THE INCOME TAX OFFICER, WARD-1, VIZIANAGARAM vs. M/S. SAI RAM DEVELOPERS AND BUILDERS, VISAKHAPATNAM

Brief facts of the case are that the assessee is a partnership firm engaged in the business of real estate and developed a layout as part of its business. The assessee filed its return of income for the A.Y.2014-15 on 27.10.2014 admitting total income from business at Rs.7,02,500/-. The case of the assessee was taken up for scrutiny by issue of notice u/s 143(2) on 03.09.2015. During the course of assessment proceedings, the assessee was asked to submit details of expenditure incurred in the form of layout development charges, labour charges, material expenses and salaries and also the evidences in support of the same. In response to the notice, the assessee submitted ledger extracts for all the aforesaid expenses and later vide letter dt.06.12.2016 submitted that some of the vouchers were torn out and some were disfigured due to HudHud cyclone and filed some of the details for verification of the Assessing Officer (AO). However, the AO completed the assessment on 06.12.2016 and as such could not examine the vouchers. The assessment was completed by disallowing the entire expenditure except salaries of Rs.48,000/-. Thus,

Aggrieved by the order of the Ld.CIT(A), the revenue preferred appeal before the Tribunal and raised the following grounds :

The Ld.CIT(A) has erred in directing the AO to delete the addition of Rs.3,82,57,374 when the AO has noted that as the development of the layout was completed long back, there is no possibility of claiming such huge expenditure during the financial year relevant to A.Y.2014-15. 4. The Ld.CIT(A) has erred in not remanding the matter to the Assessing Officer u/s 46A(3) of the IT Rules, though the bills and vouchers in support of expenditure claimed were not produced before the AO during the assessment proceedings and submitted for the first time during the appellate proceedings only, which fact was also mentioned in the order of the Ld.CIT(A) in para 6.2. 5. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and / or at the time of hearing of appeal.

The Ld.Counsel for the revenue has submitted that the assessee filed some evidences before the Ld.CIT(A), but he has not asked for any remand report from the AO, therefore, the AO had no opportunity to examine the evidences filed before the Ld.CIT(A) and the Ld.CIT(A) arbitrarily considered the evidences placed before him and partly allowed the appeal of the assessee. Therefore, the Hon’ble Tribunal may be pleased to set aside the orders passed by the Ld.CIT(A) and allow the appeal of the revenue.

On the other hand, the Ld.Counsel for the assessee has submitted that the assessee admitted total sales of Rs.6,98,83,930/- and claimed expenditure of Rs.3,88,05,374/- apart from opening stock of 5 ITA No.625/Viz/2019 & CO No.03/Viz/2020, A.Y.2014-15 M/s Sai Ram Developers & Builders , Visakhapatnam

We have heard both the parties and perused the material placed on record. Admittedly, the assessee has claimed an expenditure of Rs.4,84,37,430/- during the A.Y.2012-13, but the AO accepted the entire expenditure except an amount of Rs.6,00,000/- due to deficiency in the vouchers and bills. But in the impugned assessment year, the AO has disallowed the entire expenditure due to deficiencies in the bills and vouchers. The assessee has admitted total sales of Rs.6,98,83,930/-, which is not possible without incurring expenditure. The contention of the assessee is that the entire extent of land is about 30 acres and it is difficult to develop the entire land in one financial year. Therefore, the assessee developed certain portion of land and sold the plots. After completion of sale of certain plots, the assessee developed some plots and sold them. Considering the facts and circumstances of the case, we are of the view that the AO is not correct in disallowing the entire expenditure. The Ld.CIT(A) has considered all these aspects and directed the AO to make disallowance of Rs.5,00,000/- due to deficiency of bills and vouchers by comparing the A.Y.2012-13. Therefore, we do not find any infirmity in the order passed by the Ld.CIT(A). So far as the violation of 46A is concerned, the Ld.CIT(A) has categorically mentioned in the order that he has gone through the bills and vouchers which were submitted by the assessee for 7 ITA No.625/Viz/2019 & CO No.03/Viz/2020, A.Y.2014-15 M/s Sai Ram Developers & Builders , Visakhapatnam

The assessee filed cross objections in support of the order of the Ld.CIT(A). Since the appeal of the revenue is dismissed, the cross objections filed by the assessee becomes infructuous, hence, dismissed.

In the result, appeal of the revenue as well as the cross objections of the assessee are dismissed.