TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 849
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.... only after the A.O. sought proof of payment. 1.2 The Ld. CIT(A) erred in not appreciating the fact that contractors of the assessee have also held up payment to their creditors for a long span of three years, which is not acceptable on any surmise. 1.3 The Ld. CIT(A) erred in ignoring vital fact that the creditors of the four related contractors have withdrawn the entire amount deposited immediately leaving probability of remitting back the amount to the assessee. 1.4 The Ld. CIT(A) has not appreciated the fact that the circumstantial evidences are in favour of the Revenue. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance of Rs.6,78,749/- made u/s 14A of the Act without appreciating that the disallowance was on the basis of working submitted by the assessee in the assessment proceedings. 3. The appellant craves to add, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal. The order of the CIT(A) on the above issue be set aside and that of the Assessing Officer be restored." 2. Brief facts of the case are that the assessee is an individual, filed his return of in....
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....has deliberately cooked up the whole story to increase cost of improvement and suppress the value LTCG. 3. The AO examined the details of all four contractors. Against Gosai Vinodpuri, the AO noted that he has undertaken only labour contract work and showing exactly the same contract income of Rs.54,965,800/- against the direct expenses of Rs.53,50,986/-. Further, sundry creditors and debtors are Rs.61,60,563/- and Rs.54,96,800/- respectively. Thus, he has not made any payment to his labour during the relevant period, which is impossible looking at the nature of work done. Against Patel Rajnikant Manilal, the AO noted that his return of income along with computation of income has been submitted by assessee, the detailed financials that i.e. balance sheet, profit and loss account has not furnished. Therefore, the genuineness of transaction remained unexplained. For Pioneer Construction, the AO held that during the period under consideration, Smitaben Vinodpuri Gosai Proprietor of Pioneer Construction had undertaken labour contract of assessee's work and exactly showing the contract income of Rs.46,25,900/- against the direct expenses of Rs.44,51,700/-. Further, sundry creditors and....
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....erely to camouflage the bogus nature of expense claimed as genuine. 5. The AO also issued commission under section 131(1)(d) for seeking factual and quantitative details of actual work done on the land in order to develop the said land to DCIT, Sabarkantha Circle, Himmatnagar. The AO further noted that report of commission was received in his office on 27.03.2015, but was lacking in factual details in order to arrive at a logical conclusion. The AO observed that in the report, it was stated that development expenditure were incurred on developing spot and making earth work by boundary work street road, water line, on which the assessee never claimed such expense. The assessee claimed improvement expenses for land filling, excavation, digging and other miscellaneous works. The AO took his view that the nature of development expenses reported in commission report, might have been incurred by subsequent buyers who purchased land from the assessee. On the basis of aforesaid observation, the AO disallowed the cost of improvement expenses of Rs.1,79,19,550/-. The AO also held that the assessee claimed such expenses to supress LTCG. 6. The assessing officer further noted that the assess....
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....rk during the relevant period and paid in 2015 and not possible to hold such expenses and disallowed the same. The total area of land under various revenue survey number is 1,68,452/- square metre. Considering the large size of the land, the improvement expenses amounting expenses amounting to Rs.1.79 crore, which is Rs.212/- square metre approximately, which is very insignificant compared to size of land. 8. On the allegation of the AO that assessee increased the cost of improvement to suppress the LTCG. The assessee stated that he has sold the said land at Rs.425/- per square metre, whereas the stamp duty value at the particular area was Rs.375/- per square metre, thus, considering the same, the assessee had no intention to evade the tax, otherwise, he would be executed the sale agreement at the rate prevailing stamp duty value and would have saved Rs.82,11,300/-. On the allegation of AO that assessee has not made payment to labour contract for development charges, the assessee explained that he has finalised the rate with contractor keeping in view the term of payment in mind. The assessee made all such payments by way of account payee cheques. The AO has not disputed the payme....
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....ore deleting the additions observed that total indexed cost of improvement claimed by the assessee on non-agriculture land was Rs. 2.80 Crore. For the year under consideration the assessee claimed development expenses of Rs. 1.79 Crore. The ld CIT(A) also noted various discrepancies identified by assessing officer viz; the assessee claimed to have paid those expenses to four parties. On verification of details of payments the assessing officer noted that not a single rupee was paid by the assessee to those four contractor. The nature of expenses on development of land (claimed as improvement cost) was totally a labour work. The assessing officer was of the view that contractor hold the payment of labour for three years, which is not possible in uncontrolled business activity. Three contract parties was related with Vinodpuri Gosai being himself, his wife and one of his business concern. Vinodpuri Gosai in his return of income for the same assessment years was shown only income of Rs. 1.77 Lakhs, who has received the payment of huge contract money after three years, which is unusual. And that when the payments were made by the assessee to the said contractor it was immediately withd....
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....ffered the income for taxation therefore, the provisions of section 14A will not be applicable and deleted the entire disallowance of section 14A. 13. Aggrieved by the order of ld CIT(A) the revenue has filed present appeal before Tribunal. 14. We have heard the submissions of the ld senior departmental representative (DR) for the revenue and the learned authorised representative (AR) of the assessee and have gone through the orders of the lower authorities carefully. Ground No. 1.1 to 1.4 to relate to deleting the improvement expenses of Rs. 1.79 Crore. The ld. DR for the revenue submits that during the assessment the assessing officer has brought sufficient facts on record that the improvement expenses claimed by the assessee are bogus. Such expenses was not paid during the currency of the assessment year. The assessee has shown such expenses to sundry creditors. The AO after noting that development expenditure is apparently bogus, vide order sheet dated 12.02.2015, asked the assessee to furnish the proof of subsequent payment to these contractors and the reason for not paying the amount to sundry creditors during the year. The assessee was also asked to explain the genuineness....
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....vant time was Rs. 375/- per square metre only. Thus, the assessee has no intention to evade the tax. During the assessment the AO issued commission by exercising his power under section 131(d) to DCIT Sabarkantha. The DCIT Sabarkantha after spot visit filed his report, which was favourable to the assessee, however, the AO has not considered such report. The assessee was also asked to produce the contractor for verification. The assessee produced the contractor parties and all the parties filed their confirmation. Thus, all the expenses incurred by the assessee was substantiated. Still the AO made the disallowance of the improvement expenses. The ld CIT(A) after appreciation of facts deleted the entire addition by taking view that the AO made addition merely on the basis of his assumption and presumptions. 16. We have considered the rival submissions of the parties and have also considered the various documentary evidences filed by the assessee on record. We find that during the assessment the AO noted that the assessee has claimed long term capital gain (LTCG) of Rs. 20,13,754/- in his computation of income. On being asked the working of capital gain and indexed cost, the assessee....
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....e assessing officer made addition on presumption basis and the addition is not based on evidence. The ld CIT(A) also held that the assessing officer has not disputed the payment to contractor. The payments have been made through cheques. The payment was not made during the currency of the period, cannot be a ground for disallowance. The observation of the assessing officer that the amount was immediately withdrawn for their bank account and received back by the assessee is also his presumption. During the assessment the assessing office issued commission for making inquiries and for seeking factual report. The DCIT Sabarkantha conducted inquiry and prepared report, on which the assessing officer raised doubt and not relied on such report. The report of commission executed by DCIT Sabarkantha is not different then the nature of work claimed by the assessee. And it was held that the assessing officer was not correct in making addition of Rs. 1.79 Crore and deleted the entire additions. 18. We find that after selection of the case for scrutiny the AO issued notice under section 143(2) on 26.09.2014. During the assessment the AO examined the issue of LTCG claimed by the assessee. On b....
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.... in the capital account. We also asked for clarification with regard to delay in payment to creditors. The ld. AR of the assessee filed his written explanation through e-mail on 02/03/2022. On query with regard to the fact that impugned land is not reflected in the balance sheet, the ld. AR explained that the land was purchased in the F.Y. 2008-09 and shown in the balance sheet under "fixed assets". The land was sold in F.Y. 2011-12 and the balance sheet containing asset as on 31st March, 2012 is not reflected as on 31st March, 2012. On comparison of balance sheet file on record before Bench as per paper book 10 and the details of fixed asset filed alongwith explanation on 02/03/2022 are quite different. The assessee on the one hand is claiming that the said land was sold by the assessee in F.Y. 2011-12 and thus it was not shown in the balance sheet. However, the balance sheet filed now still shows the land in the fixed asset. On the clarification with regard to expenses not debited in the P&L account, the assessee submitted that the expenses in relation to improvement cost are not debited to the P&L account and added to the cost of asset and filed detail in the form of annexure-3.....
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....bited interest expenses in its profit and loss account, thus, the assessing officer after issuing show cause notice to the assesse made disallowance under section 14A. The ld CIT(A) deleted the entire disallowance by holding that the assessee has included the exempt income in his total income. The ld DR for the revenue Prayed for restoring the order of assessing officer and to reverse the order of ld CIT(A). 23. On the other hand the ld AR for the assessee supported the order of ld CIT(A). The ld. AR for the assessee submits that the assessee has received dividend income of Rs. 77,620/- which is taxable and the assessee already included the exempt income Rs.14,522/- exempt dividend income in his total taxable income. Thus, no disallowance under section 14A is warranted. The assessing officer has not disputed that fact explained before him and directly invoked the provisions of Rule 8D and made disallowances without disregarding the working of disallowances furnished by assessee under section 14A. The ld CIT(A) granted relief to the assessee on appreciation of facts. 24. We have considered the rival submissions of the parties and have perused the orders of the lower authorities ca....