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TMI Blog2018 (10) TMI 1523X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of the assessee. CIT(A) has rightly directed the AO to restrict the disallowance to 12.5% of the disputed purchases. We uphold the order of the ld. CIT(A) and dismiss the 1st ground of appeal filed by the revenue. Unsold flats as stock-in-trade used for purpose of business - CIT-A held that the unsold flats as stock-in-trade used for purpose of business - Held that:- In order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. In the instant case, the assessee is a builder and developer. The issue of taxability is with regard to unsold flats. The AY is 2009-10. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation Wing of the Income tax Department, Mumbai, that the assessee had obtained bogus purchase bills amounting to ₹ 2,20,472/- from M/s. Top Bricks and Sand Suppliers, which is one of the hawala operators as notified by the Investigation carried out by the Sales tax department, Govt. of Maharashtra. On that basis, the AO recorded the reasons for re-opening the assessment and issued notice u/s. 148 of the Act . In the instant case the notice u/s. 148 of the Act has been issued on 26/03/2013, thus within 4 years from the relevant AY 2009-10. As there was specific information received on the basis of investigation conducted by the sales tax department , Govt. Of Maharashtra, that the assessee had obtained bogus purchase bills of ₹ 2,20,472/- from Top Bricks and Sand Suppliers, the AO has rightly issued notice u/s. 148 on 26/03/2013. In a similar case involving beneficiary of accommodation entries, the Hon ble Bombay High Court in the case of Om Vinyls P. Ltd. vs. ITO [Writ Petition (L) No. 3114 of 2014] has held that: The information received by the Assessing Officer on which basis the impugned notice is issued is specific. There is no ambiguity in the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee filed an appeal before the ld. CIT(A). It is seen that the ld. CIT(A) by following the judgment of the Hon ble Gujarat High Court in CIT vs. Simit Sheth (2013) 38 taxmann.com 385 (Guj.) directed the AO to estimate the profit @12.5% of the purchases made from the disputed parties. 3.3. Before us, the ld.DR submits that as the assessee failed to prove with supporting documentary evidence that materials were actually delivered in its premises, the ld. CIT(A) should have confirmed the full amount of ₹ 2,20,472/- instead of directing the AO to restrict the disallowance to 12.5% of the disputed purchases. 3.4. On the other hand the ld. counsel of the assessee submits that no disallowance is called for in the instant case. 3.5. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. The assessee failed to file evidence of deliveries like Vajan Kata/transporters bilty etc. to establish that the material had been physically delivered in its premises. However, we find that the AO has failed to find any fault on the sales made by the assessee. In the case of Simit P. Sheth (supra), the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constructions vs. ACIT (ITA No.5408/Mum/2016 dtd.22/02/2018) and Progressive Homes vs. ACIT (ITA No.5082/Mum/2016 dtd. 16/05/2018). 4.5. We have heard the rival submissions and perused the relevant materials on record. On the above issue, we come across one decision for the assessee and another decision for the revenue. The decision in Neha Builders Pvt.Ltd.(supra) is for the assessee, whereas the decision in Ansal Hsg. Finance Leasing Co. Ltd., (supra) is for the Revenue. The Hon ble Supreme Court in the case of CIT vs. Vegetable Products 88 ITR 192 (SC) has held that if two reasonable constructions of a taxing provisions are possible, that construction which favours the tax payer must be adopted. In view of the above position of law, we shall follow the decision in Neha Builders Pvt.Ltd.(supra). 4.5.1. We now come to the relevant provisions in the Act. The following sub-section (5) has been inserted after sub-section (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018: (5) Where the property consisting any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in group entities. By following, the decision in CIT vs. HDFC Bank Ltd. 366 ITR 505 (Bom), the ld. CIT(A) deleted the disallowance of ₹ 18,829/- made by the AO. 6.3. Before us, the Ld. DR relies on the order of the AO, whereas the ld. counsel of the assessee supports the order passed by the Ld. CIT(A). 6.4. We have heard the rival submissions and perused the available material on record. We agree with the ld. CIT(A) that the share capital and reserves and surplus in the present case is more than investment made by the assessee. Therefore, following the decision in HDFC Bank Ltd. (supra), we delete the disallowance of ₹ 436/- made by the AO. However, we find that the AO has rightly made a disallowance of ₹ 18,393/- u/s. 14A r.w. Rule 8D(2)(iii) of the Income tax Rules, 1962. This is in line with the judgement of the Hon ble Bombay High Court in the case of Godrej Boyce Mfg.Co.Ltd. vs. DCIT (2010) 328 ITR 81 (Bom). Therefore, we set aside the order of the CIT(A) on the above issue and restrict the disallowance to ₹ 18,393/- in place of ₹ 18,829/- made by the AO. Thus, the 1st ground of appeal is partly allowed. 7. The 2nd ground of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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