ACIT RG 25(3), MUMBAI V. EKTA SHAKTI DEVELOPERS, MUMBAI

ITA 4393/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9087 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 04-12-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 28-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI
• Keywords: Unexplained expenditure; Loose papers; Revised return
• Section: 69C; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 4393 & 4394/MUM/2010 ASSESSMENT YEAR : 2002-03 & 2004-05 THE ACIT-25(3), C-11, R.NO. 308, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400 051. VS. M/S. EKTA SHAKTI DEVELOPERS 401, HALLMARK BUSINESS PLAZA, NEAR GURUNANAK HOSPITAL, KALANAGAR, BANDRA (EAST), MUMBAI-400 051. PAN NO. AAAFE 9373 L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PAWAN VED RESPONDENT BY : SHRI S.C. TIWARI DATE OF HEARING : 04.12.2012 DATE OF PRONOUNCEMENT : 21.12.2012 O R D E R PER RAJENDRA SINGH, AM: THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFE RENT ORDERS BOTH DATED 15.3.2010 OF CIT(A) FOR THE ASSESSMENT YEARS 2002- 03 AND 2004-05. THE DISPUTES RAISED IN THESE APPEALS BY THE REVENUE RELATE TO DIFFERENT ADDITIONS MADE ON THE BASIS OF SEI ZED DOCUMENTS WHICH HAD BEEN DELETED BY CIT(A). 2. THE APPEAL OF THE REVENUE IN ITA NO.4393/M/2010 (ASSESSMENT YEAR - 2002-03) :- ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 2 IN THIS APPEAL THE REVENUE HAS RAISED DISPUTES ON FIVE DIFFERENT GROUNDS WHICH HAVE BEEN DEALT WITH IN THE SUBSEQUENT PA RAS. 2.1 THE FIRST DISPUTE IS REGARDING DELETION OF ADDITIO N MADE BY AO OF RS.1,32,65,000/- ON THE BASIS OF ENTRIES MADE AT PAGE 6 2 OF THE IMPOUNDED DOCUMENT. THE SAID DOCUMENT A COPY OF WHICH H AS BEEN PLACED AT PAGE 31 OF THE PAPER BOOK CONTAINED THE FOL LOWING ENTRIES IN RELATION TO COMPUTATION OF LAND COST. PARTICULARS AMOUNT LAND COST 12,00,00,000 STAMP DUTY 11,42,000 REGN 60,000 ULC 40,00,000 STAIRCASE PREMIUM, BALCONY ENCLOSURE & OTHER BMC EXPENSES BY CHEQUE 1,32,65,000 OUT OF POCKET EXPENSES FOR OBTAINING I.O.D., CC. {CONVERSION FROM 1-3 TO R, WORK DONE BEYOND CC.} DIRECTORS ORDERS, CONDONATION OF DEFICIENCIES ETC.} 1,32,65,000 15,17,32,000 DIVIDED BY : 1,89,016 COST OF LAND = RS.802.75 P.S.F. 2.1.1 THE AO ASKED THE ASSESSEE TO EXPLAIN THE ENTRY OF RS.1,32,65,000/- MENTIONED AS OUT OF POCKET EXPENSES. THE ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 3 ASSESSEE EXPLAINED THAT THIS DOCUMENTS WHICH HAD BEEN IMPOU NDED FROM THE PREMISES AT 401, DURGA CHAMBERS, KHAR(W), MUM BAI CONTAINED THE WORKING OF CALCULATION OF LAND COST FOR T HE PURPOSE OF NEGOTIATION AND PRESENTATION OF PROPOSAL FOR SALE OF F LATS TO WORLD RENEWAL SPIRITUAL TRUST (WRST). IT WAS POINTED OUT T HAT IN THE SAID WORKING, THE LAND COST HAD BEEN INFLATED BY RS.1,32,6 5,000/- TO ARRIVE AT A HIGHER FIGURE OF LAND COST TO JUSTIFY THE SALE P RICE CHARGED BY THE ASSESSEE. THERE WAS NO ACTUAL INCURRING OF EXPENDITURE NO R ANY SUCH EXPENDITURE HAD BEEN CLAIMED IN THE P&L ACCOUNT. IT WA S ALSO POINTED OUT THAT NO OTHER EVIDENCE HAD BEEN FOUND DURING THE SURVEY TO SUBSTANTIATE INCURRING OF EXPENDITURE WHICH WAS HYPOTHET ICAL TO INFLATE THE COST OF FLAT. THE ASSESSEE ARGUED THAT IN THE ASSESSMENT, NO ADDITION CAN BE MADE BASED ON SUCH ENTRY WITHOUT ANY COR ROBORATIVE MATERIAL OR EVIDENCE. THE ASSESSEE HAD CLAIMED ANY INTER EST AND THE STAMP DUTY PAID IN RELATION TO THE LAND AND NO OTHER EXPENSES SUCH AS OUT OF POCKET EXPENSES WERE CHARGED. THE AO HOWEVER DID NOT ACCEPT THE EXPLANATION GIVEN ON THE GROUND THAT THE SAME WA S NOT SUBSTANTIATED BY DOCUMENTARY EVIDENCE. HE, THEREFORE, TR EATED THE SUM OF RS.1,32,65,000/- AS UNEXPLAINED EXPENDITURE INC URRED BY THE ASSESSEE. ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 4 2.1.2 THE ASSESSEE DISPUTED THE DECISION OF AO AND REITER ATED THE SUBMISSION MADE EARLIER THAT OUT OF POCKET EXPENSES WAS A HYPOTHECATED AMOUNT TO INFLATE THE COST OF LAND FOR T HE PURPOSE OF JUSTIFYING THE SALE PRICE CHARGED FROM THE TRUSTEE. THE LAND COST HAD BEEN INFLATED TO IMPRESS UPON THE TRUST THAT THE ASSESSEE HAD NOT CHARGED MORE THAN THE COST PRICE. THE ASSESSEE FURTHER SUBMI TTED THAT THE WORKING OF TOTAL COST OF FLATS INCLUDING COST OF LAN D AND COST OF CONSTRUCTION HAD BEEN SHOWN AT RS.2,88,19,207/- AT PAGE 65 OF THE IMPOUNDED DOCUMENT (PLACED AT PAGE-37 OF THE PAPER BO OK). THIS WORKING HAD BEEN SHOWN ON THE BASIS OF INFLATED COST OF LAND. THE ACTUAL SALE PRICE OF FLATS TO THE TRUST WAS RS.2,80,17,50 0/-. THE ASSESSEE HAD TO SHOW TO THE TRUST THAT THE FLATS HAD BEEN SOLD AT A PRICE WHICH WAS ALMOST EQUAL TO COST OF LAND. THUS, INFLA TED COST WAS FOR A LIMITED PURPOSE AND NO SUCH EXPENDITURE HAD ACTU ALLY BEEN INCURRED. THE ASSESSEE ALSO SUBMITTED THAT REASON FOR SHOWIN G INFLATED LAND COST WAS THAT OTHER PARTNERS SHOULD NOT BE PUT TO LOSS AS ONLY ONE OF THE PARTNER WHO WAS A FOLLOWER OF BRAHMA KUMARIS WAS AFFILIATED TO THE TRUST. CIT(A) WAS SATISFIED BY THE EXPLANATION G IVEN. IT WAS OBSERVED BY HIM THAT AT PAGE 65 OF THE IMPOUNDED DOC UMENTS COST OF CONSTRUCTION OF THE FLATS SOLD WAS COMPUTED AT RS.2,88,19,2 07/- IN WHICH THE INFLATED COST OF LAND AS ENTERED AT PAGE-62 OF THE DOCUMENT HAD BEEN USED. THIS PAGE ALSO CONTAINED THE SALE PRICE O F FLATS TO THE ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 5 TRUST OF RS.2,80,17,500/- WHICH HAD BEEN SEPARATELY CONF IRMED BY THE TRUST. FURTHER ON PAGE 65 OF THE DOCUMENT NAME OF SHR I B.K. JAYANTIBHAI WAS WRITTEN WHO WAS RELATED TO THE SAID TR UST. THE DOCUMENT ALSO MENTIONED THAT THE LAND COST HAD BEEN CALCU LATED AS MINIMUM AS POSSIBLE. CIT(A) OBSERVED THAT THESE NOTES SUPP ORTED THE EXPLANATION OF THE ASSESSEE THAT THE LAND COST HAD BEEN I NFALTED ONLY TO JUSTIFY THE MINIMUM SALE PRICE CHARGED FROM THE TRUST AS A BUILDER/DEVELOPER DOES NOT GIVE ANY BREAKUP OF COST T O THE BUYER. CIT(A) ALSO OBSERVED THAT THERE WAS NO EVIDENCE OF INCUR RING ANY SUCH EXPENSES. THEREFORE NO ADDITION COULD BE MADE WITHOUT GIVING ANY CORROBORATIVE EVIDENCE. CIT(A) DIRECTED THE AO TO DELE TE THE ADDITION OF RS.1,32,65,700/- AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 2.1.3 BEFORE US, THE CIT-DR APPEARING FOR THE REVEN UE ASSAILED THE ORDER OF CIT(A). IT WAS SUBMITTED THAT THE SUM OF RS.1,32,65,000/- HAS BEEN MENTIONED IN THE IMPOUNDED DOCUMENTS AS OUT O F POCKET EXPENSES. SUCH EXPENSES WERE QUITE COMMON IN THE CONSTRUCT ION BUSINESS. THESE EXPENSES WHICH WERE DULY MENTIONED IN THE DOCUMENT BY THE ASSESSEE COULD NOT BE CONSIDERED HYPOTHETICAL. THE E XPLANATION OF THE ASSESSEE THAT IT WAS A HYPOTHETICAL FIGURE ADDED T O INFLATE THE COST OF LAND FOR IMPRESSING THE TRUSTEES THAT THE SALE PR ICE WAS ALMOST EQUAL TO COST PRICE WAS NOT ACCEPTABLE AS NO DEVOTEE OF SH IVBABA WILL ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 6 DO UNETHICAL ACT OF MANIPULATING AND MISLEADING THE T RUST. THE AMOUNT WRITTEN ON THE DOCUMENT WAS SPECIFIC AND NOT A ROUNDED F IGURE. IT WAS THEREFORE ARGUED THAT THE AMOUNT, SOURCE OF WHICH HAD NOT BEEN EXPLAINED HAD BEEN RIGHTLY ADDED AS UNEXPLAINED EXPE NDITURE. IT WAS ACCORDINGLY URGED THAT THE ORDER OF CIT(A) DELETING T HE ADDITION SHOULD BE SET ASIDE. 2.1.4 THE LD. AR FOR THE ASSESSEE ON THE OTHER HAND STR ONGLY SUPPORTED THE ORDER OF CIT(A). IT WAS ARGUED THAT THE IMPOUNDED DOCUMENTS CONTAINING THE ENTRIES WERE DUMB DOCUMENTS. IT WAS NOT CLEAR WHETHER IT WAS ACTUAL FIGURE OR ESTIMATED FIGURE AND IN WHICH CONTEXT IT HAD BEEN WRITTEN. THE LD. AR ON QUERY FRO M THE BENCH ADMITTED THAT THE DOCUMENT BELONGED TO THE ASSESSEE. HE H OWEVER REITERATED THE EXPLANATION GIVEN EARLIER THAT IT WA S A HYPOTHETICAL FIGURE TO INFLATE THE COST, TO IMPRESS THE TRUSTEES THAT SALE PRICE WAS EQUAL TO COST PRICE. IT WAS ALSO SUBMITTED THAT IT WAS A M AKE BELIEVE ENTRY TO PUSH SALES. IT WAS ALSO ARGUED THAT FOR THE AMO UNT TO BE ADDED AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT, INCURRING OF THE EXPENDITURE HAS TO BE CERTAIN WHICH W AS NOT SO IN THIS CASE AS IT WAS NOT CLEAR WHEN THE EXPENDITURE WAS INCURRED . THEREFORE, ON THIS GROUND ALSO, NO ADDITION COULD BE MADE AS UNE XPLAINED EXPENDITURE. ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 7 2.1.5 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.1,32,65,000/- BASED ON THE ENTRIES AT PAGE-62 OF T HE IMPOUNDED DOCUMENT FOUND AT THE TIME OF SURVEY. ON THE SAID PAGE , THERE IS CALCULATION OF COST OF LAND AT 802.75 PER SQ.FT. THE COST OF LAND HAS BEEN MENTIONED AS RS.12.00 CRORE ALONG WITH OTHER EXP ENSES WHICH INCLUDE A SUM OF RS.1,32,65,000/- BEING OUT OF POCKET E XPENSES FOR OBTAINING I.O.D., CC, CONVERSION FROM 1-3 TO R, WORK DONE BEYOND CC., DIRECTORS ORDERS, CONDONATION OF DEFICIENCIES ETC. T HIS ENTRY MAKES IT CLEAR THAT THE AMOUNT REPRESENTED VARIOUS PAY MENTS MADE FOR OBTAINING CLEARANCES FROM THE GOVERNMENT AUTHORIT IES. THE ASSESSEE HAS HOWEVER EXPLAINED THAT IT WAS A HYPOTHETICAL AMOUNT INCLUDED IN THE COMPUTATION OF COST ONLY TO INFLATE COST OF LAND IN ORDER TO SHOW TO THE WORLD RENEWAL SPIRITUAL TRUST THE ASSESSEE WAS SELLING THE FLATS TO THAT ORGANIZATION BELOW COST PRICE. IT H AS BEEN POINTED OUT THAT ONE OF THE PARTNERS WHO WAS A FOLLOWER OF BRAHMA KUMARIS, TO AVOID ANY LOSS TO OTHER PARTNERS, HAD INFLATED LAND COST TO SHOW THAT THE ASSESSEE WAS DOING FAVOUR TO THE TRUST BY SELLING THE FLATS AT RATE ALMOST EQUAL TO COST PRICE. TO SUPPORT THE SUBMISSION THAT IT WAS A HYPOTHETICAL AMOUNT, IT HAS BEEN ARGUED THAT NO SUCH EX PENDITURE HAD BEEN CLAIMED IN P&L ACCOUNT NOR ANY EVIDENCE HAD BEEN F OUND DURING THE SURVEY OF INCURRING ANY SUCH EXPENSES. IT HAS THUS BEEN ARGUED ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 8 THAT NO SUCH ADDITION CAN BE MADE ONLY ON THE BASIS OF ENTRY IN THE DOCUMENT. THE ASSESSEE HAS ALSO REFERRED TO THE NOTING AT PAGE-65 OF THE IMPOUNDED PAPER IN WHICH ACTUAL CALCULATION OF COST O F FLAT HAS BEEN MADE IN CONNECTION WITH THE SALE OF FLAT TO THE T RUST IN WHICH COST OF LAND HAS BEEN TAKEN AT RS.802.75 PER SQ.FT. 2.1.6 HOWEVER, ON CAREFUL CONSIDERATION OF THE ENTIRE FACTS AND CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE ARGUMENTS ADVAN CED. IT IS QUITE COMMON IN THE CONSTRUCTION INDUSTRY THAT THE BUILD ERS HAVE TO PAY OFFICIALS FOR OBTAINING VARIOUS CLEARANCES AT DIFF ERENT STAGES OF CONSTRUCTION. THOUGH IT IS TRUE THAT NO ADDITION CAN BE MADE ONLY ON THE BASIS OF HEARSAY OR GUESS WORK, BUT IN THIS CASE MATER IAL HAS BEEN FOUND IN THE FORM OF NOTINGS ON THE IMPOUNDED DOCUMEN T CLEARLY MENTIONING THE AMOUNT PAID IN CONNECTION WITH VARIOUS CLEARANCES. THE IMPOUNDED DOCUMENT HAD BEEN FOUND FROM THE PREMI SES OF THE ASSESSEE AND THE ENTRIES ON THE DOCUMENTS SHOWING COMPUTATIO N OF COST OF LAND HAS NOT BEEN DENIED. THE EXPLANATION OF THE ASSESSEE THAT IT WAS A HYPOTHETICAL AMOUNT TO JUSTIFY THE SALE OF FL ATS AT LOW PRICE TO THE TRUST IS NOT AT ALL CONVINCING. NO PERSON WHO IS A D EVOTEE OF SAIBABA OR BRAHMAKUMARI WILL LIE TO THE TRUST TO SH OW FAVOURS BY INFLATING THE COST OF FLAT WHEN NO FAVOURS HAVE BEEN GIVEN. IT IS HIGHLY IMPROBABLE THAT A SPIRITUAL PERSON HAVING FAITH IN SAIBABA WILL INDULGE IN SUCH UNETHICAL ACT. THERE CAN NOT BE ANY DI RECT EVIDENCE IN ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 9 SUPPORT OF ANY BRIBERY OR SPEED MONEY PAID TO GOVERNM ENT OFFICIALS AS NO OFFICER WILL GIVE ANY CERTIFICATE OR CONFIRMATION. ASSESSEES ALSO DO NOT RECORD ANY SUCH PAYMENTS AS SUCH PAYMENTS ARE NOT ALL OWABLE AS EXPENDITURE UNDER SECTION 37(1) OF THE ACT. THEREFORE, MERELY BECAUSE NO EXPENDITURE HAD BEEN CLAIMED, DOES NOT SUPPORT THE CASE OF THE ASSESSEE THAT IT WAS A HYPOTHETICAL AMOUNT. IN SUCH CASES WH EN THERE IS NO DIRECT EVIDENCE, FINDINGS HAVE TO BE BEEN GIVEN AFTER TAKING INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES AND AFTER APPLYING T HE TEST OF HUMAN PROBABILITY WHICH IS AN ACCEPTED PRINCIPLE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF D.P. MORE (82 IT R 546). IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT THE COU RTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BY LOOKING INTO SURROUNDIN G CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES. ON THE FACTS OF THIS CASE, CONSIDERING THE ACTUAL PRACTICE IN CONSTRUCTION INDUSTRY, T HE PROBABILITY OF SUCH PAYMENT BEING MADE TO GOVERNMENT OFFICIALS IS VERY HIGH WHICH IS SUPPORTED BY ACTUAL ENTRY ON THE IMPOUNDED DOCUMENT S. ON THE OTHER HAND, IT IS HIGHLY IMPROBABLE THAT THE PARTNER BEING A RELIGIOUS PERSON WILL LIE TO THE RELIGIOUS TRUST AND SHOW FAVOURS BY INFLATING COST WHEN NO FAVOUR HAVE ACTUALLY BEEN GIVEN. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT SUM OF RS.1,32,65,000/- APPEARING ON THE DOCUMENT WHICH HAS BE EN CLEARLY ATTRIBUTED TOWARDS VARIOUS CLEARANCES GIVEN BY THE AUTHO RITIES SUCH AS ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 10 COMMENCEMENT CERTIFICATE, INTIMATION OF DEFICIENCY ETC. R EPRESENTED THE MONEY ACTUALLY PAID WHICH IS UNACCOUNTED. HOWEVER, SUCH AMOUNT CAN BE ADDED AS UNACCOUNTED EXPENDITURE UNDER SECTION 69C OF THE ACT ONLY IN THE YEAR IN WHICH EXPENDITURE HAS BEEN ACT UALLY INCURRED. THE ACTUAL POINT OF TIME OF INCURRING OF SUCH EXPENDITU RE HAS TO BE ASCERTAINED AFTER OBTAINING DETAILS OF VARIOUS CLEARANCES SUCH AS IOD, COMMENCEMENT CERTIFICATE, CONDONATION OF DEFICIENCY, OCCUPA TION CERTIFICATE ETC. AND DATES OF CLEARANCES CAN BE REASONABLY TAKEN AS THE DATES OF INCURRING THE EXPENDITURE. THEREAFTER, THE TOTAL EXPENDITURE SHOWN HAVE TO BE ALLOCATED TO VARIOUS CLEARANCES ON AN OB JECTIVE BASIS. MAKING ADDITION OF THE ENTIRE AMOUNT IN THIS YE AR WITHOUT ASCERTAINING THE DATES OF INCURRING SUCH EXPENDITURE MAY NOT BE JUSTIFIED. IN OUR VIEW THIS ASPECT REQUIRES FURTHER EXA MINATION BEFORE MAKING THE ADDITION. 2.1.7 IN VIEW OF THE FOREGOING DISCUSSION AND FOR THE REASONS GIVEN EARLIER, WE SET ASIDE THE ORDER OF CIT(A) AND R ESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECE SSARY EXAMINATION, IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 2.2 GROUNDS NOS.2 AND 4 OF THE REVENUE RELATE TO ADDI TIONS OF RS.57,82,000/- AND RS.10,00,000/- AND RS.12,00,000 ON THE BASIS OF ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 11 ENTRIES MADE IN THE IMPOUNDED DOCUMENT BEING AT PAGE- 70, A COPY OF WHICH HAS BEEN PLACED AT PAGE 41 OF THE PAPER BOOK . T HE ENTRIES ON THE SAID DOCUMENT ARE REPRODUCED BELOW FOR READY REFER ENCE : PERIOD DAYS RATE PRINCIPAL INTEREST 15.02.01/04.03.02 385 18% 2,40,00,000 45,56,000 12.12.01/04.03.02 83 18% 20,00,000 82,000 06.11.01/04.03.02 119 18% 1,60,00,000 9,39,000 13.01.01/04.03.02 416 18% 10,00,000 2,05,000 (TEMPORARY LOAN AMOUNT) 10,00,000 KUNDAN SHAH 12,23,000 DEDUCTION ON 266 L 4/3 FOR 6 MONTHS AS AGREED 46,00,000 BROKERAGE PAYABLE TO DURGA ESTATE 12,00,000 1,38,05,000 2.2.1 THE AO DURING THE ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN THE VARIOUS ENTRIES APPEARING IN THE ABOVE DOCUMENT. THE ASSESSEE VIDE LETTER DATED 11.2.2009 SUBMIT TED THAT IT HAD PURCHASED DEVELOPMENT RIGHTS FROM SHAKTI INSULATED WIRES LTD. (SIWL) AND AS PER CONFIRMATION, THE AMOUNTS WERE TO BE PAID IN INSTALMENTS. IT WAS ALSO SUBMITTED THAT AS PER REQUEST O F THE VENDOR THE INSTALMENTS WERE PAID BEFORE DUE DATE AND, THEREF ORE, THE INTEREST PERTAINING TO EARLY PAYMENT HAD BEEN REDUCED FROM LA ND COST. THUS THE SUM OF RS.57,82,000/- WAS REDUCTION ON ACCOUNT OF INT EREST. THE SUM OF RS.12.00 LACS WAS BROKERAGE PAYABLE TO DURGA ESTAT E WHICH WAS TO BE BORNE BY SIWL . HOWEVER, THE ASSESSEE HAD PAID THE SAID ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 12 AMOUNT ON BEHALF OF THE VENDOR ON WHICH TAX HAD ALSO BEEN DEDUCTED AND THE SAME AMOUNT HAD BEEN DEBITED TO THEIR ACCOUNT WHICH HAD BEEN REDUCED FROM THE COST OF LAND. SIMILARLY, A SUM OF RS.10.00 LACS HAD BEEN PAID TO SIWL. IT WAS FOUND THAT BEFORE FINA LIZATION OF DEAL, THE VENDOR WAS IN DIRE NEED OF MONEY AND, THEREFORE, THE ASSESSEE HAD PAID VARIOUS AMOUNTS. IT WAS ALSO POINTED OUT THAT SIWL HAD ENCLOSED HUNDI DATED 13.1.2001 FOR RE-PAYMENT OF LOAN OF RS. 10.00 LACS. HOWEVER, SINCE THE AMOUNT WAS NOT ACTUALLY PAID, TH E SAME WAS REDUCED FROM THE COST TOWARDS LAND. MOREOVER, THE SUM O F RS.10.00 LACS HAD BEEN PAID IN ASSESSMENT YEAR 2001-02 AND THEREFO RE NO ADDITION COULD BE MADE IN THIS YEAR. THE AO, HOWEVER, REJECTED THE EXPLANATION ON THE GROUND THAT THERE WAS NO SUPPORTIN G EVIDENCE. 2.2.2 THE ASSESSEE DISPUTED THE DECISION OF THE AO AND SUBMITTED BEFORE CIT(A) THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THERE WAS NO EVIDENCE PRODUCED BY THE ASSESSEE. IT WAS POIN TED OUT THAT THE AO WAS FULLY SATISFIED BY THE EXPLANATION GIV EN AND HAD NOT ASKED FOR ANY EVIDENCE. IT WAS SUBMITTED THAT COPIES OF A GREEMENT AND PAYMENTS MADE TO VENDOR WERE ALREADY ON RECORD OF THE AO. A CHART OF PAYMENT ALONG WITH COPIES OF BANK STATEMENT WA S SUBMITTED BY SIWL VIDE LETTER DATED 26.2.2002 THE AO REJECTED THE SAME ON THE GROUND THAT IT WAS NOTORISED ON 28.1.2009. THE ASSESSEE SUBMITTED THAT THE ORIGINAL LETTER DATED 26.2.2002 AND TRUE CO PY OF THE SAME WAS ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 13 MADE ON 28.1.2009 BY NOTARY. THE ASSESSEE SUBMITTED THAT THE VARIOUS AMOUNTS MENTIONED IN THE DOCUMENT WERE AMOUNT S /CONSIDERATION PAYABLE BY SIWL WHICH WERE REDUCED FROM THE LAND COST. THE TOTAL DEDUCTION WAS RS.1,38,05,000/- INCLUDING BROKERAGE OF RS.12.00 LACS. THE BROKERAGE AMOUNT HAD BEEN PAID BY CH EQUE AND TDS HAD ALSO BEEN DEDUCTED. IT WAS POINTED OUT THAT EN TRY OF RS. 46.00 LACS ON THE SAME PAGE WAS ALSO REDUCTION FROM LAND COST WHI CH HAD BEEN ACCEPTED BY THE AO. THEREFORE, THERE WAS NO JUSTI FICATION FOR REJECTING SIMILAR OTHER REDUCTIONS. THE SUM OF RS.12,23,0 00/- WAS THE AMOUNT GIVEN TO KUNDAN SHAH IN FINANCIAL YEAR 2000- 01 ON INSTRUCTION OF THE VENDORS. AS THE AMOUNT DID NOT RELATE TO THIS YEAR, ADDITION MADE BY AO IN THIS YEAR WAS WRONG. 2.2.3 CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE OBSERVED THAT ENTRY OF THE DOCUMENT CLEARLY SHOWED MINU TE WORKING OF INTEREST FOR PARTICULAR NUMBER OF DAYS GIVING BREAK-U P WHICH MADE IT CLEAR THAT THE WORKING WAS TOWARDS PAYMENT OF INSTALMEN TS. THE OTHER PAYMENT I.E. HAND LOAN OF RS.10,00,000/- AND RS.46.00 LACS HAD ALSO BEEN REDUCED FROM THE CONSIDERATION ALONG WITH THE NOT IONAL INTEREST. CIT(A) OBSERVED THAT IT WAS ADMITTED THAT THE ASSESSEE HA D REDUCED RS.1,26,05,000/- (RS.1,38,05,000 RS.12,00,000) FROM THE COST OF LAND AND BALANCE AMOUNT WAS SHOWN PAYABLE TO THE VENDO R. AS REGARDS THE SUM OF RS.12.00 LACS ENTERED ON PAGE 70 OF T HE ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 14 IMPOUNDED DOCUMENTS, IT WAS BROKERAGE PAYABLE TO DURGA ESTATE ON BEHALF OF THE VENDOR TO DIFFERENT PERSONS AND THE AMO UNT WAS PAID BY CHEQUE AND WAS REFLECTED IN THE BANK ACCOUNT. ASSESSEE HAD NOT CLAIMED ANY SUCH EXPENSES WHICH HAD ONLY REDUCED FROM AMO UNT PAYABLE TO VENDOR ON ACCOUNT OF PURCHASE OF LAND. FURTH ER, THE SUM OF RS.10.00 LACS RELATED TO ASSESSMENT YEAR 2001-02 AND, THER EFORE, COULD NOT BE ADDED THIS YEAR/ CIT(A) THEREFORE DELETE D THE ADDITIONS MADE BY AO AMOUNTING TO RS.57,82,000/-, RS.10.00 AND RS.12.00 LACS. THE SUM OF RS.46.00 LACS APPEARING IN THE DOCUMENT H AD ALREADY BEEN ACCEPTED BY THE AO. AS REGARDS, THE SUM OF RS.12,23 ,000/- WHICH WAS THE AMOUNT PAID TO KUNDAN SHAH, THE ASSESSEE CL AIMED THAT THE AMOUNT HAD BEEN PAID IN ASSESSMENT YEAR 2001-02 BUT THERE WAS NO DOCUMENTARY EVIDENCE PRODUCED EITHER BEFORE THE AO OR CIT(A). THE ADDITION OF RS.12,23,000/- WAS THEREFORE CONFIRMED BY CIT(A). AGGRIEVED BY THE DECISION OF CIT(A) IN RELATION TO DE LETION OF ADDITION OF RS.57,82,000/-, RS.10.00 LACS AND RS.12.00 LACS, THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 2.2.4 BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT A SUM OF RS.57,82,000/- WAS REDUCED FROM THE LAND COST ON ACCOUNT O F EARLY PAYMENT OF LOAN WHICH WAS CLEAR FROM THE WORKING GIVE N IN THE PAPER. SIMILARLY SUM OF RS.10.00 LACS WAS THE AMOUNT PAID ON B EHALF OF THE ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 15 VENDOR, WHICH HAD BEEN REDUCED FROM COST. THERE WAS NO D ISPUTE THAT TOTAL SUM OF RS.1,26,05,000/- WHICH INCLUDED RS.57,82,00 0/-, RS.10,00,000/- AND RS.12,00,000/- HAD BEEN REDUCED FR OM THE COST OF LAND LOAN PAYABLE TO THE VENDOR. NO CLAIM HAD BEE N MADE ON ACCOUNT OF ANY EXPENDITURE. THE SUM OF RS.12.00 LACS EVEN DID NOT RELATE TO THIS YEAR. THEREFORE, IT WAS SUBMITTED THAT THE ADDITIONS HAD BEEN RIGHTLY DELETED BY CIT(A). THE LD. DR PLACED RE LIANCE ON THE ORDER OF THE AO. 2.2.5 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDIT ION OF RS.57,82,000/-, RS. 10.00 LACS, RS.12.00 LACS ON THE BASI S OF ENTRIES MADE AT PAGE 70 OF THE IMPOUNDED DOCUMENTS. THE ENT RIES HAVE BEEN REPRODUCED IN PARA.2.2 EARLIER. THE ASSESSEE EXPLAINED T HAT THE VARIOUS AMOUNTS REFERRED TO IN THE DOCUMENT HAD BEEN REDUCED F ROM THE COST OF DEVELOPMENT RIGHTS PURCHASED FROM SIWL. THE SUM OF RS.57,82,000/- HAS BEEN EXPLAINED AS INTEREST CALCULATED FOR THE PERIOD OF EARLY PAYMENT OF INSTALLMENTS. IT HAD BEEN EXPLAI NED THAT SINCE PAYMENTS HAD BEEN MADE BEFORE DUE DATES, THE INTEREST FOR THE PERIOD HAD BEEN CALCULATED TO BE REDUCED FROM THE COST OF LAND . THE SUM OF RS.12.00 LACS HAS BEEN EXPLAINED AS BROKERAGE PAYABLE BY SIWL TO DURGA ESTATE WHICH HAD BEEN PAID BY THE ASSESSEE ON TH EIR BEHALF AND TAX HAD ALSO BEEN DEDUCTED AT SOURCE. AS THE VENDO R COULD NOT ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 16 PAY THE AMOUNT, THE SAME WAS REDUCED FROM COST OF LAND. SIMILARLY THE SUM OF RS.10.00 LACS HAS BEEN EXPLAINED AS PAID BY T HE ASSESSEE TO THE VENDOR WHO HAD ALSO GIVEN A HUNDI DATED 31.1. 2001 FOR REPAYMENT BUT SINCE AMOUNT WAS NOT PAID, THIS WAS REDU CED FROM THE COST. THE VENDOR HAD ALSO FILED CONFIRMATION ALONG WIT H BANK STATEMENT VIDE LETTER DATED 26.2.2002. THE AO HOWEV ER, REJECTED THE LETTER ON THE GROUND THAT IT WAS NOTARIZED ON 28.1.2 009. THE ASSESSEE HAS EXPLAINED THAT THE ORIGINAL LETTER WAS DATED 26.2 .2002 AND ONLY A COPY WAS MADE ON 28.1.2009 BY NOTARY. THE AO HAS REJ ECTED THE CONTENTION OF THE ASSESSEE AND MADE THE ADDITION. CIT(A ) HAS HOWEVER NOTED THAT IT WAS AN ADMITTED FACT THAT THE AMOUNT HA D BEEN REDUCED FROM THE COST OF LAND AND ONLY BALANCE AMOUNT HAD BEE N PAID TO THE VENDOR. THE AMOUNT OF RS.57,82,000/- WAS APPARENTLY CALCULATION OF INTEREST @18% WHICH HAD BEEN REDUCED FROM THE COST. TH E SUM OF RS.12.00 LACS WAS BROKERAGE PAID ON BEHALF OF THE VENDO R ON WHICH HAD ALSO BEEN DEDUCTED AND AMOUNT HAD BEEN REDUCED FRO M THE COST. NONE OF THE ABOVE AMOUNTS HAD BEEN CLAIMED BY THE ASSE SSEE AS EXPENDITURE IN THE P&L ACCOUNT. FURTHER THE SUM OF RS. 10.00 LACS BEING PERSONAL LOAN GIVEN BY THE ASSESSEE WAS ALSO REDUCE D FROM THE COST. MOREOVER, THIS AMOUNT RELATED TO ASSESSMENT YEAR 20 01-02 AND, THEREFORE, COULD NOT BE ADDED IN THIS YEAR. CIT(A) H AS ALSO NOTED THAT SIMILAR ENTRY OF RS.46.00 LACS NOTED ON THE SAME DOCUMENT HAD BEEN ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 17 ACCEPTED BY AO WHICH HAD ALSO BEEN REDUCED FROM THE COST. NO ERROR OF ANY KIND HAS BEEN POINTED OUT BEFORE US IN THE FIN DING OF CIT(A). WE, THEREFORE, SEE NO INFIRMITY THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE AND THE SAME IS THEREFORE, UPHELD. 2.3 THE FIFTH DISPUTE IS REGARDING THE SUM OF RS.12,65 ,000/- PAID TO SHRI VT AS APPEARING ON PAGE 229 OF THE IMPOUNDED PA PERS, WHICH HAD BEEN ADDED BY AO. THE AO NOTED HAT ON PAGE 229 SHOP NOS. AND AREA WAS MENTIONED AND THE DOCUMENT WAS ALSO MENTIONED PAID TO VT RS.12,65,000/- (RS.1,150 X 11,000) AND AT THE BOTTOM, IT WAS WRITTEN EKTA BHOOMI GARDEN A/C. SHOPS VT . THE AO, OBSERVED THAT THE SUM OF RS.12,65,000/- WAS THE AMOUNT PAID BY THE ASSESSEE AND , THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY SUM THE SHOULD NOT BE ADDED AS PAYMENT FROM UNDISCLOSED SOURCE. ASSESSEE SUBMITTED THAT T HE IMPOUNDED PAGE CONTAINED SOME ROUGH WORKING AND IT WA S NOT CLEAR WHO MADE THE WORKING AND IN WHAT CONTEXT. IT WAS ALSO SUBMITTED THAT THE EXISTING SHOPS IN B,C, AND K WINGS WERE NUMBERED A S UNDER :- WING SHOP NO. CARPET AREA OF THE SHOP (IN SQ.FT.) C P-1 335 C P-2 139 C P-3 126 C P-4 223 C P-5 287 ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 18 C P-6 135 C P-7 148 C P-8 166 B P-9 139 B P-10 126 B P-11 237 B P-12 126 B P-13 220 B P-14 136 B P-15 155 K P-16 148 K P-17 167 K P-18 334 K P-19 228 K P-20 142 K P-21 181 K P-22 286 2.3.1 IT WAS EXPLAINED THAT SHOPS WERE PREFIXED P W HEREAS ON THE IMPOUNDED PAPER SHOP NOS. WRITTEN WERE 14, 15, 16 , 17 & 18 WITHOUT ANY PREFIX. MOREOVER, THE AREA WAS ALSO NOT M ATCHING. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT AWARE OF THE SIGNIFICANCE OF VT. IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT PAID R S.12,65,000/- TO ANYONE. THE AO, HOWEVER, OBSERVED THAT THE ASSESSEE HAD NOT GIVEN ANY PLAUSIBLE EXPLANATION AND ADDED THE SUM OF RS.12,65,000/- TO THE TOTAL INCOME. 2.3.2 IN APPEAL, CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE AO HAD REJECTED THE SUBMISSION OF THE ASSE SSEE WITHOUT GIVING ANY VALID REASONS. SHOP NOS. AS WELL AS A REA DID NOT MATCH WITH THE ACTUAL SHOP NOS. AND AREA WRITTEN ON THE PAGE. FURTHER, ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 19 THE NOTING PAID TO VT RS.12,65,500/- COULD NOT BE CO NSTRUED AS PAYMENT OF THE AMOUNT IN THE ABSENCE OF ANY CORROBOR ATIVE MATERIAL. THERE WAS NO INDICATION OF ANY ACTUAL PAYMENT BY THE ASSESSEE. CIT(A), THEREFORE, DIRECTED THE AO TO DELETE THE ADD ITION AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 2.3.3 BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND SUPPORTED THE ORD ER OF CIT(A) WHEREAS THE LD. DR PLACED RELIANCE ON THE ORDE R OF AO. 2.3.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MA TTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.12,6 5,000/-. THE ADDITION HAS BEEN MADE BASED ON ENTRY ON THE IMPOUND ED DOCUMENT WHICH MENTIONED PAID TO VT RS.12,65,000/- (1,150 X 1 1,000) . THE ADDITION HAS BEEN MADE ON THE GROUND THAT THE ASSESSEE H AD ACTUALLY PAID THE AMOUNT. ON THE IMPOUNDED PAPER, SHOP NOS. AN D AREA HAVE ALSO BEEN MENTIONED. THESE HOWEVER DO NOT TALLY WITH THE ACTUAL SHOP NOS. WHICH HAD P AS PREFIX AND AREAS ALSO DO NOT TALL Y. THEREFORE, IT HAS BEEN ARGUED THAT ENTRIES DO NOT RELATE TO ACTUAL S HOPS CONSTRUCTED BY THE ASSESSEE. THE IDENTITY OF VT IS NOT KNOWN AND DAT E OF PAYMENT IS ALSO NOT MENTIONED. UNDER THESE CIRCUMSTANCES EXPLANATIO N OF THE ASSESSEE THAT IT WAS ONLY SOME ROUGH WORKING HAS TO BE AC CEPTED. WE, ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 20 THEREFORE, SEE NO INFIRMITY IN THE ORDER OF CIT(A) I N DELETING THE ADDITION AND THE SAME IS, THEREFORE, UPHELD. 3. ITA NO.4394/M/2010 (ASSESSMENT YEAR 2004-05) :- IN THIS APPEAL, THE REVENUE HAS RAISED DISPUTES ON FOUR DIFFERENT GROUNDS. 3.1 THE FIRST DISPUTE IS REGARDING ALLOWABILITY OF PR ORATA DEDUCTION UNDER SECTION 80 IB(10) OF THE ACT. THE ASSESSEE WHO WAS A BUILDER AND DEVELOPER HAD CONSTRUCTED A BUILDING NAMED EKTA BH OOMI GARDEN IN RESPECT OF WHICH THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.12,46,90,977/- UNDER SECTION 80 IB(10). SUBSEQUENTL Y, ASSESSEE IN THE REVISED RETURN REDUCED THE CLAIM OF DEDUCTION T O RS.10,97,94,257/-. THE AO ON EXAMINATION OF RECORDS N OTED THAT THERE WERE MANY FLATS IN RESPECT OF WHICH BUILT UP AREA EXCEEDED 1000 SQ.FT. VIOLATING THE CONDITIONS PRESCRIBED UNDER SECTION 8 0 IB(10). HE THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY CLAIM O F DEDUCTION UNDER SECTION 80 IB(10) SHOULD NOT BE REJECTED AS ONE O F THE CONDITIONS REGARDING BUILT UP AREA OF THE FLATS WAS NOT SATISFIED. THE ASSESSEE SUBMITTED THAT MOST OF THE FLATS HAD BUILT UP ARE A OF LESS THAN 1000 SQ.FTS. AND ONLY IN SOME CASES BUILT UP AREA HAD EXCE EDED. IT WAS POINTED OUT THAT ONLY 14% OF THE BUILT UP AREA CO NSTITUTED OF FLATS OF BUILT UP AREA EXCEEDING 1000 SQ.FT. THUS IN RESPE CT OF 86% OF THE ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 21 BUILT UP AREA, ALL CONDITIONS OF SECTION 80 IB (10) WER E SATISFIED. IT WAS ACCORDINGLY SUBMITTED THAT THE CLAIM OF DEDUCTION BY TH E ASSESSEE FOR 86% OF THE PROFIT SHOULD BE ALLOWED. THE AO, HOWEVE R, DID NOT ACCEPT THE CONTENTIONS RAISED AND OBSERVED THAT DEDUCTION UNDER SECTION 80 IB(10) COULD BE ALLOWED ONLY WHEN ALL THE CONDITIONS W ERE FULFILLED. HE ACCORDINGLY DENIED CLAIM OF DEDUCTION FULLY. 3.1.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMIT TED BEFORE CIT(A) THAT CLAIM OF DEDUCTION UNDER SECTION 80 IB(10) ON PROPORTIONATE BASIS IN RESPECT OF FLATS OF AREA LESS THAN 1000 SQ.FT. WAS CORRECT. THE ASSESSEE REFERRED TO THE DECISION OF KOLKA TA BENCH OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVE LOPMENT LTD. VS. DCIT IN ITA NO.1595/KOL/2005 DATED 24/3/2006 IN WHICH CLAIM OF THE ASSESSEE HAD BEEN ALLOWED ON PROPORTIONATE BASIS AND APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBU NAL HAD BEEN DISMISSED BY THE HONBLE HIGH COURT OF CALCUTTA. CIT(A ) ACCEPTED THE EXPLANATION OF THE ASSESSEE AND FOLLOWING THE DECISION O F THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD.( SUPRA), ALLOWED THE CLAIM ON PROPORTIONATE BASIS AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3.1.2 BEFORE US, THE LD. AR REITERATED THE SUBMISSIO NS MADE BEFORE THE LOWER AUTHORITIES AND ARGUED THAT THE ISSUE WAS COVERED IN ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 22 FAVOUR OF THE ASSESSEE BY SEVERAL DECISIONS OF THE TRIBUNA L. IT WAS SUBMITTED THAT FOLLOWING THE DECISION OF TRIBUNAL IN T HE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. (SUPRA), THE MUMBAI BE NCH OF THE TRIBUNAL IN CASE OF EKTA HOUSING PVT. LTD., A GROUP CON CERN ALLOWED DEDUCTION UNDER SECTION 80 IB(10) ON PROPORTIONATE BASI S IN ITA NO.3649/M/09. SIMILARLY, IN CASE OF EKTA SANKALP, A NOTHER CONCERN OF THE GROUP, PROPORTIONATE DEDUCTION HAS BEEN ALLOWED IN ITA NO. 3276/M/2010, FOLLOWING DECISION OF KOLKATA BENCH IN T HE CASE BENGAL AMBUJA HOUSING DEVELOPMENT LTD. (SUPRA), WHICH HAS ALSO BEEN UPHELD BY HONBLE CULCUTTA HIGH COURT. IT WAS THEREF ORE, URGED THAT THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. LD. DR PLA CED RELIANCE ON THE ORDER OF AO. 3.1.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MA TTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF PR ORATA DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. THE DEDUCTION UNDER SECTION 80IB(10) CAN BE ALLOWED ONLY ON FULFILLMENT OF CERTAI N CONDITIONS ONE OF WHICH IS THAT BUILT UP AREA OF EACH FLAT SHOULD BE LESS T HAN 1000 SQ.FT.. IN THIS CASE, IT WAS FOUND THAT 14% OF BUILT-UP AREA CO NSISTED OF FLATS WHICH HAVE BUILT UP AREA EXCEEDING 1000 SQ.FT.. THE AO HAS THEREFORE, DISALLOWED THE ENTIRE CLAIM. THE CASE OF THE ASSESSEE IS TH AT PROPORTIONATE DEDUCTION FOR 86% OF BUILT UP AREA WHI CH CONSISTED OF FLATS OF BUILT UP AREA LESS THAN 1000 SQ.FT. SHOULD BE ALLOWED. THE CLAIM ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 23 OF THE ASSESSEE IS SUPPORTED BY THE DECISION OF CALCUTTA BE NCH OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPME NT LTD. (SUPRA), WHICH HAS ALSO BEEN UPHELD BY THE HON'BLE HIGH COURT OF CALCUTTA. SEVERAL OTHER DECISIONS OF THE TRIBUNAL INCLU DING THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN WHICH THE SAID DECISI ON HAS BEEN FOLLOWED HAVE ALSO BEEN PLACED ON RECORD. WE, THEREFOR E SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN ALLOWING PROPOR TIONATE CLAIM OF THE ASSESSEE. THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD. 3.2 THE DISPUTE RAISED IN GROUNDS NO.2 & 3 RELATE TO A DDITION MADE BY AO AMOUNTING TO RS.4.00 LACS, RS.8,01,707/- AND RS.6 ,13,864/- BASED ON ENTRIES APPEARING AT PAGE 62 AND 66 OF ANNEX URE -2 IMPOUNDED AT THE TIME OF SURVEY. THE AO OBSERVED THAT THERE WERE FOLLOWING ENTRIES APPEARING ON THE SAID DOCUMENTS. I) SHRI JV --- RS.4,00,000/- II) BMC CHARGES PAID RS.6,13,864/- AND RS.8,01,707/- 3.2.1 THE AO DURING THE ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN THE ABOVE ENTRIES BUT AS PER AO, THE ASSESSEE COULD NOT SUBSTANTIATE THE EXPLANATION BY SUBMITTING SO ME DOCUMENTARY EVIDENCE. IN RELATION TO SUM OF RS.4,00,000 /-, IT HAD BEEN SUBMITTED THAT THE ENTRY PERTAINED TO SALE OF FL ATS TO WRST. THE AO DID NOT ACCEPT THE CLAIM THAT CASH PAYMENT TO JV COULD PERTAIN TO ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 24 SALE OF FLATS TO THE TRUST. MOREOVER, THERE WAS NO DOCUM ENTARY EVIDENCE TO SUBSTANTIATE THE CLAIM. THE AO THEREFORE, T REATED THE SUM OF RS.4.00 LACS AS INCOME OF THE ASSESSEE. THE OTHER ENTRIE S OF RS.6,13,864/- AND RS.8,01,707/- WERE ALSO EXPLAINED BY THE ASSESSEE AS RELATING TO WORKING OF LAND COST AND CONSTRUCTION COST OF THE FLATS SOLD TO WRST. HOWEVER, FOR THE REASONS GIVEN EARLIER TH E AO DID NOT ACCEPT THE EXPLANATION AND ADDED THE TWO SUMS TOTALING RS.14,51,571/- TO THE TOTAL INCOME. 3.2.2 IN APPEAL CIT(A) NOTED THAT, BEFORE THE AO, THE ASSESSEE HAD EXPLAINED THAT THE NARRATION BY THE SIDE OF FIGU RE OF RS.4.00 LACS AND FIGURE OF RS.4.00 LACS HAS BEEN CANCELLED BY DRAWING A LINE ALONG THE ENTIRE DESCRIPTION AND, THEREFORE, FIGURE AND NAR RATION SHOULD BE TAKEN AS CANCELLED AND NO COGNIZANCE SHOULD BE TAKEN OF SU CH ENTRY. IN RELATION TO DIFFERENCE OF RS.8,01,707/-, ASSESSEE SUBMI TTED THAT THE SAID FIGURE WAS DIFFERENCE OF SALE PRICE ON FLATS OF RS.2, 88,19,207/- AND COST OF FLATS AT RS.2,80,17,500/- AND CONFIRMATION IN TH IS REGARD HAD BEEN FILED FROM THE TRUST. THE AO HOWEVER HAD NOT ACCE PTED THE EXPLANATION AND MADE THE ADDITION. THE ASSESSEE REITERA TED THE SUBMISSION BEFORE CIT(A) AND POINTED OUT THAT THE AO W AS SILENT ON THE PLEA OF CANCELLATION OF NARRATION AND FIGURE OF R S.4.00 LACS. IT WAS ALSO POINTED OUT THAT REGARDING DIFFERENCE OF RS.8,01, 707/-, THE ASSESSEE HAD FILED CONFIRMATION OF THE TRUST. CIT(A) WAS SA TISFIED BY ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 25 THE EXPLANATION GIVEN AND OBSERVED THAT ONCE THE FIGU RE HAD BEEN CANCELLED, NO ADDITION WAS REQUIRED TO BE MADE AND A SU M OF RS.8,01,707/- HAD BEEN EXPLAINED BEING DIFFERENCE OF SALE PRICE AND COST OF CONSTRUCTION. HE THEREFORE DELETED BOTH THE ADDIT IONS. REGARDING THIRD ADDITION OF RS.6,13,864/- WHICH HAD B EEN REFERRED TO BY THE AO AS BMC CHARGES, THE ASSESSEE EXPLAINED THAT ON IMPOUNDED DOCUMENTS, THE DIFFERENCE BETWEEN SALE PRICE AND COST OF CONSTRUCTION HAD BEEN COMPUTED AT TWO PLACES GIVING FIGURE OF RS.8,0 1,707/- AND RS.6,13,864/-. THESE AMOUNTS REPRESENTED THE BALANCE RECE IVABLE FROM THE TRUST WHICH ULTIMATELY WAS NOT RECEIVED. THE SE AMOUNTS DID NOT REPRESENT ANY CASH PAYMENT. CIT(A) BEING SATISFIED B Y EXPLANATION DENIED THE ADDITION MADE. 3.2.3 BEFORE US, THE LD. AR REFERRED TO PAGE-65 OF THE IMPOUNDED DOCUMENT A COPY OF WHICH IS PLACED AT PAGE-37 OF THE PA PER BOOK TO POINT OUT THAT ON THE SAID PAGE, COST OF CONSTRUCTION OF THE FLAT INCLUDING LAND COST HAD BEEN MENTIONED AT RS.2,88,19,20 7/- BY HAND AND RS.2,84,32,464/- IN TYPED FIGURE. THE ASSESSEE HAD R ECEIVED A SUM OF RS.2,80,17,500/- AS CONFIRMED BY THE TRUST. THE D IFFERENCE OF RS.2,88,19,207/- AND RS.2,80,17,500/- I.E. RS.8,01,707 /- WAS MENTIONED AT PAGE-66 OF THE IMPOUNDED DOCUMENTS. THER E WAS ALSO ANOTHER FIGURE OF RS.2,56,92,000/- MENTIONED AS RECEIV ED FROM THE TRUST WHICH WAS FIGURE OF EARLIER RECEIPT AND DIFFEREN CE OF ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 26 RS.2,80,17,500/- AND RS.2,56,92,000/- WAS MENTIONED AT PAGE-65 AS RS.23,25,500/-. THE ACTUAL FIGURE RECEIVABLE OF RS.29, 39,364/- WAS ALSO MENTIONED ON THE SAID PAGE AND THE DIFFERENCE OF THE TWO FIGURES WHICH WAS RECEIVABLE WAS RS.6,13,864/-. THUS, FIGURES OF RS.6,13,864/- AND RS.8,01,707/- BOTH REPRESENTED AMOUN T RECEIVABLE FROM THE TRUST WHICH WAS ACTUALLY NOT RECEIVED. THESE WER E NOT PAYMENTS MADE BY THE ASSESSEE AND, THEREFORE, NO ADDITIO NS COULD BE MADE. AS FOR THE SUM OF RS.4.00 LACS, THIS HAD BEEN DULY CANCELLED BY THE ASSESSEE AND ADDITION HAD BEEN RIGHTLY DELETED BY C IT(A). THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF AO. 3.2.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MA TTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.4.0 0 LACS, RS.8,01,707/- AND RS.6,13,864/- BASED ON THE ENTRIES MA DE AT PAGE 65 OF THE IMPOUNDED DOCUMENTS. A CAREFUL PERUSAL OF SAI D DOCUMENT SHOWS THAT IT MENTIONS THE COST OF CONSTRUCTION OF THE FLAT S SOLD TO THE TRUST AT RS.2,88,19,207/-. IT ALSO MENTIONS THE AMOUNT RECEIVED AT RS.2,56,92,000/- AND HANDWRITTEN FIGURE OF 2,80,17,5 00/-. THE DIFFERENCE OF COST OF FLATS I.E. RS.2,88,19,207/- AND SALE PRICE OF RS.2,80,17,500/- HAS BEEN MENTIONED AS RS.8,01,707/-. T HE SALE PRICE OF RS.2,80,17,500/- HAS BEEN CONFIRMED BY THE TRUST AND CALCULATION OF COST PRICE I.E., RS.2,88,19,207/- HAS BEEN GIVEN. THEREF ORE, SUM OF RS.8,01,707/- WHICH REPRESENTS ONLY DIFFERENCE OF TWO F IGURES AND NOT ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 27 ANY ACTUAL PAYMENT, CAN NOT BE BASIS OF ANY ADDITION. THIS ONLY SHOW THAT THE SALE PRICE TO THE TRUST IS LOWER THAN COST PRICE TO THAT EXTENT. SIMILARLY, THE DIFFERENCE OF RS.2,80,17,500/- AND RS.2 ,56,92,000/- HAS BEEN MENTIONED AS RS.23,25,500/- WHICH IS OBVIOUSLY THE AMOUNT RECEIVABLE. ANOTHER FIGURE OF RS.29,39,364/- AS RECEIV ABLE HAS ALSO BEEN MENTIONED AND DIFFERENCE OF THE TWO HAS BEEN MEN TIONED AS RS.6,13,864/-. IT HAS, THEREFORE, BEEN EXPLAINED THAT THESE AMOUNTS REPRESENTED THE SUM RECEIVABLE FROM THE TRUST AND WERE ACTUALLY NOT RECEIVED. THERE WAS NO PAYMENT OF ANY AMOUNT MADE. TH E DOCUMENT ALSO DOES NOT SPEAK OF ANY PAYMENT. THEREFORE, WE SEE N O INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THESE ADDITIONS. AS RE GARDS THE SUM OF RS.4.00 LACS MENTIONED AS CASH TO JV CIT(A) AFTER PERUSI NG THE DOCUMENT HAS GIVEN A FINDING THAT THE SAID FIGURE ALO NG WITH NARRATION HAD BEEN CANCELLED BY DRAWING A LINE AND, THEREFORE, NO COGNIZANCE OF SUCH ENTRY CAN BE TAKEN. THERE IS NOTHING PRODUCED BEFOR E US TO CONTROVERT THE FINDING OF CIT(A). THEREFORE, DELETIO N OF ADDITION IS UPHELD. 3.3 THE FOURTH DISPUTE IS REGARDING DELETION OF ADDIT ION OF RS.1,32,65,000/- MADE BY THE AO ON ACCOUNT OF OUT OF POCKET EXPENSES AS NOTED AT PAGE-62 OF THE IMPOUNDED DOCUMEN T. THE SAME ADDITIONS HAD BEEN MADE BY AO IN THE ASSESSMENT YEAR 200 2-03 ALSO TREATING THE SAID AMOUNT AS PAYMENT TO AUTHORITIES AS U NACCOUNTED ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 28 EXPENDITURE. THE AO HAS MADE THE ADDITION THIS YEAR A LSO AS EXACT DATE OF INCURRING OF EXPENDITURE WAS NOT CLEAR FROM TH E DOCUMENT. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT T HERE WAS NO CORROBORATIVE MATERIAL TO SHOW THAT THE AMOUNT REPRESE NTED UNACCOUNTED EXPENDITURE. AGGRIEVED BY THE DECISION OF CIT(A), THE REVENUE IS IN APPEAL IN THIS YEAR ALSO. 3.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE ISSUE RAISED IN THIS GROUND HAS ALREADY BEEN CONSIDERED BY US WHILE DEALING WITH GROUN D NO.1 IN APPEAL FOR ASSESSMENT YEAR 2002-03 AND FOLLOWING OUR D ECISION IN PARA 2.1.7 WE SET ASIDE THE ORDER OF CIT(A) ON THIS GROUND AND RESTORE THE MATTER TO THE AO FOR PASSING A FRESH ORDER AFTER NECESSAR Y EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE THEREIN AND AFTER A LLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.12.2012. SD/- SD/- (AMIT SHUKLA) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 21.12.2012. JV. ITA NO.4393 & 94/M/10 A.Y. 02-03& 04-05 29 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.