LOKHANDWALA INFRASTRUCTURE P.LTD,MUMBAI vs. ACIT RG 21(1), MUMBAI

At the outset, it was pointed out by learned AR that the tax effect in the Revenue appeals is not exceeding Rs. 20 lakhs. Under the power vested by sec. 268A(1) of the I T. Act, CBDT has recently issued Circular No. 3/2018 dated 11.07.2018 instructing the authorities below that departmental appeals should not be filed before ITAT where the demand/tax effect does not exceed Rs. 20 lakhs. The circular specifically mentions that the instructions are applicable to all pending appeals also.

Subject to some exceptions, it is further directed by CBDT that all the departmental appeals pending before ITAT where the demand/tax effect is less than 20 lakhs should be either withdrawn or not pressed by the Departmental representative. 4. The present appeals are not covered by any exceptions mentioned in the said CBDT circular. Since the tax demand in dispute in these departmental appeals does not exceed the limit of Rs. 20 lakhs as set out by CBDT, such appeals are not maintainable in view of fore goings. Accordingly the appeals of the Department are dismissed as not pressed/withdrawn and hence infructuous. 5. In the result, the appeals filed by revenue are dismissed.

So far as merit of the addition is concerned, the assessee is aggrieved for addition of Rs.12 lakhs made on the basis of materials seized from the premises of Shri Satish Mundra who has purchased flat from the assessee. As per the AO, the seized material indicate cash payment of Rs.12 lakhs, however, assessee has clearly denied the said notings which are not in the hand writing of the assessee. Furthermore, no attempt has been made by the AO to identify the signature or hand writing of Shri Satish Mundra to examine as to whom he had paid the money nor any cross examination was allowed. As an alternate, it was also argued by learned AR that the entire on money which is a sale consideration cannot be subjected to tax and only profit element in the said sale consideration can be brought to tax. For this purpose reliance was placed on the decision of co-ordinate Bench in the case of Platinum Properties wherein 8% of on money has been sustained.

In the result, appeal of the assessee for the A.Y.2005-06 is allowed in part.

In the A.Y.2010-11, assessee is aggrieved for disallowance of purchase of Rs.2,28,22,577/-. Facts in brief are that in the assessment order, the Assessing Officer has mentioned that the construction cost includes purchase of building material such as steel, cement etc. During the course of assessment proceedings details in this regard were called for from the assessee, which were furnished. Information u/s 133(6) was called for from various purchase parties for verification of transactions with the asssessee. However, in 7 cases the notices were returned un- served.

The AO quantified the material alleged to have been consumed in construction work of ongoing projects against the above mentioned 7 parties" as under:

By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before us.

We have considered rival contentions and carefully gone through the orders of the authorities below. In this case the Assessing Officer in Para No.3 of the impugned order has made addition of Rs.2,28,22,577/- and reduced the WIP to the extent of Rs.2,07,96,832/- on account of unproved purchases. The assessee is a Private Limited Company engaged in business of development & Construction of Residential Units. During the course of assessment proceedings, information u/s. 133(6) was called from various parties for verification of transactions. However in 7 cases the notices were returned unserved. The Assessing Officer only on the M/s. Lokhandwala Infrastructure Pvt. Ltd., basis of not being able to produce these parties held that these parties are non - existent and the transaction are bogus. 14. From the record, we found that in most of the cases assessee procured materials such as steel, cement and other building materials through broker of the suppliers. In respect of these parties, assessee has submitted certain documentary evidence such as copies of said applications, invoices and payment details before the AO. All the payments for purchase were made by account payee cheques. Since material purchased have been actually used by assessee in its construction activity, only possibility of assessee having purchased the goods from the grey market has to be considered for computing extra income earned by the assessee. On the basis of facts and figures, we compute the net impact of such alleged non-genuine purchases of revenue of the assessee which is as under:- Profit calculated as per percentage completion method in P & L disallowing the non-genuine purchases. Expenses Total estimated cost of construction 1,30,00,00,000 Less: Non genuine purchases 2,28,22,577__ Net estimated cost 1,27,71,77,423 Actual cost incurred upto 31.03.2010 46,45,03,998 Less: Non genuine purchases 2,28,22,577 Net cost incurred 44,16,81,421 Percentage completion 34.583% Income Total estimated sales 1,76,71,71,285 Total Sq. ft 86,400 M/s. Lokhandwala Infrastructure Pvt. Ltd., Sold Sq. ft. 79,200 % of sale 91.667% Sales recognized as per percentage completion method = 176,71,71,285/- * 34.583% 61,11,34,139 (D) Cost accounted as per percentage completion method = 44,16,81,421/- * 91.667% 40,48,74,636 (E) Net Revenue recognized in P & L (D-E) 20,62,59,503' (F) Net impact on revenue on account of non genuine Purchases (C-F) 6,25,506/-