MA DURGA CONSTRUCTION,KOLKATA vs. ITO, KOLKATA

This is an appeal preferred by the assessee against the order of Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [hereinafter referred to Ld. ‘CIT(A)’] dated 11.02.2023 for the Assessment Year (in short ‘AY’) 2012-13.

The issue raised in ground no. 1 is against the confirmation of addition of Rs. 14,71,000/- by Ld. CIT(A) thereby upholding the order of the Assessing Officer (in short ld. 'AO').

The facts in brief are that the assessee is engaged in the business of contractors and builders and during the year has received advances against sale of flats which have been shown under the head unsecured loans and advances from the parties. The AO in order to verify the said advances issued notice u/s 133(6) of the Act to selected parties and accordingly the replies received from these parties were compared with the books of accounts of the assessee. However, in some cases, the letter issued u/s 133(6) of the Act to 15 parties out of which 7 notices were returned unserved. Accordingly, the AO held that the advances from these parties were not proved. Accordingly, the AO added a sum of Rs. 14.71 Lakh to the income of the assessee on the ground that the same was falsely claimed by the assessee as advances whereas the flats have been sold to these parties during the year. 4. in the appellate proceedings Ld. CIT(A) has simply affirmed the addition made by the AO.

After hearing the rival contentions and perusing the material on record, we find that undisputedly the assessee has constructed flats which were in the process of sale. We note that the assessee has accordingly received advances during the year from 8 parties, the details thereof has been furnished by the assessee at page no. 64 of the paperbook showing the opening balance of advances received against sale of flats as on 01.04.2011, the amount received during the year, adjustment and final outstanding advances as on I.T.A. No.: 350/KOL/2023 Assessment Year: 2012-13 Ma Durga Construction. 31.03.2015. We have also perused and examined the profit and loss account for the FY ending 31.03.2012 and found that the assessee has shown sales of flats worth Rs. 21 Lakh which is in agreement with the details furnished by the assessee at page no. 64 in which the amount received from Tanu Saha of Rs. 21 Lakh was duly adjusted and shown as sale. We note that the assessee has sold these flats in the subsequent years and the sale has duly been shown in the books of accounts and due taxes have also been paid. We are surprised to note that the AO has treated the advances as bogus in respect of which the sale deeds were executed in the subsequent years. Under these circumstances, we are not in the position to sustain the order of Ld. CIT(A) and accordingly we set aside the same and direct the AO to delete the addition of Rs. 14.71 Lakh. Therefore, ground no. 1 raised by the assessee is allowed.

The issue raised in ground no. 2 is against the confirmation of addition of Rs. 16,75,860/- by Ld. CIT(A) as made by the AO on estimated basis by adding 25% of the total project expenses claimed by the assessee.

The facts in brief are that the assessee has claimed Rs. 67,03,440/- as project expenses in the profit and loss account and after capitalising the proportionate expenses to the flat work-in- progress which were shown at Rs. 1,19,32,434.17 and the net I.T.A. No.: 350/KOL/2023 Assessment Year: 2012-13 Ma Durga Construction. profit was calculated at Rs. 59,832/-. For the sake of ready reference and better understanding, we extract the profit and loss account as under:

The AO has estimated the disallowance at 35% of the project expenses on the ground that the assessee has not filed the details despite several opportunity allowed to the assessee. Ld. CIT(A) justified the order of addition on the ground that major part of the expenditure was in respect of the unsold flats which was part of the closing work-in-progress carried forward in the balance sheet and thus, justified the addition on the wrong reasoning. After examining profit and loss account, the vouchers filed by the assessee, we note that these were expenses incurred in connection with the construction of the flats project which were duly supported with the bills and vouchers and has been correctly I.T.A. No.: 350/KOL/2023 Assessment Year: 2012-13 Ma Durga Construction. shown in the expenses side of the profit and loss account. We note that the substantial part of the project expenses has gone into closing work-in-progress which was carried forward to the subsequent year as closing stock as there were 14 unsold flats in hand. Further, we note that the AO has not given any reason for disallowing 25% of the project expenses and only cited the non- production of bills and vouchers whereas on the other hand the assessee has filed all the evidences before us and we note that all these expenses were genuinely incurred for the project of construction of flats. Accordingly, we are not in a position to sustain the ad-hoc disallowance of expenses that too without any basis. Hence, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition of Rs. 16,75,860/-.

The other issues raised by the assessee were not pressed at the time of hearing and therefore ground nos. 3, 4 & 5 are dismissed as not pressed. 10. Ground nos. 6 & 7 are general in nature and need no adjudication. 11. In the result, the appeal filed by the assessee is partly allowed. Kolkata, the 12th October, 2023. Sd/- [Rajesh Kumar] Accountant Member Dated: 12.10.2023 Bidhan (P.S.)