Shrinathji Developers, Mehsana V. The Income tax Officer,Ward-2, Mehsana

ITA 1327/AHD/2013

• Counselvise Citation: 132720514 RSA 2013
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Keywords: Capital asset; Business income; Business expenditure; Income from undisclosed sources; Opportunity of being heard
• Section: 69C

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . , !' # $ $ $ $ % &', # BEFORE SHRI A.MOHAN ALANKAMONY,ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1327/AHD/2013 ( ) $*) ) $*) ) $*) ) $*) / / / / ASSESSMENT YEAR : 2008-09) SHRINATHJI DEVELOPERS F:4, SHREE COMPLEX OPPPETROL PUMP RADHANPUR ROAD MEHSANA 384 002 / VS. THE INCOME TAX OFFICER WARD-2 MEHSANA 384 002 #+ !' ./,- ./ PAN/GIR NO. :ABIFS 8132 J ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ! / APPELLANT BY : SHRI ANIL KSHATRIYA, AR /0+. 2 1 ! / RESPONDENT BY : SHRI KC MATHEWS, SR.DR %$3 2 '' / / / / DATE OF HEARING : 12/08/2013 4* 2 '' / DATE OF PRONOUNCEMENT : 30/09/2013 !5 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-GANDHINAGAR (CIT(A) FOR SHORT) DATED 04/02/2013 PERTAINING TO ASSESSMENT Y EAR (AY) 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.28,50,000/- U/S.40A(3) OF THE ACT ON ACCOUNT OF CASH PAYMENT MADE FOR PURCHASE OF LAND. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) HAS ERRED IN CONFORMING THE ADDITION OF RS.9,99,099 /- ON ACCOUNT OF EXPENSES CLAIMED IN P/L ACCOUNT. ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 2 - 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) HAS ERRED IN REJECTING THE APPELLANTS GROUNDS THAT THE A.O. HAS ERRED IN ESTIMATING AN INCOME OF RS.10,00,000/- ON ACCOUNT OF PROFIT & SALE OF PLOT NOT SHOWN THOUGH NOT MADE SEPARATELY . 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING FULLY THE SUBMISSIONS OF THE APPELLANT AND THEREBY ERRED IN MAKING ENHANCEMENT OF INCOME B Y RS.16,00,000/- U/S.69C OF THE ACT AND THEREBY FURTH ER ERRED IN INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT FOR CONCEALING THE PARTICULARS OF WITH REGARD TO THIS I NCOME OF RS.16,00,000/- AS INCOME NOT DISCLOSED IN THE RETUR N. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE A SSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/2010 THEREBY THE ASSESSING OFFICER(AO) MADE ADDITION ON ACCOUNT OF EXPENSES CLAIMED FROM UNACCOUNTED/NON-BU SINESS INCOME, ADDITION ON ACCOUNT OF PROFIT ON SALE OF PLOTS NOT SHOWN AND ADDITION ON ACCOUNT CASH PAYMENT MADE U/S.40A(3) OF THE ACT FOR LAND. AGAINST THIS, ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL. 3. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THI S TRIBUNAL. 3.1. FIRST GROUND OF THE APPEAL IS AGAINST CONFIRMA TION OF ADDITION OF RS.28,50,000/- MADE U/S.40A(3) OF THE ACT ON ACCOUN T OF CASH PAYMENT MADE FOR PURCHASE OF LAND. THE LD.COUNSEL FOR TH E ASSESSEE STRONGLY SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO CONSIDER THE SUBMISSIONS MADE BY THE LD.COUNSEL FOR THE ASSESSEE IN RIGHT PERSPECTIVE. HE POINTED OUT THAT ONE OF THE SUBMISSIONS OF THE A SSESSEE BEFORE THE LD.CIT(A) WAS THAT THE APPELLANTS CASE IS ALSO COV ERED BY SUB-CLAUSE(K) ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 3 - OF RULE 6DD OF THE IT RULES, 1962. HE SUBMITTED TH AT AS PER RULE 6DD(K), THE EXEMPTION IS AVAILABLE WHERE THE PAYMEN T IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. HE SUBMITTED TH AT THE PAYMENT WAS MADE THROUGH AGENT TO THE OWNER OF THE LAND. HE SU BMITTED THAT ADMITTEDLY THE LAND IS SHOWN AS STOCK-IN-TRADE, THE REFORE FALLS UNDER THE CATEGORY OF THE GOODS. FURTHER, HE SUBMITTED T HAT UNDER THE IDENTICAL FACTS, THE HONBLE ITAT KOLKATA SPECIAL BENCH RENDE RED IN THE CASE OF ITO VS. KENARAM SAHA AND SUBHASH SAHA (AND OTHER CO NNECTED APPEALS) REPORTED AT (2008) 301 ITR (AT) 171 (KOLKATA)(SB) H AD REMITTED THE MATTER BACK TO THE FILE OF AO TO DECIDE THIS ISSUE WHETHER THE PAYMENT HAS BEEN MADE THROUGH AGENT AND VERIFICATION OF SUC H PAYMENT. ON THE CONTRARY, LD.SR.DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT RULE 6DD(K) DOES NOT APPLY AND NO SUCH PLEA WAS TAKEN BEFORE THE AO. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL THE DECISION CITED BY THE LD.COUNSEL FOR TH E ASSESSEE. THE LD.CIT(A) FAILED TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE THAT PAYMENT IN CASH WAS MADE THROUGH THE AGENT FOR THE PURPOSE OF BUYING OF LAND. ALTHOUGH LD.CIT(A) HAS RECORDED THE SUBMISSIONS OF THE ASSESSEE IN PARA 6.3 AT PAGE 23 YET THIS SUBMISSION OF THE ASSESSEE IS NOT ADVERTED. DURING THE COURSE OF HEARING, LD.COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD THE MEANING OF AGENT AS GIVEN IN OXFORD DICTIONARY AN D THESAURUS III. AS PER AGENT MEANS (1) PERSON ACTING FOR ANOTHER IN BUSINESS ETC. AND (2) ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 4 - PERSON OR THING PRODUCING EFFECT. BROKER, DELEGATE , ENVOY, EXECUTOR, FUNCTIONARY, GO-BETWEEN, INTERMEDIARY, MEDIATOR, MI DDLEMAN, NEGOTIATOR, PROXY, REPRESENTATIVE, SURROGATE, TRUSTEE. THE L D.SR.DR COULD NOT POINT OUT FROM THE ORDER OF LD.CIT(A) WHERE THE SUBMISSIO N OF THE ASSESSEE THAT THE PAYMENT WAS MADE TO THE AGENT WHO WAS REQUIRED TO MAKE PAYMENT IN CASH FOR PURCHASE OF LAND ON BEHALF OF ASSESSEE IS DEALT WITH BY THE LD.CIT(A). WE FIND THAT LD.CIT(A) NOWHERE IN HIS O RDER HAS ADVERTED TO AND DECIDED THIS SUBMISSION OF THE ASSESSEE. THERE FORE, IN OUR CONSIDERED VIEW, DECISION OF LD.CIT(A) ON THIS ISSUE IS NOT JU STIFIED, THE SAME IS HEREBY SET ASIDE. HOWEVER, THIS BEING LEGAL ISSUE, THEREFORE, IN THE INTEREST OF JUSTICE, THE SAME IS RESTORED BACK TO T HE FILE OF AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE PAYMENT WAS MADE TO THE AGENT FOR THE PURPOSE OF BUYING THE LAND AND THE PERSON TO WHOM T HE SALE CONSIDERATION WAS HANDED OVER IN CASH WAS ACTING AS AN AGENT TO T HE ASSESSEE. NEEDLESS TO SAY THAT THE AO WOULD GIVE REASONABLE OPPORTUNIT Y OF HEARING TO THE ASSESSEE. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE PROVISIONS OF RULE 6DD(K) OF THE IT RULES, 1962 . THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 5. GROUND NOS.2, 3 & 4 ARE INTER-CONNECTED AND HENC E DISPOSED OF TOGETHER. 5.1. THE BRIEF FACTS REGARDING THESE ISSUES TILL TH E ASSESSMENT STAGE ARE NOTED BY THE LD.CIT(A) IN PARAGRAPH NOS.5.1 TO 5.4, WHICH ARE REPRODUCED BELOW:- 5.1. IN APPELLANTS CASE SURVEY PROCEEDINGS WERE C ONDUCTED ON THE BUSINESS PREMISES ON 13/3/2008. DURING THE PROCEEDINGS, ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 5 - THE STATEMENT OF SHRI AMITKUMAR K.PATEL, PARTNER OF THE FIRM WAS RECORDED ON OATH. SHRI AMITKUMAR K.PATEL IN REPLY TO Q.NO.22 OF HIS STATEMENT HAD STATED THAT SHRINATHJI DEVELOP ERS HAD SPENT RS.15 LAC TO 16 LAC FOR DEVELOPING (I) PARTY LAWN A ND STAGE (II) GARDEN (III) GARDEN & CLUB HOUSE (IV) CHILDREN PLAY AREA IN RADHE KUTIR. WHEN ASKED, TO EXPLAIN THE SOURCE OF THE TRANSACTIONS; IN REPLY TO Q.NO.23, HE ADMITTED THAT THE EXPENSES OF DEVELOPING WERE NOT DEBITED IN THE BOOKS OF ACCO UNT OF THE FIRM AND THE SOURCE WAS NOT EXPLAINED. HE FURTHER AGREED TO DECLARE THESE EXPENSES MADE BY THEM AS THEIR INCOME AND AGREED TO PAY TAX ARISING THEREON. 5.2. FROM THE ACCOUNTS AND THE RETURN FILED BY THE APPELLANT, IT IS OBSERVED THAT IT HAS NOT RETRACTED THE STATEMENT OR DENIED THE CONTENTS. THE APPELLANT IN ITS WISDOM HAS AS A CON SEQUENCE; SHOWN RS.16 LAC INCOME AND HAS BY A SINGLE ENTRY IN THE BOKS OF ACCOUNT AFTER SURVEY INTRODUCED EQUIVALENT CASH . 5.3. THE APPELLANT HAS SHOWN THIS RS.16 LACS INTR ODUCED IN CASH AFTER SURVEY AS ITS BUSINESS INCOME; AND HAS CLAIME D RS.9,99,009/- SO CALLED EXPENSES LIKE ADVERTISING P ARTNERS SALARY, INTEREST, ARCHITECT FEE FROM THE P&L ACCOUNT. IT HAS NOT DECLARED ANY REVENUE RECEIPTS OTHER THAN THE ABOVE RS.16 LAC . 5.4. THE AO IN HIS WISDOM HAS DECIDED THE ISSUE, BR IEFLY STATED ON THE FOLLOWING LINES: (A) THE EXPENSES OF RS.9,99,099/- LISTED IN PAR.3, PAGE -2 OF THE ASSESSMENT ORDER HAVE BEEN DISALLOWED HOLDING T HAT THESE WERE EXPENSES OUT OF UNDISCLOSED SOURCES AND OUT OF BOOKS OF ACCOUNT; AND FURTHER THE EXPENSES ARE RELA TED TO BUSINESS AND NO BUSINESS INCOME HAS BEEN SHOWN BY I T AND WENT ON TO ADD THE SUM AS ASSESSEES INCOME. (B) THE AO COMMENTED THAT ONE OF THE PARTNERS HAD C ONFESSED DURING THE SURVEY THAT THEY HAVE SOLD OUT 10 PLOTS. THE FIRM HAS NOT DISCLOSED ANY INCOME ON SUCH SALES. I T HAS BEEN CLAIMED BY THE FIRM THAT THE SALE TRANSACTION HAS NOT BEEN COMPLETED AND THEREFORE THE RECEIPTS FROM PROSPECTIVE BUYERS HAVE BEEN DIRECTLY TAKEN TO THE BALANCE SHEET. THE AO DID NOT ACCEPT THAT THE REVENUE SHOU LD NOT ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 6 - HAVE BEEN RECOGNIZED FROM SUCH SALES AND ESTIMATED THE INCOME FROM THE SALE OF PLOTS AT RS.10 LAC. HOWEVE R, HE TREATED THIS RS.10 LAC AS COVERED IN UNDISCLOSED IN COME SHOWN SEPARATELY AT RS.16 LAC. 6. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A). AFTER EXAMINING THE FACTS, LD.CIT(A) IS SUED A NOTICE FOR ENHANCEMENT AND AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, LD.CIT(A) NOT ONLY UPHELD THE ADDITION MADE BY THE AO OF RS.9,99,009/- BUT ALSO HE ENHANCED THE ASSESSMENT BY AN AMOUNT OF RS.16 LACS. THE BASIS OF LD.CIT(A)REGARDING CONFIRMING THE ADDITION MADE BY THE AO AND MAKING ENHANCEMENT WAS THIS THAT THE ADDITION OF UN EXPLAINED EXPENSES WHOSE SOURCE WAS ADMITTEDLY NOT THERE AND, THEREFOR E, WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS AND, THEREFORE, THIS AMOUN T WAS REQUIRED TO BE ADDED U/S.69C OF THE ACT. HE HAS FURTHER NOTED ON PAGE-11 OF HIS ORDER THAT NO SUCH INCOME HAS BEEN OFFERED BY THE ASSESSE E AND THE INCOME OFFERED IS BY CASH ENTRY WHICH HAD BEEN SUBSEQUENTL Y UTILIZED IN THE BOOKS OF ACCOUNTS AND CANNOT BE SAID TO BE RELATED TO EXPENSES ALREADY INCURRED. HE HAS ALSO GIVEN A FINDING THAT THESE E XPENSES ARE NOT ALLOWABLE BECAUSE OF THE SPECIFIC PROVISO TO SECTIO N 69C OF IT ACT. ON THIS BASIS, HE UPHELD THE ADDITION MADE BY THE AO A ND ALSO MADE ENHANCEMENT OF RS.16 LACS. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US ON THESE COUNTS. 6.1. IT WAS SUBMITTED BY THE LD.AR OF THE ASSESSEE THAT THESE EXPENSES OF RS.9,99,009/- ARE ALLOWABLE BUSINESS EXPENDITURE WHICH HAS BEEN INCURRED FROM UNACCOUNTED INCOME DISCLOSED BY THE A SSESSEE AND, THEREFORE, SHOULD HAVE BEEN ALLOWED. REGARDING THE ENHANCEMENT OF THE ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 7 - INCOME BY THE LD.CIT(A) OF RS.16 LACS, IT WAS SUBMI TTED BY THE LD.AR OF THE ASSESSEE THAT THE ASSESSEE HAS ALREADY DECLARED THIS INCOME OF RS.16 LACS IN THE RETURN OF INCOME AND, THEREFORE, THE EN HANCEMENT MADE BY THE LD.CIT(A) IS DOUBLE ADDITION AND, THEREFORE, SHOULD BE DELETED. 7. REGARDING GROUND NO.3 IN RESPECT OF THE ESTIMATI ON OF INCOME OF RS.10 LACS ON ACCOUNT OF PROFIT ON SALE OF PLOTS, L D.AR OF THE ASSESSEE SUBMITTED THAT NO SALE OF PLOTS WAS MADE, THEREFORE THERE IS NO QUESTION OF UNACCOUNTED INCOME ON THIS ISSUE, THE ORDERS OF THE LOWER AUTHORITIES ON THIS ASPECT MAY BE REVERSED. AS AGAINST THIS, LD. DR OF THE REVENUE SUPPORTED THE ORDER OF THE LD.CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R CONSIDERED OPINION, WE HAVE TO DECIDE THREE ISSUES. THE FIRST ISSUE IS REGARDING ADDITION MADE BY THE AO OF RS.9,99,009/- BY DISALLO WING THE CERTAIN EXPENSES CLAIMED BY THE ASSESSEE HAVING BEEN INCURR ED OUT OF UNACCOUNTED INCOME DISCLOSED BY THE ASSESSEE. THE SECOND ISSUE IS REGARDING ESTIMATED INCOME OF RS.10 LACS ESTIMATED BY THE AO IN RESPECT OF PROFIT ON SALE OF PLOTS, ALTHOUGH NO SEPARATE AD DITION WAS MADE BY THE AO IN RESPECT OF THIS AMOUNT BY HOLDING THAT THE SA ME AMOUNT WAS USED BY THE ASSESSEE FOR INCURRING THE UNACCOUNTED EXPEN DITURE OF RS.16 LACS. THE THIRD ISSUE IS IN RESPECT OF ENHANCEMENT MADE B Y THE LD.CIT(A) OF RS.16 LACS. 8.1. FIRST WE DECIDE THE FIRST ISSUE REGARDING DISA LLOWANCE MADE BY THE AO OF RS.9,99,009/-. ON THIS ASPECT, WE FIND THAT IT IS NOTED BY THE AO ON PAGE NO.2 OF THE ASSESSMENT ORDER THAT ALTHOUGH THE ASSESSEE HAS ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 8 - VOLUNTARILY DECLARED OF AN INCOME OF RS.16 LACS IN ADDITION TO ITS REGULAR INCOME HAVING BEEN DECLARED IN THE COURSE OF SURVEY U/S.133A OF THE IT ACT. THE ASSESSEE HAS CLAIMED EXPENSES OF RS.9,99, 009/- FROM UNACCOUNTED INCOME DISCLOSED BY IT AND THE DETAILS OF SUCH EXPENSES ARE ALSO NOTED BY THE AO ON THE SAME PAGE OF THE ASSESS MENT ORDER. THE SAME INCLUDES MAINLY INTEREST EXPENDITURE OF RS.3.8 7 LACS PARTNERS SALARY AND INTEREST RS.4.93 LACS AND OTHER MISCELLANEOUS E XPENSES, SUCH AS, ADVERTISING, ARCHITECT FEE, BANK CHARGES, ELECTRIC AND OFFICE EXPENSES, ETC. THIS CLAIM WAS DISALLOWED BY AO AND CONFIRMED BY LD .CIT(A) ON THE BASIS THAT THE SAME IS INCURRED OUT OF UNDISCLOSED INCOME DECLARED IN THE COURSE OF SURVEY ON THE BASIS OF VARIOUS EXPENSES A ND, THEREFORE, AS PER PROVISO TO SECTION 69-C OF THE IT ACT, THE SAME IS NOT ALLOWABLE. BUT WE FIND THAT AS PER PARAGRAPH NO.5.7 OF THE ORDER OF T HE LD.CIT(A), THE DETAILS OF EXPENSES INCURRED BY THE ASSESSEE OF RS.16 LACS FOR WHICH DISCLOSURE WAS MADE DURING THE COURSE OF SURVEY IS REGARDING P URCHASES OF RS.11,67,594/-, CARTING EXPENSES OF RS.1,97,647/-, DEVELOPMENT EXPENSES OF RS.2,10,000/- AND LABOUR EXPENSES OF RS .32,000/- TOTALLING TO RS.16,07,241/-, WHEREAS THE ASSESSEE DECLARED AN AM OUNT OF RS.16 LACS IN THE COURSE OF SURVEY. HENCE, IT CANNOT BE SAID THA T THESE EXPENSES OF RS.9.99 LACS WERE INCURRED IN RESPECT OF THIS INCOM E OF RS.16 LACS DECLARED BY THE ASSESSEE IN THE COURSE OF SURVEY. THIS CANNOT ALSO BE INFERRED THAT THE ASSESSEE IN CLAIMING ANY DEDUCTIO N IN RESPECT OF AMOUNT OF RS.16 LACS WHICH WAS DECLARED BY THE ASSESSEE DU RING THE COURSE OF SURVEY AND, THEREFORE, IN OUR CONSIDERED OPINION, P ROVISO TO SECTION 69-C OF THE ACT IS NOT APPLICABLE IN RESPECT OF THESE E XPENSES OF RS.9.99 LACS BUT AT THE SAME TIME, IT IS ALSO REQUIRED TO BE EX AMINED REGARDING THE ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 9 - SOURCE OF THESE EXPENSES OF RS.9.99 LACS BECAUSE IF THESE EXPENSES ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND THE SAME IS A LREADY PAID, THEN ITS SOURCE OF PAYMENT REQUIRES EXPLANATION BECAUSE THE AMOUNT DECLARED BY THE ASSESSEE DURING THE COURSE OF SURVEY OF RS.16 L ACS WAS USED BY THE ASSESSEE FOR INCURRING OTHER EXPENSES OF RS.16,07,2 41/- (DETAILS OF WHICH ARE NOTED BY THE LD.CIT(A) IN PARAGRAPH NO.5.78 OF HIS ORDER). IT MAY BE THAT THESE EXPENSES ARE NOT PAID BUT INCURRED AND R EMAINED UNPAID. IT ALSO MAY BE THAT THE SAME WERE DULY ACCOUNTED BY TH E ASSESSEE IN THE BOOKS OF ACCOUNTS AFTER SURVEY. THESE FACTS WAS NE VER EXAMINED BY THE LOWER AUTHORITIES AND THERE IS NO FINDING BY THEM I N THIS RESPECT. BEFORE US ALSO, NECESSARY FACTS ARE NOT PRODUCED AND MADE AVAILABLE. HENCE, IN OUR CONSIDERED OPINION, THIS ISSUE SHOULD GO BACK T O THE FILE OF AO FOR FRESH DECISION. HENCE, WE SET ASIDE THE ORDER OF T HE LD.CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF A O FOR DECISION AFRESH. THE BURDEN IS ON THE ASSESSEE TO PRODUCE THE NECESS ARY DETAILS ALONG WITH SUITABLE EVIDENCES REGARDING SOURCE OF INCURRING TH IS EXPENDITURE OF RS.9.99 LACS OR IF THE SAME WAS UNPAID DURING RELEV ANT POINT OF TIME, THEN WHEN AND HOW THE SAME WAS ACTUALLY PAID. IF THE AS SESSEE IS ABLE TO ESTABLISH THE VALID SOURCE OF THESE EXPENSES, THEN THE SAME SHOULD BE CONSIDERED FOR ADDITION IN THE VALUE OF THE CLOSING STOCK ON WIP IN RESPECT OF ALL OTHER ITEMS EXCEPT PARTNERS SALARY OF RS.4,88,160/-. REGARDING PARTNERS SALARY, THE AO HAS TO EXAMINE T HE ALLOWABILITY AS PER THE PROVISIONS OF SECTION 40(B) OF THE ACT BY EXAMI NING THE AMOUNT OF BOOK PROFITS THE TERMS IN THE PARTNERSHIP-DEED AND THE P&L ACCOUNT, ETC. AND IF IT IS FOUND THAT THE SAME IS ALLOWABLE AS PE R PROVISIONS OF SECTION 40(B) OF THE ACT, THEN THE SAME SHOULD BE ALLOWED A S PER LAW. ON THIS ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 10 - ASPECT, WE CANNOT DECIDE THE ISSUE HERE ITSELF BECA USE NEITHER THE COPY OF PARTNERSHIP-DEED NOR THE COPY OF P&L ACCOUNT, ETC. ARE MADE AVAILABLE TO US BY ANY SIDE. WITH THESE DIRECTIONS, WE RESTORE THIS MATTER ALSO BACK TO THE FILE OF AO AS PER DISCUSSION MADE HEREINABOVE A ND AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8.2. REGARDING SECOND ISSUE, I.E. GROUND NO.3, WE A RE OF THE CONSIDERED OPINION THAT NO SEPARATE ADDITION WAS MADE BY THE A O IN THIS REGARD AND NO MATERIAL FACTS HAS BEEN BROUGHT ON RECORD BY HIM IN RESPECT OF ACTUAL SALE OF PLOTS AND PROFIT THEREON. HE HAS MADE TH E OBSERVATION IN THE ASSESSMENT ORDER THAT THE ASSESSEE MIGHT HAVE EARNE D THIS MUCH PROFIT BY SELLING PLOTS ON THE BASIS OF THE STATEMENT OF ONE OF THE PARTNERS BY IGNORING THE EXPLANATION OF THE ASSESSEE THAT ALTHO UGH TALKS WERE GOING FOR SALE OF TEN PLOTS BUT SUCH SALE DID NOT MATERIA LIZE BECAUSE THE INCOME TAX SURVEY TOOK PLACE AT THE SAME POINT OF TIME. I N THE ABSENCE OF ANY EVIDENCE HAVING BEEN BROUGHT ON RECORD BY THE AO RE GARDING ACTUAL SALE AND ACTUAL PROFIT, WE ARE OF THE CONSIDERED OPINION THAT NO SUCH ADDITION IS JUSTIFIED. MOREOVER, THE OBSERVATION OF THE AO T HAT THIS AMOUNT MIGHT HAVE BEEN UTILIZED FOR THE PURPOSE OF INCURRING EXP ENDITURE MADE OUT OF BOOKS IS ON THE BASIS OF CONJECTURES AND SURMISES. THE AO OUGHT TO HAVE BROUGHT ON RECORD SOME EVIDENCES IN SUPPORT OF HIS FINDING. IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT THIS ADDITION IS NOT CALLED FOR BECAUSE NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO REGAR DING ACTUAL SALE OF PLOTS. GROUND NO.3 IS ALLOWED. ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 11 - 9. REGARDING GROUND NO.4, WE FIND THAT THIS ENHANCE MENT WAS MADE BY THE LD.CIT(A) ON THIS BASIS THAT THE AMOUNT DECL ARED BY THE ASSESSEE IN THE COURSE OF SURVEY OF RS.16 LACS WAS IN RESPECT O F EXPENSES INCURRED BY THE ASSESSEE OUT OF UNDISCLOSED SOURCES BUT IN THE BOOKS OF ACCOUNTS THE ASSESSEE HAD NOT ACCOUNTED FOR THE EXPENSES BUT THE ASSESSEE HAS ACCOUNTED FOR THE INCOME ONLY AND THE SAME WAS SHOW N AS CASH IN HAND WHICH WAS USED SUBSEQUENTLY FOR OTHER PURPOSES. IN OUR CONSIDERED OPINION, ON THIS ISSUE ALSO, THE MATTER REQUIRES RE -EXAMINATION BECAUSE EVEN IF THE ASSESSEE HAD ACCOUNTED THIS INCOME OF R S.16 LACS BY MAKING ADDITION IN CASH IN HAND, THEN ALSO, IT HAS TO BE S EEN AS TO WHETHER SUCH CASH WAS ACTUALLY UTILIZED FOR THE PAYMENT OF THE S AME EXPENSES OF RS.16,07,241/- THE DETAILS OF WHICH ARE NOTED BY LD .CIT(A) IN PARAGRAPH NO.5.7 OF HIS ORDER. IN THE SAME PARAGRAPH, IT IS NOTED BY THE LD.CIT(A) THAT THESE EXPENSES WERE UNACCOUNTED AT THE TIME O F SURVEY BUT WAS REGULAR EXPENSES IN THE NATURE OF BUSINESS EXPENDIT URE, THE PAYMENT OF WHICH WAS MADE BY CHEQUE ONLY IN REGULAR COURSE AS AND WHEN DUE. HENCE, THIS FACT HAS TO BE EXAMINED AS TO WHETHER S UCH CASH WAS ACTUALLY UTILIZED FOR THE PAYMENT OF THE SAME EXPENSES OR NO T AND IF IT IS FOUND THAT SUCH CASH WAS USED BY THE ASSESSEE FOR MAKING OF TH E SAME EXPENSES, THEN NO SEPARATE ADDITION IS CALLED FOR IN RESPECT OF SUCH ENTRY IN THE BOOKS. IT WILL ALSO BE RELEVANT TO EXAMINE AS TO W HETHER SEPARATE DEDUCTION WAS CLAIMED BY THE ASSESSEE IN RESPECT OF THOSE EXPENSES WHICH WERE ACCOUNTED BY THE ASSESSEE AFTERWARDS. T HE BASIS OF ACCOUNTING FOR THESE EXPENSES HAS TO BE EXAMINED B ECAUSE THE SAME MAY BE ACCOUNTED FOR BY DEBITING TO SOME CAPITAL ASSET AND IN THAT SITUATION, THE ENHANCEMENT IS NOT JUSTIFIED. WITH THESE OBSER VATIONS, WE SET SIDE ITA NO.1327 /AH D/2013 SHRINATHJI DEVELOPERS VS. ITO ASST.YEAR 2008-09 - 12 - THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AND RESTOR E THE MATTER ALSO BACK TO THE FILE OF AO FOR A FRESH DECISION ON MERITS AF TER EXAMINING THE FACTS AND EVIDENCES AS PER ABOVE DISCUSSION AND AFTER PRO VIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREF ORE, GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE SD/- SD/- (. ) (% &') !' # # ( A. MOHAN ALANKAMONY ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/ 09 /2013 8.., $.../ T.C. NAIR, SR. PS !5 2 /'9 :!9*' !5 2 /'9 :!9*' !5 2 /'9 :!9*' !5 2 /'9 :!9*'/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. ' %; / CONCERNED CIT 4. %;() / THE CIT(A)-GANDHINAGAR 5. 9$&< /' , , / DR, ITAT, AHMEDABAD 6. <) =3 / GUARD FILE. !5% !5% !5% !5% / BY ORDER, 09' /' //TRUE COPY// > >> >/ // / , , , , ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD