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2016 (12) TMI 1237
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....iced at the time of survey are given below:- 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-p....
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....department to claim that surrender of Rs. 74,12,287/- on account of 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 62,9....
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....der to corroborate the veracity of the noting made in the loose paper, particularly when the assessee has offered explanations on the losse paper. The question 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 poss....
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....unt and accordingly agreed to offer the same as additional income. The assessee did not offer the same in the return of income. Before the AO, the assessee submitted 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 s....
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....CIT(A) on this issue and direct the AO to give credit to the extent of Rs. 21,59,599/-. Accordingly the remaining addition of Rs. 3,13,401/- is hereby confirmed. 17. 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 w....
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....imbedded in the structure and hence cannot be reused. Thus, the appellant do not get any enduring benefit by using M.s. pipes. 7 ISMP & ISMC 30,83,107/- ISMP & ISMC are used for giving support to the roofs and slabs. The appellant has used ISMP & ISMC in only 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 expenditur....
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....s, plywood and other consumable items cannot be treated as capital expenditure, since they get consumed in the construction. 23. The assessee has stated that the G I Sheets are used on construction of temporary sheds at the construction site and the cup locks, consisting of small items like Base plate, Verticles, 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 ....