Income Tax Appellate Tribunal - Raipur
Dy. C.I.T.2(1), Raipur (Cg) vs M/S Amisha -In-Sky Constructions, ... on 16 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
RAIPUR BENCH, RAIPUR
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI RAM LAL NEGI, JUDICIAL MEMBER)
ITA. No: 351 to 354/RPR/2014
(Assessment Year: 2009-10 to 2012-13)
Dy. Commissioner of V/S M/s. Amisha-in-Sky
Income -tax-2(1), Raipur Creations, Shriram
(C.G) Heights, St. Xavier School
Road, Avanti Vihar, Raipur
(C.G.)
(Appellant) (Respondent)
PAN: AAOFA 8279M
Appellant by : Smt. Shetal Verma,D.R.
Respondent by : Shri Sumit Verma,Sr.Adv.
(आदे श)/ORDER
Date of hearing : 07 -03-2018
Date of Pronouncement : 16 -04-2018
PER N.K. BILLAIYA, ACCOUNTANT MEMBER
1. ITA Nos. 351 to 354/Raipur/2014 are four appeals by the Revenue preferred against four separate orders of the ld. CIT(A), Raipur pertaining to A.Ys. 2009- 10 to 2012-13.
2 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
2. Since the common issues are involved in the impugned appeals, therefore, they were heard together and are disposed of by this common for the sake of convenience.
3. In ITA Nos. 351 & 352/Raipur/2014, the tax effect on the impugned relief given by the ld. CIT(A) is less than Rs. 10 lacs. Therefore, both these appeals have to be dismissed in the light of the CBDT Circular No. 21 of 2015 dated 10.12.2015 by which the board has directed the revenue not to prefer appeal before the Tribunal where the tax effect is less than Rs. 10 lacs. In the light of the CBDT Circular, ITA Nos. 351 & 352/Raipur/2014 are dismissed.
ITA No. 353/Raipur-2014 Revenue's appeal for A.Y. 2011-12
4. The first ground relates to the deletion of the disallowance of Rs. 1,33,26,552/- on account of administrative and selling expenses.
5. Briefly stated the facts of the case are that the assessee derives income from real estate business mainly as developer and builder of housing projects. The assessee enters into agreement for sale by booking flats on payment of initial booking amount and the balance sale consideration is realized in installments linked with progress of construction. While scrutinizing the return of income for the year, the A.O. noticed that the assessee has shown net loss of Rs. 1,33,26,552/-. The A.O. found that the year under consideration is the third year of effective business insofar as the projects were started in the preceding previous year. The A.O. further noticed that only 20% progress in Golden Towers and 40% progress in project Golden Sky was made. The A.O. was of the opinion that since the projects were not completed and no transaction of 3 ITA Nos. 351 to 354/Raipur/2014 . A.Ys. 2009-10 to 2012-13 sale has been made, it cannot be said that the assessee has commenced its business and therefore the expenses charged to the profit and loss account should be treated as pre-operative expenses and to be considered as work-in- progress. On this belief, the A.O. disallowed Rs. 1,33,26,552/-.
6. Assessee vehemently agitated the matter before the ld. CIT(A) and strongly contended that only the indirect expenses have been charged to the Profit and Loss account. It was brought to the notice of the ld. CIT(A) that the assessee has commenced its business and therefore as per the provisions of Section 145 of the Act. The profits and gains of the previous year are required to be computed in accordance with the relevant accounting standard.
7. After considering the facts and the submissions, the ld. CIT(A) was of the opinion that the observation of the A.O. that the assessee has not commenced its business is completely wrong as the commencement of Real Estate business would normally start with the acquisition of land or immovable properties. The ld. CIT(A) was convinced with the claim of expenditure and accordingly deleted the disallowance of Rs. 1,33,26,552/-.
8. Before us, the ld. D.R. strongly supported the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
9. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the assessee had purchased the lands in earlier years on which it has started constructing flats. Therefore, it cannot be said that the assessee has not commenced its business. A perusal of the Profit and Loss 4 ITA Nos. 351 to 354/Raipur/2014 . A.Ys. 2009-10 to 2012-13 account exhibited at page 63 of the paper book shown that during the year , the assessee has shown sales at Rs. 41,39,500/- on which cost of construction is shown at Rs. 12.15 crores and Administrative and Selling expenses at Rs. 1.42 crores.
10. The details of Administrative and Selling expenses are as under:-
SCHEDULE 'K' ADMINISTRATIVE & SELLING EXPENSES AMOUNT In Rs.
Golden Tower
Audit Fees 5515.00
Advertisement Exp. 608006.00
Commission 11375000.00
Electricity Exp. 15480.00
Insurance 17044.00
Interest on TDS 17416.00
Legal Expenses 16721.00
Printing & Stationary 137484.00
Repair & Maintenance 23283.00
Salary 410000.00
Telephone & Mobile Exp. 24979.00
TDS Exp. 27667.00
12678595.00
Golden Sky
Advertisement Exp. 6863.00
Interest on TDS 23165.00
Legal Exp. 17500.00
Office Exp. 103999.00
Printing & Stationary 22888.00
Petrol & Diesel Exp. 27940.00
Registry Exp. 129626.00
Repairs & Maintenance 1500.00
Salary 981800.00
Service Tax 48075.00
Security Charges 4424.00
Balance Written off 14621.93
Telephone & Mobile Exp. 47462.00
Travelling Exp. 158587.00
1586450.93
TOTAL 14265045.93
11. From the above, it can be seen that only indirect expenses have been charged to the Profit and Loss account and all other direct expenses have been shown as part of work-in-progress. The Hon'ble High Court of Delhi in the case of 5 ITA Nos. 351 to 354/Raipur/2014 . A.Ys. 2009-10 to 2012-13 Dhoomketu Builders & Development (P.) Ltd. 87 DTR 249 has held that the commencement of Real Estate business would normally start with the acquisition of land or immovable property. In another case, the Hon'ble High Court of Delhi 301 ITR 368 has held that business commenced with first purchase of stock in trade, the date when the first sale is made is not material in that respect. Moreover, Accounting Standard 7 issued by the ICAI states that in cases where the expenditure could not be attributed to a particular activity carried on by the assessee, the same may be allowed as a period cost.
12. Considering the facts in totality, in our considered opinion, the indirect expenses debited to the Profit and Loss account are not pre-operative expenses and these deserve to be allowed as expenses and carried forward or set off as per the provisions of the Act. We do not find any error or infirmity in the findings of the ld. CIT(A). Ground no. 1 is accordingly dismissed.
13. Ground no. 2 relates to the deletion of the disallowance u/s. 40A(3) of the act amounting to Rs. 56.26 lacs.
14. During the course of the scrutiny assessment proceedings and drawing support from the entries found on loose papers impounded from the premises of the assessee, the A.O. found that the assessee has incurred expenditure of substantial amounts towards purchase of lands and the payments have been made in cash in violation of provisions of Section 40A(3) of the Act. The A.O. was of the opinion that since the assessee is a developer and builder and the said expenditure was essentially incurred for purchase of stock in trade and since the said expenditure has been incurred in violation of Section 40A(3) of the Act, the amount of Rs. 56.20 lacs was disallowed.6 ITA Nos. 351 to 354/Raipur/2014
. A.Ys. 2009-10 to 2012-13
15. Assessee carried the matter before the ld. CIT(A) and pointed out that the impugned lands were purchased as capital assets and were converted into stock in trade on 31.03.2011. Therefore, it cannot be said that the lands were purchased as stock in trade. The assessee further contended that the A.O. has not doubted the genuineness of the transaction and the consideration paid in cash was on account of business expediency.
16. After considering the facts and the submissions, the ld. CIT(A) was convinced with the contention of the assessee and deleted the addition of Rs. 56.20 lacs.
17. Before us, the ld. D.R. strongly supported the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
18. We have carefully considered the orders of the authorities below. It is not in dispute that the lands were purchased for a consideration of Rs. 56.20 lacs and the consideration was paid in cash. On identical set of facts, the Hon'ble High court of Gujarat in the case of Anupam Tele Services 366 ITR 122 had the occasion to consider the following facts:-
A.Y. 2009-10.The assessee was working as an agent of Tata Tele services Limited for distributing mobile cards and recharge vouchers. The assessee used to make payment by account payee cheques.
However, a circular was issued by Tata Tele services Limited requiring the assessee to deposit cash at the company's office. Thereafter, if the assessee continued to make payment through cheques or demand draft, it would get the recharge vouchers only after 4-5 days which would affect its business. The assessee, thereafter, made cash payment.7 ITA Nos. 351 to 354/Raipur/2014
. A.Ys. 2009-10 to 2012-13 The Assessing Officer made addition of it on ground that the payment in cash exceeding Rs. 20,000 violate the provisions of section 40A(3) and disallowed 20 per cent of the impugned amount.
On appeal, the Commissioner (Appeals) directed to delete the addition on ground that transaction were genuine and payments were also made. On appeal by the revenue, the Tribunal allowed same.
19. On the above given facts, the Hon'ble Gujarat High Court held as under:-
• In the present case, neither the genuineness of the payment nor the identity of the payee were in any case doubted. These were the conclusions on facts drawn by the Appellate Commissioner. The Tribunal also did not disturb such facts but relied solely on Rule 6DD (j) of the Rules to hold that since the case of the assessee did not fall under the said exclusion clause nor was covered under any of the clauses of rule 6DD, consequences envisaged in section 40A(3) must follow. • Thus, the Tribunal committed an error in coming to such a conclusion for the following reasons:
(a) ) The paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions. As held by the Supreme Court in Attar Singh Gurmukh Singh v. ITO [19911 191 ITR 667/59 Taxman
11. section 40A(3) does not eliminate considerations of business expediencies.
(b) In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situation was as follow
--
(i) the principal company, to which the assessee was a distributor, insisted that cheque payment from a co-operative bank would not do, since the realization takes a longer time;
8 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
(ii) the assessee was, therefore, required to make cash payments
only;
(iii) Tata Tele services Limited assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee;
(iv) It is not disputed that the Tata Tele services Limited did not act on such promise;
(v) if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations.
• The payments between the assessee and the Tata Tele services Limited were genuine. The Tata Tele services Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) must be lifted. • The Division Bench of the Rajasthan High Court in case of Smt. Harshila Chordia v. Income Tax Officer [20081 298 ITR 349 had observed that the exceptions contained in rule 6DD are not exhaustive and that the said rule must be interpreted liberally.
• In the result, the question is answered in favour of the appellant assessee.
21. It would also be pertinent to refer to the relevant observations made by the Hon'ble Gujarat High Court which reads as under:-
18. It could be appreciated that Section 40A and in particular sub-clause (3) thereof aims at curbing the possibility of on-money transactions by insisting that all payments where expenditure in excess of a certain sum [in the present case twenty thousand rupees] must be made by way of account payee cheque drawn on a bank or account payee bank draft.9 ITA Nos. 351 to 354/Raipur/2014
. A.Ys. 2009-10 to 2012-13 As held by the Apex Court in case of Attar Singh Gurmukh Singh (supra), "..In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to me exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from undisclosed sources. The terms of section 40A(3) are not absolute.
Considerations of business expediency and other relevant factors are not excluded. Genuine and bona tide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions."
19. It was because of these considerations that this Court in case of Hynoup Foods (P.) Ltd. (supra) observed that the genuineness of the payment and the identity of the payee are the first and foremost 10 ITA Nos. 351 to 354/Raipur/2014 . A.Ys. 2009-10 to 2012-13 requirements to invoke the exceptions carved out in rule 6DD(j) of the Income-tax Rules, 1962.
20. In the present case, neither the genuineness of the payment nor the identity of the payee were in any case doubted. These were the conclusions on facts drawn by the Appellate Commissioner. The Tribunal also did not disturb such facts but relied solely on Rule 6DD (j) of the Rules to hold that since the case of the assessee did not fall under the said exclusion clause nor was covered under any of the clauses of Rule 6DD, consequences envisaged in Section 40A(3) of the Act must follow.
21. In our opinion, the Tribunal committed an error in coming to such a conclusion. We would base our conclusions on the following reasons :--
(a) The paramount consideration of Section 40A(3) is to curb and reduce the possibilities of black money transactions. As held by the Supreme Court in Attar Singh Gurmukh Singh (supra), section 40A(3) of the Act does not eliminate considerations of business expediencies.
(b) In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situation was as follow -
(i) the principal company, to which the assessee was a distributor, insisted that cheque payment from a cooperative bank would not do, since the realization takes a longer time;
(ii) the assessee was, therefore, required to make cash payments only;
(iii) Tata Teleservices Limited assured the assessee that such amount shall be deposited in their bank account on behalf of the assessee;
(iv) It is not disputed that the Tata Teleservices Limited did not act on such promise;
(v) if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations.11 ITA Nos. 351 to 354/Raipur/2014
. A.Ys. 2009-10 to 2012-13
22. We would find that the payments between the assessee and the Tata Teleservices Limited were genuine. The Tata Teleservices Limited had insisted that such payments be made in cash, which Tata Teleservices Limited in turn assured and deposited the amount in a bank account. In the facts of the present case, rigors of section 40A(3) of the Act must be lifted.
23. We notice that the Division Bench of the Rajasthan High Court in case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (raj) had observed that the exceptions contained in Rule 6DD are not exhaustive and that the said rule must be interpreted liberally.
20. Considering the facts of the case in hand in the light of the aforementioned decision of the Hon'ble Gujarat High Court, we have no hesitation to hold that in the present case also neither the genuineness of the payment nor the identities of the payee were in any case doubted. Considering the totality of the facts qua the business of the assessee.
21. We do not find any reason to interfere with the findings of the ld. CIT(A). Ground no. 2 is dismissed.
22. Ground no. 3 relates to the deletion of the addition on account of profit on sale of flats amounting to Rs. 3,69,625/-.
23. During the course of the scrutiny assessment proceedings, the A.O. noticed that in the course of survey in the case of V.K. Nagwani, Raipur, certain loose papers were found and impounded. When these loose papers were confronted to Shri Nagwani who stated that he did not have any information about these 12 ITA Nos. 351 to 354/Raipur/2014 . A.Ys. 2009-10 to 2012-13 papers because the papers belong to their firm. When the assessee was confronted to those papers, the partners stated that the papers were not prepared from the premises of the firm but were found from the premises of V.K. Nagwani and therefore he is not able to give any answer. When the A.O. asked the partner of the assessee firm that how names in the loose papers tally with the customer list of the assessee firm, the partners stated that whatever goods were sold by them were recorded in the books of accounts and since most of the sales were made through brokers and therefore he cannot comment on the entries found in the loose papers.
24. The A.O. observed that the loose papers give record balances in different borkers' accounts and the transaction with the brokers are also found to be recorded in the books of accounts of the assessee. The A.O. further noticed that even the commission payment is also found to be recorded in the books of the assessee. The A.O. was of the firm belief that the assessee has not shown the true profits in his books of accounts and computed the profit as under:-
Cost of 3BHK flat as per assessee Rs.noo /sqft (B) 14,50,000/- 1318.18 (Golden Sky) Proportionate indirect 25,74,971/-
costs A.Y.2009-10 22,12,219/-
A.Y.2010-H A.Y. 2011- 1,33,26,552/-
12
Total l,8l,13,742/- 80,62,4267- 43-07
44.51% as 80,62,426/- 187200
relatable to this
project
13 ITA Nos. 351 to 354/Raipur/2014
. A.Ys. 2009-10 to 2012-13
Built up Area of 3BHK= 1100 x 96 105600
project in sqft 2BHK= 850 X96 81600
187,200
Total Cost per sqft. which would be constant for entire project period 1361.25
with respect to project Golden Sky
Profit from the project this year Rs.i8,67,ooo (-) 14,97,3757- (1361.25 x 3,69,625/- 1100) =
25. Assessee strongly objected the manner in which the additions have been made by the A.O. before the ld. CIT(A) and once again contended that the papers were not found from the premises of the assessee but from the premises of a third person. It was brought to the notice of the ld. CIT(A) that the loose papers do not contain the name of the firm or any of the partner nor any signature is found on the loose papers.
26. After considering the facts and the submissions, the ld. CIT(A) observed that the loose papers were carefully perused. The ld. CIT(A) observed that though the Assessing Officer has contended that several transactions were recorded, however, the A.O. has not brought on record any specific instances of unrecorded transaction. The ld. CIT(A) further observed that no enquiry has been conducted by the A.O. from the commission agents whose names are appearing in the loose papers nor the A.O. has brought on record any evidence that the assessee in fact received the amounts mentioned in the loose papers. Drawing support from various judicial decisions mentioned at page 17 & 18 of his order, the ld. CIT(A) deleted the addition of Rs. 3,69,625/-.
14 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
27. The ld. D.R. strongly relied upon the findings of the A.O. and the ld. counsel for the assessee once again stated what has been stated during the curse of the assessment proceedings and also before the First Appellate Authority.
28. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the loose papers were found during the course of the survey operation at the premises of V.K. Nagwani. It is also not in dispute that the loose papers did not contain the name of the assessee firm nor its partner. The loose papers may contain some notings relating to the Real Estate brokers to whom the assessee has given commission/brokerage but at the same time no enquiry has been made by the A.O. from those brokers/commission agents. Moreover, the loose papers and documents cannot possibly be construed as books of accounts regularly kept in the course of business. Therefore, in our considered opinion, the A.O. is not justified in resting findings based on the loose papers and documents found from the premises of a third party even if such document contain narration of transaction with the assessee company. For this proposition, we draw support from the decision of the Hon'ble Supreme Court in the case of V.C. Shukla & Ors. (1998) 3 SCC 410 and Chuharmal 172 ITR 250.
29. Considering the facts of the case in the light of the judicial decision referred hereinabove, we decline to interfere. Ground no. 3 is dismissed.
30. Ground no. 4 relates to the deletion of the addition made by the A.O. on account of Short Term Capital Gain amounting to RS. 9,35,284/-.
15 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
31. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has sold land at Bhatgaon which was purchased for Rs. 13,37,216 on 21.09.2009 which was appearing in the balance sheet as investment under fixed assets, this land was sold during the year for Rs. 22,72,500/-. The A.O. treated the difference of Rs. 9,35,284/- as Short Term Capital Gain.
32. Before the First Appellate Authority, the assessee contended that the land was purchased on 21.09.2009 for Rs. 13.37 lacs and was shown as a fixed asset. It was brought to the notice of the ld. CIT(A) that the said land was converted into stock in trade during the year under consideration and the sale value is included in the Profit and Loss account. Since the sale value was duly reflected in the financials of the assessee. The ld. CIT(A) directed the A.O. to delete the addition of Rs. 9,35,284/-.
33. Before us, the ld. D.R. could not bring out any factual error in the findings of the ld. CIT(A). There is no dispute that the sale consideration was duly shown as part of sales in the Profit and Loss account meaning thereby that the impugned profit has already been reflected in the Profit and Loss account, therefore, there is no occasion for making further addition under the head 'Short Term Capital Gain'. We decline to interfere. Ground no. 4 is dismissed.
34. Ground no. 5 & 6 are of general in nature and needs no separate adjudication.
ITA No. 354/Raipur/2014 for A.Y. 2012-12 16 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
35. The first ground relates to the deletion of the disallowance of loss of Rs. 65,93,561/- on account of Administrative and Selling expenses.
36. An identical issue has been considered and decided by us in ITA No. 353/Raipur/2014 (supra) vide ground no. 1 of that appeal. For our detailed discussion therein, this ground is dismissed.
37. Ground no. 2 relates to the deletion of the addition of Rs. 30,55,610/-.
38. The underlying facts in issue are similar to the facts considered by us while deciding ground no. 3 of ITA No. 353/Raipur/2014 wherein we have elaborately discussion the fate of the additions made on the basis of loose papers found from the premises of a third party. For our detailed discussion therein, this ground is dismissed.
39. Ground no. 3 relates to the deletion of the addition of Rs. 1,63,21,567/-.
40. At the very outset, we have to state that the amount of Rs. 1,63,21,567/- has to be read as Rs. 53,53,280/- in the light of the order dated 30.07.2014 framed u/s. 154 of the Act.
41. On the basis of the loose papers impounded from the premises of Shri V.K. Nagwani, the A.O. formed a belief that the assessee has not recorded sales to the tune of Rs. 4,08,03,918/-. The A.O. adopted the Profit rate of 40% on this alleged unrecorded sales and computed the income at Rs. 1,63,21,567/-.
17 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
42. Assessee strongly agitated the addition before the ld. CIT(A). It was brought to the notice of the ld. CIT(A) that the A.O. has rejected the books of accounts on flimsy ground. It was strongly contended that once the books of accounts are accepted, the A.O. has no power to make any further addition on the alleged unrecorded sales which was not found on the loose papers.
43. After considering the facts and the submissions, the ld. CIT(A) was convinced that the rejection of books of accounts on account of claim of indirect expenses is concerned is not correct. The ld. CIT(A) further observed that rejection of books of accounts on the basis of the entries found on the loose papers impounded from the premises of a third persons is also not correct. Considering these facts, the ld. CIT(A) deleted the disallowance of Rs. 1,63,21,567/-.
44. Before us, the ld. D.R. could not bring any new dimension to what have already been done by the A.O. Ld. counsel for the assessee relied upon the findings of the ld. CIT(A).
45. There is no dispute that the A.O. has discarded the book results only -
(i) The indirect expenses have been found to be not commensurate with the business receipts of the assessee.
(ii) Entries found in the loose papers were not found to be recorded in the regular books of accounts of the assessee.
46. In our considered opinion, both the reasons given by the A.O. are ill-founded inasmuch as the loose papers were found from the premises of a third person which did not bear the name of the assessee nor its partner nor any 18 ITA Nos. 351 to 354/Raipur/2014 . A.Ys. 2009-10 to 2012-13 enquiry/verification has been done by the A.O. to substantiate its claim that the entries in the loose papers belong to the assessee. Further, as mentioned elsewhere, while deciding the appeal for A.Y. 2011-12, the indirect expenses have to be debited to the Profit and Loss account which the assessee has rightly done so and therefore the quantum of indirect expenses cannot be a basis for the rejection of the book results.
47. In our understanding of the law, the presumption u/s. 132(4A) of the Act would in any case be applicable to a third party from whose possession such papers/documents have been found by the revenue. In our understanding of the fact in the absence of corroborative evidence, addition of undisclosed income could not be made simply on the basis of entries on loose papers recovered from the premises of a third party.
48. Considering the facts in totality, we do not find any error or infirmity in the findings of the ld. CIT(A). Ground no. 3 is dismissed.
49. Ground no. 4 relates to the deletion of the addition made u/s. 40(a)(ia) of the Act.
50. In the course of the assessment proceedings and once again on the basis of the entries found in the loose papers, the A.O. formed a belief that the assessee has made unrecorded payments of these amounts without making TDS. The A.O. accordingly added a sum of Rs. 1,07,85,000/- and Rs. 27,49,000/-.
19 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
51. Assessee strongly agitated the matter before the ld. CIT(A) and strongly contended that the figures are imaginary and the assessee has never debited these expenses. Therefore, the same cannot be disallowed u/s.40(a)(ia).
52. After considering the facts and the submissions, the ld. CIT(A) observed that the conclusion drawn by the AO. appears to be one sided inasmuch as the inference drawn by the A.O. is not based on the results of any enquiry conducted by the A.O. with the persons whose names are appearing in the loose papers as commission agent. The ld. CIT(A) accordingly deleted the addition of Rs. 1,07,85,000/- and Rs. 27,49,000/-.
53. Before us, the ld. D.R. could not substantiate the additions made by the A.O. Ld. counsel for the assessee reiterated what has been stated before the lower authorities below.
54. We have carefully perused the assessment order. It is true that the A.O. has made the additions on the strength of the entries found in the loose papers. It is equally true that the assessee has never claimed such payments as expenditure in its books of accounts. It is also true that the A.O. has not brought anything on record which could suggest that the assessee has actually spent these expenditures on the persons found to be mentioned in the loose papers. In the absence of any enquiry made by the A.O, the impugned additions cannot be sustained and the ld. CIT(A) has rightly deleted the same which calls for no interference. Ground no. 4 is accordingly dismissed.
20 ITA Nos. 351 to 354/Raipur/2014. A.Ys. 2009-10 to 2012-13
55. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 16 - 04- 2018
Sd/- Sd/-
(RAM LAL NEGI) (N. K. BILLAIYA)
JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER
RAIPUR: Dated 16 /04/2018
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Sr. P.S.
ITAT,Raipur