ACIT, Bangalore v. M/s SJR Builders, Bangalore

ITA 159/BANG/2010 | 2004-2005
Pronouncement Date: 28-07-2011 | Result: Dismissed

Appeal Details

RSA Number 15921114 RSA 2010
Bench Bangalore
Appeal Number ITA 159/BANG/2010
Duration Of Justice 1 year(s) 5 month(s) 15 day(s)
Appellant ACIT, Bangalore
Respondent M/s SJR Builders, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-07-2011
Date Of Final Hearing 16-05-2011
Next Hearing Date 16-05-2011
Assessment Year 2004-2005
Appeal Filed On 12-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N BARADHVAJA SANKAR VICE PRESIDENT AND SMT. P MADHAVI DEVI JUDICIAL MEMBER ITA NO.147/B ANG/2010 (ASST. YEA R 2004-05) M/S S.J.R BUILDERS #49 27 TH MAIN B.T.M LAYOUT IST STAGE BANGALORE-560 068. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-10(1) BANGALORE. . RESPONDENT AND ITA NO.159/BANG/2010 (ASST. Y EAR 2004-05) (BY REVENUE) ASSESSEE BY : SHRI V SRINIVASAN REVENUE BY : SHRI G.V GOPALA RAO O R D E R PER SMT. P MADHAVI DEVI JUDICIAL MEMBER THESE CROSS APPEALS ARE FILED BY THE ASSESSEE AS WE LL AS THE REVENUE. THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AT BANGALORE D ATED ITA NOS.147 & 159/B/10 2 11.11.2009. THE CROSS APPEALS ARISE OUT OF THE ASS ESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS AS BUILDERS AND DEVEL OPERS OF HOUSING PROJECTS IN AND AROUND BANGALORE. DURING THE FINAN CIAL YEAR 2003-04 RELEVANT TO THE ASSESSMENT YEAR 2004-05 THE FIRM W AS IN PROCESS OF EXECUTING THE FOLLOWING PROJECTS. 1. EASTWOOD LAYOUT PROJECT 2. REDWOODS HOUSING PROJECT 3. ETERNITY LAYOUT PROJECT 4. PARKVISTA HOUSING PROJECT 5. SPENCER HOUSING PROJECT 6. BROOKLYN HOUSING PROJECT 3. SINCE EARLIER YEARS THE ASSESSEE HAS BEEN CONSI STENTLY FOLLOWING THE COMPLETED PROJECT METHOD FOR RECOGNIZING THE PR OFITS EARNED FROM THESE PROJECTS. DURING THE FINANCIAL YEAR 2003-04 THE ASSESSEE HAS RECOGNIZED THE COMPLETION OF EASTWOOD LAYOUT PROJEC T AND OFFERED THE PROFITS FROM THIS PROJECT TO TAX. IN RESPECT O F THE OTHER ON GOING ITA NOS.147 & 159/B/10 3 PROJECTS THE ASSESSEE HAS CLASSIFIED THE REVENUE E XPENDITURE AS PRE- OPERATIVE EXPENSES AND THE PROFITS FROM WHICH ARE T O BE RECOGNIZED IN THE FUTURE YEAR OF COMPLETION. 4. FOR THE RELEVANT ASSESSMENT YEAR 2004-05 THE A SSESSEE FILED THE RETURN ON 1/11/2004 DECLARING A TOTAL INCOME OF RS. 58 47 580/-. MEANWHILE ON 25.11.2004 A SURVEY WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE CONSEQUENT TO WHICH THE ASSESSEE FILED A LETTER DATED 6.12.2004 ENCLOSING STATEMENT THERETO TO THE EFFECT THAT THE NET PROFIT ARISING FROM THE EASTWOOD LAYOUT PROJECT WAS OF RS.1 01 53 623/-. SINCE THE PROFIT DECLARED FOR TH E ASSESSMENT YEAR 2003-04 FROM THE PROJECT WAS ONLY RS.58 47 580/- T HE BALANCE PROFIT OF RS.43 06 643/- IS OFFERED TO TAX IN THE CORRESPO NDING YEAR I.E FINANCIAL YEAR 2004-05. YET ANOTHER LETTER DATED 13 .12.2004 WAS FILED DECLARING AN ESTIMATED PROFIT OF RS.27 25 000/- FOR ASSESSMENT YEAR 2005-06 FROM ETERNITY PROJECT. THE ASSESSING OFFIC ER ISSUED NOTICE U/S 143(2) ON 26.8.2005 AND TOOK UP THE MATTER FOR SCRUTINY AND COMPLETED THE ASSESSMENT U/S 143(3). 5. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) TH E AO OBSERVED THAT THE ASSESSEE HAVING FOLLOWED THE COMPLETION O F PROJECT METHOD ITA NOS.147 & 159/B/10 4 HAS OFFERED THE PROFITS FROM EASTWOOD PROJECT DURIN G THE FINANCIAL YEAR 2003-04 AND HENCE OBVIOUSLY THIS PROJECT IS CO MPLETED DURING THE RELEVANT FINANCIAL YEAR ONLY. FROM THE DETAILS FURN ISHED BY THE ASSESSEE IN HIS LETTER DATED 6.12.2004 THE AO OBS ERVED THAT THE ADDITIONAL PROFITS OF RS.43 06 643/- WAS FOR THE AS SESSMENT YEAR 2004- 05 BECAUSE NOTHING HAS BEEN ESTABLISHED WHETHER THE ADDITIONAL PROFITS OF RS.43 06 043/- HAVE ARISEN IN THE FINANCIAL YEAR 2003-04 OR FOR THE FINANCIAL YEAR 2004-05. HE OBSERVED THAT THE ASSES SEE ACCOUNTS ITS REVENUE RECEIPTS BY BIFURCATING INTO DIRECT AND INDIRECT INCOME. THE DIRECT INCOME REPRESENTS THE RECEIPT TOWARDS LAND VALUE OF THE PLOT AND INDIRECT INCOME REPRESENTS DEVELOPMENT C HARGES RECEIVED. AFTER PERUSAL OF THE REVENUE RECEIPTS FOR THE FINAN CIAL YEAR 2003-04 HE OBSERVED THAT THE ASSESSEE HAS RECEIVED SITE SALE A MOUNT UNDER DIRECT INCOME FROM 116 PARTIES WHILE INDIRECT INCOME HA S BEEN RECEIVED ONLY FROM 109 PARTIES. HE OBSERVED THAT SINCE THE ENTIRE LAYOUT HAS BEEN UNIFORMLY DEVELOPED THE DEVELOPMENT CHARGES H AVE TO BE SHARED BY ALL THE BUYERS AND EACH BUYER IS REQUIRED TO PAY THE SITE SALE VALUE AS WELL AS THE DEVELOPMENT CHARGES. AFTER GOING TH ROUGH THE NAMES OF PARTIES WHO HAVE NOT PAID THE DEVELOPMENT CHARGES HE OBSERVED THAT TWO OF THEM ARE PARTNERS OF THE FIRM AND ONE OF THE M IS RELATED TO THE PARTNERS AND THE 3 RD SITE HAS BEEN CAPITALIZED AS ALLOTTED FOR CLUB HOU SE. ITA NOS.147 & 159/B/10 5 HE OBSERVED THAT WITHDRAWAL OF STOCK IN TRADE BY TH E PARTNERS OF THE FIRM WILL HAVE TO BE MADE AT THE MARKET VALUE OF TH E STOCK AND CAPITALIZE ALL STOCK IN TRADE (I.E SITE FOR CLUB HO USE) AND HAS TO BE EFFECTED AT COST PRICE. HE ALSO OBSERVED THAT NO CL OSING STOCK HAS BEEN CARRIED FORWARD IN THE FINANCIAL YEAR 2003-04. HE THEREFORE CONCLUDED THAT THE ASSESSEE HAS DELIBERATELY SUPPRE SSED THE TURNOVER OF DEVELOPMENT CHARGES IN RESPECT OF SEVEN PLOTS. SUBSEQUENTLY HE OBSERVED THAT THE ASSESSEE HAS VOLUNTARILY ADMITTED ADDITIONAL GROSS REVENUE OF RS.92 10 940/- FROM EASTWOOD PROJECT AF TER CLOSURE OF BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2003-04 AN D THEREFORE THIS INCOME IS RELATED TO THE DEVELOPMENT CHARGES IN RES PECT OF THE AFORESAID 7 PLOTS. HE THEREFORE HELD THAT THIS A MOUNT HAS ARISEN TO THE ASSESSEE FIRM IN THE FINANCIAL YEAR 2003-04 BUT WAS OMITTED TO BE CREDITED IN ITS ACCOUNTS FOR THAT PARTICULAR YEAR A ND IT IS ONLY CONSEQUENT TO THE SURVEY U/S 133A OF THE ACT THAT T HE ASSESSEE HAS ADMITTED TO RECTIFY HIS DEFAULT BY VOLUNTARILY OFFE RING THIS INCOME IN THE FINANCIAL YEAR 2004-05. HE THEREFORE TREATED THIS AMOUNT OF RS.92 10 940/- AS INCOME OF THE ASSESSEE IN THE FIN ANCIAL YEAR 2003- 04. IN ADDITION THERETO HE ALSO OBSERVED THAT THE ASSESSEE HAS BOOKED SITE SALE AMOUNT OF RS.12 99 800/- AND NO DETAILS A RE FORTH COMING FROM THE ASSESSEE. OBSERVING THAT THE ASSESSEE HAS CONFIRMED THAT THE ITA NOS.147 & 159/B/10 6 CLOSING STOCK OF RS.2 12 250/- IS BUILDING MATERIAL AVAILABLE ON THE SITE AND THAT THERE IS NO STOCK IN TRADE AS ON 31.3.2004 HE HELD THAT THIS INCOME HAS ALSO ACCRUED TO THE ASSESSEE IN THE FINA NCIAL YEAR 2003-04. HE ACCORDINGLY MADE THE ADDITION. 6. THE ASSESSEE CLAIMED THE EXPENSES FOR THE PROJEC T INCURRED IN THE FINANCIAL YEAR 2004-05 AS FOLLOWS : 1. LAND COST : RS.12 47 500/- 2. ESTIMATED COST OF COMPLETION : RS.48 50 100/- 7. ON ENQUIRY BY THE ASSESSING OFFICER THE ASSESSE E SUBMITTED THAT THERE WAS NO ADDITIONAL INCOME EARNED OR ADDIT IONAL EXPENDITURE INCURRED IN RESPECT OF THIS PROJECT FOR THE FINANCI AL YEAR 2004-05 AND THIS EXPENDITURE OF RS.12 47 500/- BEING INCREASE I N LAND COST WAS ONLY AN ESTIMATE AND NOT THE ACTUAL EXPENDITURE. L IKEWISE WITH REGARD TO THE ESTIMATED COST OF COMPLETION ALSO IT WAS SUB MITTED THAT IT WAS ONLY AN ESTIMATE AND NOT ACTUAL EXPENDITURE. THE A O ACCORDINGLY DISALLOWED THIS CLAIM OF EXPENDITURE U/S 37(1) OF T HE INCOME-TAX ACT ON THE GROUND THAT IT CANNOT BE SAID TO HAVE BEEN L AID OUT OR EXPENDED ITA NOS.147 & 159/B/10 7 WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION OF THE ASSESSEE. 8. FROM THE BALANCE SHEET OF THE ASSESSEE AS ON 31. 3.2004 THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN RS.24 36 000 A S CURRENT LIABILITY OF EASTWOOD PROJECT UNDER SCHEDULE D BEING SUNDRY C REDITORS FOR EXPENSES. THE DETAILS OF HIS LIABILITY AS CULLED O UT FROM THE LEDGER ACCOUNT OF THE ASSESSEE WAS TAKEN INTO CONSIDERATIO N AND HE OBSERVED THAT THESE EXPENSES WERE CARRIED FORWARD AS LIABILI TY AS ON 31.3.2004. IN ORDER TO AUTHENTICATE THE CLAIM OF THE ASSESSEE THE ASSESSEE WAS ASKED TO FURNISH THE POSTAL ADDRESSES OF THESE PERS ONS. IN REPLY TO THIS THE ASSESSEE SUBMITTED THAT THEY ARE NOTHING BUT LA BOUR CHARGES PAYABLE FOR PENDING WORKS IN RESPECT OF EASTWOOD PR OJECT AND THE POSTAL ADDRESSES OF THE LABOURERS WAS NOT AVAILABLE SINCE THEY ARE TEMPORARY WORKERS WHO ARE RESIDING AT THE CONSTRUC TION OF THE PROJECT ITSELF AT THE TIME OF DEVELOPMENT OF EASTWOOD LAYOU T. THE ASSESSEE ALSO ENCLOSED THE DETAILS OF PAYMENT MADE SUBSEQUEN TLY WHICH CONSISTS THE DATE OF PAYMENT AND THE MODE OF PAYMEN T. THE PAYMENT WAS MADE IN CASH ON VARIOUS DATES AS MENTIONED IN T HE LEDGER ACCOUNT AND COPY FURNISHED ALONG WITH THE REPLY. FROM THE DETAILS GIVEN IN THE DETAILS THE AO OBSERVED THAT THESE LABOURERS FO R WHOM PAYMENT ITA NOS.147 & 159/B/10 8 HAS TO BE MADE ARE SAID TO HAVE WORKED ON THE SITE DURING THE PERIOD AUG 03 TO MAR 04 AND RS. 3 TO 4 LAKHS WERE DUE TO EACH OF THEM. HE OBSERVED THAT IT IS CUSTOMARY AT PROJECT SITES TO P AY THE TEMPORARY LABOURERS ON A WEEKLY BASIS AND IT IS UNLIKELY THA T TEMPORARY LABOURERS WILL BE ABLE TO SURVIVE OVER A WEEK WITH OUT THEIR DUE WAGES. ON THE CONTRARY THE ASSESSEE CLAIMS TO HAVE REPAID THEM IN CASH OVER A SUBSEQUENT PERIOD OF FOUR MONTHS. HE THEREFORE HELD THAT THESE CIRCUMSTANCE CAST A DOUBT ON THE GENUINENESS OF THE EXPENDITURE OF RS.24 36 000/- AND THIS CLAIM APPEARS TO HAVE BEEN INFLATED TO BRING DOWN THE PROFITS. SINCE THIS PAYMENT HAVE BEEN MAD E CONTRAVENING THE PROVISION OF SEC. 40A(3) OF THE ACT AND SINCE T HE PERSONS ARE NOT IDENTIFIABLE THE GENUINENESS OF THE TRANSACTION AL SO NOT BEING PROVED HE DISALLOWED THE CLAIM OF EXPENDITURE. SIMILARLY HE DISALLOWED THE PAYMENT OR LAND COST OF RS.3 69 780/- AND A PROVISI ON FOR FURNISHING WORK EXPENSES OF RS.2 87 026/-. 9. AS REGARDS THE PROFIT OF RS.27 25 000 OF ETERNI TY PROJECT THE ASSESSEE VIDE ITS LETTER DATED 13.12.2004 SUBMITTED THAT THE ETERNITY PROJECT IS PARTIALLY COMPLETED AS ON DATE AND IT IS NOT IN A POSITION TO ARRIVE AT THE ACTUAL PROFIT FROM THE DETAILS AVAILA BLE AND THAT THEY WERE DECLARING AN ESTIMATED PROFIT OF RS.27 25 700/- FOR THE ASSESSMENT YEAR ITA NOS.147 & 159/B/10 9 2005-06 FOR ITS ETERNITY PROJECT. ON FURTHER ENQUI RY FROM THE ASSESSING OFFICER SEEKING CLARIFICATION THE ASSESS EE VIDE LETTER DATED 22.12.2006 WHICH IS REPRODUCED IN THE ASSESSMENT ORDER AT PAGE 14 SUBMITTED THAT SINCE THE ETERNITY PROJECT WAS YET T O BE COMPLETED THE ENTIRE PROFIT OF RS.27 25 000/- MAY BE TREATED AS P ERTAINING TO EASTWOOD PROJECT ONLY. THE AO ACCORDINGLY TREATED T HIS AMOUNT ALSO AS DEEMED TO BE PROFITS OF EASTWOOD PROJECTS TO BE ACCRUED IN ASSESSMENT YEAR 2004-05. HE ACCORDINGLY COMPUTED T HE INCOME OF THE ASSESSEE AFTER MAKING THE ABOVE ADDITIONS. 10. AGGRIEVED THE ASSESSEE PREFERRED ON APPEAL BEF ORE THE CIT(A). THE CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGAINST THE RELIEF GIVEN BY THE CIT(A) THE REVENUE IS IN APPEAL BEFOR E US AND AGAINST THE ADDITIONS CONFIRMED BY THE CIT(A) THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 11. THE ASSESSEE IN ITS APPEAL HAS RAISED THE FO LLOWING GROUNDS OF APPEAL : I. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW EQUITY WEIGHT OF EVIDENCE PROBABILITIES FAC TS AND CIRCUMSTANCES OF THE CASE. ITA NOS.147 & 159/B/10 10 II. THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING AN ADDITION OF RS.22 35 100/- OUT OF THE ADDITION OF RS.48 50 000/- MADE BY THE LEARNED AO IN RESPECT OF ADDITIONAL EXPENSES MENTIONED IN THE LETTER DATED 6.12.2004 WHICH WAS MERELY BASED ON ESTIMATES AT THE RELEVANT POINT OF TIME ESPECIALLY WHEN THE APPELLANT HAD ULTIMATELY OFFERED AN INCOME OF RS.70 13 043/- FOR THE ASSESSMENT YEAR 2005-06 AND THE SAME HAS BEEN DIRECTED TO ASSESSED FOR THE YEAR UNDER APPEAL ITSELF BY THE LEARNED CITA() UNDE R THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE. III. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLD ING THE ADDITION OF RS.19 73 513/- IN RESPECT OF AMOUNT S OUTSTANDING IN RESPECT OF THE LAND COST CLAIMED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. IV. THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS.24 36 000/- IN RESPECT OF LABOUR EXPENSES CLAIMED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. V. THE LEARNED CITA() IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE MADE U/S 40A(3) OF THE ITA NOS.147 & 159/B/10 11 ACT AMOUNTING TO RS.3 69 780/- UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. VI. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HONBLE CCIT/CG THE APPELLANT DENIED HIMSELF LIABLE TO THE CHARGED TO INTEREST U/ S 234B AND 234C OF THE ACT WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE AND TH E LEVY DESERVES TO BE CANCELLED. VII. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PAR T OF THE COSTS. 12. WE FIND THAT THE GROUND NOS. 1 AND 7 ARE GENER AL IN NATURE AND NEEDS NO ADJUDICATION. AS REGARDS GROUND NO.2 WE F IND THAT IT RELATES TO THE DISALLOWANCE OF THE ADDITION OF RS.48 50 100 /- MADE BY THE AO ON ACCOUNT OF ESTIMATED COST OF COMPLETION. 13. THE CIT(A) OBSERVED THAT FOR THE FINANCIAL YEAR 2003-04 THE ASSESSEE HAD MADE PROVISION FOR FINISHING WORK EXPE NSES AT ITA NOS.147 & 159/B/10 12 RS.22 35 100/- AND ALSO MADE AN ADDITIONAL ESTIMATI ON OF COST COMPLETION OF RS.48 50 000/-. HE THEREFORE OBSERV ED THAT THE ADDITION OF RS.48 50 100/- IS WITHOUT ANY CONCLUSIV E FINDINGS. HE ACCORDINGLY DELETED THE SAME. 14. AS REGARDS THE PROVISION FOR FINISHING WORK HE HELD THAT IT IS NOT FOR AN EXISTING LIABILITY BUT IS FOR CONTINGENT LIABILITY WHICH IS NOT ALLOWABLE. HE ACCORDINGLY CONFIRMED THE ADDITION. 15. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THOUGH THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD AND HAS OFFERED THE INCOME IN THE YEAR OF COMPLETION OF THE PROJEC T AT RS.58 47 580/- THERE WAS SOME ADDITIONAL INCOME ARISING TO THE ASS ESSEE AND THEREFORE IN ITS LETTER DATED 1.12.04 DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS OFFERED THE ADDITIONA L INCOME FOR THE ASSESSMENT YEAR 2005-06. HE SUBMITTED THAT THIS ADD ITIONAL INCOME WAS OFFERED BY THE ASSESSEE ONLY DUE TO FURTHER DEV ELOPMENTS IN RESPECT OF THE PROJECTS. AS PER THE SAID ESTIMATED PROFIT AND PROFIT AND LOSS OF ACCOUNT FILED BY THE ASSESSEE THE TOTAL PR OFITS FROM EASTWOOD PROJECT WOULD BE R.1 01 53 623/- AND AFTER TAKING I NTO ACCOUNT THE PROFIT OF RS.58 47 580/- ALREADY DECLARED FOR THE Y EAR UNDER APPEAL THE ITA NOS.147 & 159/B/10 13 ASSESSEE SHOWED AN ADDITIONAL INCOME OF RS.43 06 04 3/- WHICH WAS OFFERED FOR THE ASSESSMENT YEAR 2004-05. THUS ACC ORDING TO HIM THE PROFIT OF RS.1 01 53 623/- AND ALSO ADDITIONAL INCO ME FROM THE ETERNITY PROJECT OF RS.27 25 000/- ONLY SHOULD BE T AKEN AS THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. 16. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 17. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS WE FIND THAT THE ASSESSEE HAS OFFERED CERTAIN ADDITIONAL INCOME DURING THE COURSE OF SURVEY AS ATTRIBUTABLE TO THE FINANCIAL YEAR 2004-05 AND RELATING TO EASTWOOD PROJECT. SINCE TH E SAID PROJECT HAS BEEN COMPLETED IN THE FINANCIAL YEAR 2003-04 ITSELF THE AO BROUGHT IT TO TAX FOR THE ASSESSMENT YEAR 2004-05 ONLY. WHILE ARRIVING AT THE ACTUAL INCOME FROM THE EASTWOOD PROJECT THE AO HAS DISALLOWED ESTIMATED COST OF CONSTRUCTION OF RS.48 50 100/- AN D THE ASSESSEE ITSELF HAS ADMITTED THAT THIS IS ONLY AN ESTIMATE AND NOT ACTUAL EXPENDITURE. IN SUCH A CASE THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AS THE AO WITHOUT ANY BASIS HELD THAT THIS IS AN INCOME OF TH E ASSESSEE AND HAS MADE THE ADDITION. HOWEVER AS REGARDS THE PROVISI ON MADE FOR A ITA NOS.147 & 159/B/10 14 CONTINGENT LIABILITY THE CIT(A) CONFIRMED THE ADDI TION. THE ASSESSEE HAS NOT BEEN ABLE TO PROVE BEFORE US THAT IT IS NOT A CONTINGENT LIABILITY AND IS AN EXISTING LIABILITY. FOR MAKING ANY CLAIM AND ALLOWABILITY OF THE SAME IT IS THE DUTY OF THE ASSESSEE TO PROVE T HE CLAIM WITH EVIDENCE THAT IT IS FOR THE PURPOSE OF AN ASCERTAIN ED LIABILITY AND ALSO IT IS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HA VING FAILED TO DO SO WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A) AT THIS STAGE. THIS GROUND OF APPEAL IS ACCORDINGLY R EJECTED. 18. THE GROUND NO.3 4 AND 5 RELATES TO DISALLOWANC E OF RS.19 73 513/- IN RESPECT OF AMOUNTS OUTSTANDING IN RESPECT OF LAND COST AND OF RS.24 36 000/- IN RESPECT OF LABOUR EXP ENSES CLAIMED BY THE ASSESSEE. 19. WE FIND THAT THE CIT(A) HAS CONFIRMED THESE ADD ITIONS AS THE ASSESSEE HAS FAILED TO PROVE THE IDENTIFY OF THE PE RSONS TO WHOM THE SAID PAYMENT IS MADE AND ALSO THE GENUINENESS OF TH E PAYMENT. 20. AS REGARDS LAND COST THE CIT(A) HAS ALSO VER IFIED THE BALANCE SHEET AND HAS OBSERVED THAT THERE IS NO OUTSTANDING AMOUNT APPEARING ITA NOS.147 & 159/B/10 15 TOWARDS LAND COST OF EASTWOOD PROJECT AND THAT THE ASSESSEE HAS NOT FILED THE DETAILS OF INVESTMENT IN LAND OR EXPENSES RELATING TO LAND. 21. SIMILARLY WITH REGARD TO LABOUR EXPENSES ALSO THE ASSESSEE HAS NOT EXPLAINED THE PAYMENTS SATISFACTORILY BECAUSE ANNEXURE 4 TO THE ASSESSMENT ORDER HAS THE DETAILS OF COST INCURRED F OR THAT EAST WOOD PROJECT FROM 1/4//2003 TO 31/03/2004 AND 1/4/2004 T O 31/3/2005 AND THE EXPENSES RELATING TO LABOUR CHARGES DO NOT APPE AR THERE. 22. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T EXPENSES INCURRED BY THE ASSESSEE WERE GENUINE AND REASONABL E AND THE DISALLOWANCE HAS BEEN MADE PURELY ON THE BASIS OF SUSPICION AND SURMISE. 23. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 24. HAVING HEARD BOTH THE PARTIES WE FIND THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS OF PROVING THE GENUINENESS OF T HE TRANSACTION AND ALSO THE NECESSITY OF MAKING SUCH PAYMENTS. WHEN THE GENUINENESS ITA NOS.147 & 159/B/10 16 OF THE TRANSACTION AND THE IDENTITY OF THE PARTIES ARE NOT PROVED WE ARE OF THE VIEW THAT BOTH THE AO AND THE CIT(A) HAVE BE EN RIGHT IN MAKING THE DISALLOWANCE. THESE GROUNDS ARE ACCORDI NGLY REJECTED. 25. AS REGARDS GROUND NO.6 WE FIND THAT IT IS CONS EQUENTIAL IN NATURE AND THEREFORE THE AO IS DIRECTED TO GIVE T HE CONSEQUENTIAL RELIEF TO THE ASSESSEE IF ANY. ITA NO.159/BANG/2010 26. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : I. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. II. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITI ON OF RS.12 47 500/- MADE ON ACCOUNT OF ADDITIONAL LAN D COST. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AO OHAD PROCEEDED TO COMPUTE THE TOTAL INCOME WITH REFERENCE TO THE INCOME FROM EASTWOOD LAYOUT PROJECT AS COMPUTED BY THE ASSESSEE IN ITS LETTER D ATED 6.12.2004 AND NOT WITH REFERENCE TO THE PROFIT AS P ER PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE. ITA NOS.147 & 159/B/10 17 III. THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.2 87 026/- RELATING TO LABOUR PAYMENTS MADE U/S 40A(3) OF THE IT ACT WITHOUT SATISFYING HIMSELF THAT THE LABOUR PAYMENTS WERE NO T MADE ON A SINGLE DAY ATTRACTING THE PROVISIONS OF S EC. 40A(3) IN VIEW OF AGGREGATE LABOUR PAYMENTS EXCEEDING RS.20 000/- PER DAY. THE CIT(A) FAILED T O APPRECIATE THE FACT THAT ALTHOUGH THE AMOUNT OF EAC H PAYMENT DID NOT EXCEED RS.20 000/- THE PROVISION OF SEC.40A(3) WOULD STILL BE ATTRACTED IN VIEW OF THE AMENDMENT TO SEC.40A(3) BY THE FINANCE ACT 2008. IV. THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO RS.22 35 100/- WITHOUT APPRECIATING THE FACT THAT THE PROVISION FOR UNASCERTAINED EXPEN SES OF RS.48 50 100/- CLAIMED BY THE ASSESSEE IN ITS COMPUTATION OF INCOME IN RESPECT OF EASTWOOD LAYOUT PROJECT AS PER ITS LETTER DATED 6.12.2004 IS OVER AND ABOVE THE AMOUNT OF PROVISION FOR FINISHING EXPENSE S TO THE EXTENT OF RS.22 35 100/- DEBITED BY THE ASSE SSEE UNDER THE HEAD DEVELOPMENT EXPENSES. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AO HAD PROCEEDED TO COMPUTE THE TOTAL INCOME WITH REFERENC E TO THE INCOME FROM EASTWOOD LAYOUT PROJECT AS COMPUTED BY THE ASSESSEE IN ITS LETTER DATED 6.12.2 004 AND NOT WITH REFERENCE TO THE PROFIT AS PER THE PR OFIT & LOSS ACCOUNT FILED BY THE ASSESSEE. ITA NOS.147 & 159/B/10 18 V. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. VI. THE APPELLANT CRAVE LEAVE TO ADD ALTER AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 27. THE GROUND NO.1 5 AND 6 ARE GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 28. AS REGARDS GROUND NO.2 WE FIND THAT THE ASSESS EE HAD CLAIMED LAND COST OF RS.12 47 500/- AND THAT IT HAS NOT BE EN INCURRED BUT IT IS ONLY AN ESTIMATE. THE AO DISALLOWED THE SAME AND AD DED IT TO THE TOTAL INCOME OF THE ASSESSEE. THE CIT(A) HAS DELET ED THE ADDITION ON THE GROUND THAT EXCEPT FOR THE FINANCIAL STATEMENT FURNISHED ON 6.12.2004 NO MATERIAL WAS BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAS INFLATED THE LAND COST. WHILE BOTH TH E PARTIES RELIED UPON ORDERS OF THE AO AND THE CIT(A) WE FIND THAT THIS ADDITION IS ON THE BASIS OF DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06. THOUGH THERE IS A BASIS FOR MAKING THE ITA NOS.147 & 159/B/10 19 DISALLOWANCE OF THE SAID AMOUNT AS EXPENDITURE FOR THE EASTWOOD PROJECT WE DO NOT FIND ANY BASIS FOR MAKING THE AD DITION AS THERE IS NO EVIDENCE TO THE EFFECT THAT IT IS THE INCOME OF THE ASSESSEE. 29. FOR THE DETAILED REASONING GIVEN BY US FOR THE GROUND OF APPEAL NO.2 IN ASSESSEES APPEAL WE HOLD THAT THE CIT(A) S ORDER NEEDS NO INTERFERENCE ON THIS GROUND ALSO. THIS GROUND IS A CCORDINGLY REJECTED. 30. AS REGARDS GROUND NO.3 WE FIND THAT THE AO HAS DISALLOWED AN AMOUNT OF RS.2 87 026/- REPRESENTING PROVISION FOR FINISHING WORKS. THE CIT(A) OBSERVED THAT THIS PAYMENT WAS MADE TO S EVERAL LABOURERS DURING THE PERIOD FROM 3.4.2004 AND 17.7.2004 RELEV ANT TO THE YEAR ENDED 31.3.2004 I.E FOR THE ASSESSMENT YEAR 2005-06 AND THAT THE AO DISALLOWED THE SAME U/S 40A(3) OF THE ACT AND BROUG HT IT TO TAX. THE CIT(A) HAS OBSERVED THAT THE PAYMENTS ARE MADE VOUC HER WISE THOUGH THE DATES WERE NOT MENTIONED AND ALSO THAT T HE PAYMENT OF EACH VOUCHER DID NOT EXCEED RS.20 000/-. OBSERVING THESE HE DELETED THE ADDITION. WHILE THE LEARNED COUNSEL FOR THE AS SESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW THE LEARNED DR SUPPORTED THE ORDERS OF THE AO. ITA NOS.147 & 159/B/10 20 31. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS WE FIND THAT THE ASSESSEE HAS CLAIMED THIS EXPENDITURE FOR THE ASSESSMENT YEAR 2005-06. AFTER CONSIDERING THI S CLAIM OF EXPENDITURE OF EASTWOOD PROJECT FOR THE ASSESSMENT YEAR 2004-05 THE AO HAS MADE THE DISALLOWANCE U/S 40A(3) OF THE INCO ME-TAX ACT. AS RIGHTLY POINTED OUT BY THE LEARNED CIT(A) THE DISA LLOWANCE U/S 40A(3) CAN BE MADE ONLY WHERE PAYMENT MADE EACH TIM E IS MORE THAN 20 000/- IN CASH. THE CIT(A) HAS EXAMINED THE VOUC HERS FILED AS ANNEXURE-1 TO THE ASSESSMENT ORDER AND OBSERVED THA T EACH PAYMENT DID NOT EXCEED RS.20 000/-. THE REVENUE HAS NOT BE EN ABLE TO REBUT THIS FINDING WITH ANY DOCUMENTARY EVIDENCE TO THE C ONTRARY. IN VIEW OF THE SAME WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND HENCE THIS GROUND OF APPEAL IS REJECTED . 32. GROUND NO.4 IS SIMILAR TO GROUND NO.2 OF ASSESS EES APPEAL AND FOR THE REASONS GIVEN THEREIN THIS GROUND OF A PPEAL IS REJECTED. 33. IN THE RESULT THE APPEALS OF THE REVENUE AS W ELL AS THE ASSESSEE ARE DISMISSED. ITA NOS.147 & 159/B/10 21 ORDER PRONOUNCED IN THE OPEN COURT ON 28TH JUL 2011. SD/- SD/- (N BARADHVAJA SANKAR) (P MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER VMS. BANGALORE DATED : 28/07/2011 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR I TAT BANGALORE.