ACIT, Pune V. B.G. Shirke Construction Technology P.Ltd, Pune

ITA 1055/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8512 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA; VERMA
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Business expenditure; Income from undisclosed sources; Search and seizure; Valuation report; Block assessment; Revised return
• Section: 69C; 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1055/PN/2012 (ASSESSMENT YEAR 2009-10) ACIT CENTRAL CIRCLE-2(2), PUNE .. APPELLANT VS. B.G. SHIRKE CONSTRUCTION TECHNOLOGY PVT. LTD., 72-76, INDUSTRIAL ESTATE, MUNDHWA, PUNE -411036 PAN NO. AAACB7293D .. RESPONDENT CO NO.34/PN/2013 (ASSESSMENT YEAR 2009-10) B.G. SHIRKE CONSTRUCTION TECHNOLOGY PVT. LTD., 72-76, INDUSTRIAL ESTATE, MUNDHWA, PUNE -411036 PAN NO. AAACB7293D .. CROSS OBJECTOR VS. ACIT CENTRAL CIRCLE-2(2), PUNE .. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK & SHRI SANKET JOSHI REVENUE BY : SHRI MUKESH VERMA & SMT. M.S. VERMA DATE OF HEARING : 08-08-2014 DATE OF PRONOUNCEMENT : 30-09-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE AND CO FILED BY TH E ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 26-03-2012 OF THE CIT(A), CENTRAL, PUNE RELATING TO ASSESSMENT YEAR 2009-10. FOR THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. 2 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IT UNDERTAKES HOUSING PROJECTS AND PROJECTS FOR CONSTRUCTION OF ROADS, BR IDGES, FLYOVERS AND MULTIPURPOSE HALLS AND SPORTS COMPLEXES ETC. A SE ARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 18- 12-2008. DURING THE SAID SEARCH SOME VALUATION REP ORTS OF THE PROJECT ENGINEERS REGARDING VALUATION OF WIP AS ON 30-11-20 08 WERE FOUND. IT WAS NOTICED THAT THE ENGINEERS HAD VALUED THE WIP O F CERTAIN SITES AT HIGHER FIGURES THAN THE COST OF THE WIP OF THE RESP ECTIVE SITES IN THE BOOKS OF THE COMPANY AS ON 30-11-2008 (AS PER PROVISIONAL PROFIT & LOSS ACCOUNT). THE DETAILS OF THE DISCREPANCIES FOUND I N THE VALUATION OF WIP AMOUNTING TO RS.9,30,33,219/- ARE AS UNDER : SR. NO. NAME OF SITE VALUE OF WIP AS ON 30.11.2008 IN PROVISIONAL P&L ACCOUNT VALUE CERTIFIED BY THE SITE-IN-CHARGE DIFFERENCE RS. RS. RS. 1 MHADA HIND MILL, MAZGAON 11,27,22,115 12,02,22,115 75,00,000 2 CIDCO KHARGHAR 13,71,29,647 15,58,10,760 1,86,81,113 3 NEW SPORTS INFRA, BALEWADI 5,18,22,856 9,36,32,380 4,18,09,524 4 PCMC ROAD, DAPODI 4,83,34,286 5,35,72,381 52,38,095 5 NITK SURATKAL, 9,44,69,761 10,40,38,283 95,68,522 6 WIPRO LTD., HINJEWADI PHASE - III - 1,02,35,965 1,02,35,965 TOTAL 44,44,78,665 53,75,11,884 9,30,33,219 2.1 THE ASSESSEE, WHEN CONFRONTED ABOUT THE ABOVE, HAD ADMITTED THE EXCESS WIP AND AGREED FOR THE ADDITION OF RS. 10 CR ORES AS PER HIS LETTER DATED 16-02-2009. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT OFFERED THE ADDITIO NAL INCOME OF RS.10 3 CRORES IN THE COMPUTATION OF INCOME FILED WITH ITS RETURN OF INCOME FOR THE CURRENT YEAR. HE NOTED THAT THE INCOME OF RS.10 CR ORES WAS OFFERED BY THE ASSESSEE AS ADDITIONAL INCOME ON ACCOUNT OF EXCESS WIP FOR THE CURRENT YEAR VIDE LETTER DATED 16-02-2009. HE WAS OF THE O PINION THAT THE SAID EXPENDITURE, WHICH IS MET OUT OF UNEXPLAINED SOURCE S, IS DEEMED AS ASSESSEES INCOME U/S.69C OF THE I.T. ACT. IN VIEW OF THE PROVISO TO THE SAID SECTION THE ASSESSEE IS NOT ENTITLED TO ANY DE DUCTION FOR THIS EXPENDITURE. THE ASSESSING OFFICER, THEREFORE, ASK ED THE ASSESSEE TO EXPLAIN AS TO WHY THE DISCLOSURE MADE DURING THE CO URSE OF SEARCH HAS NOT BEEN HONOURED BY OFFERING ADDITIONAL INCOME OF RS.1 0 CRORES. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DIFFERENCE BETWE EN WIP AS PER BOOKS AND THAT AS PER THE ENGINEERS CERTIFICATE IS ONLY ON ACCOUNT OF DIFFERENCE IN VALUATION AND NOT ON ACCOUNT OF ANY WORKING DONE OUTSIDE THE ASSESSEES BOOKS. IT WAS ARGUED THAT ALL THE 6 CON TRACTS IN QUESTION ARE FROM GOVERNMENT/GOVERNMENT CONCERNS AND FROM WIPRO AND THE ASSESSEE HAS NO UNACCOUNTED RECEIPTS AND NO SUCH UN ACCOUNTED RECEIPTS WERE NOTICED DURING THE COURSE OF SEARCH. IT WAS A RGUED THAT THE ASSESSEE HAD NO UNACCOUNTED SOURCE OF INCOME FROM WHICH THE UNACCOUNTED EXPENDITURE COULD BE MADE. IT WAS FURTHER EXPLAINE D THAT WHILE PREPARING THE FINAL ACCOUNTS AS ON 31-03-2009, THE CORRECT VA LUE OF WIP AS ON 31- 03-2009 HAS BEEN TAKEN WHICH TAKES CARE OF THE EXCE SS WIP AS ON 30-11- 2008. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RADHIKA CREATIONS VIDE ORDER DATED 30-04- 2010. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. SO FAR AS THE C ONTENTION THAT THE 4 DIFFERENCE OF RS.9.3 CRORES WAS ONLY ON ACCOUNT OF DIFFERENCE IN VALUATION AND NOT ON ACCOUNT OF ANY EXTRA WORK, THE ASSESSING OFFICER REJECTED THE SAME IN ABSENCE OF NECESSARY DETAILS IN RESPECT OF WIP AS PER BOOKS AND THE WIP ESTIMATED BY THE ENGINEERS WHICH COULD HAVE SHOWN THAT THE WORKS CONSIDERED IN THE BOOKS AS WELL AS BY THE ENG INEERS WERE EXACTLY THE SAME AND THERE IS ONLY A DIFFERENCE IN VALUATIO N. ACCORDING TO THE ASSESSING OFFICER HAD IT BEEN SO, THERE WAS NO OCCA SION FOR THE ASSESSEE TO DECLARE THE ADDITIONAL INCOME OF RS.10 CRORES ON 16 -02-2009. HE, THEREFORE, REJECTED THE FIRST CONTENTION. 4.1 SO FAR AS THE CLAIM THAT THE ASSESSEE HAD NO SO URCE FOR ANY UNACCOUNTED INCOME THE ASSESSING OFFICER HELD THAT THE SAME IS NOT RELEVANT IN THE INSTANT CASE AS THE ASSESSING OFFIC ER IS NOT REQUIRED U/S.69C TO ESTABLISH ANY SUCH SOURCE BEFORE AN INCO ME IS DEEMED UNDER THE SAID SECTION. ACCORDING TO HIM IT IS FOR THE A SSESSEE TO EXPLAIN THE SOURCE OF ALL EXPENDITURE INCURRED BY IT. IN CASE OF FAILURE THE AMOUNT COVERED BY THE EXPENDITURE IS TO BE DEEMED AS ASSES SEES INCOME U/S.69C. WITHOUT PREJUDICE TO THIS, THE ASSESSING OFFICER HE LD THAT UNACCOUNTED MONEY NEED NOT NECESSARILY BE ONLY FROM UNACCOUNTED RECEIPTS. IT CAN ALSO BE GENERATED THROUGH INFLATION OF EXPENSES. 4.2 SO FAR AS THE DECISION OF THE HONBLE DELHI HIG H COURT IN THE CASE OF RADHIKA CREATIONS (SUPRA) RELIED ON BY THE ASSES SEE IS CONCERNED THE ASSESSING OFFICER HELD THAT THE SAID CASE IS NOT AP PLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE SAID CASE, THE ASSESSEE H AD INCURRED CERTAIN EXPENDITURE WHICH WAS ALREADY REFLECTED IN ITS BOOK S. THE ASSESSING OFFICER DOUBTED THE AUTHENTICITY OF THE EXPENDITURE AS THE RELEVANT 5 VOUCHERS WERE NOT PRODUCED. THE ASSESSING OFFICER INVOKED SECTION 69C TO THESE EXPENDITURE. THE HONBLE HIGH COURT HELD THAT SECTION 69C WILL COME INTO PLAY ONLY WHERE THE SOURCE OF THE EXPENDI TURE IS NOT PROVED AND NOT WHERE THE AUTHENTICITY OF THE EXPENDITURE IS IN DOUBT. HE ACCORDINGLY DISTINGUISHED THE DECISION RELIED ON BY THE ASSESSE E BEFORE HIM. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER MADE ADDITION OF RS.10 CRORES TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE CIT(A) THE ASSESSEE MADE EXHAUSTIVE SUBMI SSIONS. AFTER CONSIDERING THE ABOVE SUBMISSIONS AS WELL AS THE DE TAILED WRITTEN SUBMISSION FILED BY THE ASSESSEE BEFORE HIM THE LD. CIT(A) DELETED THE ADDITION OF RS. 10 CRORES BY OBSERVING AS UNDER : 2.4 VARIOUS ASPECTS OF THE ADDITION ON ACCOUNT OF UNE XPLAINED EXPENDITURE U/S.69C OF I.T. ACT HAVE BEEN DISCUSSED BEL OW : 2.4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE APPELLANT HAD NOT OFFERED ADDITIONAL INCOME OF RS.10 CRORES IN THE COMPUTATION OF INCOME FILED WITH ITS RETURN OF INCOM E FOR THE CURRENT YEAR. THE INCOME OF RS.10 CRORES WAS OFFERED BY THE APPELLAN T AS ADDITIONAL INCOME ON ACCOUNT OF EXCESS WORK IN-PROGRESS (WIP) FOR THE CURRENT YEAR VIDE LETTER DT. 16/2/2009. ON THE BASIS OF DETAILS OF WIP, AS PER PROVISIONAL PROFIT AND LOSS ACCOUNT AND AS PER ENGINEER'S CERTIFIC ATE, EXCESS WIP OF RS.9.3 CRORES WAS FOUND AS ON 30/11/2008. THE AO RAISED A QUERY ABOUT NON-DISCLOSURE OF ADDITIONAL INCOME OF RS.10 CRORES ON ACCOUNT OF EXCESS WIP IN THE COMPUTATION OF INCOME FILED WITH THE RET URN OF INCOME. THE APPELLANT EXPLAINED THAT WHILE PREPARING THE FINAL ACCOUNTS AS ON 31/3/2009 CORRECT VALUE OF WIP AS ON 31/3/2009 HAS BE EN TAKEN. THIS CORRECT VALUE OF WIP AS ON 31/3/2009 TAKES CARE OF T HE EXCESS WIP AS ON 30/11/2008. HOWEVER, THE AO INFORMED THE APPELLANT THAT DESPITE THE SAID CORRECT VALUATION OF WIP, AS ON 31/3/2009, THE E XCESS WIP NOTICED ON 30/11/2008 WAS REQUIRED TO BE ADDED U/S.69C OF IT. AC T AS THIS EXCESS WIP REPRESENTED UNEXPLAINED EXPENDITURE. THE RELEVAN T PORTION OF THE ASSESSMENT ORDER IS REPRODUCED BELOW :- 21. DURING THE COURSE OF POST SEARCH ENQUIRIES IN T HIS CASE, THE PROVISIONAL PROFIT, AND LOSS ACCOUNT OF THE APPELLANT AS ON 30.11.2008 WAS OBTAINED. IT WAS SEEN THAT THE WORK IN PROGRESS (WIP) AS ON 30.11.2008 AS PER THIS PROFIT AND LOSS ACCOUNT WAS RS. 1,65,55,70,611/-. IT WAS ALSO SEEN FROM THE SIT E-WISE BREAKUP OF THE WIP FURNISHED BY THE APPELLANT THAT THE WIP IN RESPECT OF SIX OF ITS MAJOR SITES CAME TO RS. 44,44,78,665/-. THE APPELLANT WAS THERE-AFTER R EQUESTED TO FURNISH THE ENGINEER'S CERTIFICATES REGARDING THE WIP AS ON 30. 11.2008. THE APPELLANT CO. FILED THE CERTIFICATES FROM THE ENGINEERS IN RESPECT OF T HE ABOVE SIX SITES. THE DETAILS OF THE WIP AS PER THE PROVISIONAL PROFI T AND LOSS ACCOUNT AND AS PER THE ENGINEER'S CERTIFICATES ARE GIVEN BELOW: 6 IT WAS SEEN FROM THE ABOVE COMPARISON THAT THE WORK IN PROGRESS AS CERTIFIED BY THE SITE ENGINEERS WAS MORE BY RS.9,30,33,219/- AS COMP ARED TO THE WORK IN PROGRESS AS PER APPELLANTS BOOKS. WHEN CONFRONTED WITH THIS, THE APPELLANT VIDE LETTER DATED 16.02.2009 OFFERED AN AMOUNT OF RS.10,00,00,000 AS ADDITIONAL INCOME FOR,A.Y.2009-10. AS THE WORK IN PROGRESS AS CERTIFIED BY THE ENGINEE RS WAS MORE THAN THE WIP AS PER BOOKS AND AS THE APPELLANT HAD DECLARED ADDITIONAL INCOME OF RS.10 CRORES FOR THE CURRENT YEAR, IT IS CLEAR THAT THE APPELLANT HAD IN CURRED EXPENDITURE TO THIS EXTENT IN THE WORKS OUTSIDE ITS BOOKS. THE SAID EXPENDITURE W HICH IS MET OUT OF UNEXPLAINED SOURCES IS DEEMED AS APPELLANT'S INCOME U/S. 69C OF THE ACT. IN VIEW OF THE PROVISO TO THE SAID SECTION THE APPELLANT IS NOT ENTITLED TO A NY DEDUCTION FOR THIS EXPENDITURE. THOUGH THE APPELLANT HAD DECLARED 'ADDITIONAL INCOM E OF RS.10 CRORES FOR THE CURRENT YEAR, IT WAS SEEN FROM THE COMPUTATION OF INCOME TH AT THE SAME HAS NOT BEEN OFFERED WHILE FILING THE RETURN OF INCOME. WHEN QUE STIONED ABOUT THIS, IT WAS EXPLAINED BY THE APPELLANT'S REPRESENTATIVE THAT WH ILE PREPARING THE FINAL ACCOUNT AS ON 31.03.2009, THE APPELLANT HAD TAKEN THE CORRECT VALUE OF WIP AS ON 31.03.2009. IT WAS THEREAFTER INDICATED TO THE APPELLANT THAT DESP ITE THE SAID VALUATION OF WIP AS ON 31.03.2009 THE EXCESS WIP NOTICED AS ON 30.11.20 08 REPRESENTING UNEXPLAINED EXPENDITURE WAS ALSO REQUIRED TO BE ADDED U/S 69C. THE APPELLANT IN ITS SUBMISSION STATED THAT THE DIFFEREN CE BETWEEN WIP AS PER BOOKS AND AS PER ENGINEER'S CERTIFICATE IS ONLY ON ACCOUNT OF DIFFERENCE IN VALUATION AND NOT ON ACCOUNT OF ANY W ORK DONE OUTSIDE BOOKS OF ACCOUNTS. THE APPELLANT ALSO STATED THAT IT DO ES NOT HAVE ANY SOURCE OF UNACCOUNTED RECEIPT. HOWEVER, THE AO STATED THAT THE APPELLANT DID NOT FURNISH THE NECESSARY DETAILS IN RESPECT OF THE TWO WIPS, I.E. AS TAKEN IN THE BOOKS OF ACCOUNT AND AS VALUED BY THE EN GINEER WHICH COULD INDICATE THAT THE EXCESS WIP WAS ONLY ON ACCOUNT OF VA LUATION. HE ALSO CONTENDED THAT THERE WAS NO OCCASION FOR THE APPELLAN T TO DECLARE ADDITIONAL INCOME OF RS.10 CRORES IN CASE THE EXCESS WIP WAS ONLY ON ACCOUNT OF VALUATION DIFFERENCE. THE AO ALSO CLARIFI ED THAT HE WAS NOT REQUIRED TO ESTABLISH ANY SOURCE BEFORE MAKING ADDITIO N U/S.69C. 2.4.1.1 HOWEVER, A CAREFUL PERUSAL OF THE MATERIAL A VAILABLE ON RECORD REVEALS THAT THE AO HAS NOT CONTROVERTED THE STATEMENT OF THE APPELLANT THAT IT HAS TAKEN CORRECT VALUE OF WIP AS ON 31/3/200 9. THE AO HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL; TO SHOW THAT TH E APPELLANT HAD NOT RECORDED SALE / PURCHASE / OTHER EXPENSES PROPERLY IN ITS BOOKS OF ACCOUNTS IN THE PERIOD FROM 1/12/2008 TO 31/3/2009. UNDER THE CIRCUMSTANCES, INCORPORATION OF THE CORRECT VALUE OF WIP AS ON 31/3/2009 AND CORRECT VALUE OF SALES, PURCHASES, OTHER EXPENSES ET C. IN THE PERIOD SR. NO. NAME OF SITE VALUE OF WIP AS ON 30.11.2008 IN PROVISIONAL P&L ACCOUNT VALUE CERTIFIED BY THE SITE-IN-CHARGE DIFFERENCE RS. RS. RS. 1 MHADA HIND MILL, MAZGAON 11,27,22,115 12,02,22,115 75,00,000 2 CIDCO KHARGHAR 13,71,29,647 15,58,10,760 1,86,81,113 3 NEW SPORTS INFRA, BALEWADI 5,18,22,856 9,36,32,380 4,18,09,524 4 PCMC ROAD, DAPODI 4,83,34,286 5,35,72,381 52,38,095 5 NITK SURATKAL, MANGALORE 9,44,69,761 10,40,38,283 95,68,522 6 WIPRO LTD., HINJEWADI PHASE - III - 1,02,35,965 1,02,35,965 TOTAL 44,44,78,665 53,75,11,884 9,30,33,219 7 FROM 1/12/2008 TO 31/3/2009 IN THE FINAL ACCOUNTS FO R F.Y.2008-09 ENSURES ADOPTION OF CORRECT VALUE OF WIP AS ON 30/11/2 008 IN THE FINAL ACCOUNT FOR F.Y.2008-09. CORRECT VALUE OF WIP AS ON 31/3/2009 AND CORRECT VALUES OF SALES, PURCHASES AND OTHER EXPENSES ETC. IN THE PERIOD FROM 1/12/2008 TO 31/3/2009 HAVE BEEN INCORPORATED IN THE FINAL ACCOUNT OF THE APPELLANT FOR F.Y.2008-09 AS NOTHING HAS BEEN BROUGHT ON RECORD TO CONTROVERT THESE FIGURES IN THE FINAL ACCOU NTS OF THE APPELLANT FOR THE F.Y.2008-09. THEREFORE, CORRECT VALUE OF WIP AS ON 30/11/2008 HAS ALREADY BEEN TAKEN IN THE FINAL ACCOUNTS OF THE F.Y. 2008-09. THIS CORRECT VALUE OF WIP AS ON 30/11/2008 MUST HAVE INCLUDED THE EXCESS WIP OF RS.9.3 CRORES WHICH THE AO HAS REFERRED TO AS EXCESS WIP ON ACCOUNT OF DIFFERENCE BETWEEN THE VALUE OF WIP CERTIFIED BY SIT E ENGINEER AND THE VALUE OF WIP AS RECORDED IN THE BOOKS OF ACCOUNTS. THI S MEANS THAT THE EXCESS WIP OF RS.9.3 CRORES AS ON 30/11/2008 ALREADY STOO D ADDED TO THE INCOME OF THE APPELLANT. UNDER THE CIRCUMSTANCES, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF SAME AMOUNT ON ACCOUNT OF EXCESS WIP AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT. 2.4.1.2 HERE IT IS PERTINENT TO NOTE THAT THE AO HAS MADE ADDITION U/S.69C OF IT. ACT OF THE AMOUNT WHICH REPRESENTS THE DIFFERE NCE IN THE TWO VALUES OF WIP. THESE TWO VALUES OF WIP WERE PROVIDED BY THE APPELLANT. THE FIRST VALUE OF WIP WAS THAT WHICH WAS RECORDED IN THE BOOK S OF ACCOUNTS. THE OTHER VALUE OF WIP WAS ALSO PROVIDED BY THE APPELLANT IN THE FORM OF CERTIFICATE FROM ITS SITE ENGINEERS. IT IS ALSO IMPORTAN T TO NOTE THAT SEARCH PARTY DID NOT EVALUATE THE VALUE OF WIP ON THE DATE OF SEARCH, I.E.18/12/2008. THEREFORE, THE ONLY BASIS ON WHICH TH E AO MADE ADDITION U/S.69C WAS BECAUSE OF THE EXISTENCE OF TWO VALUES OF TH E SAME WIP. NO EVIDENCE OF ANY EXPENDITURE ATTRIBUTABLE TO WIP WHI CH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS WAS FOUND BY THE AO. THEREFOR E, I AM IN AGREEMENT WITH THE CONTENTION OF THE APPELLANT THAT THE ADDITION CANNOT BE MADE U/S.69C OF I.T. ACT. SECTION 69C OF THE INC OME TAX ACT, 1961 READS AS UNDER : '69C. UNEXPLAINED EXPENDITURE, ETC. - WHERE IN ANY FINANCIAL YEAR AN APPELLANT HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSE SSING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE', OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF T HE APPELLANT FOR SUCH FINANCIAL YEAR. PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPENDITURE WHICH IS DEE MED TO BE THE INCOME OF THE APPELLANT NOT BE ALLOWED AS A DEDUCTIO N UNDER ANY HEAD OF INCOME.' THE PRIMARY REQUIREMENT FOR APPLICATION OF SECTION 69C IS THAT APPELLANT SHOULD INCUR EXPENSES OUT OF UNEXPLAINED SOURCE OF INCO ME. THE SECTION CANNOT APPLY IF THE SOURCE OF INCOME FOR MAKING EXPE NSES IS EXPLAINED. THIS SECTION REFERS TO THE SOURCE OF EXPENDITURE AND NOT T O THE EXPENDITURE ITSELF. NO EVIDENCE OF ANY UNEXPLAINED EXPENDITURE H AS BEEN BROUGHT ON RECORD EITHER BY SEARCH PARTY OR BY THE AO. NONE OF THE SEIZED MATERIAL OR DOCUMENT INDICATES THAT THE APPELLANT HAS INCURRED AN UNEXPLAINED EXPENDITURE OUT OF BOOKS. SECTION 69C IS A DEEMING PR OVISION THEREFORE, IT HAS TO BE INTERPRETED STRICTLY. ONUS WAS ON THE AO TO P ROVE THAT THE APPELLANT HAD INCURRED EXPENSES OUT OF BOOKS OF ACCOUN TS. THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE APPE LLANT INCURRED EXPENSES OUT OF BOOKS OF ACCOUNTS. THE ONLY MATERIAL ON THE BASIS OF WHICH HE MADE ADDITION U/S.69C WAS THE VALUATION REPORT CER TIFIED BY THE SITE ENGINEERS. THESE VALUATION REPORTS INDICATED EXISTENCE OF WIP OF THE VALUE 8 SHOWN IN THE REPORTS ON THAT PARTICULAR DATE, I.E 30/ 11/2008. THEREFORE, THE APPELLANT WAS IN THE POSSESSION OF THE WIP OF VALUE WHICH HAS BEEN CERTIFIED BY THE SITE ENGINEERS. AS THIS VALUE WAS MORE THAN THE VALUE RECORDED IN THE BOOKS OF ACCOUNTS, THE APPELLANT WAS IN THE POSSESSION OF THE EXCESS WIP AS ON 30/11/2008. AS DISCUSSED EARLIER, TH IS EXCESS WIP HAS ALREADY BEEN ADDED TO THE INCOME OF THE APPELLAN T IN VIEW OF INCORPORATION OF CORRECT VALUE OF WIP AS ON 31-03-20 09 AND INCORPORATION OF CORRECT FIGURES OF SALES, PURCHASES AND OTHER EXPENSES IN THE PERIOD FROM 01-12-2008 TO 31-03-2009. UNDER THE CIRCUMSTANCES, A DDITION OF THE SAME AMOUNT AGAIN U/S.69C OF I.T. ACT IS NOT JUSTIFIED. 2.4.1.3 IN FACT, THE APPELLANT HAS GIVEN REASONS FOR THE DIFFERENCE IN THE TWO VALUED OF WIP AS ON 30/11/2008. THE APPELLANT H AS ALSO POINTED OUT THAT AT THE TIME OF SEARCH (I.E. 18-12-2008) NO PHYSI CAL INVENTORY OF WORK IN PROGRESS WAS TAKEN BY THE SEARCH PARTY. THE FIGURE O F RS. 44.45 CRORES FOR THE RELEVANT SIX PROJECTS WAS TAKEN PURELY ON AN E STIMATED BASIS BY SITE ACCOUNTANTS FOR PREPARATION OF PROVISIONAL MONTHLY PR OFIT AND LOSS ACCOUNT FOR MIS PURPOSE ONLY. THE APPELLANT FURTHER EXPLAINED THAT DETAILED VALUATION EXERCISE FOR WIP IS DONE ONLY AT T HE YEAR END (I.E. 3 31 ST MARCH) FOR THE FINAL ACCOUNTS AND NOT EVERY MONTH. T HIS IS DUE TO THE FACT THAT VALUATION OF WIP IN CONSTRUCTION INDUSTRY REQUIR ES DETAILED ESTIMATION AND WORKING USING VARIOUS PARAMETERS. IT IS NOT POSSIBLE TO DO THIS EXERCISE EVERY MONTH. THE MONTHLY PROFIT AND LOSS ACCOUNT IS PR EPARED BY TAKING WIP FIGURE ON AN ADHOC ESTIMATE BASIS ONLY. THE APPELL ANT ALSO STATED THAT IT WAS ONLY AFTER THE SEARCH THAT DETAILED VALUATION EXERCISE (SIMILAR TO YEAR END EXERCISE) WAS CARRIED OUT BY PROJECT ENGINEERS AND THEREAFTER THE VALUE OF WIP FOR SIX RELEVANT PROJECTS WAS WORKED OUT AT RS. 53.75 CRORES. AS EVIDENT FROM THE DETAILED WORKING THE WIP CONSISTS OF NUMBER OF ELEMENTS SUCH : A) UNBILLED REVENUES I.E. BILLS YET TO BE RAISE D B) ESCALATION CLAIMS DUE TO INCREASE IN COSTS; C) PENDING FACTORS NOT BILLED. THE VALUATION AS ABOVE IS DONE BY USING VARIOUS OBJECTI VE AND SUBJECTIVE PARAMETERS. THE VALUES MAY VARY ON ACCOUNT OF SOME OF THESE PARAMETERS ALSO. IN VIEW OF THESE FACTORS, THE APPELLANT CONTENDE D THAT IT CANNOT BE SAID THAT THE VARIATION IN VALUATION WAS DUE TO ANY E XPENDITURE OUT OF UNEXPLAINED SOURCE. THE VARIATION WAS ENTIRELY DUE TO THE FACT THAT IN MONTHLY PROFIT AND LOSS ACCOUNT THE FIGURE OF WIP WA S TAKEN ON ADHOC ESTIMATE BASIS AND THEREAFTER, POST-SEARCH, THE PROJECT : ENGINEERS DID DETAILED VALUATION EXERCISE SIMILAR TO THE YEAREND EX ERCISE. THIS CLEARLY SHOWS THAT DIFFERENCE WAS ON ACCOUNT OF VALUATION ONLY . A CAREFUL CONSIDERATION OF THE REASONS OF DIFFERENCE BETWEEN THE TWO VALUES OF WIP AS GIVEN BY THE APPELLANT REVEALS THAT THE CONTENTION OF THE APPELLANT IN RESPECT OF THE DIFFERENCE BETWEEN THE TWO VALUES OF W IP APPEARS CORRECT. THIS IS PARTICULARLY SO IN VIEW OF THE FACT THAT, AS STA TED EARLIER, NEITHER SEARCH PARTY NOR THE AO COULD BRING ANY MATERIAL TO PROVE THE FACT THAT THE APPELLANT INCURRED ANY EXPENDITURE RESULTING INTO WI P FROM UNEXPLAINED SOURCES IN THE FINANCIAL YEAR RELEVANT TO THE A.Y.200 9-10. 2.4.1.4 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, UTMOST, THE APPELLANT WAS FOUND IN POSSESSION OF ASSETS WHICH WERE NOT FULLY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THEREFORE, I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE ADDITION ON ACCOUNT OF UNREC ORDED ASSETS IN THE 9 FORM OF WIP CAN AT WORST BE REGARDED AS UNEXPLAINED I NVESTMENT U/S.69A OR 69B OF IT. ACT. THIS HAS BEEN HELD IN VARIOUS JUDIC IAL RULINGS. IN THE CASE OF DIALUST V DCIT (261 ITR 456 BOM) BEFOR E BOMBAY HIGH COURT IT WAS HELD THAT DISCREPANCY IN VALUATION OF STO CK WOULD BE ASSESSABLE AS INCOME U/S. 69 A OF THE INCOME TAX ACT, 196 1. THE HEAD NOTES ARE AS FOLLOWS : 'UNEXPLAINED INCOME - EXPORTER OF DIAMONDS - SEARCH OPERATIONS SHOWING STOCK OF DIAMONDS NOT DISCLOSED - NO EVIDENCE THAT DIAMONDS DID NOT BELONG TO APPELLANT -ADDITION OF VALUE OF DIAMONDS AS UNDISCLOSED INCOME OF APPEL LANT - JUSTIFIED-INCOME-TAXACT, 1961, SS. 69A, I33A. ' THE RAJASTHAN HIGH COURT HAS IN THE CASE OF SHRI GIRR AJ INDUSTRIES V UOI (1312 TAXMAN 604) HELD THAT UNEXPLAINED EXCESS IN PHY SICAL STOCK IN PROCESS OF MANUFACTURING OVER BOOK STOCK IS ASSESSABLE AS IN COME U/S. 69B OF THE INCOME TAX ACT. THE RELEVANT DECISION IS A S UNDER : 'SECTION 69B OF THE INCOME-TAX ACT, 1961 - UNDISCLOSE D INVESTMENTS - ASSESSING OFFICER FOUND EXCESS STOCK DURING SEARCH - APPELL ANT FAILED TO GIVE EXPLANATION OF SAME DURING SEARCH BUT DURING ASSE SSMENT PROCEEDINGS FURNISHED STOCK REGISTER EXPLAINING DIFFERE NCE IN EXCISE REGISTER AND STOCK-REGISTER FOR REASON OF EXCESS STOCK-IN- PROCESS OF MANUFACTURING - ASSESSING OFFICER MADE ADDITIONS - COMMI SSIONER DELETED SAID AMOUNT ON APPEAL, TRIBUNAL CONFIRMED ADDITION BY REDUCING AMOUNT - WHETHER IN VIEW OF FACT THAT ISSUE INVOLVED -WAS BASICALLY A QUESTION OF FACT AND ADMITTEDLY STOCK-IN-EXCESS WAS FOU ND AND IT WAS NOT EXPLAINED AT TIME OF SEARCH AND AS TRIBUNAL HAD ALREA DY GIVEN SUBSTANTIAL RELIEF BY REDUCING ADDITIONS, NO CASE WAS MADE OUT FO R ADMISSION APPEAL - HELD, YES.' THUS, IN THE CASE OF THE APPELLANT, DIFFERENCE BETWEE N THE TWO VALUES OF WIP AMOUNTING TO RS.9.30 CRORES WAS NOT BECAUSE OF ANY UNEXPLAINED EXPENDITURE. THE DIFFERENCE WAS DUE TO THE FACT THAT DURING MIDYEAR VALUATION OF WIP IS TAKEN PURELY ON AD-HOC ESTIMATE B ASIS OR GUESS TO WORK OUT MONTHLY PROFIT AND LOSS ACCOUNTS ON AD-HOC BA SIS. AFTER SEARCH, THE EXERCISE OF VALUATION OF WIP WAS DONE IN DETAIL A S IT IS DONE AT THE YEAR END. THIS EXERCISE OF DETAILED VALUATION OF WIP AS ON 30/11/2008 WAS DONE AT THE INSTANCE OF THE DEPARTMENT. HON'BLE M. P . HIGH COURT IN THE CASE OF CIT V HINDUSTAN MILLS & ELECTRICAL STORES (232 ITR 421) HELD THAT IN CASE WHERE PHYSICAL STOCK FOUND ON DATE OF SEARCH WA S MORE THAN BOOK STOCK DERIVED BY APPLYING G.P. PERCENTAGE TO SALES, AD DITION CANNOT BE MADE AS UNEXPLAINED INVESTMENT U/S.69B OF THE INCOME T AX ACT, 1961. THE RELEVANT DECISION IS AS FOLLOWS: 'IN SEARCH AND SEIZURE OPERATIONS AT THE APPELLANT 'S P REMISES, A STOCK INVENTORY WAS TAKEN AS ON THE DATE OF SEARCH. DURING A SSESSMENT, THE ASSESSING OFFICER FOUND THAT THE APPELLANT VALUED THE C LOSING STOCK AS BALANCING FIGURE APPLYING THE GROSS PROFIT RATE ON SAL ES. FOR THE WHOLE PERIOD, THE ASSESSING OFFICER FOUND THAT THE AVERAGE GR OSS PROFIT RATE WAS 17.78 PER CENT., APPLIED IT FOR THE PERIOD TILL THE DATE OF SEARCH AND FOUND THAT THE STOCK, ON THE DATE OF SEARCH WAS LESS IN THE BO OKS THAN AS PER THE INVENTORY. HE ADDED THE DIFFERENCE UNDER SECTION 69B OF THE INCOME-TAX ACT, 1961. THE COMMISSIONER OF INCOME-TAX (APPEALS) AN D THE TRIBUNAL HELD THAT SECTION 69B OF THE ACT WAS NOT APPLICABLE. ON A REFERENCE : 10 HELD, THAT AS PER THE FINDING OF THE TRIBUNAL THERE WAS NO ROOM OR SCOPE FOR ANY PRESUMPTION ABOUT THE EXISTENCE OF ANY OF THE REQ UISITE, CIRCUMSTANCES. THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION MADE UNDER, SECTION69B.'' WHEN ADDITION CANNOT BE MADE U/S.69B OF IT. ACT, IN THE FACTS OF THE ABOVE CASE OF CIT V HINDUSTAN MILLS & ELECTRICAL STORES (SUP RA) ADDITION CANNOT BE MADE IN THE CASE OF THE APPELLANT U/S.69C OF IT. ACT . 2.4.1.5 IN THE FOLLOWING CASES WHERE ADDITION WAS MADE ON ACCOUNT OF HIGHER STOCK DECLARED TO BANKS WHILE BOOK STOCK WAS LESS EITHER THE ADDITION HAS BEEN DELETED OR HAS BEEN SUSTAINED U/S.69B OF THE INCOME TAX ACT. 1. DHANSIRAM AGARWAL V CIT (201 ITR 192GAU.): 2. COIMBATORE SPG & WVG CO. LTD. V CIT (95 ITR 375 MAD): 2.4.2 THE ARGUMENT OF THE ASSESSING OFFICER THAT THE AP PELLANT MAY HAVE GENERATED UNACCOUNTED INCOME BY INFLATING EXPENSES DO ES NOT APPEAR CORRECT. IN SUCH CASE OF INFLATION OF EXPENSES, THERE W OULD NOT HAVE ANY DISALLOWANCE OF SUCH EXPENSES, THERE WOULD NOT HAVE BEE N ANY DISALLOWANCE OF SUCH EXPENSES ON THE GROUND THAT THEY W ERE NOT INCURRED FOR BUSINESS PURPOSES OR WERE CAPITAL EXPENSE ETC. THE A SSESSING OFFICER HAVING DISALLOWED THESE EXPENSES ON THE GROUND THAT TH EY ARE FOR NON- BUSINESS EXPENSES CANNOT TURN AROUND AND SAY THAT THEY WE RE NOT INCURRED FOR SUCH NON-BUSINESS EXPENSES BUT WERE A SOURCE USED FOR CONSTRUCTION COSTS ONLY. THIS IS A CASE WHERE IT WAS FOUN D THAT THE APPELLANT HAD ART; ASSET (WIP) AS ON 30.11.2008 THE VA LUE OF WHICH WAS HIGHER THAN THE ONE FOUND IN THE BOOKS OF ACCOUNTS OF APPELLANT. HOWEVER IN ABSENCE OF ANY MATERIAL ON RECORD, IT CANNOT BE P RESUMED THAT THIS ADDITIONAL VALUE WAS A RESULT OF UNEXPLAINED EXPENSES O UT OF BOOKS INCURRED BY THE APPELLANT. IN FACT THE FACTS OF THE CASE AND MATERIAL ON RECORD (E.G. PROJECT ENGINEERS CERTIFICATES ITSELF) C LEARLY SHOWS THAT VALUE OF WIP AS ON 30.11.2008 WAS TAKEN BY THE APPELLANT O N AN ADHOC AND ESTIMATED BASIS AND SUBSEQUENTLY THE OPINION OF PROJECT ENGINEER WAS TAKEN BASED ON DETAILED WORKING DONE BY HIM. IN SUCH A CASE, VALUATION DIFFERENCES ARE BOUND TO ARISE. IN VIEW OF THIS, I AGR EE WITH THE CONTENTION OF THE APPELLANT THAT ADDITION CAN BE MADE ONLY U/S. ; 69A / 69B AND NOT U/S. 69C OF THE INCOME TAX ACT. THE APPELLANT'S INCOM E ON ACCOUNT OF EXCESS WIP AS ON 30/11/2008 HAS ALREADY BEEN TAXED AS, A S DISCUSSED EARLIER, IT HAS SHOWN CORRECT VALUE OF WIP AS ON 30/1 1/2008 IN ITS FINAL ACCOUNT FOR F.Y.2008-09. IN THE CIRCUMSTANCES THERE C ANNOT BE DOUBLE ADDITION OF THE SAID AMOUNT. ACCORDINGLY, THIS GROUND IS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS. 10 CRORES. AS THE ADDITION IS DELETED, THE ALTERNATE GROUND NO. 2 DOES NOT SURVIVE AND HENCE IS NOT REQUIRED TO BE ADJUDICATED. 2.4.3 IN VIEW OF THE DISCUSSION IN THE PRECEDING PAR AGRAPHS, GROUND OF APPEAL NO. 1.1 TO 1.4 ARE ALLOWED AND GROUND OF APP EAL NO.2 IS DISMISSED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 11 01. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10 CR ORES MADE U/S. 69C OF THE I. T. ACT, 1961 AND DECLARED BY THE ASSESSEE AS AN ADDITIONAL INCOME DURING SEARCH ON ACCOUNT OF UNDERVALUATION OF WIP AS ON 30/11/2008, WITHOUT APPRECIATING THE FACTS OF THE CASE. 02. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION BY HOLDING THAT THE CORRECT VALUATION OF WIP ADOPTED BY THE ASSESSEE AS ON 31/03/200 9 TAKES CARE OF THE DISCLOSURE DONE ON ACCOUNT OF WIP WITHOUT APPRECI ATING THE FACT THAT ENHANCED VALUE OF WIP AS ON 31/03/2009 WILL BE CLAIM ED AS AN OPENING WIP AS ON 01/04/2009 AND SUCH AS INCOME SHOWN IF ANY WA S ONLY THE NORMAL INCOME OF THE ASSESSEE AND NOT THE ADDITIONAL IN COME AS DISCLOSED DURING SEARCH. 03. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10 C RORES, AS THERE WAS AN AGREED UNDER VALUATION OF WIP ON THE DATE OF SEARCH AND THE ASSESSEE HAD AGREED TO DISCLOSE AN ADDITIONAL INCOME TO THE TUNE O F RS.10 CRORES BUT DID NOT ADHORE TO ITS COMMITMENT GIVEN DURING SEARCH. 04. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 05. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AM END, AND MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY CHA LLENGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT IN THE INSTANT CA SE THE ASSESSEE IS A BUILDER/CONTRACTOR AND THERE WAS DISCREPANCY IN THE WIP CERTIFIED BY THE ENGINEERS AND THE WIP AS PER THE BOOKS OF ACCOUNT. HE SUBMITTED THAT ANY AMOUNT PAID FOR WIP IS THE EXPENDITURE AND NOT THE INVESTMENT. IT IS AN ADMITTED FACT THAT THERE IS A DIFFERENCE OF RS.9.30 CRORES IN THE WIP AS ON 30-11-2008 PREPARED BY THE ASSESSEE AS PER PROVISIO NAL PROFIT AND LOSS ACCOUNT AND THE VALUE AS CERTIFIED BY THE SITE ENGI NEERS. THE EXCESS PAYMENT HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOU NT. SINCE THE ASSESSEE FAILED TO OFFER ANY SATISFACTORY EXPLANATI ON ABOUT THE NATURE AND SOURCE OF SUCH INVESTMENT THE ASSESSEE ADMITTED THE SAME TO BE HIS UNDISCLOSED INCOME AND ACCORDINGLY OFFERED TO PAY T HE TAX. HOWEVER, THE ASSESSEE RETRACTED FROM HIS STATEMENT AND HELD THAT THE WIP AS ON 31-03- 12 2009 HAS TAKEN CARE OF THE DIFFERENCE IN WIP WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ACCOR DINGLY TAXED THE INCOME OFFERED AND DISALLOWED THE EXPENDITURE UNDER THE PROVISIONS OF SECTION 69C OF THE I.T. ACT. REFERRING TO THE PROV ISIONS OF SECTION 69C HE SUBMITTED THAT THE SAID SECTION IS IN 2 PARTS. THE OPERATING PORTION IS THE CHARGING PROVISION WHICH ALLOWS THE TAXATION OF UNA CCOUNTED EXPENDITURE WHILE THE PROVISO TAKES CARE OF THE DISALLOWANCE OF SUCH EXPENDITURE, IF THE ASSESSEE CLAIMS THE SAME. HE SUBMITTED THAT TH E EXCESS WIP OFFERED BY THE ASSESSEE IS THE EXPENDITURE WHICH CAN ONLY B E DEALT U/S.69C AND ITS PROVISO. THE PROVISO TO THE SECTION 69C WAS SPECIF ICALLY BROUGHT TO PREVENT SUCH MISUSE OF OFFERING OF UNDISCLOSED EXPE NDITURE AS INCOME AND THEN CLAIMING IT AS AN EXPENDITURE. HE SUBMITTED T HAT THE UNEXPLAINED EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION UNDER AN Y HEAD OF INCOME NOT EVEN AS COST OF PURCHASE OF STOCK-IN-TRADE OR WIP. HE SUBMITTED THAT THE DECISIONS RELIED ON BY THE LD.CIT(A) WHILE DELETING THE ADDITION ARE NOT INDICATING AS TO WHETHER THE ADDITION IN THOSE CASE S WAS ON ACCOUNT OF EXCESS STOCK AND THEREFORE THEY ARE NOT RELEVANT TO THE FACTS OF THE PRESENT CASE. RELYING ON THE FOLLOWING DECISIONS HE SUBMITT ED THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS JUSTIFIED AND THE SAME HAS TO BE SUSTAINED : 1. ITO VS. SMT. SUNDARI CHIMANDAS REPORTED IN 124 ITD 460 2. CHANDULAL SADHURAM KHEMANI ITA NOS. 370 TO 375/ PN/2008 3. DCIT VS. SHARADA EDUCATIONAL SOCIETY ITAT, HYDE RABAD 4. M/S. ROSHAN ASSOCIATES PVT. LTD. VS. ITO ITA NO.6153/MUM2003 ORDER DATED 29-06-2011 5. DIALUST VS. DCIT REPORTED IN 261 ITR 456 6. SHRI GIRIRAJ INDUSTRIES VS. UNION OF INDIA REPORTE D IN (2003) 132 TAXMANN 604 (RAJ) 7. CIT VS. HINDUSTAN MILLS AND ELECTRICALS REPORTED IN 232 ITR 421 (MP) 13 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT DURI NG THE COURSE OF SEARCH, WHAT WAS FOUND WAS ONLY A FEW VALUATION REPORTS OF THE ENGINEERS WHICH ARE PLACED ON PAGE 8 TO 13 OF THE PAPER BOOK. IN TH ESE REPORTS, THE PROJECT ENGINEERS HAVE SIMPLY VALUED BY ESTIMATING THE WIP AS ON 30.11.2008 OF THE VARIOUS' PROJECTS OF THE ASSESSEE. THE REPORTS MENTION THAT THE VALUE OF THE WIP IS ESTIMATED BY THEM. HE SUBMITTED THAT TH E VALUE OF THE WIP IS DIFFERENT FROM THE COST OF THE WIP. THE ACTUAL COST INCURRED FOR THAT WIP MAY BE X BUT THE VALUE OF THE WIP MAY BE DIFFERENT FROM X BECAUSE THE VALUE DEPENDS ON THE MARKET RATES. HE SUBMITTED THA T THE REPORTS OF THE ENGINEERS DO NOT MENTION ABOUT ANY SUPPRESSION IN T HE MATERIAL OR LABOUR. HE SUBMITTED THAT THE VALUATION REPORTS ARE ESTIMAT ED FIGURES. BECAUSE THESE REPORTS WERE FOUND AT THE TIME OF SEARCH, THE ASSESSEE, IN ORDER TO BUY PEACE, ACCEPTED THE EXCESS VALUATION OF RS.10 C RS. HE SUBMITTED THAT DURING THE SEARCH, THE DEPARTMENT DID NOT FIND ANY EVIDENCE THAT THE ASSESSEE COMPANY HAS INCURRED ANY EXPENDITURE ON CE MENT, STEEL, LABOUR, ETC. OUTSIDE THE BOOKS OF ACCOUNTS WHICH IS UNEXPLA INED. 8.1 REFERRING TO PROVISIONS OF SECTION 69 TO SECTIO N 69B HE SUBMITTED THAT THESE SECTIONS DEAL WITH THE ADDITIONS WARRANT ED ON ACCOUNT OF UNEXPLAINED ASSETS, INVESTMENTS OR THE ASSETS / INV ESTMENTS WHICH ARE NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS. SECTION 6 9C DEALS WITH AN UNEXPLAINED EXPENDITURE. PROVISO TO SECTION 69C WAS INSERTED W.E.F 01.04.1999 TO THE EFFECT THAT THE UNEXPLAINED EXPEN DITURE, WHICH IS TO BE ADDED AS AN INCOME U/S 69C, IS NOT TO BE ALLOWED AS A DEDUCTION FROM THE INCOME. GIVING AN EXAMPLE, HE SUBMITTED THAT IF IT IS NOTICED THAT A BUSINESSMAN HAS INCURRED SOME EXPENDITURE ON SALARY OF EMPLOYEES WHICH 14 IS NOT ACCOUNTED FOR IN THE BOOKS AND THE SOURCE OF WHICH IS NOT EXPLAINABLE, THE ADDITION WILL BE WARRANTED U/S 69C AND THE DEDUCTION OF SUCH SALARY AMOUNT, ALTHOUGH A BUSINESS EXPENDITURE , WILL NOT BE ALLOWED AS DEDUCTION FROM THE BUSINESS INCOME OF THE ASSESS EE. HE SUBMITTED THAT PRIOR TO THE INSERTION OF THE PROVISO TO SECTION 69 C, SUCH AN AMOUNT OF UNEXPLAINED BUSINESS EXPENDITURE WAS ALLOWABLE AS A DEDUCTION. FOR THIS PROPOSITION, HE RELIED ON THE DECISIONS REPORTED IN [52 ITD 107] AND [31 ITD 114]. THUS, THE ADDITION MADE U/S 69C USED TO B E NEUTRALIZED BY A DEDUCTION. HOWEVER, THESE DECISIONS ARE NOW OVER RU LED BY THE PROVISO TO SECTION 69C. 8.2 HE SUBMITTED THAT THE PROVISO IS INTRODUCED TO SECTION 69C ONLY AND IT IS NOT APPLICABLE IN THE CONTEXT OF THE ADDITION S MADE U/S 69 TO 69B. SECONDLY, FOR THE PURPOSES OF MAKING AN ADDITION U/ S 69C, SOME EVIDENCE MUST HAVE BEEN FOUND THAT THE ASSESSEE HAS INCURRED THE ACTUAL EXPENDITURE WHICH IS UNACCOUNTED / UNEXPLAINED. ON THE OTHER HA ND, THE ADDITIONS ON ACCOUNT OF VALUATION DIFFERENCE ARE COVERED U/S 69 TO 69B. 8.3 HE SUBMITTED THAT IN THE INSTANT CASE THE WIP IS A STOCK IN TRADE. REFERRING TO VARIOUS DECISIONS, HE SUBMITTED THAT A DDITION ON ACCOUNT OF EXCESS STOCK HAS BEEN HELD TO BE FALLING WITHIN THE PURVIEW OF SECTIONS 69 TO 69B ONLY AND NOT U/S 69C. 8.4 REFERRING TO THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF RAMANLAL KACHRULAL TEJMAL V. CIT REPORTED I N 146 ITR 368 HE SUBMITTED THAT IN THIS CASE, THE STOCK IN TRADE IS CONSIDERED AS AN INVESTMENT FALLING U/S 69. REFERRING TO THE DECISI ON OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GIGGLES P. LTD. V. ITO REPORTED IN 43 ITD 388 15 HE SUBMITTED THAT IN THIS CASE, THE STOCK IN TRADE IS CONSIDERED AS AN INVESTMENT FALLING U/S 69. REFERRING TO THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BOMBAY H.C. DIALUS T V. DCIT REPORTED IN 261 ITR 456 HE SUBMITTED THAT IN THIS CASE, THE ASSESSEE WAS AN EXPORTER OF DIAMONDS. DURING THE SEARCH, SOME STOCK OF DIAMONDS WAS FOUND WHICH WAS NOT DISCLOSED. ACCORDINGLY, THE ADD ITION WAS SUSTAINED U/S 69A. REFERRING TO THE DECISION OF HONBLE RAJA STHAN HIGH COURT IN THE CASE OF GIRRAJ INDUSTRIES V. UOI REPORTED I N 132 TAXMAN 604 HE SUBMITTED THAT IN THIS CASE, THE UNEXPLAINED EXCESS STOCK WAS HELD TO BE TAXABLE U/S 69B. HE ACCORDINGLY SUBMITTED THAT THE ADDITION ON ACCOUNT OF EXCESS WIP IS NOT COVERED BY PROVISIONS OF SECTION 69C BUT IT HAS TO BE MADE U/S 69 TO 69B AND THEREFORE, THE QUESTION OF A PPLYING THE PROVISO TO SECTION 69C DOES NOT ARISE AT ALL. THE ADDITION ON ACCOUNT OF EXCESS VALUATION OF STOCK IS THE OPENING STOCK ON THE NEXT DAY AFTER THE SEARCH. THERE CANNOT BE ANY DISPUTE ON THIS PROPOSITION. 8.5 SO FAR AS THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE ARE CONCERNED, HE SUBMITTED THAT THE ADDITIONAL INCOME OF RS.10 CRS WAS OFFERED ON ACCOUNT OF EXCESS VALUATION OF WIP AS PE R THE REPORTS OF THE ENGINEER. SUCH EXCESS WAS ON ACCOUNT OF MERE OPINIO N OF THE VALUATION EXPERT. IT WAS NOT ON ACCOUNT OF SOME EVIDENCE THAT THE ASSESSEE HAS INCURRED THE COST OUTSIDE BOOKS IN THE WIP. THERE W AS NO EVIDENCE FOUND THAT THE ASSESSEE HAD INCURRED ANY PARTICULAR EXPEN DITURE OUTSIDE THE BOOKS OF ACCOUNTS. THE ADDITION ON ACCOUNT OF EXCESS VALU ATION FALLS UNDER SECTION 69 TO 69B. FOR THE PURPOSES OF SECTION 69C, THE DEPT. MUST PROVE THAT THERE IS AN EXPENDITURE WHICH IS INCURRED OUTS IDE BOOKS. HENCE, SECTION 69C CANNOT BE INVOKED ON A PRESUMPTION. THU S, THE ADDITION IN 16 THIS CASE WAS VERY MUCH ATTRACTED U/S 69B AND NOT U /S 69C. HENCE, THE LEARNED D.R. IS NOT JUSTIFIED IN INVOKING THE PROVI SO TO SECTION 69C IN THIS CASE. 8.6 AS REGARDS THE SUBMISSION OF LD. DEPARTMENTAL R EPRESENTATIVE THAT THE DECISIONS REFERRED TO BY THE LD. CIT(A) ARE NOT APPLICABLE IN THIS CASE, HE SUBMITTED THAT THE SAME ARE SQUARELY APPLICABLE. HE SUBMITTED THAT IN THE CASE OF H.C. DIALUST (SUPRA) THERE WAS A SURVEY AND EXCESS STOCK OF DIAMONDS WAS FOUND. IT IS SPECIFICALLY MENTIONED TH AT THE ASSESSEE WAS EXPORTER OF DIAMONDS. THE HEADNOTES REPRODUCED BY T HE LEARNED CIT(A) ON PAGE 24 OF HIS ORDER ITSELF INDICATES THE ABOVE FACT. NOW, IN THE CASE OF AN EXPORTER OF DIAMONDS, THE EXCESS STOCK OF DIAMON DS WAS STOCK IN TRADE AND THAT IS EXACTLY MENTIONED THEREIN AND THEREFORE , THE ADDITION WAS CONFIRMED U/S 69A. IT IS VERY CLEAR THAT THE ADDITI ON WAS NOT CONFIRMED U/S 69C. THEREFORE, THIS DECISION CLEARLY INDICATES THA T THE ADDITION ON ACCOUNT OF EXCESS STOCK IS NOT COVERED U/S 69C. ACCORDINGLY , BOMBAY H.C. DECISION IS IN FAVOUR OF THE ASSESSEE ON THIS POINT. 8.7 AS REGARDS THE DECISIONS REFERRED TO BY THE LEA RNED D.R. ARE CONCERNED HE SUBMITTED THAT THOSE ARE NOT AT ALL AP PLICABLE TO THE FACTS OF THIS CASE. 8.8 AS REGARDS THE CASE OF ROSHAN AND ASSOCIATES ( SUPRA) ARE CONCERNED, HE SUBMITTED THAT IN THIS CASE, DURING THE SURVEY, A LOOSE PAPER WAS FOUND WHICH INDICATED THE MONTHLY DETAILS OF THE EXPENSES INCURRED FOR THE BUSINESS AND WHICH ARE NOT ACCOUNTED FOR AND THEREF ORE, THE ADDITION WAS MADE U/S 69C AND THE ASSESSEE CLAIMED THE DEDUCTION OF THESE EXPENSES BEING THE BUSINESS EXPENSES. THE TRIBUNAL, THEREFOR E, DISMISSED THE CLAIM 17 OF THE ASSESSEE IN VIEW OF THE PROVISO TO SECTION 6 9C. IN THAT CASE, THERE WAS NO QUESTION OF APPLICABILITY OF SECTION 69 TO 69B A T ALL AND EVEN NO ARGUMENT WAS MADE TO THAT EFFECT. THE FACT THAT THE ADDITION WAS WARRANTED U/S 69C WAS NOT EVEN CHALLENGED AND RIGHT LY SO AS THE PAPERS INDICATED THE UNACCOUNTED BUSINESS EXPENSES. HENCE, THAT DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE REI TERATED THAT IN THE CASE OF THE ASSESSEE THERE IS NO EVIDENCE FOUND TO THE EFFE CT THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE OUTSIDE THE BOOKS OF ACCOU NTS. 8.9 SO FAR AS THE DECISION IN THE CASE OF CIT V. HI NDUSTAN MILLS AND ELECTRICAL [232 ITR 421] AND RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IS CONCERNED, HE SUBMITTED THAT IN T HIS CASE, THE ADDITION OF EXCESS STOCK, WHICH WAS MADE ON ACCOUNT OF ESTIMATI ON OF G.P., WAS CANCELLED. ACCORDINGLY, IT WAS HELD THAT SECTION 69 B HAS NO APPLICATION. IT IS CORRECT THAT AS THE ADDITION ON ACCOUNT OF EXCES S STOCK IS CANCELLED, THE QUESTION OF APPLYING SECTION 69B SIMPLY DOES NOT AR ISE AT ALL. THEREFORE, THIS CASE IS ALSO NOT RELEVANT TO THE FACTS OF THE PRESENT CASE. 8.10 AS REGARDS THE DECISION IN THE CASE OF ITO V. SMT. SUNDARI CHIMANDAS [124 ITD 460] IS CONCERNED, HE SUBMITTED THAT IN T HIS CASE, THE ADDITION WAS MADE ON ACCOUNT OF THE EXCESS STOCK FOUND DURING TH E SURVEY. THE ASSESSEE CLAIMED DEDUCTION OF PURCHASES FROM THE INCOME TO B E OFFERED U/S 69 ON ACCOUNT OF SUCH EXCESS STOCK. THIS DEDUCTION WAS NO T GRANTED BY ITAT ON THE GROUND THAT THERE IS NO PROVISION FOR ALLOWING ANY DEDUCTION OF EXPENSES WHILE COMPUTING THE INCOME U/S 69. THIS RA TIO IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE SUBMITTED THA T THE ASSESSEE IS NOT CLAIMING ANY DEDUCTION FROM THE EXCESS WIP OFFERED DURING THE SEARCH. 18 THE ASSESSEE HAS CLAIMED SUCH EXCESS AS A DEDUCTION FROM THE BUSINESS INCOME FOR THE WHOLE YEAR. THE WIP IS ALLOWABLE AS A DEDUCTION FROM THE INCOME FROM BUSINESS. ACCORDINGLY, THIS DECISION IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ACCORDINGLY SUBM ITTED THAT THE CIT(A) IS RIGHT IN ALLOWING THE DEDUCTION OF RS.10 CRS. TO TH E ASSESSEE ON ACCOUNT OF THE EXCESS VALUATION OF WIP FOUND AT THE TIME OF SE ARCH FROM THE BUSINESS INCOME OF THE ASSESSEE. SIMILARLY, THE VARIOUS DECISIONS RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE ARE ALSO DISTINGUIS HABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE, ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BEING IN CONSONANCE WITH LAW BE UPHELD AND THE GROUNDS RAISED BY THE REVENUE BE DISMISSED. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND, DURING THE COU RSE OF SEARCH IN THE INSTANT CASE CERTAIN VALUATION REPORTS OF THE PROJE CT ENGINEERS REGARDING VALUATION OF WIP AS ON 30-11-2008 WERE FOUND. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE PROVISIONAL PROFIT AND L OSS ACCOUNT AS ON 30-11- 2008. FROM THE SAID PROVISIONAL PROFIT AND LOSS AC COUNT THE ASSESSING OFFICER FOUND THAT THERE IS A DIFFERENCE OF RS.9,30 ,33,219/- BETWEEN THE WORK IN PROGRESS AS PER PROVISIONAL PROFIT AND LOSS ACCOUNT AND THE WIP AS CERTIFIED BY THE SITE ENGINEERS. HE FURTHER NOTED THAT DURING THE COURSE OF SEARCH THE ASSESSEE VIDE LETTER DATED 16-02-2009 HA D OFFERED ADDITIONAL INCOME OF RS.10 CRORES. HOWEVER, THE SAME WAS NOT HONOURED. THE ASSESSING OFFICER THEREFORE CONFRONTED THE SAME TO THE ASSESSEE. WE FIND THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCE EDINGS, HAD 19 CATEGORICALLY STATED THAT THE VALUE OF THE WIP AT T HE SITE WAS TAKEN ON ESTIMATE BASIS FOR THE INTERNAL MIS PURPOSE. IT WA S SUBMITTED THAT DURING THE COURSE OF SEARCH ALSO, NO UNACCOUNTED RECEIPT W AS FOUND. EVEN DURING THE COURSE OF SEARCH THE DEPARTMENT ALSO DID NOT FI ND ANY EVIDENCE OF ANY UNACCOUNTED EXPENSES INCURRED BY THE ASSESSEE ON AN Y OF THE ABOVE SITES. IT WAS FURTHER EXPLAINED THAT THE WIP ALWAYS INVOLV E SOME ELEMENT OF ESTIMATION AND CANNOT BE ON EXACT VALUATION. THE V ALUATION BY THE PROJECT ENGINEER ALSO INVOLVES SUCH ESTIMATION. IT WAS SUB MITTED THAT IN ORDER TO BUY PEACE OF MIND THE ASSESSEE HAD DECLARED ADDITIO NAL INCOME ON ACCOUNT OF THE VALUATION OF THE WIP. IT WAS FURTHER EXPLAI NED THAT THE ASSESSEE WHILE PREPARING THE ACCOUNTS FOR THE YEAR ENDING 31 -03-2009 HAS TAKEN THE CORRECT CLOSING WORK IN PROGRESS AND VARIATION, IF ANY, AS ON 30-11-2008 HAS ALREADY TAKEN CARE OF. WE FIND THE ASSESSING O FFICER NOT BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E MADE ADDITION OF RS.10 CRORES U/S.69C ON THE BASIS OF HIS LETTER DAT ED 16-02-2009. 9.1 WE FIND THE LD.CIT(A) DELETED THE ADDITION ON T HE GROUND THAT THE ASSESSING OFFICER HAS NOT CONTROVERTED THE SUBMISSI ON OF THE ASSESSEE THAT IT HAS TAKEN CORRECT VALUE OF WIP AS ON 31-03-2009. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HA D NOT RECORDED SALE, PURCHASE OR OTHER EXPENSES PROPERLY IN ITS BOOKS OF ACCOUNT DURING THE PERIOD FROM 01-12-2008 TO 31-03-2009. SINCE THE AS SESSING OFFICER HAS NOT DISPUTED THE CORRECT VALUE OF WIP AS ON 31-03-2 009 AND THE CORRECT VALUE OF SALES, PURCHASE AND OTHER EXPENSE ETC. DUR ING THE PERIOD FROM 01- 12-2008 TO 31-03-2009, THEREFORE, IN ABSENCE OF ANY ADVERSE MATERIAL THE CORRECT WIP AS ON 30-11-2008 HAS ALREADY BEEN TAKEN IN THE FINAL ACCOUNTS OF THE F.Y. 2008-09. ACCORDING TO LD.CIT(A), THIS CORRECT VALUE OF WIP 20 AS ON 31-03-2009 MUST HAVE INCLUDED THE EXCESS WIP OF RS.9.3 CRORES WHICH THE ASSESSING OFFICER HAS REFERRED TO AS EXCE SS WIP BEING DIFFERENCE BETWEEN THE VALUE OF WIP CERTIFIED BY TH E SITE ENGINEER AND THE VALUE OF WIP RECORDED IN THE BOOKS OF ACCOUNT. REL YING ON VARIOUS DECISIONS HE FURTHER NOTED THAT NO ADDITION U/S.69C CAN BE MADE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HE FURTHER NO TED THAT NO PHYSICAL INVENTORY OF WIP WAS TAKEN BY THE SEARCH PARTY ON 1 8-12-2008 FOR VALUATION OF THE WIP AS ON 30-11-2008. RELYING ON THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE HE HELD THAT NO AD DITION U/S.69C UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE CAN BE MADE. 9.2 IT IS THE SUBMISSION OF THE LD. DEPARTMENTAL RE PRESENTATIVE THAT SINCE THERE WAS UNDER VALUATION OF WIP ON THE DATE OF SEARCH AND THE ASSESSEE HAD AGREED TO DISCLOSE THE ADDITIONAL INCO ME TO THE TUNE OF RS.10 CRORES, THEREFORE, THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE TH E DIFFERENCE OF RS.9.30 CRORES IN THE VALUATION OF THE WIP HAS NOT BEEN SATISFACTORILY EXPLAINED AND THEREFORE THE ASSESSING OFFICER WAS J USTIFIED IN MAKING THE ADDITION UNDER PROVISIONS OF SECTION 69C OF THE I.T . ACT. 9.3 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE VALUATION DONE BY THE SITE ENGINEERS ARE ON ADHOC B ASIS AND PURELY ON ESTIMATE BASIS WHICH IS DURING THE MIDDLE OF THE YE AR. ACCORDING TO HIM, THE CORRECT VALUE IS PROPERTY DETERMINED ONLY AT TH E END OF THE YEAR. FURTHER, THE ASSESSEE HAS INCREASED THE WIP IN THE BOOKS BY THE ABOVE AMOUNT AND CLAIMED THE SAME AS THE OPENING WIP AS O N 01-12-2008. SINCE THE CLOSING WIP AS ON 31-03-2009 WAS TAKEN AS PER ACTUAL 21 VERIFICATION AND THE SAME WAS TAKEN FOR THE PURPOSE OF COMPUTATION OF PROFIT FOR THE YEAR WHICH WAS NOT DISPUTED BY THE A SSESSING OFFICER, THEREFORE, SUCH EXCESS VALUATION IN THE WIP HAS ALR EADY BEEN TAXED SINCE THE SAME HAS BEEN TAKEN CARE OF BY THE CLOSING WIP AS ON 31-03-21009. 9.4 WE FIND MERIT IN THE ABOVE SUBMISSION OF THE L D. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSIN G OFFICER HAS NOT DISPUTED THE VALUATION OF CLOSING WIP AS ON 31-03-2009 WHICH HAS BEEN TAKEN AS PER ACTUAL VERIFICATION. THERE IS ALSO NO DISALLOW ANCE OF ANY EXPENDITURE OR SUPPRESSION OF INCOME BETWEEN THE PERIOD FROM 01 -12-2008 TILL 31-03- 2009. THE FINDINGS GIVEN BY THE LD.CIT(A) AT PARA 2.4.1.1 OF HIS ORDER THAT THE ASSESSING OFFICER HAS NOT CONTROVERTED THE SUBMISSION OF THE ASSESSEE THAT IT HAS TAKEN CORRECT VALUE OF WIP AS ON 31-03-2009 AND THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ON RECORD AN Y MATERIAL TO SHOW THAT ASSESSEE HAD NOT RECORDED SALE/PURCHASE/OTHER EXPENSES PROPERLY IN ITS BOOKS OF ACCOUNT IN THE PERIOD FROM 01-12-2008 TO 3 1-03-2009 COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTAT IVE. WE THEREFORE CONCUR WITH THE FINDINGS GIVEN BY THE LD.CIT(A) THA T IN ABSENCE OF ANY MATERIAL BROUGHT ON RECORD TO SHOW THAT THE VALUATI ON DONE AS ON 31-03- 2009 IS INCORRECT AND THE ASSESSEE HAS NOT RECORDED THE SALES/PURCHASES OR OTHER EXPENSES PROPERLY IN ITS BOOKS OF ACCOUNT DUR ING THE PERIOD FROM 01- 12-2008 TO 31-03-2009, THEREFORE, THE CORRECT VALUE OF WIP AS ON 31-03- 2009 MUST HAVE INCLUDED THE EXCESS WIP OF RS.9.3 CR ORES AS ON 30-11- 2008. 9.5 SO FAR AS THE APPLICATION OF THE PROVISIONS OF SECTION 69C ARE CONCERNED, WE FIND THE SAME IS NOT APPLICABLE TO TH E FACTS OF THE PRESENT 22 CASE. ADMITTEDLY, THE REVENUE HAS NOT FOUND ANY MA TERIAL OR EVIDENCE TO SHOW THAT ANY EXPENDITURE HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE VALUATION OF WIP BY THE SITE ENGINEERS WAS PURE LY ON ESTIMATE BASIS, A FACT STATED BY THE ASSESSEE DURING THE COURSE OF AS SESSMENT PROCEEDINGS WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. 9.6 WE FIND A SOMEWHAT SIMILAR ISSUE HAD COME UP BE FORE THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RADHIKA CRE ATIONS (SUPRA). IN THAT CASE THE ADDITION OF RS.44,38,997/- WAS MADE B Y THE ASSESSING OFFICER U/S.69C ON THE GROUND THAT THE DETAILS OF THE SAID EXPENDITURE WAS NOT AUTHENTICATED BY ANY VOUCHERS AND DURING THE CO URSE OF SEARCH THE ASSESSEE HAS ADMITTED THAT HE WAS NOT IN A POSITION TO PRODUCE THE VOUCHERS OR AUTHENTICATE THE GENUINENESS OF EXPENSE S. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION AND ON FURTHER APPEA L THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A). WHEN THE REVENU E CHALLENGED THE SAME BEFORE THE HONBLE HIGH COURT, THE HONBLE HIG H COURT VIDE ORDER DATED 30-04-2010 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE BY OBSERVING A SUNDER : 1. THE ORDER DATED 08.02.2008 PASSED BY THE INCOME -TAX APPELLATE TRIBUNAL IN IT(SS) 349/DEL/2004 PERTAINING TO THE BLOCK PERI OD 01.04.1990 TO 17.10.2000 IS THE SUBJECT MATTER OF THE PRESENT APP EAL PREFERRED BY THE REVENUE. THE REVENUE HAS PROPOSED THE FOLLOWING QUE STIONS, WHICH, ACCORDING TO IT, ARE SUBSTANTIAL QUESTIONS OF LAW AND REQUIRE THE CONSIDERATION OF THIS COURT:- 'A) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE INCOME-TAX APPELLATE TRIBUNAL ERRED IN DELETING THE ADDITIONS OF RS 44,38,997/- IN SPITE OF ADMISSION OF THE ASSESSEE THAT IT WAS NOT IN A P OSITION TO PRODUCE VOUCHERS OR AUTHENTICATE THE GENUINENESS OF EXPENSES ? B) WHETHER THE INCOME-TAX APPELLATE TRIBUNAL ERRED IN HOLDING THAT SECTION 69C IS NOT APPLICABLE TO BLOCK ASSESSMENT ? C) WHETHER THE INCOME-TAX APPELLATE TRIBUNAL MISCON STRUED THE PROVISIONS OF SECTION 158 BB(B) OF THE INCOME-TAX ACT, 1961 ? 23 D) . . . . . . . . . . . . . . E) . . . . . . . . . . . . . . F) . . . . . . . . . . . . . . 2. PROPOSED QUESTIONS A TO C , AS WOULD BE APPARENT FROM A PLAIN READING THEREOF, RELATE TO THE ADDITION OF RS 44,38,997/- W HICH HAS BEEN HELD TO BE THE UNEXPLAINED EXPENDITURE OF THE ASSESSEE UNDER SECTI ON 69C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE SAID ACT ). THE ASSESSING OFFICER HAD EXAMINED THE DETAILS OF THE SAID EXPENDITURE AND FO UND THAT THE SAME WAS NOT AUTHENTICATED BY ANY VOUCHERS AND CONSEQUENTLY, MAD E THE ADDITION OF RS44,38,997/- AS UNEXPLAINED EXPENDITURE IN TERMS O F SECTION 69C OF THE SAID ACT. 3. WE MAY POINT OUT THAT DURING THE SEARCH AND SEIZ URE OPERATIONS, AS INDICATED IN PARA 3.1 OF THE ORDER PASSED BY THE CO MMISSIONER OF INCOME-TAX (APPEALS), NO EVIDENCE WAS FOUND INDICATING THAT TH E ASSESSEE HAD ANY UNDISCLOSED INCOME. HOWEVER, THE ASSESSING OFFICER HAD DIRECTED THE ASSESSEE TO GET ITS ACCOUNTS AUDITED AS PER THE PROVISIONS O F SECTION 142(2A) OF THE SAID ACT. IT IS ON THE BASIS OF THE AUDIT REPORT PREPARE D UNDER SECTION 142(2A) OF THE SAID ACT THAT THE ADDITION APPEARS TO HAVE BEEN MAD E BY THE ASSESSING OFFICER. 4. THE CASE BEFORE US HAS TWO DIMENSIONS. THE FIRST BEING AS TO WHETHER THE ASSESSING OFFICER WAS RIGHT IN TREATING THE SAID SU M OF RS 44,38,997/- AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE SA ID ACT. THE SECOND ASPECT IS WHETHER THE SAID ADDITION COULD LEGITIMATELY HAV E BEEN MADE IN THE COURSE OF A BLOCK ASSESSMENT . 5. INSOFAR AS THE FIRST ASPECT OF THE MATTER IS CON CERNED, WE FIND THAT SECTION 69C CLEARLY STIPULATES THAT WHERE, IN ANY FINANCIAL YEAR, THE ASSESSEE HAS INCURRED AN EXPENDITURE AND HE OFFERS NO EXPLANATIO N ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF , OR THE EXPLANATION, IF IT IS OFFERED BY HIM, IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATIS FACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MA Y BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THUS, THE FOCUS OF SECTION 69C IS ON THE 'SOURCE' OF SUCH EXPENDITURE AND NOT ON THE AUTHENTICITY OF THE EXPENDITURE ITSELF. IT IS AN ADMITTED POSITION THAT THE EXPENDITURE WAS SHOWN BY THE ASSESSEE IN ITS REGULAR BOOKS OF ACCOUNTS AND IT IS BECAUSE OF THIS REASON THAT THE INCOME-TAX APPELLATE TRIBUNAL HAD OBSERVED :- 'AS THE EXPENDITURE WAS ACCOUNTED IN THE REGULAR BO OKS, THE SOURCE IS OBVIOUSLY EXPLAINED. THE PROVISIONS OF SECTION 69C ARE NOT APPLICABLE AS THERE WAS NO UNACCOUNTED EXPENDITURE.' (UNDERLINING ADDED) 6. WHAT THE ASSESSING OFFICER ATTEMPTED TO DO WAS T O GO INTO THE AUTHENTICITY OF THE EXPENDITURE AND HE RETURNED A FINDING THAT THE EXPENDITURE WAS NOT AUTHENTICATED BY VOUCHERS AND CONSEQUENTLY, HE ADDE D THE SAID EXPENDITURE AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C. WE ARE I N AGREEMENT WITH THE OBSERVATIONS AND FINDINGS OF THE COMMISSIONER OF IN COME-TAX (APPEALS) AS WELL AS THAT OF THE INCOME-TAX APPELLATE TRIBUNAL T HAT THIS IS NOT A CASE WHICH FALLS UNDER SECTION 69C. CLEARLY, SECTION 69C REFER S TO THE SOURCE OF THE EXPENDITURE AND NOT TO THE EXPENDITURE ITSELF. CONSEQUENTLY, THE ASSESSING OFFICER WAS CLEARLY WRO NG IN TREATING THE SAID EXPENDITURE AS UNEXPLAINED EXPENDITURE UNDER SECTIO N 69C OF THE SAID ACT AND THE LOWER APPELLATE AUTHORITIES WERE RIGHT IN THEIR CONCLUSIONS IN DELETING THE SAID ADDITION. 7. COMING TO THE SECOND ASPECT OF THE MATTER, WE FI ND THAT BOTH THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL AS THE INCOME-TAX APPELLATE TRIBUNAL HAVE HELD THAT THE ADDITION IN A BLOCK ASS ESSMENT CAN ONLY BE MADE ON THE BASIS OF THE MATERIAL FOUND DURING THE SEARC H. NO MATERIAL AS SUCH WAS FOUND DURING THE SEARCH AND SEIZURE OPERATIONS AND IT IS ONLY IN THE SPECIAL 24 AUDIT DIRECTED BY THE ASSESSING OFFICER, WHO WAS UN ABLE TO FIND ANY MATERIAL AT THE TIME OF SEARCH, THAT THE AUTHENTICITY OF THE EX PENDITURES WERE DOUBTED. WE ARE OF THE VIEW THAT BOTH THE LOWER APPELLATE AUTHORITIES CORRECTL Y CAME TO THE CONCLUSION THAT THIS WAS NOT A CASE WHERE THE ADDIT ION WOULD BE JUSTIFIED IN BLOCK ASSESSMENT PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7 THE VARIOUS DECISIONS RELIED ON BY THE LD. CIT( A) ALSO SUPPORTS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DISCREPANCY BETWEEN BOOK VALUE AND PHYSICAL VALUE CANNOT BE TAXED U/S.6 9C AND CAN BE TAXED UNDER THE PROVISIONS OF SECTION 69 TO 69B ONLY. 9.8 SINCE IN THE INSTANT CASE THE EXPENDITURE HAS A LREADY BEEN ACCOUNTED FOR IN THE REGULAR BOOKS, THEREFORE, THE SOURCE IS OBVIOUSLY EXPLAINED. UNDER THESE FACTS AND CIRCUMSTANCES, RESPECTFULLY F OLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT CITED ABOVE AS WELL AS THE VARIOUS OTHER DECISIONS RELIED ON BY LD.CIT(A), WE HOLD THAT THE PROVISIONS OF SECTION 69C ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THERE IS NO EVIDENCE OF ANY UNACCOUNTED EXPENDITURE. THE DIFFE RENCE WAS ONLY ON ACCOUNT OF ESTIMATION OF THE VALUE OF WIP BY THE SI TE ENGINEERS. THE VARIOUS DECISIONS RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE ARE DISTINGUISHABLE ON FACTS AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAI LED REASONING GIVEN BY THE LD.CIT(A) WHILE DELETING THE ADDITION, WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THI S ISSUE IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. CO NO.34/PN/2012 (BY ASSESSEE) : 10. GROUNDS RAISED BY THE ASSESSEE IN THE CO ARE AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER 25 ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE A . O.'S ACTION OF TAXING THE RETENTION MONEY OF RS. 20,11,521/- WITHOUT APPRECIA TING THAT THE SAID AMOUNT DID NOT CONSTITUTE INCOME IN THIS YEAR. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T THE RETENTION MONEY WITHHELD / DEDUCTED BY THE APPELLANT COMPANY' S CUSTOMERS ACCRUED AS INCOME TO THE APPELLANT COMPANY ONLY ON EXPIRY O F DEFECT LIABILITY PERIOD PRESCRIBED IN THE CONSTRUCTION CONTRACTS AND HENCE, THE AMOUNT OF RS. 20,11,521/- TOWARDS RETENTION MONEY SHOULD NOT HAVE BEEN TAXED. 3. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE RA TIO OF BELOW MENTIONED DECISIONS : (A) CIT V ASSOCIATED CABLES P. LTD. (2006) 286 ITR 596 (BOM.) (B) DCIT V SPIRAX MARSHALL LTD. (2007) 109 TTJ (PUNE) 593 (C) NATIONAL HEAVY ENGG. CO. OP. LTD. V DCIT (2 007) 105 ITD 485 (PUNE) 4. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CLAIM MADE BY THE APPELLANT ON ACCOUNT OF RETENTION MONEY BEING NOT T AXABLE COULD NOT BE ENTERTAINED IN THE ASST. U/S. 143(3) SINCE THE SAID CLAIM WAS NOT MADE IN THE RETURN FILED U/S. 139(1) AND IN THE ASST. U/S. 143(3), THE APPELLANT COULD NOT RAISE A NEW CLAIM NOT MADE IN THE ORIGINAL RETUR N WITHOUT APPRECIATING THAT THERE WAS NO SUCH BAR IN SECTION 143(3) AND HENCE , THE CLAIM MADE OUGHT TO HAVE BEEN ALLOWED. 5. THE LEARNED CIT(A) FURTHER ERRED IN HOLDIN G THAT THE CLAIM MADE BY THE APPELLANT OF RETENTION MONEY WAS NOT MAINTAINABL E BECAUSE A. THE CLAIM WAS NOT MADE IN THE RETURN FILED BY THE APPELLANT BUT BY WAY FILING OF A LETTER WITHOUT APPRECIATING THAT TH E APPELLANT HAD MADE THE CLAIM DURING THE ASST. PROCEEDINGS AND HENCE, THE SAME OUGHT TO HAVE BEEN ALLOWED. B. IN CASE, THE CLAIM WAS ALLOWED, THE ASSESSED INCOME WO ULD HAVE BEEN LESSER THAN THE RETURNED INCOME WHICH WAS NOT PE RMITTED WITHOUT APPRECIATING THAT U/S. 143(3) THERE WAS NO SUC H BAR THAT THE ASSESSED INCOME COULD NOT BE A FIGURE LOWER THAN THE RE TURNED INCOME AND HENCE, THERE WAS NO REASON TO DISALLOW THE CLAIM OF THE APPELLANT WHICH WAS PERFECTLY JUSTIFIED IN LAW. 6. THE APPELLANT COMPANY CRAVES LEAVE TO ADD T O, ALTER, AMEND, MODIFY AND / OR DELETE ANY OR ALL OF THE ABOVE GROUNDS OF A PPEAL. 10.1 THE ASSESSEE HAS ALSO TAKEN AN ADDITIONAL GROU ND IN THE CO WHICH READS AS UNDER : 1] THE APPELLANT SUBMITS THAT WITHOUT PREJUDIC E TO THE GROUNDS OF APPEAL RAISED IN A.YS. 2003-04 AND 2006-07, IF AT ALL, THE RETENTION MONEY CLAIMED AS A DEDUCTION IN THOSE TWO YEARS IS NOT ALLOWED, I N THAT EVENT, THE RETENTION AMOUNT TO BE ALLOWED FOR THE CURRENT YEAR SHOULD BE THE RETENTION MONEY WITHHELD DURING THE CURRENT YEAR OF RS.26,15,68,604 /- AS REDUCED BY THE RETENTION MONEY RECEIVED IN THIS YEAR PERTAINING TO A.YS. 2007-08, 2008-09 & 2009-10 INSTEAD OF THE INCREMENTAL AMOUNT OF RS. 20, 11,52I/-. 26 10.2 THE LD. COUNSEL FOR THE ASSESSEE, REFERRING TO THE ABOVE ADDITIONAL GROUND SUBMITTED THAT THE ABOVE GROUND BEING PURELY A LEGAL GROUND AND SINCE ALL THE FACTS ARE ON RECORD, THEREFORE, THE S AME SHOULD BE ADMITTED FOR ADJUDICATION. 10.3 AFTER HEARING BOTH THE SIDES, THE ADDITIONAL G ROUND OF CO BEING A LEGAL GROUND IS ADMITTED. 11. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSI NG OFFICER IN THE INSTANT CASE HAS TAXED RETENTION MONEY OF RS.20,11, 521/- WHICH WAS NOT CLAIMED BY THE ASSESSEE AS A DEDUCTION IN THE RETUR N OF INCOME FILED. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S BY WAY OF A SEPARATE LETTER HAD CLAIMED FOR SUCH DEDUCTION. THE ASSESSI NG OFFICER REJECTED THE CLAIM OF THE ASSESSEE THAT THE RETENTION MONEY WITH HELD/DEDUCTED BY THE ASSESSEE FROM CUSTOMERS ACCRUED AS INCOME TO THE AS SESSEE COMPANY ONLY ON EXPIRY OF DEFECT LIABILITY PERIOD PRESCRIBED IN THE CONSTRUCTION CONTRACT AND THEREFORE THE AMOUNT OF RS.20,11,521/- TOWARDS RETENTION MONEY SHOULD NOT BE TAXED. 12. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER BY OBSERVING AS UNDER : 3.5 I HAVE CONSIDERED THE APPELLANT COMPANY'S SUBMISSI ONS AND OTHER MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE APPELLANT DID NOT CLAIM DEDUCTION OF RETENTION MONEY IN ITS RETURN . THE CLAIM WAS MADE BY WAY OF A LETTER SUBMITTED AT THE FAG END OF THE A SSESSMENT PROCEEDINGS. IN THE DECISION OF THE HON'BLE SUPREME COURT: IN THE CASE OF GOATS INDIA LTD., (284 ITR 323) IT IS NOTICED THAT THE DELHI HIGH COURT HAD DECIDED THIS ISSUE RELATING TO THE NON-ACCEPTANCE OF CLAIM MADE BY WAY OF A LETTER, NOT IN THE RETURN, IN FAVOUR OF THE DEPARTMENT, AND THI S DECISION OF THE HIGH COURT WAS UPHELD BY THE SUPREME COURT. THE SHORT POI NT INVOLVED IN THIS CASE WAS WHETHER A CLAIM OF DEDUCTION WHICH WAS NOT MA DE IN THE RETURN BY THE ASSESSEE, CAN BE ENTERTAINED BY THE ASSESSING OFFICE R OTHERWISE THAN THE ASSESSEE HAVING FILED A REVISED RETURN FOR THIS CLAIM. IT IS NOTICED FROM THE JUDGMENT THAT IN THIS CASE,' THE ASSESSING OFFI CER HAD REJECTED THE CLAIM MADE FOR THE DEDUCTION BEFORE HIM DURING THE ASSESSMENT PROCEEDINGS BY WAY OF A LETTER GIVEN BY THE ASSESSEE. HOWEVER, THE CIT(A) 27 ALLOWED THIS CLAIM AT THE FIRST APPELLATE LEVEL. DEPA RTMENT AGITATED THE MATTER BEFORE THE ITAT, WHICH DECIDED THE ISSUE IN FA VOUR OF THE DEPARTMENT, REVERSING THE ORDER OF THE CIT(A). SUBSE QUENTLY, THE DELHI HIGH COURT UPHELD THE ITATS ORDER IN I.T. APPEAL NO .770 OF 2004 DATED 17-12-2004. THE HONBLE SUPREME COURT IN THIS CASE A FFIRMED THE ORDER OF THE DELHI HIGH COURT. THESE GROUNDS OF APPEAL ARE, T HEREFORE, DISMISSED. 12.1 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US. 13. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ADDITIONAL CO IT HAS BEEN SUBMITTED THAT IF THE CLAIM OF RETENTIO N MONEY FOR A.YRS. 2003- 04 TO 2006-07 ARE NOT ALLOWED, IN THAT EVENT, THE R ETENTION MONEY FOR THIS YEAR BE ALLOWED AS REDUCED BY RETENTION MONEY PERTA INING TO A.YRS. 2007- 08 AND 2008-09 ONLY. REFERRING TO THE REVISED WORK ING OF THE CLAIM OF RETENTION MONEY HE SUBMITTED THAT THE SAME COMES TO RS.43,67,980/-. REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.YRS. 2003-04 AND 2006-07 TO 2008-09 VIDE ITA NOS. 727 TO 730/PN/2012 ORDER DATED 31-10-2013 HE SUBMITTED THAT THE TRIBUN AL HAS ALLOWED THE ASSESSEES REVISED CLAIM OF RETENTION MONEY. HOWEV ER, THIS ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE WORKING OF THE QUANTUM. HE ACCORDINGLY SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFF ICER WITH A DIRECTION TO VERIFY THE QUANTUM OF RETENTION MONEY TO BE ALLOWED DURING THIS YEAR IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS. 14. THE LD. DEPARTMENTAL REPRESENTATIVE WHILE SUPPO RTING THE ORDER OF THE CIT(A) FAIRLY CONCEDED THAT THE TRIBUNAL HAS RE STORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIO NS. THEREFORE, HE HAS NO 28 OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. 15. AFTER HEARING BOTH THE SIDES, WE FIND AN IDENTI CAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YR S. 2003-04 AND 2006- 07 TO 2008-09. WE FIND THE TRIBUNAL FROM PARA 22 O NWARDS HAS DISCUSSED THE ISSUE AND HAS ALLOWED THE CLAIM OF THE ASSESSEE WHICH WAS MADE BY WAY OF A LETTER DURING THE COURSE OF ASSESSMENT AND NOT IN THE RETURN OF INCOME. HOWEVER, THE TRIBUNAL HAS RESTORED THE ISS UE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE WORKING O F THE CLAIM MADE BY THE ASSESSEE. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 22 ONWARDS READ AS UNDER : 22. THUS, CONSIDERED IN THE AFORESAID LIGHT, WE FIND NO JUSTIFICATION FOR THE REVENUE TO REJECT ASSESSEES IMPUGNED CLAIM FOR ASSESSME NT YEARS 2007-08 AND 2008-09 ON THE GROUND THAT THE CLAIM WA S MADE BY WAY OF A LETTER DURING THE COURSE OF ASSESSMENTS AND NOT IN THE RE TURN OF INCOME. 23. THE THIRD OBJECTION WHICH HAS BEEN RAISED BY THE REVENUE IS IN TERMS OF A DISCUSSION MADE BY THE CIT(A) IN PARA 3.6 OF THE IMPUGNED ORDER. ACCORDING TO THE CIT(A), IF THE CLAIM FOR EX CLUDING RETENTION MONEY WAS ENTERTAINED AND ALLOWED, IT WOULD RESULT IN THE D ETERMINATION OF TOTAL INCOME AT A FIGURE BELOW THE INCOME ORIGINALLY RETU RNED/ASSESSED AND THUS THE SAME WAS NOT PERMISSIBLE. THIS OBJECTION OF THE REVENUE, IN OUR VIEW IS NO BAR TO ENTERTAIN THE AFORESAID CLAIM, KEEP ING IN MIND THE RATIO OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. SHELLY PRODUCTS & ANR., (2003) 261 ITR 367 (SC) AND ALSO THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT GA S CO. LTD. VS. CIT, 245 ITR 54 (GUJ). 24. ON THE BASIS OF THE AFORESAID DISCUSSION, IN CONCLUSIO N WE HOLD THAT IN SO FAR AS THE ASSESSMENT YEARS 2007-08 AND 2008-09 ARE CONCERNED, THE CLAIM OF THE ASSESSEE FOR EXCLUSION OF INCOME ON ACCOUNT RETENTION MONEY WITHHELD BY CONTRACTEES/CUSTOMERS HAS BEEN WRONGLY REJE CTED BY THE LOWER AUTHORITIES. 25. IN SO FAR AS THE MERITS OF THE CLAIM IS CONCERNED, NO DOUBT IN PRINCIPLE THE SAME IS COVERED BY THE RATIO OF THE JUD GEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED CABLES P. L TD. (SUPRA). THE ASSESSEE HAS ALSO FURNISHED THE YEAR-WISE WORKING OF THE C LAIM OF EXCLUDING INCOME ON ACCOUNT OF RETENTION MONEY FOR THE ASSESSMENT YEARS IN QUESTION. SUCH DETAILS ARE PLACED IN THE PAPER BOO K FILED BEFORE US AND IT HAS BEEN ASSERTED THAT THE SAME WAS ALSO AVAILABLE ON THE RECORD OF THE AUTHORITIES BELOW. OSTENSIBLY, THE ASSESSING OFFICER AS WEL L THE CIT(A) HAVE NOT EXAMINED THE MERITS OF THE CLAIM BECAUSE THE SAME WAS REJECTED AT THE THRESHOLD ITSELF. AT THE TIME OF HEARING, THE APPELLA NT HAS PREFERRED 29 ADDITIONAL GROUNDS OF APPEAL RE-QUANTIFYING THE CLAI M FOR ASSESSMENT YEARS 2007-08 AND 2008-09 IN THE EVENT OF SIMILAR CLA IMS NOT BEING FOUND EXIGIBLE FOR ASSESSMENT YEARS 2003-04 AND 2006-07. IN O RDER TO ENABLE THE ASSESSING OFFICER TO VERIFY THE WORKINGS OF THE CLAI M FOR ASSESSMENT YEARS 2007-08 AND 2008-09, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE WORKING OF THE CLAIM MADE BY THE ASSESSEE, INCLUDING THE REVISED WORKIN GS CONSEQUENT TO NON-ADMISSION OF SIMILAR CLAIM FOR ASSESSMENT YEARS 2003-04 AND 2006- 07, AND THEREAFTER ALLOW THE APPROPRIATE CLAIM AS PE R LAW. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF FURNISHING APPROPRIATE DETAILS IN SUPPORT OF THE CLAIM AND ONLY THEREAFTER THE ASSESSING OFFICER SHALL ADJUDICATE IT AS PER LAW AND RE-COMPUTE THE TOTAL INCOME ACCORDINGLY FOR THE ASSESSMENT YEARS 2007-0 8 AND 2008-09. 26. IN THE RESULT, IN SO FAR AS THE APPEALS FOR ASSESSMENT YEARS 2003-04 AND 2006-07 ARE CONCERNED THE SAME ARE DISMISSED; WHERE AS, THE APPEALS FOR ASSESSMENT YEARS 2007-08 AND 2008-09 ARE ALLOWED, AS ABOVE. 15.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS WE REST ORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO V ERIFY THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE DIRECTION OF THE TRIBU NAL. THE GROUNDS RAISED BY THE ASSESSEE IN THE CO ARE ACCORDINGLY ALLOWED F OR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CO FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 30-09-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PAN DA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 30 TH SEPTEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A) CENTRAL, PUNE 4. THE CIT CENTRAL, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE