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TMI Blog2015 (12) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 8% is given in section 44AD for civil contractor is to be taken only as a benchmark for the purposes of estimation of net profit in such cases. Therefore, we concur with the ld CIT(A) that the ad hoc disallowance was not warranted and we find no merits in this ground of appeal of the department. In view of the above, we hold that the ld. CIT (A) rightly deleted the addition - Decided against revenue Addition on account of cash expenditure exceeding ₹ 20,000/- - CIT(A) deleted the addition - Held that:- We find that the payments were made in cash to stamp vendors who acted as the agents of the Government for selling stamp papers, hence, such payments were covered under the exception provided in Rule 6DD(b). We further find that these payments were duly vouched by the physical existence of stamp papers in question which were actually utilized for purpose of acquiring the land in question. Therefore, we uphold the order of the ld. CIT (A) deleting the addition of ₹ 1 lakh made by the AO. Decided against revenue - ITA No.1137/Del./2012 - - - Dated:- 10-11-2015 - SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notices issued earlier. In response to this notice, the assessee filed a return on 22.11.2010 declaring an income of ₹ 5,79,030/-, as against an income of ₹ 3,60,850/- disclosed in the return of income filed earlier under section 139 of the Act. 4.1 During the course of assessment proceedings, the assessee produced the details of income and balance sheet showing investments and liabilities which were prepared on the basis of accretion to the assets, as no books of accounts were maintained by the assessee. After perusing the documents produced before him, the AO observed that the assessee had incurred an expenditure of ₹ 1,13,59,499/- on the construction. He observed that the assessee had not produced the complete accounts and details of all these expenses and from the seized material, he also found that no regular books of account were being maintained and there were half complete instances and ledger etc. of the expenditure from where the complete accounts were not emerging. The AO further observed that the assessee had increased the receipts after the search and accordingly the expenditure part was bound to go up. He observed that it has to be backed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,07,000 3,07,770 2,00,770 1,20,000 31,66,890 30,46,890 3,60,850 5,79,030 2,18,180 44,363 15,55,410 15,11,047 Not due 4,29,050 4,29,050 The group consists of the assessee and his son Shri Ashish Mohan Agarwal. It was also submitted that, together, they had made disclosure of additional income of ₹ 1,70,00,000/- during the search, as against which the additional income actually offered for taxation in the returns furnished pursuant to the search was ₹ 2,16,42,960/. The purpose of search is to detect evidence relating to undisclosed income earned by the assessee and to collect tax on the same. If a person has earned undisclosed income, it is logical that such income would not form part of his regular books of account. Hence, if the person has offered the additional income (as is apparent with reference to the seized documents and any other evidence which the AO may gather), the AO should avoid making further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of unverifiable construction expenses without appreciating the fact that the assessee was not maintaining adequate books of account and further the assessee s case was not covered under the provisions of Section 44AD of the Act as the turnover of the business exceeded ₹ 40 lakhs, therefore accepting profit equivalent to 10% of the gross profit was perverse application of law in assessee s case. So, she pleaded that the order of the Ld. CIT(A) be reversed and the order of AO be restored on this addition. 7. Ld. AR for the assessee reiterated his submissions made before the Ld. CIT (A) and relied on the order of the ld. CIT (A). Ld. AR submitted that the assessee had himself shown net profit rate of 10% which was in excess of 8% specified in section 44AD of the Act. He further submitted that the disallowance was arbitrary as the AO did not pinpoint any specific defect. In this regard, the ld. AR made a reference to the definitions of the terms 'builder' and 'developer' and reliance was placed on a number of decisions in support of the contention that arbitrary disallowance was not justified. Accordingly, ld. AR wants us not to interfere in the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt and High Courts in Plethora of judgments. Before the AO, the assessee has claimed to have furnished his income and expenditure account as well as statement of his assets and liability year after year, incorporating the findings relating to undisclosed income and assets during the search. We also take note of the fact that the assessee had shown the additional income in the returns furnished by him and his son and the AO had not recorded any finding that there was any evidence of any unexplained expenditure/ investment or any income which was not covered in the additional income disclosed by the assessee. In the light of the above facts, we are of the view that the ld. CIT (A) has rightly held that there was no justification for making ad hoc disallowance of 10% out of the expenditure claimed to have been incurred by the assessee in construction business. We agree with the Ld. CIT(A) that whether the assessee was a builder/developer or a civil contractor is not relevant and only the issue is estimation of reasonable net profit of the assessee's business. In any case, section 44AD of the Act is not applicable in the assessee s case because the turnover of the business exceede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue. 13. Ld. AR reiterated the submissions made before the ld. CIT (A) and submitted that the assessee had incurred total expenditure of ₹ 84,04,300/- on purchase of land which included cost of land (Rs.77,10,000/-), payment of stamp duty (Rs.6,21,000/-) and registration expenses (Rs.73,300/-). He submitted that the expenditure incurred in cash referred to by the AO was incurred on payment of stamp duty and registration expenses. He further submitted that the stamp duty had been paid to the government authority through the stamp vendors and the registration expenses were paid to advocate's head clerk which according to him were not hit by the mischief of 40A(3) of the Act. Ld. AR submitted that the land purchased by the assessee was situated at village Banjarawala in Dehradun District. He submitted that the sellers of the land as well as the assessee's office were situated at Banjarawala where no banking facilities were available and the persons from whom the land was purchased are farmers to whom the state government had allotted agricultural land on their rehabilitation pursuant to acquisition of their land at Tehri for purposes of building Tehri Dam. Ld.AR s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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