TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1237
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....- a) Difference in valuation of work in progress as on the date of survey Rs. 74,12,287 b) Amount spent in cash on renovation of office premises and furniture and fixture Rs. 24,73,000 However, the assessee did not offer the additional income in the return of income filed for A.Y. 2007-08. Hence the Assessing Officer added both the amounts cited above to the income of the assessee. The Assessing Officer further noticed that the assessee has claimed shuttering material costing Rs. 4,57,14,039/-as revenue expenditure. The Assessing Officer treated the same as capital expenditure and accordingly disallowed the said claim in excess of admissible depreciation. In the appellate proceedings the assessee got partial relief and hence the assessee has filed these appeals. 3. We shall take up the appeal filed for AY 2007-08. The first issue contested therein relates to addition of Rs. 74,12,287/- made on account of difference in work-in-progress. The facts relating to the same are stated in brief. During the course of survey operations, the revenue seized a paper wherein the value of work-in-progress as on 31.1.2007 was written in hand as Rs. 2,47....
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.... difference in work in progress was wrongly made. In absence of any such reply, the present contention of the assessee that impounded documents only contained estimated value of work done till 31.1.2007 and not the actual figure of work in progress cannot be accepted. 4. The Assessing Officer, by placing reliance on some case laws, expressed the view that the assessee did not retract from his statement within a reasonable period. Accordingly the Assessing Officer added the amount of Rs. 74,12,287/-, being the difference in the work-in-progress to the total income of the assessee. The Ld CIT(A) also confirmed the addition. 5. The Ld A.R reiterated the submissions made before the tax authorities, while the Ld D.R supported the orders of tax authorities. 6. We have heard rival contentions on this issue and perused the record. We notice that the basis for making this addition is the loose paper found during the course of search, which read as under:- Work in Progress as on 31.01.2007 (valuation) Lokhandwala Construction 1,24,88,893 Veena Developers 11,36,105 Sanghvi Associates 62,97,784 K.Raheja (Infinity Developers) 87,29,672 Vasai Mall 1,24,710 Castle Construc....
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....estion of any excess investment shall arise only when the assessee has incurred expenses outside the books of accounts. We notice that the AO did not take any steps to ascertain as to whether the assessee has made investments in various projects over and above that was recorded in the books of accounts. We notice that the survey officials did not unearth any other document evidencing any unaccounted investment, other than the impugned loose paper. Under these set of facts, in our view, the AO should not have placed reliance only on the statement given by the assessee without corroborating the same with any other material. 10. Another important feature is that the assessee is only a contractor and it executes various projects for its clients. Under normal circumstances, a prudent contractor would not be investing his own money more than required level, since there is no incentive in making excess investments as the projects are executed on behalf of other persons. If the projects are executed for its own use, then there is a possibility that a person may invest his unaccounted income. On the contrary, a contractor may, at the most, like to inflate the expenditure in order to reduce....
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....mitted that it has accounted all the expenses in its books of accounts and no part of expenditure remained unaccounted. It was further submitted that the expenses are being incurred by following standard procedures. The assessee also submitted that the auditors have audited the books of accounts and they have stated that the assessee has incurred expenses by way of cash to the tune of Rs. 10,42,259/- attracting the provisions of sec. 40A(3) of the Act. 13. The AO noticed that the assessee has accounted the expenses after completion of survey operations. Since the expenses were not accounted in the books of accounts at the time of survey, the AO rejected the contentions of the assessee and accordingly added the amount of Rs. 24,73,000/- as income of the assessee. The Ld CIT(A) also confirmed the same. 14. We heard the parties on this issue and perused the record. There is no dispute that the loose paper contained details of expenses incurred towards renovation and towards purchase of furniture. The partner admitted the same as unaccounted items and accordingly agreed to offer the same as income of the assessee firm. At the same time, it is also an admitted fact that there was cash....
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....The next issue urged by the assessee relates to the disallowance of expenses incurred on Shuttering materials treating the same as Capital expenditure. The assessee had claimed a sum of Rs. 5,37,81,223/- as expenditure towards Shuttering materials. The AO treated the same as Capital expenditure and after allowing depreciation at 15%, he disallowed a sum of Rs. 4.57 crores. The Ld CIT(A) noticed that the assessee has grouped various types of expenditures under the head "Shuttering Materials" and some of them are consumables and some does not have enduring benefit. Accordingly he directed the AO to delete the disallowance made on account of purchase of plywood, GI binding wire and misc. consumables. Still aggrieved, the assessee is challenging the decision of Ld CIT(A). 18. The AO has taken the cost of Shuttering material at Rs. 5,37,81,223 and accordingly worked out the disallowance. However the assessee submitted before Ld CIT(A) the details of material consumed or purchased for shuttering purposes and the same was worked out at Rs. 5,56,49,392/-. The assessee also explained the nature of each of items purchase/used for shuttering purposes as under:- "The breakup of the same as f....
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....ly one project for construction of "composite structure" of infinity. It gets embedded in the concrete and hence, does not have any enduring life. 8 Mechanical springs 2,80,750/- Mechanical springs are used for giving support to the slabs. It can be used two to three times in a particular project. However, it cannot be used in other projects as the same are cut in a particular size. Thus, it gives no enduring benefit to the appellant. 9 Misc. Consumables 5,00,000/- It requires during the period of construction of structure. Out of all items only few gets retrieved. However, it cannot be used again. Thus, it is not having any long life 10 M.S. Angles Sheet 57,80,775/- The expenditure debited under this head is with respect to angles and other M.S. sheet items which are used for shuttering. The appellant submits that these items do not survive beyond one project. Hence, the expenditure on account of the same is revenue expenditure. Total 5,56,49,392/- As stated earlier, the Ld CIT(A) held that the expenses incurred on purchase of plywood, GI binding wire and miscellaneous consumable are to be treated as revenue expenditure. 19. The Ld A.R submi....
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....s, Horizontal Ledger etc costing Rs. 85/- to Rs. 375/- each, are fully used up/consumed during the construction itself. The M.S shuttering material purchased is claimed to have a life of 8 - 10 months. They include small items such as Propos, Span, H frame, Swivel couples, M.S Pharma, Brassing & Shikansa. These items are used to support the slabs. It is stated that these items are generally used for three times in the same project. M.S Pipes are used in the construction of scaffoldings. It is stated that it gets imbedded in the structure and cannot be reused. ISMP & ISMC are used to give support to roofs and slabs and it is stated that they can be used only in one project. All other items are said to last only for one project only. 24. We find merit in the contentions of the assessee on considering the volume of work undertaken by the assessee. The shuttering materials are used to support the concrete structures till the time the concrete slabs are set. Since the shuttering materials are made of MS plates and pipes, which come in contact with water, cement etc., their durability would depend upon the type and frequency of their usage. Since the assessee has undertaken contracts fo....