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2014 (3) TMI 102 - AT - Income TaxRestriction of addition made business of building construction - Held that - The Assessee had received Rs. 1,75,000/- from 8 bunglows aggregating to Rs. 14 lacs which is stated to have been recovered towards maintenance, registration electricity etc. Before us no material has been brought on record by Assessee to show the extent of expenses incurred by Assessee on those count - the entire receipts of Rs. 14 lacs cannot be considered to be income The submission of the Assessee that it is a contractor for carrying out civil work could not be disproved by Revenue with any tangible evidence - as per the provisions of Section 44 AD as was applicable at the relevant time to an assessee who was engaged in the business of civil construction, a sum equal to 8% of gross receipts was deemed to be profits of business Relying upon Vijay Proteins Ltd vs. ACIT 1996 (1) TMI 144 - ITAT AHMEDABAD-C thus, the addition is restricted to 30% of the receipts Decided partly in favour of Assessee. Disallowance of interest Held that - CIT(A) while granting partial relief to Assessee has given a finding that there was nexus between expenditure incurred and interest bearing funds, the expenses incurred by Assessee on behalf of society in the previous year was much less and Assessee had also charged interest an advance granted to 2 parties - Revenue could not controvert the finding of CIT(A) thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue. Penalty u/s 271(1)(c) of the Act Held that - While deciding the quantum appeal the addition is restricted on the basis of 30% of the receipts - quantum proceedings and penalty proceeds are distinct and separate and therefore the fact that addition has been made in quantum proceedings will not automatically justify the imposition of penalty - a penalty cannot be imposed automatically or mechanically after an addition has been made - Even the material on which the additions were made have to be again given a fresh look from the point of view of levying penalty - all the necessary facts were furnished by Assessee and the fact that the addition has been substantially reduced and the addition has been sustained only on estimate basis thus, the addition does not call for levy of penalty u/s. 271(1)(c) of the Act Decided in favour of Assessee.
Issues Involved:
1. Quantum additions and disallowances for A.Ys. 05-06, 06-07 & 07-08. 2. Penalty orders for A.Ys. 05-06 & 06-07. Detailed Analysis: 1. Quantum Additions and Disallowances: A.Y. 05-06: - Ground No. 1: General, no adjudication needed. - Ground No. 2 and 4: Not pressed, dismissed as not pressed. - Ground No. 3: Restricting addition to Rs. 14,00,000/- by CIT(A) against Rs. 1,34,40,147/- made by A.O. Interconnected Grounds: - Assessee's Ground No. 3 and Revenue's Ground No. 2 & 3: - Search and Seizure: Conducted u/s 132, revealing suppressed contract receipts and additional charges. - Assessee's Argument: Land owned by M.Ajara Co-op Housing Society, Assessee as a contractor. - A.O.'s Findings: On money/premium charged, suppressed receipts. - CIT(A)'s Decision: Partial relief, confirming Rs. 14,00,000/- as undisclosed income from construction, rejecting addition for land sale proceeds. - ITAT's Decision: Confirmed CIT(A)'s findings on land ownership and society's legitimacy. Restricted addition to 30% of Rs. 14,00,000/- (Rs. 4,20,000/-). A.Y. 06-07: - Assessee's Grounds: - Ground No. 1: General, no adjudication needed. - Ground No. 2: Proceedings bad in law, void. - Ground No. 3: Partial relief by CIT(A), Rs. 11,49,000/- addition. - Ground No. 4: Interest liability u/s 234. - Revenue's Grounds: - Ground No. 1: Disallowance of interest for non-business purpose. - Ground No. 2 & 3: Restricting addition of Rs. 1,36,45,513/- to Rs. 11,49,000/-. - ITAT's Decision: Similar reasons as A.Y. 05-06, appeals partly allowed. A.Y. 07-08: - Assessee's Ground: - Addition of Rs. 1,54,44,720/-: Undisclosed income from construction and plot allotment. - ITAT's Decision: Similar reasons as A.Y. 05-06, appeal partly allowed. 2. Penalty Orders: A.Y. 05-06 & 06-07: - Assessee's Grounds: - Ground No. 1: Order against law, equity, and justice. - Ground No. 2: Error in upholding penalty u/s 271(1)(c). - Ground No. 3: Right to add, alter, modify grounds. - Facts: - Returned Income: Rs. 88,150/-, Determined Income: Rs. 1,40,33,890/-. - CIT(A) Confirmation: Addition of Rs. 16,10,254/-. - Penalty Levied: Rs. 5,89,234/- u/s 271(1)(c). - CIT(A)'s Decision: Partly confirmed penalty on unaccounted receipts and extra work charges. - ITAT's Decision: Reduced addition to Rs. 4,20,000/- on estimate basis, deleted penalty as addition was on estimate and Assessee disclosed all necessary facts. Conclusion: - Quantum Appeals: Partly allowed for both Assessee and Revenue. - Penalty Appeals: Allowed for Assessee, penalty deleted for both A.Y. 05-06 & 06-07. Order Pronounced: 21-02-2014.
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