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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI PRASHANT MAHARISHI, AM
These are the cross appeals filed by the learned Income Tax Officer- 28(2)(3), Mumbai (the learned Assessing Officer) and M/s NG Group (assessee/ appellant) for A.Y. 2011-12 against the appellate order passed by the learned Commissioner of
2. Assessing Officer raising following grounds of appeal: - “(1) Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA has erred in deleting the addition of Rs.3.39.42,758/-/- on account of assessing the profits of the project Ellora Castle' to the tune of Rs.6.06,77.489/- as against returned profit of Rs 2,67,34,731/- thereby making an Rs.3,39,42,758/- without appreciating the fact that the said project has been addition of completed on 26.10.2010 i.e. during the FY 2010-11 relevant to A.Y 2011-12"?
(2) Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA has erred in deleting the disallowance of the loss incurred on transfer of Plot No 807 and adding the same to the closing WIP of Plot No.786 thereby disallowing the claim of Rs.3,88,98,576/-"?
(3) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the reduction of interest income of Rs.87,91,409/?
(4) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,24,00,000/- being unexplained cash credit u/s 68 of the Act without (5) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowing the interest expense of Rs.25,13,558/- u/s 36(1)(ii) of the Act by holding that interest bearing funds have not been diverted for giving interest free advances"?.
(6) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s. 41(1) of the Act amounting to Rs. 13,04,108/ by holding that no event had taken place in the year under consideration to indicate remission or cessation of liabilities, without appreciating the fact that sundry creditors reflected in the Balance sheet of the assessee reveals certain amounts outstanding and the parties whose name appear in the list of suspicious dealers by the Sales Tax Deptt."?
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the A.O. to restrict the addition of bogus purchases to 12.5% as against 100% addition made by the Assessing Officer on account bogus purchases without appreciating the fact that parties from whom these purchases were made proven accommodation entry providers, as concluded by Sales Tax Authorities pursuant to the investigation carried out by them"?
(9) The appellant prays that the order of Ld. CIT (A) on the above grounds be reversed and that of the Assessing officer be restored.
(10) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
“1. BECAUSE, ld. CIT(A) erred in law and on facts; in confirming addition to the tune of Rs.1,00,00,000/- (One Crore) u/s. 68 of the Act, 1961; wherein act of partisanship is manifested.
BECAUSE; assessment order dated 31/03/2011 and consequential CIT(A)'s order dated 30/08/2019 are passed in violation of principle of natural justice since no opportunity to cross examine M/s. Blue View Commodities Pvt. Ltd. and it's information has been granted to appellant.
BECAUSE, ld. CIT(A) erred in law and on facts; in confirming disallowance of 12.50% of purchases amounting to Rs.46,174.25/- (12.5% of Rs.3,69,394/-) u/s. 69C of the Act, 1961. a. The assessee has shown one ongoing project at Navi Mumbai under construction which is transferred where assessee has shown a net loss of ₹3,01,07,165/- and in another residential project at Ellora Castle, the assessee has shown the profit of ₹2,67,34,731/- and thus, returned at loss of ₹33,72,435/-. During the assessment, the learned Assessing Officer verified the project profitability of Ellora. He found that assessee has not recognized sales though it follows Project Completion Method. The assessee has declared net profit of ₹2,67,34,731/- and shown work-in-progress carried forward of ₹22,12,89,283/-, resulting into total work-in-progress of ₹31,76,55,022/-. Thus, assessee has declared a profit of 8.41%. The learned Assessing Officer noted that assessee has sold six units during the year and accordingly, net profit was computed at ₹6,06,77,489/-. Thus, addition of ₹3,39,42,758/- was made on Ellora project profits. The learned Assessing Officer further noted that b. Assessee also received an unsecured loan from different parties amounting to ₹3,24,00,000/- where according to the learned Assessing Officer assessee failed to prove the identity and creditworthiness of the parties as well as the genuineness of the transactions. Thus, the learned Assessing Officer held that the loan of ₹1,20,00,000/- from Mr. Amit Jadhavji, HUF, ₹ 1 crore from Blue View Commotrade Pvt. Ltd. and ₹ 1 crore from Dimesh Jayantilal Vora fails test under Section 68 of the Act and thus, along with the interest paid was added to the total income of the assessee. c. The learned Assessing Officer also noted that the interest expenditure of ₹25,13,558/- of interest claimed by the assessee is not utilized for the purpose of the business as assessee has given interest free loans to sisters concern and other parties. Thus, disallowance of ₹25,13,558/- was made. d. Assessee was also asked to submit the details of purchase reflected in hawala list displayed on website of Sale Tax Department, Maharashtra. e. There were sundry creditors reflected in the balance sheet whose name also appears in list of suspicious dealers published by the Sales Tax Department of ₹13,04,108/- in the name of two different parties, same were added under Section 41(1) of the Act. f. An ad hoc disallowance of ₹5 lac various expenses was also made.
Accordingly, Assessment order under Section 143(3) of the Act dated 14th March 2014, the total income of the assessee was assessed at ₹10,99,84,768/- against the return loss of ₹33,72,434/-.
Assessee preferred the appeal before the learned CIT (A). As per order dated 30th August 2019, the addition of profitability with respect to Ellora Project and Bhoomi Net City Project were deleted by him. Further out of the addition of ₹3,24,00,000/- as unexplained cash credit under Section 68 of the Act, the addition of ₹2,24,00,000/- was deleted and addition of ₹1 crore was confirmed. The learned CIT (A) deleted the disallowance of interest expenditure of ₹25,13,558/- and also addition under Section 41(1) of the Act of ₹13,41,108/-. With respect to the bogus purchases, he directed the addition to be retained at 12.5% instead of 100% of bogus purchases. Accordingly, both the parties are aggrieved with the order and are in appeal before us.
We have carefully considered the rival contention and perused the orders of the lower authorities.
Now, we will come to the appeal of the learned Assessing Officer first. As per ground nos.1 and 2 are against the deletion of estimation of income of the Ellora Castle project and the Bhoomi Net City. Ground no. 3 is with respect to the interest income of ₹87,91,409/- reduced from the loss on sale of plot. Both these additions have been deleted by the learned CIT (A). With respect to the addition of ₹3,88,98,576/- and reduction of interest income by ₹87,91,409/- from work in progress as well as the estimation of profit of ₹3,39,42,758/-, The learned authorized representative submitted that identical issue arose in the case of the assessee for assessment year 2012 – 13 wherein the AO has recomputed the profit as per his own method. The ITAT deleted the addition. Therefore, it was contested that the issue is squarely covered in favour of the assessee. Our findings are as under: - i. The assessee is engaged into project Ellora Castle which is consisting of 12 flats and construction was completed on 26th October ii. Ground nos.2 and 3 are with respect to the computation of income on transfer of plot no. 807. In the profit and loss account of Bhoomi Net City, assessee has shown transfer price of plot no.807 at ₹6,60,00,000/-. This was based iv. With respect to Dimesh Jayantilal Vora, the learned Assessing Officer has made an addition of ₹1 crore. However, the actual loan is taken as ₹10 lacs. This loan was taken on 7th July, 2008 and in earlier years. During the year, assessee submitted the conformation, bank passbook, income tax return and PAN of the lender, the learned CIT (A) deleted the addition. In view of this ground no.4 of the appeal of the learned Assessing Officer is dismissed. v. With respect to the appeal of the assessee where the addition confirmed by the learned CIT (A) of ₹ 1 core of loan received from Blue View Commotrade Pvt. Ltd. is contested. The assessee submitted that the aforesaid loan has been repaid during the same financial year therefore assessee could not produce confirmation of the above party during assessment proceedings. In remand vi. Ground no. 5 of the appeal of the learned Assessing Officer is against the deletion of the disallowance of the interest of ₹25,13,558/-. We find that the learned Assessing Officer noted that assessee has paid interest on unsecured loan of ₹38,08,195/- and also given interest free advances of ₹50,07,22,387/- to various associates without charging interest.
vii. Ground no. 6 of the appeal with respect to deletion of addition under section 41(1) of the Act amounting to ₹13,04,108/-. During the course of assessment proceedings, two parties namely Shree Sai Traders amounting to ₹ 10,03,750/- and Shubham Enterprises of ₹3,00,358/- were found to be outstanding. Both these parties also appeared in the list of suspicious dealers of Sales Tax Department and therefore, the learned Assessing Officer was of the view that assessee has only taken accommodation entries from these two parties and no amount is payable to them. Thus, an addition under section 41 (1) of the Act was made. The learned CIT (A) noted that during the year no events have taken place to indicate remission or cessation of liabilities in question. Further, the material was purchased from these two parties in F.Y. 2008-09, therefore, these liability is recognized by the assessee. It was further noted that on 7.11.2011 some part payment were made to these parties. In view of this addition under section 41(1) of the Act was deleted. No infirmity was pointed out before us in the order of the learned CIT (A). Therefore, the order of the learned CIT (A) in deletion of addition is confirmed. Accordingly, ground ix. Ground no. 4 of the appeal of the assessee is with respect to ad hoc disallowance of ₹5 lac
In the result, the appeal of the learned Assessing Officer is dismissed and the appeal of the assessee is partly allowed.