DCIT, JAIPUR vs. KRISHNA BUILHOME PVT. LTD., JAIPUR

PER SHRI KUL BHARAT, JM.

This appeal by the Revenue is directed against the order of Ld. CIT (A)-II,

Jaipur dated 21.10.2014 pertaining to A.Y. 2010-11.

The Revenue has raised the following grounds of appeal :-

“ (i) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting disallowance out of construction expenses amounting to Rs. 1,71,782/-.

(ii) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) as erred in deleting disallowance out of repair and maintenance expenses amounting to Rs. 24,521/-

(iii) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting disallowance u/s 24(a) amounting to Rs. 1,68,000/-.

(iv) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting addition of Rs. 75,50,000/- made on account of unexplained loan transactions.

2 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

(v) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting addition of Rs. 53,32,044/- ,made on account of unexplained loan transactions.

(vi) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting disallowance of interest of Rs. 4,99,584/- made by disallowing the same on the excess payment claimed by the assessee.

(vii) The appellant craves its right to add, amend or alter any of the grounds on or before the hearing.”

scrutiny assessment and the assessment was framed under section 143(3) of the IT

Act, 1961 (hereinafter referred to as the Act) vide order dated 28.03.2010. While

framing the assessment, the AO made addition on account of disallowance out of

construction expenses of Rs. 1,71,782/-, disallowance out of repair and maintenance

expenses of Rs. 2,45,211/- disallowance of claim u/s 24(a) of Rs. 1,68,000/- and

addition on account of undisclosed credit of Rs. 75,50,000/- addition on account of

unexplained loan transactions of Rs. 53,32,044/- and interest of Rs. 4,99,584.

Aggrieved by this, the assessee preferred an appeal before Ld. CIT(A), who after

considering the submissions partly allowed the appeal. Thereby, the ld. CIT(A)

deleted the disallowance made out of construction expenses out of maintenance

expense of Rs. 24,521/-, deleted the disallowance made u/s 24(a) of Rs. 1,68,000/-

and deleted the addition of Rs. 53,32,044/- made on account of unexplained loan

transactions and deleted the disallowance of interest of Rs. 4,99,584/-. Against this

the revenue has preferred the present appeal.

amounting to Rs. 1,71,782. The Ld. Departmental Representatives supported the

3 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

order of the Assessing Officer and submitted that Ld. CIT(A) was not justified in

deleting the disallowance. He submitted that the Assessing Officer has given a

finding that the expenses are unvouched and made in cash payment.

3.1 On the contrary, The Ld. Counsel for the assessee reiterated the submissions

as made in the written brief. He submitted that gross profit is higher than the

previous years. The books of accounts of the assessee are audited by the Chartered

Accountant under the Income-tax Act as well as the Companies Act. The assessee

has sufficient internal control system to prevent the leakage.

3.2 We have heard the rival contentions, perused the material available on

record. The Ld. CIT(A) deleted the disallowance by observing that no specific

instance have been pointed out, where expenses are unvouched. Before this

Tribunal as well, the Ld. DR was unable to point out the specific instance.

Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A),

same is hereby to affirmed, the ground raised in this appeal is dismissed.

repair and maintenance expenses of Rs. 24,521/- and disallowance made u/s 24(A)

amounting to Rs. 1,68,000/-. The Ld. DR relied on the assessment order.

4.1 On the contrary, the Ld. Counsel for the assessee supported the order of the

Ld. CIT(A) and also reiterated the submissions of the Assessing Officer.

4.2 We have heard the rival contentions, perused written submissions of the

assesee and gone through the order impugned before us.

4.3 Apropos to ground no. 2, the Revenue has not given any specific instance,

therefore, this ground of the Revenue’s appeal is dismissed.

4 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

4.4 Qua to ground no. 3 is, the Ld. CIT(A) observed that the facts, that the

property given on rent to M/s Mobitel Telelink Pvt. Ltd; being stock in trade of the

assessee of which the assessee is the owner would not change the character of the

income so long it was occupied for the purpose of business carried on by the

Assessee. The Revenue has not pointed out any contrary material suggesting that

the property in quetion was occupied for business of the assessee. Therefore, we do

not see any reason to interfere into the order of the Ld. CIT(A),same is hereby

affirmed. This ground of the of the Revenue’s appeal is dismissed.

u/s 68 of the Income-tax Act, 1961. The Ld. Departmental Representatives

supported the order of the Assessing Officer that the Assessing Officer had treated

the advances from two customers namely shri Vijay Kumar Lodha of Rs. 61,00,000/-

and Nikki Exports Private Ltd. of Rs. 14,50,000/- as undisclosed income of the

assessee. He submitted that Ld. CIT(A) was not justified in deleting the same.

5.1 On the contrary, the Ld. Counsel for the assessee supported the order of the

Ld. CIT(A), he submitted that Assessing Officer failed to appreciate the fact that the

advance of Rs. 61,00,000/- is standing as opening balance in account of this person.

Only credit entry of the current year would fall under the scope of section 68 of the

Income-tax Act. He submitted that the assessee supplied the relevant evidence in

support of the contention, that is in support of his claim i.e. confirmation of the

concerned party, booking application form of the party, copy of PAN card of party,

copy of Income-tax return, computation of total income and balance sheet of

concerned party, copy of books of accounts of the assessee and account of Shri

Vijay Kumar Lodha. From the above documents placed on record proved that the

5 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

advances received from said party are genuine. In respect of advances from M/s

Nikki Exports Pvt. Ltd. of Rs. 14,50,000/-He submitted that out of Rs. 14,50,000/-

the assessee had received Rs. 10,00,000/- as advance in during the Assessment

Year 2009-10, therefore the same cannot be treated income of the assessee of A.Y.

2010-11. He submitted that, the assessee had submitted the copy of confirmation

of the party. He submitted that the said party expressed its unwillingness to buy the

office from the assessee and requested to assessee to cancel his booking and return

back his advance, thus the assessee refunded back its advance received from this

party on 19/02/2010. Under these facts, he submitted that the assessee discharged

the onus.

5.2 We have heard the rival contentions, perused the material available on

record. The Ld. CIT(A) has decided the issue in para 2.3 to 2.5.2.

“2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. This is a case where advances from two customers namely Shri Vijay Kumar Lodha (advance of Rs. 61 lakhs) and Nikki Exports Pvt. Ltd. (advance of Rs. 14,50,000/-) has been treated as undisclosed income of the assessee routed through the above named persons. It has been held by the Assessing Officer that the explanation of the assessee that this advance was for booking of offices is a concocted story and the assessee has failed to discharge his onus of proving the credit completely. 2.4.1 The facts of this issue are that the entire advance of Rs. 61 Lakhs from Vijay Kumar Lodha has been received in A. Y. 2009-2010 and the credit balance in his name appears as an opening balance in this assessment year. The assessee has furnished, during the assessment proceedings, the confirmation, copy of PAN card, copy of booking application form, copy of return of income with Balance Sheet for A. Y 2009-2010 and A. Y. 2010-2011, copy of bank statement of Vijay Kumar Lodha for F. Y 2008-2009 when the advance was given. The Assessing Officer has rejected the explanation of the assessee because the returned income of the creditor was very low at Rs. 2,08,948/- and the assessee was not able to produce Shri Vijay Kumar Lodha. That the returned income of Shri Vijay Kumar Lodha is very low does not

6 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

have any bearing since the copy of his bank statement shows the source of this advance which has also been reflected in the Balance Sheet. The Assessing Officer has not shown or even indicated how the source of this advance is from the assessee. The appellant has stated that the booking of offices made by the customer was cancelled in F. Y. 2010-2011 and the money was returned back to the customer. The discussion made by the Assessing Officer that the explanation of booking of offices given by the assessee is a concocted story is not germane to this issue because what has to be examined in this matter, is the nature and source of the advance. 2.4.2 In my view, the explanation furnished by the assessee in respect to the identity of the creditor, genuineness of the transaction and credit worthiness of the creditor, is satisfactory and the Assessing Officer has not been able to point out any defect in the above explanation. Also the advance of Rs. 61 lakhs has not been received in the year under consideration but has been received in the preceding year. Therefore, the addition of Rs. 61 Lakhs made by the Assessing Officer u/s 68 of the IT Act is directed to be deleted. 2.5.1 The facts of the issue are that an advance of Rs. 10 lakh was received from Nikki Exports Pvt. Ltd. in A. Y. 2009-2010 and this credit balance in its name appears as an opening balance in this assessment year. The balance amount of Rs. 4,50,000/- was received during the year. The assessee has furnished, during the assessment proceeding, the confirmation, copy of PAN Card, copy of acknowledgment of the return of income of A. Y. 2009-2010 and 2010-2011, copy of bank statement of Nikki Exports Pvt. Ltd. The Assessing Officer has rejected the explanation of the assessee on the ground that the assessee was not able to produce the director of M/s. Nikki Exports Pvt. Ltd. The copy of the bank statement of Nikki Exports Pvt. Ltd. shows the source of this advance. The Assessing Officer has not shown or even indicated how the source of this advance is from the assessee. The appellant has stated that the booking of offices made by the customer was cancelled and the money was returned back to the customer in this assessment year. The discussion made by the Assessing Officer that the explanation of booking of offices given by the assessee is a concocted story is not germane to this issue because what has to be examined in this matter, is the nature and source of the advance. 2.5.2 In my view, the explanation furnished by the assessee in respect to the identity of the creditor, genuineness of the transaction and credit worthiness off the creditor, is satisfactory and the Assessing Officer has not been able to point out any defect in the above explanation. Also the advance of Rs. 10 lakhs has not been received in the year under consideration but has been

7 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

received in the preceding year. In view of the above, the addition of Rs. 14,50,000/- made by the Assessing Officer u/s 68 of the IT Act is directed to be deleted. This ground is, therefore, allowed.” 5.3 We find that the assessee has demonstrated the genuineness of the

transaction, creditworthiness of the party and also the identity is also established, on

the basis of the evidences so placed on record. Therefore, we do not see any reason

to interfere into the order of the Ld. CIT(A), same is hereby affirmed. Thus, Ground

no. 4 of the Revenue’s appeal is dismissed.

account of loan transaction. The Revenue has also taken an additional ground in

respect of this issue.

The additional ground of the Revenue’s appeal is as under:-

“Whether on the facts and in the circumstances o the case and in law the Ld. CIT(A) has erred in admitting new evidence in contravention of Rule 46A of IT Rules and deleting addition of Rs. 53,32,044/- made on account of unexplained loan transactions.”

6.1 Ld. Departmental Representatives vehemently argued that Ld. CIT(A) was not

justified in deleting the addition by admitting the additional evidence. He submitted

that the evidences placed before the Ld. CIT(A) were not before the Assessing

Officer.

6.2 On the contrary, Ld. Counsel for the assessee opposed the submission of the

Ld. Departmental representative and reiterated the submissions as made in the

written brief. He submitted that the dispute on the issue is with regard to

repayment in respect of Shri Anuj Badaya, Shri Keshav Das Agarwal, Shri Mohan Das

Agarwal, Smt. Sangita Khandelwar (Badaya). He submitted that the confirmations of

the above named parties were submitted to Assessing Officer during the course of

8 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

assessment proceedings, he drew our attention to Paper Book Page No. 73-76 in

support of his claim. He submitted that as regard to the addition in dispute same

was made solely for the reason that there was the difference in repayment of loan to

aforementioned persons as shown in the Annexure-C & D of Tax Audit Report and

shown in cash flow statement during the course of assessment proceedings. He

submitted that the difference was on account of wrong figure reported by the

accountant of the assessee in the cash flow statement prepared for the month of

March-10 wherein the figures of Feb-10 were reproduced and the Assessing Officer

relied on the same without examining these cash flow statements from books of

accounts or confirming the same from assessee. He submitted that the copy of

copes of cash flow statement submitted before Ld. AO is at Paper Book Page No.

77-83. He submitted that from examining of the cash flow statement for the month

of March-10 and Feb-10 it can easily be inferred that figure of outflow of Feb-10

were repeated. This was a human error committed by the accountant of the

assessee in the process of copy paste of the figures. It can be seen as per the cash

flow statement on March-10. The total out flow shown in Rs. 2,05,91,151/- while if

we make the total of entries reported in cash flow statement the same comes from

Rs. 1,48,32,484/- which is total of outflows of Feb-10. Thus, the mistake accrued

due to wrong reporting the figures in cash flow of March-10 and the same was

accepted by the Ld. AO in mechanical manner without examining it properly or

asking the clarification from the assessee.

6.3 We have heard the rival contentions of the parties. The Ld. CIT(A) has given

finding that the Assessing Officer had asked assessee to prepare a month wise cash

flow statement. While making cash flow statement certain typographical error

9 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

occurred, while did not tally with the books of accounts and the audit report. In the

cases of Shri Anuj Badaya, Shri Keshav Das Agarwal, Shri Mohan Das Agarwal, Smt.

Sangita Khandelwal (Badaya) the Assessing Officer concluded that the assessee has

made his excess payment from the undisclosed source of tax, the same accordingly.

However, the Ld. CIT(A) found that this finding of the Assessing Officer was not

correct as the payment made by the assessee from the source reflected from the

books of accounts, during the appellate proceedings before the Ld. CIT(A) the

assessee furnished correct cash flow statement. This finding is not controverted by

the revenue by placing any contrary material on record. Therefore, the ground

raised by the revenue is dividing of any merit, hence, dismissed.

made by the AO on account of excess payment claimed by the assessee. Ld.

Departmental Representatives supported the order of the AO.

7.1 On the contrary, the Ld. Counsel for the assessee supported the order of the

Ld. CIT(A). He submitted that whatever payment of interest was made by the

assessee was made through the account payee cheque and verifiable from the

confirmation of the account filed before the AO.

7.2 We have heard the rival contentions, the Ld. CIT(A) has observed that the

difference on account of typographical error which is not controverted by the

revenue by placing any contrary material on record. Therefore, this ground of the

Revenues’s appeal is dismissed.

10 ITA No. 901/JP/2014 M/s Krishna Buildhome Pvt. Ltd., Jaipur.

Order is pronounced in the open court on Monday, the 15th day of May 2017.

Sd/- Sd/- ( HkkxpUn ½ ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 15/05/2017. Pooja/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत