DCIT, New Delhi V. M/s. Narsi Iron & Steel PVt. Ltd., New Delhi

ITA 5498/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6800 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Search and seizure; Document seized; Opportunity of being heard; Additional evidence; Cost of acquisition; Difference of opinion; Assessment record; Documents seized; Change of opinion
• Section: 50C; 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI L.P. SAHU, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5498/DEL./2013 (ASSESSMENT YEAR : 2007-08) ITA NO.5497/DEL./2013 (ASSESSMENT YEAR : 2008-09) DCIT, VS. M/S. NARSI IRON & STEEL PVT. LTD. CENTRAL CIRCLE 5, 13 B, 3 RD FLOOR, NETAJI SUBHASH MARG, NEW DELHI. DARYAGANJ, NEW DELHI 110 002. (PAN : AAACN3681P) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI VIJAY VERMA, CIT DR DATE OF HEARING : 06.10.2016 DATE OF ORDER : 26.10.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS, THE SAME ARE BEING D ISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. 2. APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, CE NTRAL CIRCLE 5, NEW DELHI (HEREINAFTER REFERRED TO AS TH E REVENUE) BY FILING THE PRESENT APPEALS, SOUGHT TO SET ASIDE THE IMPUGNED ORDERS ITA NOS.5497 & 5498/DEL./2013 2 BOTH DATED 22.07.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXXI, NEW DELHI QUA THE ASSESSMENT YEARS 2007-08 AND 2008-09 ON THE GROUNDS INTER ALIA THAT :- AY 2007-08 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. WHETHER ON FACTS AND IN LAW THE CIT (A) IS RIGHT IN ADMITTING ADDITIONAL EVIDENCE WHICH WAS NOT PRODUCE D BEFORE THE AO? 3. WHETHER ON FACTS AND IN LAW THE CIT (A) HAS NOT ERRED IN NOT PROVIDING PROPER OPPORTUNITY TO THE AO BEFOR E ADMITTING THE ADDITIONAL EVIDENCE? 4. WHETHER ON FACTS AND IN LAW THE CIT (A) IS RIGHT IN RESTRICTING THE DISALLOWANCE FROM RS.51,31,354/- TO RS.5,00,000/-. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. AY 2008-09 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. WHETHER ON FACTS AND IN LAW THE CIT (A) IS RIGHT IN ADMITTING ADDITIONAL EVIDENCE WHICH WAS NOT PRODUCE D BEFORE THE AO? 3. WHETHER ON THE FACTS AND IN LAW THE CIT (A) IS R IGHT IN DELETING THE ADDITION OF RS.1,00,45,159/- HOLDING T HAT ADDITION IS NOT BASED ON SEIZED MATERIAL AND IGNORING THE FA CTS OF THE ASSESSMENT ORDER. 4. WHETHER ON FACTS AND IN LAW THE CIT (A) IS RIGHT IN RESTRICTING THE DISALLOWANCE FROM RS.34,66,967/- TO RS.5,00,000/-. ITA NOS.5497 & 5498/DEL./2013 3 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. BRIEF FACTS FOR AY 2007-08 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUES INVOLVED IN THIS APPEAL ARE : SEARCH AND SEI ZURE OPERATION WAS CONDUCTED AT THE PREMISES OF ASSESSEE ALONG WIT H OTHER CASES OF RAJDARBAR GROUP ON 31.07.2008 ON THE BASIS OF WHICH NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 13.11.2009 AN D IN RESPONSE THERETO, ASSESSEE DECLARED AN INCOME OF RS.72,24,05 0/- BY FILING RETURN U/S 153A ON 14.12.2009. SUBSEQUENTLY, FIRST NOTICE U/S 143 (2) WAS ISSUED ON 04.08.2010 AND SECOND NOTICE ALON G WITH QUESTIONNAIRE WAS ISSUED ON 23.08.2010. ASSESSEE P UT IN APPEARANCE THROUGH SHRI ARUN GUPTA, CA/AR OF THE AS SESSEE WHO HAS FILED NECESSARY DETAILS / DOCUMENTS. 4. AO NOTICED THAT ASSESSEE CLAIMED DEVELOPMENT EXP ENSES OF RS.51,31,354/- IN ITS PROFIT & LOSS ACCOUNT OF REAL ESTATE BUSINESS AND THE ASSESSEE WAS CALLED UPON TO FILE THE EVIDEN CE. ASSESSEE CLAIMED TO HAVE INCURRED SUCH EXPENSES ON ELECTRICI TY, LABOUR CHARGES, BUILDING MATERIAL, BRICKS, CEMENT, IRON ET C.. HOWEVER, AO NOTICED THAT THE ASSESSEE IS SELLING LAND ONLY AND AS SUCH, IS NOT REQUIRED TO INCUR SUCH HUGE EXPENSES ON ACCOUNT OF DEVELOPMENT CHARGES. ASSESSEE HAS ALSO NOT FILED ANY EVIDENCE OF DETAIL OF ITA NOS.5497 & 5498/DEL./2013 4 PAYMENT MADE FOR SUCH EXPENSES NOR HE HAS PROVED TH AT THE SAME HAS BEEN PAID THROUGH BANK OR CASH AND CONSEQUENTLY , DISALLOWED THE DEVELOPMENT CHARGES OF RS.51,31,354/- AND ASSES SED THE TOTAL INCOME OF THE ASSESSEE AT RS.1,23,55,404/- (RS.72,2 4,050/- INCOME AS PER RETURN + RS.51,31,354 ON ACCOUNT OF DISALLOW ANCE OF THE DEVELOPMENT CHARGES). BRIEF FACTS FOR AY 2008-09 5. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUES INVOLVED IN THIS APPEAL ARE : SEARCH AND SEI ZURE OPERATION WAS CONDUCTED AT THE PREMISES OF ASSESSEE ALONG WIT H OTHER CASES OF RAJDARBAR GROUP ON 31.07.2008 ON THE BASIS OF WHICH NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 13.11.2009 AN D IN RESPONSE THERETO, ASSESSEE DECLARED AN INCOME OF RS. 0/- BY FILING RETURN U/S 153A ON 14.12.2009. SUBSEQUENTLY, FIRST NOTICE U/S 143 (2) WAS ISSUED ON 04.08.2010 AND SECOND NOTICE ALONG WITH Q UESTIONNAIRE WAS ISSUED ON 23.08.2010. ASSESSEE PUT IN APPEARAN CE THROUGH SHRI ARUN GUPTA, CA/AR OF THE ASSESSEE WHO HAS FILE D NECESSARY DETAILS / DOCUMENTS. 6. AO NOTICED FORM THE ASSESSMENT RECORD THAT DURIN G AY 2006-07, ASSESSEE HAS CONVERTED THE LAND AT VILLAGE GOVIND PURA HELD AS CAPITAL ASSET WORTH RS.1,27,33,500/- INTO S TOCK-IN-TRADE. CONVERSION HAS BEEN MADE @ RS.1600/- PER SQ.MTR. AN D SUBSTANTIAL ITA NOS.5497 & 5498/DEL./2013 5 NOTIONAL PROFIT OF RS.17,57,30,499/- HAS BEEN INCLU DED IN THE COMPUTATION OF COST OF CONVERSION. OUT OF CONVERTE D LAND, ASSESSEE SOLD LAND MEASURING 6534.20 SQ.MTR. DURING THE YEAR . AO, AFTER DISBELIEVING CONTENTIONS RAISED BY ASSESSEE, COMPUT ED THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAIN AS UN DER :- (I) THE COST OF 11779 SQUARE METER LAND AS PER ASSESSEE'S BOOKS IS 1,27,33,500. THEREFORE, PER SQU ARE METER COST IN BOOKS COMES TO RS. 108 PER SQ. METER. AGAINST THIS COST THE ASSESSEE HAS ADOPTED THE MARK ET VALUE OF RS.1600 PER SQUARE METER WHILE CONVERTING THE LAND INTO STOCK IN TRADE. DURING THE YEAR 6534.20 S QUARE METER OF LAND HAS BEEN SOLD. THEREFORE, THE COST OF ACQUISITION OF THIS MUCH OF LAND COMES TO RS.7,05,6 93/- (6534.20 X 108). FURTHER THE FULL VALUE OF CONSIDER ATION AT THE TIME OF CONVERSION INTO STOCK IN TRADE COMES TO RS.1,04,54,720/- (6534.20X1600). (II) IT IS ALSO SEEN FROM THE DETAILS FILED BY THE ASSESSEE FOR THE A.Y.2007-08 THAT SUCH LAND WAS PURCHASED IN THE YEAR 1993-94. THUS, THE BENEFIT OF INDEXATION IS BE ING ALLOWED TO THE ASSESSEE. THE INDEXED COST OF ACQUIS ITION FOR THE LAND SOLD DURING THE YEAR COMES TO RS.705693X497/244- = RS.14,37,415/- THUS, THE LONG TERM CAPITAL GAIN CHARGEABLE FOR TH E A.Y. 2008-09 COMES TO RS.90,17,305/- (10454720 1437415).' 7. AO ALSO NOTICED THAT DURING THE YEAR UNDER ASSES SMENT, ASSESSEE EARNED A PROFIT OF RS.4,29,974/- FORM THE STEEL BUSINESS BUT HAS CLAIMED A LOSS OF RS.74,63,001/- FROM THE REAL ESTATE BUSINESS UNDER WHICH PROJECT NAME KUSUM VATIKA IS BEING DE VELOPED. FROM THE PERUSAL OF PROFIT & LOSS ACCOUNT FROM THE REAL ESTATE ITA NOS.5497 & 5498/DEL./2013 6 BUSINESS OF THE ASSESSEE, IT IS NOTICED THAT ASSESS EE PURCHASED SOME MORE LAND FOR RS.61,42,420/- AND HAS ALSO DEBITED DEVELOPMENT COST AMOUNTING TO RS.34,66,967/- IN ITS PROFIT & L OSS ACCOUNT. ASSESSEE WAS CALLED UPON TO EXPLAIN. HOWEVER, AO C AME TO THE CONCLUSION THAT DURING THE YEAR UNDER ASSESSMENT, T HE ASSESSEE SOLD 6534.20 SQ.MTR. BY SHOWING THE VALUE AT RS.49,22,00 0/- I.E. RS.753.26 PER SQ.MTR. AO FURTHER NOTICED FROM THE RECORD OF THE ASSESSEE THAT DURING AY 2006-07, ASSESSEE CONVERTED THIS LAND INTO STOCK-IN-TRADE AND AT THAT TIME, MARKET VALUE WAS A T RS.1,600/- PER SQ.MTR. AND IN THE EARLIER TWO ASSESSMENT YEARS I.E . 2006-07 AND 2007-08, ASSESSEE HAS SOLD A PART OF THIS LAND AND HAS EARNED PROFIT BUT, DURING THE YEAR UNDER ASSESSMENT, ASSESSEE HAS SHOWN TO HAVE SOLD LAND @ RS.753.26 PER SQ.MTR. ON QUERY, ASSESS EE STATED THAT DUE TO A SLUGGISH PERIOD FOR THE BUSINESS OF REAL E STATE AND THE RATES OF THE PROPERTY CAME DOWN SHARPLY. FINDING THE EXP LANATION GIVEN BY THE ASSESSEE NOT TENABLE, THE AO REJECTED THE TR ADING RESULT OF THE ASSESSEE AND COMPUTED THE PROFIT AS UNDER :- 10. FOR THE PURPOSE OF COMPUTING THE PROFITS, IT I S ESTIMATED THAT SUCH LAND WAS SOLD AT LEAST WITH THE PROFIT MA RGIN OF 10%. THEREFORE, THE SALE PRICE IS BEING TAKEN AS RS. 176 0/- PER SQ. METER. THUS, THE SALE VALUE OF 6534.20 SQ. METER OF LAND S OLD DURING THE YEAR COMES TO RS.1,15,00,192/-(6534.20X1760). THUS, THE TRADING ACCOUNT OF THE ASSESSEE IS RECASTED AS BELOW OPENING STOCK 2,02,23,824 SALE OF PLOTS 1,15,00,1 92/- LAND PURCHASED 61,42,420 CLOSING STOCK 19,97 ,80,303/- TO GROSS PROFIT 29,07,251 21,12,80,495 21,12,80,495/- ITA NOS.5497 & 5498/DEL./2013 7 AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,20,29,437/- (RS.1,00,45,159/- + RS.90,17,305/- = 1,90,62,464 MI NUS RS.70,33,027/- = RS.1,20,29,437/-) 8. ASSESSEE CARRIED THE MATTER PERTAINING TO AY 200 7-08 AND AY 2008-09 BEFORE THE LD. CIT (A) WHO HAS PARTLY AL LOWED THE APPEAL QUA AY 2007-08 BY RESTRICTING THE ADDITION T O RS.5,00,000/- AS AGAINST ADDITION OF RS.51,31,354/- AND LD.CIT (A ) ALSO PARTLY ALLOWED APPEAL FOR AY 2008-09 BY RESTRICTING THE AD DITION TO RS.5,00,000/- AS AGAINST ADDITION OF RS.34,66,967/- . FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF CHALLENGING THE IMPUGNED ORDERS PASSED BY THE LD. C IT (A) BY WAY OF FILING THE PRESENT APPEALS. 9. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE OF 30.08.2016 AND CONSEQUENT LY, WE PROCEEDED TO DECIDE THE PRESENT APPEALS WITH THE AS SISTANCE OF THE LD. DR AS WELL AS ON THE BASIS OF DOCUMENTS AVAILAB LE ON THE FILE. 10. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.5497 & 5498/DEL./2013 8 11. AT THE VERY OUTSET, THE LD. DR FOR THE REVENUE DREW OUR ATTENTION TO THE FACT THAT THE CIT (A) HAS ENTERTAI NED NUMEROUS DOCUMENTS IN ADDITIONAL EVIDENCE WITHOUT PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE REVENUE AND AS SUCH, THE CASE IS REQUIRED TO BE RESTORED TO CIT (A) TO DECIDE AFRESH AFTER PROVIDIN G OPPORTUNITY OF BEING HEARD. 12. FOR READY PERUSAL, OPERATIVE PART OF ORDER DATE D 22.07.2013 PASSED BY LD. CIT (A) QUA AY 2007-08 IS REPRODUCED AS UNDER:- 3.2 GROUND NO.2 3.2.1 AS MENTIONED IN THE PREVIOUS PARAGRAPHS, THE AO HAS NOTED THAT THE APPELLANT HAD CONVERTED CAPITAL ASSET LA ND INTO STOCK-IN- TRADE IN THE YEAR 2005-06 AND THE CONVERSION RATE A DOPTED WAS RS.1600/- PER SQ. METRE. AS AGAINST THIS HE FOUND THAT THE SALE CONSIDERATION IN RESPECT OF PART OF THE LAND SOLD D URING THE PREVIOUS YEAR RELEVANT TO CURRENT ASSESSMENT YEAR WAS ONLY A T RS. 753 PER SQ. METRE. HE HELD THAT THE APPELLANT'S TRADING RESULTS ARE NOT RELIABLE AND HE REJECTED THE SAME. THEREAFTER HE HAS ADDED R S. 1,00,45,159/- AS TRADING PROFIT COMPUTED AT THE RAT E OF 10% OF THE PRICE AT WHICH THE LAND- CAPITAL ASSET WAS CONVERTE D INTO STOCK-IN- TRADE DURING THE F.Y. 2005-06. 3.2.2 IN HIS SUBMISSIONS THE AR HAS STATED THAT THE ACCOUNTS OF THE COMPANY ARE DULY AUDITED AND COMPANY MAINTAINS ALL THE BILLS AND VOUCHERS. THE AO HAD MERELY ASKED AS TO' HOW TH ERE WAS A LOSS FROM THE REAL ESTATE BUSINESS AND THAT THE APP ELLANT HAD GIVEN THE BREAK-UP OF THE TRADING RESULTS VIDE THEIR REPL Y TO AO'S LETTER DATED 23.08.2010. THE AO DID NOT SEEK ANY FURTHER I NFORMATION FROM THE APPELLANT AND HE HAS PROCEEDED TO ESTIMATE THE PROFITS FROM THE REAL ESTATE BUSINESS ON THE SUSPICION THAT THE APPELLANTS MUST NOT HAVE DISCLOSED THE CORRECT PROFITS. IN THI S REGARD HE HAS SUBMITTED THAT ALL THE SALES ARE VERIFIABLE, ALL TH E PURCHASES ARE VERIFIABLE AND THAT THE ACCOUNTS HAVE BEEN DULY AUD ITED. IN VIEW OF THE MATTER, THE AO'S ACTION IN MAKING ADDITION WITH OUT GIVING ANY OPPORTUNITY DURING THE APPEAL PROCEEDINGS WAS BAD I N LAW. 3.2.3 THE AR HAS ALSO STRESSED THAT IN A SEARCH AND SEIZURE ASSESSMENT BEING FRAMED U/S 153A OF I.T. ACT, 1961, THE AO HAD A DUTY TO BASE ALL HIS ADDITIONS OR DISALLOWANCES ONL Y ON THE ITA NOS.5497 & 5498/DEL./2013 9 DOCUMENTS IF ANY SEIZED DURING THE SEARCH. IN THE I NSTANT CASE NO INCRIMINATING DOCUMENTS W-IRE-SEIZED TO SHOW THAT T HE APPELLANT'S TRADING RESULTS ARE NOT RELIABLE. ON THE CONTRARY T HE AO HIMSELF HAS BASED ALL HIS ADDITION ON THE BALANCE SHEET AND P&L ACCOUNT WHICH WERE FILED ALONG WITH HIS RETURN AND THE DETA ILS FURNISHED IN COURSE OF ASSESSMENT PROCEEDINGS U/S 153A. THIS AMO UNTS TO CHANGE OF OPINION. THE AO CANNOT SIT IN JUDGMENT OV ER ON THE COMPLETED ASSESSMENTS WITHOUT ANY FRESH EVIDENCES R ECOVERED DURING THE SEARCH. FURTHER THE AR ALSO STATED THAT THE AO HAS DOUBTED THE LOSS FROM THE REAL ESTATE BUSINESS ONLY ON ACCOUNT OF THE VALUE ADOPTED BY THE ASSESSEE AT THE TIME OF CO NVERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE. HE HAS POINTED O UT THAT THE COST OF LAND AS PER ASSESSMENT RECORDS ITSELF WAS ONLY RS. 108.10 PER SQ. METRE. THE AO HAS NOT TAKEN NOTE THAT THE APPELLANT REALLY MADE ALMOST 750% PROFIT ON THE LAND WHICH HE ACQUIRED FE W YEARS AGO. THUS THIS IS NOT A CASE OF ANY SUPPRESSION OF PROFI TS FROM SALE OF LAND. FURTHER THE AR ALSO DREW THE ATTENTION TO THE PROVISIONS OF SECTION 50C WHERE THE AO CAN MAKE ADDITION ON SUPPR ESSION OF SALE ONLY IF THERE IS VARIATION IN THE SALE PRICE A S COMPARED TO THE PREVAILING RATES. IN THE INSTANT CASE THE APPELLANT HAS ALWAYS CHARGED THE RATES PREVAILING AT THE GIVEN POINT OF TIME AND THERE WAS NO ALLEGATION THAT LAND OR HOUSES WERE SOLD BEL OW THE CIRCLE RATES. THE AR, THEREFORE, SUBMITTED THAT THE ACTION OF THE AO IN REJECTING THE TRADING RESULTS AND COMPUTING PROFITS AT THE RATE OF 10% ON ESTIMATE BASIS WAS ARBITRARY AND AGAINST ALL THE PREVAILING BUSINESS PRACTICES. 3.2.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR A ND THE ASSESSMENT ORDER. FIRST OF ALL IT IS NOTED THAT TH E AO HAS NOT RELIED UPON ANY SEIZED DOCUMENTS FOR MAKING THIS ADDITION. HE HAS DONE AN ESTIMATED ADDITION UNDER THE REAL ESTATE BUSINES S ON THE BASIS OF MATERIAL ON RECORD. HE HAS DOUBTED THE TRADING RESU LTS ONLY BECAUSE THE RATE AT WHICH THE CAPITAL ASSET WAS CONVERTED I NTO STOCK-IN-TRADE WAS MUCH HIGHER THAN THE RATE AT WHICH THE LAND HAS BEEN ULTIMATELY SOLD. THERE CANNOT BE ANY ALLEGATION THA T THE APPELLANT DID NOT MAKE PROFIT ON SALE OF LAND IF ONE TAKES NO TE OF THE ACTUAL COST OF ACQUISITION OF LAND BY THE COMPANY. THUS TH E PRESUMPTION THAT THE APPELLANT COULD NOT HAVE SOLD LAND AT BELO W THE COST PRICE IS FRAUGHT WITH MISTAKE AS THE COST ADOPTED IN THE INSTANT CASE BY THE AO IS THE RATE AT WHICH LAND HAS BEEN CONVERTED INTO STOCK IN TRADE IN HIS BOOKS OF ACCOUNTS. IN REALITY THE COMP ANY HAS MADE ALMOST 800% PROFIT ON THE SALE OF LAND IF WE ADOPT THE COST OF LAND AS ON THE DATE OF ITS ACQUISITION. DUE TO THE TREAT MENT GIVEN TO LAND AT THE TIME OF ITS ACQUISITION, THE COMPANY HAD TO CHANGE ITS NATURE IN F. Y. 2005-06. PART OF THE PROFIT IS NOW BEING T AXED AS CAPITAL GAIN. CONSIDERING THESE FACTORS I DO NOT DEEM IT FI T TO ACCEPT THE AO'S VIEW ON THE ISSUE. THE ADDITION NOT BASED ON A NY SEIZED MATERIAL AND ALSO WITHOUT BRINGING HARD FACTS LIKE EVIDENCE OF SUPPRESSION OF ANY SALES BASED ON THE SALE DEED ETC . THE ADDITION CANNOT BE SUSTAINED. THEREFORE, THE SAME IS DELETED . ITA NOS.5497 & 5498/DEL./2013 10 3.2.5 FURTHER, AO HAS HELD THAT THE DEVELOPMENT CO ST OF RS.34,66,967/- DEBITED TO TRADING ACCOUNT OF THE RE AL ESTATE BUSINESS CANNOT BE ALLOWED, AS THE APPELLANT DID NO T FILE COMPLETE DETAILS ALONG WITH EVIDENCE. AT PARA 7 OF HIS ORDER , THE AO HAS STATED THAT IN RESPONSE TO HIS LETTER 23.08.2010 TH E ASSESSEE SIMPLY SUBMITTED THAT SUCH AMOUNT WAS INCURRED ON ELECTRIC EXPENSES, VIKAS PRADHIKARAN CHARGES ETC. AND RS. 24,66,2063/- WAS INCURRED ON BRICK, CEMENT, SAND AND OTHER BUILDING CONSTRUCT ION EXPENSES. HOWEVER THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE IN RESPECT OF ITS CLAIMS OF THESE DEVELOPMENT EXPENSES. 3.2.6 THE RELEVANT PARAGRAPH OF THE ASSESSMENT ORDE R ON THE ISSUE IS REPRODUCED BELOW:- ' VIDE THE QUESTIONNAIRE DATED 23.08.2010, THE ASSE SSEE WAS SPECIFICALLY ASKED TO FILE COMPLETE DETAILS ALONG W ITH EVIDENCES REGARDING THE DEVELOPMENT COST INCURRED B Y IT. IN RESPONSE TO THIS, THE ASSESSEE HAS SIMPLY SUBMITTED THAT SUCH AMOUNT WAS INCURRED ON ELECTRIC EXPENSES, VI/C AS PRADHIKARAN CHARGES. THE ASSESSEE HAS FURTHER SUBMI TTED THAT AN AMOUNT OF RS.24,66,206/- HAS BEEN INCURRED ON BRICKS, CEMENT, SAND & OTHER BUILDING CONSTRUCTION EXPENSES. HOWEVER, TILL DATE, THE ASSESSEE HAS NOT FILED EVEN A SINGLE EVIDENCE IN SUPPORT OF ITS CLAIM OF THESE DEVELOPMENT EXPENDITURE. AS PER PROVISIONS OF I.TAX ACT, AN EXPENDITURE CAN ONLY BE ALLOWED IF THE ASSESSEE IS ABLE TO PROVE THAT SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IN THE AB SENCE OF ANY EVIDENCE, SUCH ONUS REMAINS UNDISCHARGED AND THEREFORE, THIS AMOUNT OF RS.3466967/- TO THE INCOM E OF THE ASSESSEE. PENALTY PROCEEDING U/S 271 (1)(C) ARE ALS O BEING INITIATED FOR FURNISHING THE INACCURATE PARTICULARS OF INCOME. ' 3.2.7 THE AR SUBMITTED THAT THE AO DID-NOT ASK FOR- ANY FURTHER DETAILS THAN WHAT WAS CALLED FOR BY HIM IN QUESTION NAIRE DATED 23.08.2010. HE FURTHER HIGHLIGHTED THAT THE APPELLA NT IS MAINTAINING REGULAR BOOKS OF ACCOUNTS WHICH ARE DUL Y AUDITED AND ALL THE ENTRIES ARE SUPPORTED BY THE BILLS AND VOUC HERS. THE AO ONLY SOUGHT DETAILS OF THE DEVELOPMENT EXPENSES WHI CH WAS DULY EXPLAINED VIDE THEIR WRITTEN REPLY TO THE QUESTIONN AIRE DATED 23.08.2010. IN THIS BACKGROUND THE AR SUBMITTED LED GER A/C AND PHOTOCOPIES OF THE BILLS AND VOUCHERS OF THE DEVELO PMENT COST AND SOUGHT ADMISSION OF THE SAME AS ADDITIONAL EVIDENCE S DURING THE APPEAL PROCEEDINGS. THESE DOCUMENTS WERE FORWARDED TO THE AO ON 04.02.2013 SEEKING REPORT BOTH ON MERIT AS WELL AS ON ADMISSIBILITY OF THE SAME. TILL DATE THIS OFFICE HA S NOT RECEIVED ANY REPORT FROM THE AO. IN THIS BACKGROUND THE ASSESSME NT RECORDS WERE CALLED FOR AND EXAMINED. FROM THE ORDER SHEET NOTINGS OF THE ITA NOS.5497 & 5498/DEL./2013 11 ASSESSMENT FOLDER, THERE IS NO INDICATION THAT THE AO INSISTED ON SEEING BILLS AND VOUCHERS. HOWEVER, HE HAS DISALLOW ED THE ENTIRE 'DEVELOPMENT COST' FOR WANT OF EVIDENCES. THE ACTIO N OF THE AO CANNOT BE UPHELD. THERE ARE NO EVIDENCES THAT THE A O INSISTED ON SEEING BILLS AND VOUCHERS OR THAT HE WAS NOT SATISF IED WITH THE REPLY GIVEN BY THE APPELLANT AND THAT HE HAD CALLED UPON THE APPELLANT TO PRODUCE FURTHER EVIDENCES. IN THAT BACKGROUND THE A DDITIONAL EVIDENCES (BILLS, VOUCHERS AND LEDGER A/C) ARE REQU IRED TO BE ADMITTED. THE AO HAS NOT GIVEN HIS REPORT EITHER ON ADMISSIBILITY OF THESE EVIDENCES OR ON THEIR MERIT. IN THIS BACKG ROUND, I HAVE PERUSED THE PHOTOCOPIES OF THE BILLS AND VOUCHERS. THESE RELATE TO PURCHASE OF CONSTRUCTION MATERIAL OR EXPENSES RELAT ING TO LABOUR CHARGES. MOST OF THESE EXPENSES ARE INCURRED IN CAS H AND HENCE THEIR RELIABILITY IS LOW. HOWEVER, IT CANNOT BE DE NIED THAT THE APPELLANT HAD NOT INCURRED ANY DEVELOPMENT COST BEI NG IN CONSTRUCTION/REAL ESTATE BUSINESS. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD THAT ENDS OF JUSTICE WOULD BE MET IF RS.5 LAKH OUT OF RS. 34,66,967/- IS DISALLOW ED. HENCE ADDITION TO THE TOTAL INCOME IS RESTRICTED TO RS.5 LAKH ONLY AND THE BALANCE IS DELETED. 13. BARE PERUSAL OF THE FINDINGS RETURNED BY LD. CI T (A) IN PARA 3.2 QUA AY 2007-08 AS WELL AS FINDINGS RETURNED BY LD. CIT (A) IN PARA 3.2 QUA AY 2008-09 GOES TO PROVE THAT CIT (A) HAS ENTERTAINED COPIES OF VARIOUS LEDGERS, DIFFERENT AC COUNT RELATING TO DEVELOPMENT COST, BILLS AND VOUCHERS FOR WHICH HE H AS CALLED REMAND REPORT FROM THE AO ON 04.02.2013 BUT WITHOUT ISSUING ANY REMINDER OR IMPRESSING UPON THE AO TO FILE THE REMA ND REPORT PROCEEDED TO DECIDE THE MATTER WITHOUT PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE REVENUE. AT THE SAME TIME, CIT (A) RECORDED THE FINDING THAT MOST OF THESE EXPENSES ARE INCURRE D IN CASH AND THEIR RELIABILITY IS LOW BUT AGAIN PROCEEDED TO HOL D THAT THE ENDS OF JUSTICE WOULD BE MET IF RS.5,00,000/- APPROXIMATELY OUT OF RS.51,31,354 FOR AY 2007-08 IS DISALLOWED. SIMILAR LY, CIT (A) ITA NOS.5497 & 5498/DEL./2013 12 QUA AY 2007-08 PROCEEDED ON THE BASIS OF WHIMS AND FANCIES BY HOLDING THAT, ENDS OF JUSTICE WOULD BE MET IF RS.5 ,00,000/- OUT OF RS.34,66,967/- IS ALLOWED AND RESTRICTED THE ADDITI ON TO RS.5,00,000/- QUA AY 2008-09 AND DELETED THE BALAN CE ADDITION OF RS.29,66,967/-. 14. SO, IN THE LIGHT OF THE AFORESAID FACTS AND CIR CUMSTANCES PROVED ON FILE, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE RESTORED TO THE LD. CIT (A) TO DECID E AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE PART IES. CONSEQUENTLY, BOTH APPEALS ARE ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS DAY 26 TH OF OCTOBER, 2016. SD/- SD/- (L.P. SAHU) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 26 TH DAY OF OCTOBER, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XXXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.