INCOME TAX OFFICER 5 (1), INDORE vs. M/S SATYAMITRA INFRASTRUCTURE PVT. LTD, INDORE, INDORE

ITO-5(1), M/s. Satyamitra Infrastructure P. Indore Ltd., Indore बनाम/ (Revenue) (Assessee) Vs. P.A. No. AANCS 8880 J Appellant by Shri Rajib Jain, CIT-DR Respondent by Shri S.N. Agrawal, CA Date of Hearing: 07.07.2021 Date of Pronouncement: 07.09.2021 आदेश / O R D E R PER MANISH BORAD, A.M:

The above captioned appeal filed at the instance of the Revenue for Assessment Year 2012-13 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-II (in short ‘Ld. CIT], Indore dated 08.03.2017 which is arising out of the order passed u/s 143(3) of the Income Tax Act 1961 ( in short the ‘Act’) dated 26.03.2015 framed by ACIT-5(1) Indore. Brief facts are that Satyamitra Infrastructure ITANo.451/Ind/2017 the assessee filed its return of total income for the Assessment Year 2012-13 on 30-09-2012 declaring total income at Rs NIL.

The Assessing Officer made additions of Rs. 2,42,25,698/- on account of unexplained cash credits, Rs.2,84,555/- on account of disallowance of loss as claimed and Rs.61,84,343/- on account of estimation of income under section 145 of the Act. Grounds of appeal raised by the Revenue read as under:

1.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition of Rs. 2,42,25,698/- made u/s 68 of the Act without appreciating facts of the case in totality. 2.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition made u/s 68 of the Act by shifting the onus on the AO instead of the assessee whereas its settled law in view of the provisions laid down vi] s 68 of the IT Act that the assessee is supposed to furnish entire details in support of claim made by him in its books of accounts and particularly with respect to the credit entries in its books of accounts for alleged loans. 3.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition made u/s 68 of the Act, even when the assessee has utterly failed in establishing identity, creditworthiness of alleged lenders and genuineness of the loan transactions. 3.1 Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in considering the additional evidences produced before CIT(A) for loans without affording opportunity to AO which is against principle of natural justice and Rule 46A of IT Rules. 4.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in directing to delete the addition of Rs. 61,84,343/- made after rejection of books of accounts without appreciating facts that the assessee could not furnish requisite details and bills & vouchers regarding correctness of income and expenditure which caused 2

Satyamitra Infrastructure ITANo.451/Ind/2017 rejection of books of accounts. 5.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in allowing the claim of loss claimed by assessee of Rs. 2,84,555/- without considering the findings of the Assessing Officer.

S.No Name of the loan PA No Amount [in creditors Rs] 1 Pramod Khandelwal ADUPK6514C 74,50,000 2 Satyendra Bhawasar ACIPB0657L 89,20,000 Total 1,63,70,000 The assessee was asked to justify the identity, creditworthiness and genuineness of the loan and in reply, the assessee filed the following details and documents:-

“[i] the assessee has received entire amount of loan through account payee cheques. [ii] PA No of the loan creditors have also been provided. [iii] Confirmation of loan creditors have also been filed. [iv] Income tax return along with acknowledgement.”

Satyamitra Infrastructure ITANo.451/Ind/2017 However, the Assessing Officer made additon of Rs.1,63,70,000/- in the income of the assessee.

4. Being aggrieved, the assessee challenged the action of the Assessing Officer before the ld. CIT(A). The ld. CIT(A) having gone through the facts, submissions and judicial pronouncements thereof deleted the addition. The relevant discussion made by ld. CIT(A) is reproduced hereunder:

“Ground no.2 & 3 3. Both the grounds of appeal are with regard to the addition of Rs.1,63,70,000/- made on account of cash credit U/s 68 of the Income Tax Act. I have carefully gone through the assessment order and the submissions made by the appellant in this regard.

3.1 In the year under consdieration the assessing officer has added the loan as taken by the appellant from the following directors:-

S.No Name of the loan creditors PA No Amount [in Rs] 1 Pramod Khandelwal ADUPK6514C 74,50,000 2 Satyendra Bhawasar ACIPB0657L 89,20,000 Total 1,63,70,000

3.2 The appellant had taken loan from its directors. The appellant has submitted that the identity of the directors of the company was beyond doubt. The appellant was asked to justify the identity, creditworthiness and genuineness of the loan and it filed the following details and documents:-

“[i] the assesee has received entire amount of loan through an account payee cheques.

[ii] PA No of the loan creditors have also been provided [iii] Confirmation of loan creditors have also been filed [iv] income tax return along with acknowledgement”

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3.3 Thus, it appears that the appellant had filed sufficient documents to justify the identity, genuineness and creditworthiness of the loan creditors. The assessing officer in case of any doubt ought to have made inquiries from the assessing officer where the loan creditors are regulalry assessed to tax. However, it has been argued by the appellant that the assessing officer adopted the simplest way in adding the entire amount of loan to the income of the appellant merely for the reason that bank statement of the directors have not been filed by the appellant during the course of assessment proceeding.

3.4 The appellant has thus claimed that during the course of assessment proceeding, it had properly discharged primary onus lying on it and hence, the S.No Name of the loan creditor PAN No Relation Amount [Rs]

1 Pramod Khandelwal ADUPK6514C Director 7450000 2 Satyendra Bhawasar ACIPB0657L Director 8920000 16370000 assessing officer was not justified in adding the loan amount to the income of the appellant more so when the loan was received from the directors of the company itself. I find merit in the submission of the appellant.

3.5 Further, if the assessing officer considered the bank statement as necessary, he could have directly called the same from the loan creditors but the assessing officer did not choose to do so.

3.6 In Para {vi} on Page No 9 of the assessment order, the assessing officer himself stated that in case of loan from outside parties the appellant need to file copy of confirmation only and in last line the assesssing officer himself stated that the assessing officer cannot ask the appellant to prove the source of source. Last line of Para [vi] of Page No 9 reproduced as under:-

“[vi]........................................................... ........................... ................... ...... .... .... This has now been judicially established that the AO can not ask the appellant to prove the source of source. ”

3.7 In Para [vii] on Page No 9 & 10, the assessing officer himself noted the contradictory version wherein it was stated that the assessing officer can issue summons and ask from the appellant to furnish source of source and if the assessing officer is not satisfied 5

Satyamitra Infrastructure ITANo.451/Ind/2017 with the source of source, he can again asked from the appellant to explain the source of credit in his case. The said version of the assessing officer is contradictory with the version as recorded in Para [vi] on Page No 9 and as the law stands today, the said version is also not the correct version. Thus, the appellant argued that if the assessing officer was not satisfied with the source of source, in that case he had the right to trasnfer the said information to the assessing officer of the unsecured loan creditors but no negative inference could be drawn in the case of the appellant. I find merit in the submissions of the appellant. The AO can always call for the bank accounts of the creditors directly from the bank, if he feels that there is some ambiquity regarding the same. The AO has vast power in this regard both under section 133(6) and 131(1) which the AO has not choosen to do in the instant case.

3.8 The appellant had during the course of assessment proceeding filed copy of confirmation letter duly signed by the loan creditors and also copy of Acknowledgement and computation of income of the loan creditors and therefore, apparently, the appellant had properly discharged onus lying on it.

3.9 On receipt of income tax assessment detail, the assessing officer could found at the address given, it would not give the Revenue the right to invoke s. 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the appellant need not to prove the ‘source of source’. ”

3.23 Thus, in view of the above judicial pronoucements when the appellant has properly discharged the onus lying on it by furnishing the various documents more so when the loan recieved by the appellant relates to the directors of the appellant company, I feel that the assessing officer was not justified in adding the said amount of loan as income of the appellant. The addition so made to the income of the appellant on account of loan is deleted and these grounds of appeal are allowed.”

5. Being aggrieved, the Revenue is in appeal before this Tribunal. Ld. Departmental Representative(DR) vehemently argued supporting the order of the Assessing Officer.

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6. Per contra Ld. counsel for the assessee heavily relied on the finding of ld. CIT(A) and reiterated the submissions made before the Revenue Authorities. Reference was also made to the paper book and written submission/judicial pronouncements contending that ld. CIT(A) having appreciated the facts and material on record in the light of the relevant judicial pronouncements rightly deleted the addition. Learned Counsel for the assessee relied upon the following judicial pronouncements:

Murlidhar Lahorimal vs CIT, 280 ITR 512 [Gujarat]; People General Hospital Limited, 09 ITJ 481 [Indore]; CIT vs Dwarkadhish Investment [P] Ltd, 45 DTR 281 [Delhi] CIT Vs Metachem Industries, 245 ITR 160 (MP) Ashok Pal Daga Vs CIT, 220 ITR 452 (MP) CIT Vs Barjatiya Children Trust 225 ITR 640 (MP) CIT vs Orissa Corporation (P) Ltd, 159 ITR 78 (SC) CIT V/s Creative World Telefilms Ltd, 333 ITR 100 (2011) (Bom), Sumer Chand Jain Vs CIT, 292 ITR 241 (MP)

The Assessing Officer failed to call the bank statements from the loan creditors and merely added the amount of loan to the total income of the assessee. We find taht the Assessing Officer himself noted that in case of loan from outside parties, the assessee need to file copy of confirmation only and in last line of page 9 of the assesment order, the Assessing Officer noted that the Assessing Officer cannot ask the assessee to prove the source of source. 8

Satyamitra Infrastructure ITANo.451/Ind/2017 Further, the Assessing Officer at page nos 9 & 10 of the assessment order also noted that the Assessing Officer can issue summons and ask from the assessee to furnish source of source and if the Assessing Officer is not satisified with the source of source, he can again ask from the assessee to explain the source of credit in his case. This view of the Assessing Officer was contradictory with the earlier view as noted on last line of page 9 of the assessment order. In this view of the matter, we are of view that the Assessing Officer failed to appreciate the fact that if he was not satisfied with the source of source, in that case, he had the right to transfer the said information to the Assessing Officer of the unsecured loan creditors but no negative inference could have been drawn in the case of the present assessee in absence of any cogent material on record. The assessee during the course of assessment proceedings had filed the aforesaid documents in support of its claim and therefore the assessee had properly discharged onus lying on it. We further find that the assessee in addition to the aforessaid papers also filed the following documents:

[i] Copy of account of the assessee in the books of the loan creditors and contra account in the books of the appellant. 9

Satyamitra Infrastructure ITANo.451/Ind/2017

[ii] Copy of bank statement of Shri Satyendra Bhawsar with Standard Chartered Bank and with Punjab National Bank duly highlighting the entries related to the loan as taken by the assessee from the loan creditor.

[iii] Copy of bank statement of Shri Pramod Khandelwal with Axis Bank Limited and with HDFC Bank duly highlighting the entries related to the loan as taken by the assessee from the loan creditor.

[iv] Copy of personal balance sheet of the loan creditors wherein the amount as advanced to the assessee was properly reflected.

In view of the above facts, we find that it is not the case that loan creditros refused to have advanced the amount of loan to the assessee rather the assessee through documentary evidences proved that the amount of loan was received through account payee cheques and income-tax returns of the loan creditors were also provided. Thus, source of loan was duly established by the assessee.

“3. We have heard learned counsel for the parties. Sec.68 of the Act of 1961 says that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source, 10

Satyamitra Infrastructure ITANo.451/Ind/2017 thereof or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Therefore, according to s. 68, the first burden is on the assessee to satisfactorily explain the credit entry in the books of account of the previous year. If the explanation given by the assessee is satisfactory, then that entry will not be charged with the income of the previous year of the assessee. In case the explanation offered by the assessee is not satisfactory or the source offered by the assessee-firm is not satisfactory, then in that case, the amount should be taken to be the income of the assessee. In the present case, the AO did not feel satisfied with the explanation given by the assessee and accordingly assessed all the three credit entries to the account of the assessee as the income.

4. On appeal, the CIT(A) examined the matter in detail and found that Shri S.K. Gupta was the real owner of the business. The explanation given by the assessee was found to be satisfactory and he deleted the aforesaid three entries. The same finding of fact has been affirmed by the Tribunal. Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee- firm is over. The assessee-firm cannot ask that person who makes investment whether the money invested is properly taxed or not. The assessee is only to explain that this investment has been made by the particular individual and it is responsibility of that individual to account for the investment made by him. If that person owns that entry, then, the burden of the assessee-firm is discharged. It is open for the AO to undertake further investigation with regard to that individual who has deposited this amount.

5. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be income of the firm for the purposes of income-tax. It is open for the AO to take appropriate action under s. 69 of the Act against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the CIT(A) as well as of the Tribunal that the firm has satisfactorily explained the aforesaid entries.

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“7. As the applicant satisfied the authority as to the identity of the third party and also supplied the relevant evidence showing prima facie that the entries were not fictitious, the initial burden can be said to be discharged by the applicant- assessee. In view of the factual matrix and legal position, we are satisfied that the aforesaid two questions are questions of law arising out of the order and are required to be referred for our opinion. ”

“3. We find that the Tribunal dismissed the appeal of the Department and held as under: "He found that in the balance-sheet the loan of Rs. 20,000 given to the assessee-trust was mentioned. Under these circumstances, the Department should not have any grievance as to violation of r. 46A. The ITO could have taken pains to examine the income-tax file of Smt. Urmila Agrawal but instead he chose the easier course of ordering production of the creditor which cannot be appreciated. The Assessing Officer should realise the inconveniences which an assessee faces in producing the cash creditor before him. The production of the cash creditor in person should be insisted upon only when the genuineness of the transactions cannot be established with the help of documents and the record of the IT Department itself. I find no infirmity in the order of the Deputy CIT (A.). It is sustained."

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“13. In this case, the assessee had given the names and addresses of the alleged creditors. It Was in the knowledge of the Revenue that the said creditors were income -tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.”

“In the case in hand , it is not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement “not traceable”. In our considered view, the Assessing officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to cost.”

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“12. In the case of CIT vs. Mehrotra Brothers (2004) 270 ITR 157 (MP) a Division Bench of this Court placing reliance on the decisions rendered in the cases of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del), CIT vs. Kohinoor Tobacco Products (P) Ltd. (1998) 148 CTR (MP) 536 : (1998) 234 ITR 557 (MP), Nanak Chandra Laxman Das vs. CIT (1982) 28 CTR (All) 280 : (1983) 140 ITR 151 (All) and Malabar Industrial Co, Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC), expressed the view that when the identity of the parties is given the genuineness or the capacity of the lenders and transaction are not to be discarded on the ground that the assessee had not explained satisfactorily the cash credit in the books of account of the firm and discharged the burden.”

Therefore, we confirm the action of the ld. CIT(A) on this point.

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“4. This ground of appeal is with regard to the addition of Rs.78,55,698/- made on account of loans received by the appellant from Satyamitra Vyaparik Suraksha Sahakari Sanstha Maryadit. The assessing officer has added the loan as received from the society for the following reasons:-

4.1 The appellant company maintianing is overdraft account with SMVSS [Satyamitra Vyaparik Suraksha Sahakari Sanstha Maryadit ] and limit of the appellant was of Rs 80 Lacs. The appellant has submitted that it used its overdraft account with the society with regular intervals , withdrew cash and also deposited amount in case of surplus amount with the appellant company. The appellant has claimed that the copy of account of the appellant in the book of society has already been filed during the course of assessment

Satyamitra Infrastructure ITANo.451/Ind/2017 proceeding. The appellant further submitted as below:-

“The assessing officer for want of PA No and ITR of the Society added the amount to the income of the appellant. That directors and their family members are not in the board of the society as on the date of taking the loan similar to the cash credit/ mortgage loan of the bank. Hence, as per S.No Reason for addition 1 Directors their family members and friends of the present company is the office bearers/ promotors of the society 2 Confirmation , ITR, Bank statement and PA No of the loan creditors was not provided.

(1)para [vi] on Page No 9 of the assessment order, mere filing of the confirmation suffice the entire purpose and the assessing officer need not asked to prove the appellant other details. That whether the said soceity is filing its income tax return or not is not the business of the appellant. The appellant during the course of assessment proceeding file copy of confirmation of amount as received by the appellant from that society. Thus, there was no justification for making addition to the income of the appellant.”

4.2 Copy of Income Tax return as filed for the Asst Year 2011-12 along with the computation of income has been submitted by the appellant. The appellant has submitted the following in this regard:-

“Since, the said return has already been filed by the said society with the Income Tax department. Hence, the assessing officer would have collected the same from his counterpart. PAN No. of the society is AADAS2952D. Thus, the acknowledgment of return as filed by the appellant may very kindly be accepted as per rule 46 A of the income Tax Act even when the said return was in possession of the department from the date of filing of the return i.e on 19-03-2012 prior to the date of the passing of the assessment order.

That in case of society there was so many members and the said society is engaged in the business of accepting deposit from its members and also advanced the amount. The appellant having limit with society for Rs 80 Lacs. The appellant company has regular business transactions with that society. Copy of account of the society in the book of the appellant for the year under appeal and also for the subsequents are enclosed wherein the appellant has repaid entire amount of loan as taken from the society. The assessing officer was not correct in saying that confirmaiton was not filed by the appellant during the course of assessment proceeding. However, the appellant had filed copy of account of the appellant in the book of the society and the same was also tallied. The copy of account of the appellant in the book of the society is the confirmation which was filed by the appellant. There was no set format for the confirmation but the account balance of the loan account was 16

Satyamitra Infrastructure ITANo.451/Ind/2017 confirmed by the loan creditors in any mode called confirmation. In the present case copy of account of the appellant in the society is called confirmation.” 4.3 The appellant also relied the decisions as referred below which were also relied upon in the Ground Nos 2 & 3:- Murlidhar Lahorimal vs CIT 280 ITR 512[ Gujarat] People General Hospital Limited 09 ITJ 481 [ Indore] CIT vs Dwarkadhish Investment[P]Ltd 45 DTR 281 [Delhi] 4.4 That in view of the above, it was submitted by the appellant that addition on account of overdraft loan as taken by the appellant made by the assessing officer was neither correct nor proper. I have carefully considered the submission of the appellant and also the fact that the account balance of the loan account was duly confirmed and submitted during the course of the assessment proceedings. It is clear that the onus required to be discharged with respect to identity, genuineness and creditworthiness have been duly discharged by the appellant and more so the transaction is part of the regular overdraft account maintained by the appellant company with the cooperative society. Thus, the addition so made is hereby deleted and this ground of appeal is allowed.”

Satyamitra Infrastructure ITANo.451/Ind/2017 pronouncements rightly deleted the addition. Learned Counsel for the assessee relied upon the judicial pronouncements (supra).

However, the Assessing Officer for want of PAN and ITR of the Society added the amount to the total income of the assessee.

Before us, it was submitted by ld. Counsel for the assessee that the directors and their family members were not in the board of the society as on the date of taking of loan which is similar to the cash credit/mortgage loan of the bank and, therefore, filing of the confirmation should have sufficed the entire purpose but the Assesssing Officer unjustifiedly asked to furnish the other details.

Satyamitra Infrastructure ITANo.451/Ind/2017 We find force in the contention of the ld. Counsel for the assessee because it is not the business of the assessee that the society is filing its income-tax return or not. We also find that the assessee during the course of assessment proceedings filed copy of confirmation of accounts in respect of amount as received by the assessee from that society. Thus, there was no justification for making addition to the total income of the assessee on account of loan taken from Satyamitra Vyaparik Suraksha Sahakari Sanstha Maryadit. We further find that befoer the ld. CIT(A), the assessee also filed copy of income-tax return along with the computation of income of the said society as filed for the assessment year 2011- 12 on 19-03-2012. Since, the said return had already been filed by the said society with the Revenue, the Assessing Officer should have collected the same from his counterpart. Further, we find that the society had many members and the said society was engaged in the business of accepting deposits from its members and also advancing funds to its members and the assessee was having a limit with the society of Rs. 80 lakhs and also entered into regular business transactions with that society. From the perusal of the copy of account of the society in the books of accounts of the assessee for the year under consideration and 19

Satyamitra Infrastructure ITANo.451/Ind/2017 vice-versa and also for the subsequent year filed by the assessee at page no. 122 to 125 reveals that the assessee had repaid entire amount of loan as taken from the society in the subsequent year.

We find that the assessee had duly filed its copy of account in the books of the society which was also tallied with the copy of account of the society in the books of accounts of the assessee, therefore, the copy of account of the assessee in the books of the society is the confirmation itself which was filed by the assessee during the course of assessment proceedings. Thus, the Assessing Officer was not justified in observing that confirmation was not filed by the assessee during the course of assessment proceedings. In view of these facts, the ld. CIT(A) rightly noted that the addition on account of overdraft loan as taken by the assessee made by the assessing officer was neither correct nor proper as the account balance of the loan account was duly confirmed and filed during the course of the assessment proceedings. Thus, it is clear that the onus required to be discharged with respect to identity, genuineness and creditworthiness was duly discharged by the assessee and moreso the transaction is part of the regular overdraft account maintained by the assessee with the society. Hence, we do not 20

Satyamitra Infrastructure ITANo.451/Ind/2017 find any reason to interfere with the findings of the ld. CIT(A). We confirm the same on this point. Accordingly, ground nos. 1 to 3.1 raised in the appeal of the Revenue are dismissed.

The income offered by the assessee was accepted in the Assessment Year 2013-14. The Assessing Officer observed that the assessee company has been contracted to develop the colony 21

Satyamitra Infrastructure ITANo.451/Ind/2017 called Treasure Fantasy at Rau, Indore by constructing multi- storied building and row houses. It was also observed that the assessee company is only developing the colony on the pre- determined rates and terms and conditions reached between it and Wanderland Real Estate P. Ltd. (in short WREPL). In reply, the assessee explained that it is assigned work for construction of multistoried building only. The assessee is neither assigned the work for deveopment of colony nor construciton of raw houeses as observed by the Assessing Officer but the assessee was assigned work for construction of Multistoried flat only at pre-defined rate.

The Assessing Officer further observed that the assessee company also engaged in its own construction activities i.e. development of another colony in its own name and also engaged in the construciton of the building and row houses. In reply, the assessee submitted that the assessee in the year under consideration had purhcased land for Rs 3,74,67,770/- and incurred development of land expenses of Rs 22,94,996/- and entry tax of Rs 80,828/- but no construction work was undertaken by the assessee in the present year. The detail of development expenses as incurred by the assessee for its own project was also been provided to the Assessing Officer during the 22

Satyamitra Infrastructure ITANo.451/Ind/2017 course of assessment proceeding. The Assessing Officer also observed that since the assessee has not maintained project wise seperate set of books of account, books result as declared by the assessee was liable to be rejected u/s 145 of the Act. In reply, the assessee submitted that in the year under consdieration, the assessee had incurred major expenses for the work contract undertaken by it only. The assessee had purhcased land for its own project and also incurred small amount of development expenses. Detail of the same had also been provided by the assessee. Thus, the assessee explained that since the own project was not started in the year under consideration, the entire profit as declared by the assessee relates to its work contract only. It was also observed by the Assessing Officer that closing work-in- progress in this year has increased by the amount of Rs 6,80,56,962/- and since there was opening WIP at Rs 80700/- and closing WIP at Rs 6,81,37,662/-, the amount of closing WIP increased by the amount of Rs 6,80,56,962/-. In reply, the assessee submitted that the calculation of the increased in the Closing WIP factually correct and the same was tabulised as under:-

Satyamitra Infrastructure ITANo.451/Ind/2017 S.No Description Amount [Rs] 1 Opening WIP 80,700 2 Purhcases and development expenses as incurred 7,73,04,298 Total cost including opening WIP 7,73,84,998 3. Cost of closing Work in Progress 6,81,37,662 4 Cost of Material & Labour related to which bill raised[2-3] 92,47,336 5 Bill raised during the year under appeal 1,05,89,210 Gross Profit on Construction work 17,41,874 From the perusal of the above table, the profit on construciton work as calculated comes to Rs 17,41,874/- on the billing of Rs 1,05,89,210/- and remaining amount was considered as closing WIP as observed by the Assessing Officer. It was further observed by the Assessing Officer that it was not clear whether expenses of Rs 7,73,04,298/- as incurred by the assessee was for work contract or for its own contract and if the amount of expenditure claimed at Rs. 7,73,04,298/- includes expenditure on self project, the same is liable to be disallowed and directed to be capitalised. In reply, the assessee explained that the assessee company itself capitalised entire expenses as related either for work contract or for own project but billing for the same was not raised and the assessee has incurred cost of the material and Satyamitra Infrastructure ITANo.451/Ind/2017 labour to the tune of Rs 7,73,04,298/- in the year under consideration and at the same time, closing WIP was calculated at Rs 6,81,37,662/- and claimed revenue expenses of Rs 92,47,336/- only agaisnt which bill of Rs 1,05,89,210/- was raised in this year, therefore, the observation that expenses as incurred for own project was not capitalised was not correct. The Assessing Officer also observed that the assessee has incurrred development expenses of Rs 7,73,04,298/- and bill was raised for Rs 1,05,89,210/- only and therefore substantial receipt remains to be offered as income even when the assessee has followed mercantile system of accounting. In reply, the assessee submitted that developmenet expesnes of Rs 7,73,04,298/- includes cost of land as purhcased by the assessee for its own project of Rs 3,74,67,770/- and, therefore, effective development expenses as incurred by the assessee was of Rs 3,98,36,528/-. The said amount includes an amount of Rs 23,75,824/- as incurred by the assessee for its own project and, therefore, an amount of Rs 3,74,60,704/- was incurred by the assessee for the work contract and for work of Rs 3,74,60,704/-, the assessee had raised bill of Rs 1,05,89,210/- and balancce amount of Rs 2,82,13,368/- was capitalised and shown as closing WIP. Thus, the Assessing 25

Satyamitra Infrastructure ITANo.451/Ind/2017 Officer was not justified in considering that the assessee has claimed entire expenses as incurred for the project as revenue more so when from the face of the audited account, it was clear that deduction was claimed only in respect of those expenses for which bill was raised and balance amount shown as closing WIP.

Ultimately, the Assessing Officer calculated the income at 8% on the amount of development expenses of Rs 7,73,04,298/- as incurred by the assessee in this year for which the assessee explained that the total cost of Rs 7,73,04,298/- also incldues an amount of Rs 3,74,67,770/- related to the cost of land as purchased by the assessee for its own project details of which had also been filed during the course of assessment proceeding.

The assessee also incurred an amount of Rs 23,75,824/- related to the boundry wall and other expenses related to the assessee own project. Thus, an amount of Rs 3,74,60,704/- only was related to the work contract and agaisnt the cost of work contract of Rs 92,47,336/- , bill of Rs 1,05,89,210/- was raised and balance amount of development cost of Rs 2,82,13,368/- was capitalised as closing WIP. The assessee had raised bill as per their understanding with the Wanderland Real Estate P Limited.

Thus, the Assessing Officer was not justified in estimating the 26

Satyamitra Infrastructure ITANo.451/Ind/2017 income on notional basis even when the work was not certified by the Chartered Engineer of the land owner and bill for the same was not raised by the assessee. However, the Assessing Officer did not agree with the submissions of the assessee and added Rs.61,84,343/- to the total income at 8% on the amount of total cost of project at Rs. 7,73,04,298/-.

Satyamitra Infrastructure ITANo.451/Ind/2017 by the ld. CIT(A) in the impugned order. Having gone through the aforesaid observations of the Assessing Officer and replies thereof by the assessee, a summary of expenses as incurred for own project of the assessee and expenses as incurred for construction contract are tabulised as under:

S.No Description Own Project Work Total [Rs] Contract 1 Opening WIP NIL 80,700 80,700 2 3,98,43,594 3,74,60,704 7,73,04,298 Purhcases and development expenses as incurred 3 Total cost including 3,98,43,594 3,75,41,404 7,73,84,998 opening WIP 4 Cost of closing Work in 3,98,43,594 2,82,94,068 6,81,37,662 Progress 5 NIL 92,47,336 92,47,336 Cost of Material & Labour related to which bill raised[2-3] 6 Bill raised during the year 1,05,89,210 1,05,89,210 under appeal 17,41,874 17,41,874 Gross Profit on Construction work From the perusal of the above details in the light of the above detailed discussion of facts and submissions thereof, we find that the assessee had raised bills to the land owners from time to time

Satyamitra Infrastructure ITANo.451/Ind/2017 on the basis of terms of its agreement and on the basis of stage of completion as agreed upon by the assessee with the land owners.

Further, we are of the view that there was no law for maintianing project wise seperate sets of books of account but what is necessary is to calculate seperate project-wise profit and the assessee had properly maintained details of expenses as incurred for particular project and the same was controlled through cost centre. Thus, the books of account as rejected by the Assessing Officer for this ground was not correct. Ld. CIT(A) observed that remaining amount of expenses as incurred by the assessee on the project were shown by it as closing work-in-progress for which bills were subsequntly raised in the next year and the same were also offered to tax and as such, the ld. CIT(A) deleted the addition made by the Assesing Officer. Further, the ld. CIT-DR could not controvert the findings of the ld. CIT(A) by bringing any contrary material on record. Therefore, the Assessing Officer was not justified in estimating the income of Rs. 61,84,343/- at 8% on the amount of total cost of project of Rs. 7,73,04,298/- even when the said amount included an amount of Rs. 3,98,43,594/- as incurrred for its own project in form of cost of land and development expenses as incurred. Thus, the addition made to 29

Satyamitra Infrastructure ITANo.451/Ind/2017 the total income of the assessee was rightly deleted by the ld. CIT(A). We confirm the action of the ld. CIT(A) on this point.

Accordingly, ground no.4 raised in the appeal of the Revenue is dismissed.

However, the Assessing Officer after adjusting the other income of Rs.1,56,705/- disallowed the loss at Rs.2,84,555/- on the ground that the books of account have been rejected and profit has been estimated. Being aggrieved, the assessee challenged the action of the Assessing Officer before the ld. CIT(A) and ld. CIT(A) deleted the addition considering the facts and submission thereof.

Satyamitra Infrastructure ITANo.451/Ind/2017

Satyamitra Infrastructure ITANo.451/Ind/2017

Order was pronounced as per Rule 34 of the I.T.A.T. Rules 1963 on 7.9.2021.