9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (8) TMI 994 - AT - Income TaxAllowability of expenditure - Held that - From the very nature of expenditure it makes clear that all the expenses are related to project itself and none of the expenditures can be presumed to be non-related one. The assessee before us produced bills and vouchers which include bills raised by the contractor and details are available in the ledger account which proves the genuineness of the expenditure related to the project Rajkamal Heights . We also find from the bills and vouchers that the expenditure is related to project which was incurred after taking completion certificate. It appears that the plumbing work, gardening expenses, BMC water connection charges, work related to amenities, beautification, repair, minor reconstruction, redevelopment, replacement of various items, remodeling, misc. repair of completed works incurred by assessee after completion of the building, which is very much allowable. We have seen that the assessee is able to produce bills and vouchers to the extent of ₹ 1,67,48,172/- out of total expenditure claimed by assessee at ₹ 1,84,32,204/-. To this extent the assessee‟s expenditure can be allowed and the balance sum of ₹ 16,84,032/- can be disallowed. Accordingly, we allow the claim of the assessee to the extent of ₹ 1,67,48,172/- and retain the addition in respect to disallowance of expenses in the absence of the vouchers at ₹ 16,84,032/-. This issue of Revenue s appeal is partly allowed. Estimation of cash component - Held that - The survey party has accepted the average sale price rate @ 3750, which includes the sale price as per the sale agreement of ₹ 2,500/- and cash component of ₹ 1,250/- in the earlier year relevant to assessment year 2006-07. Even otherwise, the average PSF rate of 7 flats @ ₹ 4020/- which is almost corroborating with the statement of Shri Kamlesh Savla admitting the average rate of ₹ 4000/- PSF (per sq.feet). Even otherwise, there is no evidence relating to the assessment year 2006-07. This is merely an exploration of rate by the AO without any evidence based on earlier year evidences. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has wrongly estimated the cash component at ₹ 30 lakhs in respect of 7 flats on estimation basis. There is no basis for CIT (A) to estimate cash component in these 7 flats at ₹ 30 lakhs by taking the selling price of flat @ ₹ 3750/- per sq. ft. Accordingly, we delete the addition confirmed by CIT (A) amounting to ₹ 30 lakhs. The issue of assessee s appeal is allowed and that of the Revenue is dismissed. Disallowance of expenses of telephone, vehicle expenses and conveyance expenses - Held that - We find that the AO has disallowed these expenses on the basis of personal element involved in the same. We also find that the assessee has also paid FBT on these expenses @ 20%. We find that the AO has made addition on ad hoc basis without any finding of personal user of these expenses. We also find that these expenses are related to assessee‟s business and there is no element of personal user particularly when the assessee has already paid FBT on such expenses. There is no reason for making disallowance of these expenses. Hence, we confirm the order of the CIT (A) deleting these additions. This issue of Revenue‟s appeal is dismissed. Genuineness of the salary paid to these employees - Held that - We find that the AO disallowed salary of ₹ 3,45,000/- claimed by assessee to paid to four employees for supervision work. According to AO the assessee has not paid the salary on monthly basis but it was one time yearly payment. Accordingly, the AO disallowed the salary paid to the four persons mentioned in Assessment Order at page 13. Accordingly, he made disallowance of ₹ 3,45,000/-. The CIT (A) sustained the addition on the basis that salary expenditure was debited as on 31st March, 2007, i. e. at the end of the year. The assessee before CIT (A) claimed that these persons were hired to supervise the project during the year, since the work of the garden as well as club house was under progress. The CIT (A) observed that, had any such truth been there, there would have been regular debit and receipt of the salary by these persons whereas, Appellant has only shown debit by voucher dated 22.03,2007, which is apparently unbelievable. Therefore, disallowance of salary of ₹ 3,45,000/- out of the total claim of ₹ 7,64,975/- is sustained . We are of the view that the assessee is unable to prove the genuineness of the salary paid to these employees and CIT (A) has confirmed the disallowance with reasons. We also confirm the orders of the lower authorities. This issue of assessee s appeal is dismissed. Levy of penalty u/s 271 (1)(c) - Held that - We find from the orders of the lower authorities that both the authorities below have assumed concealment in respect to on money received for the post survey period. The on money was received by the assessee for the assessment year 2006-07, being the date of survey on 21-02-2006, for the reason that some papers for the financial year 2005-06 were found. But, no paper relating to financial year 2006-07 relevant to this assessment year 2007-08 was found. On this basis only the Tribunal has deleted the addition of on money addition and once addition is deleted, penalty will not survive. Accordingly, we delete the penalty and allow the appeal of the assessee.
Issues Involved:
1. Deletion of addition of construction expenditure incurred after the date of issue of completion certificate. 2. Restriction of addition of unexplained cash component receipt. 3. Deletion of disallowance of telephone, vehicle, and conveyance expenses. 4. Confirmation of disallowance of salary payments. 5. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Deletion of Addition of Construction Expenditure: The first issue in the Revenue’s appeal concerns the CIT(A)'s order deleting the addition of ?1,84,32,304/- made by the AO in respect of construction expenditure incurred after the date of issue of the completion certificate. The AO contended that once the completion certificate was issued, there was no need for further expenditure on items such as steel, tiles, and plumbing. The AO also noted the absence of a stock register and the discrepancy in construction rates compared to other developers. Consequently, the AO rejected the book results under Section 145(3) and disallowed the expenditure. The CIT(A) deleted the disallowance, emphasizing that the completion of a building does not mean the project is completed in all respects, and various post-completion works are often necessary. The Tribunal upheld the CIT(A)’s decision but restricted the allowable expenditure to ?1,67,48,172/- due to the absence of vouchers for the remaining amount. 2. Restriction of Addition of Unexplained Cash Component Receipt: The next issue pertains to the CIT(A)'s restriction of the addition on account of the alleged cash component to ?30,00,000/- from ?2,20,57,111/- made by the AO. During a survey, documents indicating on-money transactions were found, and the AO estimated the undisclosed income based on the sale price of flats. The CIT(A) restricted the addition to ?30,00,000/- after considering the average selling price and the fact that some flats were already accounted for in the previous assessment year. The Tribunal found that the CIT(A) had wrongly estimated the cash component and deleted the addition of ?30,00,000/-, allowing the assessee’s appeal and dismissing the Revenue’s appeal. 3. Deletion of Disallowance of Telephone, Vehicle, and Conveyance Expenses: The third issue involves the deletion of disallowance of telephone, vehicle, and conveyance expenses by the CIT(A). The AO disallowed these expenses due to the personal element involved. However, the CIT(A) deleted the disallowance, noting that the assessee had paid FBT on these expenses and the AO had made the addition on an ad hoc basis without concrete evidence of personal use. The Tribunal upheld the CIT(A)’s decision, dismissing the Revenue’s appeal on this ground. 4. Confirmation of Disallowance of Salary Payments: The fourth issue is the confirmation of the disallowance of salary payments amounting to ?3,45,000/-. The AO disallowed the salary claimed to be paid to four employees on the grounds that it was a one-time payment rather than periodic. The CIT(A) upheld the disallowance, noting that the salary expenditure was debited at the end of the year, which seemed improbable for regular salary payments. The Tribunal confirmed the lower authorities' decision, dismissing the assessee’s appeal on this issue. 5. Confirmation of Penalty Levied Under Section 271(1)(c): The final issue concerns the confirmation of penalty levied under Section 271(1)(c) on the alleged receipt of on-money and disallowance of salary payment. The CIT(A) confirmed the penalty based on the addition of ?30,00,000/- for on-money receipts. However, since the Tribunal deleted the addition of ?30,00,000/- related to the cash component, it also deleted the corresponding penalty. Consequently, the assessee’s appeal on this issue was allowed. Conclusion: - The Tribunal partly allowed the Revenue’s appeal concerning the construction expenditure, allowing ?1,67,48,172/- and disallowing ?16,84,032/-. - The Tribunal allowed the assessee’s appeal regarding the unexplained cash component, deleting the addition of ?30,00,000/-. - The Tribunal upheld the CIT(A)’s deletion of disallowance of telephone, vehicle, and conveyance expenses. - The Tribunal confirmed the disallowance of salary payments. - The Tribunal deleted the penalty under Section 271(1)(c) following the deletion of the addition of ?30,00,000/-. Order Pronounced in the Open Court on 21/07/2016.
|
