CHANDU LAL MEENA, Jaipur V. DCIT, Jaipur

ITA 769/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5394 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTM KASHYAP CIT DHK
• Keywords: Business income; Retrospective amendment
• Section: 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 769/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI CHANDULAL MEENA C - 9, SARASWATI NAGAR, MALVIYA NAGAR, JAIPUR CUKE VS. THE DCIT, CIRCLE - 6, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AECPM 2041 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI PURUSHOTTM KASHYAP (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11.02.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11 /03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, JAIPUR ORDER DATED 06.08.2013 WHEREIN THE ASSESSEE HAS TAK EN FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS. 15,87,862/- OUT OF LAND DEVELOPMENT EXPENDI TURE IGNORING THE FACT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON SU CH DEVELOPMENT UPTO F.Y. 2011-12 WORKS OUT AT 92.10 SQ.MT ADOPTED BY TH E AO. 1.1 THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN H OLDING THAT HONBLE ITAT HAS CONFIRMED THE SIMILAR DISALLOWANCES IN EARLIER YEARS IGNORING THE FACT ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 2 THAT PART DISALLOWANCE CONFIRMED BY ITAT IN A.Y. 20 07-08 IS FOR DIFFERENT REASONS. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION OF RS.18,38,269/- ON ACCOUNT OF PROVISION FOR FUTURE DEVELOPMENT EXPENDITURE BY INCORRECTLY HOLDING THAT SINCE THE AMOUNT CLAIMED HAS NOT BEEN DEMANDED BY ANY GOVERNMENT AUT HORITY, THE SAME IS SUBJECT TO FUTURE CONTINGENCY AND THEREFORE CANNOT BE ALLOWED . 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE DISALLOWANCE OF INTEREST EXPENSE OF RS. 3,60,000/- U/S 40(A)(IA ) BY HOLDING THAT THE AMENDMENT MADE BY FINANCE ACT, 2010 IS APPLICABLE P ROSPECTIVELY BY NOT CONSIDERING THE DECISION OF HIGH COURTS WHERE THE A MENDMENT HAS BEEN HELD TO BE APPLICABLE RETROSPECTIVELY. 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS.19,80,903/- MADE BY THE AO BY TREATING THE AMOUN T RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS OF M/S MAHASHIV ESTA TES INDIA LTD. IN ITS ACCOUNT AGAINST THE PLOT SOLD BY ASSESSEE U/S 68 BY HOLDING IT TO BE A MODUS OPERANDI TO REDUCE THE TAXABLE INCOME. 2. REGARDING GROUND NO.1 AND 1.1, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF DEVELOPMENT OF TOWNSHIP IN AND AROUND JAIPUR. DURING THE YEAR UNDER CONSIDERATION, ASSESS EE HAD SOLD PLOTS OF MANVIHAR & RAJEEV NAGAR TOWNSHIP. IT INCURRED DEVELOPMENT EX PENDITURE OF RS.21,51,500/- COMPRISING OF RS.2,00,000 ON MATERIAL AND RS. 19,51 ,500 ON PAYMENT TO LABOUR. THE AO IN ORDER TO VERIFY THE NATURE AND EXTENT OF DEVELOPMENT WORK DONE BY THE ASSESSEE DEPUTED HIS INSPECTOR WHO HAS GIVEN HIS RE PORT WHICH IS REPRODUCED IN THE AOS ORDER. THE AO THEREAFTER BY REFERRING TO THE RATES OF VARIOUS EXPENDITURE REQUIRED TO BE INCURRED ON DEVELOPMENT OF TOWNSHIP AS PER THE LETTER OF JDA OBSERVED THAT THE MAXIMUM EXPENDITURE WHICH ASSESSE E IS TO INCUR FOR DEVELOPMENT WORK IS 156.50 PER SQ.MT. THE AO FURTHE R OBSERVED THAT IN ABSENCE OF ANY EVIDENCE TO DETERMINE THE QUANTUM OF WORK AN D RELATIVE EXPENSES AS WELL AS FROM THE REPORT OF THE INSPECTOR AND PHOTOGRAPHS TAKEN BY HIM, IT CAN BE ASSUMED THAT ASSESSEE HAS COMPLETED THE CONSTRUCTIO N OF ROAD UPTO FIRST LEVEL INCURRING EXPENDITURE AT THE RATE OF RS.25 PER SQ. MT., ELECTRIFICATION @ RS.45 PER ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 3 SQ.MT., STREET LIGHT @ 5 PER SQ.MT. AND LEVELING AN D DEMARCATION @ 15 PER SQ.MT. TOTALING TO RS.90 PER SQ.MT. THEREFORE ON DEVELOPME NT OF 151282 SQ YARDS LAND I.E. 126490 SQ.MT OF LAND OF MANVIHAR PROJECT, ASSE SSEE SHOULD HAVE INCURRED RS.1,13,84,100/- WHEREAS UPTO AY 2008-09 IT HAS ALR EADY INCURRED EXPENDITURE OF RS.1,08,20,462/-. HE THEREFORE ALLOWED THE DIFFEREN CE AMOUNT OF RS.5,63,638/- DURING THE YEAR OUT OF TOTAL CLAIM OF RS.21,51,500/ - TOWARDS DEVELOPMENT EXPENDITURE AND DISALLOWED THE BALANCE AMOUNT OF RS .15,87,862/-. ON APPEAL, THE LD. CIT(A) HELD THAT DISALLOWANCE MADE IN EARLIER Y EARS (RS.4,51,379/- IN A.Y. 07- 08) WHICH WAS ALREADY CONFIRMED BY ITAT SHOULD BE R EDUCED WHILE COMPUTING THIS YEARS STANDARD DEVELOPMENT EXPENSES. SUBJECT TO TH IS, DISALLOWANCE MADE BY AO WAS CONFIRMED FOR THE REASON MENTIONED IN THE ASSES SMENT ORDER. 2.1 THE LD. AR SUBMITTED THAT IN RESPECT OF MANVIHAR PR OJECT, ASSESSEE PURCHASED THE LAND IN TWO CHUNKS. IN F.Y. 05-06, HE PURCHASED 2,26,657 SQ. YARDS LAND AND AFTER CONSIDERING THE FACILITY AREA, THE S ALEABLE LAND WAS 1,51,282 SQ. YARDS. THIS LAND WAS DEVELOPED AND SOME OF THE PLOT S WERE SOLD DURING A.Y. 06-07 TO AY 10-11. THE POSITION OF THE SALEABLE LAND OF 1 ,51,282 SQ. YARDS IN THIS PROJECT AND THE DEVELOPMENT EXPENDITURE INCURRED ON YEAR TO YEAR BASIS IS TABULATED AS UNDER: A.Y. LAND SOLD AREA (SQ. YDS) DEVELOPMENT EXPENSES INCURRED (RS.) DEVELOPMENT COST PER SQ. YDS OF LAND SOLD LAND IN STOCK (SQ. YDS.) 2006-07 46710.97 47,06,375.00 100.76 104570.72 2007 - 08 37315.74 21,53,570.00 57.71 67254.98 2008 - 09 32304.98 39,60,517.00 122.60 40781.02 2009 - 10 8946.71 21,51,500.00 240.48 31856.53 2010 - 11 5837.16 6,02,100.00 103.15 26019.37 2011 - 12 3933.28 798185.00 202.93 22086.09 2012 - 13 10335.58 1644800.00 159.14 11750.51 TOTAL 145384.42 16017047.00 110.17(AVG.) ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 4 FROM THE ABOVE TABLE, IT CAN BE NOTED THAT ON YEAR TO YEAR BASIS, THERE IS VARIATION IN THE PER SQUARE YARD OF THE LAND SOLD VIS-A-VIS D EVELOPMENT EXPENSES INCURRED. THIS IS FOR THE REASON THAT ASSESSEE HAS FOLLOWED A POLICY WHERE IN RESPECT OF INTERNAL DEVELOPMENT EXPENSES, THE SAME IS CHARGED TO THE PROFIT AND LOSS ACCOUNT IN THE YEAR OF INCURRENCE OF THE EXPENDITUR E WITHOUT MAKING PROVISION FOR EXPENSES YET TO BE INCURRED IN PLOTS ALREADY SOLD. THE AVERAGE DEVELOPMENT COST OF ALL THE YEARS TAKEN TOGETHER IS ONLY RS.110.17 P ER SQ. YARDS WHICH IS REASONABLE. IT WAS FURTHER SUBMITTED THAT FOR THE DEVELOPMENT O F THE TOWNSHIP, ASSESSEE HAS TO CARRY OUT VARIOUS DEVELOPMENT WORK LIKE LEVELING /CLEANING OF LAND INCLUDING LANDSCAPING, CONSTRUCTION OF INTERNAL ROADS OF PART ICULAR SPECIFICATION, DEMARCATION OF PLOT, POWER SUPPLY AND STREET LIGHTI NG, WATER SUPPLY SYSTEM, UNDERGROUND SEWERAGE AND DRAINAGE LINE, HORTICULTUR E AND PLANTATION, WATER RECYCLING AND RAIN WATER HARVESTING ETC. THESE ARE ONGOING ACTIVITIES, WHICH CONTINUES EVEN WHEN A PARTICULAR PLOT HAS BEEN SOLD AND THE PATTA HAS BEEN ISSUED. AS A MATTER OF POLICY, THE ASSESSEE CLAIMS ACTUAL EXPENDITURE INCURRED ON DEVELOPMENT ON YEAR TO YEAR BASIS IN THE PROFIT AND LOSS ACCOUNT AND SIMULTANEOUSLY ACCOUNT FOR THE SAME. THE ASSESSEE H AS NOT MADE ANY PROVISION FOR EXPENDITURE TO BE INCURRED IN RESPECT OF SUCH D EVELOPMENT WORK WHICH IS STILL TO BE CARRIED OUT THOUGH THE PLOT HAS BEEN SOLD AND ACCOUNTED FOR IN THE INCOME. IT IS FOR THIS REASON THAT THERE IS NO CORRELATION OF THE EXPENDITURE INCURRED ON DEVELOPMENT ON YEAR TO YEAR BASIS WITH THE AREA OF PLOT SOLD ON YEAR TO YEAR BASIS. IT WAS FURTHER SUBMITTED THAT THE AO HAS ASSUMED TH AT ASSESSEE HAS DONE ONLY FOLLOWING WORK ON THE DEVELOPMENT OF MANVIHAR PROJE CT ON THE BASIS OF JDA LETTER. THE COPY OF THIS LETTER HAS NOT BEEN PROVID ED TO THE ASSESSEE. PARTICULARS OF WORK AMOUNT INCURRED (PER SQ.MT) (I) CONSTRUCTION OF ROAD UPTO FIRST LEVEL RS.25 (II) ELECTRIFICATION RS.45 (III)STREET LIGHT RS.5 (IV)DEMARCATION OF PLOTS RS.15 TOTAL RS.90 ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 5 ACCORDINGLY, HE HAS APPLIED THE RATE OF RS.90 PER S Q.MT TO THE TOTAL SALEABLE AREA IGNORING THE FACT THAT BEFORE CONSTRUCTION OF ROAD AND OTHER ACTIVITIES LIKE ELECTRIFICATION, LIGHTNING, ETC, NUMBER OF OTHER AC TIVITIES ARE TO BE UNDERTAKEN I.E. CUTTING OF GRASS/TREES AND THORNY TREES, LAND CLEAN ING, FILLING OF TRANCHES, MAPING & SPACING OF LAND AND LEVELING OF RAW LAND. THEREFORE ACTION OF AO WITHOUT CONSIDERING THESE BASIC ACTIVITIES AND APPLYING STA NDARD RATE OF RS.90 PER SQ.MT IS INCORRECT. EVEN OTHERWISE, THE LAND DEVELOPMENT EXPENDITURE IN CURRED BY THE ASSESSEE AT THE AVERAGE RATE OF RS.110.17 SQ.YARDS WHEN CONVERT ED INTO SQUARE METERS, EXPENDITURE INCURRED ON DEVELOPMENT TILL FY 2011-12 WORKS OUT TO RS.92.10 SQ.MTS WHICH IS NEARBY THE SAME RATE OF RS.90 PER S Q.MT APPLIED BY THE AO (IF 90 SQ. MTR IS CONVERTED INTO YARD, IT COMES TO 107.64 SQ. YARD). FURTHER HONBLE ITAT ,JAIPUR BENCH IN APPEAL NO.805/JP/2011 FOR AY 2007- 08 HAS ALREADY CONFIRMED THE DISALLOWANCE OUT OF DEVELOPMENT EXPENDITURE AT RS.4 ,51,379. THEREFORE ANY FURTHER DISALLOWANCE ON ACCOUNT OF DEVELOPMENT EXPE NDITURE IS UNJUSTIFIED AND NOT CALLED FOR. IT WAS FURTHER SUBMITTED THAT SO FAR AS VERIFIABILI TY OF THE EXPENDITURE ON LABOUR INCURRED BY THE ASSESSEE WHICH IS DOUBTED BY THE AO IS CONCERNED, THERE CAN BE ONLY HAND MADE VOUCHERS FOR SUCH EXPENSES. IN RESPE CT OF WAGES PAYMENT THE SITE SUPERVISOR RECORDED THE ATTENDANCE IN DIARY ON THE BASIS OF WHICH WAGES SHEETS ARE PREPARED. ON PAYMENT OF WAGES, SIGNATURE OR THU MB IMPRESSION IS OBTAINED. THE INSPECTORS REPORT DATED 05.12.2011 IS NOT CONF RONTED TO ASSESSEE AND THEREFORE ASSESSEE VIDE LETTER DATED 08.12.2011 REQ UESTED AO TO PHYSICALLY VISIT THE SITE AND VERIFY THE GENUINENESS OF CLAIM OF WAG ES. IN ANY CASE CONSIDERING THE AREA DEVELOPED AND AS PER THE STATISTICAL DATA GIVE N ABOVE, THE EXPENDITURE IS REASONABLE. THE AO HAS DOUBTED THE CLAIM OF DEVELOP MENT EXPENDITURE CLAIMED DURING THE YEAR WHICH INCLUDES LABOUR EXPENSES IGNO RING THAT THE DEVELOPMENT EXPENDITURE PER SQ.MT. OF LAND SOLD DURING THE YEAR IS ALMOST SIMILAR TO HIS CALCULATION OF RS.90 PER SQ.MT & THE G.P. RATE DECL ARED AT 41.10% DURING THE YEAR IS MUCH BETTER THAN G.P. RATE OF 24.63% DECLARED IN LAST YEAR. ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 6 IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HAS NO T PROPERLY APPRECIATED THE ABOVE CONTENTION OF THE ASSESSEE. HE IGNORED THAT T HE EXPENDITURE INCURRED BY THE ASSESSEE ON LAND DEVELOPMENT WORKS OUT AT RS.92 .10 SQ. MTR. (110.17 PER SQ. YARD) OF THE LAND AREA SOLD WHEREAS AO HIMSELF HAS ACCEPTED THE REASONABLE RATE AT RS.90 PER SQ. MTR. OF LAND AREA SOLD. THE HONBL E ITAT HAS EARLIER DISALLOWED RS.4,51,379/- OUT OF THESE EXPENSES. THE LD. CIT(A) HAS DIRECTED THE AO TO REDUCE THE DISALLOWANCE BY THIS AMOUNT. THIS WORKS OUT TO RS.3.10 PER SQ. YARD OF LAND SOLD. CONSIDERING THIS DISALLOWANCE, EVEN AS PER AO , NO DISALLOWANCE IS REQUIRED TO BE MADE. IN VIEW OF ABOVE, DISALLOWANCE CONFIRMED B Y THE CIT(A) BE DELETED. 2.2 THE LD DR IS HEARD WHO HAS ARGUED THE MATTER AT LENGTH AND SUBMITTED THAT DEVELOPMENT EXPENDITURE COMPUTED BY THE AO IS AS PE R JDA FORMULA AND THE AO IS CORRECT IN BENCMARKING THE ASSESSEES ACTUAL DEV ELOPMENT EXPENDITURE AGAINST THE JDA RATE AND DISALLOWING THE EXCESS CLAIM OF SU CH EXPENDITURE. 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL ON RECORD. AS PER THE LD AR, FOR THE DEVELOPMENT OF THE TOWNSH IP, ASSESSEE HAS TO CARRY OUT VARIOUS DEVELOPMENT WORK LIKE LEVELING/CLEANING OF LAND INCLUDING LANDSCAPING, CONSTRUCTION OF INTERNAL ROADS OF PARTICULAR SPECIF ICATION, DEMARCATION OF PLOT, POWER SUPPLY AND STREET LIGHTING, WATER SUPPLY SYST EM, UNDERGROUND SEWERAGE AND DRAINAGE LINE, HORTICULTURE AND PLANTATION, WAT ER RECYCLING AND RAIN WATER HARVESTING ETC. THESE ARE ONGOING ACTIVITIES, WHIC H CONTINUES EVEN WHEN A PARTICULAR PLOT HAS BEEN SOLD AND THE PATTA HAS BEE N ISSUED. HOWEVER, AS PER AO, BASED ON REPORT OF THE INSPECTOR AND THE PHOTOGRAPH S OF THE SITES, IT CAN BE ASSUMED THAT THE ASSESSEE HAS CONSTRUCTED ROAD (UPT O FIRST LEVEL) AND HAS CARRIED OUT ACTIVITIES OF ELECTRIFICATION, STREET LIGHT, LE VELING AND DEMARACATION OF PLOTS. IT IS THUS NOT IN DISPUTE THAT THE ASSESSEE HAS CARRIE D CERTAIN DEVELOPMENT ACTIVITIES DURING THE YEAR UNDER CONSIDERATION. THE LIMITED I SSUE UNDER CONSIDERATION THEREFORE IS TO DETERMINE THE QUANTUM OF DEVELOPMEN T EXPENDITURE RELATED TO VARIOUS DEVELOPMENT ACTIVITIES UNDERTAKEN BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION. ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 7 2.4 IN OUR VIEW, IT IS THE ACTUAL EXPENDITURE WHICH HAS BEEN INCURRED DURING THE YEAR FOR CARRYING OUT VARIOUS DEVELOPMENT ACTIVITIE S WHICH SHOULD BE ALLOWED FOR TAX PURPOSES. THE ASSESSEE HAS INCURRED EXPENDITUR E OF RS 2 LACS TOWARDS MATERIAL FOR ROAD CONSTRUCTION AND AN AMOUNT OF RS 19,51,500 RELATES TO PAYMENT TO LABOURERS. AS PER AO, THE ASSESSEE HAS SUBMITTE D A COPY OF WAGE REGISTER REVEALING MONTHWISE PAYMENT TO DIFFERENT PERSONS. HOWEVER, THE ASSESSEE HAS FAILED TO PRODUCE THE BASIS OF RECORDING ATTENDANCE OF THE LABOUR, NATURE OF WORK DONE BY THEM SO THAT PER DAY REMUNERATION PAID TO T HEM MAY BE ASCERTAINED. AS PER LD AR, IN RESPECT OF WAGES PAYMENT THE SITE SUP ERVISOR RECORDED THE ATTENDANCE IN DIARY ON THE BASIS OF WHICH WAGES SHE ETS ARE PREPARED. ON PAYMENT OF WAGES, SIGNATURE OR THUMB IMPRESSION IS OBTAINED . THE INSPECTORS REPORT DATED 05.12.2011 IS NOT CONFRONTED TO ASSESSEE AND THEREF ORE ASSESSEE VIDE LETTER DATED 08.12.2011 REQUESTED AO TO PHYSICALLY VISIT THE SIT E AND VERIFY THE GENUINENESS OF CLAIM OF WAGES WHICH HAS NOT BEEN DONE. HOWEVER, W E FOUND THAT THIS IS NOTHING ON RECORD TO SUGGEST THAT THE AO HAS CARRIED OUT AN Y INVESTIGATION/ENQUIRY FROM THE LABOURERS WHO HAVE RECEIVED THE WAGES OR MADE A NY SITE VISIT AS OFFERED BY THE ASSESSEE. INSTEAD, THE AO HAS OBTAINED A LETTE R FROM JDA WHICH SPECIFIES CERTAIN ADHOC EXPENSE TOWARDS DEVELOPMENT ACTIVITIE S AND BASED ON INSPECTORS SITE REPORT, HAS DETERMINED THE DEVELOPMENT EXPENDI TURE WHICH THE ASSESSEE OUGHT TO HAVE INCURRED. GIVEN THAT THE ASSESSEE HA S FURNISHED THE WAGE REGISTER AND WHERE THE AO HAD ANY DOUBTS ABOUT THE VERACITY OF ASSESSEES CLAIM BUT FAILED TO CARRY OUT ANY FURTHER INVESTIGATION, THE ASSESSEE CANNOT BE DENIED THE CLAIM OF THE DEVELOPMENT EXPENDITURE BASIS LACK OF ATTENDANCE REGISTER SIMPLICITER. FURTHER, WE ARE UNABLE TO APPRECIATE THE STAND OF THE REVENUE THAT BASIS REPORT OF AN INCOME TAX INSPECTOR WHO IS NOT A SPECIALIZED PERSON, AN ASSESSMENT CAN BE MADE OF ACTUAL DEVELOPMENT ACTIV ITIES AND EXTENT THEREOF AND DETERMINE THE CORRESPONDING EXPENDITURE WHICH WOULD HAVE BEEN INCURRED BY THE ASSESSEE. THE REVENUE HAS ITS OWN VALUATION DEPART MENT CONSISTING OF SPECIALIZED PERSON OR OUTSIDE AGENCIES LIKE JDA WHICH COULD HAV E BEEN CONTACTED TO DETERMINE THE CLAIM OF THE ASSESSEE WHICH APPARENTL Y HAS NOT BEEN THOUGHT OF AND NOT CARRIED OUT BY THEM. ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 8 2.5 GIVEN THAT THE AO HAS FOLLOWED A MACRO APPROACH WHERE THE DEVELOPMENT EXPENDITURE OVER THE YEARS HAS BEEN CONSIDERED BY H IM FOR DETERMINING THE QUANTUM OF DEVELOPMENT EXPENDITURE FOR THE YEAR UND ER CONSIDERATION, LETS NOW CONSIDER HOW THE ASSESSEE HAS ACCOUNTED FOR THE DEV ELOPMENT EXPENDITURE OVER THE YEARS AND HOW THE SAME HAS BEEN CONSIDERED BY T HE AO. IN THE PRESENT FACTS, IT IS NOTED THAT THE DEVELOPMENT ACTIVITIES VARIES FROM YEAR TO YEAR AND THE AREA OF 151282 SQ. YARDS HAS BEEN LARGELY DEVELOPED OVER A PERIOD OF TIME STARTING FINANCIAL YEAR 2006-07 TILL FINANCIAL YEAR 2012-13. AS PER THE ASSESSEE, HE IS FOLLOWING A CONSISTENT POLICY YEAR-ON-YEAR WHERE IN RESPECT OF INTERNAL DEVELOPMENT ACTIVITIES, THE ACTUAL DEVELOPMENT EXPE NDITURE IS CHARGED TO THE PROFIT/LOSS ACCOUNT AMOUNT AND CLAIMED FOR TAX PURP OSES. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT MADE ANY PROVIS ION FOR FUTURE DEVELOPMENT EXPENDITURE THOUGH THE PLOT HAS BEEN SOLD AND ACCOU NTED FOR IN THE INCOME. IT IS FOR THIS REASON THAT THERE IS NO CORRELATION OF THE EXPENDITURE INCURRED ON DEVELOPMENT ON YEAR TO YEAR BASIS WITH THE AREA OF PLOT SOLD ON YEAR TO YEAR BASIS. ALTERNATIVELY, IT WAS SUBMITTED THAT EVEN IF THE AR EA OF DEVELOPED LAND ACTUALLY SOLD IS CONSIDERED RATHER THAN SALEABLE AREA ON WHI CH THE DEVELOPMENT IS ACTUALLY CARRIED OUT AND EXPENDITURE INCURRED ON DEVELOPMENT TILL FY 2011-12 IS CONSIDERED, THE AVERAGE DEVELOPMENT COST WORKS OUT TO RS.92.10 SQ.MTS WHICH IS VERY CLOSE TO RATE OF RS.90 PER SQ.MT APPLIED BY TH E AO. THE AO HAS TAKEN AS A BASIS A LETTER FROM THE JDA WHICH TALKS ABOUT VARIO US ADHOC EXPENSES (AND RATE THEREOF) FOR DIFFERENT AMENITIES/WORK/DEVELOPMENT T O BE DONE BY THE DEVELOPER IN COLONIES APPROVED BY JDA. THE SAID LETTER OF AO HAS FORMED THE BENCHMARK OF RS 90 PER SQ.MT TAKEN BY AO WHICH HE HAS APPLIED ON THE SALEABLE LAND MEASURING 151282 SQ. YARDS EQUIVALENT TO 126490 SQ. MTS. FUR THER, THE AO HAS CONSIDERED THE CUMULATIVE DEVELOPMENT EXPENDITURE INCURRED OVE R THE LAST THREE FINANCIAL YEARS AND THE YEAR UNDER CONSIDERATION AND AFTER AP PLYING THE RATE OF RS 90 PER SQ. MT FOR 151282 SQ. YARDS HAS WORKED OUT THE EXCE SS CLAIM OF DEVELOPMENT EXPENDITURE WHICH HAS BEEN DISALLOWED. 2.6 AS STATED ABOVE, THE DEVELOPMENT ACTIVITIES VAR IES FROM YEAR TO YEAR AND THE AREA OF 151282 SQ. YARDS HAS BEEN LARGELY DEVEL OPED OVER A PERIOD OF TIME STARTING FINANCIAL YEAR 2006-07 TILL FINANCIAL YEAR 2012-13, IN OUR VIEW, IT WOULD ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 9 GIVE A BETTER AND MORE HOLISTIC PICTURE TO CONSIDER THE ACTUAL DEVELOPMENT EXPENDITURE INCURRED DURING ALL THESE YEARS (PAST A S WELL AS FUTURE) IN RELATION TO WHOLE OF THE SALEABLE AREA OF 151282 SQ. YARDS AND THEN COMPARE IT WITH THE BENCHMARK AS TAKEN BY AO (SPECIFIED BY JDA) AND DET ERMINE WHETHER THE SAME RESULTS IN ANY VARIATION BETWEEN THE EXPENDITURE CL AIMED AND ALLOWABLE FOR THE YEAR UNDER CONSIDERATION. AS PER THE LD AR, IF ONE WERE TO FOLLOW THIS MACRO APPROACH, THE AVERAGE DEVELOPMENT COST WORKS OUT TO RS.92.10 SQ.MTS WHICH IS VERY CLOSE TO RATE OF RS.90 PER SQ.MT APPLIED BY TH E AO. FURTHER, REGARDING THE BENCHMARK RATE OF RS.90 PER SQ.MT ADOPTED BY THE AO , THE AO HIMSELF IS STATING THAT THE LETTER FROM JDA TALKS SOME CERTAIN ADHOC E XPENSES AND IT IS ALSO UNCLEAR WHETHER RATE SUGGESTED IS THE MAXIMUM RATE OR MINIM UM RATE OF DEVELOPMENT PER SQ MT. WHICH PUTS A QUESTION MARK ON RELIABILIT Y OF SUCH BENCHMARK. ANOTHER FACET OF THE BENCHMARK IS THAT IT CONSIDERS THE ACT IVITIES WHICH HAVE BEEN ASSUMED TO HAVE BEEN UNDERTAKEN BY THE ASSESSEE RAT HER THAN THE ACTUAL ACTIVITIES WHICH HAVE BEEN CONFIRMED THROUGH A SPEC IALIZED AGENCY. CONSIDERING ALL THESE FACTS INTO ACCOUNT, THE STAND OF THE REVE NUE THAT THERE IS A VARIATION BETWEEN THE ACTUAL DEVELOPMENT EXPENDITURE OVER THE PERIOD AS CLAIMED BY THE ASSESSEE AND AS DETERMINED FOLLOWING JDA RATE CANNO T BE SUSTAINED. 2.7 IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF T HE CASE, THE DISALLOWANCE OF DEVELOPMENT EXPENDITURE OF 15,87,862 SUSTAINED BY L D CIT(A) IS HEREBY DELETED. HENCE, GROUND NO. 1 OF ASSESSEE IS ALLOWED. 3. REGARDING GROUND NO.2, THE ASSESSEE HAS CHALLENG ED THE DISALLOWANCE OF CLAIM OF DEDUCTION OF RS.18,38,269/- ON ACCOUNT OF PROVISION FOR FUTURE DEVELOPMENT EXPENDITURE BY INCORRECTLY HOLDING THAT SINCE THE AMOUNT CLAIMED HAS NOT BEEN DEMANDED BY ANY GOVERNMENT AUTHORITY, THE SAME IS SUBJECT TO FUTURE CONTINGENCY AND THEREFORE CANNOT BE ALLOWED. 3.1 BRIEFLY THE FACTS RELEVANT FOR THE ISSUE UNDER CONSIDERATION ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE MADE A P ROVISION FOR LIABILITY OF EDC CHARGES AT RS.18,38,269/- I.E. AT THE RATE OF RS.16 5/- PER SQ. YARD ON THE SOLD PLOT AREA OF 11141 SQ. YARDS IN RESPECT OF MAAN VIHAR AN D RAJIV NAGAR COLONY. THE AO, ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 10 HOWEVER BY REFERRING TO THE JUDGMENT OF HONBLE SUP REME COURT IN CASE OF CIT VS. ROTORK CONTROLS INDIA (P) LTD. 314 ITR 62 OBSERVED THAT THE PROVISION SO MADE BY THE ASSESSEE IS ON ADHOC BASIS, ASSESSEE HAS NOT GI VEN THE NATURE OF DEVELOPMENT WORK TO BE DONE, QUANTUM OF WORK AND RATE/CALCULATI ON TO DETERMINE THE QUANTUM OF EXPENDITURE TO BE INCURRED IN RESPECT OF PLOTS SOLD AND THE LIABILITY IS CONTINUING. FURTHER, THE PROVISION IS AN UNASCERTAI NED LIABILITY FOR WHICH NO PROVISION CAN BE MADE UNLESS THEY ARE ASCERTAINABLE IN A DEFINITE AND SCIENTIFIC MANNER. THE AO, THUS MADE DISALLOWANCE OF RS.18,38, 269/-. 3.2 THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY GI VING THE FOLLOWING FINDINGS (PARA 3.3 OF THE ORDER): APPELLANT CLAIMED FUTURE DEVELOPMENT EXPENSES IN R ESPECT OF PLOTS SOLD. IT WAS CLAIMED THAT THESE ARE THE EXTERNAL DEVELOPMENT CHA RGES TO BE PAID TO GOVERNMENT AGENCIES AS AND WHEN DEMANDED. AO HELD T HAT THESE EXPENSES ARE UNASCERTAINED LIABILITY AND THEREFORE CANNOT BE ALL OWED IN VIEW OF THE APEX COURT DECISION REFERRED BY THE AO. IT IS NOT IN DISPUTE T HAT THE AMOUNT CLAIMED HAS NOT BEEN DEMANDED BY ANY GOVERNMENT AGENCY FROM THE APP ELLANT AS ON DATE. THEREFORE, CLAIMING ANY FUTURE EXPENSE WHICH IS BAS ED ON MANY CONTINGENCIES SUCH AS CHANGE IN RATES, POLICY ETC. CANNOT BE ALLO WED AS ASCERTAINED LIABILITY. THE ARGUMENT THAT NO DISALLOWANCE OF THESE EXPENSE WERE MADE IN EARLIER YEARS CANNOT BE THE BASIS OF CLAIM. EACH CLAIM OF EXPENSE HAS TO BE INDEPENDENTLY PROVED TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS. SINCE THERE IS NO DEMAND OF THESE EXPENSES, THIS CLAIM IS SUBJECT TO FUTURE CONTINGENCIES AND ACCORDINGLY THE SAME CANNOT BE ALLOWED. THE DIS ALLOWANCE MADE BY THE AO IS ACCORDINGLY CONFIRMED. 3.3 THE LD AR SUBMITTED THAT AS PER THE POLICY OF G OVERNMENT OF RAJASTHAN FOR TOWNSHIPS ISSUED BY THE DEPARTMENT OF URBAN DEV ELOPMENT, HOUSING & LOCAL SELF GOVERNMENT IN RESPECT OF THE SOLD PLOTS, ASSES SEE HAS TO DEPOSIT WITH THE JDA, EXTERNAL AND PERIPHERAL DEVELOPMENT CHARGES I. E. (EDC) WHICH INCLUDES WORK LIKE CROSS DRAINAGE, STREET LIGHTNING, PLANTATION, STORAGE WATER DRAINS, SEWERAGE ETC. THESE CHARGES HAVE TO BE PAID WHENEVER THE LAY OUT PLANS WILL BE RELEASED OR ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 11 CAMPS WILL BE HELD BY THE JDA AND ONLY AFTER THE PA YMENT OF THESE CHARGES IN FULL OR PROPORTIONATE AS MAY BE PRESCRIBED, PATTAS WILL BE ISSUED IN THE NAME OF THE ALLOTTEES BY THE GOVERNMENT. THE RATE FOR SUCH CHAR GES PRESCRIBED IS RS.200 PER SQ. MT FOR JAIPUR. THIS WHEN CONVERTED INTO YARDS, GIVES A RATE OF 240 PER SQ YARDS (200 SQ YARDS*1.19599). THE LD. AR FURTHER SUBMITTED THAT THE PROVISION OF RS.165 PER SQ. YARD OF THE PLOTS SOLD DURING THE YEAR IS ON SCIENTIFIC BASIS IN AS M UCH AS THE SAME IS PROVIDED AS PER THE NOTIFICATION DATED 29.03.2007 ISSUED BY THE GOV ERNMENT OF RAJASTHAN UNDER RAJASTHAN TOWNSHIP POLICY-2010. AS PER THIS SUB POL ICY FOR EXTERNAL DEVELOPMENT CHARGES, AN AMOUNT OF RS.165 PER SQ. YARD IS TO BE PAID TO THE GOVERNMENT. THE ASSESSEE IS LIABLE TO DEPOSIT THE SAID AMOUNT WHENE VER DEMANDED BY THE GOVERNMENT. THIS HAS BEEN ALLOWED TO THE ASSESSEE I N PREVIOUS YEARS ALSO. THIS IS AN ACCRUED LIABILITY. THE RATE IS PROVIDED BY GOVER NMENT AND THEREFORE ITS CALCULATION IS ALSO SCIENTIFIC. THEREFORE, THE AMOU NT CHARGED AGAINST PROVISION FOR CONVERSION BY THE ASSESSEE IS AN ALLOWABLE EXPENDIT URE AS PER THE DECISION OF SUPREME COURT RELIED BY THE AO. IT WAS FURTHER SUBMITTED THAT SIMILAR ISSUE HAS BEE N DECIDED BY THE HONBLE ITAT JAIPUR BENCH IN FAVOUR OF THE ASSESSEE IN CASE OF D CIT VS. M/S SHREE RAM KRIPA BUILDCON (P.) LTD. IN ITA NO. 1076 AND 1078/JP/11 O RDER DT. 13.01.2012, ACIT VS. M/S SHREE SALASAR OVERSEAS (P) LTD. IN ITA NO. 910 TO 912/JP/13 ORDER DT. 28.03.2014 AND DCIT VS. SHRI RAM CHANDRA AGARWAL IN ITA NO. 707/JP/12 ORDER DT. 13.02.2015. IN THE CASE OF DCIT VS. M/S SHREE RAM K RIPA BUILDCON (P.) LTD. PERTAINING TO A.Y. 08-09, THE PROVISION MADE @175/S Q. YARD OF THE SALES MADE DURING THE YEAR WAS ALLOWED BY HONBLE ITAT. AGAIN IN CASE OF DCIT VS. SHRI RAM CHANDRA AGARWAL PERTAINING TO A.Y. 09-10, THE HONB LE ITAT CONSIDERED THE ARGUMENT OF THE ASSESSEE THAT WHEN THE EXTERNAL DEV ELOPMENT IS CARRIED OUT THROUGH JDA, A PAYMENT OF RS.250/SQ. MTR. IS TO BE MADE. THE COST OF DEVELOPMENT OF THESE FACILITIES WORKS OUT AT RS.175 /SQ. MTR WHEREAS ASSESSEE MADE PROVISION @RS.145/SQ. YARD. THE LIABILITY TOWA RDS DEVELOPMENT EXPENSES IS TO BE INCURRED IN FUTURE ON THE PLOT SOLD DID NOT E XTINGUISH MERELY BECAUSE THE ASSESSEE HAS INCURRED SMALL PART OF EXPENSES IN NEX T FEW YEARS. AFTER CONSIDERING ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 12 THESE ARGUMENT AND FOLLOWING THE DECISION OF CO-ORD INATE BENCH ON IDENTICAL ISSUE IN A.Y. 08-09, THE DISALLOWANCE MADE BY THE A O WAS DELETED BY UPHOLDING THE ORDER OF CIT(A). IN VIEW OF ABOVE, THE DISALLOW ANCE CONFIRMED BY THE CIT(A) BE DELETED. 3.4 THE LD DR IS HEARD WHO HAS RELIED HEAVILY ON TH E ORDER OF THE LOWER AUTHORITIES AS WELL AS THE DECISION OF HONBLE SC I N CASE OF ROTORK CONTROLS INDIA (P) LTD. (314 ITR 62) AND SUBMITTED THAT IT IS A CL EAR CASE OF AN ADHOC PROVISION ESPECIALLY GIVEN THE FACT THAT THE AMOUNT CLAIMED H AS NOT BEEN DEMANDED BY ANY GOVERNMENT AGENCY FROM THE APPELLANT AS ON DATE . 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, IT IS NOT IN DISPUTE THAT THE PRO VISION IS TOWARDS EDC CHARGES WHICH ARE PAYABLE TO JDA IN RESPECT OF PLOTS OF LAND SOLD DURING THE YEAR INCOME WHEREOF HAS BEEN OFFERED TO TAX DULY OFFERED IN THE RETURN OF INCOME. SECONDLY, DURING THE COURSE OF HEARING, THE BENCH HAD ASKED A SPECIFIED QUESTION TO LD AR WHETHER THESE EDC CHARGES ARE IN RESPECT OF COLONIES AS APP ROVED BY JDA AND IN RESPONSE, IT WAS SUBMITTED THAT THESE TWO COLONIES NAMELY, MA ANVIHAR AND RAJIV NAGAR ARE COLONIES APPROVED BY JDA. IT IS THUS NOT IN DISPUT E THAT THE AMOUNT OF EDC CHARGES ARE PAYABLE TO JDA AS PER THE STATED POLICY OF THE STATE GOVERNMENT IN RESPECT OF APPROVED COLONIES. IT IS THUS CLEAR THAT THESE EDC CHARGES ARE PAYABLE TO JDA AND THESE CHARGES ARE IN RESPECT OF PLOTS OF LAND ACTUALLY SOLD DURING THE YEAR. ACCORDINGLY, THE LIABILITY TOWARDS SUCH EDC CHARGES HAS ARISEN DURING THE YEAR UNDER CONSIDERATION. 3.6 THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS THE RATE AT WHICH PROVISION TOWARDS THE EDC LIABILITY HAS BEEN CREATE D. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE PROVISION OF RS.165 PER SQ. YARD OF THE PLOTS SOLD DURING THE YEAR IS ON SCIENTIFIC BASIS IN AS MUCH AS THE SAME IS PROVIDED AS PER THE NOTIFICATION DATED 29.03.2007 ISSUED BY THE GOVERNM ENT OF RAJASTHAN UNDER RAJASTHAN TOWNSHIP POLICY-2010. AS PER THIS SUB POL ICY FOR EXTERNAL DEVELOPMENT CHARGES, AN AMOUNT OF RS.165 PER SQ. YARD IS TO BE PAID TO THE GOVERNMENT. AS PER AO, THE BASIS IS TAKEN ON ADHOC BASIS AT THE RATES MENTIONED BY JDA BUT IT WILL BE ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 13 ALLOWED IF CALCULATION OF LIABILITIES, IF ANY, IS M ADE IN A SCIENTIFIC MANNER IN RESPECT OF PAST ACTIVITIES AS DECIDED BY HONBLE SUPREME CO URT IN CASE OF ROTORK CONTROLS INDIA PVT LTD (SUPRA). 3.7 THE FACTS IN CASE OF ROTORK CONTROLS INDIA PVT LTD WERE THAT THE ASSESSEE- COMPANY WAS MANUFACTURING AND SELLING VALVE ACTUATO RS IN LARGE NUMBERS. AT THE TIME OF SALE IT PROVIDED A STANDARD WARRANTY, WHERE BY IN THE EVENT OF ANY ACTUATOR OR PART THEREOF BECOMING DEFECTIVE WITHIN 12 MONTHS FROM THE DATE OF COMMISSIONING OR 18 MONTHS FROM THE DATE OF DISPATC H, WHICHEVER WAS EARLIER, IT UNDERTOOK TO RECTIFY OR REPLACE THE DEFECTIVE PART FREE OF CHARGE. FOR THE RELEVANT ASSESSMENT YEARS, THE ASSESSEE MADE A PROVISION FOR WARRANTY ON ACCOUNT OF WARRANTY CLAIMS LIKELY TO ARISE ON THE SALES EFFECT ED BY IT AND TO COVER UP THAT EXPENDITURE. IN THE BACKGROUND OF ABOVE FACTS, IT WAS HELD BY HO NBLE SUPREME COURT (HEAD NOTES): A PROVISION IS A LIABILITY WHICH CAN BE MEASURED O NLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION. A PROVISION IS RECOGNIZED WHEN: (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT; (B) IT IS P ROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED TO SETTLE THE OBLIGATION ; AND (C ) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION. IF THESE C ONDITIONS ARE NOT MET, NO PROVISION CAN BE RECOGNIZED. [PARA 10] LIABILITY IS DEFINED AS A PRESENT OBLIGATION ARISIN G FROM PAST EVENTS, THE SETTLEMENT OF WHICH IS EXPECTED TO RESULT IN AN OUTFLOW OF RES OURCES FROM THE ENTERPRISE EMBODYING ECONOMIC BENEFITS. [PARA 11] A PAST EVENT THAT LEADS TO A PRESENT OBLIGATION IS CALLED AS AN OBLIGATING EVENT WHICH IS AN EVENT THAT CREATES AN OBLIGATION WHICH RESULTS IN AN OUTFLOW OF RESOURCES. IT IS ONLY THOSE OBLIGATIONS ARISING FRO M PAST EVENTS WHICH EXIST INDEPENDENTLY OF THE FUTURE CONDUCT OF THE BUSINESS OF THE ENTERPRISE, THAT ARE RECOGNIZED AS A PROVISION. FOR A LIABILITY TO QUALI FY FOR RECOGNITION, THERE MUST BE ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 14 NOT ONLY PRESENT OBLIGATION BUT ALSO THE PROBABILIT Y OF AN OUTFLOW OF RESOURCES TO SETTLE THAT OBLIGATION. WHERE THERE ARE A NUMBER OF OBLIGATIONS (E.G., PRODUCT WARRANTIES OR SIMILAR CONTRACTS), THE PROBABILITY T HAT AN OUTFLOW WILL BE REQUIRED IN SETTLEMENT IS DETERMINED BY CONSIDERING THE SAID OB LIGATIONS AS A WHOLE. IN THIS CONNECTION, IT MAY BE NOTED THAT IN THE CASE OF A M ANUFACTURE AND SALE OF ONE SINGLE ITEM, THE PROVISION FOR WARRANTY CAN CONSTIT UTE A CONTINGENT LIABILITY NOT ENTITLED TO DEDUCTION UNDER SECTION 37. HOWEVER, WH EN THERE IS MANUFACTURE AND SALE OF AN ARMY OF ITEMS RUNNING INTO THOUSANDS OF UNITS OF SOPHISTICATED GOODS, THE PAST EVENT OF DEFECTS BEING DETECTED IN SOME OF SUCH ITEMS LEADS TO A PRESENT OBLIGATION WHICH RESULTS IN AN ENTERPRISE HAVING NO ALTERNATIVE BUT TO SETTLE THAT OBLIGATION. IN THE INSTANT CASE, THE ASSESSEE HAD B EEN MANUFACTURING AND SELLING VALVE ACTUATORS. IT WAS IN THE BUSINESS FROM THE AS SESSMENT YEARS 1983-84 ONWARDS. VALVE ACTUATORS ARE SOPHISTICATED GOODS. O VER THE YEARS, THE ASSESSEE HAD BEEN MANUFACTURING VALVE ACTUATORS IN LARGE NUM BERS. THE STATISTICAL DATA INDICATED THAT EVERY YEAR SOME OF THE MANUFACTURED ACTUATORS WERE FOUND TO BE DEFECTIVE. THE STATISTICAL DATA OVER THE YEARS ALSO INDICATED THAT BEING SOPHISTICATED ITEMS NO CUSTOMER WAS PREPARED TO BUY VALVE ACTUATORS WITHOUT A WARRANTY. THEREFORE, WARRANTY BECAME AN INTEGRAL PA RT OF THE SALE PRICE OF THE VALVE ACTUATOR(S). IN OTHER WORDS, WARRANTY STOOD A TTACHED TO THE SALE PRICE OF THE PRODUCT. THEREFORE, WARRANTY PROVISION NEEDED TO BE RECOGNIZED BECAUSE THE ASSESSEE WAS AN ENTERPRISE HAVING A PRESENT OBLIGAT ION AS A RESULT OF PAST EVENTS RESULTING IN AN OUTFLOW OF RESOURCES. LASTLY, A REL IABLE ESTIMATE COULD BE MADE OF THE AMOUNT OF THE OBLIGATION. IN SHORT, ALL THE THR EE CONDITIONS FOR RECOGNITION OF A PROVISION WERE SATISFIED IN THE INSTANT CASE. [PARA 12] IN THE INSTANT CASE, ONE WAS CONCERNED WITH PRODUCT WARRANTIES. TO GIVE AN EXAMPLE OF PRODUCT WARRANTIES, A COMPANY DEALING IN COMPUTERS GIVES WARRANTY FOR A PERIOD OF 36 MONTHS FROM THE DATE OF SUPPLY. THE SAID COMPANY CONSIDERS FOLLOWING OPTIONS : (A) ACCOUNT FOR WARRANTY EXPENS E IN THE YEAR IN WHICH IT IS INCURRED; (B) IT MAKES A PROVISION FOR WARRANTY ONL Y WHEN THE CUSTOMER MAKES A CLAIM; AND (C) IT PROVIDES FOR WARRANTY AT 2 PER CE NT OF TURNOVER OF THE COMPANY BASED ON PAST EXPERIENCE (HISTORICAL TREND). THE FI RST OPTION IS UNSUSTAINABLE SINCE IT WOULD TANTAMOUNT TO ACCOUNTING FOR WARRANTY EXPE NSES ON CASH BASIS, WHICH IS ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 15 PROHIBITED BOTH UNDER THE COMPANIES ACT, 1956 AS WE LL AS BY THE ACCOUNTING STANDARDS WHICH REQUIRE ACCRUAL CONCEPT TO BE FOLLO WED. IN THE INSTANT CASE, THE REVENUE WAS INSISTING ON THE FIRST OPTION WHICH IS ERRONEOUS AS IT RULES OUT THE ACCRUAL CONCEPT. THE SECOND OPTION IS ALSO INAPPROP RIATE, SINCE IT DOES NOT REFLECT THE EXPECTED WARRANTY COSTS IN RESPECT OF REVENUE A LREADY RECOGNIZED (ACCRUED). IN OTHER WORDS, IT IS NOT BASED ON A MATCHING CONCEPT. UNDER THE MATCHING CONCEPT, IF REVENUE IS RECOGNIZED, THE COST INCURRED TO EARN THAT REVENUE INCLUDING WARRANTY COSTS HAS TO BE FULLY PROVIDED FOR. IN THE INSTANT CASE, WHEN VALVE ACTUATORS WERE SOLD AND THE WARRANTY COST WAS AN INTEGRAL PART OF THAT SALE PRICE, THEN THE ASSESSEE HAD TO PROVIDE FOR SUCH WARRANTY COST IN I TS ACCOUNT FOR THE RELEVANT YEAR, OTHERWISE THE MATCHING CONCEPT WOULD FAIL. IN SUCH A CASE, THE SECOND OPTION IS ALSO INAPPROPRIATE. UNDER THE CIRCUMSTANCES, THE TH IRD OPTION IS THE MOST APPROPRIATE BECAUSE IT FULFILS ACCRUAL CONCEPT AS W ELL AS THE MATCHING CONCEPT. FOR DETERMINING AN APPROPRIATE HISTORICAL TREND, IT IS IMPORTANT THAT THE COMPANY HAS A PROPER ACCOUNTING SYSTEM FOR CAPTURING RELATIONSH IP BETWEEN THE NATURE OF THE SALES, THE WARRANTY PROVISIONS MADE AND THE ACTUAL EXPENSES INCURRED AGAINST IT SUBSEQUENTLY. THUS, THE DECISION ON THE WARRANTY PR OVISION SHOULD BE BASED ON PAST EXPERIENCE OF THE COMPANY. A DETAILED ASSESSME NT OF THE WARRANTY PROVISIONING POLICY IS REQUIRED, PARTICULARLY IF TH E EXPERIENCE SUGGESTS THAT WARRANTY PROVISIONS ARE GENERALLY REVERSED IF THEY REMAIN UNUTILIZED AT THE END OF THE PERIOD PRESCRIBED IN THE WARRANTY. THEREFORE, T HE COMPANY SHOULD SCRUTINIZE THE HISTORICAL TREND OF WARRANTY PROVISIONS MADE AN D THE ACTUAL EXPENSES INCURRED AGAINST IT. ON THIS BASIS, A SENSIBLE ESTIMATE SHOU LD BE MADE. THE WARRANTY PROVISION FOR THE PRODUCTS SHOULD BE BASED ON THE E STIMATE AT THE YEAR END OF FUTURE WARRANTY EXPENSES. SUCH ESTIMATES NEED REASS ESSMENT EVERY YEAR. AS ONE REACHES CLOSE TO THE END OF THE WARRANTY PERIOD, TH E PROBABILITY THAT THE WARRANTY EXPENSES WILL BE INCURRED IS CONSIDERABLY REDUCED A ND THAT SHOULD BE REFLECTED IN THE ESTIMATION MADE. WHETHER THIS SHOULD BE DONE TH ROUGH A PRO RATA REVERSAL OR OTHERWISE WOULD REQUIRE ASSESSMENT OF HISTORICAL TR END. IF WARRANTY PROVISIONS ARE BASED ON EXPERIENCE AND HISTORICAL TREND(S) AND IF THE WORKING IS ROBUST, THEN THE QUESTION OF REVERSAL IN THE SUBSEQUENT TWO YEARS, I N THE ABOVE EXAMPLE, MAY NOT ARISE IN A SIGNIFICANT WAY. HENCE, ON THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, PROVISION FOR WARRANTY WAS RIGHTLY MADE BY TH E ASSESSEE BECAUSE IT HAD ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 16 INCURRED A PRESENT OBLIGATION AS A RESULT OF PAST E VENTS. THERE WAS ALSO AN OUTFLOW OF RESOURCES. A RELIABLE ESTIMATE OF THE OBLIGATION WAS ALSO POSSIBLE. THEREFORE, THE ASSESSEE HAD INCURRED A LIABILITY DURING THE RELEVA NT ASSESSMENT YEARS AND IT WAS ENTITLED TO DEDUCTION UNDER SECTION 37. THEREFORE, ALL THE THREE CONDITIONS FOR RECOGNIZING A LIABILITY FOR THE PURPOSE OF PROVISIO NING STOOD SATISFIED IN THE INSTANT CASE. THERE ARE FOUR IMPORTANT ASPECTS OF PROVISION ING, VIZ., PROVISIONING WHICH RELATES TO PRESENT OBLIGATION; IT ARISES OUT OF OBL IGATING EVENTS; IT INVOLVES OUTFLOW OF RESOURCES; AND LASTLY, IT INVOLVES RELIABLE ESTI MATION OF AN OBLIGATION. KEEPING IN MIND ALL THE FOUR ASPECTS, THE HIGH COURT SHOULD NO T TO HAVE INTERFERED WITH THE DECISION OF THE TRIBUNAL IN THE INSTANT CASE. [PARA 13] EMPHASIS SUPPLIED 3.8 IN THE INSTANT CASE, IT IS CLEAR THAT PROVISION ING TOWARDS THE EDC CHARGES RELATES TO PRESENT OBLIGATION OF SALE OF PLOTS OF L AND DURING THE YEAR. IT IS EQUALLY CLEAR THAT IT ARISES OUT OF OBLIGATING EVENTS IN TE RMS OF CARRYING OUT EDC ACTIVITIES BY JDA. IT IS ALSO CLEAR THAT AN OUTFLOW OF RESOUR CES WILL BE REQUIRED TO SETTLE THE OBLIGATION. NOW, REGARDING RELIABLE ESTIMATION OF T HE OBLIGATION, THE REVENUES APPREHENSION IS THAT THE ASSESSEE IS PROVIDING FOR THE PROVISION TOWARDS EDC CHARGES ON YEAR-ON-YEAR BASIS, HOWEVER THERE IS NO CASH OUTFLOW WHICH HAS BEEN SHOWN BY THE ASSESSEE TOWARDS ACTUAL PAYMENT OF THE SE EDC CHARGES TO JDA AND THEREFORE, THE PROVISION EVEN THOUGH MADE ON THE BA SIS OF JDA APPROVED FORMULA LACKS THE NECESSARY RELIABILITY AS THE SAME IS NOT SUPPORTED BY HISTORICAL TREND. AS PER THE LD AR, THESE CHARGES HAVE TO BE PAID TO JDA WHENEVER THE LAYOUT PLANS WILL BE RELEASED OR CAMPS WILL BE HELD BY THE JDA AND ON LY AFTER THE PAYMENT OF THESE CHARGES IN FULL OR PROPORTIONATE AS MAY BE PRESCRIB ED, PATTAS WILL BE ISSUED IN THE NAME OF THE ALLOTTEES BY THE GOVERNMENT. WE ARE HOW EVER UNABLE TO APPRECIATE THIS CONTENTION OF THE LD AR THAT THE IN ALL THESE PAST YEARS WHERE THE ASSESSEE HAS BEEN DEVELOPING AND SELLING THE PLOTS OF LAND, JDA HAS NOT RELEASED THE LAYOUT PLANS AND PATTAS HAVE NOT BEEN ISSUED TO THE BUYERS OF SUCH PLOTS AND ACCORDINGLY, THERE WAS NO DEMAND BY JDA TOWARDS PAYMENT OF EDC C HARGES. IN OTHER WORDS, CAN IT BE INFERRED THAT THERE WAS NO EXTERNAL DEVEL OPMENT ACTIVITIES UNDERTAKEN BY JDA IN ABSENCE OF EDC RECOVERY FROM THE ASSESSEE . IN OUR VIEW, THE MATTER NEED FURTHER EXAMINATION IN LIGHT OF PRINCIPLES LAI D DOWN BY HONBLE SUPREME COURT IN CASE OF ROTORK CONTROL (SUPRA) AND ACCORDI NGLY, THE MATTER IS SET-ASIDE TO ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 17 THE FILE OF AO TO EXAMINE THE SAME A FRESH AFTER PR OVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 4. REGARDING GROUND NO. 3, THE ASSESSEE HAS CHALLEN GED THE CONFIRMATION OF DISALLOWANCE OF INTEREST EXPENSE OF RS. 3,60,000/- U/S 40(A)(IA) BY HOLDING THAT THE AMENDMENT MADE BY FINANCE ACT, 2010 IS APPLICABLE P ROSPECTIVELY BY NOT CONSIDERING THE DECISION OF HIGH COURTS WHERE THE A MENDMENT HAS BEEN HELD TO BE APPLICABLE RETROSPECTIVELY. 4.1 BRIEFLY THE FACTS OF THE CASE ARE THAT DURING T HE YEAR UNDER CONSIDERATION, ASSESSEE PAID INTEREST OF RS.4,80,000/- ON UNSECURE D LOANS TAKEN FROM FOUR PERSONS. THE AO OBSERVED THAT TDS DEDUCTED ON INTER EST AMOUNT OF RS.3,60,000/- CREDITED/PAID IN THE MONTH OF APRIL/JULY/OCTOBER 20 08 HAS BEEN DEPOSITED IN GOVERNMENT ACCOUNT ON 29.05.2009 AND TDS DEDUCTED O N INTEREST AMOUNT OF RS.1,20,000/- CREDITED/PAID ON 31.03.2009 HAS BEEN DEPOSITED IN GOVERNMENT ACCOUNT ON 04.01.2010. ACCORDINGLY, HE MADE DISALLO WANCE OF RS.4,80,000/- BY HOLDING THAT DEDUCTION OF TAX AT SOURCE ON PAYMENT OF INTEREST OF RS.3,60,000/- IN THE MONTH OF APRIL/JULY/OCTOBER 2008 HAS BEEN DEPOS ITED AFTER THE END OF THE FINANCIAL YEAR AND DEDUCTION OF TAX AT SOURCE ON PA YMENT OF INTEREST OF RS.1,20,000/- ON 31.03.2009 HAS BEEN DEPOSITED BEYO ND THE PERIOD SPECIFIED U/S 139(1). 4.2 THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS .3,60,000/- BY GIVING THE FOLLOWING FINDINGS:- APPELLANT DEDUCTED AND PAID TDS ON INTEREST AFTER DUE DATE SPECIFIED FOR SUCH PAYMENTS. APPELLANT HIMSELF ACCEPTED THAT RS.1,20,0 00/- ARE DISALLOWABLE SINCE TDS WAS NOT PAID EVEN TILL THE DUE DATE OF FILING R ETURN OF INCOME AND THEREFORE DISALLOWANCE OF RS.1,20,000/- IS CONFIRMED. AS REGA RDS BALANCE RS.3,60,000/- APPELLANT CLAIMED THAT TDS WAS DEDUCTED AND PAID BE FORE DUE DATE OF FILING RETURN OF INCOME AND THEREFORE AS PER THE AMENDMENT BROUGHT OUT BY FINANCE ACT, 2010 INTERPRETED BY JUDICIAL DECISIONS AS RETR OSPECTIVE IN OPERATION, NO DISALLOWANCE IS TO BE MADE. THE AMENDMENT TO SEC. 4 0(A)(IA) IS MADE ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 18 PROSPECTIVE AND NOT RETROSPECTIVE, THEREFORE, THIS AMENDMENT WILL NOT BE APPLICABLE FOR THIS ASSESSMENT YEAR. ITAT MUMBAI SP ECIAL BENCH IN CASE OF BHARTI SHIPYARDS LTD. 141 TTJ 129 HELD THAT THIS AM ENDMENT IS PROSPECTIVE AND IS NOT APPLICABLE TO ASSESSMENT YEARS PRIOR TO 2010 -11. RESPECTFULLY FOLLOWING THE DECISION OF ITAT SPECIAL BENCH, IT IS HELD THAT APPELLANT DID NOT DEPOSIT TDS IN TIME AND THEREFORE DISALLOWANCE MADE BY THE AO I S JUSTIFIED. THE DISALLOWANCE IS ACCORDINGLY CONFIRMED. 4.3 THE LD. AR SUBMITTED THAT BY FINANCE ACT, 2010 AN AMENDMENT HAS BEEN MADE IN SECTION 40(A)(IA) THAT ASSESSEE DEDUCTING T AX EITHER IN LAST MONTH OF P.Y. OR FIRST ELEVEN MONTHS OF P.Y., SHALL BE ENTITLED T O DEDUCTION OF EXPENDITURE IN THE YEAR OF INCURRING IT, IF ASSESSEE HAS PAID THE TAX DEDUCTED AT SOURCE ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1). IN THE PRESENT CASE, ON THE AMOUNT OF INTEREST OF RS.3,60,000/- CREDITED OR PAID IN THE M ONTH OF APRIL TO FEBRUARY 2009, ASSESSEE HAS DEPOSITED THE TDS ON 29.05.2009 I.E. B EFORE THE DUE DATE SPECIFIED IN SECTION 139(1). THEREFORE, NO DISALLOWANCE CAN B E MADE IN RESPECT OF INTEREST PAYMENT OF RS.3,60,000/- U/S 40(A)(IA). IT WAS FURTHER SUBMITTED THAT THE FINDINGS OF THE L D. CIT(A) THAT THIS AMENDMENT IS NOT APPLICABLE FOR THIS ASSESSMENT YEA R BEING PROSPECTIVE AND NOT RETROSPECTIVE IS INCORRECT IN VIEW OF THE VARIOUS D ECISIONS OF HIGH COURTS INCLUDING THE RAJASTHAN HIGH COURT DECISION IN CASE OF CIT VS . HARISH CHAND AHUJA (2015) 125 DTR 184 (RAJ.) (HC) HOLDING THAT PROVISIONS OF SEC.40(A)(IA) AS AMENDED BY FA, 2010, THE EXPLANATION FOR THE AMENDMENT AND THE SPEECH OF THE FM WHILE INTRODUCING THE FINANCE BILL, 2010 CLEARLY INDICATE THAT AMENDMENT IS OF CURATIVE NATURE THEREBY HAVING RETROSPECTIVE EFFECT. 4.4 IT IS NOT IN DISPUTE THAT ON THE AMOUNT OF INTE REST OF RS.3,60,000/-, THE ASSESSEE HAS DEPOSITED THE TDS ON 29.05.2009 I.E. B EFORE THE DUE DATE SPECIFIED IN SECTION 139(1). RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE RAJASTHAN HC, WE HEREBY DELETE THE DISALLOWANCE OF INTEREST OF RS 3, 60,000. ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 19 5. REGARDING GROUND NO.4, BRIEFLY THE FACTS OF THE CASE THAT THE ASSESSEE HAS AN ARRANGEMENT TO SELL THE PLOTS THROUGH ITS MARKET ING COMPANY NAMELY MAHASHIV ESTATES INDIA LTD. THE SALES ARE MADE BY A SSESSEE TO THE MARKETING COMPANY AT A FIXED RATE. THE AMOUNT OF SALE CONSIDE RATION IS RECEIVED BY THE ASSESSEE IN RESPECT OF SALE OF THESE PLOTS EITHER F ROM THE CUSTOMERS DIRECTLY OR THROUGH THE MARKETING COMPANY M/S MAHASHIV ESTATE I NDIA LTD. THE MARKETING COMPANY IS ENTITLED TO SELL THESE PLOTS TO ITS CUST OMERS AT ITS OWN NEGOTIATED RATE. THE AO IN HIS ASSESSMENT ORDER HAS GIVEN THE LIST O F CERTAIN PERSONS FROM WHOM AMOUNT IS RECEIVED IN EXCESS OF THE SALE VALUE WHIC H AMOUNTED TO RS.19,80,903/-. HE OBSERVED THAT FROM THE REPLY OF THE ASSESSEE THE NATURE OF EXCESS CASH IS NOT DETERMINABLE AND THIS AMOUNT IS NOT INCLUDED IN THE SALES. HE THEREFORE MADE ADDITION OF THE SAME U/S 68 OF THE ACT. 5.1 THE LD. CIT(A) OBSERVED THAT THERE IS NO AGREEM ENT OR MOU BETWEEN THE ASSESSEE AND THE SISTER CONCERN. THEREFORE, IT IS N OT CLEAR AS TO HOW THE SALE IS BOOKED BY THE APPELLANT IN THE NAME OF SISTER CONCE RN AND OVER AND ABOVE SUCH SALE PRICE THE AMOUNT IS CREDITED TO SISTER CONCERN . HAD THE ASSESSEE SOLD THE PLOTS TO THE SISTER CONCERN AT FIXED RATE, APPELLAN T WOULD HAVE RECEIVED THE SALE CONSIDERATION FROM THE SISTER CONCERN AND NOT FROM THE ACTUAL BUYER. THE FACT THAT THE SALE CONSIDERATION IS RECEIVED BY THE APPELLANT DIRECTLY FROM THE END CUSTOMER, IT IS CLEAR THAT INTRODUCTION OF SISTER C ONCERN IS JUST TO REDUCE THE TAXABLE INCOME. ACCORDINGLY, THE ADDITION MADE BY T HE AO IS CONFIRMED. 5.2 THE LD. AR SUBMITTED THAT THE ASSESSEE HAS SOL D THE PLOTS THROUGH ITS MARKETING COMPANY MAHASHIV ESTATES INDIA LTD. THE P LOTS ARE SOLD TO MAHASHIV ESTATES INDIA LTD. AT A FIXED RATE. WHENEVER COMPAN Y SELLS THE PLOTS AND INTIMATE TO THE ASSESSEE, THE SALE IS BOOKED AT THE FIXED RA TE BY DEBITING THE ACCOUNT OF MAHASHIV ESTATES INDIA LTD. WHEREVER ANY AMOUNT IS GIVEN BY THE CUSTOMER DIRECTLY TO THE ASSESSEE, THE SAME IS CREDITED TO T HE ACCOUNT OF MAHASHIV ESTATES INDIA LTD. ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 20 THE LD. AR FURTHER SUBMITTED THAT THE AO ON THE BAS IS OF LEDGER ACCOUNT OF MAHASHIV ESTATES INDIA LTD. HAS PICKED UP CERTAIN T RANSACTIONS IN THE NAME OF THE PARTY WHERE THE SALES HAS BEEN BOOKED BY THE ASSESS EE AT THE FIXED RATE BY DEBITING THE ACCOUNT OF MAHASHIV ESTATES INDIA LTD BUT THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE DIRECTLY FROM THESE PARTIE S AT A HIGHER AMOUNT WHICH IS CREDITED IN THIS ACCOUNT. THIS DIFFERENCE THUS DO N OT RELATE TO THE SALE OF THE ASSESSEE BUT THE AMOUNT RECEIVED FROM MAHASHIV ESTA TES INDIA LTD AGAINST THE SALE MADE BY THE ASSESSEE TO IT . FROM THE COPY OF THE LEDGER ACCOUNT IT CAN BE NOTED THAT AFTER CONSIDERING THE AMOUNT RECEIVED FR OM MAHASHIV ESTATES INDIA LTD OR FROM ITS CUSTOMERS WHICH IS CREDITED IN THIS ACC OUNT, ASSESSEE HAS STILL TO RECOVER RS.14,16,519/- FROM MAHASHIV ESTATES INDIA LTD AT THE END OF THE YEAR. THE COPY OF ASSESSEES ACCOUNT IN THE BOOKS OF MAHA SHIV ESTATES INDIA LTD. SHOWING THE BALANCE OF RS.14,16,519/- PAYABLE TO AS SESSEE IS AT P.B 41-48 . FROM THE COPY OF THE LEDGER ACCOUNTS IT IS EVIDENT THAT THE BALANCE IN THE BOOKS OF BOTH THE ASSESSEE AND COMPANY TALLIES. THUS THE ASSESSEE HAS NOT RECEIVED ANY EXCESS/EXTRA AMOUNT. THE LOWER AUTHORITIES HAVE NOT PROPERLY UNDERSTOOD AND APPRECIATED THE EXPLANATION OF THE ASSESSEE. THE LD . CIT(A) HAS HELD THAT IN THE ABSENCE OF ANY AGREEMENT, THE CLAIM OF THE ASSESSEE THAT HE RECEIVED THE EXCESS SALE CONSIDERATION ON BEHALF OF SISTER CONCERN IS J UST TO REDUCE THE TAXABLE INCOME. IT IS SUBMITTED THAT WHEN THE FACT THAT ASSESSEE IS SELLING THE PLOTS TO MAHASHIV ESTATES INDIA LTD. AT A FIXED RATE WHICH IS VERIFIA BLE FROM THE REGULAR BOOKS OF ACCOUNTS, THE ABSENCE OF THE AGREEMENT CANNOT BE A REASON TO ASSUME THAT THE SAME IS DONE ONLY TO REDUCE THE TAXABLE INCOME. THE LD. CIT(A) HAS ALSO FAILED TO CONSIDER THAT M/S MAHASHIV ESTATES INDIA LTD. IS RE GULARLY ASSESSED TO TAX AND FOR THE YEAR UNDER CONSIDERATION, IT HAS FILED THE RETU RN DECLARING BUSINESS INCOME OF RS.9,05,828/-. IN VIEW OF ABOVE, THE ADDITION CONFI RMED BY THE CIT(A) BE DELETED. 5.3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND BASIS THE PERUSAL OF RECORDS, WE ARE OF THE VIEW THAT MATTER REQUIRE FURTHER EXAM INATION IN ORDER TO UNDERSTAND THE TRANSACTION MATRIX AMONG THE ASSESSE E, ITS SISTER CONCERN MAHASHIV ESTATES INDIA LTD AND THE END-CUSTOMERS TO WHOM THE PLOTS HAVE BEEN SOLD DURING THE YEAR AND HOW THE SAID TRANSACTIONS HAVE BEEN REFLECTED IN BOOKS OF ACCOUNTS OF BOTH THE ASSESSEE AND ITS SISTER CON CERN MAHASHIV ESTATES INDIA LTD. ITA NO. 769/JP/13 SHRI CHANDULAL MEENA, JAIPUR VS. DCIT, CIRCLE-6, JA IPUR 21 ACCORDINGLY, THE MATTER IS SET-ASIDE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY TO TH E ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 /0 3/2016. SD/- SD/- ( R.P. TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 11 / 03 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI CHANDULAL MEENA, JAIPUR 2. THE RESPONDENT- THE DCIT, CIRCLE-6, JAIPUR 3. THE CIT(A) II, JAIPUR 4. THE CIT-II, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 769/JP/13) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR