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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Appeals)-5, Ahmedabad (‘CIT' in short), dated 03.01.2017 arising in the assessment order dated 25.01.2016 passed by the Assessing Officer (AO) under s. 144 of the Income Tax Act, 1961 (the Act) concerning AY 2013-14.
[M/s. Sudeep Infrastructure vs. ITO] A.Y. 2013-14 - 2 -
The substantive grounds of appeal raised by the assessee read as under:-
“1. The learned CIT(A) has erred in law and on facts in upholding the ex-parte order u/s. 144 made by the AO without appreciating and considering the facts that various submissions were duly furnished by the appellant in response to notices of the AO. warranting no ex-parte order.
2. He has erred in law and on facts in confirming income determined at Rs.89,66,730/- u/s.144 in place of return income of Rs.815/- in as much as that there was no justification for making such high pitched order.
3. He has erred in law and on facts in confirming following additions aggregating Rs.76,64,910/- as detailed below without properly appreciating the facts and evidence adduced by the appellant: a) Disallowance u/s.80GGC as per para 5.3 : 7,85,000/- b) Addition on account of Unexplained Investment as per para 5.4 : 5,00,000/- c) Addition on account of unexplained addition of increase in capital account of partners as per para 5.5 : 44,00,000/- e) Disallowance of expenses as per para 5.7 : 8,67,610/- f) Disallowance of expenses u/s.40A(3) as per para 5.7 : 11,12,300/- -------------------------- Total Rs. : 76,64,910/- =============”
As per Ground No.1, the assessee has challenged the order passed by the AO by resorting to Section 144 of the Act instead of passing order under s.143(3) of the Act. At the time of hearing, the learned AR was confronted with the fact that the order of the AO now stands merged and thus applying the doctrine of merger no prejudice was caused to the assessee. In the absence of any rebuttal to such observation, we see no merit in the aforesaid ground. Ground No.1 of the assessee’s appeal is dismissed.
Ground No.2 being general is also dismissed as infructuous.
Ground No.3 concerns various additions/disallowances aggregating to Rs.76,64,910/-. Various additions/disallowances are dealt with hereunder: [M/s. Sudeep Infrastructure vs. ITO] A.Y. 2013-14 - 3 - 6.1 Disallowance under s.80GGC of the Act of Rs.7,85,000/-:- On consideration of rival submissions and on perusal of the orders of authorities below, we find that the AO has disallowed the donation made to a political party namely ‘Rashtriya Komi Ekta Party’. In this regard, we observe that the assessee had filed the copy of receipt issued by the political party as well as the copy of registration of said party by the Election Commission of India by letter dated 19.01.2001 bearing no.56/210/98-J.S.III/835. The bank statement filed by the assessee also reflects that payment has been made through banking channel to the aforesaid donee. Therefore, we see no justification in the action of the AO for denial of disallowance claimed under s.80GGC of the Act merely on the ground that notice issued under s.133(6) of the Act was returned unserved. We thus find merit in the plea raised on behalf of the assessee for allowability of aforestated deduction of Rs.7,85,000/- claimed under s.80GGC of the Act. The action of the CIT(A) also accordingly set aside and the AO is directed to restore the claim of the assessee.
6.2 The addition of Rs.5 Lakhs on account of unexplained investment:- It was pointed out on behalf of the assessee that the aforesaid transaction has been recorded in the books in FY 2011-12 concerning AY 2012-13 and therefore not relatable to assessment year in question. Relevant documentary evidences were filed to support such contention. Therefore, without going into other aspects on merits, we find prima facie merit in the appeal of the assessee for unsustainability of the addition in so far as AY 2012-13 in question is concerned. The AO is accordingly directed to delete the addition of Rs.5Lakhs made on this score.
6.3 The addition on account of unexplained capital of Rs.44 Lakhs introduced by partners:- As pointed out on behalf of the assessee, the assessee is a partnership firm comprising of four partners namely; Rajiv P Zala, Ajay S Raval, Sunil N Parikh and Bharat Raj and all the partners are assessed to tax and have also filed return of income for AY 2013-14. The assessee has submitted the income tax returns of partners and copy of ledger accounts towards introduction of capital during the year before the [M/s. Sudeep Infrastructure vs. ITO] A.Y. 2013-14 - 4 - lower authorities. The AO however has rejected the explanation of the assessee towards introduction to the capital accounts of the following partners amounting to Rs.44 Lakhs; (a) Bharat Raj Rs.10 Lakhs, (b) Rajiv P Zala Rs.4 Lakhs & (c) Sunil N. Parikh Rs.30 Lakhs. It is seen that the amount of capital has been introduced through banking channels. In the wake of such facts, the principles laid down by the Hon’ble Gujarat High Court in CIT vs. Odedara Construction (2014) 362 ITR 338 (Guj) would squarely apply. Hence, deeming fiction created by Section 68 of the Act could not be invoked in the hands of the assessee-partnership firm. We thus reverse the action of the lower authorities and direct the AO to delete the addition of Rs.44 Lakhs on this score.
6.4 Disallowance of expenses of Rs.8,67,610/- and disallowance of expenses of Rs.11,12,300/- under s.40A(3) of the Act incurred towards conversion of land to non-agricultural land for the purposes of development thereof: We notice that the assessee firm is stated to be engaged in selling of the plot of land as a revenue item. In the process, the assessee had incurred Rs.1,11,410/- towards legal expenses, Rs.13,58,500/- towards site development expenses and Rs.5,10,000/- towards land NA expenses. The assessee has paid Rs.5,10,000/- to one Darshanbhai who, in turn, has made payments to various Government authorities towards conversion of land. Similar legal expenses have been incurred partly in cash and partly in cheque. Site development expenses have also been incurred partly in cheque and partly in cash. The bonafides of expenses incurred has not been in question. The AO has disallowed Rs.11,12,300/- by invoking Section 40A(3) of the Act. The assessee has claimed that expenses have been incurred in several tranches without breach of limit prescribed under s.40A(3) of the Act. The Revenue authorities have applied Section 40A(3) of the Act on wrong assumptions on facts by seeking aggregate the monthly expenses in cash instead of daily expenses. The documentary evidences adduced by the assessee supports the plea of the assessee. The expenditure incurred relates to development of land and considering the nature of activity, we find force in the plea of the assessee for admissibility of claim. Needless to say, the degree of onus cast upon the assessee varies from case [M/s. Sudeep Infrastructure vs. ITO] A.Y. 2013-14 - 5 - to case. The assessee is not expected to furnish infallible proof towards incurring of expenditure in all circumstances. Many a times, it is not possible to establish the incurring of expenditure to the hilt and the surrounding circumstances and preponderance of probabilities would be guiding factor in many situations. Having regard to the totality of facts and circumstances, we find considerable merit in the case made out on behalf of the assessee for allowability of such expenditure. The order of the CIT(A) is accordingly set aside on this score and the AO is directed to delete the addition of Rs.8,67,610/- and Rs.11,12,300/- made in relation to development of land.
In the result, Ground No.3 of the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
This Order pronounced in Open Court on 22/10/2019
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 22/10/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।