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4.Aggrieved by the assessment orders dated 28.12.2011 passed by the A.O. u/s. 143(3) of the Act, the assessee filed first appeal before the learned CIT(A).

5. Before the learned CIT(A), the assessee submitted that the A.O. has made the additions to the income of the assessee in the assessment order based upon surmises and conjectures on suspicion and not supported by any evidence. The A.O. has wrongly presumed that major repair requires approval from local authorities. It was submitted that the assessee not only repaired extensively structure of 255 sq. mtr but he also carried out repair to the compound wall and leveling of the said plot. The assessee submitted that the MOU dated 17th August, 2007 is signed by both the parties and the A.O. was wrong in his finding that there was no agreement between the assessee and the buyer. As per clause 2 of the said MOU, it is stated that the assessee will make the said factory building in a fit and proper usable condition to suit the buyer's requirement and hence repairs and modifications to the structure and the flooring etc. to suit buyers requirement was a precondition for the sale. The assessee submitted that the assessee has rightly spent the amount on repairing of the building and rightly claimed the deduction as per section 43(6)(c)(i)(A) of the Act. With respect to the contentions of the A.O. that the plot was given on rent, then how the construction work was carried out in the 7 ITA 199/Mum/2013 plot and no prudent businessman will sell a plot of size 511.50 sq. mtr. after making investment of Rs. 48.22 lakhs for a consideration of Rs. 1.16 crores, the assessee submitted that it is merely a repetition of reason No. 1 & 2 stated above and the assessee has duly replied in the preceding paras. The assessee submitted that the AO was given detail bifurcation of the cost of improvement including the persons who has supplied material and labour to the assessee. The AO issued notices u/s 133(6) of the Act to the parties and in response to the notices u/s 133(6) of the Act, all the parties except one have confirmed that they were supplying building material to the assessee and also confirmed that TDS was duly deducted on amount paid to them from time to time. The assessee submitted that the A.O. was wrong in concluding that all the bills are accommodation bills. The suppliers were regularly supplying building material to the assessee and therefore outstanding as on 31-03-2009 has nothing to do with the goods supplied by them. It was contended by the assessee that because of the said expenditure , the assessee was able to realize a consideration more than the market value of the said factory building and the expenditure was incurred wholly and exclusively in connection with the cost of improvement which was a precondition laid down by the buyer. The assessee submitted that because of the said expenditure, the assessee was able to realize the sum of Rs.49,40,027/- for the factory building as against the cost of the said factory at Rs.25,69,500/- as on 31-03- 2002. The assessee has submitted the copies of balance sheet which shows that the land and factory building in the block of their share from the year 2001 onwards , the copy of deed of assignment entered between the assessee and the buyer and a copy of MOU dated 03-09-2007 vide clause No. 2 stipulates that to make the building fit and in proper usable condition , the buyer required repairing and modification before handing over the possession.

6. Aggrieved by the appellate orders dated 09.11.2012 passed by the learned CIT(A), the assessee filed second appeal before the Tribunal.

7. The learned Counsel for the assessee submitted that the dispute under this appeal is with regard to the cost of improvement of Rs. 48,22,390/- spent by the assessee for major structural repair and modification work in the factory building along with repair to the compound wall and leveling of plot, which factory building was proposed to be sold along with land for Rs. 1.16 10 ITA 199/Mum/2013 crores. The ld. counsel drew our attention to the orders of authorities below and submitted that the assessee has duly submitted all the invoices and details with respect to the construction work carried out by the assessee in the factory building. Even the tax was deducted at source on the amounts paid to the parties who undertook the work wherever applicable as per provisions of Chapter XVII-B of the Act. It was agreed by the assessee with the buyer that the assessee will carry out the repair work to make the property usable and hence the expenses was incurred of which the details are placed in the paper book filed with the Tribunal. He also drew our attention to clauses of the MOU entered into between the assessee and the buyer dated 3rd September, 2007 which is placed on record vide paper book page No. 85- 86 and submitted that as per clause -2, the assessee was required to undertake the repair work in the building structure before handing over the possession. The ld counsel drew our attention to the invoices for supply of material and labour charges for construction of factory building being placed in paper book page 92-111. The ld. Counsel submitted that the addition has been made by the learned A.O. based on surmises and conjectures on suspicion while all the cogent material has been brought on record to substantiate that major structural repairs and modification work was carried out by the assessee at the factory building . He also drew our attention to the certificate of Architect dated 10th September, 2007 describing the work to be carried on for the purposes of repairing to avoid collapsing of the building which is placed at paper book page 89. It was submitted that the learned CIT(A) erred in referring to the MOU dated 3rd September, 2007 being not incorporated in the deed of assignment dated 20th January, 2009 , though the other relevant agreement to lease dated 21st January, 1999 and 14th May, 2008 did find mention in the deed of assignment dated 20-01-2009. The ld. Counsel submitted that the payment has been made by account payee cheques to all the suppliers of the material and labour , and where-ever applicable under Chapter XVII-B of the Act, even taxes were deducted at 11 ITA 199/Mum/2013 source and deposited with government treasury .He drew our attention to page 166 of paper book to contend that tax of Rs.31,765/- was deducted at source on labour charges of Rs.15,42,000/- paid for structural repair and modification work carried on by the assessee in the factory building. Further, the ld. Counsel relied upon the submission made before the authorities below which are not repeated for the sake of brevity.

8. The ld. D.R. submitted that the factory area was only around 255 sq. meters and the expenses has been incurred for Rs. 48,22,390/- on repairs which is disproportionately excessive. The building was given on rent since assessment year 2004-05 and it is not possible to carry out extensive repairs on the rented premises. The purchases are bogus from whom the material was supplied. The ld. DR relied upon the orders of the authorities below.

9. In rejoinder the ld counsel for the assessee submitted that the said factory building was not on rent when the major and extensive structural repair and modification work was undertaken by the assessee. It was also submitted that there was no permissions required from CIDCO for carrying out these extensive structural repairs and modification work as it is not a case of construction of new factory building, consequently no permission from CIDCO was taken by the assessee.

10. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee was the owner of the land and factory building at 32-A, Sector-1, Shirwane, Nerul, Navi Mumbai- 400 706 with the leasehold rights in plot of size of 511.50 square meters , while the constructed area of the factory building was 255 sq. meters. The assessee has stated to have entered into an MOU dated 3rd September, 2007(stamp paper purchase date 17-08-2007 as the same is referred by this date in the orders of the authorities below) for the sale of the said land and 12 ITA 199/Mum/2013 factory building at Nerul for a total consideration of Rs. 1.16 crores. The said MOU dated 03-09-2007 (stamp paper purchase dated 17-08-2007) is placed by the assessee at page 85-86 of paper book filed with the Tribunal. As per clause 2 of the MOU dated 03-09-2007, the assessee was required to make the said building in a fit and proper usable conditions as the building structure required repairs and modification to suit the requirement of the buyer. The architect certificate dated 10-09-2007 is also placed by the assessee in the paper book page 89 filed with the Tribunal, which detailed in this architect certificate dated 10-09-2007 the extensive repair and modification work required in the factory building to avoid the building from collapsing. The architect has also certified that the beams and columns have developed cracks and water is seeping into the interiors of the building. The architect has also certified that the reinforcements are damaged severely. This architect certificate dated 10-09-2007 and the MOU dated 03-09-2007 are certified by the assessee in the paper book certificate that these documents were duly placed before the learned AO and the learned CIT(A) during the course of relevant proceedings before these authorities. The assessee has incurred these expenses for the extensive structural repairs and modifications in the factory building apart from repairs to the compound wall and leveling of plot, for which the assessee submitted the details/documents including invoices regarding the material cost and labour charges etc. incurred for these extensive structural repairs and modifications towards the factory building apart from repairs to the compound wall and leveling of plot, in terms of the MOU dated 03-09-2007. The payments for this work carried on by the assessee, have been stated to be made through banking channel by account payee cheque's and even the taxes were also stated to be deducted at source on these payments as covered by provisions of Chapter XVII-B of the Act. We have observed that the authorities below have made the addition merely on the basis of surmises and conjectures on suspicion by terming the invoices of material and labour submitted by the assessee as bogus and accommodation 13 ITA 199/Mum/2013 entries. No cogent incriminating material has been brought on record by the authorities below to prove that assessee has made bogus purchases except inspector report which is not sufficient to fasten the liability to tax on the assessee. The inspector report has merely submitted that two of the vendors from whom steel was bought by the assessee namely Payal Enterprsies and Bhumi Enterprises were found not existing at the addresses given in their invoices. The inspector report is placed at page 112 of paper book. We have seen from the invoices placed in the paper book that both these vendors namely Payal Enterprsies and Bhumi Enterprises are registered with VAT authorities and they have also charged Maharashtra VAT on the invoices issued to the assessee . Revenue has made no further enquiries with the VAT department or with the bankers of these two vendors as the payment were all made through account payee cheques . No further enquiry was conducted by the Revenue to bring on record cogent incriminating material to disprove and demolish the contentions of the assessee. The assessee in all dealt with fifteen parties as per details vide page 90 of paper book filed by the assessee with the Tribunal. Only enquiries were made through inspector with respect to four parties out of these fifteen parties , of which two were found non-existent at the given addresses. The enquiries with respect to the rest of the eleven suppliers were not even made by issuing notices u/s 133(6) of the Act. These material and labour suppliers, fifteen in number were not summoned u/s 131 of the Act, nor their statement were recorded. The information was not called by the Revenue from the buyer of the land and factory building by issuing summons/notices u/s 131/133(6) of the Act to verify the authenticity of the claim of the assesseee having undertaken extensive structural repairs and modification work to the factory building prior to its sale, nor the statement of the buyer of the afore-stated property was recorded. No technical expert such as DVO was appointed by the Revenue to enquire about the extensive structural repairs and modification claimed to be carried on by the assessee to disprove and demolish the contentions of the assessee . No enquiry was 14 ITA 199/Mum/2013 even made with the office of the municipal authorities to ascertain the status of construction and structural repairs and modification of the factory building , if any carried on by the assessee in the impugned assessment year to disprove the contentions of the assessee. The case of the Revenue is based on the non-existence of two parties at the given addresses vide inspector report, which is not sufficient enough to come to the conclusion that the entire theory of extensive structural repair and modification of the factory building as brought out by the assessee is a farce , in-fact the reliance by the Revenue on the inspector report without conducting further probe to conclusively disprove and demolish the contentions of the assessee, has led the revenue conclusions fall into the realm of conjectures and surmises on suspicion which is not permissible. Suspicion howsoever strong cannot take the place of the proof is a settled proposition of law. Thus, in nut-shell, no proper and adequate enquiry has been conducted by the Revenue to rebut , disprove and demolish the contentions of the assessee as no cogent incriminating material has been brought on record by the Revenue against the assessee. The ground which has been taken by the ld. CIT(A) to reject the contention of the assessee such as MOU dated 3rd September, 2007 is entered on one hundred rupee stamp paper and it does not talk about any schedule of payment and only says that the entire balance payment will be made within a period of six months from the date of signing of the MOU are irrelevant de-hors fastening of the liability to tax on the assessee . Similarly to contend that the said MOU did not find mention in the deed of assignment dated 20-01-2009 and is merely an after-thought is based on surmises and conjectures on suspicion , while the MOU did talk of payment of Rs. 3 lacs vide cheque dated 15-10- 2007 which find mention in the deed of assignment dated 20-01-2009 . To contend that the MOU dated 03-09-2007 has preceded the permissions received by the assessee from CIDCO on 31/10/2008 is again of no-use to the Revenue as it is very probable that the tax-payer will first enter into a binding agreement with a serious buyer of the property who has also 15 ITA 199/Mum/2013 advanced some amount of money and then approach the CIDCO for seeking permission to sell the property. No cogent incriminating material has been brought on record by the authorities below to demolish the MOU dated 03-09- 2007 as an after-thought but rather the same is based on conjectures and surmises based on suspicion which is not permissible under the Act. The CIT(A) again enter into realm of conjectures and surmises based on suspicion by contending that the material and labour charges must have been used in building business of the other proprietary concern of the assessee namely E. V. Homes , while the invoices speak voluminously of the name of the concern of the assessee M/s Vicky Electrical Corporation as the vendee in the said invoices , which concern of the assessee namely, M/s Vicky Electrical Corporation owned the land and factory building and these invoices also reflected the address of the 32-A, Sector-1, Shirwane, Nerul of the said land and factory building for dispatch of material and rendering of labour services. The payments for these invoices are stated to be made by account payee cheques and tax was also deducted at source on these invoices where-ever applicable as per provisions of Chapter XVII-B of the Act. These cogent material brought on record by the assessee backed with the chain of events starting from signing of MOU dated 03-09-2007 and ending with deed of assignment dated 20-01-2009 , which comprised agreement to sell land and factory building for Rs.1.16 crores vide MOU dated 03-09-2007 with conditions agreed by the assessee to make the factory building fit and usable as the building required extensive structural repairing and modification to suit the buyers requirement, architect certificate dated 10-09-2007 pointing out deficiencies in the factory building structure to avoid the collapsing of building, invoices for material and labour expenses incurred by the assessee towards extensive repairs and modification to the factory building during the period April - November 2008 , payments of these invoices by account payee cheque's, deduction of tax at source on these payments where-ever applicable under Chapter XVII-B of the Act, permission vide approval dated 31-10-2008 16 ITA 199/Mum/2013 from the CIDCO to sell the said land and building, receipt of payment from the same buyer starting from 15-10-2007 and ending on 01-01-2009 in all aggregating to Rs.1.16 crores as agreed in the MOU dated 03-09-2007 and finally execution of deed of assignment in favour of the same buyer vide deed dated 20-01-2009, which completes full chain of event of the transaction for sale of land and factory building for which necessary structural repairs and modifications were done by the assessee as contended, on the touch stone of preponderance of probabilities which cannot be simply brushed aside or demolished by the Revenue based on conjectures and surmises on suspicion , except through cogent incriminating material which revenue has failed to bring on record in the instant case. In our considered view, the assessee has duly discharged his burden cast under the Act and now it was for the Revenue to have brought on record cogent incriminating material and evidences to rebut and demolish the contentions of the assessee conclusively on the touchstone of preponderance of probabilities which the revenue could not do except by bringing on record inspector report that two of the parties are not existing on the addresses given on the invoices which is not sufficient enough to fasten the liability on the assessee as it does not prove that these purchases were bogus and are accommodation entries as set out above by Revenue . Even for the sake of argument it is assumed that the assessee has not obtained the approval from CIDCO for doing this major and extensive structural repair and modification work to the factory Building, this technical breach will not in itself disentitle the assessee from claiming the same under the Act as cost of improvement and more-so it is a case of major and extensive structural repair and modification to the existing factory building and not a case of construction of altogether new factory building. Hence, in our considered view, the additions of Rs. 48,22,390/- by disallowing the same as cost of improvement to the factory building cannot be sustained and we order deletion of the addition made by the A.O. and as sustained by the CIT(A). However, from the perusal of the invoices submitted by the assessee 17 ITA 199/Mum/2013 in the paper book filed with the Tribunal which are placed at paper book page 92-111, we have observed that the same totaled to Rs 38,18,517/-( excluding one invoice which is placed twice at page 100 and101 being Ritesh Transport of Rs.92,192/- bearing number 385 dated 31/05/2008) ) against the expenses of Rs.48,22,390/- claimed by the assessee, to that extent , we are directing the AO to undertake limited verification before allowing the claim of the assessee after satisfying that complete invoices of Rs.48,22,390/-backed with account payee cheque payments as claimed by the assessee are on record with the Revenue duly reconciled to protect the interest of Revenue. We direct accordingly.