NIKHIL HOMES P LTD,AGRA vs. DCIT CIRCLE-4(1), AGRA

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH “DB”, AGRA BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUNIL KUMAR SINGH, VICE PRESIDENT ITA No.215/AGR/2015 (Assessment Year : 2008-09) M/s. Nikhil Homes (P) Ltd., vs. DCIT, Circle 4 (1), E-12/8, Vth Floor, Agra. Shri Vrindavan Building, Sanjay Place, AGRA. ITA No.299/AGR/2015 (Assessment Year : 2008-09) ITA No.265/AGR/2014 (Assessment Year : 2009-10) DCIT, Circle 4 (1), vs. M/s. Nikhil Homes (P) Ltd., Agra. E-12/8, Vth Floor, Shri Vrindavan Building, Sanjay Place, AGRA. (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Pankaj Gargh, Advocate REVENUE BY : Shri Sukesh Kumar Jain, PCITDR. Date of Hearing : 16.02.2026 Date of Order : 12.05.2026 O R D E R PER S. RIFAUR RAHMAN, AM :

2 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 1. The cross appeals are filed by the assessee and Revenue against the order of Learned Commissioner of Income-tax(Appeals)-II, Agra [“Ld. CIT(A)”, for short] dated 16.02.2015 for the Assessment Year2008-09. The Revenue has also filed appeal against the order of ld. CIT (A) dated 18.02.2014 for the AY 2009-10. 2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take up assessee’s appeal being ITA No.215/AGR/2015 for AY 2008-09 as lead case. 3. Ground No.1 is with regard to confirmation of addition of Rs.50,00,000/- out of the addition of Rs.2,00,00,000/- made by the Assessing Officer for so called unexplained advances made for purchase of land. 4. At the outset, ld. AR of the assessee submitted that assessee disclosed income of Rs.1.50 crores in Profit & Loss Account as misc. deposits which is the amount of peak balance in the material found and seized during Survey (named as Annexure A – 7). He further referred to pages 5 to 7 of Ld. CIT(A) Order. 5. He submitted that similar issues were also involved in assessee’s own cases in AYs 2006-07 and 2007-08 in which the ITAT dismissed the Department

3 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 appeal by accepting the peak theory. He further submitted that discussion of the same is in ld. CIT (A) Order for AY 2009-10 also and referred to Page 31 Para 5.11 of Ld. CIT(A) Order of AY 2009-10. 6. Further he submitted that for kind consideration, from Page 43 from middle page of CIT(A) Order to Page 44, it is further submitted that there is no material on record to support Ld. CIT (A) finding that peak credit balance would be logical to take at Rs.2,00,00,000/- as against declared by the assessee by working the peak credit balance at Rs.1.50 Cr. 7. He submitted that finding of the Ld. CIT (A) is at Page 53 Para 5.11.6. He further submitted that the Ld. CIT (A) has wrongly confirmed the addition of Rs 50,00,000/- by not accepting the peak credit balance shown and declared by the assessee ignoring the fact that the peak credit balance has been duly accepted by him in AY 2006 -07, 2007-08 and 2009-10 and more so, when ld. CIT(A) Order for AY 2006-07 and AY 2007-08 has been confirmed by ITAT, Agra Bench vide order dated 27.04.2012 in ITA No 385 and 386/Agr/2010. 8. On the other hand, ld. DR objected to the submissions of ld. AR and heavily relied on the findings of the lower authorities. 9. Considered the rival submissions and material placed on record. We

4 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 observed that this issue is squarely covered by the decision of coordinate bench in assessee’s own case for AYs 2006-07 and 2007-08 (supra) and ITAT has decided the issue in favour of the assessee. Respectfully following the precedent, we allow this ground of assessee’s appeal. 10. Ground No.2 is against the confirmation of addition of Rs.33,52,502/- u/s 40(a)(ia) of the Act. 11. At the time of hearing, ld. AR of the assessee submitted that M/s SE Investment Ltd. from whom loan was taken and who gave the loan after deducting the interest element in advance is a regular income taxpayer. He submitted that if the payee has accounted for the interest amount in its income and due taxes have been paid, then no addition can be made u/s 40(a)(ia) of the Act. In this regard, he placed reliance on the following decisions :- (i) Kurian UlahannanMoothukuzhiyil v. ITO (ITAT, Ahmedabad) ITA No. 2524/Ahd/2014 for AY 2010 -11 dated 21.10.2015.wherein the Tribunal held that “if the payee has filed its return disclosing the receipt and paid tax, then disallowance u/s 40(a)(ia) is not sustainable.” (ii) Madhu Transport Co. Pvt Ltd. v. ITO (ITAT, Kolkata)ITA No.

5 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 1233/Kol/2024 for AY 2008-09 dated 24.04.2025 wherein the Tribunal held that “Even in a case where Form 26A was not filed, the Tribunal held that disallowance u/s 40(a)(ia) is not sustainable when the payee has already offered the income in its return.” 12. Further he submitted that moreover, there has been amendment w.e.f 01.04.2013 and 2ndproviso to sub clause (ia) of section 40(a) has been inserted according to which if the assessee is not deemed to be an assessee in default under the first proviso to sub section (i) of section 201 then, for the purpose of this sub-clause it shall be deemed that the assessee has deducted and paid tax on such some on the date of furnishing of return of income and hence no addition is called for u/s 40(a)(ia). 13. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 14. Considered the rival submissions and material available on record. We observed that the issue under consideration is non deduction of TDS on the interest expenses claimed by the assessee. We also noticed that the lender had deducted the interest portion at the time of lending the loan. The same was declared in their books of account and declared for Tax. The provisions

6 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 of section 40(a)(ia) had amended several times to address the grievances of the assessee and the provisions of section 200(1) was also amended to accommodate the issue under consideration. The courts have held that once the income is already declared in the return of income and relevant tax dues are already paid, then there is no requirement on the part of the assessee to deduct tax, subject to the proceedings to find out whether the assessee is in default. In absence of any findings that the assessee is in default and there are several decisions in favour of the assessee, including the decisions relied by the assessee in their submissions, we are inclined to allow the ground raised by the assessee as there is merit in their arguments. 15. Ground No.3 is against the confirmation of addition of Rs.5,14,208/- out of the addition of Rs.1,20,74,208/- for so-called profit on job work done for Shiva Avas Pvt. Ltd. 16. Ld. AR for the assessee submitted that ld. CIT (A) observed that the profit rate of 12% is being applied in which profit on land and construction both are concerned but in case of M/s. Shiva Avas Pvt. Ltd., the assessee did only development work on the land of M/s Shiva Avas Pvt. Ltd. and the profit was booked at the rate of 10% which is more than the rate prescribed u/s 44AD of the Act. However, nothing has been explained as to why profit has

7 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 not been booked on Rs.20 lakh received for Haridwar project of M/s. Shiva Avas Pvt. Ltd. Therefore, it has been decided to apply 12% of profit rate on the receipt of Rs.1.20 crore which comes to Rs.14,40,000/-. He further submitted that ld. CIT (A) observed that since, the assessee has already declared a profit at Rs.10 lakh for Farah Project, balance amount of Rs.4,40,000/- would be added in the income of the assessee for doing job work for Shiva Avas Pvt. Ltd. Rs.74,208/- earned by the assessee as commission would also be added separately. Accordingly, ld. CIT(A) held that the total addition to be made in the income of the assessee on account of job work done for Shiva Avas Pvt. Ltd. would come to be Rs.5,14,208/- and hence, out of Rs.1,20,74,208/ made by the AO, addition is sustained up to Rs.5,14,208/- and hence, assessee gets a relief of Rs.1,15,60,000/-. Therefore, ld. AR submitted that ld. CIT(A) has arbitrarily applied profit rate of 12% as against 10% shown by the assessee. 17. On the other hand, ld. DR of the Revenue heavily relied on the findings of the lower authorities and also submitted that Ld CIT(A) had already given substantial relief. 18. Considered the rival submissions and material placed on record. We observed from the profit and loss account for the period ending 31.03.2008

8 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 wherein the assessee had not declared any income on the jobwork done. Only upon the survey, the AO made the total addition as undisclosed. However, the Ld CIT(A) had given the relief by estimating the income adopting 12% based on the overall income declared by the assessee across the projects. Now the assessee is in appeal against the above estimation with the submission that the assessee had done only the jobwork on the development without there being any land development. We cannot agree with the above submissions and what is relevant is that the expected margin in the work carried on by the assessee. After considering the detailed findings of Ld CIT(A), we do not see any reason to disturb the same. In the result, the ground raised by the assessee is dismissed. 19. Ground No.4 is against challenging the validity of reopening and the initiation of proceedings u/s 147 of the Act, since the above ground was not pressed, the same are dismissed as such. 20. In the result, appeal filed by the assessee is partly allowed. 21. Now we take up Revenue’s appeal being ITA No.265/AGR/2014 for AY 2008-09. 22. With regard to Ground No.1& 2, restricting the addition of Rs.2,00,00,000/- made by the AO to Rs.50,00,000/-. We have already decided this issue in

9 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 Ground No.1 in assessee’s own appeal for AY 2008-09 above in favour of the assessee. Hence, the above grounds of Revenue are dismissed. 23. Ground No.3 is that the ld. CIT (A) has erred in law and facts in ignoring the proposed enhancement of taxable income by Rs.1,60,01,601/- in the remand report without appreciating the fact that cash payment above Rs.20,000/- were made against purchase of land in violation of section 40A(3). 24. The ld. CIT (A) decided the issue in detail and his findings in the appellate order is reproduced below :- “As regards the issue of adding of Rs.1,60,01,601/- u/s 40A(3) due to making payment of advances in cash in excess of Rs.20,000/-, despite my asking the JCIT, Range-4 to show-whether any particular purchase of land has been materialized during the year under consideration for which advances were made in cash either during the year under consideration or in earlier years, it has been submitted by the Ld. JCIT that the assessee company has purchased lands from different persons by making cash payments to various parties directly or through brokers. As per him, the expenditure made above Rs.20.000/- in respect of purchase of land from various persons in cash is not allowable deduction as per 40A(3) of the Act. Therefore, he requested the payment of Rs.1,60,04 601/- made for purchasing of land by the assessee by giving cash payment/ advances to various persons may be held as disallowable in accordance to section 40A(3) of the Act. However, no details have been given by the JCIT, Range 4, Agra about purchase of lands made by the assessee during the year under consideration for which payment of advance in cash above Rs. 20,000/- was made either during the year under consideration or in earlier years and such land purchased was shown by the assessee under the head "work in progress" in the Balance Sheet. Therefore, it cannot be said that on account of making of payment of advances for purchase of land, any expenditure has been incurred by the assessee during the year under consideration. As per section 40A(3), addition should be made under the provision of this section, only when the assessee incurs any expenditure during the year under consideration in cash in excess of Rs.20,000/-. Just by paying the advance, expenditure cannot be said to have been incurred. The expenditure is incurred as per the principle of accounting only when the transaction for purchase is finalized and a bill is prepared in case of purchase of

10 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 goods or sale deed is finalized in case of purchase of land. Since the JCIT,range- 4, Agra has not given any findings about purchase of land during the year under consideration out of payment of advances shown during the year under consideration, no disallowance u/s 40A(3) can be made out of advance payment made in cash during the year under consideration, specially keeping in view the fact that all payments of advances is not finalized in purchase of lands because advances paid may be subsequently returned because of non finalization of land deal. Such payment of advances in cash in excess of Rs.20,000/- can be disallowed u/s 40A(3) in the year under which purchase of land is finalized and such land purchase becomes part of work in progress, Therefore, second proposal of the Ld. JCIT, Range-4, Agra recommending to make addition of Rs.1,60,01,601/- under section 40A(3) is also rejected.”

11 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 or sale is complete by reaching agreement by both the parties, further all the terms and conditions are met. In our considered view, cash is the legal tender for purchase of land or property when the same is recorded in the agreement as settlement by cash, then the same cannot be treated as violation of provisions of section 269SS or 269T of the Act. Therefore, in our view, the provisions of section 40A(3) applicable only to the transaction of making payments towards meeting expenses. Therefore, after considering the detailed findings of Ld CIT(A), we do not see any reason to disturb the same. In the result, ground raised by the revenue is dismissed. 28. Ground No.4 is that the ld. CIT (A) has erred in law and facts in restricting the addition of Rs.4,41,557/- made on account of disallowance of interest u/s 36(1)(iii) to Rs.60,080/- ignoring the fact that the assessee has diverted interest bearing funds for non business purposes. 29. AO observed that from the perusal of Profit & Loss account of the assessee for the year under consideration, it is noticed that the assessee has debited a sum of Rs.79,60,665/- on account of interest on borrowed capital, however, on deep examination of books, AO found that the borrowed money has been given to 11 persons, whose details are given at page 9 of the assessment order, otherwise than business purpose, hence the same is not allowable in

12 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 view of the provisions of section 36(1)(iii) of the Act. AO observed that this fact was brought to the notice of the assessee and assessee has accepted that the borrowed amount has been utilized for non-business purposes and assessee has also filed details in this regard. AO further observed that advances have been given to certain parties for no apparent business reason and no interest has been charged therefrom. However, he observed that payment of interest of an amount of Rs.56,14,317 has been made on loan taken. Accordingly, AO show caused the assessee as to why proportionate interest may not be disallowed. The assessee filed its reply dated 08.03.2013. After going through the reply of the assessee, AO held that interest bearing borrowed fund given to 10 persons, details of persons at page 10 of the assessment order, are for non-business purposes and therefore the interest attributable to this amount of Rs.4,41,557/- is not deductible u/s 36(1)(iii) of the Act. 30. In appeal, ld. CIT (A) after going through the submissions of the ld. AR and the material available on record partly allowed this issue of the assessee restricting the disallowance to Rs.60,080/- and held as under :- “7.5 I have considered the entire facts relating to addition of Rs.4,41,557/- as discussed by the AO in the assessment order and also written reply submitted by the Id. AR in his written submission. As regard the submission of the Ld AR about considering the advances given to H.T. Media Ltd., Lunar Diag Pvt. Ltd.,

13 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 ManojGoyal and RakeshBohra being related to business of the assessee as held by me in AY 2009-10 in assessee's own case, I find that he is correct that the same has been held be me in AY 2009-10 as related to the business of the assessee company. Therefore, interest disallowed totaling to Rs.2,45,316/- on advances given to these four parties should not be disallowed u/s 36(1)(iii). Interest of Rs.62,400/- calculated on advances of Rs.1,60,13,601/- given to farmers for purchase of land should also be not disallowed. As regards to M/s Shiva Awas Pvt. Ltd., it has been explained that it is a sundry debtor with whom the assessee has done contract work of Rs.97.94 lacs. I find that the Ld. AR is correct because the next addition made by the AO in the assessment order is relating to work done by the assessee with M/s Shiva Awas Pvt. Ltd. Therefore, interest calculated by the AO with respect to debit balance with Shiva. Awas Pvt. Ltd. should also not be disallowed u/s 36(1)(iii). As regards M/s Umar Glass, Neeraj Stone and. Sree Cement Ltd., it has been submitted that they are supplier of the appellant company. No question arises to charge interest on advances given to material supplier. This contention of the assessee has been found to be correct because these parties have been found to be supplier of material and for advances given to them, no interest should be charged. The remaining parties, which remain are only the party M/s Nikhil Indus Infra Pvt. Ltd. and Smt. NeelamKhirwar. With respect to advances shown in the name of these two persons, no specific details have been given for the advances given to them. Only plea has been taken that the assessee has sufficient own fund for giving advances to them and no interest should be disallowed. With respect to two parties i.e. Nikhil Indus Infra Pvt. Ltd. and Smt. NeelamKhirwar, no purpose of giving of advances has been explained by the Ld. AR to show that these advances. were given for the purpose of business. In my considered opinion, interest paid on account of such advances given to these parties cannot be allowed u/s 36(1)(iii)in view of the decision of the Hon'ble Allahabad High Court in the case of CIT-I, LucknowVsSahu Enterprises (P) Ltd. (2013) 31 Taxmann.com 270 (Allahabad) in which, it has been held that it may not be relevant as to whether the advances have been extended out of the borrowed funds or out of the mixed funds, which included borrowed funds. The test to be applied in such cases is not the source of the funds but the purpose for which the advances were extended. It is also held in this decision that commercial expediency would include such purpose as is expected by the assessee to advance its business interest and may include measures taken for preservation, protection or advancement of its business interests. The business interest of the assessee has to be distinguished from the personal interest of its directors or partners, as the case may be. There has to be a nexus between the advancing of funds and business interest of the assessee. Since in case of advances given to M/s Nikhil Indus Infra Pvt. Ltd. and Smt. NeelamKhirwar, the Ld. AR has failed to show that there is any nexus between advancing of funds and business interest of the assessee, no interest paid on account of these two advances should be allowed u/s 36(1)(iii). In view of my above decision, interest paid in respect of advances shown in the name of Manoj Goyal, Lunar Diag Pvt.

14 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 Ltd., Shiva Awas Pvt. Ltd., RakeshBohra, MIs Umar Glass, H.T. Media Ltd., Neeraj Stone and Sree Cement Ltd. and land advances of Rs.1,60,13,601/- is to be allowed u/s 36(1)(iii) and interest paid in respect of advances given to MIs Nikhil Indus Infra Pvt. Ltd. and Smt. Neelam Khirwar is to be disallowed. Therefore, total amount of Rs.60,080/- on account of payment of interest for fund diversion for non business purpose to MIs Nikhil Indus Infra Pvt. Ltd. and Smt. Neelam Khirwar are disallowed u/s 36(1)(iii) and balance amount of Rs.3,81,477/- is allowed, Accordingly, Ground no.4 is partly allowed.”

15 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 by the assessee. Therefore, we do not seen reason the disturb the same. In the result, ground raised by the revenue is accordingly dismissed. 34. Ground No.5 is that the ld. CIT (A) has erred in law and facts in deleting the addition of Rs.1,15,60,000/- out of total addition of Rs.1,20,74,208/- made on account of income from M/s. Shiva Awas Private Limited ignoring the fact that the amount pertaining to work done at Farah and Haridwar and commission income were not accounted for by the assessee in its income. 35. AO observed that whether amounts receivable from M/s. Shiva as job work charges to be credited as income first. He observed that to establish the source of the disclosure made of Rs.1.5 crores in the P&L account, the assessee submitted that Rs.93 lakhs was ‘misc. deposit’ and Rs.57,30,600/- was received from M/s. Shiva Awas Pvt. Ltd., which is a sister concern of the assessee. AO asked the assessee to furnish ledger account of M/s. Shiva Awas Pvt. Ltd., which was reproduced by him at page 10 and 11 of the assessment order. After going through the same, AO required the assessee to show cause as to why the entire debit balance of Rs.1,75,98,808/- may not be treated as work done by the assessee for M/s. Shiva Awas and commensurate income may not be credited to its account. In reply, the assessee submitted that it had done development work for M/s. Shiva Awas

16 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 for a sum of Rs.1,00,00,000/- and TDS has been deducted thereon. However, AO observed that no TDS has been claimed by the assessee in its return of income as having been deducted by M/s. Shiva Awas. Accordingly, the assessee was queried as to why the entire debit balance of Rs.1.75 crores was not taken to be income accrued for the AY under consideration. In response, the assessee filed its reply however, AO did not accept the reply of the assessee. AO further observed that even if it is presumed that the contention of the assessee is correct that it had done development work/job work for M/s Shiva Awas on which TDS had been deducted by M/s Shiva Awas, it cannot be accepted that the assessee should have incorporated this project as its work in progress and by stating that it had done development work for M/s Shiva Awas and TDS had been made thereon, the assessee accepted that it had done job work, the receipts for which should have been accounted for in gross terms, and expenses debited against it. AO thus observed that the treatment of netting of the receipts and expenses and crediting only the amount of estimated profit on a jobwork is not an acceptable method of accounting for its income. AO further observed that moreover, as there is no opening balance in this ledger account, it is apparent that the entire Work was executed during the year. AO observed

17 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 that to transfer one project, out of the WIP into the account of its sister concern as 'development work' completed (ironically on the land of the assessee itself while payment being made by M/s Shiva Awas to the assessee) is incongruous and in addition to this incongruity, no agreement exist between the assessee and M/s Shiva Awas for carrying out the so called development work. He further observed that this must also be viewed in the light of the fact that WIP for Farah project in the immediately preceding AY which was only Rs.10 lakhs odd., which means that there has been addition to the tune of Rs.90 lakhs and then the entire amount was said to have been transferred out. Hence, it is clear that the work done at Farah has been transferred to M/s Shiva Awas so as to explain the surrender made on account of unexplained investment in the work in progress. AO further observed that the project at Haridwar too has been transferred to the account of M/s Shiva Awas., while in the immediately preceding AY, both the accounts stood as Farah and Haridwar, in the work in progress of the assessee. Hence, the total debits made to the account of M/s Shiva Awas are only transfer entries from the assessee's own work in progress account, thereby reducing its work in progress to that extent. AO observed that as Rs.57,30,600/- has already been accounted for as income under the surrender

18 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 made, a sum of Rs.1,00,00,000/- and Rs.20,00,000/- and Rs.74,208/- on account of work done at Farah and Haridwar respectively and commission, and charged to the account of M/s Shiva Awas Pvt Ltd. not having been accounted as income first and having been taken to the balance sheet are being added to the income of the assessee and accordingly, an addition of Rs.1,20,00,000/- is being made to the income of the assessee. 36. Ld. CIT (A) partly allowed the appeal vide para 8.4 which is reproduced below :- “8.4 The Ld. AR explained that the profit rate of 12% is being applied in which profit on land and construction both are concerned but in case of M/s. Shiva Avas Pvt. Ltd., the appellant did only development work on the land of M/s. Shiva Avas Pvt. Ltd. and the profit was booked at the rate of 10% which is more than the rate prescribed u/s 44AD of the Act. However, nothing has been explained as to why profit has not been booked on RS.20 lakh received for Haridwar project of M/s Shiva Avas Pvt. Ltd. Therefore, it has been decided to apply 12% of profit rate on the receipt of Rs.1.20 crore which comes to Rs.14,40,000/-. Since, the assessee has already declared a profit at Rs.10 lakh for Farah Project, balance amount of Rs.4,40,000/- would be added in the income of the assessee for doing job work for Shiva Avas Pvt. Ltd. Rs.74,208/- earned by the assessee as commission would also be added separately. Therefore, the total addition to be made in the income of the assessee on account of job work done for Shiva Avas Pvt. Ltd. would come to be Rs.5,14,208/- and hence, out of Rs.1,20,74,208/- made by the AO, addition is sustained up to Rs.5,14,208/- and hence, assessee(appellant) gets a relief of Rs.1,15,60,00/-. Accordingly, Ground no.5 is partly allowed.”

19 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 also made in AY 2009-10 and ld.CIT(A) allowed part relief as allowed in AY 2008-09. He submitted that the Revenue has filed appeal in Assessment Year 2009-10 also but it has not taken a ground on this issue. 39. Considered the rival submissions and material placed on record. We observed that the project work for Shiva Ava Pvt Ltd was carried out by the assessee and as per the income expected to get from the above project, the AO made addition of the whole amount instead of the income earned from the project. Accordingly, the accepted or estimated income in the above project adopted at 12% by the revenue authorities, accordingly, Ld CIT(A) had come to the conclusion that the addition cannot be made on the total contract value instead of estimation of income. Accordingly, the 12% of Rs. 1.20 crores would be Rs. 14.40 lakhs. Since the assessee had already declared the income @ 10%, Ld CIT(A) directed the AO to add the difference of @ 2%. After considering the detailed findings of Ld CIT(A), it is correct to say that only the income alone can be added to the income of the assessee instead of total project income. Therefore, we are inclined to sustain the detailed findings of Ld CIT(A). In the result, the ground raised by the revenue is dismissed. 40. Ground No.6 is with regard to deletion of addition of Rs.1,00,00,000/- made

20 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 by the AO in valuation of work-in-progress on the basis of various discrepancies found without appreciating the facts that the assessee failed to furnish evidence to justify the valuation of work-in-progress and had voluntarily surrendered the same amount during the course of survey. 41. AO observed that the work in progress was shown at Rs.5.88 crores in the immediately preceding AY, while it was valued at Rs.8,31,34,318/- for the current AY, marking an increase of Rs.2,42,98,591/-. Further during the course of survey u/s 133A of the Act, the assessee has surrendered an amount of Rs.1,00,00,000/- after considering the various discrepancies found in valuation of Work-in-Progress. Further vide order sheet entry dated 26.2.2013, the assessee was required to furnish the item wise detail of the Work-in-Progress in terms of quantity and value and was also required to justify the valuation by furnishing the necessary evidences. In compliance thereto, the assessee has furnished the requisite details which are reproduced by the AO at pages 13 and 14 of the assessment order. From the details, AO observed that complete bills or vouchers were not furnished by the assessee to justify the valuation of Work-in-Progress. He further observed that in the absence of any documentary evidence to justify the amount of work-in- progress, it cannot be believed that the assessee has made the valuation

21 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 correctly. Assessee further filed reply dated 08.03.2013 but the AO did not accept the same. AO observed that in view of the complete bills and vouchers for the expenses made not being produced for verification, and by the assessee's own submission during the course of the survey, an addition of Rs.1,00,00,000/- is being made to the total income of the assessee, not having maintained proper bills and vouchers for expenses. 42. In appeal, ld CIT (A) decided the issue in detail in favour of the assessee as under :- “9.4 I have considered the facts of the case relating to the addition of Rs.1 crore on account of unvouched expenses made towards work in progress. The Ld. AR has opposed the addition of Rs.1 crore because in his view, this addition has been made only on the basis of statement recorded during survey and besides this statement, the AO has neither any primary evidence nor any corroborating evidence in support of addition made of Rs.1 crore. On perusal of the assessment order as I have reproduced in para no.9.1, only reason given by the AO for making this addition is that during the course of assessment proceeding, complete bills could not be produced by the assessee. She found that many expenses are supported with self made vouchers alone. It has also been mentioned by her that work in progress at Haridwar and Farah have been transferred to the account of M/s Shiva Awas, thereby reducing the total work in progress and the additions made to the projects at Haridwar and Farah are not open for verification either. However, this argument of the AO is not found by me correct because Farah and Haridwar projects are not assessee's own project and this work is done by it on job work basis. Therefore, such transfer entry would not impact work in progress shown in the assessee's balance sheet on account of its own project. The work in progress of Rs.8,31,34,318/-, for which a addition has been made in the assessment order is the same work in progress as shown in the balance sheet of the assessee(appellant} company as on 31.03.2008. As regards to valuation of work in progress furnished by the appellant company, the AO held in the assessment order that it cannot be believed that the assessee-has made the valuation correctly because as mentioned by her in assessment order, no bills /vouchers have been furnished by the assessee for making verification of valuation of closing stock and hence, after relying on the statement recorded

22 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 during survey, the AO made addition of surrendered amount of Rs.1 crore ignoring the fact that while making the surrender of Rs.1 crore, it was mentioned that it includes expenditure made from earlier years till the date of survey. Nothing has been stated about inflation in the expenditure incurred on the items included in the work in progress. The AO has not discussed any corroborative evidence showing that expenditure on housing project incurred during the year under consideration to the extent of Rs.1 crore has not been included in the valuation of work in progress declared at Rs.8,31,34,318/- in the balance sheet filed along with return of income. On asking the AO at remand stage to justify the addition of Rs.1 crore made in the work in progress, no further details could be provided by the AO except relying on the assessment order. From these facts as discussed by me above, it is clear that the AO has made addition of Rs.1 crore only on the basis of surrender made by the director of the company recorded during the survey but she does not have any corroborative evidence to show that investment made in the work in progress is more than Rs.8,31,34,318/- as disclosed by the assessee(appellant) in the balance sheet till the end of the year under consideration. The AO has basically doubted supporting bills and vouchers for expenditure incurred on the items included in the work in progress but by disallowing such expenses to the extent of Rs. 1 crore due to being supported by only self made vouchers, investment shown in the work in progress would be actually reduced by an amount of Rs. 1 crore from the amount of Rs.8,31,34,318/- shown in the Balance Sheet. However, the declaration of Rs.1 crore in the work in progress was made on account of expenditure incurred on items by which investment in work in progress is to be enhanced. Since the assessee/appellant has already included the entire amount spent on work in progress coming to Rs.8,31,34,318/- shown in balance sheet, no further addition would be required to be made. It is settled law that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. In the present case under appeal, by declaring the entire amount invested in the work in progress, the assessee company has clearly shown that there is no investment made in the work in progress over and above what has already been declared in the balance sheet. The AO has not produced any corroborative evidence even in the impounded documents to show that any unaccounted investment has been made by the assessee(appellant) in work in progress. over and above amount of Rs.8,31,34,318/- shown in the balance sheet. The contention of the AO for making addition on account of work in progress by doubting its valuation stating that supporting bills & vouchers were not produced and hence, books are not reliable, has not been found to be correct because he has neither rejected the books of account as per the provisions of section 145(3) nor specifically pointed out as to which particular bills & vouchers have not been produced that she considered to be required for valuation of work-in-progress. The assessee(appellant) is a company and it is statutorily audited under the companies Act as well under the Income Tax Act and tax audit report along with audited

23 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 balance sheet and profit and loss account has been filed. Such audit could not have been possible without supporting bills & vouchers. Therefore, just mentioning in general manner in the assessment order that supporting bills and vouchers have not been furnished by the assessee in justification of the valuation of work-in-progress to make a ground to reject the valuation of stock furnished by the assessee, would not be a sufficient finding unless specific missing bills and vouchers are mentioned by the AO and then books of assessee(appellant) company is rejected as per the provisions of section 145(3) but no such finding has been given by the AG. Instead of given such finding in the assessment order, the AO has mentioned in the assessment order that the required details and books of accounts etc. have been furnished /produced and the details furnished by the assessee have been examined with reference to the books of accounts as mentioned in para no.3 of the assessment order. Such discussion made by the AO, clearly shows that he accepted the books of account because no defects have been pointed out by him in the books of account and hence, it is wrong to say now that books of account were not reliable. Once, the amount of work in progress declared by the assessee is reflected in the balance sheet, no part of such work in progress can be stated to be unaccounted and any addition made on estimate basis just relying on the statement given during survey without any corroborative "evidence cannot be sustained unless the AO during post survey enquiry has collected necessary evidence to show quantum of unaccounted expenditure incurred during the year under consideration on housing project being carried out by the assessee(appellant) is not included in the amount of work in progress shown by the assessee at Rs.8,31,34,318/-. However, no such evidence has either been collected or shown to be available in the impounded documents.” 9.5 Apart from my findings discussed in previous para, the AO instead of discussing any evidence to show that investment made in work in progress is more than the amount what has been declared in the Balance Sheet, she has only doubted the self made vouchers shown by the assessee company in support of the investment made in the work in progress and also mentioned that supporting bills are not available. However, by doubting the genuineness of the self made vouchers and genuineness of expenditure incurred on items included in the work in progress, the amount of investment declared by the assessee in the work in progress would get reduced due to claiming bogus expenditure and there would not be any excess investment as declared in the statement recorded during survey. Therefore, statement of the director of the company has not been found to be correct as far as declaration of Rs. 1crore on account of investment in the stock in trade is concerned and hence, this statement cannot be relied upon for the declaration of Rs. 1 crore on account of investment in the stock in trade. Therefore, any addition made on account of work in progress only on the basis of a statement recorded during the survey cannot be sustained. Therefore, I delete the addition of Rs.1 crore made on account of work in progress and accordingly,

24 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 Ground no.6 is allowed.” 43. At the time of hearing, ld. DR of the Revenue heavily relied on the findings of the Assessing Officer. 44. On the other hand, ld. AR of the assessee relied on the findings of the ld. CIT (A). 45. Considered the rival submissions and material placed on record. We observed that the assessee had agreed to declare additional income during the survey proceedings and accordingly, the assessee had declared the same as the additional income and the correspondingly increased the same in WIP. Since the assessee agreed to declare the additional income for the year under consideration, the assessee had declared the same and paid the tax. The AO on the same amount of additional income offered after the survey, it was asked to the assessee to substantiate the same by bringing on record the vouchers. Hence, in absence of any proper submission by the assessee, the AO made the addition. After careful consideration, in our view, the additional income offered by the assessee may be proper for the year under consideration and paid the relevant tax. Based on the above facts on record, the Ld CIT(A) deleted the addition on the above addition with the observation that the AO did not have any corroborative evidence against the

25 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 above addition nor he rejected the books of account. 46. After careful consideration, we observed that no doubt the assessee had declared the additional income on the basis of survey and on the basis of declaration by the director of the assessee, the additional income was declared by increasing the WIP, which is in fact known fact that it is adjustment entry without there being any voucher, the AO made the addition on the basis of the above fact that there was no supporting documents to increase the WIP. In our considered view, voluntary declaration by the assessee to declare the additional income, they should have declared by other means not by increasing the WIP, in our view, the assessee will take the additional benefit in the subsequent year without there being actual expenditure. May be additional income for the year under consideration but it will claim additional expenditure in the subsequent year without making any expenditure in the earlier year. Therefore, considering the overall facts and picture, in our view, the action of the AO to reduce the WIP to the extent of undisclosed income is proper. The assessee is not expected to carry forward the WIP, which are not WIP actual terms. Therefore, we are inclined to allow the ground raised by the Revenue. 47. In the result, appeal filed by revenue is partly allowed.

26 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 48. Now we take up Revenue’s appeal for AY 2009-10. 49. Ground No.1 is with regard to deletion of addition of Rs.4,00,00,000/- made by the AO on the basis of unaccounted payments made as reflected in the impounded document ‘A-7’ without appreciating the fats that during the course of survey proceedings u/s 133A of the Act the assessee had voluntarily surrendered the same on the basis of impounded incriminating documents as his unaccounted income and also in view of his admission in statement recorded during the survey proceedings. We have already decided this issue in Ground No.1 in assessee’s own appeal for AY 2008-09 above in favour of the assessee. Hence, this ground of Revenue is dismissed. 50. Ground No.2 is against the deletion of addition of Rs.1,00,00,000/- made by the AO in valuation of work-in-progress on the basis of various discrepancies found without appreciating the fats that the assessee failed to furnish evidence to justify the valuation of work-in-progress and had voluntarily surrendered the same amount during the course of survey. 51. We have discussed this issue in Ground No.6 of Revenue’s appeal for AY 2008-09 and decided the same in favour of the Revenue. Hence, this ground raised by the Revenue is allowed. 52. Ground no.3 is general in nature, hence not adjudicated.

27 ITA No.215/AGR/2015 ITA No.299/AGR/2015 ITA No.265/AGR/2014 53. In the result, the appeals filed by the assessee for AY 2008-09 and appeals filed by the Revenue for AYs 2008-09 and 2009-10 are partly allowed. Order pronounced in the open court on this 12TH day of May, 2026

SD/- SD/- (SUNIL KUMAR SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 12.05.2026 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI