ACIT 21(2), MUMBAI V. SAI SHIV DEVELOPERS, MUMBAI

ITA 5003/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5817 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 25-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: D C JAIN
• Keywords: Rejection of books of accounts; Principle of natural justice; Deemed dividend
• Section: 143(3); 133A; 145; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDI CIAL MEMBER . / ITA NO. 5003 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 0 5 06 ) . / ITA NO. 5004 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 06 07 ) . / ITA NO. 5005 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 09 10 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(2), BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 .. / APPELLANT V/S M/S. SAI SHIV DEVELOPERS C/O D.C. JAIN & CO. 75, BOMBAY MUTUAL BUILDING DR. D.N. ROAD, FORT MUMBAI 400 001 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AANFS2229J / ASSESSEE BY : MR. D.C. JAIN / REVENUE BY : MR. G IRIJA DAYAL / DATE OF HEARING 25 . 0 3 .201 4 / DATE OF ORDER 28.03.2014 M/S. SAI SHIV DEVELOPERS 2 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 23 RD JANUARY 2012 , FOR T HE ASSESSMENT YEAR 2005 06 ; ORDER DATED 31 ST MAY 2012, FOR THE ASSESSMENT YEAR S 2006 07 AND 2009 10, PASSED BY THE COMMISSIONER (APPEALS) X XX I I , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) R/W SECTION 263 OF THE INCOME TAX ACT, 1961 ( FOR SHORT 'THE ACT' ) . INSOFAR AS THE GROUNDS OF APPEAL TAKEN BY THE REVENUE FOR BOTH THE ASSESSMENT YEAR 2005 06 AND 2006 07 ARE CONCERNED, THEY ARE BEING COMMON AND ARE REPRODUCED HEREIN BELOW: GROUND FOR THE A.Y. 2005 06 ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DEEMED DIVIDEND U/S 143(3) R/W SECTION 263 DATED 26.12.2011 WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS PREFERRED FURTHER APPEAL AGAI NST THE ORDER OF THE TRIBUNAL DATED 23.5.2012 GROUND FOR THE A.Y. 2006 07 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) AMOUNTI NG TO ` 22,55,000 VIDE ORDER U/S 143(3) R.W. SECTION 263 DATED 26.12.2011 WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS PREFERRED FURTHER APPEAL AGAINST THE ORDER OF THE TRIBUNAL DATED 23.5.2012. 2 . BEFORE US, AS ADMITTED BY BOTH THE PARTIES, THE AF ORESAID APPEALS ARE ARISING OUT OF THE ORDER PASSED UNDER SECTION 143(3) R/W SECTION 263, IN PURSUANCE OF THE ORDER DATED 14 TH MARCH 2011, PASSED UNDER M/S. SAI SHIV DEVELOPERS 3 SECTION 263, BY THE LEARNED COMMISSIONER. NOW, THE SAID ORDER, WHICH WAS PASSED BY THE LEARNED COMMISSIO NER UNDER SECTION 263, HAS BEEN CANCELLED BY THE TRIBUNAL, MUMBAI BENCH, VIDE ITS ORDER DATED 23 RD MAY 2012, FOR BOTH THE YEARS I.E., ASSESSMENT YEAR 2005 06 AND 2006 07. THUS, THE PRESENT APPEALS HAVE BEEN RENDERED INFRUCTUOUS. THIS FACT HAS ALSO BEEN NOT ED BY THE LEARNED COMMISSIONER (APPEALS) IN PARA 3.3, WHICH READS AS UNDER: I HAVE CONSIDERED THE ARGUMENTS OF THE LD. A.R. I AGREE WITH LD. A.R. THAT THE ASSTT ORDERS PASSED IN PURSUANCE TO ORDER U/S 263 WILL BECOME NONEST IF THE ORDER U/S HAS BEEN SET ASIDE BY THE ITAT, BOTH ON LIMITATION AS WELL AS MERITS. UNDER THESE CIRCUMSTANCES, ADDITION OF ` 49,50,000 FOR A.Y. 2005 06 AND ` 22,55,000 FOR A.Y. 2006 07 U/S 2(22)(E) OF THE I T ACT MADE BY THE AO. WILL ALSO NOT SURVIVE AND THE SAME IS DIRECTED TO BE DELETED AS THE ASSTT ORDERS HAVE ABATED. 3 . IN VIEW OF THE ADMITTED FACTS, THE AFORESAID APPEALS FILED BY THE REVENUE HAVE BECOME INFRUCTUOUS AND, HENCE, THE GROUNDS RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005 06 AND 2006 07 ARE DISMISSED. 4 . 2005 06 2006 07 4. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2005 06 AND 2006 07 ARE DISMISSED. WE NOW TAKE UP REVENUES APPEAL FOR THE ASSESSMENT YEAR 2009 10, VIDE WHICH, T HE FOLLOWING GROUNDS HAVE BEEN RAISED: '1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE ADDITIONS M DE ON ACCOUNT OF UNACCOUNTED CASH RECEIPTS OF BROKERAGE AMOUNTING TO RS.51,00,000/ - A ND UNACCOUNTED CASH RECEIPTS ON M/S. SAI SHIV DEVELOPERS 4 SALE OF CAR PARKING CHARGES. OF R S .17 LACS ON THE BASIS OF THE ORDER OF TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A Y 2006 - 07 & 2007 - 08 FOR THE REASON THAT THE ADDITIONS WERE MADE ON ASSUMPTION THAT THE ASSESSEE MUST HAVE CONT INUED TO RECEIVE ON MONEY ON SALE OF FLATS, UNACCOUNTED CAR PARKING AND BROKERAGE IN A Y 2009 - 10 ALSO AS IN A Y 2006 - 07. '2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN IGNORING THAT THE REVENUE HAS NOT ACCEPTED THE DECISION OF TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A Y 2006 - 07 & 2007 - 08 AND HAS FILED APPEAL IN THE BOMBAY HIGH COURT'. '3. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING THE DECISIONS OF CIT VS. KAMESHWAR (1 ITR 94), HOMI VS. CIT (41 ITR 135), PARASDAS VS. CIT (5 ITR 523), KANHAIYALAL VS. CIT (9 ITR 239), CHATURBHUJ VS. CIT (9 ITR 286), LAL MOHAN VS. CIT (12 ITR 41), MANGALCHAND VS. CIT (26 ITR 706), ABDULABHAI VS. CIT (22 ITR 241), CIT VS. S OUTHERN SHIPPING (241 ITR 464) (ENTRIES IN THE BOOKS OF THIRD PARTY); CIT VS. GOLCHA PROPERTIES (227 ITR 391 ( INFERENCE FROM QUERIES) WHEREIN IT HAS BEEN HELD THAT 'MATERIAL NEED NOT BE DIRECT EVIDENCE, IT MAY BE CIRCUMSTANTIAL EVIDENCE.' '4. ON THE FACT S & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,54,511/ - MADE ON ACCOUNT OF MATERIAL, TRANSPORT AND LABOUR CHARGES EVEN THOUGH THE ASSESSEE FAILED TO PRODUCE BILLS/VOUCHERS IN RESPECT OF THESE EXPEN SES FOR VERIFICATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS.' '5. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.6,58,860/ - MADE ON ACCOUNT OF TRAVELING EXPENSES TO RS.1,31,772/ - EVEN THOUGH THE EXPENSES INCURRED FOR TRAVEL TO AHMEDABAD, RAJASTHAN & BANGALORE HAVE NO CONNECTION WITH THE PROJECTS IN MUMBAI AND THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE LINK BETWEEN THE TRAVELING EXPENSES AND ITS BUSINESS. 5 . IT HAS BEEN ADMITTED B EFORE US THAT INSOFAR AS THE AFORESAID GROUND NO.1, 2 AND 3 ARE CONCERNED, THE SAME ARE COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2095/MUM./ 2010, FOR THE ASSESSMENT YEAR 2006 07 AND ITA NO.5048/MUM./2010, FOR THE ASSESSMENT YEA R 2007 08, WHEREIN THE ISSUE ARISING OUT OF THE M/S. SAI SHIV DEVELOPERS 5 AFORESAID GROUNDS HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6 . BRIEF FACTS, QUA THE AFORESAID ISSUE, AS NOTED BY THE LEARNED COMMISSIONER (APPEALS), ARE THAT THE ASSESSEE IS A PARTNER SHIP FIRM ENGAGED IN THE BUSINESS AS DEVELOPER AND BUILDER . A SURVEY ACTION WAS TAKEN AT THE PREMISES OF THE ASSESSEE ON 2 ND MARCH 2006, DURING THE COURSE OF WHICH, A STATEMENT OF THE BROKER MR. ANTHONY FERNANDEZ, WHO WAS SELLING THE FLATS CONSTRUCTED BY THE ASSESSEE, WAS RECORDED. FROM THE SAID STATEMENT, THE ASSESSING OFFICER HAD CONCLUDED THAT THE ASSESSEE WAS CHARGING ON MONEY ON SALE OF FLATS AND WAS ALSO CHARGING CAR PARKING CHARGES AND WAS RECEIVING BACK 40% OF THE BROKERAGE PAID BY THE ASSESSEE TO THE BROKERS. IN THE ASSESSMENT YEAR 2006 07, THE ADDITIONS WERE MADE ON THE BASIS OF THE ABOVE STATEMENT OF THE BROKER. SIMILAR ADDITIONS WERE MADE IN THE ASSESSMENT YEAR 2008 09 ALSO. IN RESPONSE TO THE SHOW CAUSE NOTICE AS TO WHY THE ASSESSMENT FOR THE PRESENT ASSESSMENT YEAR MAY NOT BE COMPLETED ON THE BASIS OF ASSESSMENT YEAR 2006 07, IT WAS SUBMITTED THAT THE ADDITIONS WHICH WERE MADE IN THE ASSESSMENT YEAR 2006 07, HAD BEEN DELETED BY THE APPELLATE AUTHORITIES AND FURTHER NO ADDITION SHOULD BE MADE O N PRESUMPTION BASIS. HOWEVER, THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION ON THE GROUND THAT THE REVENUE HAS FILED FURTHER APPEAL BEFORE THE TRIBUNAL FOR THE EARLIER YEARS. IN SIMILAR MANNER, THE ASSESSING OFFICER, IN THIS YEAR, HELD THAT THE ASSESSEE HAD ALLOTTED 17 CAR PARKING DURING THE YEAR AND, HENCE, THE UNACCOUNTED RECEIPTS OF THE ASSESSEE FROM THESE CAR PARKING @ ` 1 LAKH WILL COME TO ` 17 LAKHS AND THE SAME WAS ADDED AS UNACCOUNTED RECEIPTS. BESIDES THIS, THE ASSESSING OFFICER ALSO MAD E ADDITION OF ` 5.10 LAKHS ON ACCOUNT OF UNACCOUNTED BROKERAGE RECEIVED BACK FROM THE BROKERS @ ` M/S. SAI SHIV DEVELOPERS 6 20,000 FOR THE 17 FLATS AND CALCULATED UNACCOUNTED BROKERAGE AT ` 5.10 LAKHS. 7 . THE LEARNED COMMISSIONER (APPEALS), FOLLOWING THE EARLIER YEARS ORDER OF THE T RIBUNAL, FOR THE ASSESSMENT YEAR 2006 07 AND THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) FOR THE ASSESSMENT YEAR 2008 09, HELD THAT WITHOUT ANY EVIDENCE IN THIS YEAR FOR RECEIPT OF ON MONEY THE ADDITION CANNOT BE SUSTAINED. ACCORDINGLY, HE DELETED THE ADDITIONS. 8 . FROM THE ORDER OF THE TRIBUNAL, AS RELIED UPON BY THE LEARNED COUNSEL, IT IS SEEN THAT THIS ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL, WHEREIN AFTER DETAIL DISCUSSION, THE TRIBUNAL DELETED THE ADDITION AFTER OBSERVING AND HOLDING AS UNDER: 15. SINCE THERE IS NO DOCUMENTARY EVIDENCE WITH RESPECT TO THE SALE OF CAR PARKING AREA EXCEPT THE DOCUMENT NO.15 OF THE IMPOUNDED DOCUMENTS WITH RESPECT TO FLAT NO.C 38, WHEREIN ALSO ` 50,000 ARE MENTIONED AGAINST CAR PARKING. THEREFORE, THER E IS NO BASIS FOR MAKING ADDITION OF ` 1,00,000 FOR EACH FLAT FOR CAR PARKING. THE A.O. HAD NOT MADE ANY INQUIRY OR VERIFICATION TO EXAMINE THE FACTS REGARDING THE RATE OF SALE, AREA, ON MONEY PAYMENT OF BROKERAGE CHARGES AND CAR PARKING CHARGES FROM ANY O F THE AVAILABLE SOURCES INCLUDING THE BUYERS OF FLATS AS NONE OF THE BUYERS OF THE FLATS WAS EXAMINED BY THE DEPARTMENT TO VERIFY THE INVOLVEMENT OF ON MONEY PAYMENT AND OTHER CHARGES AS ALLEGED BY THE REVENUE. EVEN THE UNDERSTATEMENT OF AREA IS NOT EXAMIN ED BY THE A.O. AT ANY STAGE OF PROCEEDINGS. THEREFORE, IT CANNOT BE PRESUMED THAT ALL THE FLATS WERE SOLD BY THE ASSESSEE THROUGH THE REAL ESTATE AGENT AND INVOLVED BROKERAGE CHARGES. 16. IN VIEW OF THE ABOVE DISCUSSION AND FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT WHEN THE STATEMENTS U/S 133A WERE RECORDED AT BACK OF THE ASSESSEE AND WERE SUBSEQUENTLY RETRACTED BY THE WITNESSES HAVE O EVIDENTIARY VALUE TO THE EXTENT OF CONTENTS WHICHEVER CORROBORATED BY DOCUMENTS IMPOUNDED DURING THE SU RVEY PROCEEDINGS. THEREFORE, NO ADDITION IS WARRANTED WITH REGARD TO THE AREA, PARKING CHARGES AND BROKERAGE. THE ADDITION REGARDING RATE IS M/S. SAI SHIV DEVELOPERS 7 SUSTAINABLE ONLY TO THE EXTENT OF RATES MENTIONED IN THE IMPOUNDED DOCUMENTS. 9 . THUS, RESPECTFULLY F OLLOWING THE AF ORESAID DECISION OF THE TRIBUNAL, AS SIMILAR FACTS ARE PERMEATING IN THIS YEAR ALSO, WE HOLD THAT THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION. THUS, GROUND NO.1, 2 AND 3 RAISED BY THE REVENUE ARE DISMISSED. 10 . GROUND NO.4, RELAT ES TO DELETION OF ADDITION OF ` 9,54,511, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MATERIAL, TR ANSPORTATION AND LABOUR CHARGES, MADE ON AD HOC BASIS @ 2%. 11 . THE ASSESSING OFFICER HAS MADE THE ADDITION ON AD HOC BASIS @ 2% OF THE EXPENDITURE S AGGREGATING TO ` 4,82,25,561 WHICH WERE DEBITED IN THE PROFIT & LOSS ACCOUNT AS INCURRED ON PURCHASING, TRANSPORT AND LABOUR ON THE GROUND THAT THE ASSESSEE COULD NOT FILE HEADWISE BREAK UP OF EXPENSES AND COULD NOT PRODUCE BILLS AND VOUCHERS FOR VERIFICATION. 12 . BEFOR E THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE DETAILS OF ALL THE MATERIAL TRANSPORTATION AND LABOUR WERE GIVEN BEFORE THE ASSESSING OFFICER, HOWEVER, THE ITEMSWISE BREAK UP OF THE MATERIAL SUCH AS CEMENT, BRICKS, TILES, ETC. COULD NOT BE GIVEN AS THE ASSESSEE HAS NOT BEEN MAINTAINING ITEMWISE MATERIAL ACCOUNT. A COPY OF THE LEDGER ACCOUNT OF PARTIES FROM WHOM PURCHASES WERE MADE WERE ALSO FILED BEFORE THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER DID NOT INFORM THE ASSESSEE TO FURN ISH THE BILLS AND VOUCHERS FOR ANY SPECIFIC PERIOD OR ITEMS BECAUSE THE OVER ALL BILLS AND VOUCHERS FOR THE MATERIALS WERE VERY VOLUMINOUS AND IT WAS PRACTICALLY DIFFICULT TO PRODUCE ALL THE BILLS , UNLESS SOME SAMPLE BILLS ARE REQUIRED TO BE FILED ON TEST CHECK BASIS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS M/S. SAI SHIV DEVELOPERS 8 DECLARED PROFIT @ 18% OF WORK IN PROGRESS AS AG A IN S T THE PROFIT OF 12% IN THE IMMEDIATELY PRECEDING YEAR AND THERE WAS NO REASON TO DISALLOW AD HOC DISALLOWANCE ON ACCOUNT OF PURCHASES. 13 . THE LEARN ED COMMISSIONER (APPEALS), AFTER VERIFYING THE DETAILS OF LABOUR ACCOUNT AND MATERIAL PURCHASES AS WELL AS THE NAMES OF THE PARTIES, BILL NUMBER, BILL DATE AND OTHER ATTENDED FACTS, DELETED THE AD HOC ADDITIONS IN THE FOLLOWING MANNER: 4.3 I HAVE CONSI DERED THE ARGUMENTS OF THE LD. A.R. THE ONLY REASON TO DISALLOW 2% OF EXPENSES IS THAT NO BILLS / VOUCHERS WERE PRODUCED FOR VERIFICATION. IT IS NOTED THAT VIDE REPLY DATED 4/11/2011 THE ASSESSEE HAD FURNISHED THE LEDGER A/C MATERIAL PURCHASED ALONG WITH T HE LEDGER A/C OF ALL PARTIES FROM WHOM THE MATERIAL WAS PURCHASED BUT NO SPECIFIC DISCREPANCY COULD BE POINTED OUT BY THE A.O. FROM THE DETAILS OF LEDGER A/C OF MATERIAL PURCHASES IT IS SEEN THAT THE NAMES OF PARTIES, BILL NO AND DATES AND THE ITEM PURCHAS ED ARE MENTIONED. IN CASE OF CIVIL CONSTRUCTION NIT IS DIFFICULT TO MAINTAIN ITEM WI SE STOCK REGISTER FOR EACH ITEM SEPARATELY CONSIDERING VARIOUS ITEMS LOCATED AS VARIOUS SITES. HENCE THE MERE FACT THAT ITEM WISE BREAKUP WAS NOT SEPARATELY MAINTAINED CANNO T BE A REASON TO DISALLOW PURCHASES ON ADHOC BASIS WITHOUT FINDING ANY OTHER DEFECT MORE SO WHEN THE NARRATION IN THE LEDGER A/ C OF MATERIAL PURCHASES, THE NAMES OF PARTIES, BILL NO AND DATES AND THE ITEM PURCHASED ARE DULY MENTIONED. FROM THE LEDGER A/ C OF PARTIES FOR EXPENSES IT IS NOTED THAT THE PAYMENTS HAVE BEEN MOSTLY BY CHEQUES AND IN CASE OF LABOUR PAYMENTS TO CONTRACTORS, TDS HAS ALSO BEEN MADE. SINCE THE ACCOUNTS OF ASSESSEE WERE ALREADY AUDITED U /S 44AB AND ALL NECESSARY LEDGER A/CS WERE WITH AO AND PAYME NT S WERE MOSTLY BY CHEQUES, IT WAS FOR THE AO LO HAVE IDENTIFIED THE SPECIFIC BILLS/VOUCHERS FOR SOME ITEMS WHICH HE' WANTED TO VERIFY BECAUSE PRODUCING ALL VOUCHERS/BILLS RUN NI NG INTO SEVERAL THOUSAND BILLS WOULD NOT HAVE SERVED THE PURPOSE. F URTHER, NOTHING HAS BEEN MENTIONED IN ASSTT ORDER ON RECORD TO SHOW THAT BEFORE DISALLOWING EXPENSES @2%, ANY SHOW CAUSE OR OPPORTUNITY WAS GIVEN INFORMING THE ASSESSEE THAT FAILURE TO PRODUCE ALL BILLS WOULD LEAD TO DISALLOWANCE @ 2%. HENCE EVEN ON PRINCI PLES OF NATURAL JUSTICE, NO SUCH ADHOC DISALLOWANCE WAS CALLED M/S. SAI SHIV DEVELOPERS 9 FOR. AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS U/S 145 AND ALSO ACCEPTED THE METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE WHEREIN HE HAS DISCLOSED PROFITS ON PERCENTAGE COMPLETION BASIS. ONCE THE PROFIT WAS BEING ESTIMATED BY ASSESSEE ON %AGE OF WIP, THERE WAS NO REASON TO MAKE FURTHER DISALLOWANCE ON ADHOC BASIS OUT OF PURCHASE EXPENSES ALSO BECAUSE ALL THE PURCHASES. EXPENSES HAVE BEEN CAPITALIZED WITH WIP ON WHICH PROFIT HAS BEEN ALREADY OFFERE D BY ASSESSEE AS A %AGE OF WIP. IT IS NOTED THAT OPENING WIP IS 24.72 CRORES AND FURTHER EXPENSES INCURRED DURING THE YEAR IS 5.87 CRORES . THE PROFIT OFFERED ON PERCENTAGE BASIS ON THE ADDITION TO WIP DURING YEAR IS 1.22 CRORES WHICH IS ALMOST 20.78% WHIC H IS VERY REASONABLE AND HENCE DOES NOT CALL FOR ANY ADHOC DISALLOWANCES OUT OF PURCHASES. THE CUMULATIVE WIP AT THE .CLOSE OF THE YEAR IS 30.60 CR ON WHICH THE CUMULATIVE PROFIT DISCLOSED UPTO THE YEAR IS 2.45 CR (INCLUDING PROFIR OF 1.22 CR OF THE CURREN T YEAR) WHICH COMES TO 12.02% FOR THE OVERALL PROFIT ON WIP UPTO YEAR AS AGAINST 10.34% ON WIP UPTO IMMEDIATELY PRECEDING YEAR. ALL THESE FACTS SHOW THAT IN THIS YEAR THE PROFIT IS ADEQUATELY OFFERED TO TAKE CARE OF ANY NON VERIFIABLE EXPENSES ON PURCHASES CAPITALIZED TO WIP AND HENCE ON THIS GROUND ALSO THERE WAS NO REASON TO MAKE ADHOC DISALLOWANCE THAT TOO WITHOUT POINTING ANY SPECIFIC DISCREPANCY IN THE ACCOUNTS. HENCE THE ADHOC DISALLOWANCE OF ` 9,64,511 @ 2% TOTAL PURCHASES EXPENSES, MADE BY AO IS DIR ECTED TO BE DELETED. 14 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ONCE THE ASSESSEE WAS UNABLE TO PRODUCE BILLS AND VOUCHERS AND COULD NOT GIVE ITEMWISE BREAK UP OF MATERIAL ACCOUNT, THEN THERE IS NO OPTION LEFT BUT TO MAKE SOME EST IMATE OF DISALLOWANCE WHICH THE ASSESSING OFFICER HAS DONE ON A VERY REASONABLE BASIS. 15 . THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY RELIED UPON THE DETAIL FINDINGS, AS GIVEN BY THE LEARNED COMMISSIONER (APPEALS). M/S. SAI SHIV DEVELOPERS 10 16 . AFTER CAREFULLY CONS IDERING THE RIVAL SUBMISSIONS AND ALSO ON A PERUSAL OF THE ORDER OF THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT THE LEARNED COMMISSIONER (APPEALS) HAS ANALYSED THE LEDGER ACCOUNT OF MATERIAL PURCHASES WHEREIN THE ENTIRE DETAILS LIKE NAME OF THE PARTIE S, BILL NUMBER , DATE AND ITEM PURCHASES WERE MENTIONED. IT HAS BEEN FURTHER NOTED BY HIM THAT MOST OF THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES AND IN CASE OF LABOUR PAYMENTS TO THE CONTRACTORS, TDS HAS ALSO BEEN DEDUCTED. THE ASSESSING OFFICER HAS NEITH ER IDENTIFIED ANY SPECIFIC DETAILS NOR ASKED THE ASSESSEE TO PRODUCE SPECIFIC BILLS OR VOUCHERS FOR ANY PARTICULAR ITEMS OF PURCHASE AND IN THE ABSENCE OF SUCH EXERCISE BEING DONE BY THE ASSESSING OFFICER, NO AD HOC DISALLOWANCE CAN BE MADE. BESIDES THIS, THE LEARNED COMMISSIONER (APPEALS) HAS ALSO ANALYSED THE WORKING OF THE PROFIT TO HIGHLIGHT THE FACT THAT THE ASSESSEE HAD SHOWN A HIGH MARGIN OF PROFIT IN THIS YEAR, THEREFORE, THE ASSESSEES PURCHASES CANNOT BE DOUBTED ON AD HOC BASIS . THESE ITEMS OF EXP ENDITURES ARE DIRECT EXPENSES AND ONCE THE HIGH MARGIN OF NET PROFIT HAS BEEN ACCEPTED, THEN SUCH A DISALLOWANCE WILL GO TO ENHANCE THE PROFIT BY FURTHER PERCENTAGE. ON THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO DEVIATE FROM TH E FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) , WHEN ALL THE DETAILS OF DIRECT EXPENSES HAVE BEEN MAINTAINED AND NO DISCREPANCIES THEREIN HAVE BEEN FOUND, THEN ANY KIND OF ESTIMATE OR AD HOC DISALLOWANCE SHOULD NOT HAVE BEEN MADE. THUS, THE DELETION OF D ISALLOWANCE OF ` 9,64,511 AS MADE BY THE LEARNED COMMISSIONER (APPEALS) IS HEREBY AFFIRMED. CONSEQUENTLY, GROUND NO.4 RAISED BY THE REVENUE IS DISMISSED. 17 . GROUND NO. 5 RELATES TO PART DELETION ON ACCOUNT OF TRAVELLING EXPENSES. M/S. SAI SHIV DEVELOPERS 11 18 . THE ASSESSING OFFICER HAS DI SALLOWED THE HUNDRED PERCENT TRAVELLING EXPENSES OF ` 6,58,860 CLAIMED IN THE PROFIT & LOSS ACCOUNT ON THE GROUND THAT NO JUSTIFICATION WAS GIVEN AS REGARD TO THE BUSINESS PURPOSE OF THE ASSESSEE FOR TRAVELLING TO PLACES LIKE AH MEDABAD , RAJASTHAN, BANGALO RE, ETC., WHEN THE PROJECTS OF THE ASSESSEE WERE LOCATED AT MUMBAI. 19 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT HAS BEEN SUBMITTED THAT THE TRAVELLINGS HAVE BEEN UNDERTAKEN BY THE PARTNERS INCONNECTION WITH THE PURCHASE OF RAW MATERIALS FOR RESIDENTIAL PROJECTS AND ALL THE DETAILS HAVE BEEN GIVEN BEFORE THE ASSESSING OFFICER INCLUDING THE EXPENDITURE INCURRED BY WAY OF CREDIT CARD AND CHEQUES. IT HAS BEEN SUBMITTED THAT FBT @ 5% HAS ALSO BEEN PAID IN TRAVELLING EXPENSES. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) RESTRICTED THE ADDITION TO 25% OF THE TRAVELLING EXPENSES FOR THE NON BUSINESS PURPOSES IN THE FOLLOWING MANNER: I HAVE CONSIDERED THE ARGUMENTS OF THE LD. A.R. THOUGH THE TRAVEL TO RAJASTHAN MAY BE JUSTIFIED IN CONNECTION WITH PURCHASE OF MA RBLES BUT NO SPECIFIC ARGUMENTS TO JUSTIFY THE TRAVEL TO OTHER PLACES LIKE AHMADABAD AND BANGALORE HAS BEEN GIVEN. CONSIDERING THE FACTTHAT FBT HAS ALSO BEEN PAID AND VISITS TO RAJASTHAN DO APPEAR TO BE FOR BUSINESS PURPOSES, ENTIRE DISALLOWANCE OF TRAVELL ING EXPENSES IS HIGHLY EXCESSIVE. IN MY OPINION IT SHALL BE FAIR AND REASONABLE TO DISALLOW ONLY 20% OF SUCH TRAVELLING EXPENSES FOR NON BUSINESS PURPOSES. ACCORDINGLY, THE ADDITION TO THE EXTENT OF ` 1,31,772 ONLY IS CONFIRMED AND BALANCE IS DIRECTED TO B E DELETED. 20 . AFTER HEARING THE RIVAL PARTIES, WE ARE OF THE CONSIDERED OPINION THAT THE REASONING GIVEN BY THE LEARNED COMMISSIONER (APPEALS) FOR RESTRICTING THE DISALLOWANCE OF EXPENDITURE @ 20% IS QUITE REASONABLE M/S. SAI SHIV DEVELOPERS 12 AND NO FURTHER DISALLOWANCE IS CALLED F OR ON THE FACTS OF THE CASE . CONSEQUENTLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 21 . 2009 10 2 1 . IN THE RESULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2009 10 IS DISMISSED. 22 . , 22 . TO SUM UP, REVENU ES APPEALS FOR ALL THE ASSESSMENT YEARS ARE DISMISSED. 28 TH MARCH 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH 2014 SD / - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 28 TH MARCH 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CIT Y CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI