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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
Before: SH.G.D.AGRAWAL, HON’BLE & SH.K.N.CHARY
ORDER PER K.N.CHARY, JUDICIAL MEMBER Aggrieved by the order dated 15.02.2016 in Appeal No.108/14-15 of the Commissioner of Income Tax (Appeal) [in short “CIT(A)”]-6, Delhi for 2011-12 Assessment Year, the assessee filed this appeal challenging the addition of Rs.4,11,00,000/- on account of expenditure incurred on land development and working progress.
Briefly stated facts are that the assessee is a company incorporated on 15.09.2010 under the provision of Companies Act, 1956 and is engaged in the business of development of housing projects. For AY 2011-12, the assessee filed return of income on 28.09.2011 declaring a loss of Rs.1,20,627/. During the scrutiny, the AO found that work-in-progress of project was declared at Rs.4,11,00,000/- along with the closing stock of Rs.91,85,000/- and when called
SA No.622/Del/2017 & ITA No.-4717/Del/2017 upon to furnish the details, the assessee explained that the company purchased land in Rishikesh and the entire work is a part of the development of a project, and for this purpose they spent Rs.4,11,00,000/- on account of payment to two contractors namely M/s AMR Construction Limited, Hyderabad and Allied Global Infrastructure Limited, Kolkata. According to AO in spite of repeated demands including the service of query note dated 21.02.2014, the assessee failed to furnish the copies of contracts and other details. AO recorded that the vendors did not confirm the transactions with the assessee, in response to the notice issued u/s 133(6) of the Act and the assessee also did not furnish any evidence to substantiate the nature of work carried out by the vendors, as such treating the expenditure as bogus AO added the same to the income of the assessee. The appeal preferred to the Ld.CIT(A) was also dismissed on the same grounds. Hence, this appeal filed by the assessee before us.
Alongwith the appeal, the assessee preferred the stay petition seeking stay of demand of Rs.1,85,12,750/- pending disposal of the appeal.
Heard the Ld. Counsel on either side and perused the material papers on record. The contention of the Ld.AR is that the assessee did not claim deduction of Rs.4,11,00,000/- but they have shown it as work in progress. Ld.AR submitted that when no deduction is claimed in respect of this particular expenditure, disallowing the same and to make any addition on that basis does not arise. He submitted that at best the AO can reduce the working progress to the extent of expenditure that is not proved. However, Ld. Counsel submitted that they have no objection for reducing the work-in-progress. In support of this contention, he brought to our attention the P&L A/c and the notes forming part of the balance
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SA No.622/Del/2017 & ITA No.-4717/Del/2017 sheet incorporated at Page Nos. 8 1to 10 of the Paper Book to demonstrate that this expenditure is not debited. However, it could be sent that at Page No.9 vide Schedule-IV under the head “other current assets” work-in-progress (in short “WIP-project”) an amount of Rs.4,11,00,000/- is shown.
Having regard to the facts and circumstances, we are satisfied that instead of making any disallowance of any expenditure which is not claimed as deduction, but shown as work in progress, the AO should have reduced the work in progress.
In these circumstances, in view of the submission of Ld. AR, we direct the AO to reduce the work in progress to compute the income of the assessee. Since we dispose of the appeal itself, the stay petition becomes infructuous and is liable to dismiss.
In the result, stay petition is dismissed as infructuous and the appeal of the assessee is allowed.
The order is pronounced in the open court on 07th November, 2017.