MORAJ BUILDINGS CONCEPTS P.LTD,NAVI MUMBAI vs. ITO 10(3)(4), MUMBAI

ORDER PER N.K. PRADHAN, A.M. The captioned appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai (in short ‘CIT(A)’) and arises out of the assessment order passed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).

Addition/ Disallowance of Rs.38,319/-

M/s Moraj Building Concepts Pvt. Ltd

2. The appellant submits that the said purchases were genuine in nature and were fully explained. 3. The appellant submits that no part of purchases be treated as representing suppressed profit and any disallowance/addition in which so ever year be deleted and that the value of the work-in-progress be not reduced by any amount whatsoever.

2.1 Briefly stated, the facts of the case are that the Assessing Officer (AO) received information from the Director General of Income Tax (Inv.) [in short ‘DGIT’] that one Shri Tushar Ruparel was controlling and handling few concerns including the account of M/s Khushi Enterprises and he had given a statement under oath on 18.12.2007 before the DGIT that M/s Khushi Enterprises was engaged in issuing bogus bills and that it had never done any actual purchase or sale transaction with delivery of goods or materials. It was further stated that the modus operandi was to receive account payee cheques against accommodation sale bills and later to withdraw cash and handover to the party who availed the bogus sale bills after deducting commission @ 0.25%. In his statement, he had specifically mentioned that M/s Moraj Building Concepts Pvt. Ltd. (the assessee herein) is one of the beneficiaries of such bogus bills. Accordingly, the AO required the assessee to furnish the ledger extracts of M/s Khushi Enterprises along with evidence in the form of bills, mode of payment, delivery challans, octroi paid, transport charges etc. In response to it, the assessee filed the above details. Thereafter, the AO issued a M/s Moraj Building Concepts Pvt. Ltd notice u/s 133(6) dated 14.12.2010 which was not replied to. Then the AO deputed the Ward Inspector to enquire and submit a report. The Ward Inspector vide letter dated 27.12.2010 reported that no purchases were made by the assessee from M/s Khushi Enterprises. Also a survey u/s 133A was carried out by the Department on 31.03.2008 in the business premises of the assessee and it was stated by the Director of the assessee-company in his statement that purchase bills were procured by the assessee through the broker. Further, it was stated by the said Director that the broker was requested to produce M/s Khushi Enterprises but he failed to respond. On the basis of the above findings, the AO made an addition of the purchases of Rs.3,06,555/- as bogus.

2.2 In appeal, the Ld. CIT(A) by relying on the decision in CIT v. Simit P. Sheth (2013) 38 taxmann.com 385 (Guj); Bholanath Polyfab Pvt. Ltd. 355 ITR 290 (Guj) estimated the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities. Further, observing that the suppressed profit element are embedded in such purchases, the Ld. CIT(A) held that it would go to reduce the closing WIP in view of the project completion method followed by the assessee.

2.3 Before us, the Ld. counsel for the assessee submits that during the course of assessment proceedings, the assessee had furnished the details and explanations sought for by the AO and had produced the books of accounts along with vouchers. Thus it is stated that the AO violated the provisions of natural justice. Further, it is stated that the AO made addition to the income of the assessee without providing the evidence on which reliance was placed by M/s Moraj Building Concepts Pvt. Ltd him viz. the statement of Shri Tushar Ruparel, supposedly taken on oath and the evidence relied on by the AO in making the addition u/s 68 and 69 of the Act.

On the other hand, the Ld. Departmental Representative (DR) supports the order passed by the Ld. CIT(A).

2.4 We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.

In the instant case, as mentioned earlier, Shri Tushar Ruparel stated under oath on 18.12.2007 before the DGIT that M/s Khushi Enterprises, which he was controlling, was engaged in the issuing bogus bills. Further, he mentioned that M/s Moraj Building Concepts Pvt. Ltd. (the assessee) was one of the beneficiaries of such bogus bills. The notice u/s 133(6) issued by the AO dated 14.12.2010 to M/s Khushi Enterprises was not replied to. Further, the enquiry by the Ward Inspector showed that no purchases were made by the assessee from M/s Khushi Enterprises. In such a factual scenario, the Ld. CIT(A) has rightly followed the decision in Simit P. Sheth (supra) ; Bholanath Polyfab (supra) and brought to tax the profit @ 12.5% of the disputed purchases of Rs.3,62,881/- which comes to Rs.45,360/-. As the order passed by the Ld. CIT(A) is based on proper appreciation of facts and position of law, we uphold it. Thus the 1st ground of appeal is dismissed.

Disallowance of Rs.7,50,000 on account of Consultancy Charges paid to Modern Line distribution

M/s Moraj Building Concepts Pvt. Ltd a The Ld. CIT(A) has appreciated the fact that the amount paid during the year and claimed in Return of Income as expenses and carried forward to work in progress was Rs.7,50,000 and not Rs.15,00,000. However, the Ld. CIT(A) has erred in law and on facts in confirming the disallowance of amount of Rs.7,50,000 paid to Modern Line distribution and "adding back" to the WIP. b The appellant submits that the said amount of Rs.7,50,000 paid in foreign currency by an authorized bank, was debited (already added) to work in progress account for the year under consideration and cannot be further added. Also the payment made to Modern Line Distribution LLC, Dubai towards consultancy charges was for business development. c The appellant pleads that the disallowance of Rs.7,50,000/- be deleted. 3.1 The above ground relates to disallowance of consultancy charges of Rs.15,00,000/- to a non-resident M/s Modern Line Distribution as consultancy charges paid. The AO disallowed the above sum on the reason that no tax was deducted on it. During the course of survey proceedings u/s 133A on 31.03.2008, Shri Mohan Gurnani, Director has stated in response to question No. 9 that the assessee was liable to make investment of Rs.15,00,000/- towards “consultancy charges” to M/s Modern Line Distribution LLC, Dubai and has confirmed that no TDS has been deducted on the said payment. In response to the query raised by the AO to explain as to why the above sum of Rs.15,00,000/- should not be added back to the total income on the basis of proviso to section 40(a)(i), the assessee filed a reply stating that :

“As per Ariticle-14, of Indo-UAE treaty, not TDS is to be deducted on the said amount as the professional receiving the money has to pay tax in his own Country. Hence under Section 195(6) of the Act, the company filed certificate to the effect and consequently no TDS has been made as there was no such liability. Consequently no disallowance can be made u/s 40(a)(i).”

M/s Moraj Building Concepts Pvt. Ltd

However, the AO was not convinced with the above explanation of the assessee for the reason that once the income is chargeable tax in India and provisions of section 195 are applicable; in terms of section 40(a)(i), the amount remitted to non-resident would not be allowable deduction so long as tax is not deducted at source. Thus she made a disallowance of Rs.15,00,000/-.

3.2 In appeal, before the Ld. CIT(A) the assessee contended that firstly only sum of Rs.7,50,000/- was paid to M/s Modern Line Distribution LLC, Dubai towards consultancy charges for business development and claim was made only to that extent and therefore, the AO had misguided herself in making a disallowance which did not exist in the first place. Secondly, as far as the merits of the disallowance is concerned, it was stated that no tax was liable to be deducted at source as per Article 14 of DTAA with UAE on account of payment to non-resident for services rendered outside India and in this regard reliance was placed on the decision in the case of GE India Technology Pvt. Ltd. 327 ITR 456 (SC). Further, it was stated that in any case the amount in question was added to the closing WIP and hence, there would be no addition as such to the income.

However, the Ld. CIT(A), after analyzing the factual and legal position held that the claim of Rs.7,50,000/- made by the assessee in the return of income is to be disallowed and added back to the WIP.

3.3 Before us, the Ld. counsel for the assessee reiterates the submission made before the Ld. CIT(A). On the other hand, the Ld. DR relies on the order passed by the Ld. CIT(A).

M/s Moraj Building Concepts Pvt. Ltd 3.4 We have heard the rival submission and perused the relevant materials on record. We are of the considered view that the submissions made by the assessee that no tax was liable to be deducted at source as per Article 14 of the DTAA with UAE on account of payment to non-resident for services rendered outside India need re-examination by the AO. Therefore, we set aside the order of the Ld. CIT(A) on the above issue and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes.

Addition u/s. 69 of Rs.7,63,865 on account of unexplained expenses a The Ld. CIT(A) erred in law and on facts in confirming the disallowance of the amount of Rs.7,63,865 mentioned on rough pages 88-90 annexure A-1 impounded during survey. b The appellant submits that loose papers are "dumb" papers that could not be relied upon for making such huge and uncorroborated additions in as much as they do not indicate any date, names, debits or credits, receipts or payments, etc. and it was presumptuous on part of A.O to assume that they represented payments that were accounted. c The appellant appreciates that CIT(A) has accepted the fact that said allowance would result in reduction in WIP leading to the higher profit in the year of completion of project. d The appellant pleads that the addition made to the year of completion of project of Rs.7,63,365 be deleted.

M/s Moraj Building Concepts Pvt. Ltd 4.1 During the course of assessment proceedings, the AO noticed that the entries in the impounded books of account at page 88 to 90 of Annexure A-1 related to cement and tiles purchased from Alankar Mineral, Bikshu Enterprises and Tulsi Enterprises. In the remand proceedings, the AO stated that the assessee’s representatives had submitted details worth Rs.3,06,353/- along with the proof of payment which was verified from the bank statements. However, the AO reported that no details in respect of the balance transaction of Rs.8,94,667/- were submitted. When the matter was remanded by the Ld. CIT(A) to the AO it was reported that while arriving at an amount of Rs.12,01,020/-, an amount of Rs.1,30,806/- was doubly taken.

Having considered the remand report and submissions made by the assessee, the Ld. CIT(A) observed that (i) when on the same set of papers more than one entry is made and one such entry is recorded in the books of account, it was for the assessee to prove that the other entries were not made in respect of unexplained expenditure/investment because the entire document as such has to be either taken as true or done, (ii) when the assessee had itself admitted that Rs.3,06,353/- which was recorded at page 90 in the books, it goes without saying that the balance amount was not recorded in the books of account, (iii) a sum of Rs.1,30,806/- appears to have been doubly taken and, therefore, after giving due weightage to the same, it is held that the assessee has failed to prove the necessary evidence of the expenditure in respect of the balance amount of Rs.7,63,865/- and hence the addition to that extent is sustained.

M/s Moraj Building Concepts Pvt. Ltd

Sustaining an addition of Rs.7,63,865/-, the Ld. CIT(A) held that as the assessee is following project completion method which was not negated by the AO, the said disallowance shall lead to reduction of WIP to that extent.

4.2 Before us, the Ld. counsel for the assessee reiterates his submissions before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

4.3 We have heard the rival submissions and perused the relevant materials on record. We find merit in the observation of the Ld. CIT(A) that when on the same set of papers, more than one entry is made and one such entry is recorded in the books of accounts, it was for the assessee to prove that the other entries were not in respect of unexplained expenditure/investment because the entire document as such has to be either taken as true or dumb.

However, we are of the considered view that the expenditure of Rs.7,63,865/- confirmed by the Ld. CIT(A) need to be re-examined on the basis of evidence of such expenditure to be filed by the assessee. Therefore, we set aside the order of the Ld. CIT(A) on the above ground of appeal and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 3rd ground of appeal is allowed for statistical purposes.

Disallowance of Rs.55,00,000 on account of payment made to Shri Sai Prerna Charitable Trust

M/s Moraj Building Concepts Pvt. Ltd a The Ld. CIT(A) erred in law and on facts in confirming the disallowance of payment of Rs.55,00,000 given to Shri Sai Prerna Charitable Trust claimed by the appellant mentioned on page 100 of Annexure A-1 impounded during survey. b The appellant submits that the payments were made to Sai Prerna Charitable Trust on 05.09.2007 through account payee cheque of Rs.25,00,000 and on 30.11.2007 through account payee cheque of Rs.30,00,000. c The appellant appreciates that CIT(A) has accepted the fact that said disallowance would result in reduction in WIP leading to the higher profit in the year of completion of project. d The appellant pleads that the addition made to the year of completion of project of Rs.55,00,000 be deleted 5.1 The above ground relates to disallowance of Rs.55,00,000/- paid as donation to Shri Sai Prerna Charitable Trust. Admittedly, the assessee vide its letter dated 17.12.2010 replied as under in respect of entry showing Rs.25,00,000/- and Rs.30,00,000/- as indicated on page 100 of Annexure A-1 :

“The amount of Rs.25 lacs and Rs.30 lacs represents donation given to Shree Sai Prerna Charitable Trust by assessee.”

When the above matter was remanded to the AO by the Ld. CIT(A), the AO vide his remand report stated that the assessee had accepted having made the donation which was corroborated by letters issued by payee on its letter head thanking the assessee for contribution made to the Trust ; however, the assessee could not explain the purpose of making the donation and as to how it was related to the assessee’s business. Moreover, it was not stated that the Trust was having tax exemption certificate based on which the deduction to be claimed by the assessee-company.

M/s Moraj Building Concepts Pvt. Ltd

During the course of appellate proceedings before the Ld. CIT(A), the assessee stated that the said amount was not claimed as an expense but was added to the cost of WIP and at best disallowance would result in reduction of WIP.

The Ld. CIT(A) after examining the remand report and submission of the assessee observed that merely because no deduction as such has been claimed, the very fact that a sum of Rs.55,00,000/- was added to the WIP in itself amounts to claim of deduction which would lead to reduction of payment of tax in the year in which the project is completed and offered for taxation. Further stating that when the assessee has itself accepted that the above sum would at best result in reduction of WIP and no evidence whatsoever has been submitted either in respect of business connection or whether any deduction u/s 80G was claimed, the Ld. CIT(A) held that the above sum cannot be allowed to be carried forward as the cost in the WIP. Thus he sustained the disallowance of Rs.55,00,000/- with the observation that as the assessee is following project completion method, the above disallowance would result in reduction of WIP to the extent of Rs.55,00,000/- leading to a higher profit in the year in which the project is completed and offered to tax. Thereby, the Ld. CIT(A) directed the AO to modify the taxable income of the assessee in the year of completion of the project.

5.2 Before us, the Ld. counsel for the assessee reiterates the submission made before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

M/s Moraj Building Concepts Pvt. Ltd 5.3 We have heard the rival submissions and perused the relevant materiasl on record. If the taxpayer is able to eatablish a nexus between the donation and the business, it would be held to be for the purpose of the business and allowable u/s 37(1). In the instant case the assessee has failed to establish it. In the instant case, the assessee has made a donation of Rs.55,00,000/- to Shree Sai Prerna Charitable Trust. As observed by the Ld. CIT(A), the assessee failed to explain the purpose of making the donation and as to how it was related to assessee’s business. Moreover, it failed to explain that the said Trust was having tax exemption certificate based on which deduction could be claimed by the assessee-company. In such a scenario, the Ld. CIT(A) has rightly observed that as the assessee is following project completion method, the said disallowance would result in reduction of WIP to the extent of Rs.55,00,000/- leading to a higher profit in the year in which the project is completed and offered to tax. Thus we uphold the order of the Ld. CIT(A) on the above ground of appeal.

Addition u/s 69 of Rs.1,27,999 of purchases from Satya Narayan Marble a The Ld. CIT(A) has appreciated the fact that the figure on dumb pages 51 to 57 of Annexure A-4 is not 12,79,990 instead it is 1,27,999. However, Ld. CIT(A) has b The Ld. CIT(A) erred in law and on facts by denying that the sum of Rs.1,27,999 was not for return of defective goods but was a sum paid u/s 69C in cash which cannot be allowed. c The appellant submits that the goods of amount of Rs.1,27,999 was returned to Satyanarayan Marble for which no payment was made and was not payable at all.

M/s Moraj Building Concepts Pvt. Ltd d The appellant appreciates that CIT(A) has accepted the fact that said disallowance would result in reduction in WIP leading to the higher profit in the year of completion of project. e The appellant pleads that the addition made to the year of completion of project of Rs.1,27,999 be deleted.

6.1 During the course of assessment proceeding, the assessee had stated before the AO that an amount of Rs.1,75,827/- was payable to Shri Satya Narayan Marbles Pvt. Ltd. against materials purchased for Panvel Site and out of this, after return of defective material, a sum of Rs.47,828/- became payable and hence, balance of Rs.1,27,999/- was cancelled. It was therefore stated that there was no cash payment of Rs.12,79,990/- but only a reversal of Rs.1,27,999/-.

During the course of appellate proceedings, the assessee submitted before the Ld. CIT(A) that the AO had mistakenly taken an amount of Rs.12,79,990/- as Rs.1,27,999/- by adding one zero to the said figure which is apparent from the notings on the loose paper, where only a sum of Rs.1,27,999/- is mentioned. The Ld. CIT(A) held that the above sum of Rs.1,27,999/- paid in cash was not for return of defective goods as mentioned by the assessee but was the sum paid which cannot be allowed. Therefore, he held that the said sum of Rs.1,27,999/- has to be reduced from the closing WIP and added as income in the year of completion of the project.

6.2 Before us, the Ld. counsel reiterates his submission before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

M/s Moraj Building Concepts Pvt. Ltd 6.3 We have heard the rival submissions and perused the relevant materials on record. Having examined the documents, we find that the goods amounting to Rs.1,27,999/- were returned to Satya Narayan Marble for which no payment was made by the assessee. In fact it was not payable at all. In such a situation, the addition of Rs.1,27,999/- confirmed by the Ld. CIT(A) cannot be sustained. Therefore, we delete the above addition of Rs.1,27,999/- and allow the 5th ground of appeal.

Addition of Rs.5,00,000 u/s 68 on account of tentative buy price, of flat to R.A. Chug a The appellant appreciates that the CIT(A) has partly allowed the ground but the CIT(A) has erred in law and on facts by confirming the part addition u/s 68 mentioned on rough page 90 of annexure A-4 impounded during survey. b The appellant submits that no amount of whatsoever nature has been received from the said Shri R.A. Chug towards the said Rs.45,00,000 at any point of time; before recording in the said loose paper, at the time of recording thereof or any time thereafter. c The appellant also submits that the notings on the said loose papers did not represent any unexplained or unaccounted or undisclosed income or expenditure or investment for the year under consideration or for any other year. d The appellant pleads that the addition made u/s 68 be deleted.

7.1 The above ground of appeal relates to the order of the Ld. CIT(A) confirming the addition of Rs.5,00,000/- on the basis of entries at page No. 90 of Annexure A-4 impounded during the course of survey where the following figures are mentioned :

M/s Moraj Building Concepts Pvt. Ltd

“RCS 7,34,533 C. Meghani 17,33,360 R.A. Chug 45,33,916 45,33,916 Being cost of 285 sq. ft. 5,33,916 allotted now 40,00,000 24.9.07 5,00,000” The Ld. CIT(A) confirmed the addition of Rs.5,00,000/- with the following reasons :

“2.4.79 Having perused the jottings at page no. 90 of Annexure A-4 and after going through the affidavit and statement of Shri Satyavan Jagdale, the author of the said jottings, it is an uncontroverted fact that a sum of Rs.40 lac was receivable from Shri R.A. Chug. Further, the very fact that a particular date has been stated against sum of Rs.5 lac viz. 24.09.2007, the said noting did not remain dumb any more as it is very clear from the said noting that out of the receivable of Rs.40 lac, the appellant had received a sum of Rs.5 lac on 24.09.2007. The appellant has also not negated the notings at the said page as being completely unrelated to its business and in fact all the notings at the said page have been accepted as true other than receipt of Rs.5 lac. Looking into the sequence of notings at said page, it could not be said that the said amount was receivable from Shri R.A. Chug on 24.09.2007. While coming to the above conclusion, I have taken into consideration the surrounding circumstances as per the dictum of the Hon'ble Supreme Court in the case of CIT Vs. Durgaprasad More 82 ITR 540 and Sumati Dayal Vs. CIT 214 ITR 801.”

M/s Moraj Building Concepts Pvt. Ltd 7.2 Before us, the Ld. counsel for the assessee reiterates his submission before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

7.3 We have heard the rival submissions and perused the relevant materials on record. In the instant case, at page No. 90 of Annexure A-4 impounded during the course of survey an amount of Rs.45,33,916/- is shown and from it an amount of Rs.5,33,916/- is substracted as cost of 285 sq. ft. allotted and balance amount of Rs.40 lacs is shown and again further amount of Rs.5 lacs is added to it. We find that the accountant in his statement recorded on 17.10.2014 mentions that the said amount pertains to booking of R.A. Chaug, wherein an amount of Rs.45,33,916/- was receivable from him towards two flats, after adjusting an amount of Rs.5,33,196/- towards 285 sq. ft., the balance amount of Rs.40,00,000/- was recoverable from him and he had promised to pay an amount of Rs.5,00,000/- by 24.09.2007. A copy of recovery letter dated 10.06.2008 for Rs.45,00,000/- was submitted by the assessee before the AO vide letter dated 13.01.2014. It is found that the same is a rough document containing no details of nature or date of transaction, signature etc. Having considered the above facts, we are of the considered view that the addition of Rs.5,00,000/- cannot be sustained. Thus deleting the above addition, we allow the 6th ground of appeal.

Addition of Rs.2,66,393 being alleged discrepancy in cash in hand

M/s Moraj Building Concepts Pvt. Ltd a The Ld. CIT(A) erred in law and on facts in confirming the addition of Rs.2,66,293 as unexplained deficit in cash found during survey and the cash on hand as per the books of account in aggregate of the said group concerns. b The appellant submits that the cash physically found was short/less than the cash balance as per books of account. The difference was on account of the cash on hand lying at different construction sites of the different projects being carried out by different group concerns. c The appellant also submits that the deficit if found would in fact represent the loss of a business asset held in the ordinary course of business and such loss was allowable u/s 28 in computing the Business Income for the year under consideration. d The appellant pleads that the addition Rs.2,66,393 be deleted and in the alternative the said amount be allowed as a business loss in the hands of the appellant.

8.1 The above ground relates to the addition of Rs.2,66,393/- on account of alleged discrepancy in cash on hand noticed during the course of survey operation. As per the AO, the amount of cash on hand should have been Rs.8,49,133/- vis-à-vis the physical cash found at the premises during the course of survey which was Rs.5,82,740/-. The assessee submitted before the AO that some of the cash was lying with the site supervisors and that the list of companies with cash balance as on the date of survey was being supplied. However, the AO was not convinced with the above explanation of the assessee and made an addition of Rs.2,66,393/-.

During the remand proceedings, the assessee had explained that cash book was being maintained at sites and that the books of accounts at year end were properly audited. However, the AO was not convinced with the explanation of the assessee and made the above addition.

M/s Moraj Building Concepts Pvt. Ltd 8.2 In appeal, the Ld. CIT(A) observed that (i) whereas the assessee has stated some of the cash was lying at site office, it was its duty to apprise the officers at the time of survey about the amount of cash lying at various sites because it would be otherwise very easy to cook up a story later on that the deficit cash was available at various sites, (ii) though the books of accounts have been audited but they are after the date of survey and at the time of survey, no such details were furnished other than saying that some cash was lying with various sites.

Thus observing that if the details of cash were not available at the time of survey, how could the assessee find out the same afterwards, the Ld. CIT(A) confirmed the addition of Rs.2,66,393/- made by the AO.

8.3 Before us, the Ld. counsel for the assessee reiterates his submission before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

8.4 We have heard the rival submissions and perused the relevant materials on record. We find substantial force in the argument of the Ld. counsel that the difference in cash of Rs.2,66,393/- was explained by way of cash lying at sites viz. Plot 448 (H.O.) : Rs.25,517/-, Plot 448 – Khare (H.O.) : Rs.1,87,599/- and Plot : Rs.53,709/-. A perusal of the above explanation which was furnished during the course of survey and also before the ADIT (Inv.) and the AO is further corroborated by the books of account. On a consideration with the above, we delete the addition of Rs.2,66,393/- and allow the 7th ground of appeal.

M/s Moraj Building Concepts Pvt. Ltd

Addition u/s 68 of Rs.16,77,178 on account of alleged untallied trial balance a The Ld. CIT(A) erred in law and on facts in confirming the addition of Rs.16,77,178 as unexplained cash credit u/s 68 on the basis of noting found in the excel sheet generated from hard disk impounded during the course of survey which read as 'Difference in TB'. b The said Hard Disk did not belong to the appellant nor did it record or store the accounts of the appellant. The said Hard Disk in fact was used. c by the accountant of the group, Shri Satyavan Jagdale for the purposes of storage of some rough records and calculation. d The appellant submits that the said excel sheet does not represent any income or expenditure and as explained in facts, it was prepared by the accountant to record the results of trial run taken for the purposes of shifting from Foxpro accounting software to Tally. The company had maintained regular books of accounts that were duly audited and no defects have been found therein. e The Ld. CIT(A) mentions that as the appellant follows Project Completion Method, the sum ofRs.16,77,178 would result in reduction in WIP leading to the higher profit in the year of completion of project. f The appellant pleads that the addition made to the year of completion of project of Rs.16,77,178 be deleted.

9.1 The above ground relates to addition of Rs.16,77,178/- as unexplained cash credit on the basis of untallied trial balance during the course of survey. The AO made the addition on the reason that the assessee did not give satisfactory explanation during the course of assessment proceedings.

In appeal, the Ld. CIT(A) observed that (i) the assessee had failed to explain the nature of discrepancy and merely stating that the said difference

M/s Moraj Building Concepts Pvt. Ltd in trial balance arose on account of shifting of one account software to another would not be of much assistance, (ii) it was for the assessee to adduce sufficient evidence before the AO and it had more than ample opportunities to do so during the assessment as well as two remand proceedings, (iii) even during the course of appellate proceedings, no attempt whatsoever was made to explain the difference as to why they arose, (iv) if the explanation furnished by the assessee is taken to be correct state of affairs, the other items should have been explained in various pages 83 to 86 of Annexure A-1 which has not been done.

With the above observations, the Ld. CIT(A) confirmed the addition of Rs.16,77,178/- made by the AO.

9.2 Before us, the Ld. counsel for the assessee reiterates his submission before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).

9.3 We have heard the rival submissions and perused the relevant materials on record. We find merit in the submissions of the Ld. counsel that the difference in rough trial balance was due to incomplete accounts on the date of survey. A perusal of the documents clearly indicate that the addition made on the basis of pages 83 to 86 of Annexure A-1 is nothing but a result of trial run taken for the purpose of shifting from Foxpro software to Tally software. Further, the assessee has maintained regular books of accounts which have been duly audited. In the instant case, the AO has not rejected the books of accounts. There is nothing on record brought out by the AO to prove that the transactions were not accounted and included in the books of accounts. All the M/s Moraj Building Concepts Pvt. Ltd more the said excel sheet does not represent any income or expenditure and it was prepared by the accountant to record the results of trial run taken for the purposes of shifting from Foxpro accounting software to Tally. The assessee at the year-end has drawn final accounting on the basis of regular account which included the transactions in the said two rough trial balances.

In view of the above facts, we delete the addition of Rs.16,77,178/- made by the AO and allow the 8th ground of appeal.

Order pronounced in the open Court on 19/02/2020.