M/s. Veera Apartments Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4687/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3451 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: LALIT MOH
• Keywords: Bogus Share capital; Unexplained investment; Gift; Business income; Principle of natural justice; Question of law; Tax effect; Onus to prove; Bogus loan
• Section: 40A(3); 143(3); 131; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA.NO.5116/DEL./2015 ASSESSMENT YEAR 2011-2012 THE DCIT, CIRCLE-26(1), R.NO.192, C.R. BUILDING, NEW DELHI. VS. M/S. VEERA APARTMENTS PVT. LTD., B/3/58, SAFDARJUNG ENCLAVE, NEW DELHI -110029 PAN AAACV0503A (APPELLANT) (RESPONDENT) ITA.NO.4687/DEL./2015 ASSESSMENT YEAR 2011-2012 M/S. VEERA APARTMENTS PVT. LTD., B/3/58, SAFDARJUNG ENCLAVE, NEW DELHI -110029 PAN AAACV0503A VS. THE DCIT, CIRCLE-26(1), R.NO.192, C.R. BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI S.R. SENAPATI, SR.D.R. FOR ASSESSEE : SHRI GAUTAM JAIN, ADVOCATE AND SHRI LALIT MOHAN, C.A. DATE OF HEARING : 19.01.2018 DATE OF PRONOUNCEMENT : 09.02.2018 ORDER PER BHAVNESH SAINI, J.M. BOTH CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-9, NEW DELHI, DATED 06 TH APRIL, 2015, FOR THE A.Y. 2011-2012. 2 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. BOT H THE APPEALS ARE DECIDED AS UNDER : ITA.NO.5116/DEL./2015 A.Y. 2011-2012 (REVENUE APP EAL) : 3. ON GROUND NO.1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.1,43,92,322 MADE BY A.O. ON ACCOU NT OF DISALLOWANCE MADE BY APPLYING PERCENTAGE COMPLETION METHOD. 3.1. BRIEFLY, THE FACTS AS NOTED IN THE IMPUGNED O RDER ARE THAT THE A.O. IN THE ASSESSMENT ORDER STATED THAT A SSESSEE IS ENGAGED INTO THE BUSINESS OF REAL ESTATE DEVELOPERS AND ALSO AS COLLABORATORS WITH OTHER PARTIES. IT WAS OBSERVED T HAT THE ASSESSEE BOOKED INCOME OF ACTUAL SALE OR TRANSFER O F PROPERTY. SINCE THE ASSESSEE WAS NOT FOLLOWING THE ACCOUNTING STANDARD- 7 (AS-7) FOR RECOGNIZING THE INCOME ON PERCENTAGE C OMPLETION METHOD, THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAI N AS TO WHY ITS METHOD FOR RECOGNIZING THE INCOME SHOULD NOT BE DISCARDED AND INCOME BE NOT COMPUTED ON PERCENTAGE COMPLETION BASIS (AS-7) READ WITH AS-9 (REVENUE RECOGNITION) AND TO SHOW CAUSE 3 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. AS TO WHY ITS BOOKS OF ACCOUNT BE NOT REJECTED UNDE R SECTION 145 OF THE I.T. ACT, 1961. 3.2. THE ASSESSEE CONTENDED BEFORE A.O. THAT AS-7 IS NOT APPLICABLE IN ITS CASE AS THE SAME IS APPLIED TO CO NSTRUCTION CONTRACTS. THE A.O. HOWEVER, NOTED THAT PERUSAL OF REVISED AS- 7 (REVISED), MAKES IT CLEAR THAT ASSESSEE FALLS INT O THE CATEGORY OF CONSTRUCTION CONTRACTOR AND AS-7 IS SQUARELY APP LICABLE TO IT. IT WAS NOTED THAT THE TERMS REAL ESTATE DEVELOPER IS NOT DEFINED IN THE INCOME TAX ACT NOR IN ANY ACCOUNTING STANDARDS. THE REAL ESTATE DEVELOPER MAY NOT BE ASSUMING THE L EGAL CHARACTER OF A CONTRACTOR WHEN HE ENTERS INTO AN AG REEMENT FOR SALE OF UNDER DEVELOPMENT PROPERTY NOR MAY THE BUYE R BE ASSUMED THE LEGAL CHARACTER OF A PRINCIPAL OF CONTR ACTEE. HOWEVER, ACCOUNTING IS CONCERNED, MORE WITH THE SUB STANCE OF A TRANSACTION. AS FAR AS THE ACCOUNTING IS CONCERNE D, A PURE CONTRACTOR AND A REAL ESTATE DEVELOPER, ONCE HE HAS ENTERED INTO AN AGREEMENT FOR SALE OF AN UNDER DEVELOPMENT PROPE RTY, ARE ON PAR BECAUSE IN SUBSTANCE, THE REAL ESTATE DEVELOPER CARRIES OUT THE WORK FOR ANOTHER AS PER PRE-DEFINED TERMS AND S PECIFICATION 4 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. AND CONSIDERATION. THUS, IN SUBSTANCE MAKES HIM CON TRACTOR, ATLEAST FOR ACCOUNTING PURPOSE. IT IS, FOR THIS REA SON, THAT AS-7 APPLIES TO THE ASSESSEE. AS LONG AS A REAL ESTATE D EVELOPER HAD NOT ENTERED INTO AN AGREEMENT FOR SALE OF PROPERTY WHICH WAS UNDER DEVELOPMENT, THERE WERE NO REVENUE TO BE RECO GNIZED IN THIS CASE. HOWEVER, THE MOVEMENT SUCH ENTERPRISE EN TERS INTO AN AGREEMENT FOR SALE OF PROPERTY UNDER DEVELOPMENT , THE ENTERPRISE FROM THAT STAGE ONWARD IS IN SUBSTANCE A CONTRACTOR FOR THE BUYER, SINCE REST OF THE CONSTRUCTION WORK WOULD BE CARRIED OUT FOR AND ON BEHALF OF THE BUYER. IN CASE OF BOTH, A PURE CONTRACTOR AND AN ENTERPRISE DEVELOPING PROPER TIES ON ITS OWN ACCOUNT, WHERE PRE-COMPLETION AGREEMENTS FOR SA LE HAVE BEEN ENTERED INTO, THE CONSTRUCTION CARRIED OUT OR TO BE CARRIED OUT, IS SOLD PRE-COMPLETION. THUS, THIS CHARACTER O F PRE- COMPLETION SALE COMMON TO BOTH CONTRACTOR OF A REA L ESTATE DEVELOPER ABOUT A PROPERTY IN RESPECT OF WHICH, AN AGREEMENT FOR SALE HAS BEEN ENTERED INTO. IT WAS OBSERVED THA T THE ASSESSEE DURING THE STAGE OF DEVELOPMENT OF ANY PROPERTY ENT ERS INTO AN AGREEMENT FOR SALE WITH THE CUSTOMER AND IS RECEIVI NG ADVANCE 5 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. FROM THE CUSTOMERS AND INCURRING SUCH EXPENDITURE B Y WHICH THE FINAL OUT-COME OF ENTIRE PROJECT CAN BE RELIABL Y ESTIMATED. IN THE CASE OF THE ASSESSEE, THE STAGES OF COMPLETION OF VARIOUS PROJECTS HAS REACHED TO VARIOUS PROJECTS OF COMPLET ION, WHICH MEANS THAT SUBSTANTIAL WORK HAS BEEN COMPLETED BY A SSESSEE AND STILL DOES NOT RECOGNIZING ANY AMOUNT OF REVENU E RECOGNITION UNDER THE GARB OF ACTUAL SALE/TRANSFER WHICH IS NOT ACCEPTABLE UNDER AS-7. IN FACT, THE ASSESSEE HAS DE VISED ITS OWN METHOD OF REVENUE RECOGNITION WHICH IS NEITHER PROJ ECT COMPLETION METHOD NOR PERCENTAGE COMPLETION METHOD WHICH ARE GIVEN IN AS-7. THE ASSESSEE IN THE NOTES OF ACC OUNT HAS MENTIONED THAT THE COMPANY DERIVES INCOME FROM SALE/PURCHASE OF PROPERTIES ON THE BASIS OF A REGIS TERED SALE DEEDS AND AGREEMENT TO SALE. THEREFORE, ASSESSEE SH OULD FOLLOW AS-7. IT MAY BE NOTED THAT AS-7 HAS SINCE BEEN REVI SED IN 2002 W.E.F. 01.04.2003, AS-7 COMPLETELY DONE AWAY WITH T HE COMPLETED CONTRACT METHOD AND ONLY METHOD NOW RECOG NIZED IS PERCENTAGE OF COMPLETION METHOD. 6 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 3.3. IN THE CASE OF THE ASSESSEE, REVENUE HAS TO B E RECOGNIZED AS PER AS-7 (REVISED). THE AGREEMENT FOR SALE IS ALSO CONSIDERED TO HAVE THE EFFECT OF TRANSFERRING ALL S IGNIFICANT RISKS AND REWARDS OF OWNERSHIP TO THE BUYER PROVIDED AN A GREEMENT IS LEGALLY ENFORCEABLE. THE SIGNIFICANT RISK RELATE D TO THE REAL ESTATE HAVE BEEN TRANSFER TO THE BUYER. THE A.O. IN VIEW OF THIS, REJECTED THE ASSESSEES METHOD OF ACCOUNTING UNDER SECTION 145 OF THE ACT AND PROFIT WAS RE-COMPUTED ON THE BASIS OF PERCENTAGE COMPLETION METHOD AND MADE THE ABOVE ADDITION IN RE SPECT OF FOUR PROPERTIES AS MENTIONED IN ASSESSMENT ORDER. 3.4. THE ASSESSEE CHALLENGED THE ADDITION BEFORE L D. CIT(A). THE WRITTEN SUBMISSIONS OF ASSESSEE IS REPR ODUCED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE SUBMITTED THAT ASSESSEE IS RECOGNIZING REVENUE IN ITS BOOKS OF ACC OUNT ON THE EXECUTION OF SALE DEED AND SUCH METHOD OF ACCOUNTIN G IS REGULARLY BEEN FOLLOWED BY THE ASSESSEE SINCE ITS I NCEPTION AND METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE HAS A LSO BEEN ACCEPTED BY THE REVENUE IN ALL THE PRECEDING ASSESS MENT YEARS. IT IS NOT THE CASE OF THE A.O. THAT UNDER THE METHO D OF 7 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ACCOUNTING EMPLOYED BY THE ASSESSEE, THE ASSESSEE H AS DECLARED LOWER INCOME OR THERE IS ANY LOSS TO THE R EVENUE. IN THE METHOD OF ACCOUNTING REGULARITY EMPLOYED BY ASS ESSEE, ASSESSEE DECLARED THE REVENUE AFTER EXECUTION OF TH E SALE DEED AND AS SUCH, THE WHOLE EXERCISE IS TAX NEUTRAL. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD., 358 ITR 295 IN WHICH IT WAS HELD THAT THERE IS NO DISPUTE THAT IN SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENSES AND DUTIES ENTITLEMENT P ASS BOOK AND PAID THE TAX. THEREFORE, IT IS NOT AS IF THE REVENU E HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT RATE OF TAX R EMAIN THE SAME IN PRESENT ASSESSMENT YEAR AS WELL AS IN SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT THE BEST, MAY FOR MINOR TAX EFFECT. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF CIT VS. REALEST BUILDERS AND SERVICES LTD., 307 ITR 202 IN WHICH IT WAS HELD THAT ASSESSING OFFICER MUST GIVE FACTS AND FIGURES THAT THE IMPUGNED METHOD OF ACCOUNTING ADOP TED BY THE 8 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ASSESSEE RESULTS IN UNDER ESTIMATION OF PROFITS, FO R CHANGING THE METHOD OF ACCOUNTING UNDER SECTION 145 OF THE ACT, OTHERWISE, IT WILL BE PRESUMED THAT ENTIRE EXERCISE IS REVENUE NE UTRAL. IT WAS SUBMITTED THAT SECTION 145 OF THE ACT PRESCRIBES TH E BUSINESS INCOME SHALL COMPUTED IN ACCORDANCE WITH CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE ASSESSEE REGULARLY EMPLOYED THE SAME METHOD IN ASSE SSMENT YEAR UNDER APPEAL AS WAS FOLLOWED IN EARLIER YEARS. THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN DISPUTED. THE CENTRAL GOVERNMENT HAS NOT NOTIFIED ACCOUNTING STANDARD AS-7 FOR BUSINESS OF T HE ASSESSEE. THE ASSESSEE RELIED UPON DECISION OF THE ITAT, BANG ALORE BENCH IN THE CASE OF PRESTIGE ESTATE PROJECTS P. LTD., VS . DCIT 129 TTJ 680 (BANG.) IN WHICH THE ASSESSEE-COMPANY WAS A REA L ESTATE DEVELOPER. IT MAINTAINS ITS ACCOUNTS BY ADOPTING TH E COMPLETED CONTRACT METHOD OF ACCOUNTING. ACCORDING TO THE A.O . IT WAS MANDATORY FOR THE ASSESSEE TO FOLLOW PERCENTAGE COM PLETION METHOD FOR RECOGNITION OF REVENUE AS PER AS-7. THE TRIBUNAL HELD THAT IT IS TRUE THAT AS-7 HAS NOT BEEN NOTIFIED BY THE CENTRAL 9 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. GOVERNMENT UNDER SECTION 145(2). THEREFORE, A.O. CO ULD NOT HAVE REJECTED THE BOOKS OF ACCOUNT OF ASSESSEE UNDER SEC TION 145 OF THE I.T. ACT . THE ASSESSEE ALSO RELIED UPON THE DECISION OF ITA T, JAIPUR BENCH IN THE CASE OF KRISH INFRASTRUCTURE PV T. LTD., IN ITA.NO.1096 & 1097/JP/2011 FOR A.YS. 2008-2009 AND 2009- 2010 AND DECISION OF ITAT, DELHI BENCH IN THE CASE OF ITO VS. M/S. NN UNITED PVT. LTD., IN ITA.NO.1337/DEL./2009 DATED 14 TH JANUARY, 2011 IN WHICH IT WAS HELD THAT AS-7 IS NOT APPLICABLE TO REAL ESTATE DEVELOPERS, AS SUCH, THERE WAS NO JU STIFICATION IN REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145(2) OF THE I.T. ACT . IT WAS SUBMITTED THAT AS-7 IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE LD. CIT(A), CONSIDERING THE EXPLANATI ON OF ASSESSEE IN THE LIGHT OF MATERIAL ON RECORD, DELETE D THE ENTIRE ADDITION. HIS FINDINGS IN APPELLATE ORDER IN PARAS 3.4 TO 3.10 OF THE ORDER ARE REPRODUCED AS UNDER: 3.4. THE SUBMISSIONS OF THE APPELLANT AND THE FACTS HAV E BEEN CAREFULLY CONSIDERED. IN THE ASSESSMENT ORDER, THE A.O . HAS HELD THAT THE APPELLANT IS A BUILDER AND SHOULD HAVE RECOGNIZED REVENUE BASED ON THE PERCENTAGE COMPLETION METHOD, FOLLOWING AS-7. THE A.O. HAS HELD THAT AS PER THE AGREEMENT T O SALE, THE 10 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. APPELLANT WAS TO COMPLETE THE CONSTRUCTION WITHIN 1 5 MONTHS OF THE DATE OF MCD APPROVAL. THE A.O. HAS CONSIDERED TH E DATE OF MOD APPROVAL AND WORKED OUT THE PROPORTIONATE COMPLET ION OF CONSTRUCTION FROM THE DATE OF APPROVAL, TO THE END O F THE PREVIOUS YEAR UNDER CONSIDERATION. IN THIS MANNER, T HE A.O. HAS COMPUTED THE REVENUE THAT SHOULD HAVE BEEN RECOGNIZ ED, AND ACCORDINGLY MADE ADDITION TO INCOME. THE APPELLANT H AS ARGUED THAT THE REVISED AS-7 IS APPLICABLE TO CONTRACTORS AND NOT TO BUILDERS OR DEVELOPERS AND SINCE THE APPELLANT IS A DEVELOPER, THE REVISED AS-7 IS NOT APPLICABLE. THE APPELLANT ST ATED THAT IT HAS RECOGNIZED REVENUE AT THE TIME OF EXECUTION OF S ALE DEED AND THIS IS A CONSISTENT ACCOUNTING METHOD FOLLOWED BY THEM IN ALL THE YEARS. THE APPELLANT STATED THAT IN ALL THE YEARS THIS ACCOUNTING METHOD HAS BEEN ACCEPTED BY THE DEPARTMENT , EVEN IN SCRUTINY ASSESSMENTS U/S 143(3). THE APPELLANT S TATED THAT EVEN IN THE SUBSEQUENT YEAR, THE ACCOUNTING METHOD H AS BEEN ACCEPTED BY THE DEPARTMENT IN THE SCRUTINY ASSESSME NT U/S 143(3) AND NO ADDITION HAS BEEN MADE ON THIS BASIS. THE APPELLANT CONTENDED THAT THERE IS NO REASON WHY AN INCONSISTENT VIEW HAS BEEN TAKEN THIS YEAR. THE APP ELLANT CONTENDED THAT ADOPTING A DIFFERENT VIEW WITHOUT ANY CHANGE IN FACTS WAS NOT TENABLE IN LAW. IN THIS REGARD, TH E APPELLANT PLACED RELIANCE ON SEVERAL JUDICIAL DECISIONS INCLUD ING THE DECISION OF THE HONBLE SUPREME COURT IN EXCEL INDUST RIES LTD. (358 ITR 295). THE APPELLANT STATED THAT THE ACCOUN TING METHOD FOLLOWED BY HIM WAS SUPPORTED BY SEVERAL JUDICIAL DECI SIONS, AND ALSO THE OPINION GIVEN BY THE EXPORT ADVISORY C OMMITTEE OF 11 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THE GUIDANCE NOTE ISSUED BY THE INSTITUTE ON ACCOUNTING FOR REAL ESTATE TRANSACTIONS. THE APPELLANT STATED THAT THE A .O.S DECISION TO REJECT THE BOOKS OF ACCOUNT U/S 145(2) W AS INCORRECT ALSO BECAUSE THE TAX ACCOUNTING STANDARDS REFERRED TO IN SECTION 145(2), WERE NOT NOTIFIED FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION. THE APPELLANT ARGUED THAT AS-7 IS APP LICABLE TO A CONSTRUCTION CONTRACT AND WOULD NOT APPLY IN THE C ASE OF THE APPELLANT BECAUSE IT WAS A DEVELOPER, AND NOT A MER E CONTRACTOR. 3.5. THE APPELLANT HAS STATED THAT IT HAD NOT BEEN GRANTE D SUFFICIENT OPPORTUNITY DURING ASSESSMENT PROCEEDINGS TO FURNISH COMPLETE EXPLANATION AND DETAILS. IT WAS STATED THAT THE SHOW CAUSE DATED 13.3.14 ISSUED BY THE A.O. WAS CRYPTIC AND THE A.O. HAD NOT CONFRONTED THE APPELLANT WITH HER OBSERVATI ONS AND NOT GIVEN THE APPELLANT ADEQUATE OPPORTUNITY TO FURNISH AN EXPLANATION AND DOCUMENTS, WHICH WOULD HAVE CLARIFIE D ALL THE ISSUES ON WHICH ADDITION HAS BEEN MADE. THE APPELLAN T FURTHER ARGUED THAT THE A.O. HAD GIVEN INADEQUATE TIME TO F URNISH ITS REPLY. THE APPELLANT HAS STATED THAT IT HAD PRODUCED ALL THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS BEFORE THE A.O . AND FURNISHED ALL DETAILS DURING ASSESSMENT PROCEEDINGS AN D THE A.O.S OBSERVATIONS IN THIS REGARD WERE FACTUALLY IN CORRECT. THE APPELLANT STATED THAT IT HAD PRODUCED ALL THE BOOKS O F ACCOUNT, BILLS AND VOUCHERS BEFORE THE A.O. ON SEVERAL DATES AND THIS WAS EVIDENT FROM ITS SUBMISSIONS DATED 5.4.13, 12.4.13 AN D 19.3.14 12 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. FILED BEFORE THE A.O. DURING ASSTT. PROCEEDINGS. 3.6. THE APPELLANT POINTED OUT THAT THERE IS A CONTRADICT ION IN THE OBSERVATIONS OF THE A.O. WHEREIN SHE HAS OBSERV ED THAT WHILE THE APPELLANT IS A REAL ESTATE DEVELOPER, IT IS A CONTRACTOR FOR ACCOUNTING PURPOSES. THE APPELLANT POINTED OUT THAT THIS OBSERVATION IS INCORRECT, ALSO BECAUSE THE APPELLAN T HAS ENTERED INTO AN AGREEMENT TO SALE WITH THE OTHER PARTIES, A ND THIS IS NOT A CASE WHERE THERE IS ONLY A CONTRACT TO CONSTRUCT CERTAIN PROPERTIES. THE APPELLANT ARGUED THAT THE WHOLE DISP UTE ESSENTIALLY RELATED TO A TIMING DIFFERENCE AND WHETHE R INCOME IS TAXABLE IN THIS YEAR, OR IN SUBSEQUENT YEARS, AND T HE APPELLANT HAD CONSISTENTLY FOLLOWED THE METHOD OF ACCOUNTING W HEREIN INCOME IS RECOGNIZED IN THE YEAR WHEN THE SALE DEED I S EXECUTED. THE APPELLANT ARGUED THAT THIS METHOD HAS BEEN CONSI STENTLY ACCEPTED BY THE DEPARTMENT. THE APPELLANT FURTHER A RGUED THAT IT HAD SHOWN INCOME FROM THESE PROJECTS IN THE SUBS EQUENT YEAR, AND THIS INCOME HAD BEEN ACCEPTED IN SCRUTINY ASSTT. U/S 143(3) FOR THE SUBSEQUENT YEAR. THE APPELLANT CONTENDED THAT SINCE THE DEPARTMENT HAD ALREADY TAXED THIS INCOME IN THE SUBS EQUENT YEAR, IT WAS NOT JUSTIFIED IN AGAIN TAXING THE SAME INCOME IN THE YEAR UNDER CONSIDERATION. 3.7. REGARDING THE A.O.S OBSERVATIONS IN RESPECT OF THE PROPERTY AT A-1/8, SAFDARJUNG ENCLAVE, NEW DELHI, T HE APPELLANT STATED THAT THE A.O.S OBSERVATIONS ARE FACTUALLY I NCORRECT. THE APPELLANT STATED THAT IN RESPECT OF THIS PROPERTY, IT HAD RECEIVED RS.25,00,000/- ONLY, OUT OF THE ENTIRE SALE CONSIDE RATION OF 13 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. RS.3.04 CR. AND THEREFORE, ONLY A RECEIPT HAD BEEN IS SUED BUT THERE IS NO AGREEMENT BETWEEN THE APPELLANT AND SHRI MITTAL. THE APPELLANT STATED THAT THERE WAS NO AGREEMENT TO SAL E IN THIS CASE, THEREFORE, THE A.O.S COMPUTATION OF INCOME WAS UNF OUNDED. THE APPELLANT STATED THAT IN THE ASSESSMENT ORDER, THE A .O. HAS HERSELF OBSERVED ON PAGE 5 THAT AS LONG AS A REAL ESTATE DEVELOPER HAD NOT ENTERED INTO AGREEMENT FOR SALE OF PROPERTY WHICH WAS UNDER DEVELOPMENT, THERE WAS NO REVENUE TO BE RECOGNIZED IN THIS CASE. THE APPELLANT CONTENDED THAT AS THERE WAS NO AGREEMENT TO SALE IN CASE OF THIS PROPERTY, THERE WAS NO QUESTION OF RECOGNIZING ANY REVENUE, EVEN AS PER TH E VIEW TAKEN BY THE A.O. THE APPELLANT STATED THAT INCOME FROM T HIS PROPERTY HAS BEEN DULY SHOWN IN A.Y. 2012-13 WHEN THE SALE DE ED WAS EXECUTED AND POSSESSION HANDED OVER. THE APPELLANT C ONTENDED THAT SINCE THIS INCOME HAD BEEN ACCEPTED IN THE SCR UTINY ASSESSMENT U/S 143(3), FOR A.Y. 2012-13, THERE WAS NO JUSTIFICATION FOR TAXING THE SAME AMOUNT AGAIN IN T HE YEAR UNDER CONSIDERATION. 3.8. REGARDING THE REMAINING PROPERTIES, THE APPELLANT A RGUED THAT THE A.O.S DECISION TO ESTIMATE INCOME MERELY ON THE BASIS OF APPROVAL OF THE BUILDING PLAN BY THE MOD IS UNJU STIFIED. THE APPELLANT ARGUED THAT IT IS CLEAR FROM THE SALE AGRE EMENT THAT THE RISK AND REWARDS ARE NOT PASSED ON TO THE BUYERS UNTIL THE PROPERTIES ARE SOLD AND SALE DEED EXECUTED. 3.9. THE APPELLANT RELIED ON SEVERAL JUDICIAL DECISIONS I NCLUDING THE FOLLOWING: 14 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. I DELHI HIGH COURT 1. CIT VS. MANISH BUILDWELL (P) LTD. ( 245 CTR 397) 2. CIT VS. TRIVENI ENGG. AND INDUSTRIES LTD. 336 ITR 374 (DEL) 3. CIT VS. M/S. SABH INFRASTRUCTURE LTD. II INCOME TAX APPELLATE TRIBUNAL 1. ITA NOS. 4572/D/09 AND 2813/D/10 FOR ASSESSMENT YEA RS: 2006- 07 AND 2007-08 DATED 20.04.2012 OF DCIT VS. M/S. SA BH INFRASTRUCTURE LTD. 2. ITA NOS. 478/D/13 AND 480/D/13 FOR ASSESSMENT YEARS : 2008-09 AND 2009-10 DATED 31.7.2013 DCIT VS. M/S. SABH INFRASTRUCTURE LTD. 3. ITA NO. 1337/DEL/2009 DATED 14.12.11 ITO VS. M/S. N .N. UNITED PVT. LTD. 4. ITA.NO.1695/D/2012 FOR ASSESSMENT YEAR 2008-09 DATE D 24.1.2013 ACIT VS. TRUE ZONE BUILDWELL (P) LTD. 5. ITA. NO (S) 2038 AND 2039/D/2012 DATED 26.9.2013 AC IT VS. GALAXY NIRMAN (P) LTD., 6. ITA.NO.5109/MUM/2008 ASSESSMENT YEAR 2005-06 DAT ED 20.8.2010 UNIQUE ENTERPRISES VS. ITO. 7. ITA.NO.2642/MUM/2012 DATED 4.10.2013 OF HAWARE INFRASTRUCTURE (P) LTD. VS. ACIT. 8. 284 ITR 173 (AT) (MUM) DCIT VS. OTIS ELEVATOR CO . INDIA LTD. 9. 71 SOT 288 (MUM) ACIT VS. PRERNA PREMISES (P) LT D. 10. 136 TTJ 263 (MUM) ACIT VS. DHARTI ESTATE 11. ITA.NO.1096 AND 1097/JP/2011 KRRISH INFRASTRUCT URE PVT. LTD. VS. ACIT 12. ITA.NO.368/JODH/2013 DATED 1-4/2014 DCIT VS. AN KIT CHIRAG DEVELOPERS 15 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 13. ITA.NOS.589 AND 590/JP/2012 FOR ASSESSMENT YEAR S 2008-09 AND 2009-10 DCIT VS. UNIQUE BUILDERS AND D EVELOPERS 14. 129 TTJ 680 (BANG) H.M. CONSTRUCTIONS VS. JCIT THE APPELLANT FURTHER STATED THAT THIS ISSUE WAS CO VERED IN ITS FAVOR BY THE ABOVE DECISIONS INCLUDING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAN ISH BUILDWELL PVT. LTD. (SUPRA) AND THESE DECISIONS WERE BINDING O N THE AUTHORITIES BELOW. 3.10. CONSIDERING THE FACTS, IT IS CLEAR THAT THE ASSESSEE IS A BUILDER AND NOT A CONTRACTOR. THE APPELLANT HAS POIN TED OUT THAT IN VIEW OF THE STIPULATIONS IN THE AGREEMENT I N THIS CASE, IT CANNOT BE SAID THAT SIGNIFICANT RISKS AND REWARDS ON OWNERSHIP HAD BEEN TRANSFERRED TO THE BUYER PRIOR TO EXECUTION OF THE SALE DEED. THE APPELLANT STATED THA T IT HAS CONSISTENTLY RECOGNIZED REVENUE AT THE TIME OF EXECU TION OF THE SALE DEED AND THIS METHOD HAS BEEN ACCEPTED BY TH E DEPARTMENT IN NOT ONLY THE EARLIER YEARS, BUT ALSO I N THE SUBSEQUENT YEAR IN SCRUTINY ASSTT. U/S 143(3), AND T HE A.O. HAS NOT GIVEN ANY JUSTIFICATION FOR FOLLOWING AN IN CONSISTENT STAND THIS YEAR. THE APPELLANT STATED THAT THE DISPU TE ESSENTIALLY RELATED TO A TIMING DIFFERENCE AND INCO ME FROM THESE PROPERTIES HAS ALREADY BEEN SHOWN IN A.Y. 2012 -13 WHEN THE SALE DEED WAS EXECUTED AND POSSESSION HANDED OVER. THE APPELLANT CONTENDED THAT SINCE THIS INCOME HAD BEEN ACCEPTED IN THE SCRUTINY ASSESSMENT U/S 143(3), FOR A.Y. 2012 - 13 , THERE WAS NO JUSTIFICATION FOR TAXING THE SAME 16 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. AMOUNT AGAIN IN THE YEAR UNDER CONSIDERATION. IN THE ASSESSMENT ORDER, THE A.O. HAS NOT BROUGHT ANY MATE RIAL ON RECORD TO CONTROVERT THE CONTENTIONS OF THE APPELLA NT. THE A.O.S DECISION TO ESTIMATE THE INCOME ON THE BASIS OF THE DATE OF SANCTION OF THE BUILDING PLAN BY THE MOD, A ND THE PERIOD AT THE END OF THE YEAR IS NOT LEGALLY SUSTAI NABLE. CONSIDERING THE FACTS AND JUDICIAL DECISIONS ON THIS SUBJECT, THE ADDITION MADE BY THE A.O. IS NOT SUSTAINABLE IN LAW AND IS DELETED. THE GROUNDS ARE ACCORDINGLY ALLOWED. 4. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. AND SUBMITTED THAT A.O. REJECTED THE BOOKS OF ACCOUNT B ECAUSE ACCOUNTING STANDARD AS-7 WAS NOT FOLLOWED BY ASSESS EE. THE LD. D.R. SUBMITTED THAT MATTER MAY BE REMANDED TO A .O. TO VERIFY IF THERE IS ANY LEAKAGE OF THE REVENUE. 5. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT THE A.O. REJECTED THE BOOKS OF A CCOUNT MERELY ON ACCOUNT OF PERCENTAGE COMPLETION METHOD N OT FOLLOWED BY THE ASSESSEE. THE ASSESSEE FOLLOWED COM PLETION METHOD SINCE BEGINNING ON EXECUTION OF THE SALE DEE D WHICH HAVE BEEN ACCEPTED BY THE INCOME TAX DEPARTMENT IN EARLIER AS 17 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. WELL AS SUBSEQUENT YEARS, IN ITS ORDERS UNDER SECTI ON 143(3), COPIES OF THE SAME ARE FILED IN THE PAPER BOOK. THE ASSESSEE DECLARED INCOME ON EXECUTION OF THE SALE DEED IN SU BSEQUENT A.Y. 2012-2013 WHICH HAVE BEEN ACCEPTED BY THE A.O. IN THE ORDER UNDER SECTION 143(3) OF THE I.T. ACT. THE DET AILS OF THE SAME ARE ALSO FILED AT PAGES 138 OF THE PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT IT IS A TAX NEUTRAL EXERCISE ONLY. THE LD. CIT(A), THEREFORE, C ORRECTLY DELETED THE ADDITION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD. THE A.O. IN THE ASSESSMENT ORDE R SPECIFICALLY NOTED THAT ASSESSEE IS ENGAGED INTO TH E BUSINESS OF REAL ESTATE DEVELOPERS AND ALSO AS COLLABORATORS WI TH VARIOUS PARTIES. THE ASSESSEE WAS BOOKING INCOME ON ACTUAL SALE OR TRANSFER OF PROPERTY ON FOLLOWING COMPLETION METHOD . THE ASSESSEE FOLLOWED THE SAME ACCOUNTING STANDARD IN E ARLIER AS WELL AS SUBSEQUENT YEAR WHICH HAVE BEEN ACCEPTED BY THE AUTHORITIES BELOW. THE A.O. HAS NOT POINTED OUT ANY INFIRMITY IN THE ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE FOR RECOGNITION 18 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. OF REVENUE. THE ASSESSEE EXPLAINED THAT IN SUBSEQUE NT A.Y. 2012-2013, THE ASSESSEE DECLARED THE INCOME ON THE BASIS OF SALE DEEDS EXECUTED ON COMPLETION OF THE PROJECT, W HICH HAVE BEEN ACCEPTED BY THE A.O. IN THE ORDER UNDER SECTIO N 143(3) OF THE I.T. ACT. COPY OF THE SAME IS FILED IN THE PAPE R BOOK WITH DETAILS OF SALES AND THE EXPENDITURE INCURRED IN TO TALITY. THEREFORE, THERE IS NO REASON TO REJECT THE BOOKS O F ACCOUNT OF ASSESSEE MERELY ON FOLLOWING THE SAME ACCOUNTING ST ANDARD IN ASSESSMENT YEAR UNDER APPEAL. THE A.O. APPLIED AS-7 WHICH IS APPLICABLE TO CONTRACTORS AND NOT TO THE BUILDERS O R DEVELOPERS. SINCE ASSESSEE IS A DEVELOPER, THEREFORE, AS-7, WOU LD NOT APPLY IN THE CASE OF THE ASSESSEE. IT IS ALSO NOT NOTIFI ED IN SECTION 145 OF I.T. ACT. THE A.O. HAS NOT MADE OUT ANY CASE TH AT ON FOLLOWING THE SAME ACCOUNTING STANDARD, THERE IS ANY LOSS TO THE REVENUE OR LEAKAGE OF THE REVENUE. THE ASSESSEE PLEADED THA T RATE OF TAX IS SAME IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN SUBSEQUENT YEAR IN WHICH INCOME HAVE BEEN SHOWN I.E ., A.Y. 2012-2013. THEREFORE, THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD., 358 ITR 295 19 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. (SUPRA), IS SQUARELY APPLICABLE TO THE FACTS AND CI RCUMSTANCES OF THE CASE BECAUSE IT IS TAX NEUTRAL EXERCISE ONLY IN ASSESSMENT YEAR UNDER APPEAL. THE A.O. HAS NOT POINTED ANY OTH ER INFIRMITY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE A.O. M ADE THE ADDITION ON THE BASIS OF APPROVAL AND BUILDING PLAN APPROVED BY THE MCD WHICH IS WHOLLY UNJUSTIFIED. THE ASSESSEE E XPLAINED THAT IT IS CLEAR FROM THE SALE AGREEMENT THAT RISK AND REWARDS ARE NOT PASSED-ON TO THE BUYERS UNTIL THE PROPERTIE S ARE SOLD AND SALE DEED EXECUTED. LEARNED COUNSEL FOR THE ASS ESSEE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF PARAS BUILD TECH INDIA PVT. LTD., VS. CIT 382 ITR 6 30 IN WHICH THE QUESTION OF LAW FOR CONSIDERATION BEFORE THE CO URT WAS FOR A.Y. 2005-2006, WHETHER THE ITAT WAS JUSTIFIED IN S ETTING ASIDE THE ORDER OF THE LD. CIT(A) AND HOLDING IN FACTS AN D CIRCUMSTANCES OF THE CASE, THE ADVANCE AMOUNT RECEIVED BY ASSESSE E SHOULD BE TREATED AS INCOME IN ITS HANDS IN THE YEAR IN WHICH THE ADVANCE AMOUNTS WERE RECEIVED AND IN APPLYING AS-7 (REVISED ) I.E., PERCENTAGE COMPLETION METHOD TO THE ASSESSEE THEREO F. THE ASSESSEE IN THIS CASE HAS TAKEN STAND THAT AS-7 WAS NOT 20 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. APPLICABLE SINCE IT WAS A DEVELOPER AND NOT THE CON TRACTOR. THE LD. CIT(A) ACCEPTED THE CONTENTION OF ASSESSEE AND HELD THAT ASSESSEE WAS DEVELOPER AND NOT A CONTRACTOR. THEREF ORE, AS-7 WOULD NOT APPLY TO IT. HOWEVER, THE ITAT, REVERSED THE ORDER OF THE LD. CIT(A). THE HONBLE DELHI HIGH COURT CONSID ERED THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. BILAHARI INVESTMENT PVT. LTD., 289 ITR 1 AND CIT VS . EXCEL INDUSTRIES LTD., 358 ITR 295. THE HONBLE GUJRAT H IGH COURT IN CASE OF SHIVALIK BUILDWELL P. LTD., (2013) 40 TAXMA NN.COM 219 (GUJ.) RECOGNIZED THAT ASSESSEE IN THAT CASE WAS EN TITLED TO APPLY PROJECT COMPLETION METHOD IN TERMS OF APPLICABLE AC COUNTING STANDARD. THE ISSUE WAS DECIDED IN FAVOUR OF THE AS SESSEE AND AGAINST THE REVENUE. 7. CONSIDERING THE ISSUE IN DETAIL IN THE LIGHT OF AFORECITED DECISIONS REFERRED TO ABOVE AND IN THE F INDINGS OF THE LD. CIT(A), IT IS CLEAR THAT ASSESSEE WAS REGULARLY FOLLOWING PROJECT COMPLETION METHOD FOR RECOGNIZING REVENUE W HICH HAVE BEEN ACCEPTED BY THE REVENUE IN EARLIER AS WELL AS SUBSEQUENT ASSESSMENT YEARS. THE ASSESSEE IS A REAL ESTATE DEV ELOPER, 21 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. THEREFORE, AS-7 WOULD NOT APPLY TO THE CASE OF THE ASSESSEE. THE ASSESSEE DECLARED ENTIRE INCOME IN A.Y. 2012-2013 B Y FOLLOWING THE SAME ACCOUNTING STANDARD. THEREFORE, IT IS ONLY A TAX NEUTRAL EXERCISE. THE LD. CIT(A), THEREFORE, ON PRO PER APPRECIATION OF FACTS AND MATERIAL ON RECORD, CORRE CTLY DELETED THE ADDITION. THE LD. D.R. CONTENDED THAT THE MATTE R MAY BE REMANDED TO THE A.O. TO VERIFY IF THERE IS ANY LEAK AGE OF THE REVENUE. SINCE A.O. HAS NOT MADE OUT SUCH CASE IN T HE ASSESSMENT ORDER, THEREFORE, THERE IS NO REASON TO REMAND BACK THE MATTER TO THE FILE OF A.O. TO DO SO, WHICH HAS ALSO NOT BEEN DONE EARLIER IN THE ASSESSMENT ORDER. IN VIEW OF TH E ABOVE, WE ARE OF THE VIEW THAT THERE WERE NO JUSTIFICATION FO R A.O. TO REJECT THE BOOKS OF ACCOUNT UNDER SECTION 145(2) OF THE I. T. ACT, 1961. THE ADDITION HAVE BEEN CORRECTLY DELETED BY THE LD. CIT(A). NO INTERFERENCE IS CALLED FOR. GROUND NO.1 OF THE REVE NUE IS DISMISSED. 8. ON GROUND NO.2, THE REVENUE CHALLENGED THE ORDE R OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.19,25 ,824 MADE BY 22 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. A.O. ON ACCOUNT OF DISALLOWANCE BY INVOKING THE PRO VISIONS OF SECTION 40A(3) OF THE I.T. ACT, 1961. 9. BRIEFLY, IT MAY BE STATED ON THE ISSUE THAT FRO M THE PROFIT AND LOSS ACCOUNT, IT WAS OBSERVED THAT ASSES SEE HAS CLAIMED AN AMOUNT OF RS.12,67,30,087/- ON ACCOUNT O F CONSTRUCTION AND DEVELOPMENT EXPENDITURE. THE ASSES SEE WAS ASKED TO FURNISH THE DETAILS AND TO JUSTIFY ITS CLA IM ALONG WITH DOCUMENTARY EVIDENCE. THE ASSESSEE SUBMITTED COPY O F THE LEDGER ACCOUNT OF CONSTRUCTION AND DEVELOPMENT EXPE NSES, WHEREIN ONLY ENTRIES PERTAINING TO TRANSFER OF COST OF CONSTRUCTION FROM CLOSING STOCK OF VARIOUS PROPERTI ES TO CONSTRUCTION AND DEVELOPMENT EXPENSES ACCOUNT WERE REFLECTED. IT DID NOT PROVIDE ANY OTHER DETAILS. THE ASSESSEE DID NOT PRODUCE ANY BILLS/VOUCHERS SUPPORTING FOR VERIFICAT ION. FROM PERUSAL OF THE BANK BOOK AND BANK STATEMENTS OF FED ERAL BANK A/C. NO.XXX17428 SUBMITTED BY ASSESSEE, IT WAS NOTI CED THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENSES IN EXCES S OF RS.20,000/- BY WAY OF ISSUE OF BEARER CHEQUE OR SEL F-CHEQUES, THE DETAILS OF THE SAME ARE NOTED AT PAGE-22 OF THE ASSESSMENT 23 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ORDER. THE A.O. ACCORDINGLY, DISALLOWED RS.19,25,82 4 UNDER SECTION 40A(3) OF THE I.T. ACT. THE ASSESSEE CHALLE NGED THE ADDITION BEFORE LD. CIT(A) AND WRITTEN SUBMISSION O F THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WH ICH THE ASSESSEE BRIEFLY EXPLAINED THAT ASSESSEE FURNISHED COMPLETE DETAILS OF CONSTRUCTION AND DEVELOPMENT EXPENSES AN D THE A.O. THEREAFTER, DID NOT MAKE ANY OTHER FURTHER QUERY. T HE A.O. DID NOT DOUBT INCURRING OF THE EXPENSES NOR DOUBT THE E XISTENCE OF THE PARTIES TO WHOM PAYMENTS HAVE BEEN MADE. THE A. O. MAINLY MADE THE ADDITION BECAUSE PAYMENTS ARE MADE BY BEAR ER CHEQUES. THE A.O. MADE THE ADDITION IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 9.1. THE ASSESSEE IS IN THE BUSINESS OF REAL ESTAT E DEVELOPER AND COLLABORATORS AND INCURRED CONSTRUCTI ON AND DEVELOPMENT EXPENSES WHICH IS MATERIAL FOR BUSINESS OF THE ASSESSEE. ALL THE EXPENSES ARE INCURRED BY CHEQUES AND EVEN THE AMOUNT IN QUESTION IS PAID BY CHEQUES, HOWEVER, IN RESPECT OF 11 PARTIES, FOR GOODS/SERVICES SUPPLIED/PROVIDED BY SUCH PARTIES, BEARER CHEQUES WERE GIVEN AT THEIR INSISTE NCE WHICH 24 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. HAVE BEEN ENCASHED BY THEM. THESE ARE GENUINE BUSIN ESS EXPENDITURE. ASSESSEE RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. K.M. VIDYASAGAR ITA.NOS.1339 & 1345/MAD./2011 DATED 21 ST MARCH, 2014, IN WHICH THE TRIBUNAL HELD THAT GENUINE AND BONAFIDE TRANSACTION S ARE NOT TAKEN OUT OF THE SWEEP OF THIS SECTION AND CONSIDER ATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. THE ASSESSEE ALSO RELIED UPON OTHER DECIS IONS IN SUPPORT OF THE SAME CONTENTION. THE LD. CIT(A) CONS IDERING THE EXPLANATION OF ASSESSEE, DELETED THE ENTIRE ADDITIO N. HIS FINDINGS IN PARA 6.3 OF THE ORDER ARE REPRODUCED AS UNDER : 6.3 THE SUBMISSIONS OF THE APPELLANT AND THE FACTS HAVE BEEN CAREFULLY CONSIDERED. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT CERTAIN PAYMENTS WERE MADE B Y BEARER CHEQUES AND THESE HAVE BEEN DISALLOWED U/S 40A(3). THE APPELLANT STATED THAT IN THE ASSESSMENT ORDER, THE A.O. HAS NOT DISPUTED THE INCURRING OF THE EXPE NDITURE AND HAS ALSO NOT DOUBTED THE EXISTENCE OF THE PARTI ES TO WHOM PAYMENT HAS BEEN MADE. THE APPELLANT STATED TH AT THE PAYMENTS WERE MADE THROUGH BEARER CHEQUES BECAU SE OF THE INSISTENCE OF THESE PERSONS AND BUSINESS EXI GENCIES. 25 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. THE APPELLANT STATED THAT IT HAD FURNISHED COMPLETE DETAILS OF THE CONSTRUCTION AND DEVELOPMENT EXPENSES VIDE I TS SUBMISSIONS DATED 28.10.13. THE APPELLANT STATED TH AT IT HAD FILED A COPY OF THE BANK STATEMENT, LEDGER ACCO UNT AND TDS CERTIFICATES OF THESE PARTIES BEFORE THE A.O. A ND IN THE ASSTT. ORDER, THE A.O. HAD GIVEN DETAILS OF THE DAT E OF TRANSACTION THROUGH BANK, AND THE CHEQUE NUMBER. TH E APPELLANT STATED THAT PAYMENT TO ALL THESE PARTIES HAD BEEN MADE THROUGH BEARER CHEQUES, AND AS THE GENUINENESS OF THE PAYMENT IS NOT DISPUTED, THESE AMOUNTS CANNOT B E DISALLOWED U/S 40A(3). THE APPELLANT CONTENDED THAT THE ISSUE WAS COVERED IN ITS FAVOUR BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. BASU DISTRIBUTO RS PVT. LTD. (206 TAXMANN 45) AND THE HONBLE A.P. HIGH COU RT IN SRI LAXMI SATYANARAYANA OIL MILL V. CIT, AND THE DE CISIONS ARE BINDING ON THE AUTHORITIES BELOW. IN THE ASSESS MENT ORDER, THE A.O. HAS NOT DISPUTED THE GENUINENESS OF THE EXPENDITURE CLAIMED BUT HAS DISALLOWED THE EXPENSES MERELY BECAUSE THE AMOUNTS HAVE BEEN PAID BY BEARER CHEQUES. CONSIDERING THE FACTS AND JUDICIAL DECISIO NS ON THE SUBJECT, THE DISALLOWANCE MADE BY THE A.O. IS NOT SUSTAINABLE IN LAW AND IS DELETED. THE GROUNDS ARE ACCORDINGLY ALLOWED. 10. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. 26 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 11. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OT HER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE AU THORITIES BELOW AND RELIED UPON THE ORDER OF ITAT, DELHI BENC H IN THE CASE OF M/S. GALAXY DWELLERS PVT. LTD., VS. DCIT 2017 (1 1) TMI 112 IN WHICH IT WAS HELD THAT WHERE GENUINE TRANSACTION S MADE IN CASH IN EXCESS OF RS.20,000/- WAS NOT DISBELIEVED B Y THE AUTHORITIES, THE SAME CANNOT BE DISALLOWED UNDER SE CTION 40A(3) OF THE I.T. ACT, 1961. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION. THE PROVISO TO SECTION 40 A(3A) PROVIDES THAT THE CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS COULD BE CONSIDERED FOR NOT DISALLOWING AMO UNT UNDER THE ABOVE PROVISIONS. THE ASSESSEE IS A DEVELOPER AND COLLABORATOR AND INCURRED EXPENDITURE ON CONSTRUCTION AND DEVELO PMENT WHICH IS THE MAIN EXPENDITURE TO RUN THE BUSINESS. THE SUBSTANTIAL PAYMENTS HAVE BEEN MADE THROUGH CHEQUES AND ONLY SMALL AMOUNT HAVE BEEN INCURRED THROUGH BEARER CHEQUES/SELF-CHEQUES AT THE INSISTENCE OF THE PARTI ES. THE A.O. 27 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. DID NOT DOUBT THE GENUINENESS OF THE EXPENDITURE AN D EXISTENCE OF THE PARTIES TO WHOM SUCH PAYMENTS HAVE BEEN MADE . THE ASSESSEE FILED COPY OF THE BANK STATEMENT, LEDGER A CCOUNT AND TDS CERTIFICATE OF THESE PARTIES TO WHOM PAYMENTS H AVE BEEN MADE. THEREFORE, LD. CIT(A), CONSIDERING THE GENUIN ENESS AND BONAFIDE TRANSACTIONS AND CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT BUSINESS FACTORS, CORRECTLY DELE TED THE ADDITION. NO INTERFERENCE IS CALLED FOR. GROUND NO. 2 OF APPEAL OF THE REVENUE IS DISMISSED. 13. ON GROUND NO.3, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.4 LAKHS AND RS.26 LAKHS MADE BY A.O. ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED/REFUNDED. THE A .O. ON PERUSAL OF THE BALANCE-SHEET OBSERVED THAT ASSESSEE HAS RECEIVED RS.4 LAKHS FROM M/S. RAMESH JAIN AND SONS ON 04 TH MARCH, 2011 ON ACCOUNT OF SHARE APPLICATION MONEY. THE ASSESSEE SUBMITTED COPY OF THE BANK ACCOUNT OF THE INVESTOR IN RESPECT OF THE SOURCE OF INVESTMENT ALONG WITH LEDG ER ACCOUNT OF THE INVESTOR IN THE BOOKS OF THE ASSESSEE DULY SIGN ED BY THE ASSESSEE AND THE SHARE APPLICATION. THE A.O. ON PER USAL OF THE 28 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. LEDGER ACCOUNT OBSERVED THAT ASSESSEE HAS SHOWN THA T THE AMOUNT OF RS.4 LAKHS HAS BEEN RECEIVED BY CHEQUE NO .040044 FROM THE SAID SHARE APPLICANT AND SAME WERE DEPOSIT ED IN THE FEDERAL BANK. ON VERIFICATION OF THE SAID ENTRY OF RS.4 LAKHS FROM THE BANK STATEMENT AND BANK BOOK, NO SUCH ENT RY EXISTED. THE A.O. THEREFORE, NOTED THAT THE SHARE APPLICATION MONEY OF RS.4 LAKHS RECEIVED FROM SHRI RAMESH JAIN & SONS, IS INCOME FROM UNDISCLOSED INCOME AND ADDED TO THE SAM E. 13.1. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THA T ASSESSEE PRODUCED CONFIRMATION, BANK STATEMENT AND COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME WHICH CLEARLY PR OVE IDENTITY OF THE INVESTOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. HE HAS SUBMITTED THAT A.O. HAS COMPLETELY FAILED TO APPRECIATE THAT IF A CHEQUE IS ISSUED WHICH IS NOT ACCOUNT PAYEE CHEQUE, THEN THE SAME WILL NOT BE REFLECTED IN THE BANK ACCOUNT OF THE PAYEE AND NOR THE NAME O F THE PAYEE WILL APPEAR IN THE BANK ACCOUNT OF THE PAYER. IT WA S SUBMITTED THAT IN THE INSTANT CASE, CHEQUE ISSUED BY THE SHAR E APPLICANT WAS BEARER CHEQUE AND WAS NOT ACCOUNT PAYEE CHEQUE, AS SUCH, 29 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. NAME OF ASSESSEE DID NOT APPEAR IN THE BANK ACCOUNT OF THE PAYER NOR THE SAID SUM WILL BE CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. HOWEVER, SAME WILL REFLECT IN CASH BO OK. A.O. DID NOT DISPUTE IDENTITY AND CREDITWORTHINESS OF INVEST OR. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE RELIED UPON THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., 319 ITR 5 (STATUTE) IN WHICH IT WAS HELD THAT EVEN IF SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE FRO M THE ALLEGED BOGUS SHARE HOLDERS, WHOSE NAMES ARE GIVEN TO THE A .O, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. VALUE CAPITAL SERVICES LTD., 307 IT R 334 WHEREIN IT HAS BEEN HELD THAT BURDEN IS ON THE A.O. TO SHOW THAT MONEY RECEIVED ORIGINATED FROM THE COFFERS OF THE ASSESSE E-COMPANY. ASSESSEE ALSO RELIED UPON OTHER UNREPORTED DECISION IN SUPPORT OF THE CONTENTION THAT GENUINENESS OF THE SHARE APP LICATION MONEY RECEIVED HAVE BEEN PROVED. THE LD. CIT(A) ON VERIFICATION 30 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. OF THE FACTS, ACCEPTED THE EXPLANATION OF ASSESSEE THAT AMOUNT WAS RECEIVED THROUGH CHEQUE WHICH WAS NOT ACCOUNT P AYEE CHEQUE AND WAS NOT DRAWN ON FEDERAL BANK. THEREFORE , THE NAME OF THE ASSESSEE WOULD NOT APPEAR IN THE BANK A CCOUNT OF THE PAYER. THE LD. CIT(A) ON THE BASIS OF THE MATER IAL ON RECORD, HELD THAT ASSESSEE DISCHARGED ONUS TO PROVE GENUINE SHARE APPLICATION MONEY AND ACCORDINGLY, DELETED THE ADDI TION. 13.2. SIMILARLY, IT WAS NOTICED THAT ASSESSEE HAS ADMITTED THAT NO SHARE APPLICATION MONEY HAVE BEEN REFUNDED DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE A.O. NOTED F ROM THE BANK BOOK OF FEDERAL BANK THAT ASSESSEE HAS REFUNDE D THE AMOUNTS OF RS.26 LAKHS TOWARDS SHARE APPLICANTS. ON CROSS VERIFICATION, IT WAS OBSERVED THAT THE ABOVE STATED TRANSACTIONS HAVE BEEN WITHDRAWN BY THE ASSESSEE AS SELF-TRANSAC TIONS FROM HIS FEDERAL BANK ACCOUNT. BUT ASSESSEE DID NOT PROD UCE COPY OF THE LEDGER ACCOUNT OR SHARE APPLICANT. SINCE THE ASSESSEE ADMITTED THAT NO AMOUNT HAVE BEEN REFUNDED DURING T HE YEAR ON ACCOUNT OF SHARE APPLICATION, THEREFORE, AMOUNT OF RS.26 LAKHS SHOWN TO HAVE REFUNDED TO THE SHARE APPLICANT S, WAS 31 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. FOUND BOGUS AND DUBIOUS AND ADDITION OF RS.26 LAKHS WAS MADE ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCE. 13.3. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT COPY OF THE LEDGER ACCOUNT OF SHARE APPLICATION MON EY HAS BEEN FILED TO SHOW THAT RS.26 LAKHS HAVE BEEN WITHDRAWN IN CASH BY THE ASSESSEE ON DIFFERENT DATES. SINCE THE AMOUNT H AVE BEEN WITHDRAWN FROM THE BANK AND STATED TO HAVE BEEN REF UNDED THE SAME, CANNOT BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE. THE LD. CIT(A) FOUND THAT ASSESSEE HAS WITHDRAWN TH E AMOUNT IN CASH FROM THE BANK, THEREFORE, ADDITION IS WHOLL Y UNJUSTIFIED. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE AUTHORITY BELOW. THE A.O. MADE ADDITION OF RS.4 LAKHS ON ACCO UNT OF UNEXPLAINED SHARE CAPITAL BECAUSE THE CHEQUE ISSUED BY THE SHARE APPLICANT DID NOT APPEAR IN THE ACCOUNT OF TH E PAYER NOR THE SAME WAS ALSO CREDITED IN THE ACCOUNT OF THE AS SESSEE. THE 32 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ASSESSEE, HOWEVER, EXPLAINED THAT THE CHEQUE IN QUE STION WAS NOT ACCOUNT PAYEE CHEQUE. THEREFORE, IT WAS NOT REF LECTED IN THE BANK ACCOUNT OF THE PAYEE NOR THE NAME OF THE PAYEE WILL APPEAR IN THE BANK ACCOUNT OF THE PAYER. THE ASSESSEE PROD UCED SUFFICIENT EVIDENCE BEFORE A.O. TO EXPLAIN THE IDEN TITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE INVESTOR. REASONS GIVEN BY THE A.O. THAT NAM E OF THE ASSESSEE IS NOT APPEARING IN THE ACCOUNT OF THE INV ESTOR WAS WHOLLY INCORRECT BECAUSE WHEN THE CHEQUE ISSUED TO THE ASSESSEE WAS NOT ON ACCOUNT OF PAYEE CHEQUE, THEREF ORE, THE NAME OF ASSESSEE WOULD NOT APPEAR IN THE BANK ACCOU NT OF THE PAYER. THE REASON GIVEN BY THE A.O. HAVE BEEN PROPE RLY CONSIDERED BY THE LD. CIT(A) IN WHICH NO INFIRMITY HAVE BEEN POINTED OUT. THEREFORE, ADDITION OF RS.4 LAKHS HAVE BEEN CORRECTLY DELETED BY THE LD. CIT(A). 15. AS REGARDS REFUND OF RS.26 LAKHS TO THE SHARE APPLICANTS, THE ASSESSEE HAS SHOWN CASH WITHDRAWALS ON THREE DATES OF RS.26 LAKHS. THEREFORE, WITHDRAWAL OF THE AMOUNT BY THE ASSESSEE COULD NOT BE TREATED AS UNEXPLAINED IN COME OF THE 33 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ASSESSEE. THE LD. CIT(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD, CORRECTLY DELETED THE ADDITION. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS DISMISSED. 16. ON GROUND NO.4, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.43,10,000 MADE BY THE A.O. ON ACCOUN T OF UNSECURED LOANS RECEIVED BY THE ASSESSEE-COMPANY. 16.1. FROM THE PERUSAL OF THE BALANCE SHEET, IT WA S OBSERVED THAT ASSESSEE HAS RECEIVED UNSECURED LOANS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF UNSECURED LOANS RECEIVED DURING THE YEAR AND ALSO TO FURNISH COPY OF THE ITR, BANK STATEMENT AND CONFIRMATION OF THE CONCERNED PARTIES SO AS TO PROV E THEIR IDENTITY, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE SUBMITTED DETAILS OF UNSE CURED LOANS TOGETHER WITH COPIES OF THE BANK ACCOUNT OF THE LEN DERS, COPIES OF THE LEDGER ACCOUNT OF UNSECURED LOANS IN THE BOO KS OF ACCOUNT AND COPIES OF ACKNOWLEDGMENT OF INCOME TAX RETURNS. THE A.O. EXAMINED THE SAME AND CROSS-VERIFIED FROM THE BANK STATEMENTS OF RESPECTIVE LENDERS AND IT WAS FOUND THAT THE AMO UNT OF 34 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. UNSECURED LOANS IN REFERENCE HAVE BEEN RECEIVED IN SUM OF RS.43,10,000 FROM ANGURI DEVI, R.K. JAIN, G.C. JAIN AND SONS, G.C. JAIN AND SATISH JAIN AND SONS. THE A.O. NOTED THAT THE LENDERS HAVE NO CREDITWORTHINESS TO GIVE THE LOAN A S THEY HAD ONLY SMALL BANK BALANCE AND WERE EARNING SMALL INCO ME AND MAINLY ARE FAMILY MEMBERS OF THE ASSESSEE. IT WAS, THEREFORE, NOTED THAT IT IS MONEY OF THE ASSESSEE WHICH IS ROU TED THROUGH THE BANK ACCOUNTS OF THE LENDERS FOR THE PURPOSE OF GIVING LOANS TO THE ASSESSEE. ACCORDINGLY, ADDITION OF RS.43,10, 000 WAS MADE ON ACCOUNT OF UNDISCLOSED CREDITS UNDER SECTIO N 68 OF THE I.T. ACT, 1961. 16.2. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A) AND IT WAS SUBMITTED THAT THE LIST OF UNSECU RED LOANS IN ASSESSMENT YEAR UNDER APPEAL HAVE BEEN FURNISHED WH ICH WOULD SHOW THE CLOSING BALANCE OF UNSECURED LOANS W AS OF RS.3.45 CRORES AND OUT OF THESE AFORESAID UNSECURED LOANS, A SUM OF RS.86,97,446 WAS FROM DIRECTORS OF THE ASSES SEE- COMPANY WHEREAS THE REMAINING SUM OF RS.2.59 CRORE WAS FROM 15 PARTIES. THE ASSESSEE FURNISHED COMPLETE DETAILS OF ALL THE 35 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. CREDITORS INCLUDING THE ABOVE CREDITORS WHICH ARE C OPY OF THEIR CONFIRMATIONS, COPY OF ACKNOWLEDGMENT OF INCOME TAX RETURN, COPY OF THE BANK ACCOUNT, COPY OF THE CASH BOOK AND LEDGER, COPY OF THE BALANCE SHEET WITH TDS CERTIFICATES. TH EREFORE, ASSESSEE PROVED IDENTITY, CREDITWORTHINESS AND GENU INENESS OF THE TRANSACTION. THE A.O. CANNOT ASK FOR THE SOURCE OF THE SOURCE OF THE CREDITORS AND RELIED UPON SEVERAL DEC ISIONS IN SUPPORT OF THE ABOVE PROPOSITION. IT WAS SUBMITTED THAT ALL THE CREDITORS HAVE DULY CONFIRMED ADVANCING LOANS TO TH E ASSESSEE AND ALL ARE INCOME TAX ASSESSEES. IF A.O. WAS NOT I NCLINED TO BELIEVE THE MATERIAL PLACED ON RECORD, THE A.O. COU LD HAVE USE COERCIVE POWERS TO MAKE AVAILABLE THESE CREDITORS F OR VERIFYING THE GENUINENESS OF THE TRANSACTION IN THE MATTER. T HE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE ABO VE CONTENTION THAT ASSESSEE PROVED INGREDIENTS OF SECTION 68 OF T HE I.T. ACT IN THE MATTER. 16.3. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE AND MATERIAL ON RECORD, FOUND THAT ASS ESSEE FILED COMPLETE DETAILS AND EVIDENCES OF THE CREDITORS DUR ING THE 36 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. COURSE OF ASSESSMENT PROCEEDINGS AS NOTED ABOVE AND NO MATERIAL HAVE BEEN BROUGHT ON RECORD FOR PROVIDING ANY ACCOMMODATION ENTRY BY THESE CREDITORS TO THE ASSES SEE BY ANY INVESTIGATION WING. THE A.O. HAS NOT BROUGHT ANY MA TERIAL ON RECORD TO CONTROVERT THE EVIDENCES SUBMITTED BY THE ASSESSEE. THE A.O. CANNOT ASK THE ASSESSEE TO PROVE THE SOURC E OF THE SOURCE OF CREDITOR. THEREFORE, LD. CIT(A) FOUND THA T THE BURDEN UPON THE ASSESSEE HAVE BEEN DISCHARGED BY PROVING T HE IDENTITY, CAPACITY OF THE CREDITORS AND GENUINENESS OF THE TR ANSACTION IN THE MATTER. THE ADDITION WAS ACCORDINGLY DELETED. 16.4. THE LD. D.R. SUBMITTED THAT THE DOCUMENTS RE FERRED TO BY THE LD. CIT(A) WERE NOT FILED BEFORE THE A.O. 16.5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERA TED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND RE FERRED TO PAGES 571 TO 677 OF THE PAPER BOOK TO SHOW THAT ALL THE DOCUMENTS LIKE CONFIRMATION OF THE CREDITORS, ACKNO WLEDGMENT OF THE RETURN OF INCOME, BANK STATEMENTS, CASH BOOK LEDGER AND BALANCE-SHEET, TDS CERTIFICATE ETC., WERE FILED BEF ORE AUTHORITIES BELOW. 37 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 17. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE HAS FILED ALL THE ABOVE DOCUMENTARY EVIDENCES BEFOR E A.O. AS WELL AS BEFORE LD. CIT(A). THE ASSESSEE HAS GIVEN A CERTIFICATE IN THE PAPER BOOK ALSO THAT ALL THESE DOCUMENTS WERE F ILED BEFORE A.O. AND LD. CIT(A). NO MATERIAL HAVE BEEN PRODUCED ON RECORD TO CONTRADICT THE CERTIFICATE GIVEN BY THE ASSESSEE . THEREFORE, THE CONTENTION OF THE LD. D.R. IS REJECTED THAT ASSESSE E DID NOT PRODUCE THE DOCUMENTARY EVIDENCES BEFORE A.O. WHATE VER DOCUMENTS A.O. ASKED THE ASSESSEE TO PRODUCE, HAVE BEEN PRODUCED, ON WHICH, NO FURTHER ENQUIRY HAVE BEEN MA DE BY THE A.O. IF A.O. WAS HAVING ANY DOUBT ABOUT THE DOCUMEN TARY EVIDENCES FILED ON RECORD, HE COULD HAVE SUMMONED T HE CREDITORS FOR RECORDING THEIR STATEMENTS UNDER SECT ION 131 OF THE I.T. ACT IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTION IN THE MATTER. THE ASSESSEE ALSO EXPLAINED BEFORE AUTH ORITIES BELOW THAT ALL THE CREDITORS ARE ASSESSED TO TAX. THE A.O . IN HIS FINDINGS NOTED THAT ALL THE CREDITORS ARE FAMILY ME MBERS OF THE ASSESSEE. IN THIS VIEW, EVEN A.O. COULD HAVE DIRECT ED THE 38 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ASSESSEE TO PRODUCE THESE CREDITORS FOR EXAMINATION IF A.O. WAS NOT SATISFIED WITH THE DOCUMENTARY EVIDENCES FILED ON RECORD. THE ASSESSEE EXPLAINED THAT TOTAL UNSECURED LOANS W ERE OF RS.3.45 CRORES, OUT OF WHICH, ASSESSEE RECEIVED RS. 2.59 CRORES FROM 15 PARTIES AND RS.86,47,496 WAS FROM THE DIREC TORS OF THE ASSESSEE-COMPANY. THEREFORE, CONSIDERING THE HUGE U NSECURED LOANS SHOWN IN THE BOOKS OF ACCOUNT AT THE END OF T HE YEAR WHICH HAVE NOT BEEN DOUBTED BY THE A.O. WOULD ALSO SUPPORT THE EXPLANATION OF THE ASSESSEE THAT ASSESSEE DID N OT RECEIVE ANY BOGUS LOAN OR ACCOMMODATION ENTRY FROM ANY SUCH PERSON. THE CONTENTION RAISED BY THE LD. D.R. IS, THEREFORE , REJECTED THAT DOCUMENTARY EVIDENCES WERE NOT FILED BEFORE A.O. SI NCE NO OTHER ARGUMENTS HAVE BEEN RAISED ON BEHALF OF THE DEPARTM ENT, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD. CIT(A) IN DELETING THE ADDITION. GROUND NO.4 OF THE APPEAL OF THE REVENUE IS DISMISSED. 18. ON GROUND NO.5, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.78,75,598 MADE BY A.O. ON ACCOUNT OF TREATING 39 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. THE SALE OF PROPERTIES AS BUSINESS INCOME INSTEAD O F LONG TERM CAPITAL GAINS AS OFFERED BY THE ASSESSEE. 19. FROM THE PERUSAL OF THE COMPUTATION OF INCOME, IT WAS OBSERVED THAT ASSESSEE HAD DISCLOSED LONG TERM CAPITAL GAINS AT RS.55,39,218 FROM SALE OF THE PROPERTIES ( 1) C-71, MALAVIYA NAGAR, NEW DELHI AND (2) D-5, HAUZ KHAS, N EW DELHI. IT WAS OBSERVED THAT ASSESSEE IS A REAL ESTATE DEVE LOPER AND IS ENGAGED IN BUSINESS OF SALE AND PURCHASE OF PROPERT IES DURING THE YEAR. IT WAS OBSERVED THAT ASSESSEE HAS ACCOUNT ED THE ABOVE SAID TRANSACTIONS THROUGH THE SALE AND PURCHASE ACC OUNT AND NOT THROUGH LONG TERM CAPITAL GAINS ACCOUNT. THE A. O. ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID TRANSACTION BE NOT TREATED AS BUSINESS INCOME OF THE ASSESSEE INSTEAD OF LONG TERM CAPITAL GAINS. THE A.O. IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION OF ASSESSEE, TREATED THE SAME TRANSACTIONS AS BUSIN ESS INCOME INSTEAD OF LONG TERM CAPITAL GAINS AND COMPUTED THE NET BUSINESS INCOME AT RS.78,75,595. 19.1. THE ASSESSEE IN HIS WRITTEN SUBMISSIONS BEFO RE LD. CIT(A) BRIEFLY EXPLAINED THAT ASSESSEE IS A REAL ES TATE DEVELOPER 40 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. AND COLLABORATOR AND HAS BEEN REGULARLY PURCHASING THE PROPERTIES FOR THE PURPOSE OF BUSINESS. FURTHER, AS SESSEE IS ALSO PURCHASING SOME PROPERTIES FOR INVESTMENTS. IT WAS SUBMITTED THAT PROPERTIES PURCHASED FOR INVESTMENTS WERE NOT SHOWN AS STOCK-IN-TRADE BUT WERE TREATED AS FIXED ASSETS OF THE ASSESSEE- COMPANY. IT WAS SUBMITTED THAT OUT OF THE AFORESAID INVESTMENTS, ASSESSEE HAS SOLD THESE PROPERTIES DUR ING ASSESSMENT YEAR UNDER APPEAL AND GAINS ARISING OUT OF THE SAME HAVE BEEN OFFERED AS LONG TERM CAPITAL GAINS. IT WA S SUBMITTED THAT PROPERTY AT C-71, MALAVIYA NAGAR WAS PURCHASED BY SAMRAT ESTATES PVT. LTD., ON 15 TH JULY, 2003 AND SUCH PROPERTY WAS SHOWN AS INVESTMENT IN THE BOOKS OF AFORESAID C OMPANY AND SIMILARLY PROPERTY SITUATED AT D-5, HAUZ KHAS, NEW DELHI WAS PURCHASED BY ASSESSEE ON 9 TH DECEMBER, 1998 AND SINCE ITS INCEPTION, IT WAS HELD AS FIXED ASSET BY THE ASSESS EE-COMPANY. BOTH THESE PROPERTIES WERE NEVER TREATED AS STOCK-I N-TRADE OF THE ASSESSEE-COMPANY. THE PRESUMPTION OF THE A.O. I S WHOLLY ERRONEOUS. THE ASSESSEE FILED CALCULATION OF LONG T ERM CAPITAL GAINS, ITS DETAILS ALONG WITH NOTE, COPY OF SCHEDUL E-V OF FIXED 41 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ASSETS AS PER COMPANIES ACT AND DETAILS OF THE STOC K. IT WAS ALSO SUBMITTED THAT PROPERTIES HELD AS INVESTMENTS HAVE ALSO BEEN SOLD IN EARLIER YEARS AND GAIN ARISING OUT OF THE S ALE OF SUCH PROPERTIES HAVE BEEN TREATED AS CAPITAL GAIN AND SU CH TREATMENT HAS BEEN ACCEPTED BY THE REVENUE. SINCE ASSESSEE PU RCHASED THE PROPERTIES AS INVESTMENTS AND ASSESSEE WAS HAVI NG TWO PORTFOLIOS I.E., CAPITAL GAIN AS WELL AS BUSINESS I NCOME, THEREFORE, THERE WERE NO BASIS FOR A.O. TO TREAT THE SAID TRAN SACTION AS BUSINESS INCOME. THE ASSESSEE RELIED UPON THE DECIS ION IN THE CASE OF DELHI APARTMENTS PVT. LTD., ITA.NO.569/2012 DATED 07 TH MARCH, 2013, IN WHICH IT WAS HELD THAT LAND WAS HELD AS ASSET AND THEREFORE, ASSESSEE HAD PROPERLY OFFERED IT FOR TAXATION UNDER THE HEAD CAPITAL GAINS. THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF DLF UNITED LIMITED 158 ITR 342 AND OTHERS. THE LD. CIT(A) FOUN D THAT ASSESSEE PURCHASED THESE PROPERTIES AS INVESTMENTS WHICH WERE SHOWN AS FIXED ASSETS. IN EARLIER YEAR, SOME PROPER TIES HELD AS INVESTMENTS HAD BEEN SOLD AND THE PROFIT HAD BEEN A CCEPTED BY THE DEPARTMENT AS INCOME FROM CAPITAL GAINS. THE LD . CIT(A) 42 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ACCORDINGLY DELETED THE ADDITION AND DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE LEARNED D.R. RELIED UPON THE ORDER OF THE A.O. AND THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED UPON DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT, DELHI- II, VS. JUBILANT SECURITIES (P.) LTD., (2011) 333 ITR 445 ( DEL.) IN WHICH IT WAS HELD AS UNDER: FINDINGS OF FACTS WERE RECORDED BY THE TWO AUTHORI TIES BELOW THAT THE ASSESSEE WAS MAINTAINING TWO PORTFOL IOS AND INSOFAR AS SHARES IN QUESTION WERE CONCERNED, THEY WERE TAKEN AS INVESTMENT FROM THE DATE OF PURCHASE ITSEL F AND SHOWN IN INVESTMENT PORTFOLIO. THE PROFITS RESULTED THEREFROM WAS CAPITAL GAIN. THE REVENUE COULD NOT S HOW ANY PERVERSITY IN THOSE FINDINGS. THOSE WERE PURE F INDINGS OF FACTS. THEREFORE, THE APPEAL WAS TO BE DISMISSED . 43 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 20.1. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CA SE OF CIT VS. DELHI APARTMENTS (P.) LTD., (2013) 32 TAXMAN.COM 38 1 (DEL.)/ (2013) 352 ITR 322 (DEL.) IN WHICH IT WAS HELD AS U NDER : WHERE ASSESSEE PURCHASED A LAND AND SHOWED IT IN BALANCE SHEET AS AN ASSET, USED IT FOR AGRICULTURAL PURPOSE, HELD IT FOR A LONG PERIOD OF TIME AND ALSO THERE WA S NO EVIDENCE THAT BORROWED CAPITAL HAD BEEN USED FOR PU RCHASE, ASSESSEE HAD APPROPRIATELY OFFERED IT FOR TAXATION UNDER HEAD CAPITAL GAINS. 21. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DECISIONS, IT IS CLEAR THAT THE ASSESSEE PURCHASED THE PROPERTIES IN QUESTION LONG BACK AND TREATED AS FIXED ASSETS O F THE ASSESSEE-COMPANY. THE ASSESSEE PURCHASED THESE PROP ERTIES AS INVESTMENTS WHICH WERE NOT SHOWN AS STOCK-IN-TRADE. IN EARLIER YEARS, PROPERTIES HELD AS INVESTMENTS WERE SOLD, ON WHICH, CAPITAL GAINS HAVE BEEN ACCEPTED BY THE DEPARTMENT. IT IS, THEREFORE, CLEAR THAT ASSESSEE HAD NOT TREATED THE SAME PROPERTIES AS STOCK-IN-TRADE AND TREATED SAME PROPE RTIES AS INVESTMENTS AND THE SAME TREATMENT HAVE BEEN ACCEPT ED BY THE 44 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. DEPARTMENT IN EARLIER YEAR. THEREFORE, ASSESSEE COR RECTLY OFFERED CAPITAL GAINS ON SALE OF THESE PROPERTIES. IT MAY A LSO BE NOTED HERE THAT THERE IS A WIDE GAP BETWEEN THE PROPERTIE S SO PURCHASED AND SOLD WHICH SUPPORTS THE EXPLANATION O F ASSESSEE THAT PROPERTIES WERE HELD AS INVESTMENTS. NO INTERF ERENCE IS CALLED FOR IN THE MATTER. GROUND NO.5 OF THE APPEAL OF THE REVENUE IS DISMISSED. 22. ON GROUND NO.6, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.35 LAKHS MADE BY A.O. ON ACCOUNT OF DIFFERENCE IN ACTUAL SALE CONSIDERATION RECEIVED AND SHOWN BY THE ASSESSEE FOR THE PROPERTY NAMELY B-23, 3 RD FLOOR, NEW FRIENDS COLONY, NEW DELHI. 23. THE A.O. OBSERVED THAT DURING THE YEAR ASSESSE E HAS SOLD THE ABOVE PROPERTY FOR A TOTAL CONSIDERATION O F RS.1.25 CRORES, HOWEVER, ASSESSEE HAS ACCOUNTED ONLY RS.90 LAKHS TOWARDS THE SAID SALE IN ITS BOOKS OF ACCOUNT. THE DIFFERENCE OF RS.35 LAKHS WAS ADDED TO THE INCOME OF ASSESSEE AS UNEXPLAINED INVESTMENT INCOME. THE ASSESSEE FILED C OPY OF THE LEDGER ACCOUNT, LEDGER ACCOUNT OF ADVANCE, LETTER D ATED 1 ST AND 45 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 5 TH SEPTEMBER, 2009 TO KOHLI REALTORS PVT. LTD., IN RE SPECT OF CONSTRUCTION OF 3 RD FLOOR AND THE COPY OF THE SALE DEED. IT WAS SUBMITTED THAT ASSESSEE SOLD THE PROPERTY FOR RS.90 LAKHS ONLY AND SOME AMOUNT HAVE BEEN SHOWN IN THE BOOKS OF ACC OUNT. THE LD. CIT(A) ACCEPTED THE CONTENTION OF ASSESSEE AND DELETED THE ADDITION. 24. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE AR E OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATT ER. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. ON THE OTHER HAND , LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS REFERRED TO PA GES 451 AND 452 OF THE PAPER BOOK WHICH IS COPY OF LEDGER ACCOU NT OF THE SALE AND PB-455 WHICH IS SALE DEED. HE HAS SUBMITTE D THAT THE SALE CONSIDERATION WAS FOR TWO PARTIES I.E., ASSESS EE AND M/S. KOHLI REALTORS PVT. LTD., AND THE SHARE OF THE ASSE SSEE WAS RS.90 LAKHS ONLY WHICH HAVE BEEN CORRECTLY SHOWN IN THE B OOKS OF ACCOUNT, WHICH FACT IS ALSO MENTIONED IN THE SALE D EED. IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY MERIT IN THI S GROUND OF THE APPEAL OF THE REVENUE. IN THE SALE DEED ITSELF, THE AMOUNT OF 46 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. RS.90 LAKHS HAVE BEEN MENTIONED AGAINST THE ASSESSE E AND OTHER AMOUNT IS MENTIONED AGAINST M/S. KOHLI REALTO RS PVT. LTD. THEREFORE, THE A.O. RECORDED WRONG FACTS IN THE ASS ESSMENT ORDER FOR MAKING THE ADDITION. THE ASSESSEE CORRECT LY SHOWN THE SALE CONSIDERATION OF RS.90 LAKHS. THEREFORE, NO IN TERFERENCE IS CALLED FOR IN THE MATTER. GROUND NO.6 OF THE APPEAL OF THE REVENUE IS DISMISSED. 25. THERE IS NO OTHER GROUND IN DEPARTMENTAL APPEA L. 26. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DIS MISSED. ITA.NO.4687/DEL./2015 A.Y. 2011-2012 (ASSESSEES APPEAL): 27. ON GROUND NO.1, ASSESSEE CHALLENGED THE ADDITI ON OF RS.16,14,800 ON ACCOUNT OF SALE PROMOTION EXPENSES. THE A.O. NOTED THAT THERE IS AN ABNORMAL INCREASE IN SALE PR OMOTION EXPENSES AT RS.26,12,584 AS AGAINST LAST YEAR OF RS .6,91,259. THE ASSESSEE MERELY SUBMITTED THAT ASSESSEE-COMPANY WAS CONSTRAINED TO INCUR THE SAID EXPENDITURE TO INCREA SE THE BUSINESS ACTIVITY AND THE SAID EXPENDITURE WERE INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ONLY. T HE ASSESSEE 47 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. FURTHER WROTE IN THE LETTER THAT THE DETAILS OF SAL E PROMOTION EXPENSES ARE ENCLOSED WITH THE SUBMISSIONS. HOWEVER , IT WAS NOTED THAT NO DETAILS ARE ATTACHED WITH THE SUBMISS IONS. THE ASSESSEE FAILED TO JUSTIFY THE CLAIM OF SALE PROMOT ION EXPENSES AND FAILED TO PRODUCE COPY OF THE LEDGER ACCOUNT OF THE SAID EXPENSES. FROM THE PERUSAL OF THE BANK BOOK OF THE FEDERAL BANK SUBMITTED BY ASSESSEE, IT WAS NOTICED THAT ASS ESSEE HAS INCURRED EXPENSES ON ACCOUNT OF SALE PROMOTION TOTA LING TO RS.25,98,569 THROUGH CHEQUES WHICH WERE PERSONAL IN NATURE AND NOT FOR THE PURPOSE OF BUSINESS. THE DETAILS AR E NOTED AT PAGE-20 OF THE ASSESSMENT ORDER. THE A.O. NOTED THA T THE SAID EXPENDITURE WERE MADE FOR CREDIT CARD IN THE NAME O F THE DIRECTOR OF THE COMPANY AND ALSO AMOUNT OF RS.16,14 ,800 WAS SPENT TO BUY WATCH FROM JOHNSON & COMPANY. THUS, TH E SAID PAYMENT WERE MADE TO FUND LUXURIOUS EXPENDITURE OF PERSONAL NATURE OF THE DIRECTOR AND NOT FOR BUSINESS PURPOSE . THE A.O. ACCORDINGLY, DISALLOWED RS.25,98,569. THE ASSESSEE SUBMITTED THAT THE SALE PROMOTION EXPENSES HAVE BEEN ALLOWED IN EARLIER YEAR AND THE PERCENTAGE OF SALE PROMOTION TO THE SA LES WAS 48 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 2.21%, 0.94% AND 1.67% IN A.YS. 2009-2010, 2010-201 1 AND 2011-2012 (UNDER APPEAL). IT WAS SUBMITTED THAT IF THE EXPENDITURE INCURRED FOR WATCHES OF RS.16,14,800 TO WARDS PURCHASE OF TWO ROLEX WATCHES ARE EXCLUDED THE PERC ENTAGE OF EXPENSES WILL COME TO .64%. IT WAS FURTHER SUBMITTE D WATCHES WERE NOT PURCHASED FOR THE DIRECTORS OF THE ASSESSE E-COMPANY BUT WERE PURCHASED FOR THE PURPOSE OF PROMOTING SAL ES OF THE PROPERTIES DEVELOPED BY IT AND WAS IN FACT GIVEN TO THE CUSTOMERS AT THE TIME OF PURCHASE OF THE PROPERTY. THE ASSESS EE PRODUCED THE DETAILS BEFORE LD. CIT(A) FOR HIS VERIFICATION. THE LD. CIT(A) ACCEPTED THE CONTENTION OF ASSESSEE WITH REGARD TO SALE PROMOTION EXPENSES EXCEPT TO THE EXTENT OF RS.16,14 ,800 FOR PURCHASE OF TWO WATCHES. THE LD. CIT(A) NOTED THAT ASSESSEE FAILED TO ESTABLISH THAT THIS EXPENDITURE WAS INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREF ORE, ADDITION WAS RESTRICTED TO RS.16,14,800. 28. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATT ER. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WATCHES WER E 49 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. PURCHASED FOR PROMOTION OF THE SALES WHICH WERE GIV EN TO THE CUSTOMERS AT THE TIME OF PURCHASE OF THE PROPERTY. COPY OF THE LEDGER ACCOUNT IS FILED IN THE PAPER BOOK. HOWEVER, ASSESSEE HAS FAILED TO ESTABLISH THAT WATCHES WERE PURCHASED FOR THE PURPOSE OF BUSINESS. ASSESSEE FAILED TO EXPLAIN WHY ONLY TW O WATCHES WERE PURCHASED FOR CUSTOMERS. THE ASSESSEE PURCHASE D TWO ROLEX WATCHES WHICH ARE VERY COSTLY ITEM AND IT IS NOT EXPLAINED AS TO WHICH OF THE TWO CUSTOMERS WATCHES HAVE BEEN GIVEN AND WHY THE WATCHES HAVE NOT BEEN GIVEN TO THE OTHER CU STOMERS. THE ASSESSEE ALSO FAILED TO EXPLAIN THE POLICY OF T HE ASSESSEE COMPANY FOR GIVING SUCH COSTLY GIFTS TO THE CUSTOME RS. IN THE ABSENCE OF COMPLETE DETAILS FILED ON RECORD AND IN THE ABSENCE OF SATISFACTORY EXPLANATION, THE AUTHORITIES BELOW WERE JUSTIFIED IN RESTRICTING THE ADDITION TO RS.16,14,800 ON ACCO UNT OF PURCHASE OF ROLEX WATCHES. THE ASSESSEE FAILED TO E XPLAIN THAT WATCHES WERE PURCHASED FOR THE BUSINESS PURPOSE. GR OUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMIS SED. 29. ON GROUND NO.2, ASSESSEE CHALLENGED THE DISALLOWANCE OF RS.10,17,238 TOWARDS TRAVELLING EXP ENSES. THE 50 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. A.O. NOTED THAT THERE IS AN ABNORMAL INCREASE IN TH E TRAVELLING EXPENSES AT RS.13,97,951 AS AGAINST LAST YEAR OF RS .4,39,605. THE ASSESSEE MERELY SUBMITTED THAT TRAVELLING EXPEN SES WERE INCURRED EXCLUSIVELY FOR BUSINESS PURPOSE. THE ASSE SSEE SUBMITTED MONTHWISE CHART OF THE AMOUNT INCURRED ON TRAVELLING EXPENSES AND NO OTHER DETAILS HAVE BEEN SUBMITTED. THE A.O. ON PERUSAL OF THE BANK BOOK OF FEDERAL BAN K ACCOUNT SUBMITTED BY ASSESSEE NOTICED THAT ASSESSEE HAS INC URRED EXPENSES ON ACCOUNT OF TRAVELLING TOTALING TO RS.10 ,17,238 THROUGH CHEQUES WHICH WERE PERSONAL IN NATURE AND N OT FOR THE PURPOSE OF BUSINESS. THE SAID PAYMENTS WERE MADE TO PURCHASE AIR TICKETS AND FOREIGN CURRENCY FOR FOREIGN TOUR A ND TRIP OF THE DIRECTORS. THE ASSESSEE DID NOT PROVIDE ANY JUSTIFI CATION FOR INCURRING THE EXPENDITURE OF FOREIGN TRIP OF DIRECT ORS. THEREFORE, AMOUNT OF RS.10,17,238 WERE DISALLOWED. 29.1. THE ASSESSEE EXPLAINED BEFORE LD. CIT(A) THA T THE FOREIGN TRAVEL OF THE DIRECTOR OF THE ASSESSEE WAS FOR THE PURPOSE OF BUSINESS I.E., FOR PURCHASE OF HOTEL I.E., RAMAD A HOTEL SITUATED AT SOLIHULL BIRMINGHAM, U.K. IN THE MONTH OF JUNE, 51 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. 2010. IT WAS SUBMITTED THAT TRAVELLING TO U.K. WAS ONLY TO NEGOTIATE THE AFORESAID DEAL FOR PURCHASE OF HOTEL AND TRAVEL TO U.K. BY THE DIRECTORS OF THE ASSESSEE-COMPANY WAS O NLY FOR THE PURPOSE OF BUSINESS AND NOT FOR PERSONAL PURPOSE OF DIRECTORS. COPY OF THE RESOLUTION DATED 2 ND APRIL, 2010 PASSED BY THE ASSESSEE COMPANY WAS ALSO FILED. THE LD. CIT(A) HOW EVER, NOTED THAT ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM AND HAS NOT BEEN ABLE TO SHOW THAT PURCHASE OF HOTEL WO ULD HAVE BEEN AN EXPANSION OF ITS EXISTING BUSINESS. THIS GR OUND WAS ACCORDINGLY DISMISSED. 29.2. THE LEARNED COUNSEL FOR THE ASSESSEE REITERA TED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE H AS SUBMITTED THAT SUFFICIENT EVIDENCES WERE ADDUCED BE FORE THE AUTHORITIES BELOW AND FILED THE DETAILS OF TRAVELLI NG EXPENSES IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN EARLIER YEARS TO SHOW THAT THE TRAVELLING EXPENSES HAVE BEEN ALLOWED IN E ARLIER AND SUBSEQUENT YEARS. THERE MAY NOT BE ANY PERSONAL EXP ENDITURE OF THE ASSESSEE-COMPANY WHICH IS LEGAL ENTITY. HE H AS RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF 52 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. RAHULJI & CO. PVT. LTD., VS. ITAT AND OTHERS REVIE W PETITION NO.668 OF 2011 IN ITA.NO.157 OF 201 DATED 1 ST JUNE, 2012 IN WHICH THE HONBLE HIGH COURT OBSERVED THAT IF THERE IS FOREIGN TRAVEL IN CONNECTION WITH THE BUSINESS, MERELY BECA USE IN THE SAID FOREIGN TRAVEL, NO BUSINESS COULD BE TRANSACTED OR THE FOREIGN TRAVEL DID NOT RESULT IN BAGGING ANY CONTRACT, IS N OT THE DETERMINATIVE FACTOR. 29.3. THE LD. D.R. ON THE OTHER HAND RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 29.4. THE ASSESSEE CLAIMED FOREIGN TRAVEL EXPENSES WHICH WERE FOUND TO BE EXCESSIVE AS AGAINST THE CLAIM MAD E IN EARLIER YEARS. THE ASSESSEE HAS FILED DETAILS OF THE SAME I N THIS YEAR AS WELL AS IN SUBSEQUENT AND EARLIER YEARS TO SHOW THA T APPROXIMATELY SIMILAR TRAVELLING EXPENSES HAVE BEEN CLAIMED FOR ABROAD AND DOMESTIC TRAVELLING. COPY OF WHICH IS FI LED AT PAGE- 54 OF THE WRITTEN SUBMISSIONS. THE A.O. FROM THE BA NK BOOK OF FEDERAL BANK SUBMITTED BY ASSESSEE FOUND THAT ASSES SEE INCURRED TRAVELLING EXPENSES TOTALING TO RS.10,17,2 38 THROUGH CHEQUE AND DETAILS OF THE SAME ARE NOTED IN THE ASS ESSMENT 53 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. ORDER AT PAGE-21, OUT OF WHICH, RS.5,73,190 HAVE BE EN PAID TO TERA FOREX PVT. LTD., FOR PURCHASE OF DOLLAR/FOREIG N CURRENCY AND REST OF THE AMOUNT IS PAID TO THE TRAVEL AGENT FOR TRAVELLING ABROAD. THEREFORE, EVEN IF IT IS ADMITTED THAT DIRE CTOR OF THE ASSESSEE-COMPANY TRAVELLED FOR BUSINESS PURPOSE FOR NEGOTIATION FOR PURCHASE OF THE HOTEL, THE AMOUNT O F RS.5,73,190 COULD NOT BE ALLOWED AS BUSINESS EXPEND ITURE UNDER SECTION 37 OF THE I.T. ACT FOR PURCHASE OF DO LLAR/FOREIGN CURRENCY. 29.5. THE ASSESSEE-COMPANY IS ENGAGED INTO THE BUS INESS OF REAL ESTATE DEVELOPERS AND ALSO COLLABORATORS WI TH VARIOUS PARTIES. THEREFORE, NATURE OF BUSINESS OF THE ASSES SEE IS SUCH THAT THE ASSESSEE COULD HAVE DEALT WITH PURCHASE OF THE HOTEL. THE ASSESSEE FILED BOARD RESOLUTION ALSO IN SUPPORT OF THE SAME. THEREFORE, CONSIDERING THE EXPLANATION OF ASSESSEE, WE ARE OF THE VIEW THAT ATLEAST TRAVELLING EXPENSES ACTUALLY INCU RRED BY ASSESSEE FOR TRAVELLING OF THE DIRECTOR MAY BE ALLO WED AS WAS ALSO CONSIDERED IN EARLIER AND SUBSEQUENT YEARS FOR TRAVEL TO ABROAD. HOWEVER, FOR PURCHASE OF DOLLAR/FOREIGN CUR RENCY, THE 54 ITA.NO.5116 & 4687/DEL./2015 M/S. VEERA APARTMENTS PVT. LTD., NEW DELHI. DEDUCTION COULD NOT BE ALLOWED TO THE ASSESSEE. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND R ESTRICT THE ADDITION TO RS.5,73,190. GROUND NO.2 OF APPEAL OF T HE ASSESSEE IS PARTLY ALLOWED. 30. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. 31. TO SUM-UP, APPEAL OF THE REVENUE IS DISMISSED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (L.P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 09 TH FEBRUARY, 2018 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT C BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSESSMENT. REGISTRAR : ITAT DELHI BENCHES : DELHI.