TaxTMI 
TaxTMI 
2013 (9) TMI 799
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....tion of land cost. Particulars Amount Land Cost 12,00,00,000 Stamp Duty 11,42,000 Regn 60,000 ULC 40,00,000 Staircase Premium, Balcony Enclosure & Other BMC Expenses by cheque 1,32,65,000 Out of Pocket Expenses for obtaining I.O.D., CC. {Conversion from 1-3 to R, Work done beyond CC.} Directors Orders, Condonation of Deficiencies etc.} 1,32,65,000 15,17,32,000 Divided by : 1,89,016 Cost of Land = Rs.802.75 p.s.f. 2.1.1 The AO asked the assessee to explain the entry of Rs.1,32,65,000/- mentioned as "out of pocket expenses". The assessee explained that this documents which had been impounded from the premises at 401, Durga Chambers, Khar(W), Mumbai contained the working of calculation of land cost for the purpose of negotiation and presentation of proposal for sale of flats to World renewal Spiritual Trust (WRST). It was pointed out that in the said working, the land cost had been inflated by Rs.1,32,65,000/- to arrive at a higher figure of land cost to justify the sale price charged by the assessee. There was no actual incurring of expenditure nor any such expenditure had been claimed in the P&L Account.....
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....at the land cost had been calculated as minimum as possible. CIT(A) observed that these notes supported the explanation of the assessee that the land cost had been infalted only to justify the minimum sale price charged from the trust as a builder/developer does not give any breakup of cost to the buyer. CIT(A) also observed that there was no evidence of incurring any such expenses. Therefore no addition could be made without giving any corroborative evidence. CIT(A) directed the AO to delete the addition of Rs.1,32,65,700/- aggrieved by which the revenue is in appeal before the Tribunal. 2.1.3 Before us, the CIT-DR appearing for the revenue assailed the order of CIT(A). It was submitted that the sum of Rs.1,32,65,000/- has been mentioned in the impounded documents as "out of pocket expenses". Such expenses were quite common in the construction business. These expenses which were duly mentioned in the document by the assessee could not be considered hypothetical. The explanation of the assessee that it was a hypothetical figure added to inflate the cost of land for impressing the trustees that the sale price was almost equal to cost price was not acceptable as no devotee of Shiv....
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....artners, had inflated land cost to show that the assessee was doing favour to the trust by selling the flats at rate almost equal to cost price. To support the submission that it was a hypothetical amount, it has been argued that no such expenditure had been claimed in P&L Account nor any evidence had been found during the survey of incurring any such expenses. It has thus been argued that no such addition can be made only on the basis of entry in the document. The assessee has also referred to the noting at page-65 of the impounded paper in which actual calculation of cost of flat has been made in connection with the sale of flat to the trust in which cost of land has been taken at Rs.802.75 per sq.ft. 2.1.6 However, on careful consideration of the entire facts and circumstances, we are unable to accept the arguments advanced. It is quite common in the construction industry that the builders have to pay officials for obtaining various clearances at different stages of construction. Though it is true that no addition can be made only on the basis of hearsay or guess work, but in this case material has been found in the form of notings on the impounded document clearly mentioning....
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....r in which expenditure has been actually incurred. The actual point of time of incurring of such expenditure has to be ascertained after obtaining details of various clearances such as IOD, commencement certificate, condonation of deficiency, occupation certificate etc. and dates of clearances can be reasonably taken as the dates of incurring the expenditure. Thereafter, the total expenditure shown have to be allocated to various clearances on an objective basis. Making addition of the entire amount in this year without ascertaining the dates of incurring such expenditure may not be justified. In our view this aspect requires further examination before making the addition. 2.1.7 In view of the foregoing discussion and for the reasons given earlier, we set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination, in the light of observations made above and after allowing opportunity of hearing to the assessee. 2.2 Grounds Nos.2 and 4 of the revenue relate to additions of Rs.57,82,000/- and Rs.10,00,000/- and Rs.12,00,000 on the basis of entries made in the impounded document being at page-70, a copy of which has b....
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....ced by the assessee. It was pointed out that the AO was fully satisfied by the explanation given and had not asked for any evidence. It was submitted that copies of agreement and payments made to vendor were already on record of the AO. A chart of payment along with copies of bank statement was submitted by SIWL vide letter dated 26.2.2002 the AO rejected the same on the ground that it was notorised on 28.1.2009. The assessee submitted that the original letter dated 26.2.2002 and true copy of the same was made on 28.1.2009 by notary. The assessee submitted that the various amounts mentioned in the document were amounts /consideration payable by SIWL which were reduced from the land cost. The total deduction was Rs.1,38,05,000/- including brokerage of Rs.12.00 lacs. The brokerage amount had been paid by cheque and TDS had also been deducted. It was pointed out that entry of Rs.46.00 lacs on the same page was also reduction from land cost which had been accepted by the AO. Therefore, there was no justification for rejecting similar other reductions. The sum of Rs.12,23,000/- was the amount given to Kundan Shah in financial year 2000-01 on instruction of the vendors. As the amount did....
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....de on account of any expenditure. The sum of Rs.12.00 lacs even did not relate to this year. Therefore, it was submitted that the additions had been rightly deleted by CIT(A). The ld. DR placed reliance on the order of the AO. 2.2.5 We have perused the records and considered the rival contentions carefully. The dispute is regarding addition of Rs.57,82,000/-, Rs. 10.00 lacs, Rs.12.00 lacs on the basis of entries made at page 70 of the impounded documents. The entries have been reproduced in para.2.2 earlier. The assessee explained that the various amounts referred to in the document had been reduced from the cost of development rights purchased from SIWL. The sum of Rs.57,82,000/- has been explained as interest calculated for the period of early payment of installments. It had been explained that since payments had been made before due dates, the interest for the period had been calculated to be reduced from the cost of land. The sum of Rs.12.00 lacs has been explained as brokerage payable by SIWL to Durga Estate which had been paid by the assessee on their behalf and tax had also been deducted at source. As the vendor could not pay the amount, the same was reduced from cost of ....
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....the existing shops in B,C, and K wings were numbered as under :- Wing Shop No. Carpet Area of the shop (in sq.ft.) C P-1 335 C P-2 139 C P-3 126 C P-4 223 C P-5 287 C P-6 135 C P-7 148 C P-8 166 B P-9 139 B P-10 126 B P-11 237 B P-12 126 B P-13 220 B P-14 136 B P-15 155 K P-16 148 K P-17 167 K P-18 334 K P-19 228 K P-20 142 K P-21 181 K P-22 286 2.3.1 It was explained that shops were prefixed "P" whereas on the impounded paper shop Nos. written were 14, 15, 16, 17 & 18 without any prefix. Moreover, the area was also not matching. It was further submitted that the assessee was not aware of the significance of VT. It was submitted that the assessee had not paid Rs.12,65,000/- to anyone. The AO, however, observed that the assessee had not given any plausible explanation and added the sum of Rs.12,65,000/- to the total income. 2.3.2 In appeal, CIT(A) agreed with the contention of the assessee that the AO had rejected the submission of the assessee without giving any ....
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....he conditions regarding built up area of the flats was not satisfied. The assessee submitted that most of the flats had built up area of less than 1000 sq.fts. and only in some cases built up area had exceeded. It was pointed out that only 14% of the built up area constituted of flats of built up area exceeding 1000 sq.ft. Thus in respect of 86% of the built up area, all conditions of section 80 IB (10) were satisfied. It was accordingly submitted that the claim of deduction by the assessee for 86% of the profit should be allowed. The AO, however, did not accept the contentions raised and observed that deduction under section 80 IB(10) could be allowed only when all the conditions were fulfilled. He accordingly denied claim of deduction fully. 3.1.1 The assessee disputed the decision of AO and submitted before CIT(A) that claim of deduction under section 80 IB(10) on proportionate basis in respect of flats of area less than 1000 sq.ft. was correct. The assessee referred to the decision of Kolkata Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. vs. DCIT in ITA No.1595/Kol/2005 dated 24/3/2006 in which claim of the assessee had been allowed on proportio....
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....T(A) in allowing proportionate claim of the assessee. The order of CIT(A) is accordingly upheld. 3.2 The dispute raised in grounds No.2 & 3 relate to addition made by AO amounting to Rs.4.00 lacs, Rs.8,01,707/- and Rs.6,13,864/- based on entries appearing at page 62 and 66 of annexure -2 impounded at the time of survey. The AO observed that there were following entries appearing on the said documents. i) Shri JV --- Rs.4,00,000/- ii) BMC charges paid Rs.6,13,864/- and Rs.8,01,707/- 3.2.1 The AO during the assessment proceedings asked the assessee to explain the above entries but as per AO, the assessee could not substantiate the explanation by submitting some documentary evidence. In relation to sum of Rs.4,00,000/-, it had been submitted that the entry pertained to sale of flats to WRST. The AO did not accept the claim that cash payment to JV could pertain to sale of flats to the trust. Moreover, there was no documentary evidence to substantiate the claim. The AO therefore, treated the sum of Rs.4.00 lacs as income of the assessee. The other entries of Rs.6,13,864/- and Rs.8,01,707/- were also explained by the assessee as relating to working o....
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....t page-66 of the impounded documents. There was also another figure of Rs.2,56,92,000/- mentioned as received from the trust which was figure of earlier receipt and difference of Rs.2,80,17,500/- and Rs.2,56,92,000/- was mentioned at page-65 as Rs.23,25,500/-. The actual figure receivable of Rs.29,39,364/- was also mentioned on the said page and the difference of the two figures which was receivable was Rs.6,13,864/-. Thus, figures of Rs.6,13,864/- and Rs.8,01,707/- both represented amount receivable from the trust which was actually not received. These were not payments made by the assessee and, therefore, no additions could be made. As for the sum of Rs.4.00 lacs, this had been duly cancelled by the assessee and addition had been rightly deleted by CIT(A). The ld. DR on the other hand placed reliance on the order of AO. 3.2.4 We have perused the records and considered the matter carefully. The dispute is regarding addition of Rs.4.00 lacs, Rs.8,01,707/- and Rs.6,13,864/- based on the entries made at page 65 of the impounded documents. A careful perusal of said document shows that it mentions the cost of construction of the flats sold to the trust at Rs.2,88,19,207/-. It also m....