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TMI Blog2018 (8) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 40A(3). In view of this, the case was reopened by issuing notice u/s.148 on 27.01.2015. In response, the assessee filed revised return of income on 26.05.2015 admitting total income at Rs. 61,86,860/-. The assessment was completed u/s.143(3) r.w.s 147 on 31.03.2016 by determining total income at Rs. 2,11,86,863/-. 2.1 The Assessing Officer gave opportunity to assessee to submit its objections for applying the provisions of Section 40A(3) in respect of purchase of business asset. In response, the assessee submitted that the said interest expenditure was not claimed in the P&L account as expenditure. The land was shown in the Balance sheet under "Fixed assets" but not shown in the books of accounts as 'stock-in-trade', hence the provisions of Section 40A(3) would not apply. The assessee's contention was not accepted by the Assessing Officer for the following reasons: "a) Since the land purchased was a business asset as subsequently, the said land was developed into a residential complex by name "Kalyan Aiswarya Residency". For the AY 2013-14, the assessee shown the said land as "fixed asset" in the balance sheet, but in the AY 2014-15, the value was shown as "N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has not proved the compelling reasons for payments made in cash. The AO relied on the following judicial pronouncements: 1. Nahgi Lal Vs. CIT, 167 ITR 139 (Raj.) 2. Attar Singh Gurumukh Singh Vs. ITO, (SAC) 191 ITR 667 (SC). In view of the above, the Assessing officer disallowed total cash payments of Rs. 1,50,00,000/- u/s.40A(3) . 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). 4. Before the CIT(A), the assessee submitted that during the accounting year relevant for the AY 2013-14, the gross receipts amounted to Rs. 1,62,65,000/- and the assessee admitted additional income of Rs. 15 lakhs and the net income amounted to Rs. 61,86,863/-. The assessee submitted the following reasons: a) The asset acquired was treated as a capital asset and the cost of same was not debited to the Purchase Account. b) It was mentioned that the land at Saroor nagar is shown in the Balance Sheet as fixed asset and no such amount is debited to the Profit and Loss account and, therefore, there is no question of disallowance of any expenditure incurred thereon. Further, the assessee submitted that it had not claimed any expenditure and when the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tside the books of the accounts, as this was not reflected in the regular books. Hence, the appellant's claim is not supported. The addition is upheld." 5. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: 1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law. 2. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition of Rs. 1,50,00,000/- made by the Assessing Officer by applying he provisions of Sec. 4OA(3) of the I.T. Act. 3. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the said amount is not debited to the Profit and Loss account and that therefore, no disallowance could have been made by the Assessing Officer. 4. The learned Commissioner of Income-Tax (Appeals) erred in confirming levy of interest u/ s 234B and 234C of the LT. Act. 5. Any other ground that may be urged at the time of hearing." 6. Ld. AR reiterated the submissions as made before the CIT(A). He further submitted that the asset acquired was treated as a capital asset and the cost of the same was not debited to the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made, the assessee preferred appeal before the CIT(A)-1, Hyderabad. The 1st appellate authority vide appeal No. 0097 dated 03.08.2017 had upheld the additions made by the AO in the Assessment order. On the said order, the Assessee is in appeal before the Hon'ble ITAT. The Assessing Officer rebutted the objections raised by the assessee by observing that the subject land constitutes business asset as it was developed into residential complex by name Kalyan Aishwarya Residency in later years. This fact is also evident from the value that the said land was shown by the assessee at Rs. Nil in the immediately succeeding year. The assessee has shown expenditure of Rs. 90.03 lakhs towards purchase of various building material. Further, expenditure to the extent of Rs. 16.37 lakhs was claimed towards labour charges. All these activities prove that the assessee had carried out construction activity. There cannot be any construction activity without land component. The assessee is in the line of construction. Taking a holistic view of facts and circumstances of the case the observation of the Assessing Officer that the subject land constitutes stock in trade of the assessee appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss expenditure or treated as stock or capitalized the same in order to claim depreciation in the future. We notice that the assessee has not claimed the payment of Rs. 1.50 crores as expenditure or capitalized the same in the value of the land. The assessee has submitted copy of the ledger "land at Saroor Nagar", as per which, assessee has debited the value as per registered document and further development expenditure in that project. It has not charged the cash payment of Rs. 1.50 crores to the said land at Saroor Nagar. This fact was also confirmed by the AO in his submission which was submitted by ld. DR before us. This submission is extracted in para 7. It clearly shows that assessee has not capitalized the above cash payment in fixed assets. Therefore, assessee cannot claim any expenditure or even convert the same as business assets or stock in trade, the cash payment of Rs. 1.50 crores is not part of value of land. Hence, it cannot be a part of future business expenditure. Therefore, the contention of the revenue authorities is not correct to say that assessee has converted the land in the subsequent year amounts to claim of expenditure in the subsequent AY, as the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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