2015 (5) TMI 782

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....see could not produce the relevant bills and vouchers to support the various expenses claimed in respect of his contracting business. Since the expenses claimed by the assessee in the absence of supporting bills/vouchers were not verifiable, the A.O. proceeded to estimate the income of the assessee from his contracting business by applying net profit rate of 10% to the gross receipts declared by the assessee which resulted in substantial trading addition. 3.1. The trading addition made by the A.O. was challenged by the assessee in an appeal filed before the Ld. CIT(A) and after considering the submissions made by the assessee as well as the material available on record, the Ld. CIT(A) found justification in the action of the A.O. in estimating the income of the assessee by applying a net profit rate as a result of failure of the assessee to produce the relevant bills/vouchers to support various expenses claimed by him. However, keeping in view that the net profit of the assessee was estimated by the A.O. in A.Y. 2007-2008 at 8%/of gross receipts, he held that the net profit rate of 10% applied by the A.O. in the year under consideration was on the higher side and it would be fair ....

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....n of Rs. 50 lakhs was claimed by the assessee under section 54EC of the Act for investment made in purchase of Rural Electrification Corporation bonds. Since the corresponding capital gain had arisen to the assessee as a result of sale of land to builder on 25.11.2006 and investment in Rural Electrification Corporation bonds was made on 22.12.2008, the A.O. disallowed the claim of the assessee for exemption under section 54EC in the assessment completed under section 143(3). 6.1. The disallowance made by the A.O. on account of its claim of exemption under section 54EC as well as the enhancement made on account of short term capital gain was challenged by the assessee in an appeal filed before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), elaborate submissions were made on behalf of the assessee on this issue which, was reproduced by the Ld. CIT(A) in paragraph No. 6.2 and 6.3 of his impugned order, were as under : "6.2. During the course of appellate proceedings, vide written submissions the appellant stated that the appellant had purchased a piece of vacant land admeasuring 1100 sq. yards situated at Bagh Ameeri Village, Balanagar Mandal, RR D....

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....cial year in which the asset was transferred to builder which is 2006-07 relevant for AY 2007-08. It was argued that thus there is no cause for the appellant to declare long term capital gain of Rs. 48,02,227/- for the AY 2009-10 and consequently, do not warrant the AO to disallow Rs. 50,00,000/- and adding back the same to the total income as inadmissible claim as per law. The appellant pleaded that the declaration of income at Rs. 48,02,227/- as long term capital gains and claim for exemption to that extent u/s. 54EC by appellant for AY 2009-10 having been found to be invalid in the eye of law, may pleas be ignored and the consequent addition of Rs. 50 lakhs made by the AO be deleted. 6.3 In respect of long term and short term capital gains calculation, the appellant had submitted that out of 14 flats received as the share of the appellant, 8 flats were sold during the FY 2007-08 relevant to AY 2008-09 and two flats were sold in FY 2008-09 for a consideration of Rs. 37,00,000/- and the resultant capital gain was worked out for the year under consideration as under: i. Long term capital gain on sale of Proportionate share of land of 65 Sq.Yds @ Rs. 6,000 per Sq. Yard Rs.3,90,00....

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.... such transaction in the year 2007-08 are to be treated as short term capital gains. Further, the flats were handed over by the builder to the appellant during the financial year 2007-08. By this perspective, the gains arisen to the appellant on account of development agreement and sale of flats are to be treated as short term capital gains. On facts, the amount considered by the assessing officer at Rs. 45,00,000/-, for arriving at short term capital gains of Rs. 48,02,227/- is disputable and there is merit in the objections raised by the appellant in respect of the plinth area of flats sold and the considerations received. The method for adopting the total consideration at Rs. 45,00,000/- by the A.O is devoid of the truth and hence no basis. As such the capital gains, which are short term in nature are required to be computed, based on the facts of the case, wherein the short term capital gains were available to the assessee at two stages i.e. on account of transfer of property (land) vide the agreement for development dated 25.11.2006, which are relatable to the AY 2007-08 and the further short term capital gains on sale of flats received by appellant from the developer, in the ....