TaxTMI 
TaxTMI 
2016 (8) TMI 994
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....first issue in the Revenue‟s appeal in ITA No.4326/Mum/2010 is as regards to the order of the CIT (A) deleting the addition of construction expenditure incurred by assessee after the date of issue of completion certificate. For this, the Revenue has raised following ground No.1:- "01. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) has erred in deleting the addition made by the AO in respect of construction expenditure of Rs. 1,84,32,304/- even though these were incurred after the date of issue of Completion Certificate by the Architect". 3. Briefly stated the facts are that the assessee is a builder and property developer. The assessee firm acquired land at Parel and constructed a building project known as 'Raj kamal Heights‟. This project constructed two residential wings. A survey u/s. 133A of the Act was carried out on the said construction site on 16-02-2006. During the course of survey, the department found that the completion certificate obtained from local authority showing the project has been completed on 06-12-2006. According to the AO, the assessee has incurred construction expenses to the tune of Rs. 1,84,32,204/- after ob....
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....t necessarily mean that project is completed in all respects. In reality obtaining of an occupation certificate only means that building is fit to be occupied subject to the condition laid down by MCGM granting such certificate. It can be seen from the nature of the expenditure itself that all the expenses are related with the project itself and none of the expenditure can be presumed to be non-related one. One can see that payment to contractor is related with project under consideration, which is, neither estrange nor irrelevant expenditure. The bill raised by the contractor and details available in the ledger account of the assessee proves the fact of genuineness of the expenditure related with this project known as Rajkamal Heights. It is also relevant to mention that aluminium window work is also related to the project, which cannot be presumed to be unrelated element or expenditure. Similar is the position in respect of the plumbing work, which is on going work even required to be done after obtainment of occupation certificate. Further, even after obtainment of occupation certificate, garden can be developed or process of garden would be made in progress. There is no bar of ....
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....ns of the contract which has duly been accepted by the department in earlier years even during the course of survey proceeding at the premise of the assessee. It is a matter of record that Ld. AO has not found out anything wrong in the regular payment to the contractor. It is worthwhile to mention that Ld. AO has not disputed the genuineness of the receipt of the contractor on which proper TDS is made by the assessee, hence there is no propriety to disbelieve the genuineness of contractual payment made by the assessee. The arguments of the Ld. AO about the expenditure of construction of the building as it was complete and there was no reason whatsoever with the assessee to incur such expenditure, is not convincing or tenable argument. The work carried out by the contractor was mainly related with the finishing work, segmental work and other works and further the plan of construction of Clun-House was approved in May, 2007 which is after receipt of occupation certificate. Similar is the situation in respect of construction of compound wall. It is a normal practice of the builder and developers to continue the work of various nature including the miscellaneous work, beautification, m....
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....acts and circumstances of the case as well as in law, the Ld. CIT (A) has directed to restrict the addition on account "Alleged Cash Component" to Rs. 30,00,000/- as against Rs. 2,20,57,111/- made by the AO. After having accepted the factum of receiving on money on one side and ignoring evidence of statement of Broker and assessee recorded at the time of survey confirming the rate charged ranging in between Rs. 4,500/- to Rs. 5,500/- (Copy of Statement on oath recorded is enclosed Question and Ans. No.22 and 25 especially and other related documents.)". And for this, the assessee has raised the following ground No.1:- "1. The Learned Commissioner of Income Tax Appeals erred in confirming the addition of Rs. 30,00,000/- alleged income as cash component". 7. Briefly stated the facts of the case are that during the course of survey operation 133A of the Act on the business premise of the assessee on 16-02-2006 the survey party papers relating to transactions of on money/cash component transactions recorded. The AO made the addition of on money i.e. cash component on account of sale of flats of Rs. 2,20,57,111/-. According to the AO, the partner of the assessee firm during the....
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..... Here in this case, it is very visible that following flats were considered in respect for cash components in A.Y. 2006-07, hence one has to consider rest of the 8 flats in this year for addition. These 9 flats are as under:- S No Flat Number Cash Component Offered In AY 2006-07 A Wing Amount (Rs) 1 703 7,98,000 2 802 9,00,000 3 1103 7,98,000 B Wing 4 302 9,80,000 5 601 7,77,000 6 802 17,50,000 7 1001 13,87,500 8 1102 17,50,000 9 1103 14,25,000 Further, out of the rest of 8 flats, flat No. 103 was sold out @ Rs. 4,603/- hence it was over and above general selling price included in on money receipt, therefore, only following flats are remained to be considered for receipt of on money in this year. The details of the same areas under:- SN FLAT Area in sq mtr Area in sq ft. Price as per sale deed PSF rate Offered in AY 2006-07 A Wing 1 103 84 903.84 42,00,000 2768 No 2 203 84 903.84 34,05,000 3768 No 3 403 69.31 745.77 26,40,000 ....
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..... 1,90,57,111/-." Aggrieved, against the restriction of addition of Rs. 30 lakhs as against the addition made by the AO at Rs. 2,20,57,111/-, the assessee as well as the revenue both in cross appeals before the Tribunal. 8. We have heard the rival contentions and gone through the facts and circumstances of the case. First of all the assessee submitted that out of 17 flats 9 flats have been already considered while disclosing the money receipts at Rs. 5.16 crores in the assessment year 2006-07 and the same has been assessed u/s. 143(3) of the Act. He explained that out of 17 flats 9 flats which were part of the flats on which cash component was already taken and declared. The details of which are as under:- S No Flat Number Cash Component in A.Y 2006-07 A wing Amount (Rs) 1 703 7,98,000 2 802 9,00,000 3 1103 7,98,000 B wing 4 302 9,80,000 5 601 7,77,000 6. 802 17,50,000 7. 1001 13,87,500 8. 1102 17,50,000 9. 1103 14,25,000 The learned Counsel for the assessee also explained the entire flats in both 'A Wing and 'B Wing. The details of whi....
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....r 2006-07. Even otherwise, the average PSF rate of 7 flats @ Rs. 4020/- which is almost corroborating with the statement of Shri Kamlesh Savla admitting the average rate of Rs. 4000/- PSF (per sq.feet). Even otherwise, there is no evidence relating to the assessment year 2006-07. This is merely an exploration of rate by the AO without any evidence based on earlier year evidences. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has wrongly estimated the cash component at Rs. 30 lakhs in respect of 7 flats on estimation basis. There is no basis for CIT (A) to estimate cash component in these 7 flats at Rs. 30 lakhs by taking the selling price of flat @ Rs. 3750/- per sq. ft. Accordingly, we delete the addition confirmed by CIT (A) amounting to Rs. 30 lakhs. The issue of assessee‟s appeal is allowed and that of the Revenue is dismissed. 10. The nest issue in the Revenue‟s appeal is against the order of the CIT (A) deleting the disallowance of expenses of telephone, vehicle expenses and conveyance expenses. For this, the Revenue has raised the following ground No.3:- "03. On the facts and circumstances of the case as well a....
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....would have been regular debit and receipt of the salary by these persons whereas, Appellant has only shown debit by voucher dated 22.03,2007, which is apparently unbelievable. Therefore, disallowance of salary of Rs. 3,45,000/- out of the total claim of Rs. 7,64,975/- is sustained". We are of the view that the assessee is unable to prove the genuineness of the salary paid to these employees and CIT (A) has confirmed the disallowance with reasons. We also confirm the orders of the lower authorities. This issue of assessee‟s appeal is dismissed. 14. Coming to the assessee‟s penalty appeal in ITA No.2558/Mum/22014, the only issue in this appeal of the assessee is against the order of the CIT (A) confirming the penalty levied by the AO u/s 271 (1) (c) of the Act on alleged receipt of on-money and disallowance of salary payment. For this the assessee has raised the following ground No.1:- "1. The learned Commissioner of Income Tax Appeals has grossly erred in confirming Penalty u/s 271 (1) (c) r. w. s. 274 of the Income Tax Act, 1961 amounting Rs. 11,25,927/- on account of alleged receipt of on money and salary payment amounting Rs. 33,45,000/-." 15. First of all we....
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....survey period. The on money was received by the assessee for the assessment year 2006-07, being the date of survey on 21-02-2006, for the reason that some papers for the financial year 2005-06 were found. But, no paper relating to financial year 2006-07 relevant to this assessment year 2007-08 was found. On this basis only the Tribunal has deleted the addition of on money addition and once addition is deleted, penalty will not survive. Accordingly, we delete the penalty and allow the appeal of the assessee. 18. In the result, the appeal of the Revenue in ITA No.4326/Mum.2011 is partly allowed, the appeal of the assessee in ITA No.4621/Mum/2010 is partly allowed and the appeal of the assessee in ITA No.2558/Mum/2014 is allowed. Order pronounced in the open court on 21/07/2016. ============= Document 1 SN Flat Area in sq Name Price as Mkt PSF Offered in mtr per sale value deed rate A.Y. 2006-07 A WING 1 103 84 KP JAIN 2 203 84 VD SHAH 3 303 84 R SANGHAVI 41,61,000 37,88,400 4603 No 34,05,000 35,28,000 3768 No K 42,00,000 59,22,000 2768 No K 26,40,000 29,11,000 3540 No 4 403 84 R....