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TMI Blog2014 (7) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... timated by the Departmental Valuation Officer of ₹ 1.50 crores, the value remaining of ₹ 1,20,00,000 does not leave much of a margin above the cost of construction of ₹ 1,14,05, 509 disclosed by the assessee itself - the difference is less than 5%, the addition made by the AO is unjustified – revenue has not brought on record any evidence to indicate that the assessee has incurred any expenditure over and above what has been recorded in the books – the order of the CIT(A) is upheld that the additions made by the AO cannot be sustained – Decided against Revenue. Addition of capital introduced – Source not explained properly - Held that:- CIT(A) rightly deleted the addition made by the AO observing that the partners have invested the amounts from out of the existing assets as on 31.3.2007 and out of the income derived by them during the year - the investments were also properly recorded in the books of account of the partners and were also shown in the balance sheets filed by them along with the returns of income before the AO - In the absence of anything to the contrary brought on record by the Revenue to disprove the above findings of the CIT(A), there was no j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing with the appeal for the assessment year 2006-07, deleted the addition of ₹ 85,00,000 made by the Assessing Officer, in the following manner- 4. ..I find that the year under consideration is the first year of its activity. The partnership firm came into existence through a partnership deed dated 11.09.2006 relevant for the assessment year 2007-08. Insofar as assessment year 2006-07 is concerned, there was only an oral understanding between the partners and the investment was made jointly by all the partners in acquisition of the land. As on 31.03.2006, the amount spent was only on purchase of the property and the same was admitted by the partners. Therefore, I hold that the investment made in acquisition of the property jointly should only be considered in the assessment of the partners and not in the assessment of the partnership firm. I am fortified by the decision of the Supreme Court in the case of CIT V/s. Bharath Engineering and Construction Company reported in 83 ITR 187 wherein it is held that the cash credit in the first year of business of engineering construction should be treated as the capital receipt and cannot be added by applying the provisions of Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, could be made in the assessment of the firm, either under S.68 or 69 of the Act. We accordingly uphold the order of the CIT(A) on this issue, and reject the grounds of the Revenue in this appeal. 9. In the result, this appeal for the assessment year 2006-07, being ITA No.1207/Hyd/2011, is dismissed. ITA No.1208/Hyd/2011 : Assessment year 2007-08 ITA No.1209/Hyd/2011 : Assessment year 2008-09 10. First grievance of the Revenue common in both these appeals relates to additions made by the Assessing Officer, on account of difference in the cost of construction, which has been deleted by the CIT(A). 11. Brief facts of the case are that the assessee-firm commenced its business activity of construction of flats, admitted the income on completion of the project. During the financial year 2006-07 relevant for assessment year 2007-08, the assessee agreed to sell three floors of the property to one Shri Girish Kumar, who paid an advance of ₹ 15,00,000. The said Girish Kumar also spent an amount of ₹ 30 lakhs on the area purchased by him. The Assessing Officer referred the matter of valuation of cost of construction to the Valuation Cell, which determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.50 crores. He therefore, submitted that the addition made by the Assessing Officer on this count for both the years should be restored. 15. The learned counsel for the assessee on the other hand, strongly supported the order of the CIT(A) and submitted that the additions made by the Assessing Officer on this count are wholly unjustified and cannot be sustained. 16. We have considered the rival submissions and perused the orders of the Revenue authorities and other material available on record. It is evident from the impugned order of the CIT(A) that the buyer of the property, Shri Girish Kumar, has confirmed the fact of ₹ 30-lakhs having been spent by him after taking possession of three floors of the building. As such this part of the investment cannot be taken as that of the assessee. If this amount is reduced from the value of cost of construction estimated by the Departmental Valuation Officer of ₹ 1.50 crores, the value remaining of ₹ 1,20,00,000 does not leave much of a margin above the cost of construction of ₹ 1,14,05, 509 disclosed by the assessee itself. Considering the smallness of the difference, which is less than 5%, the addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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