RADHEY CONSTRUCTION PVT. LTD.,JAIPUR vs. ITO, JAIPUR

PER SHRI KUL BHARAT, JM.

The appeal by the assessee is directed against the order of ld. CIT(Appeals)-I,

Jaipur dated 30.08.2016 pertaining to assessment year 2012-13. The assessee has

raised the following grounds of appeal :-

“1. Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition by giving part relief out of Rs. 14,11,556/- made by the ld. Assessing Officer as income from house property by calculating ALV on assumption basis. 2. Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 21,967/- u/s 40A(3) of the Income Tax Act, 1961. 3. Under the facts and circumstances of the case the ld. CIT(A) has erred in making the confirming the addition of Rs. 29,26,000/- on account of advances shown against flat booking for which sales has been made in subsequent years. 4. Under the facts and circumstances of the case the ld. CIT(A) has erred in not considering the additional evidences furnished by the assessee under rule 46A of the Income Tax Act, 1961. 5. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”

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scrutiny assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter

referred to as the Act) and assessment was framed vide order dated 31.03.2015.

While framing the assessment, the AO made disallowance of Rs. 21,967/- while

invoking all provision of section 40A(3) of the Act, assessed the income from house

property at Rs. 14,11,556/- and made addition on account of advances shown

against flat booking of Rs. 29,26,000/- Against this , the assessee preferred an

appeal before ld. CIT (A), who after considering the submissions, partly allowed the

appeal. Thereby, the Ld. CIT(A) confirmed the addition of Rs. 29,26,000/-, Rs.

21,967/-. However, directed the Assessing Officer to re-compute the income of

house property.

Tribunal.

from the house property. Ld. Counsel for the assessee reiterated the submissions

and stated that these written submissions may be considered and this issue we

decided. The written submissions of the assessee are as under:-

“Ground no. 1- Under the facts and circumstance of the case the ld. CIT(A) has erred in confirming the addition by giving part relief out of Rs. 14,11,556/- made by the ld. Assessing Officer as income from house property by calculating ALV on assumption basis. The assessee had constructed a multistory project Rama’s Janaki Vihar at Bani Park, Jaipur. Out of the unsold portion some part was let out and the assessee

3 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. disclosed the rental income under the head income from house property at Rs. 1,85,150/-. On the basis of rent disclosed by the assessee of the portion of building which was let out the ld. Assessing Officer calculated ALV of portion which could not be let out and was vacant and accordingly has made an addition of Rs. 14,11,556/-. The ld. Assessing Officer has supported his action by quoting the decision in the case of Ansal Housing Finance and Leasing Co. Ltd. In Income Tax Act, 1961 18/1999 dated 31/10/2012 of the Delhi High Court. The action of the ld. Assessing Officer is illegal, unlawful and unjustified which has been confirmed by the ld. CIT(A). Same is assailed as under:- 1. Annunal value a per provision of section 23:- It is submitted that annual value has to be determined in accordance with the section 23 which are quoted below:- Annual value how determined. 23. (1) For the purposes o section 22, the annual value of any property shall be deemed to be- (a) The sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is et and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to n clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect therof is less than the sum referred to in clause (a), the amount of received or receivable: The case of the assessee is fully covered under clause (c) of sub section 1 of section 23 which has the following stipulation:- (I) Where the property or any part of the property is let.

4 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. (ii) And was vacant during the whole or any part of the previous year. (II) And owing to such vacancy the actual rent received or receivable is less than the sum referred to in clause (a). It is submitted that all the aforesaid stipulation and parameters laid down in section 23(1)(c) are fully applicable to the facts of the case. The property of the assessee meets these conditions. The assessee has disclosed rent from letting out the part of the property namely Ramas Janki Vihar. Such rent has been disclosed at Rs. 2,64,500/-. Copies of rent agreements are available on paper book page no. 39 to 50. This is mentioned in the assessment order itself and it is undisputed fact. In view of this the second stipulation makes it clear that if the property remained vancant then the actual rent received is to be considered if the same is less than the amount referred in clause (a). It is submitted that clause(a) is in respect of rent which the property might reasonably be expect to let. It is a sper this clause that the ld. Assessing Officer has worked out the annual letting value of the vacant portion of the house property at Rs. 21,17,433/-. The ld Assessing Officer has not considered the provisions of section 23(1)(c). Had the ld. Assessing Officer considered clause (c) of sub-section 1 of section 23, then the actual rent received and disclosed by the assessee would have been accepted. The provisions very specifically stipulate that in a case where the property or part of the property is let and remains vacant for whole or any part of the year then in such a case actual rent received or receivable shall be deemed to be the annual value of the property. The action of the ld. Assessing Officer violates the provisions of section 23(1)(c). Hence the addition made by the ld. Assessing Officer is bad in law and deserves to be quashed and ld. CIT(A) has considered this aspect on page 10 of order in para 4 that the whole project is not a single property and it is a number of independent flats. In this regard our submission is that it is unsold of the assessee and the entire project is accounted for under the single head and single head nd single property for the assesee and if any par tof the property is let out then the assese false under the ambit of section 23(1) (c) of the Income Tax Act, 1961. Therefore the rental income declared should be the assessable income under the head ‘income from house property’ and not the ALV decided as directed by the ld. CIT(A). 2. Decision in the case of Ansal Housing Finance and Leasing Co. Ltd. in Income Tax Act, 1961 18/1999 dated 31/10/2012 is not applicable:

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The entire exercise of the ld. Assessing Officer is based on the above decision imparted by the Hon’ble Delhi High Court. It is submitted that this decision is in respect of a property which remains totally vacant and was not let out even party or for a part of the year. The facts of the case of the assessee are totally different. In the case of the assessee the part of the property was let out and income under the head house property of Rs. 1,85,150/- was disclosed after claiming deduction u/s 24(a) of the Income Tax Act, 1961 the same is also mentioned in the assessment order. In view of this the decision of the Hon’ble High Court of Delhi is of no avail. 3. Board circular is in favour of the assessee The board has issued explanatory notes on the amendments carried out by Finance act, 2001. The provisions of section 23 were amended by the Finance Act 2001. The board has issued the following clarification under Circular No. 014 of 2001 Dt. 22nd November, 2001 which goes in favour of the assessee. Circular No. 014 of 2001 DT. 22nd November, 2001 Subject Finance Act, 2001-Explanatory Notes on provisions relating to Direct Taxes Dated 22/11/2001 “29.2 The substituted section 23 retains the existing concept of annual value as being the sum for which the property might reasonably be expected to let from year to year i.e., annual letting value (ALV). However, in case of let out property, the concept of “annual rent”, has been removed. The new section provided that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is still higher than the ALV. Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owning to such vacancy, the actual rent received or receivable is less than the ALV, the sum so received or receivable shall be the annual value. In case the actual rent

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received or receivable during the year is less than the ALV, but not because of vacancy, it is the ALV which shall be taken to be the annual value.” The above para of the circular very clearly state that where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy, the actual rent received or receivable is less than the ALV, the sum so receive or receivable shall be the annual value. The circular issue by the board are of binding nature particular those which given relief to the assessee which is so held by the Hon’ble Supreme Court in the following case:- UCO Bank vs. CIT (1999)237 ITR 889 CBDT Circulars-Binding nature- Relaxation of law- CBDT has power, inter alia, to tone down the rigour of the law and ensure fair enforcement of its provisions by issuing circulars- Circulars contemplated in s. 119(2) (a) cannot be adverse to the assessee- power is given for the purpose of just, proper and efficient management of work of assessment-Circular, however, are not meant for contradicting or nullifying any provision of the statute- they are meant to mitigate the rigour of application of a particular provision-So long as such a circular is in force it would be binding on the Departmental authorities in view of the provision of s. 119 to ensure a uniform and proper administration and application of the IT Act. 4. Alternative Plea:- It is submitted that the action of the ld. Assessing Officer in making addition under the head income from house property is in contravention of section 23(1)(c), notwithstanding this the assessee makes an alternative plea also. The assessee is a builder and developer and the asessee is giving vacant falts for earning of rent on temporary basis, otherwise the main objects of the assessee is to earn profit by sale of flats not by giving flats on rent. So the assessee company has temporarily grabbed the opportunity of earning rent. It is not the regular feature of the assesse e company or business of the assessee company. The assessee company has declared rental income which has been earned by it. The income tax is levy on the income which has been earned by it. The income tax is levy on the income received and not on

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notional calculations. In other words the levy of income tax is for receipts and nor for notional amounts. We would also like to submit that the rental income of flats cannot be taxed on the basis of ALV because of owner is an occupant and such occupation in the course of and for the purpose of business as a builder. Therefore ALV cannot be assessed as income of the assessee company. The ld. CIT(A) has rejected the claim and explanation of the assessee in the grab of language of section 23(a) of the Income Tax Act. But he did not considered the last line that the actual rent received or receivable shall be the annual value. So in our case the actual rent received is to be considered a ALV because we have let our the part of the property during the year. So the whole addition confirm by the ld. CIT(A) deserves to be deleted.” Ld. Counsel for the assessee submitted that authorities below failed to appreciate

the facts that provision of section 23(1)(a) of the Act is not applicable but section

23(1)(c), is applicable. He further contended that the assesee is a builder and he

constructed the project as a whole and the projects should be considered as a single

property not as individual flats.

4.1 On the contrary, the Ld. Departmental Representatives opposed the

submissions and submitted that what the Ld. Counsel for the assessee submitting, is

contrary to the law. He submitted that by no stretch of imagination it can be

inferred that the entire project where the assessee had constructed various flats

should be considered as single property and provisions of section 23(1)(c) should be

applied, accordingly. In rejoinder, the Ld. Counsel for the assessee submitted that

there is a proposal for not taxing income from house property on the basis of the

notional income qua house property held as stock in trade. Therefore, he submitted

that the intention of the legislation is clear, where the property is kept as stock in

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trade; same cannot be subjected to notional income by applying the provisions of

section 23 of the Act.

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

records. The Ld. CIT (A) examined the issue elaborately and decided the issue as

under:-

“3.1.2 Determination:-

(i) The appellant is a builder and ha constructed a multistory project, named as Rama’s Janak Vihar at Bani Park, Jaipur. The said project consists of number of flat and showrooms. The appellant let out some of the unsold flats/showrooms of the said project and disclosed the rental income under the head ‘income from House property’ at Rs. 1,85,150/-. The AO, on the basis of the actual rent disclosed by the appellant in respect of the let out flats/ showrooms, computed ALV in respect of the remaining vacant unsold flats/showrooms and accordingly computed income under the head ‘ income from house property’ at Rs. 14,11,556/- including income of Rs. 1,85,150/- as declared by the appellant by placing reliance upon the decision of Hon’ble Delhi High Court in the case of Ansal Housing Finance and Leasing Co. Ltd. [2013] 29 taxmann.com 303 (Del.). It would be appropriate here to reproduce the provisions of section 23 of the Act as under: “ Annual value how determined.

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(c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owning to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable.” (ii) During the appellate proceedings, it was submitted by the appellant that its case is fully covered under clause (c) of sub section 1 of section 23 which has the following stipulation:- (i) where the property or any part of the property is let. (ii) and was vacant during the whole or any part of the previous year (iii) and owning to such vacancy, the actual rent received or receivable is less than the sum referred to in clause(a). (iii) It was further submitted that its property meets the above conditions whereas the AO has applied clause (a) of section 23 of the Act. It was submitted that clause (a) is in respect of rent which the property might reasonably be expected to let an the AO has not considered the provisions of section 23(1)(c). Had the Ao considered clause (c) of sub-section 1 of section 23, then the actual rent received and disclosed by the appellant would have been accepted. The provisions very specifically stipulate that in a case where the property or part of the property is let and remains vacant for whole or any part of the year then in such a case actual rent received or receivable shall be deemed to be the annual value of the property an the action of the AO violates the provisions of section 23(1)(c). Hence the addition made by the AO is bad in law an deserves to be quashed. The appellant has also tried to distinguish the case of Ansal Housing Finance and Leasing Co. Ltd. (supra) as relied upon by the AO by stating that the said decision was in respect of a property which remains totally vacant and was not let out even partly or for a part of the year. The appellant has also relied upon the CBDT Circular No. 014 of 2001 date 22nd November, 2001 by stating that as per the said circular where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owning to such vacancy, the actual rent received or

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receivable is less than the ALV, the sum so received shall be the annual value. The appellant has also relied upon a number of judicial pronouncements in support of its contention. (iv) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is noted that the appellant tried to mislead by stating that it has let out part of its property as it considered the entire project i.e. Rama’s Janki Vihar as one single property whereas the said project consisted of a umber of independent flats / showromms, some of which wer already sold by the appellant, some were let out and some were lying vacant. Thus, there wa a fallacy in the basic argument of the appellant which cannot be allowed. Hence, it is held that the project Rama’s Janki Vihar is not a single property as claimed by the appellant but consisted of a number of independent flats/showrooms and the provisions of section 23 are to be applied to each of these individual flat/showroom and not to be entire project as one unit or property. (v) It may be mentioned that the amendment in section 23 of the Act was explained by circular no. 14/2001 dated 22/11/2001 wherein it was stated that: “ The new section provides that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is still higher than the ALV. Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy, the actual rent received or receivable is less than the ALV, the sum so received or receivable shall be the annual value. In case the actual rent received or receivable during the year is less than the ALV, but not because of vacancy, it is the ALV which shall be taken to be the annual value.”

(vi) Thus, in view of the provisions of section 23 of the Act and the above circular, the clause (a) of section 23 of the Act is clearly applicable to flats/showrooms which were vacant for the whole year under

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consideration or which were vacant till the date of their sale and thus it is held that the AO has rightly applied caluse (a) to section 23 thereof. It may be mentioned that in the case of CIT vs. Ansal Housing Finance & Leasing Company Ltd. (supra), it was by Hon’ble high Court of Delhi that:

“ The assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock-in-trade, and ae not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income – which is the basis for assessment under the ALV method, should not be attributed. The argument, though attractive cannot be accepted. The levy of income tax in the case of one holding houe property is premised not on whether the asesee carried on busnes, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership.[para 13] In every case, the court has to discern the intention of the assessee; in this case the intention of the assessee was to hold the properties till they were sold. The capacity of being an owner was not diminished on whit because the assessee carried on business of developing, building and selling flats in housing estates. The argument that income tax is levied not on the actual receipt (which never arose in this case) but on a notional basis, i.e. ALV and that it is therefore not sanctioned by law, is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has restored to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received ; it is premised on what constitutes reasonable letting value, if the property were to be leased out in the market place.[para 13] As far as the alternative argument that the assesee itself is occupier, because it holds the property till it is sold, is concerned, there is no merit in this submission. While there can be no quarrel with the proposition that ‘occupation’ can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be

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used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one’s own property, in the course of business, and for the purpose of business, i.e. an active use of property, (instead of mere passive possession) qualifies as ‘own’ occupation for business purposes. This contention is, therefore, rejected. [para 14] Thus, the assessee was liable to pay income tax on the annual letting value of unsold flats owned by it under the head ‘income from house property’. [para 14] (vii) It was the alternate contentions of the appellant that it is a builder and developer and has given flats on rent on temporary basis and because the owner is an occupant and such occupation was in the course of any for the purpose of business as a builder. Therefore, ALV cannot be assessed as its income. I have duly examined the alternate contention raised by the appellant. It is to be noted that similar contention has also been considered and rejected by the Hon’ble Delhi High Court in the above referred case. Therefore, respectfully following the above decision of the Hon’ble High Court of Delhi, the alternate contention of the appellant is hereby rejected.

(viii) It may be mentioned that in the case of Susham Singla vs. ACIt [2015] 58 taxmann.com 252 (Chandigarh-Trib.), it was held by Hon’ble ITAT that:

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property was let out. Therefore, in our opinion, the ld. CIT(A) has rightly interpreted the provisions of section 23(1)(c) of the Act. Clearly, the property for which notional income has been computed by the Assessing Officer was never let out by the assessee, therefore, section 23(1)(c) of would not be applicable. (ix) In view of the above discussion, it is held that the AO was justified in determinig ALV in view of the clause (a) of section 23 of the Act in respect of unsold flats/showrooms lying vacant during the year under consideration subject to modification in the ALV of the showroom on ground floor and B- 104 in view of the discussion made in the subsequent para.

(x) During the appellate proceedings, it was submitted that the AO gas calculated the ALV of the unsold portion of the house property at Rs. 21,17,333/- which includes ALV of the showroom at Rs. 4,80,000/- and of B-404 at Rs. 1,96,574/-. It was submitted that in respect of B-404 at Rs. 1,96,574/-. It was submitted that in respect of B-404 and shops ‘B’ block, the rent agreemts were furnished before the AO, as per which, the rent received by the appellant from these portions of the house property was only of Rs. 2,64,500/- as these were let out only for part of the year, against which the AO has calculated rent of these properties for the whole year as under at Rs. 6,76,574/-:

Showrooms rent @ 40000/-per month Rs. 4,80,000/- B-404 rent @ 11.68 per sqft. Rs. 1,96,574/- Total Rs.6,76,574/-

(xi) In view of the above contention of the appellant, the assessment record was examined and it was observed that the showroom at ground floor admeasuring 400 sq. ft. and B-404 were let out for the period 06/10/2011 to 05/09/2012 and 01/01/2012 to 31/11/2012 on a monthly rent of Rs. 15,000/- as Rs. 16,500/- respectively and not for the whole year as taken by the AO. The AO is directed to re-compute the ALV of these showrooms/flats in view of the provisions of section 23 of the Act accordingly.”

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4.3 We do not see any merit into the contention of the ld. Counsel for the

assessee as the provisions are clear even the assessee had sold flats individually and

offered income from house property, the flats which was part of the project and had

been let out on rent. We find that the Assessing Officer recorded that during the

year under consideration assessee has shown income from house property at Rs.

1,85,150/-, on account of rent of Rs. 2,64,500/- received from letting out of part of

unsold portion of project Rama’s Janak Vihar, Banipark, Jaipur. The Assessing

Officer has applied ratio lay down by the Hon’ble Delhi High Court in the case of

Commissioner of Income Tax vs. M/s Ansal Housing Finance and Leasing Co. Ltd. in

ITA No. 18/1999 dated 31/10/2012. We find that the facts are identical as were in

the Commissioner of Income Tax vs. Ansal Housing Finance and Leasing Co. Ltd.

(supra). In the case in hand some of the flats are admittedly let out by the

assessee. Therefore, under these undisputed facts, respectfully fallowing the

Hon’ble Delhi High Court. We do not see any reason to interfere into the order of

the Ld. CIT(A), same is hereby affirmed. Therefore, this ground of the assessee’s

appeal is dismissed.

for the assessee reiterated the submissions as made in the written submissions. The

written submissions of the assessee are reproduced as under:-

“Ground no.2- Under the facts and circumstances of the case the ld. CIT (A) has erred in confirming the addition of Rs. 21,967/- u/s 40A(3) of the Income Tax Act, 1961. 1. Backgrounds of the section 40A(3)-

15 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. It is submitted that the purpose of introducing s. 40A(3) was to block the loopholes so that the tax liability may not be reduced artificially by deduction of bogus and unverifiable expenditure and in this connection it is relevant to got though the relevant part of the speech of the Deputy Prime Minister of Finance delivered on 29th Feb. 1968, while introducing the Finance Bill, 1968, which is found in (1969) 67 ITR (st)p.15: “Tax liability is something artificially reduced by diverting profits to relatives and associates concern in the form of excessive payments for goods and services. Claims are also made for deduction of expenses in large amounts shown to have been paid in cash, often with a view to frustrating investigation as to the identity of the recipients and the genuineness of the claim. To plug these loopholes, I propose to provide that payments made in businesses and professions to relatives or associates concern will have to pass the test of reasonableness in order to qualify for deduction. Further, I propose to provide that payments made in amounts exceeding Rs. 2,500 after a date to be notified later will be allowed as a deduction only if these are made by crossed cheques or by crossed bank drafts.” Thus the very purpose of introducing this new section was to have a check over the dishonest assessee who wants to make false deduction on account of expenditure incurred in cash. The speech clearly lays stress that in order to ascertain the identity of the recipients and the genuineness of the expenditure, the aforesaid provision was brought on statute. In other words, if the identity of the recipient and the genuineness of the expenditure is established, the spirit of the provision would stand complied with. The genuineness of the payments has also not been doubted as the payment has been made to JVVNL which is government agency. In view of this it is submitted that under the facts and circumstances of the case no addition was called for. This is supported by the Jurisdictional High Court of Rajasthan in the case of Smt. Harshila Chourdia vs. ITO in 98 ITR 349 wherein it has been held that no disallowance u/s 40A(3) could be made by taking a hyper –technical view. 2. Favourable decision of the court- There are a number of decision wherein it has been held that when the identity of the parties have been established and genuineness of payments have not been doubt, no disallowance was required to be made u/s 40A(3)-

16 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. (i) Attar Singh Gurumukh Singh Vs. Income Tax Officer 97 CTR 251 (Supreme Court) Genuine and bona fide transactions are taken out of the sweep of the section. (ii) Anupam Tele Services vs. Income Tax Officer (2014) 100 DTR 411 (Guj. High Court) Rigours of section 40A(3) are lifted when the identity of the payee is not in doubt and payment is genuine. (iii) Smt. Harshila Chordia Vs. ITO (2007) 208 CTR 208(Raj.) (iv) Kanti Lal Purshottam & Co. vs. Commissioner of Income Tax (1985) 155 ITR 519 (Raj) (v) Commissioner of Income Tax vs. Nikko Auto Ltd. (2002) 256 ITR 476 (P&H) (vi) Janambhumi v. CIT (1997) 141 CTR (Gau) 518: (1997) 225 ITR 517 (Gau): TC S18.2032 In view of the aforesaid facts the addition made by the ld. Assessing Officer u/s 40A(3) deserves to be deleted. 3. Favourable circular of the Board:- It is submitted that under circular no. 6P dated 06.07.1968 Board has stressed that provisions of section 40A(3) come into play only when the trail of expenditure is not possible. In the instant case the payee is a government agency, hence the payment of expenditure is beyond doubt. The addition so made may kindly be deleted. The ld. CIT(A) has not considered the circular of the Board which is of the binding nature and the case law cited by the assessee. The ld.CIT(A) has only mentioned that JVVNL is not the Government which is against the latest judicial pronouncement.” 5.1 On the contrary, Ld. Departmental Representatives opposed the submissions

and supported the order of the ld. CIT(A).

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

record. Ld. CIT (A) rejected the claim of the assessee in para 3.2.2 by observing as

under.

“3.2.2 Determination:

(i) The brief facts of the case are that during the year under consideration., the appellant has made cash payment of JVVNL for electricity expenses in violation of the provisions of section 40A(3) of the Act and consequently, the AO made addition of Rs. 21,967/- u/s 40A(3) of the Act. During the appellate proceedings, it was submitted by the appellant that JVVNL is a government agency and there is no doubt about the identity of the payee and the genuineness of the transactions is not doubted by the AO and thus the AO was not justified in making the said disallowance u/s 40A(3) of the Act. In support of its contention, the appellant relied upon a number of judicial pronouncements. (ii) I have duly considered the submission of the appellant, assessment order and the material placed on record. I have also considered the judicial pronouncement relied upon by the appellant and found them to be distinguishable on fact. Further, these judicial pronouncements were pertaining to the period prior to amendment made in Rule 6DD by the IT (Seventh Amendment) Rule 2008 w.e.f. AY 2009-10. The Rule 6DD of the IT rules prescribed the exceptions for making the payments in violation of section which clauses of the Rule 6DD of the IT Rules, its case is covered. The JVVNL may be a government agency but the exception in Rule 6DD is for making the payment to the government and certainly, the JVVNL is not the government. (iii) Therefore, in view of the above discussion, the addition of Rs, 21,967/- made by the AO in violation of provisions of section 40A(3) of the Act is hereby held to be justified and hence sustained.”

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5.3 We have given our thoughtful consideration to the fact of the case. The

assessee has failed to demonstrate that the payments made to the Jaipur Vidhyut

Nigam falls under the category of exemption as provided under Rule 6DD of the

Income Tax Act Rule 1962. In the absence of the same, we do not see any reason

to interfere into the order of the Ld. CIT(A). This ground of assessee’s appeal is

dismissed.

reiterated the submissions as made in the written submissions. The written

submissions of the assessee are observed as under:-

“Ground no. 3- Under the facts and circumstances of the case the ld. CIT(A) has erred in making the confirming the addition of Rs. 29,26,000/- on account of advances shown against flat booking for which sales has been made in subsequent years. 1. Facts of the case:-

The assessee constructed a house property namely Rama’s jnki Vihar. In this property various flats, showroom and basement was constructed. One of the flat no. B-104 was allotted/ sold to Shri Azad Hussain S/o Rashid Khan, Ward no. 67, Shastri Nagar, Jaipur. Against the booking/sale of this flat a sum of Rs. 28,24,000/- was received from Shri Azad Hussain. The flat was allotted on 20.02.2009 as per copy of allotment letter copy of which is available on Paper book page no. 1. Apparently the flat was allotted in Assessment Year 2009-10. Simultaneously on 20.02.2009 itself possession of the flat was also handed over to Shri Azad Hussain. A copy of the possession letter dated 20.02.2009 is also available on paper book page no. 2. Both the copy of the allotment letter a well as the possession letter are duly attested by the notary public. Since no sale deed was executed, as a matter of abundant caution a power of attorney was also executed in favour of Shir Azad Hussain

19 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. on 28.02.2009 itself. This power of attorney was registered with sub-registrar, Jaipur on 20.02.2009 itself. A copy of the power of attorney is available on paper book page no. 3 to 8. Further the assessee though its direction Shir Gauri Shankar Chhipa also executed a will in favour of Azad Hussain in respect of this flat. A copy of the will executed on 20.02.2009 duly attested by the Notary Public is also available on paper book page no. 9 to 11. The submission of the assessee is that all these documents namely the allotment letter, the possession letter, the power of attorney and the will are strong documentary evidences establishing that the flat no. B-104 stood transferred to Shri Azad Hussain on 20.02.2009 itself i.e. in Assessment Year 2009-10. As all these papers were not available at the stage of assessment proceedings as such these could not be furnished before the ld. Assessing Officer. Since these papers are at the root of the issue are strong material for deciding the same, therefore these are required to be admitted as additional evidence and considered for the purpose.

It is submitted that the ld. Assessing Officer has made the addition of the advance amount received against this flat from Shri Azad Hussain treating the sale as bogus and assessee’s on accounted money. The finding of the ld .Assessing Officer is perverse, and against the facts and law. The ld. Assessing Officer himself has quoted at length the sale deed executed by Shir Azad Hussain on 01.05.2012 regarding the sale of this flat to Smt. Rahisha W/o Shri Hamir R/o plot no. 17, Sundamapuri, Nahri Ka Naka, Jaipur for a sum of Rs. 30,00,000/-. In this sale deed he has referred to the power of attorney executed in his favour on 18.02.2009 copy cited supra. The submission of the assessee is that it is only after getting the flat from the assessee on the basis of power of attorney that Shri Azad Hussain could sale it for a sum of Rs. 30,00,000/-. The assessee has shown receipt of advance of Rs. 28,24,000/-. This amount was received before execution of the power of attorney and handling over the allotment letter and also the possession of the flat. The amount was received from Azad Hussain in the financial year 2008-09. Copies of the relevant accounts are available on paper book page no. 37 to 38.

20 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur.

It is submitted that no addition could be made in the Assessment Year under consideration because no amount was received during the year. The assessee had submitted a copy of audited accounts along with the return of income which were before the ld. Assessing Officer at the time of Assessment proceedings. The perusal of the audit report i.e. other current liabilities discloses old deposits of Rs. 29,26,000/- i.e. (2824000 from the assessee + 102000 which has been separately added by the ld. Assessing Officer). A copy of the audit report is available on paper book page no. 12 to 36. Since all the documents, the facts of the case established beyond doubt that no amount was received from Azad Hussain during the year under consideration as such no addition could be made. The amount of Rs. 28,24,000/- was received in Financial year 2008-09 relevant to Assessment Year 2009-10 i.e. at the stage of booking/allotment of the flat. It is submitted that due to inadvertence and a mistake on the part of accountant the amount of Rs. 28,24,000/- continued to be carried forward a booking advance in the books of accounts of the assessee from 2009-10 onwards to Assessment Year 2012-13, whereas this should have been transferred to sale account. The mistake has been rectified in Financial Year 2014-15 i.e. in Assessment Year 2015-16 wherein the sale has been booked. The mistake has occurred mainly on account of the fact that no sale deed was executed and only power of attorney was given to Shri Azad Hussain. This was done by Shri Azad Hussain to avoid stamp duty and registration charges for registering the property first in his name and then again in the name of the purchaser. Since Shri Azad Hussain was intending to put the flat to sale and which he actually did as is apparent from the sale deed dated 01/05/2012. So he wanted to avoid registration of sale expenditure for him. In these circumstance only power of attorney and other documents were executed. However as far as the assessee is concerned the flat no. B-104 was sold to him for a um of Rs. 28,24,000/- and which has been duly accounted for in the books of accounts. Since the transaction did not take place during the year under consideration and the amount of Rs. 28,24,000/- was also not received during the year under consideration, there was absolutely

21 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. no case for any addition in the hands of the assessee during the year under consideration. The amount of Rs. 28,24,000/- was received in Assessment Year 2009-10, relevant copies of accounts are on paper book cited supra. 2. Conclusion:- In view of the aforesaid facts the ld. Assessing Officer erred in giving the finding that the advance deposit in the name of Shir Azad Hussain of Rs. 28,24,000/- was bogus and was assessee’s own unaccounted money. The assessee has been able to establish that the amount of Rs. 28,24,000/- was received against sale of flat No. B-104 and the same was received in Assessment year 2009-10. In these circumstances the addition made deserves to be deleted. The ld. CIT(A) has rejected the arguments of the assessee because of the following reasons. (i) That there is a credit entry appearing in the books of accounts in the year under consideration and the assessee has accounting policy for recognition of revenue on accrual basis as per registry-agreement of property. (ii) That the contention of the appellant the sale took place in Financial year 2008-09 has no weight, therefore he confirmed the addition. In this regard our respectfully submission is that the credit entry appearing in the books of accounts are the carried forward balances and not the amount credited in the books of accounts credited during the year which is mandatory condition for application of section 68 of the Income Tax Act, 1961. Secondly the agreement to sale and possession letter was pertaining to Assessment Year 2009- 10 so the entry should be considered in the year 2009-10 or in Assessment year 2015-16 when the assessee has entered the sale transaction in books of accounts and the profit element of the sales should be added considering the over facts and circumstances. Ground no. 4-

22 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur. Under the facts and circumstance of the case the ld. CIT(A) has erred in not considering the additional evidences furnished by the assessee under rule 46A of the Income Tax Act, 1961. During the appellate proceedings it was submitted that the paper at page no. 1 to 11 are relevant and goes to the root of the matter and are strong material for deciding the issue. But the ld. CIT(A) refused to admit these additional evidences by saying that assessee is not falling in any circumstances under rule 46A of the Income Tax Rules, 1962. In this regard our submission is only that the paper submitted in form of copy of allotment letter (paper book page no. 1) copy of possession letter (paper book page no. 2) copy of power of attorney (paper book page no. 3 to 8) and other papers (paper book page no. 9 to 11) are relevant and are in relation to question to be decided and ground to be decided in appeal, therefore falls under the clause (4) of the Rule 46A and the assessee has also claimed that these papers were not available with him during the course of assessment proceedings and were subsequently obtained from the Azad Hussain who has executed the sale deed. Therefore, he falls under clause (c) and (d) of clause (1) of rule 46A. Therefore, these addition evidences should be considered for deciding the appeal. We also rely on the following case laws in this regard:- (i) Electra (jaipur) Pvt. Ltd. Vs. IAC 26 ITD 236 If evidence produced by assessee is genuine, reliable and proves assessee’s case than assessee should not be denied opportunity of it being produced even if he first time produces same before appellate authority. (ii) Smt. Prabhavati S. Shah vs. CIT 231 ITR 1 (Bom.) Production of additional evidence- assessee taking loans from two creditors-ITO treating loans as income from undisclosed sources as summons could not be served on creditors- Assessee wanting to prove genuineness of loan by relying on fact that amount borrowed and repaid by cheques. Assessee producing Photostat Copies of cheques and certificate from Bank before AAC. AAC refusing to admit additional evidence. AAC should have considered evidence produced by assessee regarding loan. (iii) CIT vs. Gani Bhai Wahab Bhai 232 ITR 900 (MP)

23 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur.

There is no prohibition for taking additional evidence at the appellate stage, the only condition being that the Department should not be prejudiced and should be given reasonable opportunity to rebut this additional evidence. In this case no such request was made by the representative of the Department whether they disputed this certificate of 46 per cent of the yield. In this view of the matter, the additional evidence entertained by the Tribunal cannot be said to be bad. (iv) Anmol Color India Pvt. Ltd. (2009) 121 TTJ 269 (Jaipur ITAT) The power of the first appellant authority are very wide and co-terminus with those of the AO and what AO can do...he can do and what AO fails to do, that also he can do. The embargo put on his power under r. 46A(1) and (2) has also been loosened by sub-r. (4) which also empowers the CIT(A) to direct the production of any document, the examination of witness to enable him to dispose of the appeal. Thus the legislative intent is quite clear and the CIT(A) should not jump straightway to reject, if the appellant files some evidence before him under the pretence of r. 46A(1). The powers of the CIT(A) are also to be interpreted in the context of the amended law, wherein he is no more empowered to restore back any matter which was earlier under s. 251(1)(a) necessitating a compulsory admission of the evidence before him in the interest of justice. Therefore, in the present circumstance and facts of the case, the CIT(A) was not justified in not admitting the additional evidences which were necessary for the disposal of the case. Therefore the case should be decided on the basis of all evidences before the Hon’ble Bench.” 6.1 On the contrary, the Ld. Departmental Representatives opposed the

submissions and submitted that the assessee has not shown the cost as why these

evidences were not placed before the Assessing Officer.

6.2 We have heard the rival contentions, and given our thoughtful consideration

to the facts on record. The Assessing Officer made addition by treating the

24 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur.

advances from Shri Azad Hussain as bogus. It is observed by the Assessing Officer

that vide letter dated 19/3/2015, the assessee was specifically asked to file the date

and mode of receipt of advances of Rs. 28,24,000/- from Shri Azad Hussain but

nothing was stated in the reply dated 23/3/2015. The contention of the assessee is

that, the amount was not received during the year under appeal. After considering

the totality of the facts, we are of the view that this issue requires fresh

consideration by the Assessing Officer. The Assessee is directed to furnish the

supporting evidences in respect of its claim that the advances were received in

earlier years. The AO would then verify the same by making necessary inquiry.

Therefore, this ground is allowed for statistical purposes, in the terms indicated

hereinbefore.

for statistical purposes.

Order pronounced in the open court on Friday , the 21st day of April 2017.

Sd/- Sd/- ( dqy Hkkjr) ¼foØe flag ;kno½ (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 21 /04/2017. Pooja/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Radhey Construction Pvt. Ltd, Jaipur. 2. The Respondent- The Income Tax Officer, Ward 3(2), Jaipur. 3. The CIT 4. The CIT (A) 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 822/JP/2016) vkns'kkuqlkj@ By order

एसहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

25 ITA No. 822/JP/2016 Shri Radhey Construction Pvt. Ltd., Jaipur.