IT Appeal Nos.1809 to 1812 & 2103 to 2107 (Mds.) of 2010
[ASSESSMENT YEARS 2002-03 & 2004-05 TO 2008-09]

ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER

Nagendra Prasad for the Appellant.
R. Sivaraman for the Respondent.

ORDER

1. These are appeals filed by the Revenue and assessee respectively, directed against a consolidated order dated 29.9.2010 of Commissioner of Income Tax (Appeals), Tiruchirappalli, for the impugned assessment years. Appeals of the assessee are taken up first for disposal.

2. Grievance raised by the assessee in its appeals for assessment years 2004-05 to 2007-08 is one and the same. This concerns disallowance of its claim for deduction under Section 80-IB(10) of Income-tax Act, 1961 (in short 'the Act'), for one of its housing projects called "Shri Vijaya Rengam".

3. Facts apropos are that assessee, a partnership firm engaged in construction and promotion of flats sin e 1986, was subjected to a search proceeding on 29.8.2007. Assessee had developed about 35 house projects in Tiruchi. Assessee had originally filed its returns for assessment year 2004-05 on 1.10.2004, for assessment year 2005-06 on 31.10.2005, for assessment year 2006-07 on 31.10.2006 and for assessment year 2007-08 on 31.10.02007. Thereafter, pursuant to search proceedings, assessee was issued notice under Section 153A for filing returns for these assessment years as well as assessment years 2002-03 and 2008-09. In the returns filed pursuant to such notice, it seems assessee declared the same income as shown in the original returns.

4. One of the housing projects undertaken by the assessee was called "Shri Vijaya Rengam" and assessee had claimed deduction under Section 80-IB(10) on the profits arising out of such project in its returns for assessment years 2004-05 to 2007-08. Assessing Officer was of the opinion that assessee was not owner of the land on which the housing project was being developed and assessee had merely acted as contractor. Further, as per the Assessing Officer, one of the flats of the said project exceeded 1500 sq.ft. Assessing Officer (A.O.) also noted from the valuation report submitted by the assessee that built-up area of commercial portion came to 3719 sq.ft. Thus, as per A.O., there were violation of sub-clause (c) and (d) of Section 80-IB(10) of the Act. Further, as per A.O., assessee was only a contractor and was not eligible for claiming such deduction at all. He denied the deduction for these four years and the disallowance made for these years were as under:-

Profit from the project, while effecting the disallowance of the claim preferred under Section 80-IB(10), was reworked by the Assessing Officer in accordance with Accounting Standard 7, based on a statement furnished by the assessee.

5. Assessee's appeals before CIT(Appeals) were not successful. Ld. CIT(Appeals) held that benefit under Section 80-IB(10) was available only to a land owner, who was also a developer and could not be passed on to a builder by giving a liberal interpretation of section. He thus confirmed the disallowance for all the impugned assessment years.

6. Now before us, learned A.R., strongly assailing the orders of authorities below, submitted that there was no dispute that assessee was developing the housing project. According to him, it might be true that the land ownership was with vendors. But, assessee had deployed its men, money and expertise in developing the project and for finding the buyers of the flats. According to him, it was not necessary that ownership of the land should be with the project developer for claiming a deduction under Section 80-IB(10) of the Act. Reliance was placed on the decision of Hon'ble jurisdictional High Court in the case of CIT v. Sanghvi and Doshi Enterprise [2013] 29 taxmann.com 386/214 Taxman 463 (Mad.).

7. As for one of the flats having built-up area exceeding 1500 sq.ft., learned A.R. submitted that measurement taken by the Assessing Officer included car parking space. According to learned A.R., Assessing Officer had himself admitted that the car parking space could not be included the built-up residential area and there was no violation of clause (c) of Section 80-IB(10) of the Act. Vis-à-vis commercial area exceeding 2000 sq.ft., learned A.R. submitted that when the project was started, there was no restriction on commercial area that could be built within a project. According to him, sub-section (10) of Section 80-IB was substituted by Finance (No.2) Act, 2004 with effect from 1.4.2005. Assessee had started claiming deduction under Section 80-IB(10) on "Shri Vijaya Rengam" project from assessment year 2004-05 onwards. The law as it stood prior to such substitution, did not place any restriction on the area of commercial use included in a housing project. According to him, Hon'ble jurisdictional High Court in the case of CIT v. Arun Excello Foundation (P.) Ltd. [2013] 29 taxmann.com 149/212 Taxman 342 (Mad.) had held that Section 80-IB(10) mentioned construction of any building and widest possible meaning had to be given to such building. According to learned A.R., it could not be given a restricted meaning to mean that only if all the area in a housing project was used for residential purpose, then only a deduction under Section 80-IB(10) will be available. Further, according to him, assessee had not claimed any deduction under Section 80-IB for the commercial space within the residential project and therefore, denial of claim of deduction was not justified.

8. Per contra, learned D.R. submitted that Hon'ble Apex Court in the case of Suraj Lamp and Industries (P.) Ltd. v. State of Haryana [2011] 202 Taxmann 607/14 taxmann.com 103, had held that unless a property was transferred through a registered conveyance deed, a person would not become owner. According to him, the decision given by Hon'ble jurisdictional High Court, which was relied on by the learned A.R., was without considering the above law laid down by Hon'ble Apex Court. Further, according to him, the commercial area in the project exceeded 2000 sq.ft., and by virtue of sub-clause (d) of Section 80-IB(10), assessee could not claim a deduction under the said section.

9. We have perused the orders and heard the rival submissions. It is true that assessee was not the land owner. At the same time, it is an accepted position that the assessee was a flat promoter constructing flats and selling it. The land owner was one Shri T.V. Anand and approval for project was also obtained in the name of Shri T.V. Anand. However, it is not denied that assessee was the developer of the project and when the ultimate sale of flats were effected to customers, it was a confirming party. It is not disputed by the Assessing Officer that assessee was engaged in the work of developing and constructing the building structure. However, according to him, unless assessee was owning the land, it could not be given the deduction claimed under Section 80-IB(10) of the Act. Assessing Officer, despite noting the decision of Ahmedabad Bench of this Tribunal in the case of Radhe Developers v. ITO [2003] 23 SOT 420, declined to follow the said decision stating that it had not become final. However, in our opinion, refusal to follow a decision of Tribunal, when no other contrary decisions are there, was not appropriate on the part of the Assessing Officer. Further, Hon'ble jurisdictional High Court in the case of Sanghvi and Doshi Enterprise (supra), has held that when the builder's responsibility was not limited to construction as per the directions of the owner, and where he carried the risk element that was involved in a project, then the builder could not be considered as a normal builder undertaking mere construction. Further, the decision of Ahmedabad Bench of this Tribunal in the case of Radhe Developers (supra), which was not followed by the Assessing Officer, was later confirmed by the Hon'ble Gujarat High Court in Radhe Developers (supra). Thus, the position as of now is that there is no requirement that a developer of a project necessarily had to be the owner of the land, for availing a deduction under Section 80-IB(10) of the Act.

10. Coming to the argument of the Department that one of the flats exceeded 1500 sq.ft., Assessing Officer himself had given a clear finding that the said flat No.101 in project "Shri Vijaya Rengam" was having a built-up area less than 1500 sq.ft. when the car parking area was excluded. Assessing Officer had himself also noted that there was no violation of clause (c) of Section 80-IB(10) of the Act.

11. This leaves us with the last ground taken by the Department regarding commercial area having exceeded 2000 sq.ft. There is no dispute that in the valuation report of "Shri Vijaya Rengam" project filed by the assessee, plinth area of commercial establishment was mentioned as 2567 sq.ft., equivalent to 3.81% of the total plinth area of all the residential flats. It is also not disputed that assessee had started claiming deduction under Section 80-IB(10) on the said project from assessment year 2004-05 onwards. Prior to substitution of sub-section (10) of Section 80-IB by Finance (No.2) Act, 2004 with effect from 1.4.2005, there was no specific restriction that a claim could not be allowed if there was any commercial area included in the project. In the case of Arun Excello Foundations Pvt. Ltd. (supra), where also the question was regarding eligibility for a claim of deduction under Section 80-IB(10) when commercial space was there in the built-up area, their Lordships held at paras 33 to 40 of the judgment as under:—

"33. Thus, given the fact that the one and only definition we have on the 'housing project' is under Section 80HHBA and it refers to the project of construction of a building apart from other things, we hold that the expression 'housing project' as defined therein referring to "any building", should be taken as referable to a structure that is built irrespective of its usage as for residential/commercial usage for the purpose of understanding the scope of Section 80-IB(10) of the Act. Thus, as rightly pointed out by learned senior counsel appearing for the assessee, irrespective of the purpose for which the housing project has been developed and constructed, so long as the conditions stipulated under Section 80-IB(10) of the Act are satisfied, the assessee would be entitled to the benefit of deduction under the said provision.

34. It is also a matter of relevance that the Development Control Rules also draws divisions of the zones as residential zones, commercial zones and mixed zones. Even here, residential zone is not a watertight compartment to have houses alone, given the need for providing for other infrastructural facilities, the zonal classification takes note for the space for commercial establishment in prime housing zone also.

35. As far as the assessee's case is concerned, the Revenue does not deny the fact that the assessee had complied with clauses (a) and (b) and that it has commenced the development of construction of the project on 1st October 1998 and that the area of the land satisfies the minimum required area of one acre. The one and only dispute herein is as to the built-up area, as regards the residential unit, later on converted as commercial unit.

36. It may be seen that the built-up area of 8.33%, as relatable to commercial area, has nothing to do with the dispute raised, since the assessee has not made any claim for deduction on this. However, as a matter of principle, considering the understanding that we place on the expression 'housing project', in a given case, we do not find such occupation of commercial area in a housing project would negate the claim of the assessee for 100% deduction of the profits and gains from the business of undertaking, development and construction of housing project subject to the assessee complying with the other conditions under Clauses (a), (b) and (c) of Section 80-IB(10) of the Act.

37. Leaving that aspect aside, on a reading of the three clauses, it is clear that in a given case, when the housing project, a 100% residential unit, satisfies other clauses (a) and (b) and the built-up area as given under clause (c) of Section 80-IB(10) of the Act, there could be no difficulty for the Revenue to grant the deduction. The question becomes a little complicated when 100% residential housing project has built-up area of mixed nature. While few of the units may satisfy the criteria of the built-up area of less than 1500 sq.ft., there may be units which have built-up area crossing the limit as specified in clause (c) of Section 80-IB(10) of the Act. In such an event, on a reading of the provision, we hold that the assessee would not be entitled to have the benefit of 100% absolute deduction under Section 80-IB(10) of the Act in respect of the entire project, but would be entitled to pro-rata deduction on the units satisfying the condition under Clause (c). Given the object of the provisions under Section 80-IB(10) of the Act, when the deduction to be granted is on the profits and gains of undertaking developing and constructing approved housing projects, in the absence of restrictive covenant under sub-section (10) of Section 80-IB, we do not find any justifiable ground to hold that on the mere fact of some of the units having the built-up area exceeding the condition specified under clause (c), the claim for deduction would stand rejected on the entire project. As pointed out in the decision of the Bombay High Court reported in [2011] 333 ITR 289CIT v Brahma Associates, with zones classification permitting commercial establishment in residential flats too, once the local authorities approved the project with or without the commercial use as permitted under the Rules, the project approved is eligible for deduction under Section 80-IB(10). The fact that the housing project has residential flats and commercial user, by itself, cannot, in any way, stand in the way of granting deduction. The restriction under Section 80-IB(10)(c) cannot be constructed as negative condition to deny the benefit to an assessee, when the approved project has residential units of more than 1500 sq.ft. The idea of prescribing such restriction is to encourage construction of affordable houses to common man and the restriction is not by way of negative condition to reject a claim where the housing projects have units with the built-up area exceeding the prescribed limit as well as within the limits. So too, in a case where the project contains commercial as well as residential area.

38. As far as the law as it stood during the relevant assessment year or even thereafter upto 2004-05 is concerned, the Section contains no condition that the housing project has to be out and out a residential one or is there a ceiling referable to commercial usage. For the first time in 2005, clause (d) was inserted under Finance (No.2) Act of 2004, which restricted the built-up area of the shops and other commercial establishments included in the housing project as not to exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.

39. Thus, going by Section 80-IB(10) of the Act, as it stood during the assessment year, four things are clear, namely expression 'housing project' cannot receive a restricted meaning, as had been propounded by the Revenue. The meaning of the expression "housing project", as given under Section 80HHBA of the Act, hence, would govern the case herein. Hence, the housing project would include commercial buildings also. Secondly, there is no restriction that the built-up area for the housing project cannot have any commercial units. Thirdly, the provision of law as it stood prior to the amendment in 2005 contained no such ceiling as to the extent of the built-up area of the shops and commercial units included in the housing project. Finally, this is made clear by the insertion of the clause (d) under the Finance Act in Section 80-IB(10) of the Act, which, for the first time spoke about the restriction on the commercial area in the housing project. Hence, the amendment makes clear that the law as it stood till 2005 did not contemplate any restrictions as to the extent that the commercial establishment should occupy in housing project. The only condition that the provision contemplated in clause (c) to Section 80-IB(10), as it stood during the relevant assessment, was that if there be a housing unit in a housing project, the said unit shall not have a built-up area beyond what is contemplated under clause (c) of Section 80-IB(10) of the Act, which means, in a given project, even if the total built-up area occupied by the commercial establishment is 100% or 90% or more, but less than 100% and the residential unit occupied a minor area only, the assessee would nevertheless be entitled to the relief of 100% deduction under the said provision. The only condition is that where there is residential unit, in the case of cities like Delhi and Mumbai or places within twenty five kilometers from the municipal limits of these cities, the residential unit shall be of an extent of one thousand square feet or one thousand and give hundred square feet at any other place, as the case may be.

40. Thus, in the face of the clear provisions and going by the strict construction, one cannot read any limitation into the expression "housing project" to mean the residential project alone and that if and when the projects have mixed built-up area of commercial and residential, the question of disallowance will arise only if and when the residential flats are beyond the limit as provided under sub clause (c) of Section 80-IB(10) of the Act and not otherwise. Even herein, the disallowance could be only proportionate to the extent of units in violation of the area prescribed under Clause (c). In a pure commercial housing project, the question of applicability of sub-clause (c) does not arise at all."

Thus, there can be no doubt that setting apart 3.81% of total built-up area for commercial space cannot, deprive the assessee from preferring a claim under Section 80-IB(10) of the Act. Further, assessee had not claimed such deduction on commercial area at all and this position has not been disputed by the Revenue.

12. No doubt, by virtue of substitution of sub-section (10) of Section 80-IB(10) with effect from 1.4.2005, clause (d) has been introduced wherein it is mentioned that built-up of shops and commercial establishment included in a housing project shall not exceed 5% of the aggregate built-up area or 2000 sq.ft., whichever was less. Admittedly, the commercial area in the housing project here exceeded 2000 sq.ft. Nevertheless, as noted by us, the first year in which assessee had claimed deduction under Section 80-IB(10) in respect of "Shri Vijaya Rengam" was assessment year 2004-05, when no such stipulation was there in the Act. The claim in the subsequent year was also on the same project. In our opinion, once the assessee fulfilled the requirement of Section 80-IB(10), as it stood for assessment year 2004-05, it cannot be declined such deduction in a subsequent year, for a reason that some limitations were brought into the Act through later amendment. In other words, the substituted sub-section (10) of Section 80-IB will apply only to projects, which were initiated after 1.4.2005 and not prior to that. Projects prior to that date, in our opinion, will be governed by earlier law. A benefit already given to assessee could not have been denied through a subsequent amendment, especially when assessee had acted based on the earlier position of law. Once assessee satisfied the conditions specified under sub-section (10) of Section 80-IB for assessment year 2004-05, in respect of its project "Shri Vijaya Rengam", in our opinion, for the same project in the succeeding years, it cannot be denied such benefit. The profits from this project for all the years, were worked out based on percentage completion method as prescribed in Accounting Standard 7 of Institute of Chartered Accountants of India and Assessing Officer himself had insisted on such method. In taking this view, we are fortified by the judgment of Hon'ble Gujarat High Court in the case of Manan Corprn. v. Asstt. CIT [2013] 29 taxmann.com 15/214 Taxman 373.

13. Therefore, in our opinion, none of the reasons cited by the Assessing Officer for refusing the assessee its claim for deduction under Section 80-IB(10) of the Act, in respect of the project "Shri Vijaya Rengam" was valid. Ld. CIT(Appeals) fell in error in confirming denial of such deduction. We, therefore, set aside the orders of lower authorities and direct the Assessing Officer to grant the assessee the deduction claimed under Section 80-IB(10) in respect of "Shri Vijaya Rengam" project.

14. Appeals of the assessee are allowed.
15. Now, we take up appeals of the Revenue. These appeals have been preferred for assessment years 2002-03, 2004-05, 2006-07, 2007-08 and 2008-09. Two effective grounds have been taken. First is regarding addition of unaccounted cash receipts for specific services made by the Assessing Officer, which was deleted by the CIT(Appeals). Second is regarding addition for unaccounted cash receipts for extra work made by the Assessing Officer, scaled down by the ld. CIT(Appeals) to 8% of such receipts.

16. Facts apropos are that during the search proceeding on 29.8.2007, one file which contained booking forms of purchase of flats for one of the projects named "Sri Lambodara", was found and seized. Such booking forms mentioned various amounts collected by the assessee from its customers under the following heads:—

17. During the post-search proceeding before Assistant Director of Income-tax, Tiruchy, assessee filed similar details with respect to its other projects as well, namely, Sri Ganesh Darshan, Sri Kanda, Sri Kapila, Sri Vijaya Rangam and Sri Annamalai. The amounts collected by the assessee from its customers, as per such details were as under:—

Assessee was required to explain why the sum of Rs. 2,79,83,146/-should not be treated as unaccounted receipts and added to income of the respective assessment years as per the above split-up given by it. Reply of the assessee was that the sums received from the flat buyers were for effecting payments to various statutory boards and authorities and also for meeting cost of extra work in the flats. As per the assessee, such extra works were not covered under the construction agreement but, were performed as per the requirement of individual flat buyers. It was only reimbursement of cost of such work. The amounts received for service charges were to meet cost of registration of land, Electricity Board deposit, drainage deposit, payment of house tax and for contribution to the corpus fund of the housing society to be formed. As per the assessee, the sum received also included one-year maintenance charges, which was to be handed over to such society. Assessee also submitted that registration expenses, drainage deposit, Corporation tax, corpus fund for society and one-year maintenance charges were supported by vouchers and documents and these were produced at the time of post-search proceeding before the Department and all these were found in order. Assessee did admit that such amounts were not reflected in its regular books of accounts, but, according to it, these were either reimbursements for extra work done or for paying to various authorities as mentioned above. As per the assessee, the search officials had made enquiries with the stake-holders who had admitted that extra works were done by the assessee for which payments were effected by them. Assessee reiterated that it had maintained records in respect of payments to Government and quasi-Government Boards as also to third parties, except for extra work. With respect to extra work, as per the assessee, vouchers were handed over to respective customers, once the work was completed.

18. However, the Assessing Officer was not impressed. According to him, none of the receipts, which were mentioned in the booking forms as received in cash, appeared in the regular books of account of the assessee. Further, as per Assessing Officer, the receipts were not properly vouched. The transactions were not entered in the books. Assessee had not given any receipts to the customers with regard to these amounts. Certain payments towards sales tax, Electricity Board charges were already reflected in the books of accounts and therefore, the claim of the assessee that such payments were effected outside the books from money collected in cash from the customers, was incorrect. He refused to accept the contention of the assessee that cash transactions, which were outside the books, were all done on behalf of flat buyers. Further, according to him, the possibility of expenses relating to extra work being loaded in the construction cost already accounted could not be ruled out. There were no separate register for material purchased, or for labour payments effected for the extra work. Therefore, he considered whole of the amount Rs. 1,20,53,827/- received for extra work, as income of the assessee in the respective assessments. Nevertheless, since such amount was included in the total amount of Rs. 2,79,83,146/-, which he proposed to add, no separate addition was made. Effectively, an addition of Rs. 2,79,83,146/- was made for impugned assessment years as per the break-up given in the table at para 17 above.

19. Assessee moved in appeal before CIT(Appeals) against these additions. As per assessee, there was a detailed break-up of various services rendered and money collected from the flat buyers for such services. Each of the party had given affidavit certifying the work done by the assessee on their behalf and payments effected for such work. As per the assessee, such supplementary services to flat buyers were an accepted trade practice and not something new. Hence, considering whole of the receipts as income was unfair.

20. Ld. CIT(Appeals) was appreciative of the contentions of the assessee. According to him, claim of the assessee that it had collected specific sums for specific services stood substantiated. Construction agreement with customers contained a specific clause that expenses for specific services and extra work were to be borne by the flat buyers. According to him, collections from flat buyers for specific services, were paid to Government Departments and could not be considered as income of the assessee. Thus, he held that the sum of Rs. 1,59,29,319/- collected by the assessee from its customers, for specific service, could not be added as its income.

21. As far the issue of extra work, CIT(Appeals) was of the opinion that the whole of such receipts could not be considered as income of the assessee. According to him, the view of the Assessing Officer that entire receipts towards extra work was income, was incorrect, in the absence of any specific seized records which suggested so. Assessing Officer had only surmised that there was some possibility of expenses for extra work loaded into the accounted construction costs. Considering these aspects, ld. CIT(Appeals) directed the Assessing Officer to estimate the income from extra work at 8% of the recoveries effected for such extra work. In other words, he scaled down the addition for extra work to 8% of Rs. 1,20,53,827/-.

22. Now before us, learned D.R., strongly assailing the order of CIT(Appeals), submitted that assessee had not produced before the Assessing Officer any proof for expenses incurred out of the collections made from its customers in cash, whether it was for Electricity Board connection, water connection, Corporation tax, drainage deposit or for funding the society. Nothing was brought on record to show any amount expended in any extra work. The books submitted by the assessee did not show any such receipts from customers nor were any expenses of nature mentioned by the assessee shown therein. If at all any expenses were incurred for extra work, it would have been already included in the construction cost accounted in the books. Assessee having failed to account the cash received by it from its customers, as mentioned in the booking forms seized at the time of search, could not say that all such cash receipts were expended in various services rendered to its customers. Ld. CIT(Appeals) fell in error when he held that such collections were made by the assessee for meeting statutory payments on behalf of flat owners. There was nothing on record to show that assessee had expended any sum out of the cash received for doing extra work. Despite no evidence being produced by the assessee, ld. CIT(Appeals) reduced the addition to 8% of such receipts. In other words, CIT(Appeals) gave substantial relief to the assessee without any corroborating evidence but, merely relying on the submissions of the assessee. Further, according to him, there was nothing on record to show that assessee had produced vouchers for such payments. Thus, learned D.R. submitted that the order of ld. CIT(Appeals) had to be set aside and addition of the A.O. had to be reinstated.

23. Per contra, learned A.R., in support of the order of CIT(Appeals), submitted that assessee had furnished break-up of collection and expense details head-wise and page-wise during the course of post-search enquiries before Assistant Director of Income-tax. According to him, this fact was very much noted by the Assessing Officer himself in the assessment order. A copy of such break-up was before him as well. This break-up, according to learned A.R., clearly showed that the cash receipts from the customers were only for payments of statutory fees, levies and for meeting the corpus fund of the society and maintenance expenses for one year. The break-up of receipts towards extra work, was also clearly furnished. According to him, in respect of the claim of expenses out of such receipts, assessee had also filed affidavits from various flat owners. Relying on copies of such affidavits placed at paper-book pages 7 to 103, learned A.R. submitted that it was based on these records, a break-up was computed and furnished before the ADIT, Tiruchy. In the face of such evidence, to say that assessee had not produced records in support of its claim, was incorrect.

According to learned A.R., it was true that assessee had not shown such cash receipts or payments effected therefrom in its regular books of accounts. This was only due to a reason that such money was never a part of the income of the assessee, but, were collection for payments to be effected and for meeting the cost of extra work, all of which were required by the flat owners. As per learned A.R., a flat sold to a customer, only met the condition of a standard flat and was not furnished. Almost all the customers required additional facilities as per their personal taste. These were not part of the regular income of the assessee. Such work was undertaken only on cost reimbursement basis and as a service to the customers. Nevertheless, ld. CIT(Appeals) held 8% of such amount to be profit of the assessee and assessee preferred not to file an appeal against this finding so as to give a quietus to the legal proceeding. According to him, CIT(Appeals)'s order was well-reasoned and there was no reason to interfere with such order.

24. We have perused the orders and heard the rival submissions. There is no dispute that assessee had received Rs. 2,79,83,146/-, as mentioned in table at para 17 above, in cash from its various customers and this was not accounted in its regular books of accounts. Nevertheless, assessee had all along claimed that these were only reimbursement of various statutory levies and for meeting the additional work requirements mandated by its customers outside the agreements entered with them. Details of such amounts found by the search officials at the time of search, were in respect of one of the projects of the assessee called "Sri Lambodara" alone. It is an admitted position that with respect to the other projects, assessee itself had filed similar details, during the post-search proceeding before ADIT (Inv.), Trichy. This is mentioned at para five of the assessment order itself. In the statement taken from Shri T.V. Murali, who was the Managing Partner of the assessee-firm, in answer to question No.46, it was mentioned as under:—

"Q.No.46: In the same annexure as referred in the above Q.No.45, in Sheet No.26 there is a noting that for doing extra work cash received is Rs. 80,12,762/-. Whether these receipts have been reflected in the books of accounts.

Ans: No. The above said amount was collected from the prospective flat owners towards extra work as reimbursement for the internal works carried out by the firm as an added service."
Thus, insofar as receipt for extra work was concerned, assessee all along maintained that these were reimbursement of internal work termed by it as additional service to its customers. As for the collections made by the assessee towards sales tax, service tax, registration charges, etc., there was one another question numbered as Question. No.44. The said question and reply is reproduced hereunder:—

"Q.No.44: Towards Sales Tax, Service Tax, Registration, EB, House Tax, Drainage, Water, Corpus fund, Maintenance and extra work, you have (the firm) collected from various projects as shown below:-

Why these receipts are not reflected in the books of accounts?

Ans: The above receipts do not come in the firm's books of accounts because the above mentioned expenses towards EB & other things were informed to the flat buyers at the time of booking and the same were collected and remitted to the respective authorities as service to our customers."

Thus, while admitting that the said receipts were not accounted in the books of accounts, it was also mentioned that these were received for onward transmission to respective authorities, as a service to its customers. Ld. CIT(Appeals) has clearly mentioned in para five of his order that for the payments of registration expenses, drainage deposit, Electricity Board charges, Corporation tax, corpus fund and one-year maintenance charges, there were vouchers and documents in support. In any case, assessee had filed affidavits from each of the flat owners for such receipts and payments effected therefrom. Nothing has been brought before us by the Revenue to disbelieve such affidavits. Computation of break-up of service charges received and paid was also furnished by the assessee before the ADIT, Trichy. In fact, Assessing Officer had himself referred to the chart given by the assessee to ADIT, Trichy, during the course of post-search enquiries. Therefore, preponderance of probability was that assessee had produced records to show the payments effected by it out of the service charges received from its customers. Affidavits were also there which showed that money received for services from flat owners were paid for meeting various statutory requirements on behalf of such flat owners. In such circumstances, ld. CIT(Appeals) was justified in taking a view that there was no necessity for any addition for service charges.

25. As for reimbursements for extra work, it is a normal practice of flat builders to do such extra work as required by their customers and get paid for it. No doubt, some of such expenses for extra work might have been loaded into the expenditure items accounted by the assessee for the work. But, to consider whole of the money for such extra work as income, will not be fair. Assessee, though it had not accounted the cash receipts for extra work in its books of accounts, would have necessarily incurred expenditure for meeting the additional requirements of its customers. Considering the probability of duplication of expenses, the CIT(Appeals) had held 8% of such amount to be income of the assessee over and above what it had returned. There is nothing on record to show that assessee had made any income in excess of normal profit that it would have made out of such extra work. As pointed out by learned A.R., there is no seized record which would show any income arising to the assessee out of such extra work. In fact, details with regard to such extra work as also service charges and reimbursement were given by the assessee itself before the ADIT, Trichy, during the course of post-search proceeding.

26. In such circumstances, we are of the opinion that CIT(Appeals) was justified in scaling down the addition in respect of extra work to 8% of such amounts received. We thus do not find any reason to interfere with the order of CIT(Appeals) for impugned assessment years in this regard.

27. In the result, appeals of the Revenue for all the years stand dismissed.