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TMI Blog2013 (9) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Vishwa Ganga Flat out of the total addition made of Rs. 1, 47, 7171-. " iv)"On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs. 1, 35, 9501- made by the A. O. on account of disallowance of part of interest expenses claimed by the assessee. " v)The appellant prays that the order of the Id. CIT (A) on the above grounds to be set aside and that of the A. O. be restored. vi)The appellant craves leave to amend or alter any ground or add a new ground. Assessee, an individual and proprietor of M/s Appollo Associates, engaged in the business of infr -astructure development contract and re-development of buildings, filed his return of income on 26. 10. 2007 admitting the total income at Rs. 30. 16 lacs. AO finalised the assessment u/s. 143(3) of the Act on 27. 11. 2009 determining the income of the assessee at Rs. 1. 05 Crores. 2. First ground of appeal is about deleting the addition of Rs. 43. 4 lacs, AO on account of deemed dividend u/s. 2(22)(e) of the Act. During the assessment proceedings, AO found that assessee had received unsecured loan of Rs. 43, 14, 000/-from one M/s Konark Structural Engineering Pvt. Ltd. (K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate Authority(FAA). After considering the submissions of the assessee and the assessment order, he held that the transactions which were the subject matter of addition were available in form of account copy of the KSPEL in the books of account of the assessee, that the assessee first debited Rs. 24, 64, 000/- towards sale of flat that Rs. 64, 000/- were received by cheque and was evidenced by the registered agreement, that subsequently the assessee received Rs. 24, 00, 000/- in accordance with the other agreement, that the AO did not dispute the fact that the appellant sold the premises mentioned in the above agreement to the company, that only objection raised by the AO was that the appellant did not file the entire copy of registered agreement, that the assessee had received Rs. 64, 000/ -as per registered agreement, that total consideration mentioned in the agreement was Rs. 24, 64, 000/-, that said fact was also mentioned in the registered agreement , . that subsequently the assessee had received Rs. 24, 00, 000/- on 03. 06. 2006. , that there was no dispute that the payment was received towards sale of premises. Relying upon the judgment of the Hon'ble Supreme Court deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they could not funds for purchase of premises for Rs. 1, 40, 00, 000/-, that the assessee ultimately repaid the amount on 11. 01. 2007(Rs. 14, 50, 000/-) and on 19. 01. 2007(Rs. 4, 00, 000/-), that the agreement was genuine, that the assessee did not receive loan or advance and what was received was only payment in the normal course of the business of the assessee, that provisions of section 2(22)(e) were not applicable. 2. 2. Before us, Departmental Representative (DR)written agreement was not produced during the assessment proceedings, that total sale agreement was not filed before the AO, that FAA has not considered the factor of accumulated profits while deciding the appeal, that in the tax audit report said transaction was shown as loan, that flat was not shown in the balance sheet of KSEPL as current assest, that FAA did not call for any remand report from the AO. Authorised Representati -ve(AR)submitted that an agreement was entered in to between the assessee and KSPEL, that it was submitted during the assessment proceedings, that no discrepancy was pointed out by the AO in the MOU, that AO did not make any inquiry with the purchaser or the witnesses, that bank statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, AO held that the assessee had claimed to have made payments to different parties, that all the payments had been made by way of cash, that it was not ascertainable as for which side how many labourers were employed, that there was no check over the claim made by the assessee. He directed the assessee to produce vouchers for the said expenses. On verification of a few of the vouchers, he noticed that vouchers were prepared on a single day. He held that the vouchers indicated that they were prepared on the last day of the year, that the labour charges worked out to 76. 94 % of the total contract receipts in addition to the sub-contract charges of 19. 3 lacs. Finally, he held that labour charges were on higher sides as compared to the other cases of the same category, that the expenses claimed under the head labour-charges had great effect on fall in profit, that profit declared by the assessee had gone down to almost 1/5, that payments had been made in cash and the assessee had not fully proved the genuineness of the transaction. As a result, he made an addition of Rs. 24. 30 lacs(25% out of the expenses) to the total income of the assessee. 3. 1. Assessee preferred an appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however strong, cannot take place of evidence. In the case under consideration AO had made addition only on suspcicion. Therefore, in our opinion, FAA had rightly deleted the same. Confirming his order we decide ground no. 2 against the AO. 4. Next ground of appeal is about deemed rent in respect of Vishwa Ganga flat. During the assess -ment proceedings, AO found that assessee was owner of five house properties, that he had not shown any deemed house property income other than the self occupied porperty. He directed the assessee to submit reasons for not showing deemed income from house property u/s. 23(4) of the Act and to provide the annual let-able value of those properties. After considering the letter filed by the assessee on 27. 07. 2009, he held that assessee had not submitted any evidence to prove that property at Vishwa Ganga was utilised for purpose of providing temporary accommodation to the tenants, that he had not provided any notional rent from such house property. Relying upon the decision of the Hon'ble High Court of Allahabad delivered in the case of Radha Devi Dalmia (125 ITR 134), he held that gross annual value @ 12% of the investment had to be taken as reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such claim in view of specific provisions of section 36(1)(iii) r. w. s. 37 of the Act. Assessee filed party wise details of interest paid and the details of TDS made thereon. From the said details AO noticed that assessee had claimed interest payment at Rs. 1. 35 lacs against the commission received at Rs. 3, 10, 474/-, that he had advanced certain amounts to different parties and had not charged any interest. AO asked the assessee to explain as to why the interest should not be disallowed as borrowed funds were not utilised for business and there was no need to borrow funds for earning of commission income. After considering the submissions of the assessee, AO held that major portion was shown by the way of investment for fixed assets, that no income was earned from such investment, that assessee had not proved any nexus of borrowed funds and interest paid thereon with the activities carried out for earning taxable income. Finally, he held that entire amount of Rs. 1. 35 lacs was disallowable in view of specific provisions of section 36(1)(iii) r. w. s. 37 of the Act. 5. 1. Assessee preferred an appeal before the FAA. After hearing the assessee. FAA held that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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