ACIT CEN CIR 18 & 19, MUMBAI v. SUBHALAXMI DEVELOPERS, MUMBAI

ITA 3506/MUM/2009 | 2004-2005
Pronouncement Date: 23-02-2010 | Result: Dismissed

Appeal Details

RSA Number 350619914 RSA 2009
Bench Mumbai
Appeal Number ITA 3506/MUM/2009
Duration Of Justice 8 month(s) 25 day(s)
Appellant ACIT CEN CIR 18 & 19, MUMBAI
Respondent SUBHALAXMI DEVELOPERS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 23-02-2010
Date Of Final Hearing 10-01-2011
Next Hearing Date 10-01-2011
Assessment Year 2004-2005
Appeal Filed On 29-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 3506/MUM/2009 ASSESSMENT YEAR- 2004-05 THE ACIT CENT. CIR. 18 & 19 AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. SUBHL AXMI DEVELOPERS 99 PRABHU NIWAS JAWAHAR NAGAR GOREGAON (W) MUMBAI-400 062 PAN-AAAFS 0392P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATBIR SINGH RESPONDENT BY: SHRI REEPAL G. TRALSHAWALA O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 26.3.2009 PASSED BY THE LD. CIT(A)- C-VI FOR THE ASSESSMENT YEAR 2004-05 AGAINST THE DELETION BY THE CIT(A) OF THE A DDITION OF RS 37 87 715/- 2. THE FACTS OF THE CASE ARE THAT DURING SEARCH AT THE RESIDENCE OF A PARTNER IN THE ASSESSEE FIRM CERTAIN PAPERS WERE FO UND WHICH ACCORDING TO THE ASSESSEE CONTAINED AN ESTIMATE OF THE CONSTR UCTION EXPENSES OF CIVIL WORK (RELATING TO B WING AND C WING OF SH UBHLAXMI PROJECT) WRITTEN BY THE CONTRACTOR I.E. M/S RUSHABH REAL DEVELOPERS PVT. LTD TO WHOM THE CONTRACT FOR THE CIVIL WORK OF THESE WINGS WAS EARL IER AWARDED BUT LATER CANCELLED. HOWEVER THE ASSESSING OFFICER NOTED ON P AGE 25 OF THE ORDER THAT THESE DOCUMENTS DID NOT CONTAIN AN ESTIMATE GI VEN BY THE CONTRACTOR ITA NO. 3506/M/09 2 BUT REFLECTED THE AMOUNT OF WORK DONE. THIS CONC LUSION WAS BASED ON AN OBSERVATION BY THE AO THAT THESE DOCUMENTS MADE A REFERENCE TO THE EXPENDITURE IN THE PAST TENSE E.G. WORK DONE MATER IAL SUPPLIED AT SITE BALANCE PAYMENT TO AHMED CORPORATION. THE AO THERE FORE CONCLUDED THAT THE WORK HAD ACTUALLY BEEN CARRIED OUT AND IT WAS NOT AN ESTIMATE. THE AO THEREFORE PROCEEDED TO COMPARE THE AMOUNT RE FLECTED IN THE TWO SEIZED DOCUMENTS AS REPRESENTING THE WORK DONE IN R ESPECT OF B AND C WING WITH THE WORK IN PROGRESS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2004 IN RESPECT OF THESE TWO WI NGS AND ADDED THE DIFFERENTIAL AMOUNT OF RS 77 87 715/- AS UNDISCLOSE D INVESTMENT BY THE ASSESSEE IN THE TWO WINGS. 3. ON APPEAL BEFORE THE CIT(A) THE ASSESSEE SUBMIT TED THAT FOR THE TWO WINGS B& C WORK WAS INITIALLY ASSIGNED TO A CONTRACTOR M/S RUSHABH REAL DEVELOPERS P. LTD. WHICH DUE TO VARIO US REASONS WAS TERMINATED AND THE CONSTRUCTION WAS THEN CARRIED OU T BY THE ASSESSEE WITH ITS JOINT VENTURE PARTNER ZENITH CONSTRUCTION CO. THE APPELLANT SUBMITTED THAT SINCE THE CONSTRUCTION ACTIVITY WAS CARRIED OUT TOGETHER BOTH THE APPELLANT AND ZENITH WERE TO SHARE CONSTRU CTION EXPENSES AS WELL AS REVENUES EQUALLY I.E 50% EACH. THE ASSESSE E SUBMITTED THAT IN ITS BOOKS OF ACCOUNT THE EXPENSES SHOWN WERE ONLY 50% AND THE BALANCE EXPENSES WERE REFLECTED IN THE BALANCE SHEET OF ZEN ITH. THE ASSESSEE CLAIMED THAT DETAILED EXPLANATION COULD HAVE BEEN GIVEN IN THE COURSE OF ASSESSMENT PROCEEDINGS HAD THE AO GIVEN OPPORTUNITY BEFORE MAKING ANY ADDITIONS IN RESPECT OF 2 PAGES OUT OF 90 PAGES SEI ZED. ALL THE ADDITIONAL EVIDENCES I.E. CONTRACT WITH RUSHABH DEVELOPERS CO RRESPONDENCES WITH THEM ETC COULD HAVE BEEN FURNISHED AT THE TIME OF THE ASSESSMENT PROCEEDINGS ITSELF. IN FACT THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT SINCE EXPLANATION WAS ALREADY FURNISHED FOR TH E SEIZED PAPERS OF 90 PAGES AND NO FURTHER DETAILS WERE CALLED FOR THE E XPLANATION OFFERED WOULD BE ACCEPTED BY THE AO. HENCE IT WAS ONLY AF TER THE RECEIPT OF THE ITA NO. 3506/M/09 3 ASSESSMENT ORDER THAT THE ASSESSEE CAME TO KNOW THA T THE AO HAS RELIED UPON TWO PAGES AND MADE ADDITIONS. IN FACT THE AGR EEMENT WITH THE JV PARTNER ZENITH CONSTRUCTION WAS VERY MUCH PART OF T HE RECORDS OF THE AO AND SEIZED DURING THE COURSE OF SEARCH ACTION HOWE VER NO COGNIZANCE OF THE SAME WAS ALSO TAKEN WHILE MAKING THE ADDITION I N THE HANDS OF THE ASSESSEE. 4. THE ASSESSEE FURNISHED A COPY OF THE CONTRACT EN TERED INTO WITH M/S RUSHABH DEVELOPER AS ALSO OTHER CORRESPONDENCES WITH THE CONTRACTOR AND LETTERS FOR TERMINATION OF THE CONTR ACT AS ADDITIONAL EVIDENCE. THE ASSESSEE ALSO FILED COPY OF THE ASSES SMENT ORDER FOR A.Y 2005-06 AND BALANCE SHEET WITH SCHEDULES FOR A.Y 20 04-05 OF ITS JV PARTNER ZENITH CONSTRUCTION CO. TO PROVE THAT THE C ONSTRUCTION ACTIVITY WAS CARRIED OUT BY THE ASSESSEE AND JV PARTNER AFTE R TERMINATION OF THE CONTRACT. A CHART WAS PREPARED FROM THE BOOKS OF A CCOUNT OF THE ASSESSEE IN SUPPORT OF THE ABOVE CONTENTIONS. ALL T HESE DOCUMENTS WERE SUBMITTED AS ADDITIONAL EVIDENCE IN TERMS OF RULE 4 6A OF THE I.T RULES. 5. THE PAPER BOOK CONTAINING THE ADDITIONAL EVIDENC E WAS FORWARDED BY THE LD. CIT(A) TO THE AO VIDE LETTER DATED 5.1.2 009 SEEKING HIS COMMENTS ON THE ADDITIONAL EVIDENCE. THE AO FURNISH ED HIS REMAND REPORT VIDE HIS LETTER DATED 19.2.2009. A COPY OF THE REMAND REPORT OF THE AO WAS ALSO MADE AVAILABLE TO THE AR WHO FURNISHED THE APPELLANTS REPLY VIDE LETTER DATED 26.2.2009 AND 22.3.2009. 6. THE AO IN HIS REMAND REPORT HAS REFERRED TO TH E SUBMISSIONS MADE BY THE AR WITH REFERENCE TO THE ADDITION OF RS 77 87 715/- THAT THE AMOUNT OF RS 40 00 000/- HAS BEEN CONSIDERED FOR AD DITION AS MENTIONED IN PAGE 12 (IN RESPECT OF CIVIL WORK FOR C WING) AND A FURTHER SUM OF RS 42 07 500/- IN RESPECT OF THE SAME WORK F OR C WING HAS BEEN CONSIDERED FOR ADDITION AS MENTIONED IN PAGE 11 RES ULTING IN DOUBLE ITA NO. 3506/M/09 4 ADDITION OF RS 40 LACS. THE AO HAS ADMITTED IN PAR A 2 OF THE REMAND REPORT THAT OUT OF THE ADDITION OF RS 77 87 715/- D ISPUTED BY THE ASSESSEE A SUM OF RS 42 07 500/- HAS BEEN TAKEN TWI CE IN THE ADDITION. REGARDING THE REMAINING ADDITION OF RS 37 87 715/- THE AO IN THE REMAND REPORT STATED THAT THE ADDITION NEEDED TO BE SUSTAINED IN VIEW OF THE DISCUSSION IN THE REMAND REPORT AND ALSO CERTAI N CASE LAWS RELIED UPON BY HIM. THE AO MAINLY RELIED ON THE FOLLOWING POINTS TO SUBMIT THAT THE ADDITION OF RS 37 87 715/- NEEDED TO BE CO NFIRMED. 1. THE DOCUMENT IN WHICH THE IMPUGNED ENTRIES ARE WR ITTEN ARE SEIZED DURING THE COURSE OF A SEARCH IN THE ASSESSE ES RESIDENCE. 2. THE ENTRIES ARE ADMITTEDLY WRITTEN BY THE CONCERNED CONTRACTOR M/S RUSHABH DEVELOPERS. 3. THE ASSESSEE IS UNABLE TO PRODUCE THE CONCERNED CON TRACTOR 4. THE RELEVANT ENTRIES ARE ALL IN PAST TENSE THEREBY MEANING THE WORK HAS BEEN ALREADY COMPLETED. 5. THE SUBMISSION OF THE ASSESSEE THAT THE CONTRACTOR DOES NOT HAVE COMMAND OVER ENGLISH IS NOT BASED ON ANY FACTS OR A NY FIRST HAND KNOWLEDGE AND THE REVENUE HAS ESTABLISHED THAT THE CONTRACTOR HAS REASONABLE COMMAND OVER ENGLISH AND IS SURE OF WHAT HE IS WRITING OR HAS WRITTEN 6. THE MORE IMPORTANT SURROUNDING CIRCUMSTANCES AND HU MAN PROBABILITIES IS THE WIDELY PREVALENT PRACTICE OF ON MONEY AND THE PAYMENT OF CASH OUTSIDE THE BOOKS IN THE REAL ESTAT E BUSINESS AND BUILDING INDUSTRY. 7. THE FIGURES WERE WRITTEN BY THE CONTRACTOR FROM HIS MEMORY AND KNOWLEDGE WITHOUT THE AID OF THE DOCUMENTS RESULTIN G IN ROUND FIGURES BEING MENTIONED IN THE SEIZED DOCUMENTS. 7. THE AO ALSO MADE COMMENTS ON THE SUBMISSIONS OF THE AR ON THIS ISSUE. THE AR OF THE ASSESSEE IN THE REPLY TO THE REMAND REPORT ITA NO. 3506/M/09 5 SUBMITTED THAT THE SAID REMAND REPORT DEALT WITH TH E FOLLOWING THREE PARTS I.E. I. CALCULATION MISTAKE OF RS 40 LACS II. APPLICABILITY OF PRESUMPTION U/S 132(4A) OF THE ACT III.ON MERITS OF THE ADDITION MADE 8. THE AR SUBMITTED THAT IN RESPECT OF THE CALCULAT ION MISTAKE OF RS 40 LACS THAT THE AO IN THE REMAND REPORT DATED 19.2 .2009 IN PARA 2 HAD AGREED TO THE FACT THAT THERE WAS COMPUTATION ERROR IN THE ASSESSMENT ORDER WHILE MAKING THE ADDITION ON THE BASIS OF SEI ZED PAPERS. THE ADDITION TO THE EXTENT OF RS 40 LACS WAS ACCEPTED AS MISTAKE AND HENCE THE ADDITION MADE IN THE ASSESSMENT ORDER OF RS 77 87 815/- STOOD REDUCED TO RS 37 87 815/-. 9. IN REGARD TO THE APPLICABILITY OF THE PROVISION OF SECTION 132(4) THE ASSESSEE SUBMITTED THAT IT HAD NEVER DISPUTED THAT THE SEIZED PAPER RELATED TO IT AND HENCE THE QUESTION OF INVOKING PR OVISIONS OF SEC 132(4A) OF THE ACT DID NOT ARISE. IN FACT IT WAS CLAIMED T HAT THE APPELLANT HAD EXPLAINED THE CONTENTS OF THE SEIZED PAPERS IN DETA IL. THE APPELLANT THEREFORE SUBMITTED THAT THE DETAILED DISCUSSION MA DE IN THE REMAND REPORT IN THIS REGARD WAS OF NO CONSEQUENCE AND HEN CE NO COGNIZANCE NEEDED BE TAKEN OF THE SAME. 10. IN RESPECT TO THE MERITS OF THE ISSUE IT WAS C LAIMED THAT THE AO HAD NOT REBUTTED THE SUBMISSION OF THE ASSESSEE WIT H REGARD TO THE CONTRACT ENTERED INTO WITH M/S RUSHABH REAL DEVELOP ERS PVT. LTD AND THE CANCELLATION THEREOF AS ALSO THE DEBIT NOTE RAI SED BY THE SAID CONTRACTOR ON THE ASSESSEE AND THE VARIOUS COMMUNIC ATION LETTERS BETWEEN THE ASSESSEE AND THE CONTRACTOR WHICH WERE THE MOST RELEVANT DOCUMENTS FOR DECIDING THE SEIZED PAPERS AND ALSO T HE SEIZED PAPERS ITA NO. 3506/M/09 6 ITSELF SHOWING THE FLATS TO BE ALLOTTED TO THE CONT RACTOR IN LIEU OF CONSTRUCTION COSTS AND CANCELLATION OF THE SAME ONC E THE CONTRACT WAS CANCELLED AND ALSO TAKING BACK THE FLATS ALLOTTED FOR SECURITY PURPOSES. THUS IN OTHER WORDS THE AO HAD NOT DISPUTED THE EVI DENCES S STATED ABOVE WHICH WERE FURNISHED IN SUPPORT OF THE EXPLAN ATION OF THE SUBMISSION OF THE APPELLANT. 11. THE AR CLAIMED THAT IN PARA 20.1 OF THE REMAND REPORT THE AO HAD WRONGLY PRESUMED THAT CIVIL WORK FOR B-WING MENTION ED IN PAGE 12 WAS ALSO TO BE READ AS PAST TENSE AS WORK DONE FOR B WI NG EVEN THOUGH IT WAS NOT MENTIONED AS SUCH. THE AR SUBMITTED THAT THE AO IN HIS REMAND REPORT IN PARA 16.5 STATED THAT THE DIRECTOR OF M/S RUSHABH WAS CONVERSANT OF ENGLISH LANGUAGE AND THAT THE NOTING IN THE SEIZED PAPER WERE IN SIMPLE ENGLISH AND THE NOTING WERE TO BE AC CEPTED AS CORRECT AND THEREFORE THE EXPLANATION GIVEN BY THE APPELLANT TH AT THE CONTENTS OF THE SEIZED PAPER WERE MERE ESTIMATIONS WAS STATED TO BE NOT SATISFACTORY. HAVING CONCLUDED AS ABOVE THE AO THEREAFTER HIMSEL F DISPUTED THE CORRECTNESS OF THE NOTING IN THE SEIZED PAPER AND W ENT ON TO READ SIMPLE ENGLISH AS OBSERVED BY HIM IN THE SEIZED NOTING AS NOT CORRECTLY WRITTEN BY PRESUMING THAT THE NOTING IN RESPECT OF CIVIL WO RK FOR B WING AND THE AMOUNT CALCULATED ALONG WITH WAS ALSO TO BE READ IN PAST TENSE AND THUS CONCLUDED THAT CIVIL WORK FOR B WING WAS PRESUMED T O BE COMPLETED. THE ASSESSEE SUBMITTED THAT : A) THE AO WAS CONTRADICTING HIMSELF AS TO THE NOTING IN THE SEIZED PAPER B) THE AO WAS MERELY PRESUMING THE STATE OF AFFAIRS TO BE READ IN A DIFFERENT MANNER WITHOUT HAVING ANY SUPPORTING EV IDENCE IN HIS POSSESSION. ITA NO. 3506/M/09 7 C) THE NOTING IN THE SEIZED PAPER GAVE AD HOC APPROXIM ATE FIGURES. 12. WITH REGARD TO THE SUPREME COURT DECISIONS RELI ED UPON BY THE AO THE AR STATED THAT IN BOTH THE CASES NO SATI SFACTORY EXPLANATION WAS GIVEN BY THE ASSESSEE NOR WAS EVIDE NCE PRODUCED IN SUPPORT OF THE CONTENTIONS OR THE EXPLANATIONS IN R ESPECT OF THE CONTENTS OF THE DOCUMENTS. IT WAS CLAIMED BY THE A R THAT HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANCES NEEDED TO BE SHOWN BY THE REVENUE AUTHORITIES BEFORE COMING TO ANY CONCLU SION AND THE GENERAL PRINCIPLES LAID DOWN BY SUPREME COURT COULD NOT BE APPLIED VAGUELY BUT HAD TO BE APPLIED AFTER CONSIDERING THE FACTS OF EACH CASE. 13. IN THE INSTANT CASE IT WAS NOT STATED AS TO HO W THE EXPLANATION GIVEN WAS NOT SATISFACTORY NOT ANY SURR OUNDING CIRCUMSTANCES WERE SHOWN TO EXIST IN ORDER TO PROVE THAT THE CONTENTS OF THE SEIZED PAPER WERE NOT AS ESTIMATION BUT ACTUAL TRANSACTIONS. 14. REGARDING THE AOS CONTENTION THAT THE FIGURES IN THE SEIZED PAPER WERE MENTIONED WRITTEN WITHOUT THE AID OF PRO PER DOCUMENTS AND THEREFORE WERE WRITTEN IN ROUND FIGURES AND WHI CH EVEN THE APPELLANT HA SIMILARLY WRITTEN IN ROUND FIGURE IN I TS SUBMISSION THE AR SUBMITTED THAT IF IT WERE A CASE OF ACTUAL FIGU RES OF WORK DONE THE SAME WOULD BE PREPARED IN ACCORDANCE WITH THE SUPPO RTING DOCUMENTS AND THE AMOUNTS MENTIONED WOULD HAVE BE EN THE EXACT FIGURES AND NOT ESTIMATES OR ROUND FIGURES. IF IT WERE A CASE OF ACTUAL WORK DONE AND THE CASH ELEMENT TO BE RECOVERED FROM THE APPELLANT IN THAT CASE DEFINITELY THE FIGURES HAD TO BE EXACT SINCE IF THE ACTUAL CONSTRUCTED AREA OF B WING WAS 37 925 SQ.FT NO CONT RACTOR WOULD ITA NO. 3506/M/09 8 CHARGE ONLY FOR 35 500 SQ.FT AREA THEREBY INCURRING A LOSS OF RS 909 375/- (37925(-) 35500) I.E. 2 425 X 375/) FURTH ER IF FOR C WING THE WORK WAS ACTUALLY DONE AS PER SEIZED PAPER IN T HAT CASE WHEN THE EXACT AMOUNT OF WORK DONE WAS KNOWN AS PER PAGE 11 OF THE SEIZED PAPERS THERE WAS NO REASON FOR THE CONTRACTOR NOT T O RECOVER THAT EXACT AMOUNT OF RS 42 07 500/- AND ONLY ASK FOR RS. 40 LACS AS PER SEIZED PAPER PAGE 12 AND THEREBY AGAIN INCUR LOSS OF RS 2 07 500/- THUS THE OBSERVATION OF THE AO THAT FIGURES WERE WR ITTEN BY THE CONTRACTOR FROM HIS MEMORY AND KNOWLEDGE WITHOUT TH E AID OF DOCUMENTS WAS NOT BASED ON FACTS. 15. THE AR FURTHER CLAIMED THAT ASSUMING WITHOUT AC CEPTING THAT THE CONTRACTOR HAD MENTIONED ROUND FIGURES IN THAT CASE WHY DID THE CONTRACTOR MULTIPLY AREA OF B WING BY TAKIN G 35 500 WHEN THE ACTUAL AREA OF CONSTRUCTION WAS 37 925 AND THUS THE RE WAS NOWHERE A ROUND FIGURE THAT COULD BE THOUGHT OF WHEN INSTEA D OF 37925 AREA THE AREA MENTIONED WAS 33500 FURTHER IF IT WAS TO B E ROUNDED OFF WHY THE AMOUNT OF B WING WAS CALCULATED AND WRITT EN AT RS 133 12 500/- AND NOT ROUNDED OFF IF THE LOGIC OF TH E AO WAS TO BE APPLIED. THE APPELLANT FURTHER SUBMITTED THAT THE R OUNDING OFF WOULD NORMALLY BE DONE ONLY TO THE EXTENT OF CONVERTING T HE ODD FIGURES INTO HUNDREDS OR THOUSANDS AS ALSO DONE BY THE AO IN HIS OWN ILLUSTRATION GIVEN IN PARA 20.2 WHEREIN THE PRICE O F FLAT ILLUSTRATED AT RS 150 95 785/- WAS STATED AS 1.50 CRORES APPLYING HUMAN TENDENCY OR PROBABILITY. THUS ROUNDING OFF COULD BE IN THI S MANNER AND NOT BY MENTIONING WRONG AREA OF CONSTRUCTION IF IT WAS A CASE OF ACTUAL COMPLETION OF WORK. AGAIN IF THE LOGIC OF AO WAS T O BE APPLIED AND CONSIDERING HIS OWN ILLUSTRATION AS GIVEN BY HIM TH EN FOR C WING.. THE ROUNDING OFF SHOULD HAVE BEEN RS 42 LACS AND NOT RS 40 LACS. ITA NO. 3506/M/09 9 16. THE AR FURTHER QUESTIONED THE AOS OBSERVATION THAT THE CONTRACTOR HAD WRITTEN THE ENTRIES WITHOUT THE AID OF DOCUMENTS. THE AR QUESTIONED THE SOURCE FROM WHICH THE AO GOT THAT INFORMATION. THE AR STATED THAT IF THE CONTRACTOR WAS GIVING WOR KING FOR THE COST OF WORK COMPLETED BY HIM AND THE CASH ELEMENT TO BE RE CEIVED FROM THE APPELLANT (AS PER THE VIEW OF THE AO) IN THAT CASE THERE HAD TO BE SUPPORTING DOCUMENTS ON THE BASIS OF WHICH THE EXAC T WORKING WOULD BE DONE FOR ASKING THE CASH COMPONENT. THE AR QUEST IONED THE BASIS ON WHICH THE AO MADE SUCH OBSERVATIONS CONSIDERING THE FACT THAT AS PER THE TERMS OF CONTRACT THE CONTRACTOR WAS TO BE PAID FOR THE COST OF CONSTRUCTION IN KIND I.E. BY WAY OF CONSTRU CTED FLATS AND NOT BY WAY OF ANY MONETARY CONSIDERATION. 17. REGARDING THE OBSERVATION OF THE AO THAT SINCE THE HEADING WAS IN PAST TENSE I.E. MATERIAL SUPPLIED AT SITE AN D ALSO CERTAIN OTHER PARTICULARS MENTIONED THERE UNDER BEING ALSO IN PAS T TENSE IT DENOTED WORK COMPLETED AND MATERIAL SUPPLIED AT SITE THE AS SESSEE SUBMITTED THAT THE AO HAD NOT REBUTTED THE CONTENTIONS OF THE ASSESSEE MADE IN THE SUBMISSION. THE ASSESSEE SUBMITTED THAT THE OTHER PARTICULARS MENTIONED THEREIN WERE ALL IN ROUND FIGURES WHICH C OULD NOT BE THE CASE IF IT WERE TO BE OF ACTUAL WORK DONE AND CARRI ED OUT BY THE CONTRACTOR. THE AR CLAIMED THAT THE AMOUNT AT SERIA L NO (VI) IN RESPECT OF PLUMBING WORK WAS STATED AT APPROX. FIGU RE AND SIMILARLY THE LAST SERIAL NUMBER WAS AN APPROXIMATE FIGURE FO R 1 ST FLOOR WORK OF RS 3 LACS WHICH SHOWED THAT THE CONTRACTOR WAS MER ELY GIVING ESTIMATION FOR THE ENTIRE INTERNAL CIVIL ELECTRICA L PLUMBING WORK OF 1 ST FLOOR. IF ACTUAL WORK WAS CARRIED OUT HOW COULD TH ERE BE AN APPROXIMATE ROUND FIGURE CHARGED. THE AR STATED THA T NO BUSINESSMEN WOULD PAY TO THE CONTRACTOR ON SUCH ASS UMED AND APPROXIMATE FIGURES. FURTHER IN RESPECT OF PLUMBIN G WORK IT WAS AGAIN MENTIONED AS APPROXIMATELY AND FIGURE COMPUTE D ACCORDINGLY ITA NO. 3506/M/09 10 ON APPROX. BASIS WHICH COULD NOT BE THE CASE IF IT WERE TO BE ACTUAL WORKING IN CASE OF WORK COMPLETED AS VIEWED BY AO. 18. THE AR SUBMITTED THAT THE SEIZED PAPER NO. 12 MENTIONED THE TOTAL COST OF CIVIL WORK OF B WING AT RS. 1 3 3 12 500/- CALCULATED BY MULTIPLYING AREA OF 35000 SQ.FT. BY RS 375/- BEI NG THE AGREED CONTRACT PRICE. THE AR QUESTIONED THAT IF THE CONS TRUCTION OF B WING WERE COMPLETE AS OBSERVED BY THE AO IN THE REMAND R EPORT IN THAT CASE THE APPELLANT COULD NOT HAVE ONCE AGAIN INCURR ED HUGE COST OF CONSTRUCTION ALONG WITH ITS JV PARTNER ZENITH CONST RUCTION WHICH AMOUNTED TO MORE THAN RS 2.97 CRORES WHICH ITSELF S UGGESTED THAT THE SEIZED PAPERS MERELY DEPICTED ESTIMATIONS AND N OT ACTUAL FIGURES. 19. THE AR STATED THAT THE SEIZED PAPER PAGE MARKE D 11 ALSO MADE A REFERENCE TO ONLY ESTIMATIONS OF THE CONTRAC TOR IN RESPECT OF C WING. THIS WAS FOR THIS REASON THAT AFTER COMPU TING THE ESTIMATED FIGURE OF RS 42 07 500/- APPLYING CERTAIN PERCENTAG E TO THE TOTAL COST MENTIONED THEREIN THE CONTRACTOR HAD THEN MENTIONED ON PAGE MARKED 12 AS CIVIL WORK FOR C WING RS 40 LACS I.E MENTIONING THE FIGURE ON AD HOC BASIS AS AGAINST THE FIGURE MENTI ONED ON PAGE 11. IT WAS ALSO PERTINENT TO NOTE THAT ON BOTH THE PAGE S IN RESPECT OF C WING IT WAS MENTIONED AS WORK DONE AND IF THAT WAS THE CASE THEN THERE WAS NO NEED TO WRITE THE FIGURE OF RS 40 LACS ON PAGE MARKED 12 WHEN THE ACTUAL FIGURE OF RS 42 07 500/- WAS CALCUL ATED ON PAGE MARKED 11 OF THE SEIZED PAPERS WHICH ONLY WENT ON T O SHOW THAT THE FIGURES WERE MERE ESTIMATIONS AND DID NOT DEPICT AC TUAL FIGURES. FURTHER PAGE 11 MENTIONED THE PERCENTAGE OF PLINTH TO THE TOTAL COST OF CONSTRUCTION AT 10% WHEREAS IN THE BILL SUBMITTE D BY THE CONTRACTOR UPON CANCELLATION OF THE CONTRACT FOR DE TERMINING THE FINAL VALUE OF WORK ACTUALLY DONE THE PERCENTAGE OF PLIN TH TO THE TOTAL COST OF CONSTRUCTION WAS TAKEN AT 7.5% WHICH ALSO SHOWED THAT THE ITA NO. 3506/M/09 11 PAPERS SEIZED WERE MERE ESTIMATION OF THE CONTRACTO R AND NOT ACTUAL WORK DONE. 20. THE AR FURTHER STATED THE ASSUMING WITHOUT AD MITTING THAT THE SEIZED PAPER PAGE MARKED 11 GAVE THE CALCULATIO N OF ACTUAL WORK DONE EVEN IN THAT CASE THE CONTRACTOR WAS NOT PAID FOR THE SAME FOR THE REASON THAT THE REASON THAT THE CONTRACT WAS UL TIMATELY CANCELLED FOR THE REASON OF INFERIOR QUALITY OF WORK. FURTHER IN THE ENTIRE SEIZED PAPERS THERE WAS NOTHING THAT EVEN REMOTELY SUGGEST ED THAT THE CONTRACTOR WAS PAID ANY PART OF AMOUNT IN CASH WHIC H WAS AGAIN A MERE PRESUMPTION OF THE AO. IT WAS CLAIMED THAT TH IS PLEA OF THE APPELLANT WAS FURTHER STRENGTHENED BY THE FACT THAT THE CONTRACTOR I.E. RUSHABH REAL DEVELOPERS P. LTD HAD UPON CANCE LLATION OF THE CONTRACT GIVEN THE 1 ST RUNNING BILL DATED 2.3.2003 AND COMPUTED THE VALUE OF WORK UPTO PLINTH LEVEL AND THEREBY THE TOT AL AMOUNT CHARGED WAS RS 19 68 750/- THE AR ALSO STATED THAT THE APPE LLANT DID NOT AGREE TO THE TOTAL BILL VALUE OF RS 19 68 750/- AND TOOK FURTHER DISCOUNT OF RS 25 000/- AS MENTIONED ON THE SAID BI LL 9 ON RIGHT SIDE OF RS 25 000/- KASAR WAS WRITTEN IN GUJARATI WHIC H MEANT DISCOUNT AND BALANCE AMOUNT WAS ARRIVED AT RS 19 43 750/- TO BE THE TOTAL AMOUNT PAID PAYABLE TO THE SAID CONTRACTOR FOR THE WORK DONE BY HIM. THE ASSESSEE SUBMITTED THAT IF IT WERE THE CA SE THAT THE CONTRACTOR HAD CARRIED OUT THE ACTUAL WORK AND THAT THE BILL RAISED WAS MERELY A FORMALITY OR MANAGED WITH THE CONTRACT OR IN THAT EVENT THE APPELLANT WOULD NOT HAVE MADE FURTHER DEDUCTION S FROM THE BILL BY TAKING FURTHER DISCOUNTS FROM THE CONTRACTOR. 21. THE AR FURTHER SUBMITTED THAT IT WAS PERTINEN T TO NOTE THAT THE ABOVE EVENTS HAD OCCURRED BEFORE THE DATE OF SE ARCH ACTION ON 25.6.2003 ON THE APPELLANT AND HENCE IT COULD NOT B E SAID TO BE AN AFTER THOUGHT. THE AR THEREFORE CLAIMED THAT THE AF ORESAID SEQUENCE ITA NO. 3506/M/09 12 OF EVENTS LEAD TO THE INEVITABLE CONCLUSION THAT TH E PAPERS SEIZED WERE ONLY ESTIMATIONS CALCULATIONS OF THE CONTRAC TOR AND DID NOT DEPICT ANY ACTUAL FIGURES FOR THE REASON THAT NO SU CH WORK WAS IN FACT CARRIED OUT BY THE SAID CONTRACTOR. 22. THE AR THUS SUBMITTED THAT TAKING INTO CONSIDER ATION THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO THE SURROUNDING CIRCUMSTANCES AS ALSO THE DOCUMENTARY EVIDENCES AN D THE SEQUENCE OF EVENTS THAT HAD OCCURRED PRIOR TO THE DATE OF SE ARCH ACTION AS ALSO THE FACT THAT NO WHERE IN THE ENTIRE SEIZED PAPERS ANYTHING WAS MENTIONED AS PAID IN CASH AND MORE PARTICULARLY THE FACT THAT THE APPELLANT HAD NOT TAKEN ANY ON MONEY THE PAPERS SEI ZED MERELY DEPICTED ESTIMATIONS AND ON SUCH ESTIMATIONS NO ADD ITION COULD BE MADE IN THE HANDS OF THE APPELLANT TREATING THE SAM E AS UNDISCLOSED INVESTMENTS. THE ASSESSEE RELIED UPON THE DECISION OF SUPREME COURT IN UMACHARAN SHAW & BROS 37 ITR 271 (SC) WHER EIN IT HAD BEEN CATEGORICALLY HELD THAT NO ADDITION COULD BE M ADE MERELY ON THE BASIS OF PRESUMPTIONS AND THAT THE SURMISES HOWEVER STRONG COULD NOT TAKE PLACE OF PROOF. 23. AFTER CONSIDERING THE SUBMISSIONS OF THE AR AS WELL THE REMAND REPORT OF THE AO THE LD. CIT(A) DELETED THE ADDITION OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE ISSUE THE REMA ND REPORT FURNISHED BY THE AO AS WELL AS THE WRITTEN S UBMISSIONS MADE BY THE AR IN RESPECT OF THE DOUBLE ADDITION OF RS 40 LACS ADMITTED BY THE AO IN HIS REMAND REPORT (WRONGLY CO NSIDERED AS RS 42 07 500/- BY THE AO) THERE IS MERIT IN THE SUBMISSIONS OF THE AR AND THE REPORT OF THE AO. TH IS ADDITION OF RS 40 LACS IS THEREFORE DELETED. I ALSO FIND MER IT IN THE SUBMISSIONS OF THE AR ON THE ISSUE OF THE REMAINING AMOUNT OF IMPUGNED ADDITION OF RS 37 87 815/- IT IS TRUE THAT THE AO HAS NOT DISPUTED THE EVIDENCE ADDUCED BY THE AR TO SUPP ORT THAT ITA NO. 3506/M/09 13 THE CONTRACT AWARDED TO M/S RUSHABH REAL DEVELOPER S HAD BEEN CANCELLED ON ACCOUNT OF INFERIOR QUALITY OF WO RK MUCH BEFORE THE DATE OF SEARCH. IT IS ALSO NOT DISPUTED THAT THE BILL WAS RAISED BY THE CONTRACTOR ON 2.3.2003 COMPUTING THE VALUE OF WORK DONE UPTO PLINTH LEVEL FOR AN AMOUNT OF RS 19 68 750/- AND THAT THE APPELLANT DID NOT AGREE EV EN TO THAT AMOUNT AND TOOK A FURTHER DISCOUNT OF RS 25 000/- AS MENTIONED ON THAT BILL. THE OCCURRENCE OF THESE EVE NTS BEFORE THE DATE OF SEARCH AS EVIDENCED BY THE SEIZED DOCUM ENTS AND ALSO THE CANCELLATION OF THE FLATS ALLOTTED TO THIS CONTRACTOR IN CONSIDERATION OF THE EXECUTION OF THE CONTRACTED WO RK BEFORE THAT DATE IS ALSO INDICATIVE OF THE FACT THAT THE C IVIL WORK CONTRACTED TO BE COMPLETED BY THIS CONTRACTOR WAS N EVER COMPLETED. THERE IS ALSO MERIT IN THE SUBMISSIONS OF THE AR T HAT IF THE CONSTRUCTION OF B WING WAS COMPLETED AT A COS T OF RS 1 33 12 500/- AS PRESUMED BY THE AO FROM THE SEIZED PAGE NO 12 THE APPELLANT COULD NOT HAVE ONCE AGAIN INCUR RED HUGE COST OF CONSTRUCTION AMOUNTING TO MORE THAN RS 2.97 CRORES. THERE IS ALSO MERIT IN THE CLAIM OF THE AR THAT PAG E NO.11 ALSO MADE A REFERENCE ONLY TO ESTIMATES IN RESPECT OF C WING. IF THAT WERE NOT SO THERE WAS NO NEED TO MENTION THE F IGURE OF RS 40 LAKHS ON PAGE NO 12 WHEN THE ACTUAL FIGURE OF RS 42 07 500/- HAD BEEN CALCULATED ON PAGE NO 11 OF TH E SEIZED PAPERS. THE THEORY THAT THE SEIZED DOCUMENTS CARRIE D ONLY ON ESTIMATION IS ALSO REINFORCED BY THE DIFFERENTIATIO N IN THE PERCENTAGE OF PLINTH TO THE TOTAL COST OF CONSTRUCT ION AS MENTIONED IN THE BILL SUBMITTED BY THE CONTRACTOR U PON CANCELLATION TAKEN AT 7.5% OF THE TOTAL COST VIS A VIS AS MENTIONED IN THE SEIZED DOCUMENT TAKEN AT 10% OF TH E TOTAL COST. THIS CONCLUSION ALSO DERIVES STRENGTH FROM TH E FACT THAT EVEN THAT FINAL BILL AMOUNT WAS FURTHER NEGOTIATED TO TAKE A DISCOUNT OF RS 25 000/- WHICH SHOWS THAT THE SAID F INAL BILL WAS NOT A MANAGED OR A FAKE BILL ESPECIALLY WHEN TH E SAID BILL IS DATED PRIOR TO THE DATE OF SEARCH. IT CAN BE CO NCLUDED THAT HAD THE CONTRACTOR ACTUALLY CARRIED OUT THE ENTIRE CIVIL WORK PRESUMING PAGES NO 11 AND 12 CARRIED THE COST OF AC TUAL WORK DONE AND HAD THE BILL OF RS 19 68 750/- BEEN A FAKE OR A MANAGED BILL IN THAT EVENT THE APPELLANT WOULD NOT HAVE MADE A FURTHER DEDUCTION FROM THE BILL BY TAKING A DISCO UNT OF RS 25 000/- IN ARRIVING AT THE CONCLUSION RELIANCE IS ALSO PLAC ED ON THE FOLLOWING FACTS: ITA NO. 3506/M/09 14 THE SEIZED DOCUMENTS NOWHERE MAKE A REFERENCE TO TH E EXPRESSION AMOUNT RECEIVED OR CASH RECEIVE D OR PAI D ETC. EVEN AS PER THE SEIZED DOCUMENTS THE CONSIDERATION FOR THE CIVIL WORK WAS TO BE PAID TO M/S RUSHABH DEVELOPERS NOT IN CASH BUT IN KIND I.E. BY ALLOTMENT OF FLATS. ON PAGE 12 IN RESPECT OF B WING THERE IS NO MEN TION OF THE EXPRESSION WORK DONE STILL THE AO TOOK THE E NTIRE VALUE OF RS 133 12 500/- AS WORK DONE. THE AREA STATED IN THE SEIZED DOCUMENTS IS IN ROUND FIGURES AND NOT ACTUAL AREA E.G. FOR B WING AN A REA OF 33 500 SQ.FT IS MENTIONED WHEREAS THE ACTUAL AREA IS 37 92 5 SQ.FT. PAGE 11 REFERS TO MATERIAL SUPPLIED AT SITE GIVING COST ON APPROXIMATION BASIS IN RESPECT OF PLUMBING WORK (RS3 00 000)AND WORK DONE ON 1 ST FLOOR (RS 3 00 000) IF THE ENTIRE AMOUNT OF RS 1 91 93 700/- WERE PAID AS CLAIMED BY THE AO THERE WAS NO NEED TO REDUCE THE A MOUNT OF RS 19 50 000/- TO WORK OUT THE BALANCE FIGURE OF RS 172 43 700/- IN THE SEIZED PAPER. THE SEIZED PAPERS ALSO SUGGEST THE CANCELLATION OF CONTRACT WITH RUSHABH DEVELOPERS AND CARRYING OUT O F WORK WITH JOINT VENTURE PARTNER ZENITH CONSTRUCTIONS FOR BOTH THE WINGS AND THE CONSEQUENTIAL CANCELLATION OF FLATS N O 501-506 EARLIER ALLOTTED TO RUSHABH DEVELOPERS AS SECURITY FOR THE CONSTRUCTION WORK WHICH FACTS HAVE NOT BEEN DISPUTE D BY THE AO IN HIS ORDER REMAND REPORT. THE TOTAL ACTUAL COST INCURRED AS ON 31.3.2004 IN RESPECT OF B WING IS RS 2 97 41 347/- (SINCE PART OF THE COST REFLECTED BY ZENITH IN ITS BOOKS) EVEN IN RESPECT O F CIVIL WORK ONLY THE COST IN THE BOOKS OF APPELLANT IS RS 1 10 49 767/- AS ON 31.3.2004 AND IF SIMILAR AMOUNT IS CONSIDERED AS INCURRED BY ZENITH (50% JV PARTNER) THE ACTUAL COST INCURRED FOR CIVIL WORK WOULD BE ABOUT RS 2 CRORES AS AGAINST THE ESTI MATED AMOUNT GIVEN BY THE CONTRACTOR (AS PER SEIZED PAPER S) OF RS 142 21 875/- THUS THE VERY HYPOTHESIS OF THE ADDITI ON ITSELF IS FAULTY. B WING IS ACTUALLY COMPLETED IN THE AY 2005-06 I. E. IMMEDIATELY SUCCEEDING YEAR AND THE TOTAL COST INCU RRED IN RESPECT OF THIS WING HAS BEEN ACCEPTED BY THE DEPAR TMENT IN ITA NO. 3506/M/09 15 SCRUTINY ASSESSMENT FOR THE AY 2005-06 IN THE CASE OF APPELLANT AS WELL AS M/S ZENITH CONSTRUCTION. SIMILARLY IN RESPECT OF C WING ALSO THE ACTUAL CO ST OF CONSTRUCTION DISCLOSED BY THE APPELLANT HAS BEEN DU LY ACCEPTED BY THE DEPARTMENT IN THE AY 2005-06 WHEN T HE CONSTRUCTION OF THAT WING WAS COMPLETED. HENCE IN VIEW OF THE CONSIDERATION OF THE DISCUSSI ON IN THE FOREGOING PARAGRAPHS IT IS HELD THAT THE IMPUGN ED ADDITION OF RS 37 87 715/- IS NOT WARRANTED UNDER THE CIRCUM STANCES AS DISCUSSED. HENCE THIS ADDITION IS DELETED AND T HIS GROUND OF APPEAL IS ALLOWED. 24. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 25. WE HEARD BOTH THE PARTIES. THE ISSUE IS WHETHER THE ASSESSEE INCURRED CERTAIN COSTS IN CONSTRUCTION OF B AND C W INGS OF THE SHUBHLAXMI PROJECT UNDERTAKEN BY THE CONTRACTOR I. E. M/S RUSHABH REAL DEVELOPERS PVT. LTD AND PAID THEM RS 37 87 715/- W ITHOUT THE AMOUNT BEING ACCOUNTED. THE LD. CIT(A) HAS BROUGHT OUT THE FACTUAL MATRIX IN AN ELABORATE MANNER. HE HAS POINTED OUT HOW THE CONTRA CT WITH M/S. RISHAB REAL DEVELOPERS PVT. LTD FOR CONSTRUCTION OF THESE BLOCKS WERE CANCELLED AND HOW THE DEVELOPERS RAISED THE FINAL BILL FOR RS 19 68 750/- AND A FURTHER DISCOUNT OF RS. 25 000/-. IT HAS ALSO BEEN BROUGHT OUT HOW THE ASSESSEE HAD CANCELLED THE CONTRACT WITH M/S. RISHA B REAL DEVELOPERS PVT. LTD FOR CONSTRUCTION OF THESE WINGS AND HAD EN TERED INTO A FRESH CONTRACT WITH M/S ZENITH CONSTRUCTION FOR CONSTRUCT ION OF THESE WINGS. CONSIDERABLE EXPENDITURE HAS BEEN INCURRED IN CONST RUCTION OF THESE TWO WINGS WHICH HAVE BEEN ACCOUNTED. THE PROFIT ON SALE OF THESE WINGS HAVE ACCEPTED IN THE SUBSEQUENT YEARS. IN THE CIRCUMSTA NCES WE CONCUR WITH THE LD. CIT(A) THAT THE DEPARTMENT HAS NOT PROVED T HAT EXCESS PAYMENT OF RS. RS 37 87 715/- HAS BEEN MADE BY THE ASSESSEE TO M/S. RISHAB ITA NO. 3506/M/09 16 REAL DEVELOPERS PVT. LTD OVER AND ABOVE THE AMOUNT ACCOUNTED IN THE BOOKS OF ACCOUNTS. WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 26. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF FEBRUARY 2011 SD/- SD/- ( S.V. MEHROTRA) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 23 RD FEBRUARY 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 3506/M/09 17 DATE INITIALS 1 DRAFT DICTATED ON: 17 . 02 .201 1 SR. PS/PS 2. DRAFT PLACE D BEFORE AUTHOR: 21 .02.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. 10. DATE O N WHICH FILE GOES TO AR DATE OF DISPATCH OF ORDER: _________ ______