Shri Rajesh Krishnakumar Goyal, Pune V. Asst. CIT, Circle-9, Pune

ITA 1472/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93695 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MRS M N KULKARNI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA. NO.1472/PN/2013 (ASSESSMENT YEAR : 2009-10) SHRI RAJESH KRISHNAKUMAR GOYAL, SHOP NO.7 & 8, PRESTIGE PLAZA, PHASE-II, PUNE-MUMBAI ROAD, AKURDI, PUNE 411035 PAN NO.AELPG9647L .. APPELLANT VS. ACIT, CIRCLE-9, PUNE .. RESPONDENT ASSESSEE BY : MRS. M.N. KULKARNI DEPARTMENT BY : SHRI M.M. CHATE DATE OF HEARING : 30-04-2015 DATE OF PRONOUNCEMENT : 30-04-2015 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31-05-2013 OF THE CIT(A)-V, PUNE RELATING TO ASSESSMENT YEAR 2009-10. 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING ASSESSING OFFICER'S ACTION OF DISALLOWING RS. 3,71,813/- AS 10% OF DEVELOPMENT EXPENSES WITHOUT BRINGING ON RECORD ANY SP ECIFIC INSTANCES THAT THE VOUCHERS ARE NOT RELATED TO THE BUSI NESS OF THE ASSESSEE. SUCH AD-HOC DISALLOWANCE BASED ON ESTIMATE BASIS W ITHOUT BRINGING ON RECORD ANY COGENT REASONS, IS NOT JUSTIFIED AND IS INVALID, AND THE SAID ADDITION BE DELETED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF PURCHASE AND S ALE OF PLOTS/LAND. HE FILED HIS RETURN OF INCOME ON 01-10-2009 DECLARING TOTAL INCOME OF RS.12,03,40,350/-. DURING THE COURSE OF 2 ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSE E HAS SHOWN LAND PURCHASE AMOUNTING TO RS.2,91,26,743/- IN VALUE. THE ASSESSEE HAS INCURRED DEVELOPMENT EXPENSES OF RS.37,41,759/- WHICH HAS BEEN DEBITED TO LAND PURCHASE ACCOUNT. THESE EXPENSES PERTAIN TO LAND EXCAVATION, REM OVING STONES, SOILING, CUTTING, FILLING MORUM/ APPROACH ROAD, WORK AT SITE, EXPENSES FOR GENERAL IMPROVEMENT OF LAND PURCHASED E TC. THE AO NOTED THAT THE BILLS RAISED HAVE BEEN RAISED IN LUM PSUM BASIS WITHOUT EXACT QUANTITATIVE DETAILS OF WORK DONE BY T HE CONTRACTORS. HE THEREFORE CONFRONTED THE ASSESSEE TO EXPLAIN THE SAME ON THE GROUND IT IS NOT ASCERTAINABLE FROM THE BILLS A S TO WHAT QUANTITY OF WORK HAS BEEN CHARGED AND ON WHICH RA TE THE WORK HAS BEEN CHARGED. IT WAS EXPLAINED THAT THE EXPE NDITURE HAVE BEEN INCURRED IN CONNECTION WITH PURCHASE OF LAND ON LY AND THEREFORE MAY BE ALLOWED. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. SINCE THE EXPENSES WERE UNVERIFIA BLE IN NATURE HE WAS OF THE OPINION THAT THE QUANTUM OF EXPENS ES INCURRED IN CONNECTION WITH THE LAND DEVELOPMENT BECOMES UNASCERTAINABLE. FROM THE BREAKUP OF EXPENSES SUBMITTED BY THE ASSESSEE THE AO NOTED THAT A PORTION OF EXPENDITURE AM OUNTING TO RS.23,622/- ARE UNAVOIDABLE/MANDATORY EXPENSES SUCH AS MOJANI AND SURVEY CHARGES WHICH HAVE TO BE INCURRED IN CONNECTION WITH THE PURCHASE OF LAND. HOWEVER, AFTER GIVING CREDIT TO SAME EXPENDITURE AMOUNTING TO RS.37,18,137/- STILL REMA INS UNVERIFIABLE. HE THEREFORE DISALLOWED AN AMOUNT OF RS.3,71,813 /- BEING 10% OF THE ABOVE EXPENSES ON ADHOC BASIS ON ACCO UNT OF LEAKAGE OF REVENUE THAT MAY HAVE ARISEN DUE TO IMPROPER MAINTENANCE OF EXPENDITURE RECORDS. 3 5. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 10. AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT, IT IS SEEN THAT THE APPELLANT HAS NOT BEEN ABLE TO ADDRESS THE DEFECTS POINTED OUT BY THE ASSESSING OFFI CER IN BILLS AND VOUCHERS. THIS BEING SO, THE APPELLANT CANNOT CLAI M THAT THE ACTION OF THE ASSESSING OFFICER IS UNJUSTIFIED. FOR CLAIM ING ANY EXPENDITURE, IT IS INCUMBENT UPON THE APPELLANT TO MAINTAIN PROPER RECORDS OF EXPENSES DULY VERIFIED. IN THIS CASE, THIS HA S NOT BEEN DONE AND THEREFORE NO FAULT CAN BE FIND WITH THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING 10% OF THE TOTAL EXPENDITURE. ACCORDINGLY, ACTION OF THE ASSESSING OFFICER IS UPHELD AND THE GROUND IS DISMISSED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HA VE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM T HE DETAILS SUBMITTED BEFORE THE CIT(A) WE FIND THAT THE ASSESSEE WHILE JUSTIFYING THE PAYMENTS MADE ON LUMPSUM HAS STATED AS UNDER : E. WE WOULD LIKE TO CLARIFY THAT IN CASE OF LAND DE VELOPMENT AND CONSTRUCTION OF WBM ROADS THE AMOUNT PAYABLE TO THE C ONTRACTORS IS DECIDED ON A LUMP SUM BASIS. THIS IS WORKED OUT ON APPR OXIMATE AREA TO BE EXCAVATED AND LEVELED, LENGTH OF WBM ROA D TO BE CONSTRUCTED, ETC. IT IS DIFFICULT TO ESTIMATE THE EXAC T AREA TO BE EXCAVATED AND LEVELED BECAUSE OF UNEVEN LEVELS OF THE LAND AND ALSO THE HARDNESS OF THE LAND CANNOT BE GAUGED FROM THE TO P SURFACE. THE RATES OF EXCAVATION ARE DEPENDENT ON THE HARDNESS OF T HE LAND. AS SUCH AFTER CONSIDERING THE ESTIMATES GIVEN BY THE RESPEC TIVE CONTRACTOR AND TO AVOID FUTURE DISPUTES WHILE SETTLING THE BILLS BECAUSE IT IS NOT POSSIBLE TO CROSS VERIFY THE MEASUREMENT S MINUTELY AND IN DETAILS IN SUCH TYPE OF CONTRACTS, THE FINAL AM OUNT PAYABLE TO THE CONTRACTOR IS DECIDED ON A LUMP SUM BASIS. F. THE ASSESSEE HAS CARRIED OUT MAJOR DEVELOPMENT WORK F OR MAKING VARIOUS APPROACH ROADS IN LAND AT KARADWADI DU RING THE YEAR DETAILS OF WHICH ARE SEPARATELY GIVEN. HIS TOTAL HOLD ING IN LAND AT KARADWADI IS 22 ACRES AND 13 GUNTHAS. TAKING INTO CONSI DERATION THE HUGE SIZE OF HOLDING IN LANDS, EXPENSES ON DEVELOPMENT PER ACRE ARE MEAGER. 4 7.1 FROM THE ABOVE, WE FIND THAT THE ASSESSEE HIMSELF HAS ADMITTED THAT THE AMOUNT PAYABLE TO THE CONTRACTORS FO R LAND DEVELOPMENT AND CONSTRUCTION OF WBM ROADS IS PAYABLE ON LUMPSUM BASIS. FURTHER, FROM THE SAMPLE COPIES OF THE BILLS A ND VOUCHERS FILED IN THE PAPER BOOK, WE FIND THE ENGINEERS AND CONTRACTORS IN MOST OF THE CASES HAVE RAISED LUMPSUM BILLS . THEREFORE, THE NATURE OF EXPENDITURE DEBITED BY THE ASSE SSEE IS NOT RELIABLE AND FULLY VERIFIABLE. HOWEVER, UNDER THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE AT 10% OF TH E EXPENSES ON ADHOC BASIS APPEARS TO BE ON THE HIGHER SIDE. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO RESTRICT SUCH DISALLOWANCE TO 5% OF RS.37,18,137/-. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWED. 8. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING ASSESSING OFFICER'S ACTION OF AGRICULTURAL INCOME RS.20,0 00/- ARISING FROM AGRICULTURAL LAND AT VILLAGE SHIRGAON UNDER TH E HEAD INCOME FROM OTHER SOURCES. THE APPELLANT PLEADS THAT THE ACT ION OF THE ASSESSING OFFICER IS NOT JUSTIFIED & IS INVALID AND THE SAI D ADDITION BE DELETED. 9. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSEE HAS CLAIMED AGRICULTURAL INCOME OF RS.20,000/- DURING THE YEAR. ON BEING QUESTIONED BY THE ASSESSING OFFICER, THE ASSESSEE SU BMITTED THAT HE HAS RECEIVED NET AGRICULTURAL INCOME OF RS.20,000/- FROM AGRICULTURAL ACTIVITY CARRIED ON LAND AT SHIRGAON. HOWEVER , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS A HIGH PROFILE BUSINESSMAN HAVING DIVERSE PORTFOLIO OF ECONOMIC ACTIVITIES. I T IS A REMOTE POSSIBILITY THAT HE WOULD UNDERTAKE AGRICULTURAL A CTIVITY OF A SCALE THAT WOULD FETCH AN INCOME OF RS.20,000/- ONLY. THE CLAIM OF THE AGRICULTURAL INCOME ALTHOUGH IS SMALL HAS POSSIBLY MADE WITH A VIEW TO SHOW CASE THE LAND AS AGRICULTURAL LAN D SO 5 THAT CAPITAL GAIN IS NOT ATTRACTED IN THE FUTURE. LOOKING TO THE STATUS OF THE ASSESSEE AND SMALLNESS OF RECEIPT, THE CLAIM OF INCOME OF RS.20,000/- APPEARS IMPLAUSIBLE. HE, THEREFORE, TREATED THE AGRICULTURAL INCOME OF RS.20,000/- SHOWN BY T HE ASSESSEE AS INCOME FROM NON-AGRICULTURAL SOURCES AND ADD ED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE,. 10. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE ASSE SSING OFFICER ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO FURNISH ANY EVIDENCE REGARDING THE AGRICULTURAL INCOME EXCEPT FOR MERELY STATING THAT THE AMOUNT BEING SMALL THE SAME SHOULD BE ALLOWED. 11. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSING OFFICER DISALLOWED THE AGRICULTURAL INCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IN FUTURE MA Y TAKE ADVANTAGE OF SUCH AGRICULTURAL INCOME SO THAT CAPITAL GAIN IS NOT ATTRACTED. THIS HAS BEEN UPHELD BY THE CIT(A). THIS IN O UR OPINION IS FAR-FETCHED AND BASED ON SURMISES AND PRESUMPT IONS ONLY. MERELY BECAUSE THE ASSESSEE IS A HIGH PROFILE BUSIN ESSMAN HAVING DIVERSE PORTFOLIO OF ECONOMIC ACTIVITIES, THE SAME CA NNOT BE A GROUND TO DENY EARNING OF ANY AGRICULTURAL INCOME. THE OBSERVATION OF THE ASSESSING OFFICER THAT IT IS A REMOTE PO SSIBILITY THAT THE ASSESSEE WOULD UNDERTAKE AGRICULTURAL ACTIVITY O F A SCALE THAT WOULD FETCH AN INCOME OF RS.20,000/- ONLY IN OUR OPINI ON IS MISCONCEIVED AND TOO NARROW. THE ASSESSEE HAS SHOWN O NLY NET AGRICULTURAL INCOME OF RS.20,000/-. THE ENTIRE ORDER OF THE 6 ASSESSING OFFICER IN OUR OPINION IS BASED ON SURMISES AND PRESUMPTIONS WHICH HAS BEEN UPHELD BY THE CIT(A). UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF RS.20,000/- AS AGRICULTU RAL INCOME. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30-04-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 30 TH APRIL, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V, PUNE 4. CIT-V, PUNE 5. THE D.R, B BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE