TaxTMI 
TaxTMI 
2014 (3) TMI 102
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....re us, at the outset Ld. A.R. submitted with respect to quantum additions that though the appeals of the assessee pertain to different assessment years but the issue and facts involved in the appeals are identical except for the amount and the submissions made by them in case of one year would be applicable to the other years and therefore all the appeals can be heard together. The Ld A.R. further submitted that A.Y. 05-06 can be considered to be the lead matter. We therefore proceed to dispose of the appeals against quantum addition together for the sake of convenience by means of a consolidated order and thus proceed with the facts for AY 2005-06. 3. Assessee is a firm engaged in the business of building construction. It filed its return of income for AY 2005-06 on 31.10.2005 declaring total income of Rs 88,150/-. The case was selected for scrutiny and thereafter the assessment was framed u/s 143(3) vide order dated 29.12.2006 and the total income was determined at Rs 1,40,33,890/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). C1T(A) vide order dated 22.1.2009 partly allowed the appeal of the Assessee. Aggrieved by the order of CIT(A)....
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....restored to the above extent. We first take up Assessee's appeal (ITA No. 808/AHD/2009 for A.Y. 05- 06). Ground No 1 is general and requires no adjudication. Ground No 2 and 4 are not pressed and therefore dismissed as not pressed. Ground No 3 is with respect to restricting the addition to Rs. 14,00,000/- by CIT(A) as against the addition of Rs. 1,34,40,147/- made by the A.O. 5. Since ground no. 3 of Assessee and ground no. 2 & 3 of Revenue are interconnected both are considered together. 6. A search u/s 132 of the Act was conducted at the business premises of the assessee on 9.2.2005 along with search in Dharamdev Builder group of cases. On the basis of documents impounded, it was noticed that Assessee had charged cost of land @ Rs 8000 sq yd and cost of construction @ Rs 6200 per sq yd, in addition to which additional charge of Rs 1,50,000/- on account of AEC charges, maintenance charges etc was also recovered. It was also noticed that during the year the Assessee had received construction receipts of Rs 1,18,39,149/- in respect of 8 bunglows (details of bunglow nos etc. stated at page 10 of the order) and on perusing the P&L account it was noticed by him th....
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....ged Rs 8000 per sq yard on allotment of land to different members, out of which the part amount was credited in the books of M Ajara Co-op Housing society and the balance amount was charged by the Assessee as premium/on money. He was further of the view that Assessee had charged rate of construction at Rs 6000 per sq yard out of which only part of the amount has been disclosed in the books of accounts. He further noticed that Ajara society had allotted land to 10 members out of which 8 members had started construction work through assessee and balance 2 members had not started construction activities and thus the Assessee had charged premium for allotment of land in respect of 10 members but had received construction receipts from only 8 members. Thus on the basis of rates noted in the seized documents, AO worked out the sale proceeds in respect of 10 bunglows and construction receipts in respect of 8 bunglows and based on the working as shown on page 10 of the assessment order, worked out the total undisclosed income at Rs 1,34,40,147/-. Aggrieved by the order of AO, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee granted partial....
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.... applies. It is also seen that the two plot owners, namely Harjit Singh and Ketanbhai, examined by the Department, on 21/2/2005 and 2/3/2005 respectively have also confirmed their plot area and the cost of land (at Rs.2,500/- per sq. mtr.) which is in line with their respective agreements with the society. As such, the investment in the land of the society and on money received therefrom, cannot be considered as part of the assessee's undisclosed income. The addition made by the A.O. for the premium/on money earned on sale of plots to the members, is therefore not tenable/justified, in the hands of the appellant firm. 13.1 In respect of the addition made for on money/premium received from construction activities of the residences in the previous year it is seen however that the aforementioned owners have confirmed that the rate charged per sq. yard for construction was Rs.6,200/-. Their statement corroborates the rate of construction as seen in the seized documents i.e. (approximately Rs.6,000/- per sq. yard). It is also seen that while Shri Hardik Jani may be a third party, not privy to the details in respect of the transactions of land/plot, yet he was intimately involved,....
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....Housing society had purchased land from landowners vide registered sale deeds, the society has not been proved to be not a regular society or a benami of the assessee, the established and independent existence of the society has not been negated, the executed and legally registered land documents have not been proved to be sham or fabricated. He has also noted that 2 plot owners, when examined, have confirmed their plot area and cost of land which is in line with the agreement with the societies. He has further given a finding that the view of the AO that society was just a facade while the actual beneficiary was the assessee and the on money /premium earned on sale of plot/obtained from construction had flown to assessee was not supported by any evidence. Before us also nothing has been brought on record by the Revenue to controvert the aforesaid findings of CIT(A). Therefore we do not find any reason to interfere in this finding of ld. CIT(A). Now the issue to be examined is as to whether ld. CIT(A) is justified in confirming the entire construction receipt? With respect to construction cost, CIT(A) has noted that owners have confirmed the rate charged for construction to be Rs 6....
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....t free loan of Rs. 38,97,550/- to M/s Ajara Co-op. Society and Rs. 1,40,290/- to others. On the query of A.O., Assessee interalia submitted that it has not given any advance to the society but had incurred expenses on behalf of society as part of legal obligation as a contractor and therefore the expenses were out of business consideration. The submission of Assessee was not found acceptable to A.O. He thereafter worked out interest @ 12% on the amount advanced and worked out the interest of Rs. 4,71,392/- to be not for the purpose of business and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) disposed the matter in Assessee's favour by holding as under:- "In respect of the interest disallowed, it is seen that there was a business nexus between the expenditure incurred and the interest bearing funds. Moreover, the expenditure incurred by the appellant on behalf of the society, in the previous year was much less as indicated by the fact that the opening balance itself was of Rs. 37.35 lakhs. It is also seen that the appellant had charged interest on the advances given to N.M. Kothari HUF and Tejas . C. Joshi HUF. However....
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....ts in deleting the addition made on account of disallowance of interest for use of borrowed funds for non business purpose of Rs. 4,85,408/-. 2. The ld. CIT(A) has erred in law and on facts in restricting the addition of Rs. 1,36,45,513/- to Rs. 11,49,000/- made on account of unrecorded receipts from the same of plots and construction of bungalows, without considering the fact that Co-operative Housing Society was merely a façade created by the assessee for carrying out its activity of purchase and sale of plots and construction of bungalows. 3. The ld. CIT(A) has erred in law and on facts in holding that the addition made on account of on money received from sale of plots cannot be made in the hands of the assessee as land belongs to Co-operative Housing Society, without considering the clear cut finding and material on records that Co-operative Housing Society was a non trading organization and entire profit belong to the assessee firm only. 4. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent. 18. Before us, both the parties submitted that the grounds raised in both the appeals of Assessee a....
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.... consolidated order for the sake of convenience and thus proceed with the facts of A.Y. 05-06. 25. In this case against the income of Rs. 88,150/- returned by the Assessee the total income was determined at Rs. 1,40,33,890/- by order dated 29.12.2006 passed u/s. 143(3) of the Act. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who confirmed the addition only to the extent of Rs. 16,10,254/-. On the aforesaid addition confirmed by CIT(A). A.O. vide order dated 25.03.2010 levied penalty of Rs. 5,89,234/- u/s. 271(1)(c). Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) partly confirmed the penalty by holding as under:- 3.1 . As far as the levy of penalty on account of disallowance out of motor car expenses and telephone expenses and disallowance of interest is concerned, mere fact is that the disallowance has been made on estimate and the same has been partly confirmed in appeal, does not call for levy of penalty u/s.271(l)(c) of the I.T. Act. Reliance in this regard is placed on the decision of The Hon''ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158(SC). The penalty le....
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....port the same was filed. 3.5 It is also seen that the appellant has also indirectly accepted the receipt of on money before CIT(A) which is evident from the fact that in para 14 of the appellate order the CIT(A) mentions as under: "It has been pleaded before me during the course of hearing that if it was held so, then only the profit element i.e. about 8 of the receipts, should be considered for addition. This plea however is not substantiated by the appellant with requisite evidence of there being undebited expenses/cost etc," 3.6 In view of the above facts, it becomes apparent that the appellant was fully aware of the amount charged for the extra work done in the bungalows because no extra work would have been done in any of the bunglows without the knowledge of the appellant. The fact that the seized papers give the details of such unaccounted extra charges has to be appreciated. The CIT(A) clearly held that the appellant had received consideration over and above the declared sales amount on account of extra works done. The AO was hence justified in levying penalty u/s 271(l)(c) of the Act on this account. 3.7 In view of the above, the Assessing Officer was justified in....