Vipin Madanlal Thapar Vs DCIT (ITAT Mumbai)
The assessee was engaged in the business of real estate development. During the year under consideration the assessee was engaged in construction of development of building project named ‘Swaraj Crystal’ in Navi Mumbai. The project was completed in assessment year 2012-13 and assessee has declared a total profit of Rs.30,79,372/-. The addition of Rs.1,25,60,620/- in respect of purchases made from 5 parties as referred above were made by the A.O on the ground that sales tax department has treated these as bogus. The assessee submitted before the lower authorities that the said expense were capitalized in work in progress of Rs.3,44,85,729/- as on 31.03.2011. The assessee has also submitted the copies of ledger account of the 5 parties, copy of bank statement showing payment made by account payee cheques certificate from civil engineer and site engineer etc. and submitted that without disproving these material the A.O has made the addition on the basis of information displayed on the website of the sale tax department. After taking into consideration the above facts and material on record, it is observed that assessee has not claimed such expenses as revenue expenses during the year under consideration but same were capitalized as work in progress. Therefore, any disallowance it is made its amount to reduce work in progress, since, the expenses were capitalized in the work in progress. We have considered the judicial pronouncements referred by the ld. Counsel wherein it is held that since the expenses were shown by the assessee under the head work in progress and has not been reflected in the trading account, therefore, no addition can be made. In the light of the above facts and findings, we consider that decision of ld. CIT(A) in sustaining the impugned disallowance of expenditure made by the A.O is not justified.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal filed by the assessee is directed against the order passed the CIT(A)-11, Pune, dated 14.01.2022 for A.Y. 2011-12. The assessee has raised the following grounds before us:
“1. BECAUSE the CIT(A) has erred in law in upholding the assessment order even though the underlying order under section 127 of the Income Tax Act, 1961 is bad in law.
2. BECAUSE the CIT(A) has erred in law and on facts in upholding the disallowance of 100% of the alleged bogus purchases amounting to Rs.125,60,620 ignoring the plethora of evidence placed on record mainly on the basis that the vendors did not appear before the authorities below.
3. BECAUSE the CIT(A) has erred in upholding the disallowance ignoring relevant documents like the bank certificate and the certificate of the civil engineer along with affidavit of the site supervisor.
4. BECAUSE the CIT(A) has erred in law and on facts in upholding the disallowance on the basis of certain so-called affidavits before the sales tax authorities, none of which were provided to the Appellant during the course of proceedings before the authorities below.
5. BECAUSE the CIT(A) has erred in law and on facts in upholding the disallowance on the basis of certain affidavits without providing an opportunity of cross-examination to the appellant, to test the veracity and relevance of these affidavits to the facts of the present case.
6. Without prejudice, such disallowance could only reduce the WIP and could not have been treated as income of the year.
7. BECAUSE such a huge disallowance has led to an unexpected inflation in the profit of the project being 38% of the turnover which is completely unrealistic and unattainable.
2. The fact in brief is that return of income declaring total income of Rs.13,31,371/- was filed on 30.09.2011. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 31.07.2022. The assessee was a proprietor of Shubham Builder and Developers and a director in Swaraj Formulation Pvt. Ltd. The A.O stated that as per the information received from Sale Tax Department the assessee has made purchases from the following bogus dealers listed by the Sale Tax Department during the year under consideration:
