M/s. Bafna Builders & Land Developers, Jalgaon V. Joint Commissioner of Income-tax,

ITA 185/PUN/2015

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3661 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 40A(3); 143(3); 40(a)(ia); 40a(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No. 185/PUN/2015 (Assessment Year: 2010-11) M/s. Bafna Builders and Land Developers "Nayantara", Subhash Chowk Jalgaon 425001 Vs. JCIT, Range - 1 Jalgaon 425001 PAN – AADFB4627P Appellant Respondent Appellant by: Shri Sunil Ganoo Respondent by: Shri S.P. Walimbe Date of Hearing: 22.04.2022 Date of Pronouncement: 27.04.2022 O R D E R Per S.S. Godara, JM This assessee’s appeal for AY 2010-11 is against the order of the CIT(A) 2, Nashik dated 13.01.2015 passed in case No. Nsk/CIT(A)-2/4713-14 involving proceedings under Section 143(3) of the Income Tax Act, 1961 in short “the Act”. 2. Heard both the parties. Case file perused. 3. The assessee’s first the foremost substantive ground challenges correctness of both the lower authorities’ action making adhoc addition of Rs.50 lakhs on account of the fact that it had sold many of its developed properties at lower rates than those charged from other customers. The assessment findings dealing with the instant issue read as under: - 5.4 I have considered the arguments of the assessee. Alongwith written submission the assessee has also submitted a chart which is being marked as Annexure B-I and B-2 of the assessment order. The reasons given by the assessee are either payment received or close friend of manager or client is government officer or client has introduced 2 clients or client is supplying material and in some cases no reasons has been given. These reasons are very general and carries no weight. There was always an upward Trend in reality market then if the rate in ITA No. 185/Pun/2015 M/s. Bafna Builders and Land Developers 2 2007 was Rs.2,250/- to Rs.2,537/-, it cannot be less than Rs.2,537/- in FY.2009-10. The assessee has also not produced any booking agreement. So that actual date of booking can be verified from the chart. It is also evident that in respect of Flat No. B-5 of Estate, full payment has been received and rate was charged at Rs.1,778/- on 08-10-2009 then how for Flat No. A-14 rate of Rs.l,587/- was charged and that too after two months and for booking on 14-08-2007 rate of Rs.1814/- per Square Ft. was charged. Thus the arguments given by the assessee is only for the sake of arguments and it carries no weight. Similarly in Empire site against the rate of Rs.1908/- on 05-04-2009 in respect of D- 12 on 28-03-2009 it has been shows at the rate of Rs.1390/- in respect of B-9 on the pretext of government officer on 23-12-2009 at the rate of Rs.1511/- for flat No. A-16 on the pretext of friend of manager. The concession of Rs.50/- to Rs.l00/- per square feet may only be treated as reasonable and not more than that. Hence keeping all these facts in view, it is absolutely clear that the assessee has suppressed the sale receipt and obtained amount in cash over the sale price disclosed in books of accounts. Last year, on this basis I have made an addition of Rs.30.00 Lakhs against which the assessee has went in appeal before the Honourable CIT(A)-II, Nashik. The Ld. CIT(A)-II Nashik vide Appellate order dated 26-02-2013 vide para 6.1 has confirmed it and since during the year there are more variations in rates than the last year and also considering the volume of the transactions disclosed. I make an ad-hoc addition of Rs.50,00,000/- on this point. 4. Both the learned representatives reiterated their respective stands against and in support of the impugned adhoc additions. We make it clear that there is not even an indication in the assessment findings that the assessee had collected any on-money from the alleged customers or its books accounting the alleged lower price(s). This issue deserve to be rejected. What the learned lower authorities have done is to compare the rates of some of the properties sold with other residential units to come to the impugned conclusion. Learned DR also could not clarify any basis for the extrapolated addition in issue. 5. Coupled with this, we find that the very issue had arisen in assessee’s appeal itself ITA No. 706/Pun/2013 and ITA No. 162/Pun/2015 for AY 2009- 10 and 2011-12 wherein the learned coordinate bench has rejected the Revenue’s identical stand as follows: - “10. It is undisputed fact that assessee sold the residential flats at different rates of sell price. The assessee, in response to the above queries, furnished explanation and they were considered and dismissed as general in nature. Therefore, AO rejected not only explanation of the assessee but also the offer of additional income of Rs. 6,00,000/- for the A.Y. 2009-10 given by the assessee. As such, the AO did not have any direct evidence to demonstrate that the sale price is received by the assessee in cash in part and the same is unaccounted in the books of account. Therefore, it is not a case of ITA No. 185/Pun/2015 M/s. Bafna Builders and Land Developers 3 outright suppression of sale proceeds. AO also failed to prove the fact of granting discount towards bulk purchases, known persons and the social obligations etc., is not genuine. Therefore, in our view, it is a case of ad-hoc addition. Of course, 'all is not well' with the sale prices recorded by the assessee in the books of accounts and there is need for some addition of income. It is a settled legal proposition that in principle, the business discounts constitute an allowable deduction. However, the discounts given for personal reasons are not allowable. From the list of such discounts-beneficiary, we find all the discounts are not business linked discounts. For example, the lower sale price given in respect of flats sold to the landlord, Govt. authorities etc. Further, at the same time, we find that it is a case of AO directing the assessee to do his business of sale flats in a particular fashion in matters of granting such discount ignoring practical obligations and social realities, is not proper. Therefore, we are not with the AO on this. Thus, there are problems in the order of the AO as well as the assessee's books of account qua the sale price of flats. Having held so, we shall now take up the correctness of the offer of Rs. 6,00,000/- Vs. Rs. 30,00,000/- added by the AO in his order. 11. In the above paragraph, we have held that the addition of Rs. 30,00,000/- is a case of ad-hoc addition. It shot up the gross profit rate to the levels which is not there in this line of business. With this addition, the GP of the assessee records extremely high. As such, the assessee offered the additional income of Rs. 6,00,000/- ,.,vide his letter dated 20-12-2011 and the same is never retracted till date. On merits of the AO's observation, we find the assessee granted discounts to various customers both for business as well as personal reasons. In absence of any direct evidence to demonstrate the concealment of sale price, rejecting the assessee's explanation which is general in nature, rejecting the offer of additional income of Rs. 6,00,000/- given by the assessee vide his letter dated 28-12-2011, is not appropriate. Further, we are of the view that said addition of Rs. 30,00,000/- could not be sustained in full as the AO failed to consider the average sale price of the flats, while working out the variation in it. Hence, we approve the assessee's variation of Rs.18.88 lakhs say 19 lakhs rounded off). Therefore, we direct the AO to restrict the addition to the said assessee's offer of Rs.6 lakhs, which constitutes around 31.50% of the variation of Rs.18.88 lakhs for this year. In effect, the basis, which is considered prudent by the assessee, while offering the said additional income of Rs.6,00,000/- is approved. Accordingly ground No. 1 and 2 raised by the assessee in appeal are partly allowed.” 6. Mr. Walimbe sought to pin-point that the assessee had already offered additional income of Rs. 6,00,000/- as considered in the learned coordinate bench order extracted hereinabove. Be that as it may, the fact remains that there is not even a single documentary evidence against the assessee to justify the impugned addition, since the same has been made as per lower authorities assumptions and presumptions only. We therefore delete the impugned adhoc income addition of Rs.50,00,000/-. The assessee succeeds in its instant first and foremost substantive ground. ITA No. 185/Pun/2015 M/s. Bafna Builders and Land Developers 4 7. Next comes the unproved cash vouchers and purchase as well as transportation expenses disallowance of Rs. 2,50,000/- and Rs.3,50,326/-; respectively, made on adhoc basis. The assessee’s sole plea before us is that the same be reduced to a reasonable disallowance of 5% only. The fact remains that the learned lower authorities have already taken a lenient view in disallowing the impugned sum(s) which are indeed appear as higher side only as the assessee could not prove each and every head of expenditure. Faced with this situation, we hold that these twin disallowances of Rs.2,50,000/- and Rs.3,50,326/- deserves to be reduced to the extent of Rs.1,25,000/- and Rs.1,50,000/-; respectively, with a rider that the same shall not be treated as precedent. Necessary computation shall follow as per law. The assessee’s second and third substantive grounds stand partly accepted accordingly. 8. Mr. Ganoo does not press for assessee’s 4 th and 7 th substantive grounds of Rs.2,670/- and Rs.22,000/- respectively keeping in mind the smallness of the sum(s) involved therein. Rejected accordingly. 9. The assessee’s 5 th substantive ground seeking to delete Section 40A(3) disallowance of Rs.8,97,389/- made in the lower proceedings has not been pressed before us. Rejected accordingly. 10. Next comes assessee’s 6 th substantive ground seeking to reverse Section 36(i)(iii) interest disallowance of Rs.49,43,223/- made in both the lower proceedings. Learned A.R. has placed reliance on tribunal’s order in AY 2011-12 (supra) that the very issue stands restored back to the assessing authority. We adopt judicial consistency in these facts and circumstances and restore assessee’s instant fifth substantive ground back to the assessing authority for his afresh adjudication in line of his findings in AY 2011-12 as per law. Suffice to say the assessee shall be at liberty to produce all the relevant details in consequential proceedings. 11. We are now left with assessee’s 8 th substantive ground challenging Section 40(a)(ia) disallowance of Rs.1,36,530/- by the learned lower authorities. The CIT (A) made detailed discussion confirming the same which reads as under: - “19. The fourteenth ground relates to the disallowance of Rs.1,36,530/- u/s 40a(ia) of the Act. During the assessment ITA No. 185/Pun/2015 M/s. Bafna Builders and Land Developers 5 proceedings, the AO. found that the appellant had paid Rs.1,20,000/- as rent for taking a generator from Perfect Engineering Works. The appellant had also paid Rs.16,570/- to the same company for Rotor/winding charges of alternator field and labour charges. No agreement was produce for hiring the generator. Therefore, the view that the payments must be for the composite contract and therefore, the appellant cannot artificially bifurcate the composite contract into rent and repair work. As such, TDS being not deducted on such payments, the provisions of section 40a(ia) of the Act are attracted and accordingly, the amount of Rs.1,36,530/- was disallowed u/s 40a(ia) of the Act. 19.1 On the other hand, the appellant had contested the AO's finding by saying that the amount of Rs.16,570/- was paid to Perfect Engineering for repair of other generator. But the appellant has not produced any evidences in this regards. Both the appellant and the A.O. had failed to support their contentions. Therefore, the principle of possibilities is to be applied here. The appellant had paid the amount of Rs.1,36,530/- to the same party and therefore, it appears that there is only one contract/matter and the payment is more than Rs.1,20,000/-. As such, provisions of section 40a(ia) of the Act will apply. Therefore, the addition is confirmed.” 12. Mr. Ganoo could hardly rebut the fact such a rent payment indeed attracts TDS deduction under Section 194(1)(a) of the Act regarding use of any machinery or plant or equipment; as the case may be. We thus find force in Revenue’s arguments having rejected assessee’s bifurcation of the impugned payment of Rs.1,20,000/- and Rs.1,60,520/- for want of corresponding repair/maintenance agreement. This 8 th substantive ground stands rejected accordingly. 13. We next note that the assessee has filed its application dated 25.03.2021 seeking to raise its additional ground of appeal regarding claiming deduction of education cess and higher and secondary education cess paid during the relevant previous year. The same has not been pressed during the course of hearing. Rejected accordingly. 14. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open court on 27 th April, 2022. Sd/- Sd/- (Shri Dipak P. Ripote) (Satbeer Singh Godara) Accountant Member Judicial Member Pune, Dated: 27 th April, 2022 ITA No. 185/Pun/2015 M/s. Bafna Builders and Land Developers 6 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -2, Nashik 4. The CIT - 2, Nashik 5. The DR, “A” Bench, ITAT, Pune By Order //True Copy// Assistant Registrar ITAT, Pune Benches, Pune n.p.