The DCIT.Circle-8, Surat V. M/s. Vaghasia Associates, Surat

ITA 3389/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89529 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: MEHUL R SHAH A R
• Keywords: Unexplained investment; Business income; Cost of acquisition; Corroborative evidences; Valuation report; Onus to prove
• Section: 69C; 143(3); 133A; 80IB; 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER ./ ././ ./ ITA NO. 3389/AHD/2010 / ASSESSMENT YEAR: 2007-08 DCIT, CIRCLE-8, SURAT V/S. M/S. VAGHASIA ASSOCIATES, 50/3, SURYAM RESIDENCY, SINGANPORE, DABHOLI ROAD, SURAT PAN : AAFFV 6838 A / // / (APPELLANT) / // / (RESPONDENT) REVENUE BY : SHRI O.P. VAISHNAV, CIT-DR ASSESSEE(S) BY : SHRI MEHUL R. SHAH, AR !' # $%&/ // / DATE OF HEARING : 21/05/2015 '( # $%& / // / DATE OF PRONOUNCEMENT: 12/06/2015 )* )* )* )*/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE REVENUE AND IS DIREC TED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS )-V, SURAT DATED 12.10.2010, PERTAINING TO ASSESSMENT YEAR 2007-08. 2. GROUND NOS. 1, 2 & 3 OF THE REVENUES APPEAL REA D AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,9 4,17,251/- MADE BY THE A.O. ON ACCOUNT OF SUPPRESSION OF PROFIT DESPITE TH E FACT THAT THE SAID ADDITION WAS MADE ON THE BASIS OF THE IMPOUNDED MAT ERIAL IMPOUNDED DURING THE COURSE OF SURVEY U/S 133A FROM THE ASSES SEE PREMISES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.29, 70,895/- MADE BY THE A.O. U/ 69C ON ACCOUNT OF LABOUR CHARGES DESPITE TH E FACT THAT THE SAID ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 2 ADDITION WAS MADE ON THE BASIS OF THE IMPOUNDED MAT ERIAL IMPOUNDED DURING THE COURSE OF SURVEY U/S 133A FROM THE ASSES SEE PREMISES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE PLEA OF THE ASSES SEE THAT THE FIGURES MENTIONED ON PAGE 110 OF IMPOUNDED BOOK BF/7 ARE NO THING BUT AN ESTIMATE DESPITE THE FACT THAT THE BOOK BF/7 WAS IM POUNDED JUST 3 DAYS BEFORE FROM THE CLOSING OF THE F.Y. 2007-08 AND THE ASSESSEE FAILED TO PRODUCE ANY SUBSTANTIVE EVIDENCE BEFORE THE A.O. RE GARDING ITS CLAIM OF ESTIMATION. 3. ALL THE ABOVE THREE GROUNDS ARE INTERRELATED; TH EREFORE, THEY ARE BEING TAKEN-UP AND CONSIDERED TOGETHER. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME FROM CONSTRUCTION AND SALE OF FLATS. DURING THE ACCOUNT ING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS SURV EY AT THE ASSESSEES PREMISES ON 28.03.2007. DURING THE COURSE OF SURVE Y, CERTAIN PAPERS WERE FOUND AND IMPOUNDED. ONE OF THE PAPERS, I.E. PAGE 1 10, THERE WAS A TRADING AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 28. 03.2007; AS PER WHICH, THE NET PROFIT WORKED OUT TO RS.2,94,17,251/-. DUR ING THE COURSE OF SURVEY, THE ASSESSEE HAS DISCLOSED AN INCOME OF RS.1,24,00, 000/- WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CON SIDERATION. HOWEVER, IN THE RETURN OF INCOME, THE ASSESSEE DID NOT OFFER AN Y INCOME FROM THIS PROJECT EXCEPT THE INCOME SURRENDERED AT RS.1,24,00,000/-. THE ENTIRE EXPENDITURE INCURRED AS PER BOOKS OF ACCOUNTS WAS SHOWN AS WORK -IN-PROGRESS. THE ASSESSING OFFICER MADE THE ADDITION OF RS.2,94,17,2 51/-, TREATING THE SAME AS BUSINESS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ON APPEAL, THE CIT(A) DELETED THE SAME. THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT(A) IS IN APPEAL BEFORE US VIDE GROUND NO.1 OF T HE REVENUES APPEAL. ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 3 5. AS PER TRADING AND PROFIT & LOSS ACCOUNT FOUND A T THE TIME OF SURVEY, THE LABOUR PAYMENT WAS RS.98,19,829/-, BUT AS PER A UDITED BALANCE-SHEET AND PROFIT & LOSS ACCOUNT FILED ALONGWITH THE RETUR N OF INCOME, THE LABOUR PAYMENT WAS DISCLOSED AT RS.68,48,934/-. THE ASSES SING OFFICER TREATED THE DIFFERENCE OF RS.29,70,895/- AS UNEXPLAINED EXPENDI TURE U/S 69C OF THE INCOME-TAX ACT. THE CIT(A) DELETED THE SAME; HENCE , THE GROUND NO.2 OF THE REVENUES APPEAL. 6. GROUND NO.3 OF THE REVENUES APPEAL IS ONLY THE ARGUMENT IN SUPPORT OF ABOVE TWO GROUNDS. 7. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LD. DEPARTMENTAL REPRESENTATIVE THAT DURING THE COURSE OF SURVEY AT THE ASSESSEES PREMISES, A LOOSE PAPER WAS FOUND WHICH WAS TRADING AND PROFIT & LOSS ACCOUNT IN RESPECT OF ASSESSEES BUSINESS FO R THE PERIOD FROM 01.04.2006 TO 28.03.2007. THE SAID PAPER IS AT PAG E NO.14 OF THE ASSESSEES PAPER-BOOK AND FROM THE SAID PAPER, IT IS EVIDENT T HAT THE FIGURES ARE ODD FIGURES AND THEREFORE, IT CANNOT BE ACCEPTED THAT T HIS WAS ONLY AN ESTIMATED PROFIT & LOSS ACCOUNT AS CLAIMED BY THE ASSESSEE BE FORE THE ASSESSING OFFICER AS WELL AS CIT(A). HE ALSO STATED THAT ON THE SAID PAPER, IT IS NOWHERE MENTIONED THAT IT IS AN ESTIMATED PROFIT & LOSS ACC OUNT OR PROJECTED PROFIT & LOSS ACCOUNT AND NOT THE REAL PROFIT & LOSS ACCOUNT . HE, THEREFORE, SUBMITTED THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN M AKING THE ADDITION OF NET PROFIT AS DISCLOSED BY THE PROFIT & LOSS ACCOUNT AS ON 28.03.2007. THAT THE ACCOUNTING YEAR ENDED JUST 3 DAYS AFTER 28.03.2007 AND THEREFORE, THERE CANNOT BE MUCH CHANGE IN THE NET PROFIT. HE, THERE FORE, SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AS PER PROFI T & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY WAS RIGHTLY MADE BY THE ASSES SING OFFICER AND THE SAME SHOULD BE SUSTAINED. THE LD. DEPARTMENTAL REP RESENTATIVE FURTHER ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 4 POINTED OUT THAT AS PER PROFIT & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY, THE LABOUR PAYMENT WAS RS.98,19,829/- WHILE IN THE AUDITED PROFIT & LOSS ACCOUNT FILED ALONGWITH RETURN OF INCOME, THE LABOU R PAYMENT DISCLOSED WAS ONLY RS.68,48,934/-. OBVIOUSLY, THE BALANCE LABOUR PAYMENT WAS NOT RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. THUS, THE SAME WAS MADE OUT OF UNEXPLAINED SOURCE AND THE ADDITION WAS RIGH TLY MADE BY THE ASSESSING OFFICER U/S 69C OF THE INCOME-TAX ACT. HE , THEREFORE, SUBMITTED THAT ON BOTH THESE COUNTS THE ORDER OF THE CIT(A) S HOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, POINTED OUT THAT THE TRADING AND PROFIT & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY IS ROUGH AND ESTIMATED PROFIT & LOSS ACCOUNT. HE POINTED OU T THAT THE LAND FOR THE PROJECT WAS PURCHASED IN THE PRECEDING YEAR AND THE CONSTRUCTION WORK WAS ALSO STARTED IN THE PRECEDING YEAR AND HAS BEEN SHO WN AS CLOSING WORK-IN- PROGRESS IN THE LAST YEAR. THAT THE PROFIT & LOSS A CCOUNT FOUND AT THE TIME OF SURVEY DOES NOT DISCLOSE EITHER THE OPENING WORK-IN -PROGRESS OR THE LAND COST. THAT THE CORRECT TRADING AND P&L ACCOUNT CANN OT BE PREPARED WITHOUT CONSIDERING VALUE OF LAND OR OPENING WORK-IN-PROGRE SS. HE ALSO STATED THAT THIS PROFIT & LOSS ACCOUNT IS ONLY ROUGH AND ESTIMA TED ONE IN WHICH PROFIT EXPECTED ON THE COMPLETION OF PROJECT WAS WORKED OU T. HE SUBMITTED THAT THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION ME THOD. DURING THE YEAR UNDER CONSIDERATION, THE PROJECT WAS CERTAINLY NOT COMPLETED AND THE CONTRACT WORK INCOME SHOWN IN THE TRADING & PROFIT & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY WAS THE SALE CONSIDERATION WH ICH WAS TO BE RECEIVED BY THE ASSESSEE ON THE SALE OF FLATS WHICH HAVE BEEN B OOKED TILL 28.03.2007. THAT FROM THE FLATS BOOKED TILL 28.03.2007, THE CONSIDER ATION ACTUALLY RECEIVED BY THE ASSESSEE UP TO 31.03.2007 WAS ONLY RS.52,95,000 /-, WHICH WAS EVEN LESS ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 5 THAN THE 10% OF THE SALE CONSIDERATION WHICH WAS TO BE ACTUALLY RECEIVED. THAT NOT A SINGLE SALE DEED WAS EXECUTED AND EVEN T HE CONSTRUCTION WORK WAS NOT COMPLETED. THEREFORE, THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE WAS DISCLOSED IN THE AUDITED PROFIT & LOSS ACCOUNT AND BALANCE- SHEET AS WORK-IN-PROGRESS. THAT THE PROJECT WAS C OMPLETED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-10 AND THE IN COME OF RS.3,08,58,867/- WAS DISCLOSED FROM THIS PROJECT. THE ASSESSMENT FOR ASSESSMENT YEAR 2009- 10 IS COMPLETED U/S 143(3); COPY OF WHICH IS PLACED IN ASSESSEES PAPER-BOOK AT PAGES 56-57. HE POINTED OUT THAT THE ASSESSEE W AS ENTITLED TO EXEMPTION U/S 80IB AND THEREFORE, THE ENTIRE INCOME EARNED BY THE ASSESSEE FROM THIS PROJECT WAS EXEMPT U/S 80IB. HE SUBMITTED THAT SIN CE DURING THE YEAR UNDER CONSIDERATION, THE PROJECT WAS IN PROGRESS, T HE QUESTION OF DETERMINATION OF INCOME FROM THE SAID PROJECT COULD NOT AROSE. THEREFORE, THE PROFIT & LOSS ACCOUNT PREPARED TILL A PARTICULA R DATE WAS ONLY ROUGH/ESTIMATED/PROJECTED PROFIT & LOSS ACCOUNT. T HE FIGURE OF THE PROFIT IN THE SAID PROFIT & LOSS ACCOUNT IS NEAR ABOUT THE PROFIT WHICH WAS ACTUALLY EARNED BY THE ASSESSEE FROM THIS PROJECT. HE, THER EFORE, SUBMITTED THAT MERELY BECAUSE THE ASSESSEE PREPARED SOME ESTIMATED /PROJECTED PROFIT & LOSS ACCOUNT TILL A PARTICULAR DATE IN THE YEAR UND ER CONSIDERATION, INCOME FROM THE PROJECT CANNOT BE ASSESSED. 9. WITH REGARD TO LABOUR PAYMENT, HE EXPLAINED THAT THE LABOUR PAYMENT MENTIONED IN THE PAPER WAS ALSO ESTIMATED/PROJECTED ONE, WHICH THE ASSESSEE WAS SUPPOSED TO INCUR ON THE COMPLETION OF THE PROJECT. HE FURTHER SUBMITTED THAT EXCEPT THE LOOSE PAPER, NO CORROBORA TIVE EVIDENCE WAS FOUND WITH REGARD TO INCURRING OF ANY LABOUR PAYMENT OVER AND ABOVE WHAT WAS DEBITED IN THE BOOKS OF ACCOUNT. THAT THE LABOUR PA YMENT DEBITED IN THE BOOKS OF ACCOUNTS IS DULY SUPPORTED BY BILLS AND VO UCHERS OF THE PETTY LABOUR CONTRACTORS. THE COMPLETE DETAILS OF THE LAB OUR PAYMENT MADE BY THE ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 6 ASSESSEE ALONGWITH NECESSARY BILLS AND VOUCHERS WER E PRODUCED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . THE REGULAR BOOKS OF ACCOUNTS ARE DULY AUDITED BY THE CHARTERED ACCOUNTA NT. THE AUDITOR HAS NOT POINTED OUT ANY DISCREPANCY IN THE MAINTENANCE OF THE BOOKS OF ACCOUNTS OR IN RESPECT OF LABOUR PAYMENTS. HE, THER EFORE, SUBMITTED THAT MERELY BECAUSE SOME ESTIMATED LABOUR PAYMENT WAS WR ITTEN ON THE PROJECTED PROFIT & LOSS ACCOUNT, THE ADDITION FOR U NEXPLAINED EXPENDITURE CANNOT BE MADE. 10. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE FIRST Q UESTION IS WHETHER THE INCOME FROM THE PROJECT IS TO BE ASSESSED IN THE YE AR UNDER CONSIDERATION, BECAUSE IF THE PROJECT INCOME IS TO BE ASSESSED IN THE YEAR UNDER CONSIDERATION, THEN ONLY THE QUESTION OF DETERMINAT ION OF INCOME FROM THE SAID PROJECT WOULD ARISE. THERE ARE TWO RECOGNIZED METHODS FOR DETERMINATION OF INCOME IN THE CASE OF CONTRACTOR O R BUILDER. ONE IS PERCENTAGE COMPLETION METHOD AND THE SECOND IS P ROJECT COMPLETION METHOD. IN THE FIRST METHOD, THE INCOME IS RECOGN IZED ON THE BASIS OF PERCENTAGE OF COMPLETION OF THE PROJECT, BUT IN THE SECOND CASE, THE INCOME IS RECOGNIZED ONLY AFTER COMPLETION OF THE PROJECT. AD MITTEDLY, THE ASSESSEE WAS FOLLOWING THE PROJECT COMPLETION METHOD. FROM T HE FACTS OF THE CASE IT IS EVIDENT THAT DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION PROJECT WAS NOT COMPLETED. THE ASSES SEE STARTED THE CONSTRUCTION OF BUILDING IN THE IMMEDIATELY PRECEDI NG YEAR AND THE CONSTRUCTION WORK CONTINUED IN THE YEAR UNDER CONSI DERATION AND ALSO IN SUBSEQUENT YEAR. THE ASSESSEE ALSO STARTED BOOKING OF THE FLATS, BUT NEITHER THE BUILDING CONSTRUCTION WAS COMPLETED NOR THE SAL E DEED WAS EXECUTED. IT WAS POINTED OUT BY THE LD. COUNSEL THAT THE AMOUNT CREDITED IN THE LOOSE ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 7 PAPER AS CONTRACT WORK INCOME WAS ONLY PROJECTED SALE PROCEEDS WHICH ASSESSEE WAS TO RECEIVE ON THE SALE OF THE FLATS WH ICH WERE BOOKED TILL THE DATE OF SURVEY. THAT OUT OF THE ACTUAL SALE CONSIDE RATION OF FLATS AT RS.5,63,27,300/-, THE AMOUNT RECEIVED BY THE ASSESS EE TILL THE END OF THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER C ONSIDERATION WAS ONLY RS.52,95,000/-. THUS, THE SALE CONSIDERATION RECEI VED WAS NOT EVEN 10% OF THE TOTAL SALE CONSIDERATION OF THE FLATS. NOT A SI NGLE SALE DEED WAS EXECUTED. FROM THESE FACTS, IT IS EVIDENT THAT THE PROJECT UN DER CONSIDERATION WAS FAR FROM COMPLETION DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS ALSO POINTED OUT BY THE LD. COUNSEL THAT THE PROJECT WAS ACTUALLY COMPLETED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-10 IN WHICH THE INCOME FROM THE SAME PROJ ECT WAS OFFERED. THE ASSESSMENT FOR ASSESSMENT YEAR 2009-10 IS COMPLETED U/S 143(3) AND COPY OF THE ASSESSMENT ORDER IS PLACED ON RECORD. THESE FACTS, STATED BY THE LD. COUNSEL, HAVE NOT BEEN CONTROVERTED BEFORE US AT TH E TIME OF HEARING. CONSIDERING THE TOTALITY OF THESE FACTS, WE HAVE NO HESITATION TO HOLD THAT THE INCOME FROM THE PROJECT UNDER CONSIDERATION DURING THE YEAR UNDER CONSIDERATION WAS NOT ASSESSABLE IN THIS YEAR, BECA USE THE PROJECT WAS NOT COMPLETED. ONCE THE INCOME IS NOT ASSESSABLE, THE Q UESTION OF DETERMINATION OF QUANTUM OF INCOME FROM THE SAID PROJECT IS ONLY ACADEMIC. IN VIEW OF ABOVE, WE DO NOT FIND ANY MERIT IN GROUND NO.1 OF T HE REVENUES APPEAL AND THE SAME IS REJECTED. 11. SO FAR AS THE DIFFERENCE BETWEEN THE LABOUR PAY MENT MENTIONED IN THE PROFIT & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY A ND THE LABOUR PAYMENT DISCLOSED IN THE BOOKS OF ACCOUNT AND THE AUDITED P ROFIT & LOSS ACCOUNT, THE FINDING OF THE CIT(A) IS AS UNDER:- ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 8 . IT IS FURTHER SEEN THAT IT IS NOT THE CASE THAT THE AMOUNT OF RS.98,19,829/- APPEARING IN THE IMPOUNDED TRADING & P&L A/C HAS BEEN ACTUALLY PAID AS NO MATERIAL EVIDENCING THE PAYMENT OF LABOUR CHARGES TO THAT EXTENT HAS BEEN BROUGHT ON RECORD. AS COMPLETE DETA ILS OF LABOUR PARTIES HAVE BEEN FILED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, ASSESSING OFFICER COULD HAVE VERIFIED THE ACTUAL FACTS BY MAKING INDE PENDENT INQUIRY FROM THE LABOUR CONTRACTORS. AS DETAILS RELATING TO PAN AND ADDRESS ARE ALREADY ON RECORD, ASSESSING OFFICER OUGHT TO HAVE MADE CROSS VERIFICATION BEFORE COMING TO THE CONCLUSION THAT ASSESSEE HAS SUPPRESSED ITS LABOUR CHARGES. THE ADDITION U/S 69C CAN BE MADE ONLY WHEN ASSESSEE IS FOUND TO HAVE INCURRED THE EXPENDITURE AND THE SOURCE OF WHICH IS NOT SATI SFACTORILY EXPLAINED. HOWEVER, IN THE INSTANT CASE IT HAS NOT BEEN PROVED THAT ASSESSEE ACTUALLY INCURRED LABOUR CHARGES TO THE EXTENT OF RS.98,19,8 29/- AS AGAINST THE CLAIM MADE IN THE AUDITED ACCOUNTS AT RS.68,48,934/-. AS SUCH IN ABSENCE OF ANY CORROBORATIVE EVIDENCES INDICATING THE FACT THAT AS SESSEE ACTUALLY INCURRED MORE EXPENDITURE THAN WHAT IS SHOWN IN THE AUDITED ACCOUNTS, NO ADDITION U/S 69C COULD BE MADE. HENCE, ADDITION MADE BY ASSE SSING OFFICER IS DIRECTED TO BE DELETED AND THE APPEAL ON THIS COUNT IS ALLOWED. 12. THE ABOVE FINDING OF FACT RECORDED BY THE CIT(A ) HAS NOT BEEN CONTROVERTED BEFORE US. DURING THE COURSE OF SURVEY , THE REVENUE HAS SEIZED VARIOUS PAPERS AND THE BOOKS OF ACCOUNTS. HOWEVER, THERE IS NO CORROBORATIVE EVIDENCE IN RESPECT OF LABOUR PAYMENT MENTIONED IN THE PROFIT & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY. ON THE OTHER HAND, COMPLETE DETAILS OF THE LABOUR PAYMENTS DEBITED IN THE BOOKS OF ACCOUNTS HAVE BEEN FURNISHED. MOREOVER, AFTER THE ARGUMENTS OF BOTH TH E SIDES AND THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE PROFIT AND LOSS ACCOUNTS FOUND AT THE TIME OF SURVEY IS ONLY AN ESTIMATED PROFIT AND LOSS ACCOUNT IN WHICH PROJECTED PROFIT IS WORKED OUT WHICH THE ASSESSEE E XPECTED TO EARN ON THE COMPLETION OF THE PROJECT. FROM THE PROFIT & LOSS ACCOUNT FOUND AT THE TIME OF SURVEY, WE FIND THAT ON INCOME SIDE THERE WAS A CREDIT OF RS.5,63,27,300/- WITH THE NARRATION CONTRACT WORK INCOME. THE ASSE SSEE IS NOT DOING ANY CONTRACT WORK, BUT THIS AMOUNT WAS THE SALE CONSIDE RATION WHICH THE ASSESSEE WAS EXPECTED TO RECEIVE ON THE EXECUTION O F SALE DEED OF THE FLATS BOOKED TILL THE DATE OF SURVEY. AT THE EXPENDITURE SIDE, THERE IS NO DEBIT FOR ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 9 THE VALUE OF THE LAND OR THE OPENING WORK-IN-PROGRE SS. CONSIDERING THE TOTALITY OF THESE FACTS AS WELL AS THE FACTUAL FIND ING RECORDED BY THE CIT(A), WE ARE OF THE OPINION THAT THE CIT(A) WAS FULLY JUS TIFIED IN HOLDING THAT IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCES INDICATI NG THE FACT THAT ASSESSEE ACTUALLY INCURRED MORE EXPENDITURE THAN WHAT WAS SH OWN IN THE BOOKS OF ACCOUNTS, NO ADDITION U/S 69C CAN BE MADE. WE, THE REFORE, UPHOLD THE ORDER OF THE CIT(A) WITH REGARD TO GROUND NOS. 2 & 3 OF THE REVENUES APPEAL AND THUS, THESE GROUNDS OF REVENUE ARE REJEC TED. 13. GROUND NO.4 OF THE REVENUES APPEAL READS AS UN DER:- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,5 7,358/- MADE BY THE A.O. AFTER DISALLOWING THE TRANSPORTATION EXP. DESPITE T HE FACT THAT THE ASSESSEE FAILED TO PRODUCE ANY SUBSTANTIVE EVIDENCE IN SUPPO RT OF THESE EXP. AND THUS FAILED TO DISCHARGE THE ONUS TO PROVE GENUINENESS O F THE EXP. BEFORE THE A.O. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDINGS:- 7.3 I HAVE CONSIDERED THE REASONS GIVEN BY ASSESSI NG OFFICER AND ALSO THE SUBMISSIONS OF APPELLANT. ON PERUSAL OF THE ABOVE, IT IS SEEN THAT ASSESSEE HAS FILED ALL THE RELEVANT EVIDENCES IN SUPPORT OF THE GENUINENESS OF EXPENDITURE CLAIMED BY IT. IT IS SEEN THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE FILED COPY OF RELEVANT INVOICES ISSUED BY THE PARTIES TO WHOM PAYMENT OF TRANSPORTATION CHARGES HAVE BEEN MADE. T HE ASSESSEE HAS ALSO MADE TDS FROM PAYMENT OF TRANSPORTATION CHARGES. SI NCE, ASSESSEE HAS FILED ALL THE RELEVANT INVOICES, THE NATURE OF EXPENDITUR E STANDS CLEARLY EXPLAINED AND ADDITION CANNOT BE MADE ON THE GROUND THAT MONT H-WISE DETAILS OF SUCH EXPENDITURE HAS NOT BEEN FILED. HERE, ALSO ASSESSIN G OFFICER HAS FAILED TO BRING ANY EVIDENCE ON RECORD BY MAKING INDEPENDENT INQUIRY FROM THE PARTIES TO WHOM TRANSPORTATION CHARGES HAVE BEEN PA ID WHICH COULD INDICATE THAT THE EXPENDITURE INCURRED BY ASSESSEE IS NOT GE NUINE. IN ABSENCE OF ANY SUCH EVIDENCE ON RECORD, I AM OF THE OPINION THAT T HE CLAIM OF EXPENDITURE MADE BY ASSESSEE CANNOT BE DISALLOWED AS ASSESSEE H AS CLEARLY DISCHARGED THE BURDEN CAST ON IT IN PROVING THE GENUINENESS OF EXP ENDITURE. HENCE, THE ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 10 ADDITION OF RS.2,57,358/- IS HEREBY DELETED AND THE APPEAL ON THIS COUNT IS ALLOWED. 15. THE ABOVE FACTUAL FINDING RECORDED BY THE CIT(A ) HAS NOT BEEN CONTROVERTED BY THE REVENUE AT THE TIME OF HEARING. IN THE GROUND OF APPEAL, THE REVENUE HAS CONTENDED THAT THE ASSESSEE FAILED TO PRODUCE SUBSTANTIVE EVIDENCE IN SUPPORT OF THESE EXPENSES. HOWEVER, THE CIT(A) HAS RECORDED THE FINDING THAT THE ASSESSEE HAD FILED TH E RELEVANT INVOICES ISSUED BY THE PARTIES TO WHOM THE PAYMENT OF TRANSPORTATIO N CHARGES HAVE BEEN MADE. THE ASSESSEE HAS ALSO DEDUCTED TDS FROM THE P AYMENT OF TRANSPORTATION CHARGES. THUS, THE CIT(A) WAS OF THE OPINION THAT FROM THESE EVIDENCES THE NATURE OF THE EXPENDITURE STANDS CLEA RLY EXPLAINED. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGUMENTS OF BOTH THE SIDES, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) AND THE SAME IS SUSTAINED. THUS, GROUND NO.4 OF THE REVENUES AP PEAL IS REJECTED. 16. GROUND NO.5 OF THE REVENUES APPEAL READS AS UN DER:- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,4 1,28,000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND D ESPITE THE FACT THAT THE ADDITION WAS MADE ON THE BASIS OF THE LOAN DOCUMENT S IN POSSESSION OF STATE BANK OF MYSORE AND THE VALUATION MADE BY THE BANK W AS VERY WELL ACCEPTED BY THE ASSESSEE TO AVAIL THE LOAN FACILITY. 17. THE RELEVANT FACTS RELATING TO GROUND NO.5, AS GIVEN BY THE ASSESSING OFFICER IN HIS ORDER, READ AS UNDER:- 6.1 THE BANK HAS MORTGAGED THE OPEN PLOT OF LAND A ND AS PER THEIR VALUATION, THE VALUE OF THE OPEN PLOT OF LAND IS OF RS.448.59 LACS WHEREAS IN THE BOOKS OF ACCOUNTS THE PURCHASE COST OF LAND IS OF RS.7,31,00 0/-. THE ASSESSEE WAS ISSUED SHOW CAUSE WHICH IS REPRODUCED AS UNDER: ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 11 'AS PER THE COPY OF SALE DEED OF /AND IN QUESTION D ATED 16.2.2006, YOU HAVE PURCHASED THE LEND ADMEASURING 6523 SQ, MTRS. AT REVENUE SURVEY NO. 112 OF VILLAGE SINGANPORE, T.P. 26, FINA L PLOT NO.50/3, FOR RS.7,31,000/-. FROM THE COPY OF THE SALE DEED, IT IS ALSO FOUND THAT THE SAME IS REGISTERED AT SR. NO..1830 OF KATARGAM, SURAT, 2006. THE LAND ON WHICH RESIDENTIAL TOWERS/COMPLEX CONSTR UCTED, WORKED OUT AT RS. 112.06 PER SQ. MTRS, WHICH IS PRIMA FACI E VERY LOW RATE. YOU ARE HEREBY ISSUED SHOW CAUSE AND REQUIRED TO PR ODUCE THE VALUATION REPORT OF THE APPROVED REGISTERED VALUER. 5.1 IT IS ALSO NOTICED THAT AS PER MEDIUM TERM LONG TERM AGREEMENT WITH STATE BANK OF MYSORE DATED 28.02.2007 UNDER TH E HEAD 'SECURITY AND MARGIN', IT IS CONTENDED THAT THE EQUITABLE MOR TGAGE OF OPEN LAND AT SY NO. 112/2, TPS NO. 26: FINAL PLOT NO. 50/3 PA IKEE ADMEASURING 6523 SQ. MTRS. AT SINGANPORE, SURAT VAL UED AT RS.448.59 LACS BELONGING TO YOU ON WHICH THEY HAVE SANCTIONED A MEDIUM TERM LOAN OF RS.3 CRORES. YOU ARE HEREBY ISSUED CAUSE AS TO WHY THE VALUE OF THE LAND SHOULD NOT BE CONSIDERED AS PER THE AGREEM ENT WITH STATE BANK OF MYSORE. 6.2 THEREFORE, AS PER PARA 5 & 5.1 OF THE SHOW CAUS E NOTICE DATED 22.12.2009, THE ASSESSEE WAS ASKED TO PRODUCE THE VALUATION REP ORT OF THE APPROVED REGISTERED VALUER. THE ASSESSEE WAS ALSO ISSUED SHO W CAUSE NOTICE AS TO WHY THE VALUE OF THE LAND SHOULD NOT BE CONSIDERED AS P ER THE AGREEMENT WITH STATE BANK OF MYSORE, SURAT. THE ASSESSEE REPLY ON THIS ISSUE IS REPRODUCED AS UNDER: 'WE HAVE PURCHASE LAND ON 16/2/2006 ADMEASURING 652 3 SQ.MTRS & AFTER THE GAP OF 12 MONTHS THE ASSESSEE HAD OBTAINE D LOAN FROM STATE BANK OF MYSORE ON 28/02/2007. IN BETWEEN THIS PERIO D OF 12 MONTHS ASSESSEE FIRM HAS DEVELOPED THE LAND BY DOING LEVEL ING, FENCING ETC AS A RESULT OF WHICH MARKET PRICE OF THE LAND HAS INCREA SED. FURTHER ASSESSEE HAS PURCHASE LAND AT THE TOTAL COST OF RS, 731000 WHICH WAS AS PER JANTRI RATE PREVAILED AT THAT TIME. COPY OF JANTRI IS ENCLOSED. FURTHER THE FINANCIAL INSTITUTION SANCTIONED THE LO AN ON THE BASIS OF MARKET VALUE & NOT AS PER VALUE ADOPTED IN THE BOOK S OF A/C. WE FURTHER STATES THAT BANK HAD DISBURSED THE TERM LOA N STAGE WISE AS PER THE PROGRESS OF CONSTRUCTION. WE ARE ENCLOSING HERE WITH COPY OF LOAN STATEMENT SHOWING THE VARIOUS DATES ON WHICH LOAN W AS DISBURSED BY THE BANK.' 6.3 ON CAREFUL EXAMINING THE ASSESSEE'S REPLY, IT I S ASCERTAINED THAT THE LAND WAS PURCHASED AT THE TOTAL COST OF RS.7,31,000/- WH ICH IS AS PER JANTRI RATE ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 12 PREVAILED AT THAT TIME, BUT THE COPY OF JANTRI IS N OT ENCLOSED BY THE ASSESSEE IN THE SHOW CAUSE REPLY. 6.4 IT IS WORTHWHILE TO MENTION HERE THAT IN T HE FASTEST DEVELOPING LIKE SURAT, PURCHASING OF LAND ADMEASURING 6523 SQ. RNT ON 16.2.2006 FOR RS.7,31,000/- IS NOT BELIEVABLE. IT IS ALSO FOUND T HAT THE ASSESSEE HAS CONSTRUCTED RESIDENTIAL TOWERS/COMPLEX ON IT. AS PER LOCAL NEWS PAPER DIVYA BHASKAR DATED 1.6.2008, THE MARKET PRICE OF A SMALL HUT IN SLUMS OF SURAT WAS BETWEEN RS.3 LAKHS TO RS. 7 LAKHS AND THE PRICE OF SHOP AT RS.8.5 LAKHS (SEE ANNEXURE'A'). THEREFORE, THE VALUE OF PURCHASE OF LAND ADMEASURING 6523 SQ. MTS. FOR RS.7,31,000/- IS APPARENTLY NOT JUSTIFIED. TO SUBSTANTIATE ITS CLAIM; I) THE ASSESSES DID NOT ENCLOSE COPY OF SO CALLED JANT RI AS PER THE JANTRI RATE OF THE LAND WHICH WAS PURCHASED BY IT FOR MERE CONSIDERATION OF RS.7,31,000/-. II) THE ASSESSEE DID NOT FURNISH THE VALUATION REPORT OF APPROVED REGISTERED VALUER. III)THE ASSESSEE HAS NOT ADDUCED ANY DOCUMENT TO PR OVE THAT THE WORK OF LEVELING, FENCING ETC. WAS CARRIED OUT BY THEM. EVE N IF IT IS ASSUMED THAT THE WORK OF LEVELING, FENCING ETC. WAS CARRIED OUT BY THE ASSESSEE, IT IS DIFFICULT TO BELIEVE THAT THE MARKET VALUE OF THE OPEN PLOT OF LAND CAN RISE BY AS HIGH AS 6136%. . 6.5 BESIDES, THE ASSESSEE ITSELF ADMITTED THAT THE FINANCIAL, INSTITUTION HAS SANCTIONED THE LOAN ON THE BASIS OF MARKET VALUE AN D NOT AS PER VALUE ADOPTED IN THE BOOKS OF ACCOUNTS. THEREFORE, THERE IS NO AM BIGUITY IN ADOPTING THE REAL MARKET VALUE AT RS.448.59 LAKHS AS ADOPTED BY THE S TATE BANK OF MYSORE AS PER AGREEMENT DATED 28.2.2007. THEREFORE, THE ASSES SEE HAS UNDERVALUED THE LAND TO THE EXTENT OF RS.4,41,28,000 I.E.(RS.4,48,5 9,000 - RS.7,31 ,000/-). 6.6 THEREFORE, THE AMOUNT OF RS.4,41,28,000/- IS T REATED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S 69 OF THE I.T. ACT. 18. THE CIT(A) DELETED THE ADDITION; HENCE, THIS GR OUND OF APPEAL BY THE REVENUE. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSEE HAD PURCHASED AN OPEN PLOT OF LAND ON 16.02.2006 ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 13 FOR A SUM OF RS.7,31,000/-. SUBSEQUENTLY, IN THE Y EAR 2007, THE ASSESSEE MORTGAGED THIS PLOT OF LAND FOR OBTAINING THE LOAN FROM STATE BANK OF MYSORE. FOR THE PURPOSE OF OBTAINING THE LOAN, THE VALUE OF THE SAID PLOT OF LAND WAS DETERMINED AT RS.448.59 LACS. SINCE THE V ALUATION OF THE PLOT CLAIMED BY THE ASSESSEE FOR THE PURPOSE OF OBTAININ G THE BANK LOAN WAS SEVERAL TIMES HIGHER THAN THE PURCHASE VALUE SHOWN BY THE ASSESSEE, THE ASSESSING OFFICER DID NOT BELIEVE THE PURCHASE VALU E AND MADE THE ADDITION OF RS.4,41,28,000/- U/S 69 OF THE INCOME-TAX ACT. T HE LD. COUNSEL FOR THE ASSESSEE ARGUED AT LENGTH AND POINTED OUT THAT THE LOAN WAS NOT OBTAINED MERELY ON THE MORTGAGE OF THE PLOT BUT ON THE MORTG AGE OF THE ENTIRE PROJECT, I.E., PLOT AS WELL AS FLATS TO BE CONSTRUCTED ON TH E SAID PLOT. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUP PORTED THE ORDER OF THE ASSESSING OFFICER AND POINTED OUT THAT THE VALUE OF THE PLOT ONLY WAS SHOWN AT RS.448.59 LACS AND IT IS IMPOSSIBLE THAT THE VAL UE OF THE PLOT WOULD INCREASE ABOUT 60 TIMES IN A YEARS PERIOD. HE, THE REFORE, SUBMITTED THAT THE ADDITION AS MADE BY THE ASSESSING OFFICER U/S 69 SH OULD BE SUSTAINED. HOWEVER, IN OUR OPINION, THE ISSUE WHETHER THE PURC HASE PRICE SHOWN BY THE ASSESSEE AT RS.7,31,000/- IS THE CORRECT PURCHA SE PRICE OR NOT IS NOT RELEVANT IN THE YEAR UNDER CONSIDERATION. THE YEAR UNDER APPEAL BEFORE US IS ASSESSMENT YEAR 2007-08 AND THE RELEVANT PREVIOUS Y EAR WOULD BE 01.04.2006 TO 31.03.2007. ADMITTEDLY, THE ASSESSEE PURCHASED THE SAID PLOT OF LAND ON 16.02.2006 WHICH WOULD FALL IN THE ASSESSME NT YEAR 2006-07. WE, THEREFORE, HOLD THAT THE ISSUE OF ADDITION U/S 69 I N RESPECT OF PURCHASE OF LAND AS ON 16.02.2006 CANNOT BE CONSIDERED IN ASSES SMENT YEAR 2007-08. THEREFORE, ANY ADDITION FOR ALLEGED UNDERSTATEMENT OF PURCHASE PRICE OF PLOT PURCHASED ON 16.02.2006 CANNOT BE SUSTAINED IN ASSE SSMENT YEAR 2007-08. WITH THIS REMARK, WE HOLD THAT THE DELETION OF ADDI TION BY THE CIT(A) FOR UNEXPLAINED INVESTMENT IN THE PURCHASE OF PLOT WAS FULLY JUSTIFIED AND ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 14 THEREFORE, HIS ORDER ON THIS POINT IS SUSTAINED. TH US, GROUND NO.5 OF THE REVENUES APPEAL IS REJECTED 20. GROUND NO.6 OF THE REVENUES APPEAL READS AS UN DER:- 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSES SEE REGARDING DEDUCTION U/S 80IB OF THE ACT DESPITE THE FACT THAT THE A.O. BROUGHT MANY EVIDENCES ON RECORD THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF THE ACT THUS MAKING HIM INELIGIBLE FOR THE CLAIM. 21. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SID ES AND FACTS OF THE CASE, WE FIND THAT THIS GROUND RAISED BY THE REVENU E IS MISCONCEIVED. THE CIT(A) HAS NOT GIVEN ANY FINDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB. THE RELEVANT FINDING OF THE CIT(A) READ S AS UNDER:- 9. IN THE FIFTH GROUND, THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) OF THE ACT ON VARIOUS ADDITIONS MADE TO THE INCOME OF ASSESSEE. 9.1 AS ADDITIONS MADE TO THE INCOME OF ASSESSEE ST AND DELETED, THE ABOVE GROUND BECOMES INFRUCTUOUS AND THE SAME IS NOT DISC USSED ON MERITS. 22. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT(A) H AS TREATED THIS GROUND AS INFRUCTUOUS AND DID NOT GIVE ANY FINDING ON MERI T. THUS, THE GROUND NO.6 OF THE REVENUES APPEAL IS MISCONCEIVED AND TH E SAME IS REJECTED BEING MISCONCEIVED. 23. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 12 TH JUNE, 2015 AT AHMEDABAD. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 12/06/2015 BIJU T., PS ITA NO. 3389AHD/2010 DCIT VS.M/S. VAGHASIA ASSOCIATES FOR AY 2007-08 15 )* # $+ ,)+$ )* # $+ ,)+$ )* # $+ ,)+$ )* # $+ ,)+$/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ !- / CONCERNED CIT 4. !- ( ) / THE CIT(A) 5. +01 $ , , / DR, ITAT, AHMEDABAD 6. 13 4' / GUARD FILE . )*! )*! )*! )*! / BY ORDER, TRUE COPY 5 55 5/ // / 6 6 6 6 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD