DARSHAN CONSTRCUTION S, MUMBAI V. DCIT RG 15(1), MUMBAI

ITA 3964/MUM/2010

• Counselvise Citation: 396419914 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Assessee Lawyers: VIJAY MEHTA
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI RAJENDRA (A.M.) ITA NO. 3964/MUM/2010 ASSESSMENT YEAR : 2007-08 DARSHAN CONSTRUCTIONS, 701/702, DARSHAN BUILDING, 21, RAGHUNATH DADAJI STREET, FORT, MUMBAI 400 001. PAN : AADFD 8347 C VS. DY. COMMISSIONER OF INCOME TAX RANGE 15(1), ROOM NO. 104, MATRU MANDIR,IST FLOOR, TARDEO ROAD, MUMBAI- 400 007. (APPELLANT) (RESPONDENT) ITA NO. 4328/MUM/2010 ASSESSMENT YEAR : 2007-08 DY. COMMI SSIONER OF INCOME TAX RANGE 15(1), ROOM NO. 104, MATRU MANDIR,IST FLOOR, TARDEO ROAD, MUMBAI- 400 007. VS. DARSHAN CONSTRUCTIONS, 701/702, DARSHAN BUILDING, 21, RAGHUNATH DADAJI STREET, FORT, MUMBAI 400 001. PAN : AADFD 8347 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA RESPONDENT BY : MS. RUPINDER BRAR DATE OF HEARING 12-4-2012 DATE OF PRONOUNCEMENT 25-4-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER DATED 23-03-2010 PASSED BY THE LD . CIT (A) 26, ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 2 MUMBAI FOR THE A.Y. 2007-08. BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRU CTION AND DEVELOPMENT OF PROPERTIES. THE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME OF RS. 49,88,700/-. HOWEVER, THE ASSESSMENT AFTER REJECTING THE BOOKS OF ACCOUNT WAS COMPLETED AT AN INCOME OF RS. 14,37,82,390/- VIDE ORDER DTD. 21-12-2009 PASSED U/S 143(3)(II) OF THE INCOME TAX ACT, 1961 (THE ACT). ON APPEAL, THE LD. CIT(A) PARTLY ALLOWE D THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO. 4328/MUM/2010 (BY THE REVENUE): 4. GROUND OF APPEAL NO. 1 READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN LAW IN HOLDING THAT BOOKS O F ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED, OVERLOOKING THE FA CTS THAT A.O. HAS BROUGHT SUFFICIENT EVIDENCE ON RECORD BEFO RE REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 5. BRIEFLY STATED FACTS OF THE ABOVE ISSUE ARE THAT THE A.O. REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECT ION 145(3) OF THE ACT MAINLY ON THE FOLLOWING GROUNDS:- ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 3 (I) NO RECORD OF DAY-TO-DAY CONSUMPTION/CONSTRUCTIO N MATERIAL AND PURCHASED GOODS WAS MAINTAINED BY THE ASSESSEE. (II) THE CONSTRUCTION COST OF THE PROJECT WAS ON HI GHER SIDE. (III) THE ASSESSEE CLAIMED BOGUS EXPENSES EVEN WHEN THE PROJECT WAS COMPLETED AS PER ASSESSEES OWN ARCHITECTS LET TER. ASSESSING OFFICER OBSERVED THAT THE ASSESSEES ARCHITECT MADE APPLICATION FOR OBTAINING OCCUPATION CERTIFICATE WHEREIN IT WAS STA TED THAT THE PROJECT WAS COMPLETED ON 30-3-2006 AND THE ASSESSEE HAD CLAIMED EXPENSES AFTER THAT DATE. (IV) SELLING PRICE OF THE FLATS ARE COMPARATIVELY L OW. (V) ACCORDING TO THE AO PART OCCUPATION CERTIFICATE WAS OBTAINED ON 05-11-2001 AND FURTHER, IT IS NOTICED BY THE AO THAT THE ARCHITECT HAD, APPLIED FOR FULL OCCUPATION CERTIFIC ATE ON 31-03- 2006. THE A.O. FURTHER OBSERVED THAT SUCH APPLICATI ON CAN ONLY BE MADE WHEN BUILDING IS COMPLETED IN ALL RESPECTS. AS PER ARCHITECTS LETTER, THE A.O. OBSERVED THAT THERE WAS NO WORK PE NDING FOR CONSTRUCTION OF BUILDING HENCE THERE WAS NO NEED TO PURCHASE OF MATERIAL AFTER 31-03-2006 TO 22-9-2006. FURTHER TH E A.O. HAS NOTED FROM THE VOUCHER NO. HC- 1279 OF M/S HIRAL CE RAMICS THAT MATERIAL HAS NOT GONE TO THAKUR DWAR BUT TO MAZGAON LOVE LANE. ACCORDING TO THE AO BILL OF ONE SHRI KAMLESH R. PAT EL DATED 08-05- 2006 AND OTHER BILL OF M/S K.R PATEL & CO. WERE SIG NED BY A SINGLE PERSON AND THESE BILLS WERE HAVING SAME ADDRESS AND SAME FAX NOS. THEREFORE, AO HAS OBSERVED THAT WHEN LABOUR CO NTRACT WAS GIVEN TO M/S MADHAVI ENTERPRISES WHO HAD COMPLETED ALL THE WORK THEN WHY M/S K.R. PATEL WAS INVOLVED. IT IS BECAUSE , AS MENTIONED BY AO, TO INFLATE THE EXPENSE ONLY. THE A.O. FURTHE R OBSERVED THAT WHEN WORK WAS COMPLETED ON 08-05-2006 AS PER THE BI LL OF M/S K.R. PATEL THEN WHERE AND HOW PURCHASED GOODS FROM 10-05-2006 ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 4 TO 22-09-2006, HAS BEEN CONSUMED WITHOUT LABOUR CHA RGES. THE A.O. WHILE DISALLOWING THE PURCHASES, INVOKED THE P ROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT. 6. ON APPEAL, IT WAS SUBMITTED THAT DURING ASSESSM ENT PROCEEDINGS VARIOUS DETAILS LIKE DATE WISE RECEIPTS AND REPAYME NT OF LOAN, DISCHARGE OF PREVIOUS YEARS LIABILITIES, COPY OF OCCUPATION CERTIFICATE, FLAT-WISE DETAILS OF SALES, PURCHASE BILLS, SAMPLE COPY OF AG REEMENT, ETC AND EXPLANATIONS ON VARIOUS RELEVANT POINTS ASKED FOR B Y THE ASSESSING OFFICER WERE SUBMITTED BY THE ASSESSEE THROUGH REPRESENTATI VES. IT WAS FURTHER SUBMITTED THAT THE AR OF THE ASSESSEE MADE DETAILED WRITTEN SUBMISSIONS AND FILED PAPER BOOK IN THE COURSE OF APPELLATE PRO CEEDINGS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS IN THE BUSIN ESS OF REAL ESTATE CONSTRUCTION AND DEVELOPMENT. THE ASSESSEE HAD UNDE RTAKEN A PROJECT FOR REDEVELOPING OLD BUILDING (CHAWL) AT THAKURDWAR , MUMBAI 400 002. THE REDEVELOPMENT WAS DONE BY DEMOLISHING THE EXIST ING OLD BUILDING. THE OWNERSHIP TITLE OF THE LAND BELONGED TO M.C.G.M ., WHICH HAS GIVEN LAND ON LEASE IN FAVOUR OF THE SOCIETY FOR A PERIOD OF 30 YEARS. THE REDEVELOPED NEW BUILDING IS ONE COMPOSITE BUILDING COMPRISING OF BMC SCHOOL, OLD TENANTS STAYING IN ERSTWHILE OLD BUILDI NG (CHAWL), OLD COMMERCIAL TENANTS THEREIN AND THE NEW PURCHASERS I N THE REDEVELOPED NEW BUILDING. WHEN THE BUILDING WAS IN HABITUAL CON DITION, THE ASSESSEE HAD OBTAINED PART OCCUPATION CERTIFICATE ON 5-11-20 04. THE ASSESSEE HAD GIVEN POSSESSION OF THE FLATS TO THE TENANTS IN THE SAID BUILDING, ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 5 WHICH WAS STILL UNDER CONSTRUCTION AND NOT COMPLETE D IN TOTALITY IN ALL RESPECT. IT WAS FURTHER SUBMITTED THAT SUBSEQUENTLY , THEIR ARCHITECT APPLIED FOR FULL OCCUPATION CERTIFICATE ON 31-3-200 6 BUT AS ON THAT DATE TOO, THE CONSTRUCTION WORK WAS STILL IN PROGRESS AN D WAS NOT COMPLETED TOTALLY. THERE WERE SOME DEFECTS FOUND IN PLUMBING, SOME PAINTING AND TOUCH UPS WERE TO BE DONE AND SOME MAJOR CORRECTION S IN CAR PARKING SYSTEMS WERE STILL TO BE CARRIED OUT. THESE ACTIVIT IES WERE DONE POST 31-3- 2006 AND UPTO THE END OF FINANCIAL YEAR 31-3-2007, THE CONSTRUCTION WAS COMPLETED IN ITS ENTIRETY AND HENCE, THE ASSESSEE O FFERED PROFIT FROM THE PROJECT FOR TAXATION DISCLOSING TOTAL INCOME FROM T HE PROJECT AT RS. 49.88 LACS. AS REGARDS TO THE CONTENTION OF THE ASSESSING OFFICER FOR REJECTING THE BOOKS, IT WAS SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ITS BOOKS OF ACCOUNT ARE AUDITED UNDER THE PROVISIO NS OF THE INCOME TAX ACT AND NO QUALIFICATION AND / OR ADVERSE COMMENTS HAVE BEEN MADE BY THE AUDITORS IN RESPECT OF THE AUDIT OF ACCOUNTS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT IN ABSENCE OF SPECIFIC FIN DING TO THE EFFECT THAT THE CASE OF THE ASSESSEE FELL WITHIN THE FIRST PROV ISO TO SECTION 145(1) OR SECTION 145(3) OF THE ACT, BOOKS OF ACCOUNT CANNOT BE REJECTED. AS FOR THE FINDINGS OF THE ASSESSING OFFICER FOR NON MAINTENAN CE OF RECORDS OF MATERIALS AND LABOUR, THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAD MAINTAINED COMPLETE DETAILS OF PURCHASES WHICH WERE RECORDED IN THE PURCHASE REGISTER AND THE SAME WERE PRODUCED FOR VE RIFICATION AND BILLS FOR THE SAME WERE ALSO PRODUCED BEFORE THE ASSESSIN G OFFICER FOR ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 6 VERIFICATION. FURTHER, THE PROJECT AT THAKURDWAR WA S THE ONLY PROJECT UNDERTAKEN BY THE ASSESSEE AND ALL THE MATERIAL PUR CHASED WAS USED FOR THE SAID PROJECT. THE ASSESSEE FURTHER SUBMITTED TH AT CONSIDERING THE NATURE OF BUSINESS ACTIVITY I.E. REDEVELOPMENT OF B UILDING, IT WAS IMPOSSIBLE TO MAINTAIN DAY-TO-DAY CONSUMPTION REGIS TER. NEVERTHELESS, INPUT OF RAW OR BUILDING MATERIAL CAN VERY WELL VER IFY FROM THE RECORDS ITSELF AND FURTHER FROM THE RECORDS OF ARCHITECT. A S REGARDS THE CONTENTION OF THE A.O. ABOUT THE COST OF CONSTRUCTION ON A HIG HER SIDE, IT WAS SUBMITTED THAT THE A.O. HAS HIMSELF STATED THAT THE NORMAL COST OF CONSTRUCTION WOULD BE ABOUT RS. 800/- TO RS. 1,100/ - PER SQ. FT. IT WAS FURTHER SUBMITTED THAT THE COST OF CONSTRUCTION IN THE ASSESSEESS PROJECT WORKED OUT TO RS. 799/- PER SQ. FT. THUS, COST OF C ONSTRUCTION PER SQ. FT. IS VERY MUCH REASONABLE AND AT PAR WITH NORMAL CIRC UMSTANCES AS CONSIDERED BY ASSESSING OFFICER HIMSELF. AS REGARDS THE DISALLOWANCE OF EXPENSES INCURRED AFTER 31-3-2006, IT WAS STATED TH AT THE MAJOR EXPENSES INCURRED WERE TOWARDS THE PLUMBING MATERIAL AND VAR IOUS MISCELLANEOUS WORKS AND ALSO FOR CAR PARKING SYSTEM. THE OTHER E XPENSES WERE SMALL EXPENSES NEEDED TO BE INCURRED FOR FINAL TOUCHES AN D SOME LEFT OUT WORK ETC. TO BE COMPLETED EVEN AFTER OCCUPATION CERTIFIC ATE. THE ASSESSEE AFTER JUSTIFYING THE EXPENSES INCURRED BY THE ASSESSEE AF TER 31-3-006 WHICH IS AS PER FULL OCCUPATION CERTIFICATE FOR THE PROJECT COMPLETED, SUBMITTED THE SAME ARE ALLOWABLE. ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 7 7. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION WHILE OBSERVING THAT THE A.O. HAS NOT POINTED OUT ANY DIS CREPANCY IN THE BOOKS OF ACCOUNT AND EXPLANATION WITH RESPECT TO EACH ISS UE RAISED IN THE COURSE OF ASSESSMENT PROCEEDINGS, HELD THAT THE FIN DING OF THE A.O. ONLY REFLECTS SOME SORT OF SUSPICION, WHICH IS NOT SUBST ANTIATED ONE, THEREFORE, SUCH UNFOUNDED REASONING CANNOT BE SUSTAINED, ALLOW ED THE ASSESSEES GROUNDS RELATING TO THE REJECTION OF BOOKS OF ACCOU NT. 8. AT THE TIME OF HEARING THE LD. D.R. SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER, THE LD. CIT(A) W AS NOT JUSTIFIED IN HOLDING THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE C ANNOT BE REJECTED. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE A.O. BE RESTORED. 9. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND LD. CIT(A) STRONGLY SUPPORTED THE ORDER OF LD. CIT(A). 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS MAINTAINED FLAT-WISE DETAILS OF SALES, PURCHASE BILLS, COPY OF AGREEMENT AND RELEVANT REGI STERS INCLUDING PURCHASE REGISTER AND BILLS. WE FURTHER FIND THAT THE ASSESSEE HAS ALSO JUSTIFIED THAT THE COST OF CONSTRUCTION OF THE PROJ ECT WORKED OUT TO RS. 799/- PER SQ. FT. AS AGAINST RS. 800/- PER SQ. FT. TO RS. 1100/- PER SQ. FT. CITED BY THE A.O. UNDER THE PROVISIONS OF SECTION 1 45(3) OF THE ACT, IT HAS ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 8 BEEN PROVIDED THAT IF THE A.O. IS NOT SATISFIED ABO UT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHE RE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144. IN THE CASE BEFORE US, IT IS NOT THE CASE OF THE REVENUE THAT THE ACCOUNTS MAINTAINED BY THE ASSESSE E ARE NOT CORRECT OR COMPLETE OR NO CONSISTENT METHOD OF ACCOUNTING IS F OLLOWED BY THE ASSESSEE. IN THE ABSENCE THEREOF AND KEEPING IN VI EW THAT THE COST OF CONSTRUCTION SHOWN BY THE ASSESSEE AT RS. 799/- PER SQ. FT. IS LESS THAN THE COST OF CONSTRUCTION CITED BY THE A.O. I.E. RS . 800/- TO 1100/- PER SQ. FT., WE ARE OF THE VIEW THAT MERELY BECAUSE SOME OF THE EXPENSES RELATING TO THE COMPLETION OF PROJECT HAVE BEEN INCURRED AFT ER THE ALLEGED OCCUPATION CERTIFICATE DOES NOT MEAN THAT THE EXPEN SES INCURRED ON PLUMBING, LABOUR, PAINTING, JUPITER WINDOWS, TILES AND MARBLES, CAR PARKING SYSTEM, SAND METAL BLOCK, LABOUR-GRILLS AND FABRICATION AND MISC. LABOUR ARE NOT ALLOWABLE EXPENSES AND ON THAT PRESU MPTION BASIS, BOOKS OF ACCOUNTS CANNOT BE REJECTED. 11. IN CIT VS. REALEST BUILDERS AND SERVICES LTD. ( 2008) 307 ITR 202 (SC) IT HAS BEEN HELD (HEAD NOTE): IN CASES WHERE THE DEPARTMENT WANTS TO TAX AN ASS ESSEE ON THE GROUND OF LIABILITY ARISING IN A PARTICULAR YEA R, IT SHOULD ALWAYS ASCERTAIN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN THE PAST AND WHETHER THE CHANGE IN THE METHOD OF ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 9 ACCOUNTING WAS WARRANTED ON THE GROUND THAT PROFIT IS BEING UNDER-ESTIMATED UNDER THE IMPUGNED METHOD OF ACCOUN TING. IF THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT THERE IS UNDER-ESTIMATION OF PROFITS, HE MUST GIVE FACTS AND FIGURES IN THAT REGARD TO DEMONSTRATE THAT THE IMPUGNED METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE RESULTS IN UNDER -ESTIMATION OF PROFITS AND IS THEREFORE REJECTED. OTHERWISE THE PRESUMPTION WOULD BE THAT THE ENTIRE EXERCISE IS REVENUE NEUTRA L. THE SUPREME COURT ACCORDINGLY DID NOT SEE REASON TO INTERFERE WITH THE CONCLUSION OF THE HIGH COURT IN THIS CASE, SINCE THE DEPARTMENT HAD NOT GONE INTO THIS VITAL ASPECT REGA RDING THE METHOD OF ACCOUNTING UNDER SECTION 145 OF THE INCOM E-TAX ACT, 1961. 12. FOR THE AFORESAID REASONS AND RESPECTFULLY FOLL OWING THE ABOVE DECISION, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT UNDER THE PROVISIONS OF SECTION 14 5(3) OF THE ACT AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN HOLDING THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE REJECTED. THE GROUND TAKEN BY THE REVENUE IS, THEREFORE, REJECTED. 13. GROUND OF APPEAL NO. 2 READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED TO DELETE THE ADDITION ON ACCO UNT OF BOGUS CONSTRUCTION EXPENSES OF RS. 29,05,687/- MADE BY TH E A.O. IGNORING MATERIAL FACTS THAT AS PER ARCHITECTS CERT IFICATE THE PROJECT WAS COMPLETE MUCH BEFORE THE INCURRENCE OF THESE EXPENSES AND ASSESSEE HAS FAILED TO DISCHARGE ITS O NUS OF PROVING THE FACTUM OF INCURRENCE OF THESE EXPENSES TOWARDS THE PROJECT BEFORE THE A.O. AND/OR PRODUCE DOCUMENT ARY EVIDENCE SUCH AS RECEIPT OF MATERIAL AT SITE, DAY-T O-DAY CONSUMPTION/UTILISATION OF MATERIAL AND INCURRENCE OF LABOUR WHILE APPLYING THESE MATERIAL TOWARDS THE PROJECT E TC. 14. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O . NOTED THAT THE ASSESSEE HAS CLAIMED THE FOLLOWING EXPENSES:- ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 10 SR.NO. NATURE OF EXPENSES AMOUNT(RS) 1 PLUMBING MATERIAL 14,39,538/- 2 LABOUR PLUMBING (K.R. PATEL) 1,96,300/- 3 LABOUR WATER PROOFING (CHETAN ENT.) 1,45,000/- 4 PAINTING MATERIAL 55,289/- 5 JUPITOR WINDOWS 50,000/- 6 TILES & MARBLES 24,151/- 7 CAR PARKING SYSTEM 8,71,272/- 8 SAND METAL BLOCK 26,440/- 9 LABOUR GRILLS & FABRICATION 89,697/- 10 MISC. LABOUR CHARGES 8,000/- TOTAL 29,05,687/- ACCORDING TO THE A.O., AS PER THE ARCHITECTS LETT ER DTD. 30-3-2006 THE PROJECT WAS COMPLETED ON 30-03-2006 THERE IS NO REA SON TO INCUR FURTHER EXPENSES AFTER 30-3-2006 AND HENCE HE DISALLOWED TH E CLAIM. ON APPEAL, THE LD. CIT(A) WHILE ALLOWING THE EXPENSES OF RS. 1 4,39,538/- INCURRED TOWARDS PLUMBING MATERIAL AND RS. 8,71,272/- INCURR ED ON CAR PARKING SYSTEM EXPENSES, UPHELD THE DISALLOWANCE OF RS. 5,9 4,877/- MADE BY THE A.O. 15. AT THE TIME OF HEARING, THE LD. D.R. SUPPORTS T HE ORDER OF THE A.O. 16. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT ALL THE EXPENSES HAVE BEEN INCURRED FOR THE DEVELOPMENT OF THE PROJECT AND THE FULL OCCUPATION CERTIFICATE WAS OBTAINED ON 29- 9-2006 APPEARING AT ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 11 PAGE 16 OF THE PAPER BOOK, THEREFORE, THE ABOVE EXP ENSES ARE ALLOWABLE IN FULL AS PROJECT DEVELOPMENT EXPENSES AND THE LD. CI T(A) WAS NOT JUSTIFIED IN SUSTAINING PART OF THE DISALLOWANCE OF EXPENSES. 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE ABOVE EXPENSES HAVE BEEN DISALLOWED BY THE A.O. ON THE GR OUND THAT THE SAME WERE INCURRED AFTER THE ALLEGED COMPLETION CERTIFIC ATE. HOWEVER THE ASSESSEE HAS PLACED ON RECORD THE COPY OF FULL OCCU PATION CERTIFICATE DTD. 29-9-2006 APPEARING AT PAGE 16 OF THE PAPER BOOK, T HEREFORE, THE ABOVE EXPENSES HAVE BEEN INCURRED BEFORE THE SAID FULL OC CUPATION CERTIFICATE AND EVEN OTHERWISE THE ABOVE EXPENSES HAVE BEEN INC URRED FOR THE PURPOSE OF PROJECT DEVELOPMENT. THIS BEING SO AND F OR THE REASONS AS DISCUSSED IN PARA 10 TO 12 OF THIS ORDER, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES OF RS . 29,05,687/- AND THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN SUSTAINING THE PART OF THE DISALLOWANCE OF RS. 594877/- OUT OF THE ABOVE EXPENSES. THE GRO UND TAKEN BY THE REVENUE IS, THEREFORE, REJECTED. 18. GROUND OF APPEAL NO. 3 READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE BY THE A.O. ON ACCOUNT OF EXTRA SALES OF RS. 13,58,88,000/ - IGNORING THE VITAL MATERIAL FACTS AVAILABLE ON RECORD. 19. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE A.O. O BSERVED THAT THE ASSESSEE HAS NOT SHOWN THE ACTUAL SELLING PRICE WHE REAS DURING THE ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 12 ASSESSMENT YEAR 2007-08 THE REALTY MARKET WAS AT BO OM. THE ASSESSEES PROPERTY IS SITUATED IN BHULESHWAR DIVISION WHERE D URING THE YEAR RATE WAS RS. 10,000/- TO RS. 15,000/- PER SQ. FT. OF TH AKUR DWAR ITSELF MARKED AS ANNEXURE B WHERE THE PROPERTY WAS REGIST ERED FOR GROUND FLOOR VIDE DOCUMENT NO. 5881-2006 DTD. 17-06-2006 W HERE RATE AS PER READY RECKONER WAS RS. 15,42,420/- AND THE PURCHASE R HAS SHOWN THE PURCHASE PRICE AT RS. 16,30,000/-. THUS THE A.O. AF TER APPLYING THE RATE OF RS. 10,000/- PER SQ. FT. WORKED OUT THE EXTRA PR OFIT AT RS. 13,58,88,000/- AND ADDED THE SAME TO THE TOTAL INCO ME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) HELD THAT ADDITION CANNOT BE MADE ON ESTIMATE BASIS IN THE ABSENCE OF ANY SPECIFIC MATERIAL OR EV IDENCE AND, HENCE HE DELETED THE SAME. 20. AT THE TIME OF HEARING, THE LD. D.R. SUPPORTS T HE ORDER OF THE A.O. 21. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND THE LD. CIT(A) FURTHER SUBMITS THAT THE ASSESSEE HAS FI LED ALL DOCUMENTARY EVIDENCES BEFORE THE A.O. TO JUSTIFY THE SALE CONSI DERATION, THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDI TION MADE BY THE A.O. AND, THEREFORE, THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 22. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE LD. CIT(A) ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 13 HAS DELETED THE ABOVE ADDITION VIDE FINDINGS RECORD ING IN PARA 9.6 AND 9.7 OF HIS ORDER WHICH ARE REPRODUCED AS UNDER:- 9.6 I HAVE CAREFULLY CONSIDERED THE ARGUMENTS AND REASONING GIVEN IN ASSESSMENT ORDER. THE LD. ASSESS ING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL OR EVIDENC E TO ESTABLISH THAT THE ACTUAL RATE OF SALE IN THE APPEL LANTS PROJECT WAS MUCH HIGHER THAN THAT RECORDED IN THE B OOKS OF ACCOUNT. THE ASSESSING OFFICER HAS NOT CARRIED O UT ANY INQUIRIES WITH THE FLAT PURCHASERS NOR BROUGHT ANY OTHER EVIDENCE ON RECORD TO SHOW THAT THE ACTUAL SALES PR ICE RECEIVED BY THE APPELLANT WAS HIGHER THAN THAT RECO RDED IN THE ACCOUNTS. THE ASSESSING OFFICER HAS MERELY CITE D ONE EXAMPLE PRESUMING IT AS COMPARABLE CASE AND STATED THAT THE MARKET PRICE PREVALENT WAS IN THE RANGE OF RS. 10,000 TO RS. 15,000/- PER SQ. FT.,AND ADOPTED THE SALES R ATE OF RS. 8,000/- PER SQ. FT., IS UNFOUNDED: HOWEVER, THE SALE RATE IN THE COMPARABLE INSTANCE CITED BY THE ASSESS ING OFFICER IS ALSO RS. 6,037/- ONLY AND IT IS NOT KNOW N WHETHER THE SAME WAS FOR A READY POSSESSION BUILDIN G OR AN UNDER CONSTRUCTION BUILDING. SIMILARLY, THE OTHE R FACTORS AFFECTING THE PROJECT ARE NOT KNOWN IN THE CASE OF THE COMPARABLE INSTANCE CITED BY THE ASSESSING OFFICER. THE COMPARABLE INSTANCE, AT THE BEST, COULD BE AN INDIC ATION FOR THE ASSESSING OFFICER TO CARRY OUT FURTHER INQU IRY AND ESTABLISH WHETHER ANY SALES WERE SUPPRESSED BY THE APPELLANT OR NOT. HOWEVER; THE ASSESSING OFFICER HA S CONCLUDED SUPPRESSION OF SALES ON THE BASIS OF SUCH COMPARABLE INSTANCE WITHOUT BRINGING ANY MATERIAL O R EVIDENCE WHATSOEVER ON RECORD AND WITHOUT REVEALING THE DETAILS OF 100% APPLICABILITY OF COMPARABLE CASES. 9.7 THE HONBLE SUPREME COURT IN THE CASE OF K. P. VARGHESE V. ITO (131 ITR 597) HAS VERY CATEGORICALL Y SAID THAT THERE COULD NOT BE ANY ADDITION TO INCOME FOR UNDERSTATEMENT OF CONSIDERATION WHEN THE TRANSACTIO N IS CORRECTLY AND PROPERLY DISCLOSED AND IF THE REVENUE ALLEGES THAT THERE IS UNDERSTATEMENT OF THE ACTUAL CONSIDER ATION THEN THE BURDEN OF PROVING THE SAME IS ON THE REVEN UE. ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 14 EVEN IN THE CASE OF CIT V. K. K. ENTERPRISES (178 T AXMAN 187), HONBLE RAJASTHAN HIGH COURT HAS HELD THAT IN ABSENCE OF EVIDENCE ON RECORD, HIGHER PRICE FOR SAL E OF LAND CANNOT BE MERELY PRESUMED. IT HAS BEEN CONSISTENTLY HELD BY COURTS THAT ADDITION ON ESTIMATED BASIS CANNOT B E MADE MERELY ON THE BASIS OF PRESUMPTIONS IN THE ABS ENCE OF ANY SPECIFIC COGENT MATERIAL OR EVIDENCE. THE AS SESSING OFFICER HAS NOT GIVEN ANY BASIS FOR ADOPTING RATE O F SALE AT RS. 8,000/- PER SQ. FT. FOR ESTIMATION OF INCOME. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY VARIO US COURTS INCLUDING THE APEX COURT, I HOLD THAT ADDITI ON CANNOT BE MADE IN THE PRESENT CASE ON FOR ESTIMATE BASIS IN THE ABSENCE OF ANY SPECIFIC MATERIAL OR EVIDENCE . I THEREFORE DELETE THE ADDITION OF RS. 13,58,88,000/- MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS. 23. IN ABSENCE OF ANY CONTRARY MATERIAL PLACED ON R ECORD BY THE REVENUE AGAINST THE ABOVE FINDINGS OF THE LD. CIT(A ) AND KEEPING IN VIEW THAT THE SALE PRICE SHOWN BY THE ASSESSEE IN THE RE GISTERED SALE DEED IS NOT FOUND TO BE FALSE OR UN-TRUE AND ALSO IN THE AB SENCE OF ANY SPECIFIC MATERIAL OR EVIDENCE BROUGHT ON RECORD, WE ARE OF T HE VIEW THAT THE ADDITION MADE ON PRESUMPTION BASIS IS NOT SUSTAINAB LE IN LAW. ACCORDINGLY, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE SAME. THE GROUND RAISED BY THE REVENUE IS THEREFORE REJECTED. ITA NO. 3964/MUM/2010 (BY THE ASSESSEE) 24. THE EFFECTIVE GROUND TAKEN BY THE ASSESSEE READ S AS UNDER:- THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS I N CONFIRMING THE DISALLOWANCE OF CONSTRUCTION EXPENDITURE OF RS. 5,94,877/- MADE BY THE ASSESSING OFFICER. ITA NO. 4328 & 3964/MUM/2010 M/S DARSHAN CONSTRUCT ION 15 25. AFTER HEARING THE RIVAL PARTIES AND PERUSING TH E MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDINGS RECOR DED IN PARA NO. 17 OF THIS ORDER WHEREIN WE HAVE DELETED THE ENTIRE AMOUN T OF DISALLOWANCE OF RS. 29,05,687/-, THE DISALLOWANCE OF RS. 594877/- S USTAINED BY THE LD. CIT(A) IS THEREFORE DELETED. THE GROUND TAKEN BY T HE ASSESSEE IS, THEREFORE, ALLOWED. 26. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF APRIL, 2012. SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 25 TH APRIL, 2012. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 26 MUMBA I 4. COMMISSIONER OF INCOME TAX , CITY -15, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI