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of <h1>Appeal allowed for statistical purposes, issues set aside for fresh consideration by AO.</h1> <h3>M/s. Mataji Reality Developers Pvt. Ltd. Versus The ITO Ward-1 Beawar</h3> M/s. Mataji Reality Developers Pvt. Ltd. Versus The ITO Ward-1 Beawar - TMI Issues Involved:1. Trading addition by disallowing 25% of construction expenses.2. Disallowance of 20% of total indirect expenses.3. Addition of Rs. 9 lacs under Section 68 of the IT Act for unexplained cash credits.Detailed Analysis:1. Trading Addition by Disallowing 25% of Construction ExpensesThe assessee, engaged in real estate and construction, filed a return declaring an income of Rs. 4,93,870/-. The case was selected for scrutiny, and notices were issued under Sections 143(2) and 142(1) of the IT Act. Due to non-compliance, the AO issued a show cause notice and eventually disallowed 25% of the construction expenses, totaling Rs. 73,49,533/-, due to the non-production of books of account and supporting vouchers. The CIT(A) reduced this disallowance to 10%.The assessee argued that the books of account, subject to audit under Section 44AB, were misplaced but ledger accounts were provided. The AO's rejection of the books under Section 145(3) was not challenged, but it was contended that the AO should have framed the assessment under Section 144 for best judgment assessment. The Tribunal observed that the AO should estimate income based on reasonable criteria like GP/NP rates instead of disallowing expenses. Since this was the first year of reporting, past GP rates were unavailable. The Tribunal set aside the issue to the AO for income estimation based on industry standards, providing the assessee an opportunity for a hearing.2. Disallowance of 20% of Total Indirect ExpensesThe assessee claimed indirect expenses of Rs. 1,38,490/-. The AO disallowed 20% of these expenses for lack of supporting evidence, which the CIT(A) confirmed. The assessee argued that the expenses, amounting to 0.56% of the turnover, were reasonable. The Tribunal noted the failure to produce supporting documents but found the 20% disallowance arbitrary. The issue was set aside to the AO for reconsideration, aligned with the estimation of income based on GP/NP rates. If income is estimated on NP rates, the disallowance of indirect expenses would not arise.3. Addition of Rs. 9 Lacs Under Section 68 of the IT ActDuring the assessment, the AO noted discrepancies in loans from various persons. Notices under Section 133(6) were issued, and discrepancies were found between the books and confirmations. An addition of Rs. 9 lacs was made under Section 68 for unexplained credits. The CIT(A) confirmed this addition.The assessee explained that discrepancies were due to cross-entries in the books, with loans shown under incorrect names but traceable to the correct bank accounts. For instance, a loan shown under Shri Prakash Chand Jain was actually received from Smt. Vidya Devi Jain. The Tribunal found the explanation plausible and set aside the issue to the AO for verification against bank statements and loan creditors' records, ensuring proper reconciliation and providing the assessee an opportunity for a hearing.Conclusion:The appeal was allowed for statistical purposes, with all issues set aside for fresh consideration by the AO, ensuring proper verification and adherence to judicial principles. The order was pronounced in open court on 04/07/2019.
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