B.H. CONSTRUCTIO & CO., MUMBAI V. ACIT 19(2), MUMBAI

ITA 850/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75481 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 02-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Cost of acquisition
• Section: 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 850/MUM/2011 ASSESSMENT YEAR: 2007 - 08 M/S. B.H. CONSTRUCTION & CO. 101, SAVITRI SADA N CHSL, ST. ANTHONY STREET, SANTACRUZ (E) MUMBAI - 400 055 VS. ITO RAGE. 19(2) MUMBAI. (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. : - AAAFB 5824 B APPELLANT BY : SHRI K. GOPAL RESPONDENT BY : SHRI PITAMBAR DAS DATE OF HEARING : 05.12.2013 DATE OF PRONOUNCEMENT : 04 . 02 .201 4 O R D E R PER DR . S.T.M. PAVALAN , J M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - 30, MUMBAI DATED 23.12.2 010 FOR THE ASSESSMENT YEAR 2007 - 08 . 2. IN THIS APPEAL, THE ASSESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) CONFIRMING THE DECISION OF THE AO IN DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,63,23,570/ - AS AGAINST THE RETURNED INCOME OF RS.9904 465/ - . 3. BRIEFLY STATED, THE ASSESSEE, A FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS AND DEVELOPERS, FOR THE YEAR UNDER CONSIDERATION, FILED THE RETURN OF INCOME DECLARING A TOTAL INCOME AT RS.99,04,465/ - . IN THE ASSESSMENT FRAMED UNDER SECTION 1 43(3) OF THE INCOME TAX ACT, THE AO HAD ASSESSED AND THEREBY DETERMINED THE TOTAL INCOME AT RS.16323570/ - .THE SAID DETERMINATION OF THE TOTAL INCOME INCLUDED THE ADDITIONS OF RS.64,19,106/ - AND RS.18,00,000/ - ON ACCOUNT OF ESTIMATED ITA NO. 850/MUM/2011 M/S. B.H. CONSTRUCTION & CO. ASSESSMENT YEAR: 2007 - 08 2 SALE PROFITS FROM THE P ROJECT AND THE DISALLOWANCE OF COST OF THE PROJECT FROM THE SALE PROFITS RESPECTIVELY. THE AO MADE THE SAID ADDITIONS/DISALLOWANCES ON THE BASIS OF THE STATEMENT OF SHRI SALIM G. GOUD, MANAGING PARTNER OF M/S. B. H. CONSTRUCTIONS RECORDED ON 12.03.2007 DUR ING THE COURS E OF SURVEY UNDER SECTION 133A AND A SHEET OF PAPER MARKED AS ANNEXURE A DATED 02.03.2007 FOUND IN HIS DRAWER OF OFFICE CABIN. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED DECISION, ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE SHEET OF PAPER ANNEXURE A DATED 02.03.2007 FOUND IN THE DRAWER OF THE OFFICE CABIN DURING THE COURSE OF SURVEY I S AN ESTIMATE SHOWING THE AMOUNT OF ESTIMATED SALE FROM PROJECT AS WELL AS THE ESTIMATED PROFIT FOR THE YEAR ENDED 31.03.2007. THE ASSESSEE HAS EXPLAINED THE SAID SHEET OF PAPER BY GIVING THE STATEMENT UNDER SECTION 133A WHICH HAS BEEN RECORDED AND ACCEPTED BY THE SURVEY PARTY. TH E E XTRACT OF THE STATEMENT OF SHRI SALIM G. GOU D, MANAGING PARTNER OF M/S. B. H. CONSTRUCTIONS RECORDED ON OATH UNDER SECTION 131 OF THE INCOME TAX ACT, 1961, DURING THE COURSE OF SURVEY UNDER SECTION 133A READS AS UNDER: 5. UPTO WHAT DATE YOUR BOOKS OF ACCOUNTS ARE WRITTEN? ANS: BOOKS OF ACCOUNTS AND OTHER RELEVANT DOCUMENTS ARE WRITTEN ON CO M PUTER BY MY ACCOUNTANT SHRI ANIL BALAD. BOOKS OF ACCOUNTS ARE WRITTEN UPTO 10.03.2007. 6. DURING THE COURSE OF SURVEY PROCEEDINGS, CASH OF RS.4,10,000/ - WAS F OUND. KINDLY GIVE THE DETAILS OF CASH IN HAND AS PER BOOKS OF ACCOUNTS. ANS: I HAVE GONE THROUGH THE COMPUTER I ZED BOOKS OF ACCOUNTS, THE CASH IN HAND AS ON DATE IS RS.4,16,660/ - . 7. PLEASE GIVE THE DETAILS OF DIFFERENCE OF RS.6,660/ - , IN CASH IN HAND AND CASH FOUND. ANS: WE HAVE MADE PETTY CASH EXPENSES OF RS.6,660/ - FOR WHICH BILL HAVE NOT BEEN ENTERED IN THE BOOKS OF ACCOUNTS. 9 . I AM SHOWING YOU A SHEET OF PAPER MARKED AS ANNEXURE A FOUND IN THE DRAWER OF YOUR OFFICE CABIN, WHICH GIVES DETAI LS AS UNDER: - ITA NO. 850/MUM/2011 M/S. B.H. CONSTRUCTION & CO. ASSESSMENT YEAR: 2007 - 08 3 RS. IN CRORES TOTAL SALE PROCEED RS.2.65 CLOSING STOCK MARKET VALUE RS.0.50 CASH RECEIPT RS.0.30 LESS DIRECT COST RS.2.20 INDIRECT COST RS.0.30 RS.2.50 PRO FIT (APPROX,) RS.0.95 IT IS A COMPUTERIZED PRINTOUT OF THE WORKING OF PROJECT PROFIT. PLEASE LET ME KNOW AS TO WHEN THIS WAS DRAWN AND ALSO EXPLAIN IN DETAILS ENTRY THEREIN. ANS: THIS IS WORKING OF PROJECT PROFIT PREPARED BY THE FIRM AS ON 02.03.2007 AN D THE WORKING SHOW ME TOTAL SALE PROCEED OF THE FLAT SOLD AS PER AGREEMENT VALUE AND ALSO CASH RECEIVED DURING THE PROJECT PA LM ACRE AND THE MARKET VALUE OF ONE FLAT REMAINING UNSOLD. THUS, THE TOTAL RECEIPTS ARE RS.3.45 CRORES AND AFTER DEDUCTING THE DIRE CT AND INDIRECT COST THE PROJECT PROFIT IS ABOUT RS.95 LAKHS. THIS WORKING HAS BEEN BASED ON THE ACTUAL AND REAL DERIVED BY THE ABSENCE EXACT DETAILS OF THE EXPENDITURE I HEREBY OFFER RS. 1 CRORE AS MINIMUM PROFIT FROM THE PROJECT. PALM ACRE FOR THE FINANC IAL YEAR 2006 - 07. SINCE I HAVE ALREADY PAID ADVANCE TAX OF RS.9 LAKHS SO FAR, I HEREBY HAND OVER TWO POST DATED CHEQUES FOR BALANCE TAX PAYMENT OF RS.25 LAKHS. THE PERUSAL OF THE STATEMENT AFOREMENTIONED INDICATES THAT THE DEPARTMENT STARTED RECORDING STA TEMENTS ON 12 TH MARCH WHICH WAS COMPLETED ON 13 TH MARCH 2007. AS ON THE DATE OF SURVEY AS RECORDED IN ANSWER GIVEN FOR QUESTION NO. 5, BOOKS OF ACCOUNTS HAVE BEEN WRITTEN UP TO 10 TH MARCH 2007. AS PER THE BOOKS OF ACCOUNTS, THE CASH IN HAND AS ON DATE HAS BEEN RS.4,16,66 0/ - AND THE ACTUAL CASH FOUND I S RS.4,10,000/ - . EXPLANATION TO THE DIFFERENCE OF RS.6,660/ - HAS BEEN GIVEN IN ANSWER TO QUESTION NO. 7. AFTER THE PRINT OUT TAKEN BY DEPARTMENT ON 13 TH MARCH 2007, THE ASSESSEE ENTERED THE RECEIPT OF RS.30 LA KHS OFFERED AS INCOME AND EXPENSES INCURRED BUT NOT ENTERED RS.6,660/ - . THEREFORE, THE CASH BALANCE IS APPEARING AS ON 13.03.2007 IS AT RS.33,99,770/ - . THIS JUSTIFIES THAT THE ASSESSEE HAS MADE THE ENTRIES OF RS.30 LAKHS AND IN CSE AS STATED IN QUESTION NO .9 . THIS IS SUPPORTED BY THE LEDGER COPY WHICH SHOWS THE ENTRY APPEARING ON 13 TH MARCH 2007 AND THE COPY OF TRIAL BALANCE FOR THE PERIOD APRIL 01, 2006 TO MARCH 13, 2007 WHERE THE CREDIT OF RS.30 LAKHS IS APPEARING UNDER THE HEAD MISCELLANEOUS CASH RECEIP T (SALES ACCOUNT) . THE ASSESSEE HAS ITA NO. 850/MUM/2011 M/S. B.H. CONSTRUCTION & CO. ASSESSMENT YEAR: 2007 - 08 4 DEMONSTRATED THAT ONLY ONE FLAT REMAINED UNSOLD HAS BEEN GIVEN BY CONSIDERING THE ADVANCES RECEIVED AGAINST SALE OF FLAT NO. 403 FROM MR. RICHAR D MACDONALD PEARL ON 19.02.2007. RS.5 LAKHS AND AGREEMENT FOR RS.35 LAKHS H AS BEEN LYING IN THE OFFICE. THE BALANCE AMOUNT OF RS. 30 LAKHS H AS BEEN RECEIVABLE AND RECEIVED ON 15.03.2007 . THE ASSESSEE HAS RECEIVED ADVANCE OF RS.5 LAKHS AGAINST SALE OF FLAT NO. 401 FROM ULFAT NISAR AHMED ON 27.02.2007. THEREFORE, ONLY ONE FLAT NO. 503 HAS REMAINED UNSOLD AS ON THE DATE OF SURVEY. THE ABOVE MENTIONED FACTS SUGGESTS THAT ANNEXURE A DATED MARCH 02, 2007 HAS BEEN PREPARED AS ESTIMATE D PROFIT FROM THE PROJECT PALM ACRE WHEREIN THE AGREEMEN T ENTERED FOR FLAT NO. 403 WITH MR. RICHARD MA CDONALD PEARL, BUT PENDING FOR REGISTRATION HA S BEEN CONSIDERED IN SALE PROCEED OF RS.2.65 CRORES. THE A NSWER TO QUESTION NO.9, WORKING SHOW THAT TOTAL SALE PROCEED OF THE FLAT SOLD AS PER AGREEMENT VALUE, SUPPORTS THIS VIEW. CONSIDERING THE ENTIRETY OF TH E FACTS, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE TOTAL SALE PROCEEDS SHOWN AT RS. 265 LAKHS TOWARDS SALE OF FLAT SHOULD BE READ AS UNDER : - SALE PROCEED S ACCOUNTED AS SALE IN BOOKS RS. 235 LAKHS. THE SALE CONSIDERATION NET OF A DVANCE FOR FLAT 403 RS. 30 LAKHS TOTAL RS. 265 LAKHS THE CLOSING STOCK AND AMOUNT RECEIVABLE BREAK UP IS AS UNDER: - RS. 25 LAKHS SALE CONSIDERATION FOR FLAT 401 (ADVANCE RECEIVED RS. 5 LAKHS VIDE AGREEMENT DATED 17.03.2007) APPROXIMATE MARKET VALUE OF FLAT NO. 503 (21.03.2007) RS. 20 LAKHS TOTAL RS.45 LAKHS CLOSING STOCK AND RECEIVABLES AS ON 13.03.2007 RS. 50 LAKHS THEREFORE, T HE TOTAL SALE CONSIDERATION RS.345 LAKHS WHICH IS MENTION ED IN THE ANSWER TO QUESTION NO. 9, RECORDED IN THE STATEMENT HAS BEEN CORRECTLY DISCLOSED IN THE AUDITED ACCOUNTS AS ON MARCH 31, 2007. ALSO, T HE INCOME STATED AS PER THE STATEMENT RECORDED ON MARCH 13, 2007, H AS BEEN APPROXIMATELY 95 LAKHS AS AGAINST RET URN ED TAXABLE INCOME AT RS.99 LAKHS. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT SINCE THE AO HAS NOT CORRECTLY APPRECIATED THE FACTS WHILE ESTIMATING THE INCO ME BY IGNORING THE AUDITED BOOK, THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMI NG THE IMPUGNED ADDITION OF RS.64,19,106/ - MADE BY THE AO ON ACCOUNT OF ESTIMATED SALE PROFITS FROM THE PROJECT AND HENCE THE SAME IS DELETED. ITA NO. 850/MUM/2011 M/S. B.H. CONSTRUCTION & CO. ASSESSMENT YEAR: 2007 - 08 5 5. AS REGARDS THE ADDITION CONFIRMED ON ACCOUNT OF DISALLOWANCE OF COST OF THE PROJECT FROM THE SALE RS.18,00,0 00 / - , IT IS PERTINENT TO MENTION THAT THE ASSESSEE , IN THE P&L ACCOUNT, HAS DEBITED THE SAID AMOUNT AGAINST PROJECT LAND COST - KALINA ON ACCOUNT OF THE EXPENDITURE INCURRED FOR ACQUISITION OF THE LAND. HOWEVER, THE AO DISALLOWED THE SAME AS THE ACQUISIT ION OF THE PROPERTY OR EXPENDITURE CANNOT BE RELATABLE TO THE SALES MADE DURING YEAR UNDER CONSIDERATION AND THE LD.CIT(A) HAS CONFIRMED THE FINDINGS OF THE AO. IT IS OBSERVED THAT THE SAID DISALLOWANCE HAS BEEN MADE BY THE AO ON THE BASIS OF THE SHEET OF PAPER ANNEXURE A FOUN D DURING THE SURVEY WHICH CONTAINED THE ESTIMATED ACCOUNT FOR THE PERIOD 14.03.2006 TO 31.03.2007 AND AS ON THE DATE OF SURVEY, THE ACCOUNTS ARE NOT COMPLETE. WHEN THE FACTS ARE BEING SO, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE AUTHORITIES BELOW TO MAKE /CONFIRM THE DISALLOW ANCE ON THE FALSE PRESUMPTION BASED ON THE SAID SHEET OF PAPER FOUND DURING THE SURVEY WHEN THE ASSESSEE IS ENTITLED FOR DEDUCTING THE COST OF ACQUISITION THE PROJECT LAND. IN VIEW OF THAT MATTER , WE ARE OF THE CONSIDERED VIEW THAT THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE IMPUGNED DISALLOWANCE AND HENCE THE ADDITION MADE ON THIS COUNT IS DELETED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN CO URT ON THIS 4 TH DAY OF FEBRUARY , 2014 . SD/ - SD/ - ( D. KARUNAKARA RAO ) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 04.02 . 20 14 . * S RIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH