M/s Bhomiyaji Land & Finance Co., Dewas v. The ACIT, Ujjain

ITA 197/IND/2010 | 2005-2006
Pronouncement Date: 31-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 19722714 RSA 2010
Assessee PAN SINCE1991A
Bench Indore
Appeal Number ITA 197/IND/2010
Duration Of Justice 11 month(s) 15 day(s)
Appellant M/s Bhomiyaji Land & Finance Co., Dewas
Respondent The ACIT, Ujjain
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 31-03-2011
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year 2005-2006
Appeal Filed On 15-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARMA A.M. INDORE BENCH INDORE ITA NO. 197/IND/2010 A.Y. 2005-06 M/S BHOMIYAJI LAND & FINANCE COMPANY DEWAS PAN AACFB- 9350 ASSESSEE VS ASSTT. COMMISSIONER OF INCOME TAX 1(1) UJJAIN RESPONDENT ITA NO. 269/IND/2010 A.Y. 2005-06 ASSTT. COMMISSIONER OF INCOME TAX 1(1) UJJAIN ASSESSEE VS M/S BHOMIYAJI LAND & FINANCE COMPANY DEWAS RESPONDENT DEPARTMENT BY SHRI P.K. MITRA SR. DR ASSESSEE BY SHRI RAVI SARDA ADVOCATE O R D E R -: 2: - 2 PER R.C. SHARMA A.M. THESE ARE CROSS APPEALS PREFERRED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOMETAX (APPEALS) DATED 23 RD FEBRUARY 2010 FOR THE ASSESSMENT YEAR 2005-06. 2. IN ITA NO. 197/IND/2010 THE ASSESSEE HAS TAKEN T HE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED IN DIRECTING THAT CREDI TORS ARE NOT PRODUCED AS DIRECTED BY A.O. ON 20.12.2007 IGNORING THE SPECIFIC REQUEST MADE ON ORDER SHEET O N 19.12.2007 WITH PROVISIONS OF SECTION 131 OF INCOME TAX ACT 1961. 2. THE LD. CIT(A) HAS ERRED IN MAINTAINING DISALLOWANCE/ADDITION OF SALARY OF RS. 60 000/- OUT OF SALARY GIVEN TO SHRI GAURAV JAIN U/S 40A(2)(B) IGNO RING THAT HE WAS LOOKING FOR SUPERVISION OF COLONIES BA NKS AND GOVT. WORKS. 3. THE LD. CIT(A) HAS ERRED IN MAINTAINING DISALLOWANCE/ADDITION OF PAYMENTS OF WORK CONTRACT OUT -: 3: - 3 OF PAYMENTS TO SHRI SHYAM SUNDER AHUJA SHRI KAMAL AHUJA AND MRS. ARCHANA AHUJA OF RS.14 88 218/- @ 25 % AT 3 72 055/- ARBITRARILY. 4. THE LD. CIT(A) HAS ERRED IN MAINTAINING ADDITION OF CREDITORS OF RS. 6 72 500/- ARBITRARILY. 5. THE ORDER OF LD. CIT(A) IS UNJUSTIFIED IMPROPER AND WARRANTED. IN ITA NO. 269/IND/2010 THE REVENUE HAS TAKEN THE F OLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.56 75 350/- MADE BY THE A.O. BEING TRADE ADVANCE U/S 68 OF THE IT ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1 13 500/- MADE BY THE A.O. BEING THE CAPITAL INTRODUCED BY A PARTNER IN THE FIRM TO BE ADDED IN HIS HANDS U/S 69 OF THE IT ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.34 000/ - -: 4: - 4 MADE BY THE A.O. BEING THE CAPITAL INTRODUCED BY A PARTNER IN THE FIRM TO BE ADDED IN HIS HANDS U/S 69 OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUS ED. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS A DEVELOPER AND BUILDER. RETURN SHOWN INCOME OF RS. 2 17 640/- WAS FILED ON 26.09.2005. THE ASSESSMENT WAS COMPLETED AT RS. 88 90 7401-. THE FOLLOWING ADDITIONS HAVE BEEN MADE BY THE AO:- 1. DISALLOWANCE OF SALARY U/S 40A(2)(A/B) RS. 60 000/- 2. DISALLOWANCE OF CONTRACT PAYMENT U/S 40A(2)(B) RS. 1 37 754/- 3. UNPROVED LOAN' RS. 1 13 500 /-- 4. UNPROVED DEPOSITS RS. 34 000 /-- 5. DISALLOWANCE OF INTEREST RS. 77 601/- 6. DISALLOWANCE OF COMMISSION RS. 3 12 825/- 7. UNPROVED CASH CREDITS U/S 68 R S. 63 47 850/- 8. DISALLOWANCE U/S 40A(IA) RS. 4 50 000/- 9. DISALLOWANCE U/S 40A(3) RS. 1 38 800/-- 5. IN THE FIRST GROUND THE ASSESSEE IS AGGRIEVED FOR RETAINING DISALLOWANCE OF RS. 60 000/- U/S 40A(2) BY CIT(A) I N RESPECT OF SALARY PAID TO SHRI GAURAV JAIN SON OF ONE OF THE P ARTNERS OF THE FIRM ON THE GROUND THAT THE SALARY OF RS. 1 20 000/- PAID WAS EXCESSIVE AND UNREASONABLE. BY THE IMPUGNED ORD ER THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. -: 5: - 5 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTE NTIONS AND FOUND THAT SHRI GAURAV JAIN WAS DEVOTING TWELVE HOU RS FOR FIRMS BUSINESS AT VARIOUS SITES BANKERS GOVERNME NT OFFICES ETC. KEEPING INTO VIEW THE NATURE OF ASSESSEES WOR K BEING DEVELOPERS AND THE WORK EXECUTED AT VARIOUS SITES A ND AT DISTANT PLACES AND ALSO KEEPING INTO VIEW THE HOURS FOR WHICH GAURAV JAIN WAS WORKING THE SALARY OF RS. 8000/- P .M. WILL BE REASONABLE TO COVER VARIOUS TYPES OF WORK BEING DON E BY SHRI GAURAV JAIN. ACCORDINGLY THE AO IS DIRECTED TO RES TRICT THE DISALLOWANCE TO THE EXTENT OF RS. 24 000/-. 7. NEXT GRIEVANCE OF THE REVENUE AND ASSESSEE ALSO REL ATES TO DELETING DISALLOWANCE OUT OF PAYMENTS MADE TO 3 CONTRACTORS NAMELY SHRI SHYAM SUNDER AHUJA (RS. 15 85 1501-) SMT. KAMAL AHUJA (RS. 16 94 700/-) AND SMT. ARCHANA AHUJA (RS. 5 11 922/-). IN THIS REGARD WE FOUND THAT DURING THE COU RSE OF SCRUTINY ASSESSMENT T HE AO ASKED THE ASSESSEE TO PRODUCE THESE PERSONS FOR VERIFICATION. HOWEVER THE ASSESS EE COULD PRODUCE ONLY SHRI SHYAM SUNDER AHUJA. IT WAS OBSERV ED BY THE AO THAT SMT. KAMAL AHUJA WAS THE WIFE OF SHRI SHYAM SUNDER -: 6: - 6 AHUJA AND SMT. ARCHANA AHUJA IS THE. DAUGHTER-IN-LA W OF SHRI SHYAM SUNDER AHUJA. I T WAS FURTHER OBSERVED BY THE AO THAT THERE' WERE NO WRITTEN AGREEMENTS ENTERED WITH THES E CONTRACTORS AND NO DETAILS OF QUANTUM OF WORK CARRI ED OUT BY THEM IN SQ. FT. WAS GIVEN TO HIM. HOWEVER OBSERVIN G THAT THE ASSESSEE MUST HAVE INCURRED EXPENDITURE ON CONTRACT THE AO DISALLOWED ON AD HOC BASIS A SUM OF 25% OF SUCH EXP ENDITURE TOTAL AMOUNTING TO RS. 37 91 070/- AND THUS DISALLO WANCE OF RS. 9 47 767/- WAS MADE. 8. BY THE IMPUGNED ORDER THE LD. CIT(A) DELETED THE DISALLOWANCE OF RS. 5 75 712/- AGAINST THE TOTAL PA YMENT OF RS. 9 47 767 MADE TO THREE CONTRACTORS. THUS HE HAS CO NFIRMED THE DISALLOWANCE OF RS. 3 72 055/-. AGAINST THIS OR DER OF LD. CIT(A) THE ASSESSEE AND REVENUE BOTH ARE IN APPEAL BEFORE US. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE ASSESSEE HAS FURNISHED THE FULL DETA ILS OF WORK DONE BY INDIVIDUAL CONTRACTORS DULY INCORPORATING T HE RATES OF CONSTRUCTION AS PER COPIES OF BILLS FILED BY THE AS SESSEE. THE AO HAS NOT OBJECTED THE AUTHENTICITY AND CORRECTNESS O F SUCH BILLS NOR THE RATES OF SUCH WORK IN THE BILLS RAISED BY T HE -: 7: - 7 CONTRACTORS. THERE IS NO FINDING OF AO THAT FOR SIM ILAR CONTRACTS PREVAILING MARKET RATE WAS LOWER THAN WH AT THE ASSESSEE HAS PAID. ON ESTIMATION THE AO HAS DISALL OWED 30 % OF THE CONTRACT AMOUNT WHICH WAS RESTRICTED BY THE LD. CIT(A) TO 25 % OF RS. 14 88 218/-/-. WE DO NOT FIND ANY ME RIT IN THE DISALLOWANCE IN SO FAR AS NOTHING WAS BROUGHT ON RE CORD BY THE ASSESSING OFFICER TO SUGGEST THAT RATE PAID FOR THE CONSTRUCTION WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE WORK UNDERTAKEN NOR IT WAS CASE OF AO THAT PAYMENT WAS MADE FOR NON BUSINESS CONSIDERATIONS. W E THEREFORE DIRECT FOR DELETION OF ENTIRE DISALLOWAN CE MADE BY THE ASSESSING OFFICER. 10. THE REVENUE IS AGGRIEVED FOR DELETION OF DISALLOWAN CE OF RS. 1 13 500/- IN RESPECT OF UNPROVED LOAN PERTAINI NG TO SHRI SHRINIVAS GUPTA. 11. WE FOUND THAT IN THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE FIRM HAD TAKEN A LOAN OF RS. 1 LAKH FROM SHRI SHRINIVAS GUPTA. HE WAS EXAMINED ON OATH WHER EIN IT WAS FOUND THAT SHRI GUPTA WAS A RETIRED MAN SINCE 1991 AND WAS DEPENDING UPON HIS PENSION INCOME OF RS. 3600/- PER MONTH FOR -: 8: - 8 HIS LIVELIHOOD. IT WAS ALSO FOUND THAT BEFORE GIVIN G LOAN OF RS. 1 LAKH SHRI SHRINIVAS GUPTA DEPOSITED CASH OF RS. 2. 22 LAKHS IN HIS BANK ACCOUNT. THE AO DISBELIEVED THE CONTENTION THA T THE RETIREMENT BENEFIT RECEIVED BY SHRI GUPTA WAS DEPO SITED BY HIM IN HIS BANK ACCOUNT AND AO ADDED THE SAME U/S 69 OF TH E INCOME- TAX ACT 1961. 12. BY THE IMPUGNED ORDER THE LD. CIT(A) DELETED THE ADDITION IN THE HANDS OF THE ASSESSEE FIRM BY OBSERVING THAT IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F METACHEM INDUSTRIES 245 ITR 160 SUCH ADDITION IN THE HANDS OF THE ASSESSEE FIRM IS NOT JUSTIFIED AND THE AO WAS FREE TO TAKE ACTION IN THE HANDS OF THE PERSON WHO GAVE THE LOAN. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM RECORD THAT IN RESPECT OF LOAN OF RS. ON E LAKH GIVEN BY SHRINIVAS GUPTA BY WAY OF ACCOUNT PAYEE CHEQUES HE WAS EXAMINED ON OATH BY THE ASSESSING OFFICER WHEREIN HE HAS CONFIRMED THE ADVANCE OF LOAN AND IT WAS ALSO OBSER VED THAT HE HAD DEPOSITED RS. 2.22 LAKHS IN HIS BANK ACCOUNT OU T OF WHICH RS. 1 LAKH WAS GIVEN BY ACCOUNT PAYEE CHEQUES TO THE AS SESSEE FIRM. ON THE BASIS OF DOCUMENTS PLACED ON RECORD WE FOUN D THAT THE -: 9: - 9 ASSESSEE HAS DISCHARGED ALL THE THREE INGREDIENTS O F CASH CREDIT WITH REGARD TO IDENTITY OF LENDER GENUINENESS OF L OAN TRANSACTION AND CREDITWORTHINESS OF LOAN CREDITOR. WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE CIT(A). FOR DELETING THE ADDITI ON. 14. NEXT GRIEVANCE OF THE REVENUE RELATES TO CIT(A)S A CTION FOR RETAINING ADDITION OF RS. 6 72 500/- OUT OF TOT AL ADDITION OF RS. 63 47 850/- MADE BY THE ASSESSING OFFICER U/S 6 8 IN RESPECT OF THE CREDITORS. REVENUE IS AGGRIEVED FOR DELETING ADDITION OF RS. 56 75 350/- AND THE ASSESSEE IS AGG RIEVED FOR SUSTAINING ADDITION OF RS. 6 72 500/-. IN THIS REGA RD IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAD SHOWN LIAB ILITY OF RS . 62 51 500 /- ON ACCOUNT OF ADVANCES FROM THE PROSPECTIVE BUYERS. IT WAS NOTICED BY HIM THAT THE SO CALLED BUYERS HAV E MADE THE PAYMENTS IN CASH AND CHEQUES. TO PROVE THEIR GENUIN ENESS THE ASSESSEE WAS GIVEN OPPORTUNITY TO PRODUCE THEM FOR EXAMINATION. IT IS OBSERVED THAT OUT OF 28 PARTIES POINTED OUT B Y THE AO IN THE ASSESSMENT ORDER ONLY 14 PARTIES APPEARED BEFORE T HE AO. ON EXAMINATION OF THE SAME IT WAS NOTICED THAT SUCH PR OSPECTIVE BUYERS COULD NOT EXPLAIN THE SOURCE OF DEPOSITS MAD E WITH THE ASSESSEE TO THE SATISFACTION OF THE AO. BY STATING THAT THE ASSESSEE -: 10: - 10 COULD NOT PROVE THE CREDITWORTHINESS OF THE BUYERS WHO PAID INSTALLMENT/ADVANCE PAYMENT THE AO MADE ADDITION OF RS. 63 47 850 /- AS UNEXPLAINED CASH CREDITS U/S 68 OF THE LT. ACT. IN THE APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT OUT OF SALE OF PLOTS TOTAL ADVANCES OF RS . 62 51 500 /- AS VERIFIABLE FROM AUDIT REPORT FILED ALONG WITH RETURN OF INCOME. THE LD. C IT(A) OBSERVED THAT IT WAS NOT KNOWN FROM WHERE AO ARRIVED AT THE FIGURE OF RS. 63 47 850/- FOR WHICH ADDITION WAS MADE. IT WAS POINTED OUT THA T THE DEPOSITS WERE MADE IN INSTALLMENTS SOME OF WHI CH FALL IN EARLIER YEARS. IN SOME CASES THE REGISTERED SALE-DE ED HAS BEEN EXECUTED AND IN REMAINING CASES AGREEMENT TO SALE H AS BEEN UNDERGONE. THE ASSESSEE HAS SUBMITTED THE COMPLETE CHART SHOWING YEAR WISE ADVANCES FROM BUYERS/PROSPECTIVE BUYERS IN THE WRITTEN SUBMISSIONS AT PAGE NO. 24 TO 32 CONTAI NING THE LIST OF 156 PERSONS . THE ASSESSEE'S WRITTEN SUBMISSIONS ALONGWITH THE DETAILS OF COMPLETE ADVANCES WAS HANDED OVER TO THE AO BY CIT(A) VIDE THIS OFFICE LETTER DATED 27.06.08 CALLING THE REMAND REPORT UNDER RULE 46A OF I. T. RULES 1962. IT WAS SPECIFI CALLY ASKED TO THE AO THAT SINCE INADEQUATE TIME WAS GIVEN TO THE ASSESSEE -: 11: - 11 DURING THE ASSESSMENT PROCEEDINGS FOR PRODUCING CER TAIN CREDITORS PERSONALLY THE AO WAS REQUIRED TO EXAMINE THE CRED ITORS ON OATH U/S 131 OF I.T. ACT AND SUBMIT HIS REPORT ON THIS G ROUND AS WELL AS OTHER CONTENTIONS OF THE ASSESSEE. THE AO EXAMINED SOME OF THE CREDITORS AND SUBMITTED HIS REPORT VIDE LETTERS DAT ED 06.02.09 AND 03.03.09. 15. IN THE IMPUGNED ORDER LD. CIT(A) OBSERVED THAT IT IS REALLY NOT KNOWN FROM WHERE FROM THE FIGURE OF RS 63 47 850/- HAS BEEN PICKED UP BY THE AO ALTHOUGH AS PER BALANC E-SHEET THE AMOUNTS OF ADVANCES RECEIVED BY THE ASSESSEE ST OOD AT RS. 62 51 500/-. THE CIT(A) OBSERVED THAT OUT OF TOTAL ADVANCES OF RS. RS.62 51 500/- RS. 13 83 300/- WAS RECEIVED BY THE ASSESSEE UP TO 31.03.03 RS . 21 90 700/- WAS RECEIVED DURING THE F.Y. 03-04 AND ONLY AMOUNT OF RS. 26 77 500 /- HAS BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION. THE C IT(A) OBSERVED THAT EVEN AFTER ALL THE CREDITORS WERE CON SIDERED AS NON GENUINE BY THE AO THE ADDITIONS IN RESPECT OF EARLIER YEARS' ADVANCES VIZ. 13 83 300/- AND RS. 21 90 700/- WAS NOT JUSTIFIED IN THIS YEAR AND THE AO WAS FREE TO TAKE NECESSARY ACTION IN RESPECTIVE YEARS IF SUCH ADVANCES WERE FO UND NON- -: 12: - 12 GENUINE BY HIM. OUT OF THE ADVANCES OF RS. 26 77 500 /- RECEIVED DURING THE YEAR THE CIT(A) OBSERVED THAT AS PER THE CHART SUBMITTED BY THE ASSESSEE FROM PAGE 24 TO 32 OF WRITTEN SUBMISSIONS IN SOME CASES THE REGISTERED SALE DEED HAS BEEN EXECUTED AND IN REMAINING CASES THE AGREEMENT TO SA LE HAS BEEN UNDERTAKEN. BY OBSERVING THAT IN RESPECT OF SO ME OF THE BUYERS EVEN THOUGH ADVANCES INITIALLY FOR THE SAID PLOT. SUCH REFUNDED AMOUNTS WERE THROUGH BEARER CHEQUES IN MAN Y OF THE CASES AND THEREFORE THE GENUINENESS OF SUCH ADVANC ES AND THEIR REFUND WAS NOT RELIABLE. IN SUCH CIRCUMSTANCE S IT WOULD BE JUSTIFIED AND APPROPRIATE TO CONSIDER ONLY THOSE CASES AS NON GENUINE IN AGREEMENT OF SALE HAS BEEN EXECUTED BUT THE ASSESSEE FAILED TO PRODUCE SUCH PERSONS BEFORE THE AO. FROM THE LIST SUBMITTED BY THE ASSESSEE THE FOLLOWING PERSONS COME IN THIS C ATEGORY. . S.N NAME REFERENCE NO. OF AMOUNT W.S. PAGE NO./ S.NO. 01 SMT. NEELKAMAL PRAMOD 24/13 35 000/- KUMAR GUPTA 02 SMT. SARIKA MANISH JAIN 25/34 50 000/- 03 SATISHCHANDRA BALKISHAN TIWARI 28/41 60 000/- TIWAR I 04 DR. L.R. CHOUUHAN 26/48 84 500/- SHANKER RAO -: 13: - 13 05 SHRI KAILASHCHANDRA 27/49 41 000/- SHIVNARAVAN GOYAL 06 SMT. MANGLA 27/60 40 000/- KAILASHCHANDRA KAMBLI 07. SMT. RANGBHARI PRAFULLJI 27/61 13 000/ - 08 SHRI RAMESHCHANDRA 28/81 33 000/- CHOUHAN 09 SHRI RAMCHANDRA 30/107 1 00 000/- DAKSHARAM PUN J ABI 10. SMT. SANGEETA RAJENDRA 31/128 45 000/- MEHTA TOTAL 5 01 500/- 16. IT WAS FURTHER OBSERVED BY THE LD. CIT(A) THAT BESIDES THE ABOVE IN THE FOLLOWING FOUR CASES THE ASSESSEE NEITHER FURNISHED THE DETAILS OF THE STATUS OF TRANSACTIONS NOR PRODUCED THEM BEFORE THE AO. S.NO. NAME REFERENCE NO.OF AMOUNT 1: . W.S. PACE 01 SMT. PUSHPA ASHOK KUMAR 29/103 75 000/- RA THORE 02 SMT. LEELA SHYAM KUMAR 30/113 11 000/- SHARMA 03 SHRI GOPALSINGH PRATAPSING H 30/116 25 000/- GAUR 04 SH. ALKESH DWIVEDI 31/138 I 60 000/- TOTAL 1 71 000/- 17. ACCORDINGLY THE CIT(A) CONFIRMED THE ADDITION OF RS. 6 72 500 /- (5 01 500 + 1 71 000) IN THE HANDS OF THE ASSESSEE. -: 14: - 14 REGARDING THE LIST OF THE PERSONS WHO WERE SHOWN AS NOT ATTENDED' BY THE AO IN THE ASSESSMENT ORDER THE CIT(A) OBSER VED THAT EXCEPT THE THREE PERSONS NAMELY SHRI RAJESH CHOUHAN SMT. DALJIT KAUR W/O. PRITHVILAL AND SMT. BHARTI BABBAR; OTHER PERSONS WE RE EITHER PRODUCED OR THE COPIES OF SALE DEEDS EXECUTED BY TH EM HAVE BEEN FURNISHED. HOWEVER NO SUCH NAMES ARE FIGURING IN T HE LIST OF 156 PERSONS SUBMITTED BY THE ASSESSEE IN ITS WRITTEN SU BMISSIONS. IT CLEARLY ESTABLISHES THE FACT THAT THE ASSESSEE USED TO CHANGE THE NAMES OF THE PROSPECTIVE BUYERS. HOWEVER NO ADVERS E VIEW IS BEING TAKEN IN RESPECT OF THESE THREE PERSONS AS RELIANCE HAS BEEN PLACED ON THE LIST OF 156 PERSONS SUBMITTED BY THE ASSESSE E DURING THE APPELLATE PROCEEDINGS AND SUCH LIST DOES NOT CONTAI N THESE THREE NAMES. 18. BOTH ASSESSEE AND REVENUE ARE IN APPEAL AGAINST THE ABOVE DECISION OF CIT(A) BEFORE US. 19. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT IN VIEW OF ITS NATURE OF BUSINESS BEING BUILDER AND DE VELOPER OF LAND CUSTOMERS USED TO BOOK THEIR PLOT/FLATS AND FOR THE SAME THEY WERE PAYING ADVANCE MONEY IN THE FORM OF INSTALLMENT FOR ITS BOOKING. THE MONEY SO RECEIVED BY THE ASSESSEE WAS CONVERTED INT O INCOME AS -: 15: - 15 SOON AS THE PLOT/FLAT IS ALLOTTED/REGISTERED IN THE NAME OF PROSPECTIVE CUSTOMERS. HE DREW OUR ATTENTION TO THE DETAILED CH ART PLACED ON RECORD GIVING NAMES AND ADDRESS OF THE PERSONS WHO HAVE BOOKED THE PLOTS/FLATS AND THE RESPECTIVE AMOUNT RECEIVED IN VARIOUS YEARS AGAINST THE BOOKING. SINCE THERE WAS ALSO SYSTEM OF PAYING THE MONEY IN INSTALLMENTS ENTIRE AMOUNT OF PLOT/FLAT WAS NOT RECEIVED IN ONE YEAR BUT WAS RECEIVED IN 2-3 YEARS AS PER THE TERMS OF INSTALLMENT PAYMENT. THIS DETAILED CHART ALSO INDIC ATED PLOT NUMBER/FLAT NUMBER TOTAL AREA OF PLOT/FLAT AND THE TOTAL AMOUNT OF ADVANCE RECEIVED IN RESPECTIVE YEARS. THE ASSESSEE HAS ALSO INDICATED THE RESPECTIVE YEARS IN WHICH THE REGISTRY WAS EXEC UTED IN FAVOUR OF THE CUSTOMER AFTER RECEIPT OF ENTIRE AMOUNT. IN VIE W OF THESE DETAILS THE LD. AUTHORIZED REPRESENTATIVE CONTENDED THAT MO ST OF THE ADVANCES WERE CONVERTED IN TO INCOME AS SOON AS THE REGISTRY IS GOT DONE THUS THE ADVANCE SO RECEIVED WAS NOT IN THE NATURE OF CASH CREDIT BUT WAS ACTUALLY IN THE NATURE OF ADVANCE FO R SALE OF PLOT/FLAT. THE LD. AUTHORIZED REPRESENTATIVE ALSO INVITED OUR ATTENTION TO THE DETAILED CHART SUBMITTED BEFORE LOWER AUTHORITIES A LONGWITH AGREEMENT/SALE DEEDS DULY ESTABLISHING ALL THE THR EE INGREDIENTS OF CASH CREDIT WHICH HAVE BEEN DISCHARGED BY ASSESSEE. -: 16: - 16 20. ON THE OTHER HAND THE CONTENTION OF THE LD. SENIOR D.R. WAS THAT THE MONEY RECEIVED IN ADVANCE FOR BOOKING OF P LOT/FLAT BY THE ASSESSEE WAS IN THE NATURE OF CASH CREDIT THEREFOR E HE WAS REQUIRED TO FULFIL ALL THE INGREDIENTS OF CASH CREDIT INCLUD ING THE CREDITWORTHINESS OF CUSTOMERS PAYING THE INSTALLMEN T/ADVANCE MONEY. 21. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALS O REMAND REPORT SENT BY THE ASSESSING OFFICER. WE HAVE ALSO EXAMINE D AND VERIFIED THE DETAILED CHART PLACED ON RECORD SHOWING CUSTOMER-WI SE DETAILS OF INSTALLMENTS AND ADVANCE MONEY RECEIVED. THIS CHART ELABORATELY INDICATED THE NAMES AND ADDRESSES OF THE CUSTOMERS BOOKING THE PLOTS AND AMOUNT RECEIVED BY CHEQUES/CASH IN VARIOU S YEARS NUMBER OF PLOT/HOUSE FOR WHICH SUCH ADVANCE WAS REC EIVED TOTAL AREA OF THE PLOT/HOUSE SO AGREED TO SALE AND DATE O F AGREEMENT ENTERED WITH THE BUYERS. THIS CHART ALSO INDICATED THE DATE ON WHICH REGISTRY WAS GOT EXECUTED IN FAVOUR OF THE CUSTOMER S BOOKING FLATS. WE HAD ALSO VERIFIED THE RESPECTIVE REGISTRY PLACED ON RECORD AND THE DETAILS OF PAYMENTS MENTIONED IN THE REGISTRY WHIC H IS DULY TALLIED WITH THE DETAILS OF PAYMENT SHOWN BY THE ASSESSEE I N ITS BOOKS OF -: 17: - 17 ACCOUNT AND ALSO IN THE CHART PLACED ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS DEVEL OPING AND SELLING PLOTS/HOUSES. THE ADVANCES WERE RECEIVED FROM THE C USTOMERS AGAINST THE BOOKING OF PLOT/FLATS WHICH WAS EITHER PAID IN CASH OR BY CHEQUES. IN SOME CASES ADVANCE WAS RECEIVED IN INS TALLMENTS. AS PER THE TERMS OF BOOKING THE REGISTRY WAS TO BE GOT DO NE ONLY AFTER RECEIPT OF ENTIRE AMOUNT OF SALE CONSIDERATION. THU S THE AMOUNT SO RECEIVED FOR BOOKING THE LAND/HOUSE WAS NOT STRICTL Y IN THE NATURE OF CASH CREDIT IN SO FAR AS NORMALLY THE ASSESSEE WAS NOT UNDER OBLIGATION TO RETURN THE SAME AND SUCH BOOKING PAYM ENT/INSTALLMENT WAS GOT CONVERTED INTO INCOME IN THE YEAR OF RECEIP T OF ENTIRE AMOUNT OF SALE CONSIDERATION OF THE RESPECTIVE PLOT/FLATS. THE BOOKING AMOUNT WAS THUS NOT PURELY IN THE NATURE OF CASH CREDIT FOR WHICH THE ASSESSEE WAS REQUIRED TO PROVE THE CREDITWORTHINESS OF THE PERSONS WHO BOOKED THE PLOT WITH HIM. FROM THE RECORD WE F OUND THAT THE AO HAS ISSUED NOTICE U/S 131 WHICH WERE SERVED ON ALL THE PARTIES 14 PARTIES APPEARED BEFORE THE AO AND THEY HAVE ACC EPTED THE FACTUM OF MAKING PAYMENT FOR BOOKING THE PLOT/FLATS . HOWEVER BEING NOT SATISFIED WITH THE CREDITWORTHINESS OF PROSPECT IVE BUYERS FOR MAKING THE ADVANCE PAYMENT FOR BOOKING OF PLOT THE AO HAS MADE -: 18: - 18 THE ADDITION. THE LD. CIT(A) FOUND THAT THE AMOUNT WAS RECEIVED IN EARLIER 2 3 YEARS. IN RESPECT OF AMOUNT NOT RECEI VED IN 2005-06 THE LD. CIT(A) OBSERVED THAT NO ADDITION CAN BE MADE DU RING THE YEAR UNDER CONSIDERATION AND FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION THE AO SHOULD CONFINE HIS INQUIRY ON LY TOWARDS THE AMOUNT RECEIVED DURING THIS YEAR. AS PER THE LD. CI T(A) THE AO WAS FREE TO TAKE NECESSARY ACTION IN RESPECT OF ADVANCE RECEIVED IN EARLIER YEARS IN THE RESPECTIVE YEARS IN WHICH SUCH ADVANC E WAS RECEIVED BY THE ASSESSEE. WITH RESPECT TO THE AMOUNT OF RS. 26 77 500/- RECEIVED BY THE ASSESSEE DURING THE YEAR AS PER THE DETAILED CHART FURNISHED BEFORE HIM AND WHICH WAS PLACED IN PAPER BOOK AT PA GES 24 32 THE LD. CIT(A) OBSERVED THAT IN SOME CASES REGISTERED S ALE DEED HAS BEEN EXECUTED AND IN REMAINING CASES THE AGREEMENT TO SA LE HAS BEEN UNDERTAKEN. WE ALSO FOUND THAT THE DETAILS OF COMPL ETE ADVANCE WHICH WAS SUBMITTED BEFORE THE CIT(A) WAS HANDED O VER BY THE LD. CIT(A) VIDE OFFICE LETTER DATED 27.6.2008 TO THE AO CALLING THE REMAND REPORT UNDER RULE 46A OF INCOME TAX RULES 1962. IT WAS SPECIFICALLY ASKED TO THE AO THAT SINCE ADEQUATE TIME WAS NOT GI VEN TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FOR PROD UCING CERTAIN CREDITORS PERSONALLY THE AO WAS REQUIRED TO EXAMIN E CREDITORS ON -: 19: - 19 OATH U/S 131 OF THE INCOME-TAX ACT 1961 AND SUBMI T HIS REPORT ON THESE GROUNDS AS WELL AS OTHER CONTENTIONS OF THE A SSESSEE. THE AO HAS EXAMINED SOME OF THE CREDITORS AND ALSO SUBMITT ED HIS REPORT VIDE LETTER DATED 6.2.2009 AND 3.3.2009. IN RESPECT OF LIST OF PERSONS WHO WERE SHOWN AS NOT ATTENDED BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER THE CIT(A) FOUND THAT EXCEPT THRE E PERSONS NAMELY SHRI RAJESH CHOUHAN AND SMT. DALJEET KAUR W /O PRITHVILAL AND SMT. BHARTI BABBAR; ALL OTHER PERSONS WERE EITH ER PRODUCED OR THE COPIES OF SALE DEED EXECUTED BY THEM HAVE BEEN FURNISHED. THIS FINDING OF THE CIT(A) HAS NOT BEEN CONVERTED. 22. IN RESPECT OF ADDITION OF RS. 5 01 500/- SUSTAINED BY CIT(A) IN RESPECT OF TEN PERSONS WE FOUND THAT SMT. NEELK AMAL PRAMOD KUMAR GUPTA HAD DULY FILED AGREEMENT WHICH IS PLAC ED AT PAGES 289 290 OF THE PAPER BOOK. AMOUNT WAS REFUNDED THROUG H ACCOUNT PAYEE CHEQUES NO. 725212 725213 DRAWN ON ORIENTAL BANK OF COMMERCE WHICH WAS DULY REFLECTING IN THE BANK STA TEMENT OF THE ASSESSEE. IN RESPECT OF SMT. SARIKA MANISH JAIN AG REEMENT WAS EXECUTED AND PLACED AT 291 & 293 OF PAPER BOOK. SHE WAS REFUNDED THE AMOUNT BY WAY OF CHEQUE NO. 24356 DRAWN ON ORIE NTAL BANK OF COMMERCE. SIMILARLY IN CASE OF SATISHCHANDRA BALKI SHAN WE HAVE -: 20: - 20 VERIFIED AGREEMENT EXECUTED WITH HIM WHICH FOUND P LACE AT PAGE NOS. 299 302 OF THE PAPER BOOK. REFUND WAS GIVEN BY CHEQUES NO. 47231 DRAWN ON PUNJAB NATIONAL BANK. SIMILARLY IN RESPECT OF KAILASHCHANDRA SHIVNARAYAN GOYAL SMT. MANGLA KAILA SHCHANDRA KAMBLI SHRI RANGBHARI PRAFULLJI SHRI RAMESH CHAND RA CHOUHAN SHRI RAMCHANDRA DAKSHARAM AND SMT. SANGEETA RAJENDR A WE FOUND THAT AGREEMENTS WERE DULY EXECUTED IN THEIR F AVOUR WHICH WE FOUND AS PLACED IN THE PAPER BOOK. WE HAD VERIFIED THE SAME. ON CANCELLATION OF THE AGREEMENT THESE PERSONS WERE P AID MONEY THROUGH ACCOUNT PAYEE CHEQUES. CORRESPONDING ENTRIE S FOR THE SAME IS ALSO REFLECTED IN THE BANK STATEMENT OF THE ASSE SSEE. THUS WE DO NOT FIND ANY JUSTIFICATION FOR CONFIRMING THE ADDIT ION OF RS. 5 01 500/- IN RESPECT OF TEN PERSONS STATED HEREINA BOVE SINCE ALL THE THREE INGREDIENTS OF IDENTITY GENUINENESS AND CRED ITWORTHINESS WERE DULY SATISFIED. 23. FROM THE RECORD WE FOUND THAT THE ASSESSEE IS A COLONIZER/DEALER/DEVELOPER OF PLOTS. PAYMENT OF PLO TS/BUILDING WAS RECEIVED IN INSTALLMENTS. AS PER THE PROCEDURE ADOP TED BY THE ASSESSEE HE USED TO EXECUTE AGREEMENT FOR THE AMOU NT OF INSTALLMENTS AND BOOKING OF FLATS SO RECEIVED. THE SALE DEED WAS GOT -: 21: - 21 REGISTERED ONLY AFTER FINAL INSTALLMENT OF BOOKING IS PAID BY THE PROSPECTIVE CUSTOMERS. THUS THE AGREEMENT CONTINUE S TILL THE FINAL INSTALLMENT IS PAID AND SALE DEED IS REGISTERED AFT ER RECEIPT OF ENTIRE INSTALLMENTS. THE ASSESSEE HAS FURNISHED BEFORE THE LOWER AUTHORITIES DETAILS OF ALL SUCH BUYERS WHO HAD M ADE ADVANCE PAYMENTS FOR PURCHASE OF PLOTS IN THE FORM OF INST ALLMENTS GIVING FULL PARTICULARS OF AMOUNT PAID DATE OF PAYMENT M ODE OF PAYMENT DATE OF AGREEMENT/SALE DEED SO EXECUTED. AS PER OUR CONSIDERED VIEW KEEPING INTO THE VIEW THE NATURE OF PAYMENT AND THE NATURE OF ASSESSEES BUSINESS OF SELLING THE PLOTS IN INSTALL MENTS THE AMOUNT SO PAID THROUGH INSTALLMENTS USED TO CONVERT INTO INCO ME WHEN THE SALE DEED WAS GOT REGISTERED AFTER PAYMENTS OF ALL THE I NSTALLMENTS. THUS THE INSTALLMENT SO RECEIVED WERE ULTIMATELY CONVERT ED INTO INCOME EXCEPT FEW EXCEPTIONS WHERE THE CUSTOMERS COULD NOT PAY THE INSTALLMENTS AND WAS REFUNDED MONEY. EVEN FOR SUCH REFUNDS THE ASSESSEE HAS GOT EXECUTED REFUND AGREEMENTS WITH TH E PERSONS WHO WERE PAID THE AMOUNT BY ACCOUNT PAYEE CHEQUES WHIC H WERE DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. W E HAD VERIFIED FROM THE PAPER BOOK EACH AND EVERY AGREEMENT SO EXECUTE D THE PAYMENTS MENTIONED THEREIN IS DULY CORROBORATED BY THE ENTRY IN THE BANK -: 22: - 22 STATEMENT OF THE ASSESSEE. WE HAD ALSO GONE THROUGH THE SALE DEED EXECUTED AFTER RECEIPT OF ALL THE INSTALLMENTS. 24. HOWEVER IN RESPECT OF ADVANCE RECEIVED FROM SMT. P USHPA ASHOK KUMAR RATHORE AMOUNTING TO RS. 75 000/- SMT. LEELA SHYAM KUMAR SHARMA AT RS. 11 000/- SHRI GOPALSINGH PRATAPSINGH GAUR AT RS. 25 000/- AND SHRI ALKESH DWIVEDI AT RS. 60 000/- WE FOUND THAT THE ASSESSEE HAS REFUNDED ADVANCES TO TH ESE PARTIES HOWEVER NO AGREEMENT WAS FOUND IN THE PAPER BOOK TO ESTABLISH THE GENUINENESS OF THE TRANSACTION OF INSTALLMENT HAVIN G BEEN PAID IN ADVANCE. TOTAL OF ALL THESE TRANSACTIONS WORK OUT T O BE RS.1 71 000/-. ACCORDINGLY WE CONFIRM THE ADDITION TO RS. 1 71 00 0/- AND DELETE THE BALANCE ADDITION AS MADE BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY. 25. THE REVENUE IS ALSO AGGRIEVED FOR DELETION OF ADDIT ION OF RS. 34 000/- IN THE NAME OF SHRI KESARIMAL JAIN. 26. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE AO HAD EXAMINED SHRI KESARIMAL JAIN ON OATH WHO HAD DEPOSITED RS. 4 000/- RS. 9 000/- AND RS. 26 000/- TOTALLING TO RS. 34 000/- IN THE ASSESSEE'S FIRM. IN THE -: 23: - 23 APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT SHRI KE SARIMAL JAIN WAS A GOVT. EMPLOYEE RETIRED IN 1996. RS. 4 000/- WAS GOT VERIFIED BY THE AO AS WITHDRAWN FROM THE BANK A CCOUNT. HOWEVER RS. 30 000/- WHICH HE RECEIVED FROM HIS FAMILY MEMBERS WAS NOT ACCEPTED BY THE AO. RS. 4 000 /- HAS BEEN ADDED BY THE AO TWICE. THE AMOUNT SO RECEIVED FROM SHRI KESARIMAL JAIN WAS ULTIMATELY REFUNDED ON 07.01.05 WHICH FIND PLACE IN HIS BANK ACCOUNT. IT WAS ARGUED BEFOR E THE LD. CIT(A) THAT IN VIEW OF DECISION OF HON'BLE M.P. HIG H COURT IN THE CASE OF CIT VS METACHEM INDUSTRIES (2000) 245 I TR 160 SINCE THE PERSON FROM WHOM LOAN HAS BEEN RECEIVED B Y THE FIRM HAS BEEN PRODUCED AND HE HAS ADMITTED THE SAME - NO ADDITION SHOULD BE MADE IN THE FIRM'S HANDS. BY IMP UGNED ORDER THE LD. CIT(A) DELETED SAME. 27. ON EXAMINING THE FACTS OF THE CASE IT IS OBSERVED T HAT RS. 34 000/- WERE SHOWN AS CASH DEPOSIT ON 15.07.04 FOR WHICH THE WITHDRAWALS FROM BANK WERE SHOWN ON 06.11.03 IN RESPECT OF RS. 4 000/-. REGARDING THE GENUINENESS OF RS. 26 000/- DEPOSITED -: 24: - 24 BY SHRI KESARIMAL THE SAME WAS STATED TO BE RECEIV ED FROM HIS FAMILY MEMBERS. ON VERIFICATION IT WAS FOUND THAT R S. 4 000/- HAS BEEN CONSIDERED BY THE AO TWICE AND THEREFORE RS. 30 000/- ONLY (RS. 4000 + RS. 26000) SHOULD HAVE BEEN TREATED AS UNEXPLAINED. THE CIT(A) DELETED THE ADDITION BY RELYING ON THE D ECISION OF HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS METAC HEM INDUSTRIES (2000) 245 ITR 160. 28. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT FOR DELETING THE ADDITION THE LD. CIT(A ) HAS RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF MCMAN INDUSTRIES 245 ITR 160. THE PROPOSITION LAID DOWN IN THE CASE OF MCMAN INDUSTRIES (SUPRA) IS APPLICABLE IN THE CASE OF DEPOSIT BY A PARTNER IN HIS FIRM WHO BRING HIS CAPITAL IN THE B USINESS. THE HON'BLE HIGH COURT HAS HELD THAT IF THE PARTNER IS PRODUCED BEFORE THE AO WHO CONFIRMS THE FACTUM OF CONTRIBUTING CAP ITAL NO ADDITION SHOULD BE MADE IN THE HANDS OF THE FIRM. H OWEVER IT WAS OBSERVED THAT IN SUCH CASES ADDITION CAN BE CONSID ERED IN THE HANDS OF THE PARTNERS. THE INSTANT CASE BEFORE US I S QUITE DISTINGUISHABLE IN SO FAR AS SHRI KESHRIMAL JAIN WHO HAD PAID RS. 30 000/- TO THE ASSESSEE FIRM IS NOT A PARTNER BUT AN OUTSIDER -: 25: - 25 THEREFORE PROPOSITION LAID DOWN BY HIGH COURT IN T HE CASE OF MCMAN INDUSTRIES (SUPRA) CANNOT BE APPLIED TO THE F ACTS OF THE INSTANT CASE. HOWEVER ON MERIT WE FOUND THAT SHRI KESARIMAL JAIN WAS A GOVERNMENT EMPLOYEE RETIRED IN 1996 AND GETTING PENSION. AMOUNT OF RS. 4 000/- WAS WITHDRAWN FROM BANK AND RS. 30 000/- WAS ALLEGED TO BE RECEIVED FROM THE FA MILY MEMBERS. KEEPING IN VIEW THE STATUS OF ASSESSEE AND HIS FAMI LY WE CAN REASONABLY HOLD THAT RS. 20 000/- WAS GIVEN BY HIS FAMILY MEMBERS AND RS. 4 000/- WAS WITHDRAWN BY HIM FROM H IS BANK ACCOUNT. THUS AS PER OUR CONSIDERED VIEW THE ADDI TION SHOULD BE SUSTAINED TO THE EXTENT OF RS. 10 000/-. 29. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE A ND REVENUE ARE ALLOWED IN PART IN TERMS INDICATED HERE INABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN CO URT ON 31 ST MARCH 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MARCH 2011. CPU* 1831 -: 26: - 26