2010 (4) TMI 1032 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 11,00,000/- as on-money receipt.
2. Deletion of addition of Rs. 1,30,000/- as unexplained expenditure of interest payment.
3. Deletion of addition of Rs. 70,000/- as unexplained investment in fencing.
4. Deletion of addition of Rs. 6.70 lakhs as suppression of sale consideration.
5. Deletion of addition of Rs. 7,11,330/- as suppression of sale consideration.
6. Deletion of disallowance of interest expenditure of Rs. 1,48,204/-.
7. Deletion of addition of Rs. 5.72 lakhs as suppression of sale consideration.
8. Deletion of addition of Rs. 3,58,530/- as sale consideration out of books.
9. Deletion of disallowance of interest expenditure of Rs. 2,17,245/-.

Summary:

Issue 1: Deletion of addition of Rs. 11,00,000/- as on-money receipt
The Revenue challenged the deletion of Rs. 11,00,000/- added as unexplained investment by the assessee. The CIT(A) had set aside the assessment for fresh examination, but the AO re-added the amount after examining the partners of M/s. Modern Properties. The CIT(A) deleted the addition, relying on the decision in Ruby Builders and Nishant Housing Development Pvt. Ltd., stating that any addition could be made u/s 69C and would be nullified by the expenses. The Tribunal upheld the CIT(A)'s order, referencing the Gujarat High Court decisions in CIT Vs. Star Builders and Krishna Textiles Vs. CIT, which held that such payments are revenue expenditure and deductible u/s 37.

Issue 2: Deletion of addition of Rs. 1,30,000/- as unexplained expenditure of interest payment
The AO added Rs. 1,30,000/- as interest paid for delayed payment of Rs. 11 lakhs. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s order, following the same reasoning as in Issue 1.

Issue 3: Deletion of addition of Rs. 70,000/- as unexplained investment in fencing
The AO added Rs. 70,000/- for unexplained investment in fencing. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s order, following the same reasoning as in Issue 1.

Issue 4: Deletion of addition of Rs. 6.70 lakhs as suppression of sale consideration
The AO added Rs. 6.70 lakhs, alleging the sale of land to Shri Atul Dalmia was below market value. The CIT(A) deleted the addition, stating the AO's inference was guesswork without evidence of extra money received. The Tribunal upheld the CIT(A)'s order, referencing its own decision in the assessee's case for A.Y. 1996-97 and the Allahabad High Court decision in CIT Vs. Smt. Rajkumari Vimla Devi.

Issue 5: Deletion of addition of Rs. 7,11,330/- as suppression of sale consideration
The AO added Rs. 7,11,330/- for the sale of land to Smt. Ushaben Gandhi, claiming the transaction occurred in A.Y. 1997-98. The CIT(A) deleted the addition, stating the sale was in A.Y. 1998-99. The Tribunal upheld the CIT(A)'s order, referencing Gujarat High Court decisions in CIT Vs. Motilal C. Patel & Co. and CIT Vs. Ashaland Corporation, which held that profit is recognized only upon completion of sale.

Issue 6: Deletion of disallowance of interest expenditure of Rs. 1,48,204/-
The AO disallowed interest expenditure, claiming the loan was for agricultural purposes. The CIT(A) found the loan was used for business purposes and allowed the interest. The Tribunal upheld the CIT(A)'s order, as the finding was uncontroverted.

Issue 7: Deletion of addition of Rs. 5.72 lakhs as suppression of sale consideration
The AO added Rs. 5.72 lakhs for the sale of land to Shri Jitendra Patel and Shri Ashok Patel, alleging it was below market value. The CIT(A) deleted the addition, and the Tribunal upheld the CIT(A)'s order, following the same reasoning as in Issue 4.

Issue 8: Deletion of addition of Rs. 3,58,530/- as sale consideration out of books
The AO added Rs. 3,58,530/- for the sale of land to Smt. Ushaben Gandhi on a protective basis. The CIT(A) deleted the addition, and the Tribunal upheld the CIT(A)'s order, following the same reasoning as in Issue 5.

**Issue 9: Deletion of disallowance of interest expenditure