Labh Construction & Industries Ltd., Ahmedabad V. Dy. Commissioner of Income Tax,Circle-4, Ahmedabad

ITA 2010/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6875 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-05-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 07-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Proportionate interest; Bad and doubtful debts; Revised return; Capital expenditure; Set aside
• Section: 40A(3); 143(3); 14A; 68

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER &SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NOS.1926 & 1745/AHD/2014 & 2010/AHD/2015 ( / ASSESSMENT YEARS:2002-03& 2003-04) ITO WARD-4(3), AHMEDABAD / VS. LABH CONSTRUCTION &INDUSTRIES LTD. 104-SHANTANU, OPP. HOTEL KLASSIC GOLD, SARDAR PATEL NAGAR, E.B., AHMEDABAD- 380006 ./ ./PAN/GIR NO. : AAA CL2 648 G ( /APPELLANT ) .. ( / RESPONDENT ) LABH CONSTRUCTION & INDUSTRIES LTD. 104-SHANTANU, OPPOSITE SARDAR PATEL NAGAR, ELLISBRIDGE, AHMEDABAD-380009 / VS. ACIT CIRCLE- 4, AHMEDABAD ./ ./PAN/GIR NO. : AAA CL2 648 G ( /APPELLANT ) .. ( / RESPONDENT ) LABH CONSTRUCTION & INDUSTRIES LTD. 104-SHANTANU, OPPOSITE SARDAR PATEL NAGAR, ELLISBRIDGE, AHMEDABAD-380009 / VS. DCIT CIRCLE- 4, AHMEDABAD (PRESENT JURISDICTION WITH RANGE-2 AHMEDABAD) ./ ./PAN/GIR NO. : AAA CL2 648 G ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SAKAR SHARMA, A.R. / RESPONDENT BY: SHRI L. P. JAIN, SR. DR !' /DATE OF HEARING 15/07/2019 #$!' / DATE OF PRONOUNCEMENT 30/07/2019 ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 2 %& /O R D E R PER AMARJIT SINGH - AM: IN THESE THREE APPEALS TWO APPEALS HAVE BEEN FILED BY THE ASSESSEEAND ONE BY THE REVENUE FOR A.YS. 2002-03&2003-04, ARISE FROM O RDER OF THE CIT(A)-VIII, AHMEDABAD AND CIT(A)-2, AHMEDABAD DATED 31.03.2014&3 0.04.2015, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961; IN SHORT THE ACT. ITA NO. 1926/AHD/2014 (A.Y. 2002-03) (REVENUES APP EAL):- 2. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLAR ING LOSS OF RS. 1,47,30,830/- WAS FILED ON 31.10.2002. THE CASE WAS SUBJECT TO S CRUTINY. THE ASSESSEE WAS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF T HE CONSTRUCTION. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FINALIZED ON 31.03.2005 AND TOTAL INCOME WAS ASSESSED AT RS. 3,85,36,831/-. THE REMAINING FA CT OF THE CASE ARE DISCUSSED WHILE ADJUDICATING THE VARIOUS GROUNDS OF APPEAL FI LED BY THE REVENUE AS UNDER:- 1. I) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR BAD DEBTS OF RS.1,03,54,6 17/- WITHOUT APPRECIATING THE FACT THAT THE AO REJECTED THE ASSESSEE'S CLAIM FOR THE P RIME REASON THAT NO EVIDENCE WAS FURNISHED BY THE ASSESSEE TO PROVE THAT THE AMOUNT BEING CLAIMED AS BAD DEBTS OFFERED AS INCOME IN EARLIER YEAR. II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEES CLAIM OF BAD DEBTS OF RS.55,99,506/- ACCEPTING THE ASSESSEE' S SUBMISSION THAT THE AMOUNT WAS OFFERED WHILE FILING THE REVISED RETURN WHEN NO SUC H CLAIM WAS MADE BY THE ASSESSEE IN THE FIRST APPELLATE STAGE AND THE ASSESSEE ALSO FAILED TO PRODUCE ANY EVIDENCE OF FILING THE REVISED RETURN. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF RS.4,69,735/- BEING CAPI TAL EXPENDITURE AS CERTIFIED BY THE AUDITOR, ACCEPTING THE ASSESSEE'S SUBMISSION THAT T HE EXPENDITURE IS REVENUE IN NATURE. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 17,81,469/- MADE IN THE WORK-IN-PROGRESS RELATABLE TO ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,51,60,000/- MADE IN THE WORK-IN-PROGRESS ON AC COUNT OF PROPORTIONATE INTEREST PAYABLE BY THE ASSESSEE ON BANK LOAN OBTAINED. ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 3 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. GROUND NO. 1& 1.1:- CLAIM OF BAD DEBT OF RS. 1,03,54,617:- 3. DURING THE COURSE OF ASSESSMENT THE AO HAS NOTIC ED THAT OUT OF TOTAL BAD DEBT OF RS. 7,50,134,338/- CLAIMED ON ACCOUNT OF SH ILALEKH PROJECT THE ASSESSEE COMPANY ITSELF HAS ADDED BACK THE AMOUNT TO RS. 5,9 3,49,497/- IN THE STATEMENT OF TOTAL INCOME ON THE GROUND THAT IT HAS OBTAINED REL IEF FROM A.Y. 1996-97 TO 2000- 01. ON FURTHER VERIFICATION THE AO OBSERVED THAT A SSESSEE HAS CLAIMED BAD DEBT TO THE AMOUNT OF RS. 1,82,74,615/- ON ACCOUNT OF SHILA LEKH PROJECT. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE CLAIM OF BAD DEBT IN RESP ECT OF THE SHILALEKH PROJECT. THE ASSESSEE HAS SUBMITTED THE SUBMISSION AND STATED TH AT THE PROJECT WAS IN LOSS AND INCOME SHOWN IN EARLIER YEAR WAS ON THE BASIS OF RE ALISATION OF RECEIPT FROM THE MEMBER AND THE CONSTRUCTION COST WHICH WERE NOT REA LISABLE THE SAME WAS REVERSED DURING THE YEAR AND CLAIMED AS BAD DEBT. THE AO HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE AND HAS STATED THAT ASSE SSEE HAS NOT FURNISHED ANY EVIDENCE TO DEMONSTRATE THAT AMOUNT CLAIMED IN THE BAD DEBT WAS OFFERED AS INCOME IN THE EARLIER YEARS. THEREFORE, THE AO HAS REJECTED THE CLAIM OF BAD DEBT TO THE AMOUNT OF RS. 1,56,64,841/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO FURTHER NOTICED THAT ASSESSEE HAS DEBITED RS. 55,99,506/- TO THE PROFIT AND LOSS ACCOUNT CLAIMING THAT THE AMOUNT REPRESENTS THE INCOME CREDITED IN THE BOOKS IN EARLIER YEAR WHICH WAS NO MORE REALISABLE. THE A O HAS OBSERVED THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO SHOW THAT IT WAS REALLY DIFFICULT TO RECOVER THE AMOUNT AND THE GENUINENESS OF WRITE OFF COULD NOT B E ESTABLISHED. THE AO HAS STATED THAT ASSESSEE HAS NOT FURNISHED COMPLETE EXP LANATION WITH REGARD TO EACH AND EVERY ENTRY UNDER THIS HEAD, THEREFORE, THE CLAIM O F WRITE OFF AMOUNTING TO RS. 55,99,506/- WAS DISALLOWED. ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 4 4. AGGRIEVED ASSESSEE FILE BEFORE THE LD. CIT(A). LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEEAND THE CLAIM OF BAD DEBT OF THE ASSESSEE TO THE EXTENT OF RS. 1,03,54,617/- WAS HELD TO BE ALLOWED AFTER VERIFICATION OF THE AO. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE. AFTER PERUSAL OF THE FINDING OF THE LD. CIT(A) IT IS NOTICED THAT EACH IT EM OF BAD DEBT CLAIMED BY THE ASSESSEE AND DISALLOWED BY THE AO WAS DISCUSSED ELA BORATELY IN THE FINDING OF THE LD. CIT(A). THE RELEVANT PART OF THE FINDING OF THE CIT(A) IS REPRODUCED AS UNDER:- 2.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT HAD CLAIMED CERTAIN BAD DEBTS IN THE RETURN OF INCOME WHICH HAVE BEEN DISALLOWED BY THE AO. A DISALLOWANCE OF RS.2,24,73,405/- HAS BEEN MADE WHICH CONSISTED OF B AD DEBTS IN RESPECT OF THREE DIFFERENT ITEMS. EACH ITEM, FOR WHICH THE BAD DEBT HAS BEEN CLAIMED AND DISALLOWED BY THE AO, IS DISCUSSED SEPARATELY FOR THE SAKE OF CON VENIENCE AND CLARITY. 1. BAD DEBTS IN RESPECT OF SHILALEKH PROJECT: - THE AO HAD MADE DISALLOWANCE OF RS. 1,56,64,843/- IN RESPECT OF SHILALEKH PROJECT, AS IN HIS OPINION THE APPELLANT DID NOT FU RNISH ANY EVIDENCE TO SHOW THAT AMOUNT WAS OFFERED AS INCOME IN EARLIER YEARS. FURT HER NO COPIES OF ACCOUNT TO SHOW WHETHER THE AMOUNT HAD ACTUALLY BEEN WRITTEN OFF OR NOT AND ALSO THAT THE GENUINENESS OF WRITE OFF WAS ALSO DOUBTED BY THE AO. IT HAS BEEN CLAIMED BY THE APPELLANT THAT IT HAD A CCOUNTED THE INCOME FROM SHILALEKH PROJECT IN THE FORM OF ORGANIZING FEES AN D REMUNERATION FOR THE PROJECT AT THE RATE OF 12% AND 8% RESPECTIVELY. BUT AT THE TIM E OF SHOWING THE INCOME IT DID NOT VERIFY WHETHER THE APPELLANT WAS ENTITLED TO SUCH R EMUNERATION AS PER THE TERMS OFDEVELOPMENT AGREEMENT. THERE WERE DIFFERENCES I N COMPUTATION OF WORK IN PROGRESS WHICH WAS ACCOUNTED BY THE APPEL LANT AFTER CONSIDERING THE INCOME ELEMENT WHEREAS THE CHARTERED ACCOUNTANT OF THE PRO JECT ACCOUNTED THE WORK IN PROGRESS WITHOUT CONSIDERING THE ORGANIZING FEES AN D REMUNERATION. ON DISCOVERING THE DIFFERENCE THE ISSUE WAS RAISED BY THE APPELLAN T FOR THE FIRST TIME IN A.Y. 96 - 97 AND 98 -99. WHILE THE APPEALS WERE PENDING, THE APPELLANT FILED A REVISED RETURN UNDER SECTION 264 FOR A.Y.I997-98. THE REVISION P ETITION UNDER SECTION 264 WAS ALLOWED BY CIT AND HE DIRECTED TO EXCLUDE THE INCOM E SHOWN HYPOTHETICAL BASIS FROM THE RETURN AS WELL AS ASSESSED INCOME OF THE APPELL ANT. ON THAT BASIS THE APPELLANT GOT RELIEF IN THE YEARS FOR WHICH THE APPEAL WAS FI LED BEFORE CIT(A). SUBSEQUENTLY THE SIMILAR RELIEF WAS ALLOWED IN ASSESSMENT YEAR 1999 -2000 ALSO. THE MATTER FOR THESE YEARS WENT BEFORE HONOURABLE ITAT AND THE APPELLANT SUCCEEDED BEFORE ITAT FOR A.YS. 1996 - 97, 1997 - 98, 1998 - 99 AND 1999 -200 0. THE APPELLANT HAS EXPLAINED THAT THE ENTIRE INCOME WHICH WAS OFFERED IN THOSE Y EARS WAS NOT EXCLUDED AS THERE WAS ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 5 SOME DIFFERENCE BETWEEN THE WORKING OF THE CHARTERE D ACCOUNTANT AND THE APPELLANT AND CERTAIN AMOUNT STILL REMAINED IN THE BOOKS OF A CCOUNT OF THE COMPANY AS RECEIVABLE ON ACCOUNT OF THE PROFIT. IT IS THESE PROFITS, WHICH HAVE NOT BEEN WRITTEN OFF IN EARLIER YEARS, WHICH ARE NOW CLAIMED BY THE APPE LLANT AS BAD DEBT DURING THE YEAR UNDER CONSIDERATION. THEAPPELLANT HAS GIVEN A WORKI NG SHOWING THE DIFFERENCE OF INCOME SHOWN IN THE BOOKS OF ACCOUNTS AND THE AMOUN T CLAIMED UNDER REVISION IN EARLIER YEARS AND THE DIFFERENCE WHICH IS STILL REM AINING IN THE BOOKS OF ACCOUNTS. FOR THE SAKE OF CONVENIENCE AND CLARITY THE CHART GIVEN BY THE APPELLANT IS REPRODUCED HEREUNDER. A.Y. 8% ORGANISING FEES AS PER BOOKS & ASSESSED 12% REMUNERA TION AS PER BOOKS & ASSESSED TOTAL AS PER BOOKS 8% ORGANISING FEES AS PER CA CERTIFICATE REMUNERATI ON AS PER CA CERTIFICATE TOTAL AS PERCA CERTIFICATE DIFFERENCE 1995-96* 1118558 2116473 3235031 1118558 2116473 3235031 0 1996-97 4860083 11131874 15991957 4860083 11131394 15991477 480 1997-98 2841227 16324814 19166041 2841227 15790984 18632211 533830 1998-99 12131101 10174927 22306028 12131101 9114247 21245348 1 060680 1999-00 5603372 5145660 10749032 5603372 3187314 8790686 1958346 2000-01** 2609774 956476 3566250 2609774 0 2609774 956476 TOTAL 29164115 45850223 75014339 29164115 41340411 70504527 4509812 THE APPELLANT HAS ALSO EXPLAINED THAT IN AMOUNT OF RS. 2609774/- FOR A.Y. 2000 - 01 WAS ALSO ADDED BACK BY IT FOR THE CURRENT ASSESSMEN T YEAR WITH THE ASSUMPTION THAT THE AMOUNT WAS BASED ON CA CERTIFICATE AND WOULD BE EXCLUDED FROM THE RETURNED INCOME OF 2000 - 01 BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT THE REQUEST OF THE APPELLANT WAS NOT ACCEPTED AND ACCOR DINGLY THE SAME WAS NOT ALLOWED. THEREFORE, THIS AMOUNT IS ALSO THEREFORE, WRITTEN O FF. THE APPELLANT HAS ACCORDINGLY GIVEN A FINAL TABLE SHOWING THE AMOUNT OF INCOME WH ICH PERTAINED TO DIFFERENT ASSESSMENT YEARS WHICH ARE NOW BEEN WRITTEN OFF BY HIM AS BAD DEBT: - A.Y. TOTAL AMOUNT WRITTEN OFF AS PER BOOKS AMOUNT FOR WHICH RELIEF HAS BEEN AVAILED IN EARLIERASSESSMENTS EITHER THROUGH APPEAL OF THROUGH REVISION ORDER DIFFERENCE TO BE ALLOWED AS BAD DEBTS IN THE YEAR OF ACTUAL WRITTEN OFF IN THE BOOKS 1995-96 3235031 0 3235301 1996-97 15991957 15991477 480 1997-98 19166041 21245348 1060680 1999-00 10749032 8790686 1958346 2000-01 3566250 0 3566250 TOTAL 75014338 64659722 10354617 ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 6 IT IS SEEN FROM THE ABOVE TABLE THAT THERE IS A VAR IATION BETWEEN THE CLAIM OF THE APPELLANT WHICH WAS AT RS. 1,56,64,843/- WHEREAS TH E TOTAL FROM THE ABOVE TABLE COMES TO RS. 1,03,54,617/-. THEREFORE, THERE IS A DIFFERENCE OF RS. 53,10,226/-. THE APPELLANT HAS EXPLAINED THAT THIS DIFFERENCE IS ARI SING AS THERE WERE SOME DIFFERENCES IN ADOPTION OF VARIOUS FIGURES. FOR THE SAKE OF CL ARITY THE CHART GIVEN BY THE APPELLANT IS REPRODUCED HEREUNDER:- A.Y. FOR WHICH INCOME PERTAINS AMOUNT WHICH WAS REQUIRED TO BE ADDED BACK IN STI AMOUNT WHICH WAS ACTUALLY ADDED BACK IN STI AMOUNT SHORT ADDED BACK IN STI 1996-97 15991477 15991477 0 199798 18632211 18632211 0 1998-99 21245348 21245348 0 1999-00 8790686 870686 7920000 2000-01 0 2609774 (2609774) TOTAL 64659722 59349496 5310226 THE APPELLANT HAS EXPLAINED THAT THE VARIATION WAS DUE TO ADOPTION OF FIGURE OF RS. 26,09,774/- IN COMPETITION OF INCOME WHICH WAS NOT REQUIRED TO BE CONSIDERED AS NO RELIEF WAS GRANTED BY THE AO FOR 2000-01. IT IS FU RTHER SUBMITTED THAT FOR A.Y. 1999- 00 THE DIFFERENCEOCCURRED DUE TO TYPOGRAPHICAL MIST AKE WHEREIN THE AMOUNT OF RS.87,90,686/- WAS TAKEN AS AGAINST THE CURRENT AMO UNT OF RS.8,70,686/-FOR A.Y.I999- 2000 WAS TAKEN. THEREFORE, THE CLAIM OF DEDUCTION W HICH SHOULD BE ACTUALLY ALLOWED COMES TO RS. 10354617/-. AFTER CONSIDERING THE ENTIRE GAMUT OF FACTS, THE O RDERS OF ITAT FOR EARLIER ASSESSMENT YEARS AS WELL AS THE OTHER RELATED ORDER S, IT IS NOTED THAT THE APPELLANT HAS ALREADY SHOWN THE INCOME WHICH IS NOW BEING WRITTEN OFF BY IT IN ITS PROFIT AND LOSS ACCOUNT IN EARLIER YEARS. PART OF THE INCOME SHOWN IN PROFIT AND LOSS ACCOUNTS HAVE BEEN REDUCED BY WAY OF REVISION OF RETURNS. THE INC OME WHICH HAS NOT BEEN REDUCED IN EARLIER YEAR IS STILL BEING SHOWN AS OUTSTANDING AND RECEIVABLE FROM SHILALEKH PROJECT. .SINCE THE INCOME IS NOT BEING REALIZED FR OM THAT PROJECT THE APPELLANT WANTS TO WRITE THAT OFF IN THE CURRENT YEAR AS BAD DEBT. THE LAW RELATED TO WRITE OFF OF BAD DEBT HAS SINCE BEEN SETTLED BY THE HONOURABLE SUPREME COURT BY THE DECISION IN THE CAS E OF TRF LTD 323 ITR 327. IT HAS BEEN HELD BY THE HONOURABLE SUPREME COURT THAT AFTE R 01/04/1989 IT WAS NOT NECESSARY FOR THE APPELLANT TO ESTABLISH THAT THE D EBT, IN FACT, HAS BECOME IRRECOVERABLE. IT WAS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE APPELLANT. THEREFORE, THE APPELLANT HAS TO ONLY ESTABLISH NOW THAT THE AMOUNT HAS ACTUALLY BEEN WRITTEN OFF IN THE BOOKS O F ACCOUNTS. IT IS NOTED THAT THE AMOUNTS HAVE DULY BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS AND THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF HONOURABLE S UPREME COURT IN THE CASE OF TRF LTD THE CLAIM OF THE APPELLANT IN RESPECT OF BAD DE BTS IS TO BE ALLOWED. THE FACTS WHICH ARE RELEVANT FOR THE PRESENT ISSUE ARE WHETHER THE AMOUNT WHICH IS BEING WRITTEN OFF IN THE CURRENT YEAR WAS OFFERED BY THE APPELLANT IN TH E RETURN OF INCOME IN EARLIER YEAR, IT IS STILL SHOWN AS RECEIVABLE IN THE BOOKS OF ACCOUN TS OF THE COMPANY IN THE CURRENT FINANCIAL YEAR AND THE APPELLANT HAS DULY WRITTEN O FF THE SAME IN THE BOOKS OF ACCOUNTS. ALL THESE CONDITIONS ARE BEING SATISFIED AND THEREFORE, THE CLAIM OF BAD DEBT OF THE APPELLANT TO THE EXTENT OF RS. 1,03,54,617/- IS DIRECTED TO BE ALLOWED IN PRINCIPLE. THE AO IS FURTHER DIRECTED TO VERIFY, F ROM RECORDS, ONCE AGAIN WHETHER THE ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 7 AMOUNTS THAT HAVE NOW BEEN WRITTEN OFF WERE SHOWN B Y IT IN THE INCOME IN EARLIER YEAR AND PART OF IT HAS BEEN ALLOWED N THOSE YEARS AND O NLY THE REMAINING AMOUNT IS NOW BEING WRITTEN OFF. THE ADDITION MADE BY THE AO TO THIS EXTENT IS DIRECTED TO BE DELETED. THE LD. CIT(A) HAS DISCUSSED THE VARIOUS DIFFERENCE O F INCOME SHOWN IN THE BOOKS OF ACCOUNT AND THE AMOUNT CLAIMED UNDER REVIS ION IN THE EARLIER YEARS AND THE DIFFERENCE WHICH WAS STILL REMAINING IN THE BOO KS OF ACCOUNT. THE LD. CIT(A) HAS ALSO PLACED RELIANCE ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TRF LTD. 323 ITR 327 THAT THE ASSESSEE HAS TO ONLY THAT THE AMOUNT HAS ACTUALLY BEEN RETURNED IN THE BOOKS OF ACCOUNT. IT IS CLEAR FROM THE FINDING OF THE LD. CIT(A) THAT THE AMOUNT WHICH WAS WRITTEN OFF IN THE YEAR UNDER CONSIDERATION WAS OFFERED BY THE ASSESSEE IN THE RETURN INCOME IN EAR LIER YEAR AND SAME WAS STEEL SHOWN AS RECEIVABLE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN ADDITION TO THE ABOVE THE LD. CIT(A) HAS DIRECTED THE AO TO VERIFY FROM RECORD ONCE AGAIN WHETHER THE AMOUNT THAT HAVE NOT BEEN WRITTEN OFF W AS SHOWN BY THE ASSESSEE AS INCOME IN THE EARLIER YEAR AND PART OF IT HAS BEEN ALLOWED IN THOSE YEAR AND ONLY THE REMAINING AMOUNT WAS NOW BEING WRITTEN OFF. IN VIE W OF THE ABOVE DIRECTION OF THE LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THEREFORE, THE SAME IS DISMISSED. GROUND NO. 2:- ADDITION OF RS. 4,69,735 BEING CAPITAL EXPENDITURE :- 5. AT THE TIME OF ASSESSMENT THE AO HAS NOTICED THA T ASSESSEE COMPANY HAS CLAIMED AN AMOUNT OF RS. 4,69,735/- AS REVENUE EXPE NDITURE. ON VERIFICATION OF THE DETAIL FILED AO WAS OF THE VIEW THAT NATURE OF AFORESAID EXPENDITURE WAS OF CAPITAL NATURE. THEREFORE, HE HAS DISALLOWED THE CL AIM OF EXPENDITURE TREATING AS CAPITAL EXPENDITURE AND ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD . CIT(A). LD. CIT(A) HAS DELETED THE DISALLOWANCE ON VERIFICATION OF THE SUP PORTING MATERIAL FURNISH BY THE ASSESSEE WHICH DEMONSTRATE THAT THE EXPENDITURE WAS OF REVENUE NATURE PERTAINING TO ROUTINE REPAIR AND MAINTENANCE AS ELABORATED AT PAGE NO. 27 OF THE CIT(A) ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 8 ORDER. IN THE LIGHT OF THE ABOVE FACTS WE DO NOT F IND ANY SUBSTANCE IN THE APPEAL OF THE REVENUE. THE SAME IS DISMISSED. GROUND NO. 3:- ADDITION OF RS. 17,81,469 AS WORK-IN-PROGRESS:- 7. DURING THE COURSE OF ASSESSMENT THE AO HAS NOTIC ED THAT ASSESSEE HAS CLAIMED ADMINISTRATIVE EXPENSES TOTHE AMOUNT OF RS. 1,18,76,462/-. THE AO OBSERVED THAT THESE EXPENSES HAVE NOT BEEN TAKEN IN TO CONSIDERATION FOR COMPUTING WORK-IN-PROGRESS OF VARIOUS PROJECTS. THEREFORE, TH E AO HAS CONSIDERED 15% OF SUCH ADMINISTRATIVE EXPENDITURE PERTAIN TO WORK-IN- PROGRESS FOR VARIOUS PROJECT AND MADE ADDITION OF RS. 17,81,469/- PERTAINING TO NOT SHOWING IN WORK-IN-PROGRESS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE. 8. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE. IT IS NOTICED THAT AFORESAID ADMINISTRATIVE EXPENDITURE WAS OF THE FOLLOWING NAT URE:- NATURE OF EXPENSES AMOUNT PAYMENT TO STAFF 3719791 PAYMENT TO DIRECTORS 981509 TRAVELLING & CONVEYANCE 741525 ELECTRICITY EXPENSES 258440 POSTAGE, TELEGRAM AND TELEPHONE 426438 PRINTING & STATIONERY 255509 MEMBERSHIP FEES AND SUBSCRIPTION 3389 LEGAL & PROFESSIONAL EXPENSES 1665633 RENT, RATES & TAXES 1774907 REPAIRS & MAINTENANCE 1810599 INSURANCE 2740 OTHER EXPENSES 219283 DONATION 16700 TOTAL 11876462 ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 9 AFTER PERUSAL OF THE NATURE OF AFORESAID EXPENDITU RE IT IS OBSERVED THAT THIS EXPENDITURE WERE NOT CONNECTED TO THE CONSTRUCTION PROJECT UNDERTAKEN BY THE ASSESSEE. THE LD. CIT(A) HAS ELABORATED IN HIS FINDI NG THAT THESE EXPENSES WERE MAINLY RELATED TO THE HEAD OFFICE WHICH CANNOT BE A LLOCATED TO ANY SPECIFIC CONSTRUCTION ACTIVITY. IN THE LIGHT OF THE ABOVE F ACTS AND FINDINGS OF CIT(A) WE OBSERVED THAT THESE EXPENSES WERE IN THE MANDATORY NATURE AND HAVE NOTHING TO DO WITH THE CONSTRUCTION PROJECT UNDERTAKEN BY THE ASS ESSEE COMPANY. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT (A). ACCORDINGLY, THIS APPEAL OF THE REVENUE IS DISMISSED. GROUND NO. 4:- ADDITION OF RS. 2,52,60,000 IN THE WORK-IN-PROGRES S ON ACCOUNT OF INTEREST PAYABLE:- 9. DURING ASSESSMENT PROCEEDING THE AO HAS NOTICED THAT ASSESSEE COMPANY HAS CLAIMED INTEREST EXPENSES TO THE AMOUNT OF RS. 92,88,453/- ONLY. AS PER ASSESSEE COMPANY OUT OF THESE EXPENSES AND AMOUNT O F RS. 78,35,725/- WAS FURTHER SUN CITY PROJECT FLAT THEREFORE PORTION OF SUCH INTEREST EXPENSE WAS ALLOCATED TOWARD WORK-IN-PROGRESS. HOWEVER, ON FUR THER VERIFICATION THE AO HAS NOTICED THAT ON SEVERAL TERM LOAN THE ASSESSEE HAS NOT PROVIDED THE INTEREST EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, AO WAS OF THE VIEW THAT INTEREST EXPENSES HAVE NOT BEEN CONSIDERED FOR COMP UTATION OF WORK-IN-PROGRESS AS THE INTEREST WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE AO FURTHER OBSERVED THAT WHY THIS ACTION THE ASSESSEE COMPANY HAS REDUCED THE VALUE OF WORK- IN-PROGRESS. THE AO HAS FURTHER STATED THAT ASSESSE E HAS NOT PROVIDED COMPLETE FIGURES OF WORK-IN-PROGRESS OF VARIOUS PROJECT. THE REFORE, THE AO CONSIDERED THAT TOTAL INTEREST PAYMENT OF TERM LOAN ON VARIOUS PROJ ECT WAS TO THE AMOUNT OF RS. 781.11 LAKH AND THE PROPORTIONATE INTEREST TOWARD W ORK-IN-PROGRESS OF ALL PROJECT WAS COMPUTED AT RS. 251.6 LAKH. THEREFORE, THIS IN TEREST EXPENSES OF RS. 251.6 LAKH WAS ADDED TO WORK-IN-PROGRESS OF VARIOUS PROJE CTS AND TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 10 10. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE A ND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT ASSESSEE HAS NO T PROVIDED THE INTEREST EXPENSES IN THE PROFIT AND LOSS ACCOUNT IN RESPECT OF SEVERAL T ERM LOAN AVAILED BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED TO THE AO THAT SUCH INTER EST EXPENSES WOULD BE CLAIMED ON ACTUAL PAYMENT BASIS. THE AO WAS OF THE VIEW THA T WHY NOT DEBITING THE INTEREST ON TERM LOAN TO THE PROFIT AND LOSS ACCOUNT THE ASSESSEE COMPANY HAS REDUCED THE VALUE OF WORK-IN-PROGRESS. THEREFORE, ON THE BASIS OF DETAIL OF INTEREST GIVEN BY THE ASSESSEE COMPANY AO HAS MADE ADDITION OF 32.21% OF THE INTEREST NOT PROVIDED IN THE BOOKS OF ACCOUNT AND MADE ADDITION OF RS. 251.6 LAKH OUT OF THE TOTAL INTEREST OF RS. 788.11 LAKH TOWARD THE WORK-I N-PROGRESS. DURING THE APPELLATE PROCEEDING BEFORE LD. CIT(A) THE ASSESSEE HAS SUBMIT TED THAT THE INTEREST LIABILITY WHICH WAS NOT PROVIDED FOR SECURED LOAN ON HAVING T O DO WITH THE SUN CITY PROJECT AND THIS PROJECT WAS EXCLUSIVELY FINANCE BY RAJKOT NAGRIK SAHAKARI BANK LTD. AND PARTLY BY GRUH FINANCE. THEREFORE, THE INTEREST WHI CH WAS NOT PROVIDED CANNOT BE ALLOCATED TO THE VALUE OF WORK-IN-PROGRESS ON THE B ASIS OF HYPOTHETICAL WORKING. IT IS NOTICED THAT LD. CIT(A) HAS STATED THAT ASSESSEE HAS BORROWED MONEY FROM RAJKOT NAGRIK SAHAKARI BANK LTD. AND THE INTEREST PA YMENT ON DEBT LOAN HAS ALREADY BEEN ACCOUNTED FOR IN THE WORK-IN-PROGRESS RELATED TO SUN CITY PROJECT. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAVE GO NE THROUGH THE MATERIAL ON RECORD AND IT IS OBSERVED THAT IN RESPECT OF LOAN O BTAINED FROM RAJKOT NAGRIK SAHAKARI BANK LTD. AND GRUH FINANCE LTD. TOWARD SUN C ITY PROJECT AS MENTIONED AT PAGE NO. 81 OF THE ORDER OF THE CIT(A) THE DETAI L OF INTEREST AMOUNT ACCOUNTED IN THE BOOKS OF ACCOUNT HAS NOT BEEN SPECIFIED IN THE REPORT OF THE AUDITOR. THEREFORE, WE ARE OF THE VIEW, THAT IT WILL BE APPROPRIATED TO RESTORE THIS ISSUE TO THE FILE OF AO FOR DECIDING THE SAME A DENOVO AFTER VERIFICATION OF THE DETAIL OF LOAN AND AMOUNT OF INTEREST ACCOUNTED BY THE ASSESSEE FOR THE WORK- IN-PROGRESS. THEREFORE, APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 11 11. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 1745/AHD/2014 (A.Y. 2002-03)(ASSESSEES AP PEAL):- 12. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE READS AS UNDER:- 1. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING DISALLOWANCE OF RS. 1,29,115/- (RS. 89,075/- + 40,040/-) BY INVOKING PR OVISIONS OF SECTION 40A(3) OF THE ACT. 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT DIRECTING TO THE ASSESSING OFFICER TO MAKE ADJUSTMENT IN THE OPENING WORK IN P ROGRESS OF NEXT ASSESSMENT YEAR FOR SUSTAINED ADDITION OF RS. 54,21,853/-. 3. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS. 1,20,000/- BY INVOKING SECTION 14A OF THE ACT. GROUND NO. 1:- DISALLOWANCE OF RS. 1,29,115 U/S. 40A(3) OF THE AC T:- 13. DURING THE ASSESSMENT THE AO HAS NOTICED THAT A S PER STATEMENT OF INCOME THE ASSESSEE HAS CLAIMED EXPENDITURE TO THE AMOUNT OF RS. 23,41,87/- DESPITE THE DISALLOWANCE MADE BY THE AUDITOR U/S. 40A(3). THE ASSESSEE HAS STATED THAT IN SPITE OF THIS AMOUNT WAS DESIRABLE AS PER AUDIT REPORT BU T STILL TO BE ALLOWABLE ON THE BASIS OF PAST APPELLATE ORDER. THE AO HAS REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAME U/S. 40A(3) OF THE ACT. 14. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE LD. C IT(A). LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AFTER ALL OWING CERTAIN PAYMENT WHICH WERE NOT CLAIMED AS DONATION AS EXPENSES. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE. THE ASSESSEE HAS STATED THAT THESE PAYMENTS WERE MADE IN CASH AS THE ASSESS EE WAS PASSING THROUGH A LIQUIDITY CRISIS AND THERE WAS PRESSURE OF BANKING INSTITUTIONS AND IT IS MOST OF BANK ACCOUNTS WERE ATTACHED. AFTER PERUSAL OF THE MATER IAL ON RECORD WE CONSIDER THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE THE CIRCUMST ANCES ACCORDING TO RULE 6DD OF THE IT RULE. THE CIRCUMSTANCES HAVE UNDER WHICH IT HAS BEEN COVERED FOR MAKING THE PAYMENT IN CASH. AFTER CONSIDERING THE PROVISI ON OF RULE 6DD AND SUBMISSION ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 12 OF THE ASSESSEE WE CONSIDER THAT ASSESSEES CASE IS NOT COVERED UNDER THE SPECIFIC PROVISION OF RULE 6DD. THEREFORE, WE DO NOT FIND AN Y ERROR IN THE DECISION OF CIT(A). ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS DISMISSED. GROUND NO. 2:- ADJUSTMENT OF OPENING WORK-IN-PROGRESS:- 15. DURING THE COURSE OF ASSESSMENT THE AO HAS NOTI CED THAT IN RESPECT OF SUN CITY PROJECT THE ASSESSEE HAS DEBITED EXPENDITURE P ERTAINING TO ROAD TO THE PROJECT BUT DID NOT CONSIDER THE SAME FOR COMPUTATION OF WO RK-IN-PROGRESS. THE AO HAS ALSO INTRODUCED THAT ASSESSEE HAS PAID INTEREST TO THE AMOUNT OF RS. 78,35,725/- ON ACCOUNT OF SUN CITY PROJECT, HOWEVER, THE PROPORTIO NATE INTEREST EXPENSES WAS NOT ADDED TO THE WORK-IN-PROGRESS. THEREFORE, THE ASSES SEE HAS COMPUTED AMOUNT OF RS. 54,21,853/- PERTAINING TO AFORESAID EXPENSES TO WARD WORK-IN-PROGRESS OF SUN CITY PROJECT AND ADDED TO THE TOTAL INCOME OF THE A SSESSEE. 16. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND A LSO DIRECTED THE ASSESSEE TO PROVIDE CREDIT OF THE AMOUNT ADDED IN THE OPENING S TOCK OF THE WORK-IN-PROGRESS. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE. THE AOP HAD MADE ADDITION OF RS. 54,21,853/- IN THE WORK-IN-PROGRESS AS THE ASSESSEE HAD NOT INCLUDED THE PROPORTIONATE CASES OF LOAN AND INTERE ST IN THE WORK-IN-PROGRESS VALUE AT THE END OF THE YEAR. THE ASSESSEE HAD DEBITED EX PENDITURE PERTAINING TO CONSTRUCTION OF ROAD TO THE PROJECT BUT HAD NOT CON SIDERED THE SAME FOR COMPUTATION OF WORK-IN-PROGRESS OF FLATS. OUT OF THE AFORESAID ADDITION THE LD. CIT(A) HAS DELETED THE ADDITION TO THE EXTENT OF RS. 29,36,700 /- ON THE GROUND THAT SAID ADDITION WAS MADE IN ASSESSMENT YEAR 2001-02 ON THE SAME GROUND. IT IS ALSO NOTICED THAT THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT IT HAS NO OBJECTION IN MAKING ADJUSTMENT IN THE WORK-IN-PROGRESS PROVIDED APPROPRIATE ADJUSTMENT IN THE OPENING STOCK OF WORK-IN-PROGRESS OF SUBSEQUENT YEA R SHOULD BE ALSO ALLOWED TO BE MADE. AFTER TAKING INTO CONSIDERATION THE LD. CIT(A) HAS HELD THAT SINCE THE ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 13 ASSESSEE HIMSELF HAS AGREED FOR SUCH ADJUSTMENT PRO VIDED THE CREDIT SHOULD BE GIVEN IN THE SUBSEQUENT YEAR THE ACTION OF THE AO B Y INCLUDING THE PROPORTIONATE COST OF INTEREST AND CONSTRUCTION OF ROAD WAS JUSTI FIED. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE APPE AL OF THE ASSESSEE. THEREFORE, THE SAME IS DISMISSED. GROUND NO. 3:- DISALLOWANCE OF RS. 1,20,000 U/S. 14A:- 17. THE AO HAS NOTICED THAT ASSESSEE HAS MADE INVEST MENT TO THE AMOUNT OF RS. 3,57,29,042/- IN THE SHARES AND MUTUAL FUNDS AND IN THE BEGINNING OF THE YEAR SUCH INVESTMENT WAS TO THE AMOUNT OF RS. 7,10,73,558/-. AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF THE ASSESSEE THAT NO INTEREST EXP ENSES HAS BEEN CLAIMED DURING THE YEAR UNDER CONSIDERATION THE AO HAS MADE DISALL OWANCE OF RS. 1,20,000/- FOR ADMINISTRATIVE EXPENDITURE INCURREDTOWARD EARNING E XEMPT INCOME. 18. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT( A). LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTION. DURING THE CO URSE OF APPELLATE PROCEEDING BEFORE US THE LD. CIT(A) HAS CONTENDED THA T ASSESSEE HAS EARNED DIVIDEND INCOME WHICH IS LESS THAN RS. 1,20,000/-. IN VIEW OF THE ABOVE AND AFTER CONSIDERING THE VARIOUS DECISION OF CO-ORDINATE BEN CH OF ITAT AHMEDABAD WE RESTORE THIS ISSUE TO THE FILE OF THE AO TO RESTRIC T THE DISALLOWANCE U/S. 14A TO THE EXTENT OF DIVIDEND INCOME EARNED BY THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. GROUND NO. 4:- DISALLOWANCE OF PERSONAL EXPENSES OF RS. 3,75,373: - 19. DURING THE COURSE OF APPELLATE PROCEEDING BEFOR E US GROUND NO. 4 IS NOT PRESSED. THEREFORE, THE SAME IS STAND DISMISSED. ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 14 ITA NO. 2010/AHD/2015 (A.Y.2003-04) (ASSESSEES AP PEAL):- 20. GROUNDS OF APPEAL ARE RAISED BY THE ASSESSEE RE ADS AS UNDER:- 1. THE LD. CIT(A) ERRED N FACTS AND IN LAW IN CONF IRMING ADDITION MADE U/S. 68 AMOUNTING TO RS. 8,40,164/- ACCOUNTED IN THE NAME O F SMT. SUSHILA KAK. 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ADDITION OF RS. 39,47,052/- IN THE VALUE OF WORK IN PROGRESS BY INC LUDING ADMINISTRATIVE EXPENSES INCURRED BY THE APPELLANT. 3. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS. 5,86,641/- U/S. 40A(3) BEING ELECTRICITY PAYMENTS M ADE TO GUJARAT ELECTRICITY BOARD. GROUND NO. 1:- ADDITION OF RS. 8,40,164 U/S. 68 OF THE ACT:- 21. DURING THE COURSE OF ASSESSMENT THE AO HAS NOTI CED THAT ASSESSEE HAS RECEIVED UNSECURED LOAN OF RS. 8,40,164/- FROM SMT. SUSHILA KAK. THE ASSESSEE WAS ASKED TO PRODUCE CONFIRMATION LETTER AND PROOF THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTY. SIN CE THE ASSESSEE HAS NOT FURNISHED CONFIRMATION LETTER ALONG WITH PAN AND SMT. SUSHILA KAK WHO WAS THE WIFE OF PROJECT CONSULTANT, THEREFORE, THE AMOUNT WAS ADDED U/S. 68 OF THE ACT AS ASSESSEE GIVEN FURNISHED EVIDENCE TO PROOF THE CREDITWORTHIN ESS OF THE PARTY AND GENUINENESS OF THE TRANSACTION. 22. ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) . LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 23. SINCE IN SPITE OF GIVING AMPLE AMOUNT OF OPPORT UNITY THE ASSESSEE HAS FAILED TO FURNISH THE BASIC AND PRIMARY INFORMATION TO SUB STANTIATE THE GENUINENESS OF THE LOAN TRANSACTION. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE A ND CONSIDERED THAT SINCE THE ASSESSEE HAS FAILED TO FURNISH THE CONFIRMATION LETTER AND THE PAN OF THE LENDER THEREFORE, WE OBSERVED THAT CREDITWORTHINESS OF THE AFORESAID LOAN TRANSACTION WAS ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 15 NOT PROVED BY THE ASSESSEE. THEREFORE, WE DO NOT FI ND ANY ERROR IN THE DECISION OF THE LD. CIT(A). ACCORDINGLY, THIS APPEAL OF THE ASSE SSEE IS DISMISSED. GROUND NO. 2:- ADDITION OF RS. 39,47,052 AS WORK-IN-PROGRESS:- 24. DURING ASSESSMENT THE AO HAS NOTICED THAT ASSES SEE HAS NOT INCLUDED THE ADMINISTRATIVE EXPENSES AMOUNTING TO RS. 39,47,052/ - IN THE VALUATION OF CLOSING STOCK OF WORK-IN-PROGRESS OF VARIOUS PROJECTS. THE AO OBSERVED THAT ADMINISTRATIVE EXPENSES HAVE TO BE INCLUDED IN THE VALUATIONS OF WORK-IN-PROGRESS TO ARRIVE AT THE CORRECT VALUATION OF WORK-IN-PROGR ESS OF THE PROJECT. THEREFORE, THE AO HAS MADE ADDITION OF RS. 39,47,052/- ON ACCOUNT OF INCLUSION OF ADMINISTRATIVE EXPENSES IN VALUATION OF CLOSING STOCK OF WORK-IN-P ROGRESS. 25. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT( A). LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. THE LD. CIT(A) HAS HELD THAT IT IS CLEAR FROM THE ACCOUN TS OF THE ASSESSEE THAT ADMINISTRATIVE EXPENSES HAS BEEN INCURRED FOR SPECI FIC PROJECT THEREFORE, THE SAME HAS TO BE CONSIDERED FOR COMPUTING THE WORK-IN-PROG RESS OF THE PARTICULAR PROJECT. WE OBSERVE THAT THESE ADMINISTRATIVE EXPENSES HAVE DIRECT NEXUS WITH THE CONSTRUCTION OF PARTICULAR PROJECT THEREFORE SUCH E XPENSES HAVE RIGHTLY BEEN INCLUDED IN THE CLOSING WORK-IN-PROGRESS OF THE PRO JECT. THESE ADMINISTRATIVE EXPENSES WERE ORIGINATED ON ACCOUNT OF CONSTRUCTION OF THE PROJECTS REFERRED IN THIS ORDER WHICH CLEARLY DEMONSTRATE THAT SUCH EXPENSES HAVE DIRECT NEXUS AND DIRECT BEARING IN RELATION TO CONSTRUCTION OF THE PROJECT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A) IN INCLUDING THESE EXPENSES IN VALUATION OF CLOSING STOCK OF WORK-IN-PROGRESS. HOWEVER, WE DIR ECT THE AO TO MAKE ADJUSTMENT IN VALUE OF OPENING WORK-IN-PROGRESS OF SUBSEQUENT ASSESSMENT YEAR ACCORDINGLY. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 16 GROUND NO. 3:- DISALLOWANCE OF RS. 5,86,641 U/S. 40A(3):- 26. DURING THE COURSE OF ASSESSMENT THE AO HAS NOTI CED THAT OUT OF RS. 4,54,296/- AN AMOUNT OF RS. 5,86,641/- HAS BEEN PAI D TO THE GUJARAT ELECTRICITY BOARD IN CASH, THEREFORE, THE SAME WAS DISALLOWED B Y THE AO U/S. 40A(3) OF THE ACT. 27. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT( A). LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE A ND NOTICED THAT ASSESSEE HAS FAILED TO DEMONSTRATE THE CIRCUMSTANCES UNDER W HICH IT HAS MADE CASH PAYMENT TO THE AFORESAID PARTY HOW IT IS COVERED UNDER RULE 6DD OF THE I.T. RULE. THEREFORE, WE DO NOT FIND ANY MERIT IN THE FILE OF T HE ASSESSEE. THE SAME IS DISMISSED. 28. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE AND APPEAL OF THE ASSESSEE VIDE ITA NO. 174 5/AHD/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND APPEAL OF THE ASSESSEE VIDE ITA NO. 2010/AHD/2015 IS PARTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER AC COUNTANT MEMBER AHMEDABAD: DATED 30/07/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. % / ASSESSEE 3. '( ! )! / CONCERNED CIT 4. )! - / CIT (A) THIS ORDER PRONOUNCED IN OPEN COURT ON 30 /07/2019 ITA NOS. 1926 & 1745/AHD/2014 & 2010/AHD/2015 A.YS. 2002-03 &2003-04 17 5. *+, ! ( , ' ( , -.%'% / DR, ITAT, AHMEDABAD 6. ,/ 0 / GUARD FILE. BY ORDER / %& , 1 / - ' ( , -.%'% 2 1.DATE OF DICTATION ON 19.07.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 22.07.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 29.07.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .07.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S .07.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .07.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER