TaxTMI 
TaxTMI 
2011 (3) TMI 1771
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....on of colonies, banks and Govt. works. 3. The ld. CIT(A) has erred in maintaining disallowance/addition of payments of work contract out of payments to Shri Shyam Sunder Ahuja, Shri Kamal Ahuja and Mrs. Archana Ahuja of Rs. 14,88,218/- @ 25% at 3,72,055/- arbitrarily. 4. The ld. CIT(A) has erred in maintaining addition of creditors of Rs. 6,72,500/- arbitrarily. 5. The order of ld. CIT(A) is unjustified, improper and warranted." In ITA No. 269/Ind/2010 the revenue has taken the following grounds of appeal :- 1. On the facts and circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 56,75,350/- made by the A.O. being trade advance u/s 68 of the IT Act. 2. On the facts and circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 1,13,500/- made by the A.O. being the capital introduced by a partner in the firm to be added in his hands u/s 69 of the IT Act. 3. On the facts and circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 34,000/- made by the A.O. being the capital introduced by a partner in the firm to be added in his hands u/s 69 of the IT Act.....
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....O that there' were no written agreements entered with these contractors and no details of quantum of work carried out by them in sq. ft. was given to him. However, observing that the assessee must have incurred expenditure on contract, the AO disallowed on ad hoc basis a sum of 25% of such expenditure, total amounting to Rs. 37,91,070/- and thus disallowance of Rs. 9,47,767/- was made. 8. By the impugned order, the ld. CIT(A) deleted the disallowance of Rs. 5,75,712/- against the total payment of Rs. 9,47,767 made to three contractors. Thus, he has confirmed the disallowance of Rs. 3,72,055/-. Against this order of ld. CIT(A), the assessee and Revenue both are in appeal before us. 9. We have carefully considered the rival contentions and found that the assessee has furnished the full details of work done by individual contractors duly incorporating the rates of construction as per copies of bills filed by the assessee. The AO has not objected the authenticity and correctness of such bills nor the rates of such work in the bills raised by the Contractors. There is no finding of AO that for similar contracts, prevailing market rate was lower than what the assessee has paid.....
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....ity in the order of the CIT(A). for deleting the addition. 14. Next grievance of the Revenue relates to CIT(A)'s action for retaining addition of Rs. 6,72,500/- out of total addition of Rs. 63,47,850/- made by the Assessing Officer u/s 68 in respect of the creditors. Revenue is aggrieved for deleting addition of Rs. 56,75,350/- and the assessee is aggrieved for sustaining addition of Rs. 6,72,500/-. In this regard, it was observed by the AO that the assessee had shown liability of Rs. 62,51,500/- on account of advances from the prospective buyers. It was noticed by him that the so called buyers have made the payments in cash and cheques. To prove their genuineness, the assessee was given opportunity to produce them for examination. It is observed that out of 28 parties pointed out by the AO in the assessment order, only 14 parties appeared before the AO. On examination of the same it was noticed that such prospective buyers could not explain the source of deposits made with the assessee to the satisfaction of the AO. By stating that the assessee could not prove the creditworthiness of the buyers who paid installment/advance payment, the AO made addition of Rs. 63,47,850/- as ....
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....essee from page 24 to 32 of written submissions, in some cases the registered sale deed has been executed and in remaining cases the agreement to sale has been undertaken. By observing that in respect of some of the buyers even though advances initially for the said plot. Such refunded amounts were through bearer cheques in many of the cases and therefore, the genuineness of such advances and their refund was not reliable. In such circumstances it would be justified and appropriate to consider only those cases as non genuine in agreement of sale has been executed but the assessee failed to produce such persons before the AO. From the list, submitted by the assessee, the following persons come in this category. S.N Name Reference No. of W.S. Page No./ S.No. Amount 01 Smt. Neelkamal Pramod Kumar Gupta 24/13 35,000/- 02 Smt. Sarika Manish Jain 25/34 50,000/- 03 Satishchandra Balkishan TiwariTiwari 28/41 60,000/- 04 Dr. L.R. Chouuhan Shanker Rao 26/48 84,500/- 05 Shri Kailashchandra Shivnaravan Goyal 27/49 41,000/- 06 Smt. Mangla Kailashchandra Kambli 27/60 40,000/- 07. Smt. Rangbhari Prafullji ....
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..... He drew our attention to the detailed chart placed on record giving names and address of the persons, who have booked the plots/flats and the respective amount received in various years against the booking. Since there was also system of paying the money in installments, entire amount of plot/flat was not received in one year, but was received in 2-3 years as per the terms of installment payment. This detailed chart also indicated plot number/flat number, total area of plot/flat and the total amount of advance received in respective years. The assessee has also indicated the respective years in which the registry was executed in favour of the customer after receipt of entire amount. In view of these details, the ld. Authorized Representative contended that most of the advances were converted in to income as soon as the registry is got done, thus, the advance so received was not in the nature of cash credit but was actually in the nature of advance for sale of plot/flat. The ld. Authorized Representative also invited our attention to the detailed chart submitted before lower authorities alongwith agreement/sale deeds, duly establishing all the three ingredients of cash credit whic....
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....nd they have accepted the factum of making payment for booking the plot/flats. However, being not satisfied with the creditworthiness of prospective buyers for making the advance payment for booking of plot, the AO has made the addition. The ld. CIT(A) found that the amount was received in earlier 2 - 3 years. In respect of amount not received in 2005-06, the ld. CIT(A) observed that no addition can be made during the year under consideration and for the relevant assessment year under consideration, the AO should confine his inquiry only towards the amount received during this year. As per the ld. CIT(A), the AO was free to take necessary action in respect of advance received in earlier years, in the respective years in which such advance was received by the assessee. With respect to the amount of Rs. 26,77,500/- received by the assessee during the year as per the detailed chart furnished before him and which was placed in paper book at pages 24 - 32, the ld. CIT(A) observed that in some cases registered sale deed has been executed and in remaining cases the agreement to sale has been undertaken. We also found that the details of complete advance, which was submitted before the CIT....
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....n of Rs. 5,01,500/- in respect of ten persons stated hereinabove, since all the three ingredients of identity, genuineness and creditworthiness were duly satisfied. 23. From the record, we found that the assessee is a colonizer/dealer/developer of plots. Payment of plots/building was received in installments. As per the procedure adopted by the assessee, he used to execute agreement for the amount of installments and booking of flats so received. The sale deed was got registered only after final installment of booking is paid by the prospective customers. Thus, the agreement continues till the final installment is paid and sale deed is registered after receipt of entire installments. The assessee has furnished before the lower authorities, details of all such buyers, who had made advance payments for purchase of plots, in the form of installments, giving full particulars of amount paid, date of payment, mode of payment, date of agreement/sale deed so executed. As per our considered view, keeping into the view the nature of payment and the nature of assessee's business of selling the plots in installments the amount so paid through installments used to convert into income, when t....
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....and he has admitted the same - no addition should be made in the firm's hands. By impugned order, the ld. CIT(A) deleted same. 27. On examining the facts of the case it is observed that Rs. 34,000/- were shown as cash deposit on 15.07.04 for which the withdrawals from bank were shown on 06.11.03 in respect of Rs. 4,000/-. Regarding the genuineness of Rs. 26,000/- deposited by Shri Kesarimal, the same was stated to be received from his family members. On verification it was found that Rs. 4,000/- has been considered by the AO twice and therefore Rs. 30,000/- only (Rs. 4000 + Rs. 26000) should have been treated as unexplained. The CIT(A) deleted the addition by relying on the decision of Hon'ble M.P. High Court in the case of CIT Vs Metachem Industries (2000) 245 ITR 160. 28. We have carefully considered the rival contentions and found that for deleting the addition, the ld. CIT(A) has relied on the decision of Jurisdictional High Court in the case of Mcman Industries, 245 ITR 160. The proposition laid down in the case of Mcman Industries (supra) is applicable in the case of deposit by a partner in his firm, who bring his capital in the business. The Hon'ble High Co....