DCIT 1(1)(1), MUMBAI V. ALUMILITE ARCHTECURAL P. LTD, MUMBAI

ITA 5731/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5984 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 21-12-2015
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5731/MUM/2015 ASSESSMENT YEAR: 2012 - 13 DY. COMMISSIONER OF INCOME TAX - 1(1)(1), 579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. VS. M/S ALUMILITE ARCHITECTURAL PVT. LTD., 5 TH FLOOR, DHIRAJ CHAMBERS, 9 HAZARIMAL SOMANI MARG, FORT, MUMBAI - 400001. PAN NO. AABCA0567C APPELLANT RESPONDENT REVENUE BY : MR. R.A. DHYANI, DR ASSESSEE BY : MR. BIREN GABHAWALA, AR DATE OF HEARING : 15/05/2019 DATE OF PRONOUNCEMENT : 31/07/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2012 - 1 3 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE 1 ST GROUND OF APPEAL WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE ON ACCOUNT OF CASH EXPENSES M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 2 OF RS.4,34,264/ - WHICH WAS NOT EXPLAINED DURING THE COURSE OF SURVEY ACTION AND THE AO CONCLUSIVELY PROVED THE SAME TO BE BOGUS EXPENSES IN THE ASSESSMENT. 2 . 1 BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2012 - 13 ON 01.10.2012 DECLARING TOTAL INCOME OF RS.70,12,000/ - . IT IS ENGAGED IN THE BUSINESS OF FABRICATION AND INSTALLATION OF WINDOWS AND DOORS. THE ASSESSEE WAS SURVEYED U/S 133 A OF THE ACT BY THE ITO 1(1)(1), MUMBAI ON 23.02.2012. DURING THE COURSE OF SURVEY, THE ASSESSEE WAS FOUND TO BE IN POSSESSION OF CASH IN HAND OF RS.5,56,090/ - . BUT AS PER THE BOOKS OF ACCOUNTS, THE CASH IN HAND WAS RS.9,90,354/ - . IN RESPONSE TO THE QUERY RAISED BY THE AO VIDE ORDER SHEET NOTING DATED 23.03.2015 TO EXPLAIN THE DIFFERENCE, THE ASSESSEE FILED A REPLY DATED 25.03.2015 STATING THAT THE CASH IN HAND COULD NOT BE UPDATED DUE TO THE ONGOING SURVEY PROCEEDINGS AND THEREFORE, THERE WAS A SHORTFALL IN CASH FOUND. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE AND TR EATED THE DISCREPANCY IN CASH INVENTORIED AND CASH IN HAND AS PER BOOKS AS EXPENDITURE NOT INCURRED FOR THE PURPOSE OF BUSINESS AND THEREBY MADE AN ADDITION OF RS.4,34, 264/ - TO THE INCOME SHOWN. 2.2 IN APPEAL, THE LD. CIT(A) OBSERVED THAT (I) SHRI S.K. DA MANI HAS ADMITTED IN HIS ANSWER TO Q. NO. 48 OF THE STATEMENT RECORDED ON OATH DURING THE COURSE OF SURVEY, PERTAINING TO THE SHORTAGE OF CASH THAT CASH WAS WITHDRAWN FROM CASH IN HAND FOR WHICH VOUCHERS WERE YET TO BE ENTERED IN THE BOOKS, (II) THE ASSES SEE HAS FURNISHED A STATEMENT RECONCILING THE CASH IN HAND ACCOUNT THAT THE EXPENSES INCURRED ALONG M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 3 WITH THE VOUCHERS WHICH RELATE TO THE PERIOD 01.04.2011 TO 29.02.2012, (III) THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE VOUCHERS FURNISHED, (IV) THE AO HAS MADE A GENERAL REMARK THAT EXPENSES INCURRED EVEN ON 29.02.2012 WERE SHOWN IN THE BOOKS OF ACCOUNTS; HOWEVER, PERUSAL OF THE DETAILS SHOWS THAT THE EXPENSES INCLUDING PAYMENT OF TOLL TAX, OCTROI CHARGES, POSTAGE/COURIER, STAFF WELFARE ETC. INCUR RED AFTER SURVEY COMES TO RS.97,092/ - AND RS.7,182/ - PERTAINING TO BHIWANDI OFFICE AND MUMBAI RESPECTIVELY, (V) IN THE INSTANT CASE, SHORTAGE OF CASH HAS ARISEN BECAUSE THE ENTRIES RELATING TO EXPENSES FOR WHICH ADVANCES ARE GIVEN OUT OF CASH AVAILABLE IN HAND, ADMITTEDLY, WERE YET TO BE RECORDED. THUS OBSERVING, THE LD. CIT(A) DELETED THE ADDITION OF RS.4,34,264/ - MADE BY THE AO. 2.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE RELIES ON THE OR DER OF THE LD. CIT(A). 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, SHRI S.K. DAMANI HAS ADMITTED IN HIS ANSWER TO Q. NO. 48 OF THE STATEMENT RECORDED ON OATH DURING THE COURSE OF SURVEY, PERTA INING TO THE SHORTAGE THAT CASH WAS WITHDRAWN FROM CASH IN HAND FOR WHICH VOUCHERS WERE YET TO BE ENTERED IN THE BOOKS OF ACCOUNTS. THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE VOUCHERS FURNISHED BY THE ASSESSEE. THE AO HAS MADE A GENERAL REMARK T HAT EXPENSES INCURRED EVEN ON 29.02.2012 WERE SHOWN IN THE BOOKS. HOWEVER, A PERUSAL OF THE DETAILS CLEARLY SHOWS THAT THE EXPENSES M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 4 INCLUDING PAYMENT OF TOLL TAX, OCTROI CHARGES, POSTAGE/COURIER, STAFF WELFARE ETC. WERE INCURRED AFTER SURVEY COME TO RS.97, 092/ - AND RS.7,182/ - PERTAINING TO BHIWANDI OFFICE AND MUMBAI RESPECTIVELY. WE FIND THAT THE ASSESSEE HAS EXPLAINED REASONABLY THAT ALL EXPENDITURE RELATE TO BUSINESS ONLY AND IS AGAINST ADVANCES MADE. IN VIEW OF THE ABOVE FACTS, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE 1 ST GROUND OF APPEAL. 3. THE 2 ND GROUND OF APPEAL WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS EXPENSES TO ONE SHRI MANISH YADAV FOR RS.16,12,394/ - DESPITE THE FACT THAT THE ASSESSEE COULD NOT RECONCILE THE EXPENSES BOOKED IN THE NAME OF SHRI MANISH YADAV IN THE COURSE OF ASSESSMENT. 3.1 THE ISSUE RELATES TO DISALLOWANCE OF PAYMENT OF RS.16,12,394/ - BY THE ASSESSEE TO L ABOURERS THROUGH SHRI MANISH YADAV. THE AO NOTED THAT SHRI YADAV, THROUGH WHOM PAYMENT OF RS.16,12,394/ - WAS MADE, DID NOT MAINTAIN THE RELEVANT DETAILS, THOUGH HE ADMITTED HAVING RECEIVED THE AMOUNT FROM THE ASSESSEE AND PAID TO THE LABOURERS. THE AO CONC LUDED THAT THE ASSESSEE COULD NOT COMPLETELY RECONCILE THE EXPENSES BOOKED IN THE NAME OF SHRI YADAV AND THEREFORE, THE EXPENSES ARE NOT GENUINE AND THEREFORE, NOT ALLOWABLE. 3.2 IN APPEAL, THE LD. CIT(A) OBSERVED THAT (I) THE ASSESSEE HAS PRODUCED THE WA GE REGISTERS CONTAINING THE SIGNATURES OF THE RECIPIENTS ALONG WITH COPIES OF BILLS AND VOUCHERS AND DETAILS OF EXPENSES, (II) VIDE M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 5 ANSWER TO Q. NO. 5 OF THE STATEMENT RECORDED DURING THE TIME OF SURVEY, THE ASSESSEE HAS POINTED OUT THAT SHRI DINESH OJHA H AS STATED THAT ALL THE IOUS ARE RECONCILED AFTER RECEIPT OF SUPPORTING BILLS AND VOUCHERS FOR EXPENSES INCURRED FROM THE SITE AND THEN SQUARED OFF, (III) THE ASSESSEE HAS FURTHER CONTENDED THAT SHRI MANISH YADAV AND OTHERS ARE NOT EDUCATED AND DO NOT HAV E ACCOUNTING KNOWLEDGE , (IV) THERE IS FORCE IN THE CONTENTION OF THE ASSESSEE THAT GROUP LEADER SUCH AS SHRI MANISH YADAV ETC. ARE ENTRUSTED WITH ALL THE RESPONSIBILITIES TO DISBURSE PAYMENT AND AFTER PAYMENT IS MADE TO THE WORKERS, RECEIPT IS OBTAINED AND THE ATTENDANCE IS MAINTAINED AND THEREFORE, THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO TAKE RECEIPT FROM INDIVIDUAL WORKERS. THUS OBSERVING, THE LD. CIT(A) RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA R URAL INFRASTRUCTURE DEVELOPMENT LTD. V. ITO, TDS (2014) 41 TAXMANN.COM 497 AND DELETED THE ADDITION OF RS.16,12,394/ - MADE BY THE AO. 3.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL RELIES ON THE ORDER OF THE LD. CIT(A). 3. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE, WE NOTICE THAT VIDE ANSWER TO Q. NO. 5 OF THE STATEMENT RECORDED AT THE TIME OF SURVEY, SHRI DINESH OJHA HAS STATED THAT ALL THE IOUS ARE RECONCILED AFTER RECEIPT OF SUPPORTING BILLS AND VOUCHERS FOR EXPENSES INCURRED FROM THE SITE AND THEN SQUARED OFF. WE AGREE WITH THE O BSERVATION OF THE LD. CIT(A) THAT THERE IS FORCE IN THE CONTENTIONS OF THE ASSESSEE THAT GROUP LEADER SUCH AS SHRI MANISH YADAV AND OTHERS ARE ENTRUSTED WITH ALL THE RESPONSIBILITIES TO DISBURSE M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 6 PAYMENT AND AFTER PAYMENT IS MADE TO THE WORKERS, RECEIPT IS OBTAINED AND THE ATTENDANCE IS MAINTAINED AND THEREFORE, THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO TAKE RECEIPT FROM INDIVIDUAL WORKERS. IN VIEW OF THE ABOVE FACTS, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE 2 ND GROUND OF APPEAL. 4. THE 3 RD GROUND OF APPEAL WHETHER ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDITION MADE ON ACCOUNT OF CASH EXPENSES U/S 40A(3) AMOUNTING TO RS.2,45,20,6 8 3/ - OUT OF RS.2,52,79 ,05 4/ - , DESPITE THE FACT THAT THE AO I N THE ASSESSMENT CONCLUSIVELY PROVED THAT EVEN IOU PAYMENT I S AN EXPENSE WHICH THE ASSESSEE HAS INCURRED FOR BUSINESS PURPOSES ONLY AND THE ASSESSEE WAS WRONGLY SHOWING IT AS A BOOK ENTRY AND FURTHER THE IOU IS NOT A LOAN OR A DVANCE . THE 4(A) GROUND OF APPEAL 4A . W HETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT ( A) WAS CORRECT IN DELETING THE ADDITION MADE ON ACCOUNT OF RENOVATION IN DIRECTORS' R ESIDENCE IN CASH OF RS.29,67,780/ - WHICH WAS CLEA RLY A NON - BUSINESS EXPENDITURE AND THE SAME BEING UNEXPLAINED EXPENSE I S ADDED U/S69C OF THE ACT BASED ON A LOOSE PAPER IMPOUNDED IN THE SURVEY ACTION. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE DETAILS, THE AO FOUND THAT NUMBER OF EXPENSES IN THE CASH BOOK WERE EXCEEDING THE LIMIT OF ALLOWABLE CASH EXPENSES PRESCRIBED UNDER THE ACT. IN RESPONSE TO A QUERY RAISED BY THE AO VIDE SH OW CAUSE NOTICE DATED 20.03.2015 TO EXPLAIN WHY CASH EXPENSES INCURRED BY IT IN VIOLATION OF M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 7 PROVISIONS OF SECTION 40A(3) SHOULD NOT BE DISALLOWED, THE ASSESSEE FILED A REPLY DATED 23.03.2015 STATING THAT CASH EXPENSES ARE GIVEN ON IOU BASIS AS ADVANCES AN D LATER ON ADJUSTED TOWARDS ACTUAL EXPENSES AND MOST OF THESE ARE FOR THE PURPOSE OF LABOUR PAYMENTS TO CONTRACTORS, DAILY WAGE LABOURERS, OCTROI ETC. HOWEVER, THE AO NOTED THAT THE ASSESSEE FAILED TO RECONCILE COMPLETELY THE EXPENSES BOOKED IN CASH, WHI CH ARE EXCEEDING RS.20,000/ - ON ONE DAY. THE TOTAL OF SUCH EXPENSES, WHICH ARE INCURRED IN CASH, DURING THE YEAR UNDER CONSIDERATION, WHERE INDIVIDUAL PAYMENTS ARE EXCEEDING RS.20,000/ - ON EACH SUCH DATE IS RS.2,52,79,054/ - (EXCLUDING CASH IN HAND ON BHIWA NDI AND OCTROI EXPENSES IN CASH). THE AO MADE A DISALLOWANCE OF THE ABOVE AMOUNT U/S 40A(3) OF THE ACT. THE AO FURTHER NOTED THAT AS PER THE LOOSE PAPERS FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY THE ASSESSEE HAD INCURRED RS.69,21,532/ - ON RENOVATIO N OF A FLAT IN JOLLY MAKER CHAMBER. THIS FLAT BELONGS TO THE DIRECTOR OF THE COMPANY AND THE EXPENSES INCLUDE CASH PAYMENT OF RS.29,67,780/ - . IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE SUBMITTED THAT THE EXPENSES HAVE BEEN CLAIMED IN THE DIRECTO RS PERSONAL ACCOUNT, AND NOT BY ITSELF. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID EXPLANATION AND MADE A DISALLOWANCE OF THE ABOVE AMOUNT OF RS.29,67,780/ - . 4.2 IN APPEAL, THE LD. CIT(A) HAVING EXAMINED THE LEDGER ACCOUNTS FILED BY THE ASSESSEE BEF ORE HIM OBSERVED THAT CONSIDERING THE NATURE OF BUSINESS ACTIVITY AND KEEPING IN VIEW THE PROCEDURE FOLLOWED BY THE ASSESSEE FOR ACCOUNTING THE PAYMENTS MADE ON IOU BASIS AND THE DETAILS M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 8 OF EXPENSES WHICH ARE ADJUSTED AGAINST THESE PAYMENTS, ACCEPTED THE A SSESSEES CONTENTION THAT IOU PAYMENTS ARE NOT DEBITED AS EXPENSES. THE LD. CIT(A) ALSO ACCEPTED THAT THE ASSESSEE HAS ADJUSTED THE EXPENSES AGAINST SUCH IOU PAYMENTS AND NECESSARY ENTRIES IN THIS REGARD ARE MADE IN THE BOOKS. FURTHER, IT IS HELD BY HIM TH AT SINCE THE PROJECT OF THE ASSESSEE IS LABOUR INTENSIVE, DEBITING 21% TOWARDS LABOUR COSTS APPEARS TO BE FAIR. HOWEVER, OBSERVING THAT THE POSSIBILITY OF INFLATION OF LABOUR EXPENDITURE CANNOT BE RULED OUT, THE LD. CIT(A) DISALLOWED 3% OF THE ABOVE EXPENS ES WHICH WORKS OUT TO RS.7,58,371/ - AND ALLOWED THE BALANCE OF RS.2,45,20,683/ - . REGARDING THE DISALLOWANCE OF RS.29,67,780/ - MADE BY THE AO TOWARDS RENOVATION OF DIRECTORS RESIDENCE IN CASH, THE LD. CIT(A) EXAMINED THE COPIES OF PERSONAL LEDGER ACCOUNT FOR RENOVATION EXPENSES AND FIXED ASSETS ACCOUNT OF THE DIRECTOR SHRI S.K. DAMANI AND SHAREHOLDER SMT. MANJU DAMANI AND HELD THAT (I) THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO INDICATE THAT THE EXPENSES INCURRED ARE DEBITED TO THE P&L ACCOUNT OF THE ASSESSEE TO ESTABLISH THAT THE FUNDS OF THE COMPANY ARE INDEED DIVERTED TO THE DIRECTORS BUT CLAIMED AS EXPENSES IN THE HANDS OF THE ASSESSEE, (II) THE ADDITION IS MADE MERELY ON THE BASIS OF SURVEY REPORT WITHOUT CORROBORATING BY ANY INDEPENDENT AND COGE NT EVIDENCE, WHICH WOULD LAND SUPPORT TO THE SURVEY FINDING. THUS OBSERVING THE LD. CIT(A) DELETED THE ADDITION OF RS.29,67,780/ - MADE BY THE AO. 4.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL RELIES ON THE ORDER OF THE LD. CIT(A). FURTHER THE LD. COUNSEL M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 9 RELIES ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2010 - 11, AND 2012 - 13 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE REGARDING CASH EXPENSES U/S 40A(3) DECIDED IN ONE YEAR IS NOT APPLICABLE IN SOME OTHER YEAR. THE FACTS LEADING TO CASH PAYMENT IN VIOLATION OF PROVISIONS OF SECTION 40A(3) IN ONE YEAR CANNOT BE REPLICATED IN SOME OTHER YEAR. THEREFORE, INSTEAD OF BLINDLY F OLLOWING THE ORDER OF THE CO - ORDINATE BENCH ON ISSUES WHICH NEEDS VERIFICATION OF FACTS, WE HAVE TO EXAMINE THE FOLLOWING CONTENTIONS. IT IS FOUND THAT VIDE LETTER DATED 23.03.2015, THE ASSESSEE FILED A REPLY BEFORE THE AO EXPLAINING THAT CASH EXPENSES RELATING TO RS.2,52,79,054/ - ARE GIVEN ON IOU BASIS AS ADVANCES AND THEN LATER ON ADJUSTED TOWARDS ACTUAL EXPENSES. HOWEVER, THE DOCUMENTS/EVIDENCE SUPPORTING THE ABOVE CONTENTIONS WERE NOT FILED BEFORE THE AO. ALSO WE FIND THAT THE ASSESSEE COULD NOT FILE THE SUPPORTING DOCUMENTS IN RELATION TO ITS CLAIM REGARDING CASH PAYMENT OF RS.29,67,780/ - ON RENOVATION OF DIRECTORS RESIDENCE. CONSIDERING THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ABOVE TWO GROUNDS OF APPEAL AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE AN ORDER AFRESH, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 3 RD AND 4(A) GROUNDS OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 10 5. THE 4(B) GROUND OF APPEAL 4 B. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) WAS CORRECT IN DELETING THE ADDITION MADE ON ACCOUNT OF EXPENSE MADE AT THE DIRECTO RS' RESIDENCE OF RS.25,81,779/ - AND FURTHER EXPENSE OF RS.10,40,536/ - IN CASH BEING DIVERTED FROM BUSINESS, WHICH ARE NON - BUSINESS EXPENDITURE . 5.1 THE AO DISALLOWED A SUM OF RS.25,81,779/ - , CLAIME D BY THE ASSESSEE TO HAVE BEEN SPENT IN CHEQUE, BUT IS AGAIN ON ACCOUNT OF RENOVATION OF DIRECTORS RESIDENCE. FURTHER, THE AO DISALLOWED RS.10,14,536/ - IN CASH BEING DIVERTED FROM BUSINESS. 5.2 IN APPEAL, THE LD. CIT(A) OBSERVED THAT ADDITION OF RS.25,81,779/ - HAS BEEN MADE BASED ON THE FIGURES APPEARING ON THE LOOSE PAPER FOUND DURING THE COURSE OF SURVEY AND MARKED AS PAGE NO. 80 OF ANNEXURE A - 1. ON PERUSAL OF THE DETAILS FURNISHED BEFORE HIM, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAS NOT DEBITED IN ITS BOOKS OF ACCOUNTS THE EXPENSES INCURRED ON RENOVATION OF DIRECTORS RESIDENCE, AS IS EVIDENT FROM THE COPIES OF INDIVIDUAL LEDGER ACCOUNT OF DIRECTORS, LEDGER ACCOUNT OF RENOVATION EXPENSES, FIX ED ASSET ACCOUNT, BALANCE SHEET ETC. FURTHER, THE DIRECTORS ARE FILING THEIR INDIVIDUAL INCOME TAX RETURNS. HE OBSERVED THAT AS PER BALANCE SHEET OF THE DIRECTORS AS ON 31.03.2011 AND 31.03.2012, THE EXPENSES INCURRED ON RENOVATION ARE ADDED TO THEIR FIXED ASSETS. ON THE BASIS OF ABOVE REASONS, THE LD. CIT(A) DELETED THE ADDITION OF RS.25,81,779/ - MADE BY THE AO. FURTHER, HE DELETED THE DISALLOWANCE OF RS.10,14,536/ - MADE BY THE AO ON THE REASON THAT NO MATERIAL OR M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 11 CORROBORATIVE EVIDENCE WAS BROUGHT ON RE CORD TO ARRIVE AT THE CONCLUSION THAT THE ABOVE AMOUNT WAS DIVERTED TO THE DIRECTORS. 5.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL RELIES ON THE ORDER OF THE LD. CIT(A). 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIALS ON RECORD. THE AO HAS MADE THE ADDITION OF RS.25,81,779/ - ON THE BASIS OF FIGURES APPEARING ON THE LOOSE PAPER FOUND DURING THE COURSE OF SURVEY AND MARKED AS PAGE NO. 80 OF ANNEXURE - 1. THERE IS MERIT IN THE FINDING OF THE LD. CIT (A) THAT AS PER THE DETAILS, THE ASSESSEE HAS NOT DEBITED IN ITS BOOKS OF ACCOUNTS THE EXPENSES INCURRED ON RENOVATION OF DIRECTORS RESIDENCE AS IS EVIDENT FROM THE COPIES OF INDIVIDUAL LEDGER ACCOUNT OF DIRECTORS, LEDGER ACCOUNT OF RENOVATION EXPENSES, F IXED AS SET ACCOUNT, BALANCE SHEET ETC. FACTS BEING SO, WE CONFIRM THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS.25,81,779/ - MADE BY THE AO. WE ALSO AGREE WITH THE LD. CIT(A) THAT THE AO HAS NOT BROUGHT OUT ANY MATERIAL OR CORROBORATIVE EVIDENCE TO ARRIVE AT THE CONCLUSION THAT RS.10,14,536/ - WAS DIVERTED TO THE DIRECTORS. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND OF APPEAL. THUS THE GROUND OF APPEAL NO. 4(B) IS DISMISSED. 6. THE 5 TH GROUND OF APPEAL WHETHER ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) WAS CORRECT IN DELE TING THE ADDITION MADE BY THE A O OF M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 12 RS. 1,96,60,129/ - BEING PROFIT ESTIMATED ON 'WORK IN PROGRESS' IN RESPECT OF UNBI LLED SALES NOT OFFERED FOR TAX. 6.1 DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT AS PER THE SURVEY FINDINGS, THE ASSESSEE HAS NOT BILLED THE GOODS CLEARED WITH EXCISE COMPONENT DESPITE PHYSICAL DELIVERY OF GOODS TO CLIENTS AND THEREFORE THE WIP SHOWN REPRESENTS COST OF UNBILLED SALES OF THE YEAR. OBSERVING THAT THE GROSS PROFIT OF THE ASSESSEE IS 43.85%, THE AO ARRIVED AT THE PROFIT ELEMENT ON ACCOUNT OF WIP AT RS.2,45,75,161/ - (43.85% OF RS.5,60,43,696/ - ). THE AO ALLOWED 20% OF THE ABOVEMENTIONED GROSS PROFIT ON ACCOUNT OF WIP AS EXPENS ES AND BROUGHT TO TAX THE BALANCE AMOUNT ON ACCOUNT OF WIP OF RS.1,96,60,129/ - (I.E. 80% OF RS.2,45,75,161/ - ). 6.2 IN APPEAL, THE LD. CIT(A) DELETED THE ABOVE ADDITION MADE BY THE AO WITH THE FOLLOWING OBSERVATION: I N THE PRESENT CASE, THERE IS NO FINDING RECORDED BY THE ASSESSING OFFICER THAT THE METHOD FOLLOWING BY THE APPELLANT DISTORTS THE PROFITS OF THE PARTICULAR YEAR. IT APPEARS THAT THE ADDITION IS MADE CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW AND ALSO WITH PRE CON CEIVED NOTIONS AND THAT THE ADDITION IS BASED ON CONJECTURES AND SURMISES. ON GOING THROUGH THE CHART FOR RECONCILIATION REVENUE ON PERCENTAGE COMPLETION METHOD IN RESPECT OF SHETH BUILDERS PVT. LTD. AS PER ACCOUNTING POLICY AS 7, THE APPE LLANT HAS OFFERED REVENUE REALIZ ATION IN FOUR FINANCIAL YEARS I.E. 2010 - 11, 2011 - 12, 2012 - 13 AND 2013 - 14 BY OFFERING 100% OF THE REVENUE FROM THE PARTICULAR PROJECTION. THE AR OF THE APPELLANT COMPANY IS REALIZ ING THE INCOME FROM THE ABOVE PATTERN BY FOLLOWING THE PERCENTA GE COMPLETION METHOD AND PLEAD THAT THERE IS NO LEAKAGE/SUPPRESSION OF REVENUE. IN SUCH A SITUATION, THERE IS NO JUSTIFICATION FOR THE ADDITION OF RS.1,96, 60,129/ - MADE BY THE ASSESSING O FFICER ON THE M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 13 BASIS OF ESTIMATE OF GP. ACCORDINGLY, IT IS HELD THAT T HE SAID ADDITION IS NOT SUSTAINABLE AND THEREFORE, SAME IS DELETE D. 6.3 BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO . ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORD ER OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2010 - 11 AND THUS SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE ITAT A BENCH, MUMBAI IN ASSESSEES OWN CASE FOR AY 2010 - 11 (ITA NO. 6753/MUM/2014). THE TRIBUNAL VIDE ORDER DATED 28.09.2017 HEL D AS UNDER : 10. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE RELEVANT MATERIALS PLACED BEFORE US. WE FIND THAT THE ASSESSEE HAS BEEN REGULARLY SHOWING THE WIP IN ITS ACCOUNTS WHICH REPRESENTS THE UNBILLED WORK DONE ON BEHALF OF THE VARIOUS CLIENTS. T HE NATURE OF BUSINESS OF THE ASSESSEE IS SUCH THAT MATERIALS ARE NORMALLY DELIVERED AT THE SITES OF THE CUSTOMERS/ CONTRACTORS AND NECESSARY MODIFICATIONS AND FITTINGS ARE DONE AT THE SITE OF THE PROJECT. AT THE YEAREND INCOMPLETE WORK IS SHOWN AS WIP. TH IS IS A REGULAR FEATURE IN BUSINESS OF THE ASSESSEE. THE WIP IS AUTOMATICALLY ACCOUNTED FOR IN THE NEXT YEAR AND ALSO BILLED ACCORDINGLY DEPENDING UPON THE COMPLETION OF WORK AND PROFIT ON THE SAID AMOUNT IS OFFERED TO TAX ACCORDINGLY. WE FIND MERIT IN THE SUBMISSIONS OF THE LD.AR AND HAS GONE THROUGH THE PREVIOUS YEARS IN WHICH THE LD.CIT(A) HAS DELETED THE SIMILAR ADDITIONS MADE BY THE DEPARTMENT. THE DEPARTMENT HAS NOT FURTHER APPEALED BEFORE THE HIGHER FORUM. IN VIEW OF THESE FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE ORDER OF M/S ALUMILITE ARCHITECTURAL ITA NO. 5731/MUM/2015 14 CIT(A) IS NOT CORRECT IN UPHOLDING THE ADDITIONS AND THEREFORE WE REVERSE THE SAME AND DIRECT THE DIRECT THE AO TO DELETE THE ADDITION. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND CONFIRM THE ORDER OF THE LD. CIT(A). THUS THE 5 TH GROUND OF APPEAL IS DISMISSED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/07/2019. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/07/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI