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TMI Blog2012 (12) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... ated at 25% of the sales As it is a matter of estimation and that also in a search and seizure related matter & assessee has admitted that expenses outside the books were incurred opined here that 2% reduction in the formula adopted by the FAA will meet the end of justice. AO is directed to recalculate the income of the assessee @ 23% of the cost of the sales (sales minus profit). Section 40 A(3) disallowance - As in a matter where income is determined on estimate basis, there is no need to make further additions including additions made u/s. 40A. Upholding the order of the FAA, in this regard, the appeals filed by the Revenue dismissed. - ITA No. 4604 & 4605 & 4794 & 4795/Mum/2010 - - - Dated:- 6-6-2012 - SHRI B.R. MITTAL, AND SHRI RAJENDRA, JJ. Revenue by : Shri D.S. Sunder Singh Assessee by : Shri Paresh Shaparia ORDER PER RAJENDRA, A.M. Out of the two Grounds of Appeal filed by the Assessee challenging the order dt. 12-03-2010 for both the years, Ground No.1 is effective ground and it reads as under: The Learned CIT(A) erred in estimating the net profit @ 25% of the sales Grounds of Appeal filed by the Revenue are as under: 1. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asst.Year Total Expenses (unaccounted) Expenses claimed as allowable in the P L A/c. filed with the Return u/s. 153c 2000-01 49,02,781 38,97,825 2001-02 23,75,693 7,74,874 2002-03 23,47,337 12,00,430 2003-04 89,62,914 34,55,356 2004-05 70,85,795 27,41,482 2005-06 7,50,000 6,00,000 2006-07 50,000 50,000 The said expenditure had been incurred for Leela Baug Building. The said expenditure was over and above the expenditure debited to the profit and loss account in regular books of accounts. During assessment proceedings, the AO made inquiries about construction activities of the assessee and the cash payments made out of the Books of Accounts by the assessee. AO determined the profit of the assessee @ 26.52 or the cost of sale (sales minus profit). He also made a disallowance of Rs.30.17 lakhs u/s. 40A(3) of the Act. 3. Assessee preferred an appeal before the First Appellate Authority (FAA), CIT(A). FAA decided the issue as under: I have gone through the issues, written submissions and the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate business was at its peak during assessment year 2005-06 and 2006-07 and considering the fact the appellant s working itself comes to 19.07% and considering the fact the appellant s books are not reliable, to meet the needs of justice, I hereby estimate the net profit @ 25% of sales as against avg. net profit on the project reflected of 19.07%. Addition made by the AO u/s. A(3) was dealt by the FAA in para 7 of his order and the said para reads: With regard to addition u/s. 40A (3), since I have fixed the total income by estimating the net profit at 25% of the sales, there is no need to make further addition u/s. 40A(3) of the I.T.Act. I completely agree with the appellant s submissions in this regard. In view of this, I direct the A.O. to delete the addition made u/s. 40A(3) of the I.T.Act . 4. Before us, Authorised Representative (AR) submitted that estimate made by the CIT(A) was on higher side, that no seizure was made from the assessee s premises, that during 153C proceedings, assessee had filed full details of his income. Departmental Representative (DR) supported the orders of the FAA. After hearing the rival submission and perusing the material available on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.8,943/- per sq. ft whereas the rate charged to Mrs. Chandrika K shah works out to Rs.2,895/- (165000/570 i.e. 748-178) which is comparatively very low. Hence, vide show cause notice dtd. 12-04-2007, the assessee company was required to show cause as to why the value of the additional area allotted to Ms. Chandrika K Shah should not be adopted at the prevailing market rates and why the difference in the value so arrived and the sum of Rs.16.50 lack should not be added to the total income of the assessee company . 9. After considering the submission of the assessee, the AO held In view of the above discussion after taking into consideration all the information available and submissions of the assessee company, the prevailing market rate as per the stamp duty reckoner of Rs.4,660/- per sq. ft is adopted for determining the value of the additional area of 534 sq. ft which works out to Rs.24,88,400/-. The consideration received is shown at Rs.16,50,000/-. Hence, the difference of Rs.8,38,440/- is added to the total income of the assessee company . Deciding the appeal filed by the assessee, FAA held as under: I have gone through the submission and the arguments of the AR, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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