TaxTMI 
TaxTMI 
2018 (4) TMI 1998
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.... 352/Raipur/2014 are dismissed. ITA No. 353/Raipur-2014 Revenue's appeal for A.Y. 2011-12 4. The first ground relates to the deletion of the disallowance of Rs. 1,33,26,552/- on account of administrative and selling expenses. 5. Briefly stated the facts of the case are that the assessee derives income from real estate business mainly as developer and builder of housing projects. The assessee enters into agreement for sale by booking flats on payment of initial booking amount and the balance sale consideration is realized in installments linked with progress of construction. While scrutinizing the return of income for the year, the A.O. noticed that the assessee has shown net loss of Rs. 1,33,26,552/-. The A.O. found that the year under consideration is the third year of effective business insofar as the projects were started in the preceding previous year. The A.O. further noticed that only 20% progress in Golden Towers and 40% progress in project Golden Sky was made. The A.O. was of the opinion that since the projects were not completed and no transaction of sale has been made, it cannot be said that the assessee has commenced its business and therefore the expenses c....
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.... Advertisement Exp. 6863.00 Interest on TDS 23165.00 Legal Exp. 17500.00 Office Exp. 103999.00 Printing & Stationary 22888.00 Petrol & Diesel Exp. 27940.00 Registry Exp. 129626.00 Repairs & Maintenance 1500.00 Salary 981800.00 Service Tax 48075.00 Security Charges 4424.00 Balance Written off 14621.93 Telephone & Mobile Exp. 47462.00 Travelling Exp. 158587.00 1586450.93 TOTAL 14265045.93 11. From the above, it can be seen that only indirect expenses have been charged to the Profit and Loss account and all other direct expenses have been shown as part of work-in-progress. The Hon'ble High Court of Delhi in the case of Dhoomketu Builders & Development (P.) Ltd. 87 DTR 249 has held that the commencement of Real Estate business would normally start with the acquisition of land or immovable property. In another case, the Hon'ble High Court of Delhi 301 ITR 368 has held that business commenced with first purchase of stock in trade, the date when the first sale is made is not material in that respect. Moreover, Accounting Standard 7 issued by the ICAI states that in cases where th....
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....e occasion to consider the following facts:- A.Y. 2009-10. The assessee was working as an agent of Tata Tele services Limited for distributing mobile cards and recharge vouchers. The assessee used to make payment by account payee cheques. However, a circular was issued by Tata Tele services Limited requiring the assessee to deposit cash at the company's office. Thereafter, if the assessee continued to make payment through cheques or demand draft, it would get the recharge vouchers only after 4-5 days which would affect its business. The assessee, thereafter, made cash payment. The Assessing Officer made addition of it on ground that the payment in cash exceeding Rs. 20,000 violate the provisions of section 40A(3) and disallowed 20 per cent of the impugned amount. On appeal, the Commissioner (Appeals) directed to delete the addition on ground that transaction were genuine and payments were also made. On appeal by the revenue, the Tribunal allowed same. 19. On the above given facts, the Hon'ble Gujarat High Court held as under:- * In the present case, neither the genuineness of the payment nor the identity of the payee were in a....
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....fer to the relevant observations made by the Hon'ble Gujarat High Court which reads as under:- 18. It could be appreciated that Section 40A and in particular sub-clause (3) thereof aims at curbing the possibility of on-money transactions by insisting that all payments where expenditure in excess of a certain sum [in the present case twenty thousand rupees] must be made by way of account payee cheque drawn on a bank or account payee bank draft. As held by the Apex Court in case of Attar Singh Gurmukh Singh (supra), "..In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to me exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whe....
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.... situation. Such situation was as follow - (i) the principal company, to which the assessee was a distributor, insisted that cheque payment from a cooperative bank would not do, since the realization takes a longer time; (ii) the assessee was, therefore, required to make cash payments only; (iii) Tata Teleservices Limited assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee; (iv) It is not disputed that the Tata Teleservices Limited did not act on such promise; (v) if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations. 22. We would find that the payments between the assessee and the Tata Teleservices Limited were genuine. The Tata Teleservices Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) of the Act must be lifted. 23. We notice that the Division Bench of the Rajastha....
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....costs A.Y.2009-10 22,12,219/- A.Y.2010-H A.Y. 2011-12 1,33,26,552/- Total l,8l,13,742/- 80,62,4267- 44.51% as relatable to this project 80,62,426/- 187200 Built up Area of 3BHK= 1100 x 96 105600 project in sqft 2BHK= 850 X96 81600 187,200 Total Cost per sqft. which would be constant for entire project period with respect to project Golden Sky 1361.25 Profit from the project this year Rs. i8,67,ooo (-) 14,97,3757- (1361.25 x 3,69,625/- 1100) = 3,69,625/- 26. Assessee strongly objected the manner in which the additions have been made by the A.O. before the ld. CIT(A) and once again contended that the papers were not found from the premises of the assessee but from the premises of a third person. It was brought to the notice of the ld. CIT(A) that the loose papers do not contain the name of the firm or any of the partner nor any signature is found on the loose papers. 27. After considering the facts and the submissions, the ld. CIT(A) observed that the loose papers were carefully perused. The ld. CIT(A) observed that though the Assessing Officer has c....
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....n the balance sheet as investment under fixed assets, this land was sold during the year for Rs. 22,72,500/-. The A.O. treated the difference of Rs. 9,35,284/- as Short Term Capital Gain. 33. Before the First Appellate Authority, the assessee contended that the land was purchased on 21.09.2009 for Rs. 13.37 lacs and was shown as a fixed asset. It was brought to the notice of the ld. CIT(A) that the said land was converted into stock in trade during the year under consideration and the sale value is included in the Profit and Loss account. Since the sale value was duly reflected in the financials of the assessee. The ld. CIT(A) directed the A.O. to delete the addition of Rs. 9,35,284/-. 34. Before us, the ld. D.R. could not bring out any factual error in the findings of the ld. CIT(A). There is no dispute that the sale consideration was duly shown as part of sales in the Profit and Loss account meaning thereby that the impugned profit has already been reflected in the Profit and Loss account, therefore, there is no occasion for making further addition under the head 'Short Term Capital Gain'. We decline to interfere. Ground No. 4 is dismissed. 35. Ground No. 5 & 6 a....
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.... Ld. counsel for the assessee relied upon the findings of the ld. CIT(A). 46. There is no dispute that the A.O. has discarded the book results only - (i) The indirect expenses have been found to be not commensurate with the business receipts of the assessee. (ii) Entries found in the loose papers were not found to be recorded in the regular books of accounts of the assessee. 47. In our considered opinion, both the reasons given by the A.O. are ill-founded inasmuch as the loose papers were found from the premises of a third person which did not bear the name of the assessee nor its partner nor any enquiry/verification has been done by the A.O. to substantiate its claim that the entries in the loose papers belong to the assessee. Further, as mentioned elsewhere, while deciding the appeal for A.Y. 2011-12, the indirect expenses have to be debited to the Profit and Loss account which the assessee has rightly done so and therefore the quantum of indirect expenses cannot be a basis for the rejection of the book results. 48. In our understanding of the law, the presumption u/s. 132(4A) of the Act would in any case be applicable to a third party from whose posses....