Dilipsinh N.Vaghela, Ahmedabad vs Department Of Income Tax

आयकर अपील सं./I.T.A. No. 2407/Ahd/2011 ( नधा रण वष / Assessment Year : 2008-09) The ITO बनाम/ Shri Dilipsinh N.Vaghela Ward-9(2) Vs. 1, Kumkum Park Society Ahmedabad Sanand Dist.Ahmedabad थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : ABRPV 5392 E (अपीलाथ% /Appellant) .. (&'यथ% / Respondent)

अपीलाथ% ओर से /Appellant by : Shri M.K. Singh, Sr.DR &'यथ% क) ओर से/Respondent by : Ms.Urvashi Shodhan, AR

ु वाई क) तार,ख / सन Date of Hearing 17/03/2015 घोषणा क) तार,ख /Date of Pronounce ment 19/03/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XV, Ahmedabad ('CIT(A)' in short) dated 22/07/2011 pertaining to Assessment Year (AY) 2008-09. The Revenue has raised the following grounds of appeal:-

1. The Ld.Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow ITA No.2407/Ahd/2011 ITO vs. Shri Dilipsinh N.Vaghela Asst.Year - 2008-09 -2-

the assessee's claim for deduction of Rs.3,78,490/- u/s.80IB(10) of the Act.

2. The Ld.Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in holding that the assessee fulfills the conditions laid down for claiming deduction u/s.80IB(10) even when the land was in the names of Shakarbhai S.Patel HUF, Kantaben M.Patel and Vinodbhai M.Patel, HUF, which are separate legal entities in the eye of law and the assessee entered into the project by a development agreement with the Mahalaxmi(Naroda) Owners Association. The entire responsibility to execute the housing project and abide by the terms and conditions of its approval right from the inception of the project till its completion rests with the Mahalaxmi(Naroda) Owners Association. Assessee was just a contractor AND not a developer.

3. The Ld.Commissioner of Income-tax(Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.7,15,237/- made by the Assessing Officer u/s.40A(3).

4. On the facts and in the circumstances of the case, the Ld.Commissioner of Income-tax(Appeals)-XV , Ahmedabad ought to have upheld the order of the Assessing Officer.

5. It is therefore, prayed that the order of the Ld.Commissioner of Income-tax(Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 27/12/2010. While making assessment the AO made disallowance for deduction claimed u/s.80IB(10) of the Act amounting to Rs.3,78,4980/-. The AO also made addition of Rs.7,15,237/- by invoking section 40A(3) of the Act on account of the payment made to Shri Kanjibhai B.Charan and Shri Omprakash R.Prajapati on the basis that the ITA No.2407/Ahd/2011 ITO vs. Shri Dilipsinh N.Vaghela Asst.Year - 2008-09 -3-

payment has been made by cash. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions allowed the appeal. Now, the Revenue is in appeal before us.

3. Ground Nos.1 & 2 are inter-connected and the same have been raised against the direction of ld.CIT(A) to AO for allowing deduction to the assessee u/s.80IB(10) of the Act. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in allowing the claim. He submitted that the AO has given a finding that the assessee is not a developer.

3.1. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the AO was not justified in disallowing the claim of deduction u/s.80IB(10) of the Act. The ld.counsel for the assessee submitted that the claim of the assessee was allowed in earlier years.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding in para-3 of his order which reads as under:-

"3. Ground No.1 is that the AO wrongly disallowed the claim of deduction of Rs.3,78,490 u/s.80IB(10) of the Act. The disallowance has been made as per para 3 of the assessment order (3.1 to 3.18).

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During the course of appellate proceedings the ld.AR argued that in AY 2006-07 the AO had disallowed 80IB(10) deduction which was found in order and allowed vide CIT(A)XV order dated 13.1.2009. It was also informed that in AY 2007-08 80IB(10) deduction has been allowed by the Department in 143(1) and no scrutiny assessment was there. It was also confirmed by the ld.AR that the facts of the case this year are same as were in AY 2006-07.

As the facts of the case are same in the present AY as were in AY 2006-07 relying upon this office appellate order dated 13.1.2009 in AY 2006-07. 80IB(10) deduction is allowed in this year also. The disallowance made by the AO u/s.80IB(10) of Rs.3,78,490 is directed to be deleted."

4.1. The aforesaid finding of the ld.CIT(A) is not controverted by the Revenue by placing any material on record. It is not disputed by the Revenue that in earlier years deduction u/s.80IB(10) has been allowed. No change into the facts and circumstances has been pointed out by the ld.Sr.DR. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, ground Nos.1 & 2 of Revenue's appeal are rejected.

5. Ground No.3 is against the deletion of addition of Rs.7,15,237/- made by the AO by invoking the provisions of section 40A(3) of the Act. The ld.Sr.DR supported the order of the AO and submitted that before the AO, no detail was filed by the assessee.

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5.1. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the AO has wrongly invoked the provisions of section 40A(3) of the Act. The ld.counsel for the assessee submitted that the ld.CIT(A) has given a finding on fact in para-5 of his order.

6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO has made addition by observing as under:-

"4. Disallowance u/s.40A(3) On verification of the copy of account of Shri Kanjibhai B.Charan (Chanatar Plaster Expenses) and Shri Omprakash R.Prajapati (Colour works) filed by the assessee, it is noticed that the assessee has made payment in contravention of section 40A(3) of the I.T.Act, 1961. As such, during the assessment proceeding the assessee was required to how cause as to why the provisions of section 40A(3) of the Act, should not be invoked and why an amount of Rs.6,85,237/- (Shri Kanjibhai B.Charan) and Rs.30,000/- (Shri Omprakash R.Prajapati) should not be disallowed. The assessee failed to furnish any documentary evidences regarding payment made to Shri Kanjibhai B.Charan and Shri Omprakash R.Prajapati and also failed to furnish cash book and bank book for verification of the genuineness of the transaction. Payment of Rs.7,15,237/- (Rs.6,85,237/- + Rs.30,000/-) is clearly covered under the provision of section 40A(3) of the I.T.Act, is disallowed and added to the total income."

6.1. However, the ld.CIT(A) has deleted the addition by observing as under:-

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"5. The appellant has submitted ledger account copy of the two persons which shows payments by cheque and not a single rupee was paid in cash. Cheque payments were made from bank account (Account number 1666) maintained by the appellant in Gujarat Mercantile Cooperative Bank Ltd. Ghodasar branch. It was informed by the ld.AR that bank account was submitted to the AO vide letter dated 23.8.2010 vide point number 3 of the reply. Copy of reply was produced during the appellate proceedings and also the bank statement.

It is to be kept in mind that Form 3CD Audit Report was filed by the appellant and in column 17 (h) the Auditors have not pointed any cash payment in contravention to provisions of section 40A(3).

As clear from the aforesaid discussion no payment has been made in cash as presumed by the AO the addition of Rs.7,15,237 is directed to be deleted."

6.2. As per provisions of section 40A(3) of the Act, the AO can disallow the expenditure if the payment or aggregate payment made to a person in a day, otherwise than by an 'account payee cheque' drawn on a bank or by an 'account payee draft', exceeds Rs.20,000/-. It is not in dispute that the expenditure is related to business. The only dispute is whether the payment made in cash is allowable u/s.40A(3) of the Act. We find that the ld.CIT(A) has given a finding on fact that the payments have been made by way of 'account payee cheque' from bank account No.1666 maintianed by the assessee in Gujarat Mercantile Co-operative Bank Ltd., Ghodasar Branch. This finding of ld.CIT(A) is not ITA No.2407/Ahd/2011 ITO vs. Shri Dilipsinh N.Vaghela Asst.Year - 2008-09 -7-

controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, ground No.3 of Revenue's appeal is rejected.

7. Ground Nos.4 & 5 are general in nature and require no independent adjudication.

8. In the result, Revenue's appeal is dismissed.

Order pronounced in the Court on Thursday, the 19th day of March, 2015 at Ahmedabad.

Sd/- Sd/- (जी.डी.अ वाल) (कुल भारत) उपा य या यक सद य ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER Ahmedabad; Dated 19/ 03 /2015 ट,.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ% / The Appellant

2. &'यथ% / The Respondent.

3. संबं6धत आयकर आयु8त / Concerned CIT

4. आयकर आयु8त(अपील) / The CIT(A)-XV, Ahmedabad

5. 9वभागीय & त न6ध, आयकर अपील,य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड< फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स'या9पत & त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad