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2014 (10) TMI 701 - AT - Income TaxAddition of contracts payments Held that - The supplementary cash book has been verified it could not be understood that after making such verification how whole receipts were added to the income - It is not possible in case of various construction receipts to have 90-100% rate of profit which is shown in profit and loss account by special auditor which itself shows that contention of the assessee has merits - However at the same time there is no evidence to show that receipts in the hands of G.M. Construction Company proprietary concern and in the hand of Matchless Associates were security receipts - these receipts do not relate to construction payment therefore whole of the amounts is required to be added to the income - these are construction receipts and therefore direct receipts and therefore the AO is directed to apply Net profit rate of 8% on these receipts - Therefore this ground is partly allowed. Unexplained cash credits u/s 68 Held that - The matter was remanded to the AO and the AO has made enquiries - In response to the query u/s 133(6) Matchless Associates had clearly mentioned the fact regarding purchase of property jointly with Pritam Singh i.e the assessee and the fact that M.S. 5 lakh withdrawn by Hardeep Singh on various dates which becomes clear from the copy of the bank account placed - Hardeep Singh has clearly stated in his letter that he was employed by the assessee and was deputed to Gurdaspur site and the amounts were withdrawn from the bank and were handed over to Pritam Singh - clearly the assessee has discharged the onus which was put on the assessee and the AO has not made any further inquiry the AO is not right to reject this evidence without further enquiry the order of the CIT(A) is set aside Decided in favour of assessee. Addition of opening/closing work in progress Total contract receipts received from PBIL Apex Consortium Ltd. treated as income Held that - The income and expenditure account clearly show that opening stock of 214700/- closing stock is also shown at 214700/-. Therefore there is no justification in addition of opening stock which has been shown as closing stock the order of the CIT(A) is set aside Decided and accordingly we set aside the order of the Ld. CIT(A) and delete the addition of 214700 - The contention of the assessee is accepted that for example in G.M. Construction case against the payment of 1579700/- Net profit is shown at 1364715/- which is almost 90% which is not possible in construction business - the expenses were booked in the supplementary cash book which was verified by the AO during remand report in AY 2003-04 the order of the CIT(A) is to be set aside and the AO is directed to apply rate of profit at 8% in respect of receipts of 2265000/- and delete the addition made on account of construction receipts Decided in favour of assessee. Addition of cash deposited for purchase of demand draft Held that - As decided in assessee s own case for the earlier assessment year it has been held that the supplementary cash book was originally admitted by the CIT(A) and sent for remand report - entry in respect of 450000/- was verified by the AO - If the Assessing officer had any further doubt he should have made further enquiry but he could not simply reject this evidence thus the order of the CIT(A) is to be set aside Decided in favour of assessee. Unexplained cash credits u/s 68 Held that - As far as a sum of 2 Lakh is said to have received from Sharma Associates the assessee has filed a copy of confirmation copy of account is sent by the assessee to Sharma Associates in which Mahinder Sharma has simply signed - PAN No. has also been given - The AO has not made any enquiry - Once the depositor has given the confirmation and PAN if the AO had any doubt he should have conducted further enquiry and could not have rejected this evidence without any further enquiry - the assessee has discharged the burden of proving the genuineness of this transaction of 2 lakhs. In respect of a sum of 4.50 lakhs and 4 lakhs received from R.K. Associates they were having 25% share in property No. BMM 373 Ph 11 Mohali which was purchased through auction - Other details of payment through DD were also furnished. Even copy of the agreement was filed - PAN of R.K. Associates was not mentioned in the confirmation - Thus the assessee had clearly failed to discharge the onus. Sum of 3 lakhs received from G.M. Construction only document filed is a letter from M.S. Alagh stating that he has purchased a truck and a jeep - Even PAN No is not mentioned in such letter - during hearing whether evidence in the form of transfer of vehicles by way of endorsement in the registration certification is there the assessee showed inability to file such evidence - in respect of the transaction the assessee has not discharged his burden and the addition has been rightly made by the CIT(A) - Decided partly in favour of assessee. Validity of transaction - Cash withdrawal or cheque withdrawal Held that - The contention of the assessee is to be accepted that once additional evidence was accepted and during verification in the remand proceedings certain further documents were filed - all the evidences were filed including a certificate from bank - Certificate from the bank show that through cheque No. 252583 cash was withdrawn - This evidence cannot be brushed aside by simply saying that cash was withdrawn through Sarabjit Singh who is only a domestic help - If the Revenue had any doubt the AO should have made further enquiry during assessment proceedings thus the order of the CIT(A) is to be set aside Decided in favour of assessee. Addition of undisclosed investment in jewellery Held that - Net jewellery is required to be added because no explanation is available and that is 598.48 gms - This jewellery is required to be added in the hands of Pritam Singh and Gurjit Singh - Since this issue has been considered jointly no details have been furnished for individual jewellery and out of the jewellery weighing 298.48 gms should be added in the hands of the assessee and balance 300 gms should be added in the hands of Gurjit Singh the order of the CIT(A) is to be set aside and the AO is directed to make addition on account of jewellery weighing 298.48 gms in case of the assessee Decided partly in favour of assessee. Validity of gift received Failure to prove the genuineness Held that - The Revenue has already accepted the fact of giving gifts by Shri Surinderpal Singh - after issuing notice u/s 148 on the basis of above noted reasons the assessment was ultimately completed u/s 143(3) r.w.s. 148 in case of Shri Surinderpal Singh vide order dated 28.2.2013 for AY 2005-06 in which it is clearly mentioned that the gifts given by Surinderpal Singh to Pritam Singh and Gurjit Singh were verified - Surinderpal Singh is an NRI and running many business organizations and assessable income in India was nil - Therefore it becomes clear that source of gifts stand explained - reasoning given by the CIT(A) for deleting the addition is totally correct and the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Lack of proper opportunity for the appellant. 2. Automatic appointment of Special Auditor. 3. Validity of the appointment of Special Auditor under section 142(2A). 4. Confirmation of various additions under section 68. 5. Disallowance under section 40A(3). 6. Reliance on entries recorded in supplementary cash book. 7. Deletion of additions on account of gifts received. 8. Deletion of disallowance of interest expenses on loan against FDR claimed against interest income. Detailed Analysis: Issue 1: Lack of Proper Opportunity for the Appellant The appellant contended that the assessment was framed without affording a proper opportunity of being heard. This ground was not pressed before the Tribunal and was dismissed as not pressed. Issue 2: Automatic Appointment of Special Auditor The appellant argued that the authorities erred in appointing the Special Auditor automatically without considering the case's facts. This ground was also not pressed before the Tribunal and was dismissed as not pressed. Issue 3: Validity of the Appointment of Special Auditor under Section 142(2A) The appellant claimed that the appointment of the Special Auditor was not in accordance with the spirit of the law under section 142(2A) and was only to gain time for completing the assessment, which was barred by limitation. This ground was not pressed before the Tribunal and was dismissed as not pressed. Issue 4: Confirmation of Various Additions under Section 68 - Assessment Year 2003-04: - The Tribunal noted that the Assessing Officer (AO) made additions based on the books prepared by the Special Auditor, which reflected high profits due to non-consideration of expenses. The Tribunal directed the AO to apply a net profit rate of 8% on certain receipts and partly allowed the appeal. - Assessment Year 2004-05: - The Tribunal directed the AO to apply a net profit rate of 8% on certain receipts and partly allowed the appeal. - Assessment Year 2005-06: - Additions of Rs. 13,50,000 were confirmed due to lack of proper evidence. The Tribunal partly allowed the appeal. - Assessment Year 2006-07: - The Tribunal deleted the addition of Rs. 9,50,000 as the supplementary cash book entries were verified. - Assessment Year 2009-10: - The Tribunal deleted the addition of Rs. 24,54,000 as the bank confirmed the cash withdrawals. - Other Additions: - The Tribunal confirmed and deleted various additions based on the verification of supplementary cash book entries and other evidences. Issue 5: Disallowance under Section 40A(3) The Tribunal noted that once the income is assessed under section 44AD, no further disallowance under sections 28 to 43C is permissible. Therefore, the Tribunal deleted the disallowance of Rs. 2,73,544. Issue 6: Reliance on Entries Recorded in Supplementary Cash Book The Tribunal held that the supplementary cash book entries were verified by the AO during remand proceedings and should have been considered. The Tribunal directed the AO to give effect to the verified entries and partly allowed the appeals. Issue 7: Deletion of Additions on Account of Gifts Received - Assessment Year 2004-05: - The Tribunal confirmed the deletion of additions on account of gifts received from S.P. Singh, noting that the gifts were verified in the donor's assessment. - Other Years: - Similar deletions were confirmed for subsequent years based on the verification of gifts in the donor's assessments. Issue 8: Deletion of Disallowance of Interest Expenses on Loan Against FDR Claimed Against Interest Income The Tribunal noted that the interest on FDR was returned and assessed as business income. Since the FDRs were purchased for business purposes, the interest paid on loans against these FDRs was allowable. The Tribunal confirmed the deletion of disallowance of interest expenses. Conclusion: The Tribunal partly allowed the appeals of the assessee and dismissed the appeals of the Revenue, confirming and deleting various additions and disallowances based on the verification of supplementary cash book entries, gifts, and interest expenses. The Tribunal emphasized the importance of proper verification and consideration of all relevant evidence in making additions and disallowances.
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