall of Net Profit in the Net Profit as per Return of Income filed and the Learned Assessing Officer has erred in taking the Total Income as per the Return of Income filed to compare with the Net Profit as per provisional Profit and Loss Account impounded at the time of survey proceedings. The said provisional Profit and Loss Account is extracted from the regular books of accounts maintained by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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