TMI Blog2022 (2) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. As per statutory mandate, a presumptive rate of 8% is applicable on civil construction business. Taking cue from the same, we apply the same rate to the unaccounted sales as computed by Ld. AO. Accordingly, Ld. AO is directed to estimate profit rate of 8% on unaccounted sales Unaccounted investment in Land - HELD THAT:- To presume that the assessee would have paid 5 times of the registered sale deed value would not be correct particularly when there was no adverse material on record. The value of land would depend upon various factor such as location of site, extant market conditions, position of the parties, nature of sale etc. and all these relevant factors could not be brushed aside. Moreover, it was incumbent on Ld. AO to prove that extra money was paid by the assessee. There was no such finding on record. The extrapolation done by Ld. AO had no basis and the action of Ld. AO in estimating the additions could not be upheld. The action of Ld. AO was totally untenable and devoid of any merits for it was based on conjectures and surmises. Therefore, the addition made in all these three years was deleted. We find that the revenue has accepted the findings of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai [CIT(A)] in the matter of assessment framed by Ld. AO on 30.12.2016. The assessee has filed cross-objections against revenue s appeal which are only in support of impugned order and therefore, would not require any specific adjudication on our part. 2. It was point of agreement between both the sides that the facts as well issues in all the years are same and adjudication in any one year shall equally apply to all the other years also. It transpired that the cross-appeals for AY 2013-14 would cover all the issues arising out of these appeals and therefore, AY 2013-14 was taken as the lead year. 3. The grounds raised by the assessee read as under: - 1. The order of the Learned CIT(A) is bad and erroneous in law and against the principles of natural justice. 2. The learned CIT (A) erred in not considering the grounds of appeal and written submissions in proper perspective. 3. a) The learned CIT (A) erred in not considering the vital fact that when the time to serve notice u/s.143(2) is already over and when there is no incriminating material. Any addition made requires deletion. b) Unaccounted Sales (i) The findings by the learned CIT (A) that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) against development expenses. The grounds raised by the assessee in cross-objections read as under: - 1) The order of the learned CIT (A) is correct and sustainable to the extent allowed by him in the facts and circumstances of the case. 2) The learned CIT(A), after duly considering the magnitude of the disallowance made by the Assessing Officer without there being any material to support disallowance, allowed 60% of the expenditure incurred under the development expenses by the appellant. And for other reasons that may be adduced at the time of appellate hearing, the Cross Objector prays that this cross objection may be admitted, considered and justice be rendered. As evident, the cross-objection merely support the impugned order to the extent relief granted by Ld. CIT(A). Therefore, the same would not require any specific adjudication on our part. 4. The registry has noted a delay of 19 days in revenue s appeal, the condonation of which has been sought by revenue on the strength of an affidavit wherein it has been submitted that delay occurred due to nonreceipt of assessment records on time. The Ld. AR did not raise any serious objection against condona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,71,050 08.09.2016 2013-14 12.07.14 8,72,780 11.08.2016 36,46,090 08.09.2016 2014-15 Not filed - 18.08.2016 38,39,690 08.09.2016 2015-16 - - 16.09.2016 47,55,320 20.09.2016 7.2 After considering assessee s submissions and explanations, Ld. AO made four addition / disallowances in assessee s income- (i) Addition on account of unaccounted / suppressed sales; (ii) Addition of unaccounted investment in Land; (iii) Disallowance of development expenses claimed by the assessee; (iv) disallowance of Sales Commission expenses claimed by the assessee. These additions / disallowances are the subject matter of cross appeal before us. The facts leading to impugned additions are as under: - (i) Addition on account of unaccounted / suppressed sales The assessee sold several developed sites altogether admeasuring 2240 cents in Karamadai and Pogalur village in Coimbator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refuted the allegations of Ld. AO and submitted that the land was purchased for ₹ 38.70 Lacs which was already reflected in the regular books of account. However, disregarding the same, Ld. AO made this addition. (iii) Development expenses The assessee claimed development expenses of ₹ 764.23 Lacs in the Profit Loss Account. Though the assessee produced self-made vouchers, however, the same were held to be not acceptable by Ld. AO. The assessee submitted that it has produced all the vouchers / documents / evidences related to development expenses. It was a normal practice in the trade of real estate development that most of the services obtained for road laying, civil work, laying-off of plants, electrical works etc. was done by unorganized sector which would not issue proper bills / vouchers. However, Ld. AO opined that the assessee failed to discharge onus of substantiating the expenditure and accordingly, disallowed 70% of this expenditure. The same resulted into disallowance of ₹ 534.96 Lacs in the hands of the assessee. (iv) Sales Commission The assessee debited sales commission of ₹ 14.67 Lac. However, it could not produce the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement u/s 132(4), deposed that he had bought lands, developed and sold them and had work-in-progress as well as lands that were yet to be developed and sold. The AO had assessed income on the basis of income method and did not consider the investment since the income assessed is higher than the investments and year-wise apportionment for the investment was not produced by the assessee before AO as well. Thus, the unaccounted sales assessed by AO had the backing of the assets to an extent. Therefore, the addition of unaccounted sales for AYs 2013-14 2014-15 were confirmed. In AY 2009-10, the sale shown by the assessee was ₹ 42.24 Lacs as against ₹ 44.12 Lacs estimated by Ld. AO and the difference was merely 4% of sales offered. No reference to cash receipt or agreement indicating cash receipt in respect of sale of plots was brought on record as apparently no such material was available on record. Further, the sales had just commenced during the previous year relating to AY 2009- 10 in respect of impugned project sites. Therefore, the addition for AYs 2009-10 was to be deleted. Similar addition for AYs 2010-11 2012-13 were deleted on the same reasoning / logic th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not relate to impugned AY, in few cases there was no other incriminating evidence in the form of receipts or enquiries that the purchase price was extrapolate for all the other land purchased by the assessee. Therefore, to presume that the assessee would have paid 5 times of the registered sale deed value would not be correct particularly when there was no adverse material on record. The value of land would depend upon various factor such as location of site, extant market conditions, position of the parties, nature of sale etc. and all these relevant factors could not be brushed aside. Moreover, it was incumbent on Ld. AO to prove that extra money was paid by the assessee. There was no such finding on record. The extrapolation done by Ld. AO had no basis and the action of Ld. AO in estimating the additions could not be upheld. The action of Ld. AO was totally untenable and devoid of any merits for it was based on conjectures and surmises. Therefore, the addition made in all these three years was deleted. We find that the revenue has accepted the findings of Ld. CIT(A) for all the three years and the issue has thus, attained finality. Development Expenditure The Ld. CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o restrict the disallowance to 40% as against 70% confirmed by Ld. CIT(A). The assessee s ground of appeal, for all the year, stand partly allowed. 9. The only issue which has remained to be adjudicated by us in assessee s appeal is addition of alleged unaccounted sales as confirmed by Ld. CIT(A) for AYs 2013-14 2014-15. We find that on the basis of seized material, citing few instances, Ld. AO has concluded that the assessee has suppressed sales to the extent of 2 to 5 times. However, the sale for these two years have been extrapolated only on the basis of few instances and by extending the sale value to other registration of the properties. A blanket 2/3rd has been considered to be the one reflected in the registered document. The said approach, in our considered opinion, is not a correct approach since in an assessment framed on the basis of search action, the additions are strictly to be based on incriminating material found and seized by the revenue during the curse of search proceedings. Only on the basis of few instances, to presume that such concealment was done by the assessee in all the transactions, in a blanket manner, was not a correct presumption. It could also b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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