M/s. Anriya project Management Services Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 136/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0683 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREETHI GARG
• Assessee Lawyers: SHANKAR
• Keywords: Agreed addition; Reason to believe
• Section: 40A(3); 143(3); 153A; 234B; 80IB; 69; 132

Judgement Text

ITA NO.136 & 137/B/09 1 IN THE INCOME TAX APPEL LATE TRIBUNAL, BANGALORE BENCH B BEFORE GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS.136 & 137/BANG/2009 (ASSESSMENT YEAR 2005-06 & 2006-07) M/S ANRIYA PROJECT MANAGEMENT SERVICES PVT. LTD., NO.42, 3 RD FLOOR, RR PLAZA, 3 RD CROSS, 8 TH MAIN, VASANTHANAGAR, BANGALORE-560 052. . APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(2), QUEENS ROAD, BANGALORE. . RESPONDENT APPELLANT BY : SHRI SHANKAR RESPONDENT BY : SMT. PREETHI GARG O R D E R PER GEORGE GEORGE K, JUDICIAL MEMBER : THESE TWO APPEALS PREFERRED BY THE ASSESSEE A PR IVATE LIMITED COMPANY ARE AGAINST THE ORDERS OF THE CIT (A)-VI, BANGALORE, FOR THE ASSESSMENT YEARS (AYS) 2005-06 AND 2006-07. AY 2005-06 ITA NO:136: 2. THE ASSESSEE HAS RAISED THIRTEEN EXHAUSTIVE GRO UNDS WHICH ARE IN ILLUSTRATIVE MANNER. ON A PERUSAL, GR OUND NOS: 1, 12 AND ITA NO.136 & 137/B/09 2 13 ARE GENERAL IN NATURE AND NO SPECIFIC ISSUES INV OLVED WHICH, IN OUR CONSIDERED VIEW, DO NOT SURVIVE FOR ADJUDICATION. 2.1. IN GROUND NO.11, THE ASSESSEE DENIES ITS LIAB ILITY TO BE CHARGED TO INTEREST U/S 234A, 234B AND 234C OF THE ACT. THIS GROUND CANNOT BE ENTERTAINED AS THE CHARGING OF INTEREST U NDER THESE SECTIONS IS MANDATORY AND CONSEQUENTIAL IN NATURE. 2.2. THERE WAS ANOTHER GROUSE OF THE ASSESSEE THAT THE CALCULATION OF INTEREST U/S 234A AND 234B OF THE AC T WAS NOT IN ACCORDANCE WITH THE ACT AS THE AO HAD FAILED TO CON SIDER THE AMOUNT PAID U/S 140A OF THE ACT. WHILE GIVING EFFECT TO T HIS COMMON ORDER, THE AO SHALL LOOK INTO THE MISGIVING OF THE ASSESSEE AN D TAKE REMEDIAL ACTION, IF FOUND NECESSARY. 2.3. IN THE REMAINING GROUNDS, THE CRUXES OF THE I SSUES, FOR THE SAKE OF CONVENIENCE AND CLARITY, ARE REFORMULAT ED IN CONCISE MANNERS AS UNDER: (I) THE ASSESSMENT WAS BAD IN LAW AS THE MANDATORY COND ITIONS TO INVOKE THE JURISDICTION U/S 153A OF THE ACT DID NOT EXIST OR HAVING NOT BEEN COMPLIED WITH - AS THE REASONS FOR ISSUANCE OF NOTICE U/S 153A WERE NOT GIVEN AND THE ASSESSEE HAD REASON TO BELIEVE THAT T HE SAME WAS NOT RECORDED, THE MANDATORY CONDITIONS TO ASSUME JURISDICTION WAS TO RECORD REASONS AND IN TH E ABSENCE OF THE SAME, THE ASSESSMENT WAS BAD IN LAW; ITA NO.136 & 137/B/09 3 (II) WITHOUT PREJUDICE, THE ASSESSEE DENIES ITSELF LIABL E TO BE ASSESSED AT RS.8.08 CRORES AS AGAINST RS.70.34 LAKH S RETURNED; - THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLO WING THE CLAIM OF RS.7.25 CRORES U/S 80-IB(1) OF THE ACT; - THE AUTHORITIES HAVE FAILED TO SEE REASON FOR ADOPT ING THE DEFINITION OF BUILT UP AREA AS PER BUILDING INDUST RY STANDS AND THE BYE-LAWS OF THE BBMP IN THE ABSENCE OF BUI LT UP AREA IN THE ACT; (III) THE DEFINITION OF BUILT UP AREA WAS BROUGHT ON TH E STATUTE ONLY ON 10/9/2004 BY THE FINANCE ACT 2004 W.E.F. 1. 4.2005 AND THE ASSESSEE WAS UNDER BONA-FIDE BELIEF THAT IT CAN CLAIM DEDUCTION U/S 80-IB (10) OF THE ACT RELIED ON THE DECISION IN THE CASE OF M/S.BAJAJ TEMPO V CIT (196 ITR 188 SC ); - THE AUTHORITIES OUGHT TO HAVE DISALLOWED THE CLAIM PROPORTIONATELY U/S 80 IB WITH REGARD TO TWELVE FLA TS WHICH PURPORTED TO HAVE EXCEEDED THE MAXIMUM CEILING LIMI T - PLACES RELIANCE ON IN THE CASE OF CIT V. BENGAL AMB UJA HOUSING DEVELOPMENT LIMITED IN ITA NO: 1735/KOL/200 5 ITAT, KOLKATTA; (IV) ADDITIONS ARE DISPUTED IN THE FOLLOWING - RS.3.5 LAKHS PAYMENTS MADE TOWARDS THE PURCHASE OF FLAT; - RS.1.0 LAKH BEING 1/5 TH OF THE TOTAL PAYMENT OF RS.5 LAKHS MADE TOWARDS THE PURCHASE OF LAND TO C.NARAYANASWAMY DISALLOWANCE EFFECTED TWICE; & - RS.8.67 LAKHS BEING 1/5 TH OF RS.43.37 LAKHS DISALLOWED. AY 2006-07 ITA NO:137: 3. OUT OF TEN GROUNDS, GROUND NOS: 1,2, 9 AND 10 A RE DISMISSED AS THEY WERE LARGELY GENERAL AND NO SERIO US ISSUES INVOLVED FOR WORTH CONSIDERATION. 3.1. IN GROUND NO.8, THE ASSESSEE DENIES ITS LIABI LITY TO BE CHARGED TO INTEREST U/S 234A, 234B AND 234C OF THE ACT. THIS GROUND ITA NO.136 & 137/B/09 4 CANNOT BE ENTERTAINED AS THE CHARGING OF INTEREST U NDER THESE SECTIONS IS MANDATORY AND CONSEQUENTIAL IN NATURE AND, THUS DISMISSED AS SUCH. 3.2. IN THE REMAINING GROUNDS, THE SUBSTANCE AND E SSENCE OF THE ISSUES RAISED ARE CULLED OUT AND REFRAMED AS UN DER: (I) DISALLOWANCE OF RS.1.41 CRORES U/S 80-IB(10) OF THE ACT WAS UNJUSTIFIED; - THE AUTHORITIES FAILED TO APPRECIATE THE ADOPTION O F THE CONCEPT OF BUILT-UP AREA AS PER THE BUILDING INDU STRY STANDARD AND ALSO THE BYE-LAWS DEFINED BY THE BBMP IN THE ABSENCE OF SUCH DEFINITION IN THE ACT; (II) THE AUTHORITIES OUGHT TO HAVE DISALLOWED THE C LAIM PROPORTIONATELY U/S 80 IB WITH REGARD TO THREE FLAT S WHICH PURPORTED TO HAVE EXCEEDED THE MAXIMUM CEILING LIMI T. 4. AS THE ISSUES RAISED IN THESE APPEALS ARE RATHE R IDENTICAL, FOR THE SAKE OF CONVENIENCE, BOTH THE APPEALS ARE C ONSIDERED TOGETHER AND DISPOSED OFF IN THIS COMMON ORDER. AYS 2005-06 & 2006-07: 5. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE A SSESSEE WAS CARRYING ON THE BUSINESS OF DEVELOPING AND CONSTRUC TION OF RESIDENTIAL FLATS. DURING THE YEARS UNDER DISPUTE, THE ASSESSE E WAS EXECUTING TWO PROJECTS ANRIYA DWELLINGTON PHASE I & II CONSISTI NG OF 152 AND 11 FLATS RESPECTIVELY. 5.1. THE PREMISES OF THE ASSESSEE AND THE RESIDENC ES OF ITS DIRECTORS WERE SUBJECTED TO ACTION U/S 132 OF THE A CT ON 30/9/05. IN ITA NO.136 & 137/B/09 5 COMPLIANCE TO A NOTICE U/S 153A OF THE ACT FOR THE AY 2005-06, THE ASSESSEE HAD FURNISHED A ROI, ADMITTING AN INCOME O F RS.70.34 LAKHS AFTER CLAIMING DEDUCTION U/S 80-IB. THE AO, HAD, H OWEVER, CONCLUDED THE ASSESSMENT U/S 143(3) RWS 153A OF THE ACT, DETE RMINING THE INCOME AT RS.8.08 CRORES. IN DOING SO, THE AO HAS OBSERVED THUS (I) WHILE PURCHASING A FLAT NO.2 IN ANRIYA RESIDENC Y, THE ASSESSEE HAD PAID THE CONSIDERATION OF RS.15 LAKHS THROUGH CHEQUES AND CASH OF RS.3.5 LAKHS. HOWEVER, THE CAS H PAID WAS NOT FINDING A PLACE IN THE BOOKS OF ACCOUNT. W HEN THE AR OF THE ASSESSEE WAS CONFRONTED, HE HAD AGREED FO R ADDITION. HENCE, ADDITION OF RS.3.5 LAKHS WAS MADE U/S 69 OF THE ACT; (II) THE ASSESSEE HAD PURCHASED LANDS AT ALLALASAND RA FOR A CONSIDERATION OF RS.3 CRORES AS PER SALE DEED DATED : 16.3.2005. HOWEVER, AS PER RECORDS, RS.2.95 CRORES WERE PAID THROUGH CHEQUES/DDS AND THE BALANCE OF RS.5 LA KHS WAS THROUGH CASH. AS THE ASSESSEE HAD CONTRAVENED THE PROVISIONS OF S.40A(3), 1/5 TH OF RS.5 LAKHS WAS DISALLOWED, FOR WHICH, THE AR HAD CONSENTED; (III) DEDUCTION U/S 80-IB OF RS.7.25 CRORES: ON VERIFICATION OF SEIZED MATERIALS, THE AO FOUND THAT IN 12 FLATS IN ANRIYA DWELLINGTON PHASE I & II PROJECTS, THE MAXIMUM BUIL T UP AREA PRESCRIBED IN SUB-SECTION (10)(C ) OF S.80-IB OF TH E ACT, HAD BEEN BREACHED. AFTER CONSIDERING THE LENGTHY EXPL ANATION OF THE ASSESSEE COUPLED WITH EXTENSIVELY QUOTING THE F INANCE ACT 2004, THE AO HAD DISALLOWED RS.7.25 CRORES U/S 80-IB OF THE ACT BY RELYING ON THE DECISION REPORTED IN 118 ITR 326 (SC); (IV) BY APPLYING THE PROVISIONS OF S. 40A(3), THE A O HAD DISALLOWED 1/5 TH OF RS.4337250/- BEING CASH PAYMENTS, AGGREGATING TO RS.867450/-. WHILE DOING SO, PERHAP S, BY OVERSIGHT, THE AO HAD RESORTED TO DISALLOW 1/5 TH OF RS.5 LAKHS IN THE CASE OF S.NARAYANASWAY (PURCHASE OF LAND) TW ICE. 5.2. FOR THE AY 06-07, THE AO HAD DISALLOWED RS.1. 41 CRORES U/S 80IB OF THE ACT FOR THE REASONS SET-OUT ELABORA TELY IN THE ASSESSMENT ORDER. ITA NO.136 & 137/B/09 6 6. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES BEFO RE THE CIT(A) FOR REDRESSAL. AFTER GIVING DUE WEIGHTAGE TO THE FORCEFUL CONTENTIONS OF THE ASSESSEE, THE LD. CIT(A) HAD ANA LYZED THE ISSUE THUS 7. WHAT IS MEANT BY BUILT UP AREA IS THE BONE OF CONTENTION. TO BE MORE EXACT WHETHER BUILT UP AREA INCLUDES BAL CONY SPACE OR NOT IS THE HUB. AS PER THE BUILDING INDUSTRY PR ACTICE, BALCONY SPACE, IF NOT HABITABLE, IS EXCLUDED FROM THE BUIL T UP AREA. THERE IS NO DEFINITION OF BUILT UP AREA IN THE BYE- LAWS OF BMP BUT OPEN BALCONIES ARE EXCLUDED FROM CALCULATION OF FLO OR AREA AND, THEREFORE, NOT APPLICABLE TO THE FACTS OF THE CASE ON HAND. HOWEVER, THE PLAN SANCTIONED BY THE BMP PROHIBITS T HE USE OF BALCONY FOR HABITABLE PURPOSE WHICH IN TURN INDICAT ES THAT THE PROJECTS UNDER TAKEN BY THE APPELLANT CONSISTS OF F LATS HAVING OPEN BALCONIES NOT USED FOR HABITABLE PURPOSE AND, THEREFORE, EXCLUDED FROM CALCULATION OF BUILT UP AREA AS PER B UILDING INDUSTRY PRACTICE. HOWEVER, THE I.T.ACT PROVIDES T HAT BUILT UP AREA INCLUDES THE BALCONY SPACE IRRESPECTIVE OF THE FACT WHETHER IT IS OPEN OR HAS ONLY UTILITY VALUE WHETHER IT IS USED FOR HABITABLE PURPOSE OR NOT. BUT THE EXPLANATION HAS COME INTO EFFECT FROM 1.4.2005 AND AY 2005-06. FACTS OF THE CASE RECORDS REVEAL THAT BY THAT TIME, THE PROJECT WAS ALREADY COMPLETE AND THE SEIZED DOCUMENT VIDE NO.A1/APM/SPL/7 REVEALS THAT THE APPE LLANT HAD SENT LETTERS TO TAKE OCCUPATION OF THE FLAT TO THE RESPECTIVE OWNERS BEFORE 1.4.2005. THEREFORE, I CONCUR WITH T HE VIEW OF THE AUTHORIZED REPRESENTATIVE WHEN HE EXPRESSES: THE FINANCE (NO:2) BILLS 2004 WHICH WAS ENACTED ON 10 TH OF SEPTEMBER 2004 INTRODUCED DEFINITION OF BUILT UP A REA INTO SECTION 10-IB FOR THE FIRST TIME. BY THE TIME THE DEFINITION WAS INSERTED THE BUILDING COMPLETE IN ALL RESPECTS. NO ADJUSTMENTS/CORRECTIONS WERE POSSIBLE TO STRUCTURE AT THIS MOMENT. HOWEVER, THE EXPLANATION INSERTED BY TH E FA 2004 DOES NOT TAKE AWAY ANY RIGHTS OF THE ASSESSEE OVER THE PRO PERTY OR OTHER ALLIED RIGHTS. IT ONLY CLARIFIES WHAT IS TO BE INCLUDED WHILE CALCULATING THE AREA OF 1500 SQ.FT. THEREFORE, THE CLARIFICATORY EXPLAN ATION IS, I FIND APPLICABLE TO ALL PENDING CASES AND, THEREFORE, I F IND THE ACTION OF AO JUSTIFIED AND, THEREFORE, DISMISS THE GROUNDS OF AP PEAL. ITA NO.136 & 137/B/09 7 6.1. AFTER DISTINGUISHING THE CASE LAWS ON WHICH T HE ASSESSEE PLACED STRONG RELIANCE, THE CIT(A) HAD REJECTED TO CONCEDE THE LD.A.RS PLEA FOR PRO RATA ALLOWANCE OF THE SAID CL AIM. 6.2. WITH REGARD TO THE SUSTAINING OF THE ADDITION S OF RS.3.5 LAKHS AND RS.1 LAKH, THE CIT(A)S JUSTIFICATION WAS THAT DURING THE ASSESSMENT PROCEEDINGS, THE AR HAD AGREED FOR SUCH ADDITIONS AND THAT THE ASSESSEE HAD NO GROUND TO AGITATE NOW. 6.3. IN RESPECT OF THE ADDITION OF RS.8.67 LAKHS, THE LD CIT(A)S OBSERVATION WAS AGAIN THAT FOR THE REASONS ENUMERATED IN PARA 9 OF THE ASSESSMENT ORDER, THE ADDITION WAS JU STIFIED. 6.4. FOR THE ASSESSMENT YEAR 2006-07, THE LD.CIT(A ) HAD FOLLOWED THE REASONS LISTED OUT IN HIS APPELLATE OR DER FOR THE AY 2005- 06 IN THE ASSESSEES OWN CASE, HE DISMISSED THE APP EAL IN TOTO. 7. DISILLUSIONED WITH THE STAND TAKEN BY THE LD.CI T(A), THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. THE LD. AR CAME UP WITH SPIRITED ARGUMENTS, THE SUBSTANCES OF WHICH AR E SUMMARIZED AS UNDER: (I) THE VERY ASSESSMENT MADE U/S 153A OF THE ACT WA S NOT VALID AS THE REASONS RECORDED FOR THE INITIATION OF SEARCH W ERE NOT PROVIDED WHICH WAS AGAINST THE PRINCIPLES OF NATURA L JUSTICE: - RELIED ON THE CASE LAWS: ITA NO.136 & 137/B/09 8 (A) UNION OF INDIA V. AJITH JAIN 260 ITR 80 (SC) (B) MANISH MAHESHWARI - 289 ITR 341 (SC) (II) THE ASSESSEE HAD STARTED TWO PROJECTS ANRIYA DWELLINGTON PHASES I & II CONSIST OF 152 AND 11 FLATS RESPECTIV ELY. THE PHASE I PLAN WAS GOT SANCTIONED BY JULY, 2003; - THE FLATS UNDER CONSTRUCTION WERE OFFERED FOR PUBLI C FOR PURCHASE ADVANCE BOOKING; (III) KEEPING IN VIEW THE DEDUCTION U/S 80-IB AND O THER RELATED COSTS, COST PRICE OF FLATS IN PHASE I WAS FIXED; (IV) DURING THE CONSTRUCTION OF FLATS [ AY 03-04] T HE SUB-SECTION (10) TO S.80-IB HAD FOUR CONDITIONS TO BE FULFILLED TO A VAIL SUCH DEDUCTION WHICH WERE (1) SANCTION FROM THE LOCAL AUTHORITY BEFORE 31/3/0 5 FOR CONSTRUCTION OF A HOUSING PROJECT OBTAINED PLAN S ANCTIONED FROM THE LOCAL AUTHORITY ON 15/7/03; (2) THE DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT WAS COMMENCED OR COMMENCES ON OR AFTER 1.10.98 TH E PHASE I PROJECT WAS COMMENCED AFTER 1/10/98; (3) THE PROJECT WAS ON THE SIZE OF A PLOT OF LAND W HICH HAD A MINIMUM OF ONE ACRE THE CONSTRUCTION SITE WAS MOR E THAN ONE ACRE ON WHICH THE PROJECT WAS STARTED; & (4) THE RESIDENTIAL UNIT HAD A MAXIMUM BUILT-UP AR EA OF 1500 SFT. THE UNIT HAD A MAXIMUM BUILT-UP AREA OF 1500 SFT AS PER STRUCTURAL DESIGN AND THE PLAN APPROVED BY BBMP WHOSE BYE-LAWS EXCLUDED THE OPEN BALCONY IN ITS DEF INITION; (V) THE AO IN HIS IMPUGNED ORDERS, HAD OBSERVED THA T THE BUILT-UP AREA IN 12 OUT OF THE TOTAL FLATS CONSTRUCTED EXCEE D THE CEILING LIMIT OF 1500 SFT. AS ENVISAGED IN S.80-IB(10) OF T HE ACT; - WHEN THE PLAN GOT SANCTIONED FOR THE AY 04-05, THE WORD BUILT-UP AREA WAS NOT DEFINED IN THE ACT WHEN THE PROJECT IN PHASE I GOT UNDER-WAY. AS SUCH, THE ASSESSEE HA D TO FOLLOW THE MEANING OF THE TERM BUILT-UP AREA AS F OLLOWED BY THE BUILDING INDUSTRY PRACTICE AND FLOOR AREA DEFINED IN THE BYE-LAWS OF BBMP; - AS PER THE BUILDING INDUSTRY PRACTICE, THE TERM BU ILT-UP AREA IN EACH FLAT WAS DEFINED AS HABITABLE AREA OF THE FLAT UNIT INCLUDING THE WALL THICKNESS. THE BUILT-UP AR EA EXCLUDES COMMON AREA OF THE BUILDING AND OPEN BALCONIES WHICH WERE NOT HABITABLE AND HAVE ONLY UT ILITY VALUE; ITA NO.136 & 137/B/09 9 - AS PER THE BYE-LAWS OF BBMP; THE FLOOR AREA WHICH W AS ALSO CALLED AS BUILT UP AREA EXEMPTS OPEN BALCONI ES FOR THE PURPOSE OF ARRIVING AT THE BUILT UP AREA. T HE SANCTIONED PLAN PROHIBITS CLOSURE OR USAGE OF BALCO NY FOR HABITABLE USAGE. ANY USAGE/ENCLOSURE TO THE BALCON Y WAS TREATED AS VIOLATION OF THE BUILDING PLAN WITH PENAL PROVISIONS; - WHEN THE BUILT-UP AREA WAS NOT DEFINED IN THE ACT , THE ASSESSEE HAD TO RELY ON THE DEFINITION GIVEN BY THE LOCAL AUTHORITIES IN WHICH THE BALCONY WAS DEFINED AS EXC LUSIVE IN THE TERM OF BUILT UP AREA; (VI) THE AO HAD DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE HAD NOT MET THE SPECIFICATIONS LAID DOWN I N CLAUSE (A) OF SUB-SECTION 14 OF S.80-IB IN WHICH THE TERM BUI LT-UP AREA WAS DEFINED AND INSERTED; - THE INSERTION OF SUB-SECTION 14(A) TO S.80-IB OF TH E ACT WAS W.E.F. 1.4.2005 THROUGH FINANCE ACT 2004 ENACTE D ON 10/9/2004 WHEREIN THE BUILT-UP AREA WAS DEFINED; (VII) THE LAW AS IT STOOD PRIOR TO INSERTION OF S.8 0-IB (14)(A) HAD TO BE CONSIDERED FOR THE PURPOSE OF DEDUCTION. IN THE I NSTANT CASE, THE OCCUPATION CERTIFICATE WAS OBTAINED ON 9/6/04 I TSELF I.E., WELL BEFORE THE ENACTMENT OF FINANCE ACT, 2004; - RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS: (A) ARUN EXCELLO FOUNDATIONS (P) LTD. V. ACIT 108 TTJ 71 ITAT, CHENNAI; (B) HARSHAD P DOSHI 109 TTJ 335 ITAT, MUMBAI; & (C) GR DEVELOPERS, BLORE V. DCIT IN ITA NOS:668 & 669/BANG/2006 (VIII) WITHOUT PREJUDICE, THE AUTHORITIES BELOW OUG HT TO HAVE DISALLOWED PROPORTIONATELY FOR THE FLATS WHICH EXCE EDED THE MAXIMUM CEILING LIMIT; - OUT OF TOTAL FLATS CONSTRUCTED, 9 AND 3 FLATS (SOLD DURING THE AYS 05-06 AND 06-07) RESPECTIVELY, HAVE EXCEEDED TH E MAXIMUM CEILING LIMIT AS PER THE NEWLY INSERTED EXPLANATION IN S.80-IB(14)(A) OF THE ACT; - RELY IN THE CASES OF (A) ACIT V. BENGAL AMBUJA HOUSING DEVELOPMENT LTD. IN ITA NO:1735/KOL/2005 ITAT, KOLKATTA BENCH; (B) BAJAJ TEMPO LTD. V. CIT 196 ITR 188 (SC); (C ) MYSTIC INVESTMENTS IN ITA NO: 1170/BANG/2007 ITA NO.136 & 137/B/09 10 ADDITIONS : (IX) RS.1 LAKH OUT OF RS.5 LAKHS CASH PAYMENTS TO C.NARAYANASWAMY AND AJITHKUMAR FOR PURCHASE OF LA ND. THE SAID AMOUNT WAS NOT DEBITED TO P & L ACCOUNT IN THE BOOKS OF ACCOUNT AS THE SAME WAS ACCOUNTED FOR UNDER THE HEA D PROJECT WORK-IN-PROGRESS IN SCHEDULE VI OF THE BALANCE SHEE T HENCE, THE PROVISIONS OF S.40A(3) ARE NOT APPLICABLE; - IN ADDITION, THE CASH PAYMENT OF RS.5 LAKHS WAS AGA IN CONSIDERED FOR DISALLOWANCE OF RS.8.67 LAKHS MADE SUBSEQUENTLY WHICH AMOUNTS TO DOUBLE ADDITION; (X) RS.8,67,450 BEING 1/5 TH OF CASH PAYMENTS OF RS.4337250/- WAS MADE AS DETAILED BELOW: SL.NO. DETAILS OF CASH PAYMENTS MADE AMOUNT 01 BYLAPPA FOR PURCHASE OF LAND 497850 02 MRS.SUBBALAKSHMI FOR PURCHASE OF LAND 88400 03 MRS.SUBBALAKSHMI FOR PURCHASE OF LAND 846000 04 MRS.SUBBALAKSMI FOR PURCHASE OF LAND 1000000 05 CASH DEPOSITED IN TO CURRENT ACCOUNT OF M/S.CONSTRUCTION SOLUTIONS (P) LTD. 655000 06 NARAYANASWAMY FOR PURCHASE OF LAND THIS AMOUNT HAS ALREADY BEEN CONSIDERED FOR ADDITION/DISALLOWANCE U/S 40A(3) SUPRA 500000 07 CASH DEPOSITED IN TO CURRENT ACCOUNT OF M/S.CONSTRUCTION SOLUTIONS (P) LTD. 400000 08 MRS.SHALINI R KUMAR 350000 TOTAL 4337250 (XI) THE AO MADE AN ADDITION OF RS.3.5 LAKHS AS CAS H PAYMENTS TO V.VIJAYARAGHAVAN AND SMT.V.LATHA, AS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE SAID AMOUNT WAS PAID FROM AV AILABLE CASH BALANCES WITH THE ASSESSEE AND THAT IF IT WERE TO BE ADDED THEN THE SAME SHALL ALSO BECOME PART OF THE COST OF FLAT AND THAT THE AR HAD NOT CONSENTED TO ANY ADDITIONS MADE AS A LLEGED BY THE AO. 7.1. BUTTRESS HIS ARGUMENTS, THE LD. AR HAD FURNIS HED A VOLUMINOUS PAPER BOOK CONTAINING 1 98 PAGES WHICH CONSIST OF, INTER- ALIA, COPIES OF (I) SANCTIONED PLAN BY BBMP, (II) C ERTIFICATE PERMITTING TO CONSTRUCT THE BUILDING; (III) AGREEMENT OF SALE WIT H THE BUYERS; (IV) OCCUPATION CERTIFICATE FROM BBMP; (V) COPY OF BUILD ING BYE-LAW OF ITA NO.136 & 137/B/09 11 BBMP; (VI) COPY OF DEFINITIONS AS LAID BY THE NATIO NAL BUILDING CODE OF INDIA ETC, 7.2. ON THE OTHER HAND, THE LD. D R WAS EMPHATIC I N HER RESOLVE THAT THE LOWER AUTHORITIES HAVE GONE TO THE ROOT OF THE ISSUE(S) AND HAVE COME TO THE CONCLUSION IN A JUDICIOUS MANN ER WHICH REQUIRES TO BE SUSTAINED. TO DRIVE HOME HER POINT, THE LD.D .R. HAD FURNISHED A PAPER BOOK WHICH AMONG OTHERS CONTAINED COPIES OF ( I) CORRESPONDENCE FROM THE AO, (II) SEIZED MATERIALS, (III) SEIZED MATERIALS CONTAINING SALE DEED ETC., 8. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS A ND ALSO PERUSED THE RELEVANT RECORDS, EVIDENCES PRODUCED BY EITHER PARTY ETC., 8.1. THE FIRST GROUND OF THE ASSESSEE IS THAT THE ASSESSMENT WAS BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOK E THE JURISDICTION U/S 153A OF THE ACT DID NOT EXIST OR HAVING NOT BEEN CO MPLIED WITH. WHAT S.153A SAYS? 153A.(1) NOT WITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31 ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL- (A) ISSUE NOTICE TO SUCH PERSON REQUIRI NG HIM TO FURNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM A ND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PART ICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ITA NO.136 & 137/B/09 12 ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIR ED TO BE FURNISHED UNDER SECTION 139; (B) .. 8.1.1. AS COULD BE SEEN FROM THE IMPUGNED ORDER OF THE AO THAT THE ASSESSMENT WAS INITIALLY CONCLUDED U/S 143(3) O F THE ACT. SUBSEQUENT TO SEARCH OPERATION IN THE PREMISES OF T HE ASSESSEE AND ITS DIRECTORS, THE ASSESSMENT IN QUESTION GOT REOPE NED AUTOMATICALLY BY VIRTUE OF S.153A OF THE ACT. THUS, THE AO WAS WITHI N HIS POWERS PROVIDED BY THE ACT AND THAT THE CONDUCT OF SEARCH U/S 132 OR THE REQUISITION OF BOOKS/ASSETS UNDER S.132A OF THE ACT WOULD SUFFICE FOR THE ISSUANCE OF NOTICE U/S 153A OF THE ACT AND ASSU ME JURISDICTION OVER THE ASSESSEE. 8.1.2. WITH DUE RESPECTS, WE HAVE PERUSED THE CASE LAWS REPORTED IN 260 ITR 80 (SC) AND 289 ITR 341 (SC) ON WHICH THE ASSESSEE HAD PLACED STRONG RELIANCE. WITH REGARDS, WE WOULD LIKE TO POINT OUT THAT THE SAID RULINGS OF THE HIGHEST COUR T OF THE LAND WERE IN RESPECT OF MERE INFORMATION FROM CBI RECEIVED AND O N THE BASIS OF WHICH THE SEARCH CONDUCTED AND CONSEQUENT BLOCK ASS ESSMENT WAS NOT VALID. HOWEVER, THE PRESENT CASE ON HAND IS ON THE DIFFERENT FOOTING AND THE CASE LAWS ON WHICH THE ASSESSEE PLA CED RELIANCE ARE DISTINGUISHABLE. MOREOVER, VARIOUS HIGH COURTS AN D SPECIAL BENCH DECISIONS, TRIBUNAL HAVE HELD THAT TRIBUNAL HAS NO POWER TO EXAMINE VALIDITY OF AUTHORIZATION FOR SEARCH AND SAME IS NO T JUSTICIABLE BEFORE THE TRIBUNAL. THE FOLLOWING ARE CASE LAW REPORTED ON ABOVE ISSUE: ITA NO.136 & 137/B/09 13 1) M.B LAL VS. CIT, 199 CTR 571 (DEL) 2) CIT VS. PARAS RICE MILLS, 313 ITR 182 (P&H) 3) RAGHU RAJ PRATAP SINGH & OTHERS VS. ACIT, 307 IT R 450 (ALL) 4) PROMAIN LTD. VS. DCIT, 281 ITR 107 [(SB), DEL] WE ARE, THEREFORE, UNANIMOUS IN OUR VIEW TO DISMIS S THIS GROUND OF THE ASSESSEE. 9. THE NEXT MAJOR ISSUE IS WITH REGARD TO THE DISA LLOWANCE OF RS.7.25 CRORES UNDER SECTION 80-IB OF THE ACT. 9.1 THE CONTENTIONS OF THE ASSESSEE WITH REFERENCE TO THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT ARE TWO FOLD: (I) THE ASSESSEE HAD TAKEN THE BUILT UP AREA AS P ER THE BUILDING INDUSTRY PRACTICE AND HENCE, NO FLAT EXCEEDED CEILING LIMIT OF 1500 SQ. FT. AS ENVISAGED U/S 80IB(10) OF THE ACT. IT IS, FURTHER STATED BY THE AR THAT, THE DEFINITION OF BUILT UP AREA IN THE I T ACT WAS INSERTED BY FINANCE ACT NO.2 (ENACTED ON 30.9.04) W.E.F 1.4.05. [SEE SEC. 80IB(14)(A)]. IT WAS CONTENTED, SINCE THE OCCUPATION CERTIFICATION WAS OBTAINED BY THE ASSESSEE ON 9.6.04 MUCH BEFORE THE FINANCE ACT 2004 WAS ENACTED ON 30.9.04, THE EXPLANATION OF BUILT UP AREA VIDE SE C. 80IB(14)(A) DOES HAVE APPLICATION TO THIS CASE. ITA NO.136 & 137/B/09 14 THIS CONTENTION OF THE ASSESSEE IS WITHOUT MUCH FOR CE. THE EXPLANATION OF BUILT UP AREA DOES NOT TAKE AWAY A NY RIGHT OF THE ASSESSEE OVER THE PROPERTY OR OTHER ALLIED RIGHTS. IT ONLY CLARIFIES THAT WHAT IT HAS TO BE INCLUDED, WHILE CALCULATING AREA OF 1500 SQ. FT. THE EXPLANATION IS CLARIFICATORY IN NATURE AND WE ARE O F THE OPINION, IT IS APPLICABLE FOR THE ASSESSMENT YEARS 2005-06 AND 200 6-07. (II) THE OTHER CONTENTION OF THE AR IS THAT THE INCOME-TAX AUTHORITIES OUGHT TO HAVE DENIED DEDUCTION U/S 80IB ONLY IN RESPECT OF THOSE FLATS, WHICH EXCEEDED MAXIMUM CEILING LIMIT OF 1500 SQ. FT. IT WAS SUBMITTED THAT OUT OF TOTAL 156 FLATS CONSTRUCTED, THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06, SOLD 125 FLATS. OUT OF WHICH, 9 FLATS ONL Y EXCEED THE MAXIMUM CEILING LIMIT OF 1500 SQ. FT. F OR ASSESSMENT YEAR 2006-07, IT IS SUBMITTED THAT ONLY 3 FLATS EXCEEDED THE MAXIMUM CEILING LIMIT OF 1500 SQ . FT. AND, THEREFORE, IT WAS SUBMITTED THAT PROPORTIO NATE DEDUCTION U/S 80IB OUGHT TO HAVE BEEN GRANTED BY THE AUTHORITIES BELOW : 9.1.1 HAVING HEARD RIVAL ISSUE, WE ARE OF VIEW, A N IDENTICAL ISSUE HAD CROPPED UP BEFORE THE HONBLE TRIBUNAL IN ITA NO: 1 192/BANG/2008 DATED: 21/8/2009 IN THE CASE OF SJR BUILDERS V. ACI T . AFTER DELIBERATING THE ISSUE IN A COMPREHENSIVE MANNER CO UPLED WITH ANALYZING THE NUMEROUS JUDICIAL PRECEDENTS, THE HON BLE TRIBUNAL WAS OF THE FIRM VIEW THAT - ITA NO.136 & 137/B/09 15 12. CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THE APPEAL BY THE ASSESSEE IS TO BE ALLOWED TO THE EXTENT OF THE FLATS THE BUILT-UP AREA OF THE FLAT IS NOT MORE THAN 1500 SFT. WE AGREE WITH THE SUBMISSION OF THE LEARNED REPRESE NTATIVE FOR THE ASSESSEE THAT WHILE CONSIDERING THE BUILT-UP-AR EA OF 1500 SFT. FOR THE PURPOSE OF EXEMPTION U/S 80-IB(10), TH E MEZZANINE FLOOR AND COMMON AREAS ARE TO BE EXCLUDED. THE ASS ESSING OFFICER IS DIRECTED ACCORDINGLY. WE HOLD THAT IN R ESPECT OF THE PENT HOUSES THE BUILT-UP-AREA OF WHICH IS MORE THAN 1500 SFT. THEY MAY BE EXCLUDED FOR EXEMPTION. HOWEVER, IN TH E LIGHT OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BR AHMA ASSOCIATES [SUPRA ITA NO:1417/PN/06 DT: 6.4.2009 ITAT, PUNE (SB)], MERELY BECAUSE SOME FLATS ARE LARGER TH AN 1500 SFT, THE ASSESSEE WILL NOT LOST (SIC) LOSE THE BENE FIT IN ITS ENTIRETY. ONLY WITH REFERENCE TO THE FLATS WHICH H AS MORE THAN THE PRESCRIBED, THE ASSESSEE WILL LOSE THE BENEFIT. II. YET AN ANOTHER FINDING IN THE CASE OF G.R. DEVE LOPERS V. DCIT IN ITA NOS:668 & 669/BANG/2006 DATED: 5.2.2009 ON A SIMILA R ISSUE, THE HONBLE TRIBUNAL WAS OF THE VIEW THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80-IB(1O) OF THE ACT FOR BOTH THE ASS ESSMENT YEARS UNDER APPEAL. III. IN A SIMILAR ISSUE IN THE CASE OF MYSTIC INVE STMENTS V. ITO IN ITA NO:1170(BANG)/2007 DATED: 25 TH APRIL, 2008, THE HONBLE TRIBUNAL HAD OBSERVED THAT - 12. IN THE PRESENT CASE, ALL THE AFORESAID CONDI TIONS HAD BEEN FULFILLED BY THE ASSESSEE. THE DOCUMENTS FILED BY THE ASSESSEE QUANTITATIVELY PROVE THAT THE ASSESSEE HAD NOT VIOLATED ANY CONDITIONS. FURTHER, UPON THE FACTS A ND CIRCUMSTANCES OF THE CASE, WE FIND MUCH FORCE IN TH E STAND TAKEN BY THE ASSESSEE. NO CONVINCING MATERIALS BRO UGHT BY THE REVENUE ON RECORD TO ASSAIL THE CLAIM OF THE AS SESSEE. FURTHER, THE ISSUE IS ALSO COVERED BY THE DECISIONS OF MUMBAI BENCH AND CHENNAI BENCH OF TRIBUNAL REPORTED IN 109 TTJ 335 (HARSHAD P DOSHI V. ACIT) AND 108 TTJ 71 (ARUN EXCE LLO FOUNDATIONS (P) LTD V. ACIT) RESPECTIVELY. ITA NO.136 & 137/B/09 16 IN CONCLUSION, IT HAD OBSERVED THUS , 13.FROM THE UNDISPUTED FACTS, IT IS OBVIOUS THAT AT THE TIME WHEN THE ASSE SSEE HAD COMPLETED THE PROJECT, THE ENTIRE TRANSACTIONS WERE WELL WITH IN THE CONDITIONS PROVIDED IN TERMS OF THE PROVISIONS OF S.80IB(10) O F THE ACT. CONSIDERING ALL THESE, WE DIRECT THE AO TO ACCEPT T HE CLAIM OF THE ASSESSEE AND ALLOW DEDUCTION U/S 80-IB(1) OF THE AC T 9.1.2. IN AN OVERALL CONSIDERATION OF THE FACTS AN D CIRCUMSTANCES OF THE ISSUE RAISED FOR BOTH THE ASSESSMENT YEARS U NDER DISPUTE AND RESPECTFULLY FOLLOWING THE HONBLE TRIBUNALS FINDI NGS REFERRED SUPRA, WE ARE OF THE UNANIMOUS VIEW THAT THE ASSESSEE IS ENTI TLED TO CLAIM DEDUCTION U/S 80-IB (10) OF THE ACT (I) TO THE EXTENT OF THE FLATS WHERE THE BUILT-UP A REA OF EACH FLAT IS NOT MORE THAN 1500 SFT. FOR THE BOTH THE AYS UNDER DISPUTE (AYS 05-06 AND 06-07); (II) IN A NUT-SHELL, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80-IB (10) OF THE ACT WHERE THE BUILT-UP-AREA EXCEEDED 1500 SFT. PER FLAT - [ 9 + 3 = 12 FLATS IN THE AYS 05-06 & 06-07 RESPECTIVELY] IT IS ORDERED ACCORDINGLY. 10. THE NEXT GROUND IS WITH REGARD TO THE FOLLOWIN G DISALLOWANCES U/S 40A (3) OF THE ACT: ITA NO.136 & 137/B/09 17 (I) RS.3.5 LAKHS PAYMENTS MADE TOWARDS THE PURCHASE O F FLAT : AS PER THE ASSIGNMENT-CUM-SALE DATED 13/4/2006 (SEI ZED DURING THE COURSE OF SEARCH), THE ASSESSEE HAD PURCHASED A FLA T BEARING NO.002 IN ANRIYA RESIDENCY FROM V.VIJAYARAGHAVAN AND SMT.V .LATHA FOR A SALE CONSIDERATION OF RS.18.5 LAKHS, OUT OF WHICH, RS.15 LAKHS WAS PAID THROUGH CHEQUES AND THE BALANCE AMOUNT OF RS.3.5 LA KHS WAS PAID IN CASH. ON VERIFICATION OF CASH BOOK, THE AO FOUND T HAT THERE WAS ENTRY FOR RS.15 LAKHS ONLY WHEREAS THE ALLEGED CASH PAYME NT OF RS.3.5 LAKHS HAD NOT PASSED THROUGH THE BOOKS OF ACCOUNT. ACCOR DING TO THE AO, WHEN THE A.R OF THE ASSESSEE WAS COUNTERED WITH, PE RHAPS, HE HAD CONSENTED FOR THE ADDITION AS UNEXPLAINED INVESTMEN T U/S 69 OF THE ACT. THE ASSESSEE HAS NOW COME UP WITH A THEORY THAT THE SAID PAYMENT OF RS.3.5 LAKHS WAS PAID FROM THE AVAILABLE CASH BALAN CES WITH THE ASSESSEE AND THAT IF AT ALL IT WAS TO BE ADDED THEN THE SAME SHALL ALSO BECOME PART OF THE COST OF FLAT. THE ASSESSEE HAD FLATLY DENIED THE AOS ASSERTION THAT IT WAS AN AGREED ADDITION. CONSIDERING THE FACTS OF THE ISSUE, WE ARE OF THE C ONSIDERED VIEW THAT THE ASSESSEE HAD NOT COME UP WITH ANY DOCUMENTARY E VIDENCE TO CONTRADICT THE AOS ASSERTION AND, THUS, WE UPHOLD THE ACTION OF THE AO ON THIS COUNT. (II) RS.1.0 LAKH BEING 1/5 TH OF THE TOTAL PAYMENT OF RS.5 LAKHS MADE TOWARDS ITA NO.136 & 137/B/09 18 THE PURCHASE OF LAND TO C.NARAYANASWAMY DISALLOWANCE EFFECTED TWICE : THE ASSESSEE HAD PURCHASED LANDS AT ALLALASANDRA VI LLAGE (AS PER SEIZED MATERIAL) ADMEASURING 3.12 ACRES FROM C.NARA YANASWAMY AND AJITH KUMAR FOR A CONSIDERATION OF RS.3 CRORES AS PER SALE DEED DT.16/3/05. OUT OF RS.3 CRORES, THE PAYMENTS TO TH E TUNE OF RS.2.95 CRORES WERE BY WAY OF CHEQUES/DDS AND THE BALANCE O F RS.5 LAKHS WAS IN CASH AND AN ENTRY TO THIS EFFECT WAS FINDING A PLACE IN THE CASH BOOK. AS THE CASH PAYMENT WAS EXCEEDED THE STIPUL ATED LIMIT U/S 40A(3) OF THE ACT, THE AO HAD INVOKED THE SAID PROV ISION FOR WHICH, ACCORDING TO THE AO, THE A.R. HAD CONSENTED FOR DIS ALLOWANCE TO THE TUNE OF RS.1 LAKH [1/5 TH OF RS.5 LAKHS]. THIS HAS BEEN OBJECTED TO BY THE ASSESSEE ON THE GR OUND THAT THE SAID SUM OF RS.5 LAKHS WAS NOT DEBITED TO THE P & L ACCO UNT AS THE SAME WAS ACCOUNTED UNDER THE HEAD PROJECT WORK-IN-PROGRE SS IN SCHEDULE VI OF BALANCE SHEET AND THUS IT CANNOT BE DISALLOWED U /S 40A(3) OF THE ACT. THE ARGUMENT OF THE ASSESSEE DOESNT HOLD WATER. T HE PAYMENT TO THE OWNERS OF THE LAND, IN OUR CONSIDERED VIEW, WOULD H AVE BEEN PAID WELL BEFORE THE COMMENCEMENT OF THE PROPOSED CONSTRUCTIO N OF THE SO CALLED PROJECT. THUS, THERE WAS A CLEAR CONTRAVENT ION OF THE PROVISIONS OF S.40A(3) OF THE ACT. WE ARE, THEREFORE, IN FUL L AGREEMENT WITH THE AO ON THIS COUNT. ITA NO.136 & 137/B/09 19 (III) RS.8.67 LAKHS BEING 1/5 TH OF RS.43.37 LAKHS DISALLOWED U/S 40A(3): ACCORDING TO THE AO, THE ASSESSEE HAD PAID PAYMENTS IN CASH IN EXCESS OF LIMIT SPECIFIED IN RULE 6DD TO THE PERSON S [ PARA 7 (X) SUPRA ] AGGREGATING TO RS.43.37 LAKHS. BY INVOKING THE PROVISIONS OF S.40A(3), THE AO WENT AHEAD WITH THE DISALLOWANCE O F 1/5 TH OF RS.47.37 LAKHS AMOUNTING TO RS.8.67 LAKHS. THE ASSESSEES SPIRITED ARGUMENT PUT FORTH BEFORE U S WAS THAT THE SAID AMOUNT OF RS.47.37 LAKHS WAS NOT DEBITED TO THE P & L ACCOUNT IN THE BOOKS OF THE ASSESSEE AS THE SAME WAS ACCOUNTED FOR UNDER THE HEAD PROJECT WORK-IN-PROGRESS IN SCHEDULE-VI OF BALANCE SHEET. IT COULD BE SEEN FROM THE IMPUGNED ORDER OF THE AO THAT THIS PI ECE OF ARGUMENT WAS NOT ADVANCED DURING THE COURSE OF ASSESSMENT PR OCEEDINGS. FOR ARGUMENT SAKE WITHOUT CONCEDING THAT THE NEW THEORY OF PAYMENTS HAVE BEEN ACCOUNTED FOR UNDER THE HEAD WORK-IN-PROG RESS WAS NOT FINDING A PLACE IN THE IMPUGNED ASSESSMENT ORDERS. HOWEVER, THE CRUX OF THE ISSUE BEFORE US IS THAT THE ASSESSEE HAD CON TRAVENED THE PROVISIONS OF S.40A(3) OF THE ACT WHILE MAKING THE PAYMENTS IN CASH. AS SUCH, THE AO WAS WITHIN HIS DOMAIN IN INVOKING T HE PROVISIONS OF S.40A(3) OF THE ACT. HOWEVER, WHILE DOING SO, THE AO, PERHAPS, BY OVERSIGHT, HAD RESORTED TO DISALLOW THE CASH PAYMEN TS OF RS.5 LAKHS MADE IN THE CASE OF C.NARAYANASWAMY AND AJITHKUMAR TWICE . HENCE, THE CASH PAYMENTS ARE RESTRICTED TO RS.3837250 [43, 37,250 ITA NO.136 & 137/B/09 20 5,00,000] AND THE DISALLOWANCE IS BROUGHT DOWN TO RS.7,67,450 [RS.8,67,450 1,00,000 ] INSTEAD OF RS.8,67,450/- RESORTED TO BY THE AO. THUS, THE ASSESSEE GETS A RELIEF OF RS.1 LAKH. IT IS ORDERED ACCORDINGLY. 11. IN THE RESULT, THE ASSESSEES APPEALS FOR THE AYS 2005-06 AND 2006-07 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13 TH NOV, 2009. SD/- SD/- (A. MOHAN ALANKAMONY) (GEORG E GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 13/11/09 VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. BY ORDER ASST. REGISTRAR, ITAT, BANGAL ORE.