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TMI Blog2016 (6) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... litches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case - Decided in favour of assessee Addition on account of unexplained cash credits - Held that:- It is a fact on record that inspite of stating the donor to be a close relation, the assessee did not file any evidence other than confirmation in order to corroborate the assertion contained therein. - Decided against assessee Addition on undisclosed capital gains - Held that:- The whole amount of sale consideration has been taxed by the Assessing Officer as capital gains without giving assessee any benefit with regard to cost of acquisition or cost of construction. It can be nobody's case that the assessee had acquired the property without paying any cost. Some value for cost of acquisition has to be given to the assessee. We observe that even in cases of properties acquired through gifts, etc. the cost of acquisition as incurred by the previous owner is given to the assessee. The fact of acquiring the plot from Dr.Rajan Sushant is evident from the office order of Himachal Pradesh Housing & Urban Development Authority dated 8.1.2003. The Assessing Officer as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 raised by the assessee reads as under : 1. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in upholding the adding back of the sum of ₹ 32,24,130/- as an unexplained expenditure under section 69 C of the Income Tax Act, 1961 . The said addition is unwarranted and not sustainable in the eyes of law as the profit from the execution of works contract @ 8% had been returned by the appellant under section 44 AD of the Income Tax Act, 1961. 5. Briefly, the facts are that the assessee is a civil contractor and had declared its profits under section 44AD of the Income Tax Act, 1961 (in short 'the Act') amounting to ₹ 3,02,050/- against the gross receipts of ₹ 37,75,444/-. The Assessing Officer on the basis of these figures inferred that the assessee has incurred expenses to the tune of ₹ 34,73,394/- (Rs.37,75,444 - ₹ 3,02,050/-). However, he observed that it is contrary to the expenses shown in the cash flow statement of ₹ 18,49,264/-. The explanation of the assessee was that an amount of ₹ 16,24,130/- was paid from the bank account on various dates which was not refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee fails to explain about the source of certain expenditure incurred during the year, the same may be deemed to be the income of the assessee. 9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue to be decided by us is whether accepting the case of the assessee as taxable under the presumptive taxation as provided under section 44AD of the Act, the Assessing Officer can make addition under section 69C of the Act making the cash flow statement provided by the assessee the basis of his addition. 10. Section 44AD of the Act reads as under : 44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB. 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get then audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts. 14. Now, applying the above to the facts of the present case, we observe that the Assessing Officer, for making the impugned addition has started with the presumption that an amount to the extent of 92% of the gross receipts is the expenditure incurred by the assessee, which is a totally wrong premise. If the income component is estimated, how the expenditure component on the basis of said income can be considered to have been 'actually' incurred. We must also observe here that this is not a case, where the Assessing Officer has doubted the gross receipts or gross turnover of the assessee. In fact, accepting the same, estimating income @ 8% on the same at presumptive rate, he preferred to make further addition under section 69C of the Act. The argument of the learned D.R. that the turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses, the Assessing Officer could have made the addition under section 69C of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case. Before parting we would like to deal with the case law relied on by the learned D.R. 18. The only case law relied on by the learned D.R. is that of Ahmedabad Bench of the Tribunal in the case of Shivani Builders (supra). On perusal of the said order, we observe that the basis of finding given in this order is mainly the fact that the assessee had failed to record its turnover correctly in its books. However, no such finding is there in the present case. As already held by us in the preceding paragraph, the Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB, it is seen that it is has no date. The assessee is stated to be the uncle of the wife of Shri Vijay Wadwa. Considering the close relationship, there is no reason not to have supplemented the confirmation with more supporting documents at the time of filing written submissions in appeal, as categorically called for by the AO. Hence, 1 am afraid the assessee cannot be said to have discharged the onus of proving he genuineness of the transaction as well as the creditworthiness of Shri Wadhwa. 25. On perusal of the same, we do not find any infirmity since it is a fact on record that inspite of stating the donor to be a close relation, the assessee did not file any evidence other than confirmation in order to corroborate the assertion contained therein. The ground raised by the assessee is dismissed. 26. The appeal of the assessee is partly allowed. ITA No.1162/Chd/2013 : 27. The ground No.1 raised by the assessee is as under : 1. That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the adding back of the sum of ₹ 17,04,706/- as an unexplained expenditure under section 69 C of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 lacs in assessment year 2006-07, ₹ 16 lacs in assessment year 2007-08 and ₹ 4 lacs in assessment year 2008-09 were spent on construction. The confirmation filed by the assessee was not disputed by the Assessing Officer and the transfer letter issued by the HIMUDA talks of plot does not make any difference as lease holder imposing penalty by SADA and copy of Completion Certificate was placed on record as additional evidence before the CIT (Appeals). The CIT (Appeals) after considering the submissions of the assessee observed that no document in support of his contention, be it cost of acquisition or improvement or construction of building or sale consideration has been produced. Further, the CIT (Appeals) dismissed the ground of assessee holding as under: Copy of statement of Prithvi Vikram Sen filed on page 24 of PB is not even dated and is without any address, proof of identity or supported by any other documents. Penalty letter placed at page 50 of the PB carries signature of the Member Secretary, SADA, New Shimla which is dated 22.12.2005, while the office letter bearing the file no.2808 dated 22.12.08. The compounding fee receipt is dated 9.8.2008 (page 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are not in agreement with the findings of the lower authorities to take the cost of construction as nil. The assessee has maintained that he has incurred an amount of ₹ 4 lacs in the assessment year 2006-07, an amount of ₹ 16 lacs in the assessment year 2007-08 and an amount of ₹ 4 lacs in assessment year 2009-10. From the perusal of the assessment orders for these three assessment years, it is observed that in all the three years, while adjudicating another issue, the Assessing Officer himself has accepted the cost of construction in very clean terms. In the Assessing Officer's order for assessment year 2006-07, an amount at ₹ 4 lacs as cost of construction has been accepted at page 4. Similarly, in assessment year 2007-08, at page 5 and in assessment year 2008-09 at page 4, the cost of construction at ₹ 16 lacs and ₹ 4 lacs respectively have been accepted by the Assessing Officer. Since the Assessing Officer himself has accepted these costs of construction, no different stand can be taken by him while making the addition. In view of this, we direct the Assessing Officer to delete the addition made on account of construction cost being t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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