2010 (10) TMI 1064 - AT - Income Tax

Undisclosed investment in a property - assessee failed to produce his books of accounts to substantiate otherwise - fact came to knowledge of the Revenue due to AIR information - CIT-A deleted the addition - HELD THAT - On the close perusal of the Ld.CIT(A) s order it is observed that the appellant had explained that the Investment was not projected as an Asset in the Balance sheet but was shown as the expenditure forming part of cost of construction of the project since the appellant is a builder. The ld. CIT(A) had also examined the payments met out of Indian Bank current account and verified the schedule of cash and bank balances. The ld.CIT(A) s order mainly held that the investment made by the appellant for the purpose of residential complex has not been reflected under Fixed Assets in the financial statements. In this connection the addition without any evidence or material on record cannot be sustained and upheld. The AO has no cogent reason to disallow the said expenditure when the payment was made through appellant s bank account and the expenses are accounted in the books of accounts. In view of this I am of the considered opinion that the disallowance made by the AO is not justified and the same has to be deleted. The arguments put forth by the ld. AR and the Ld.DR are quit contrary to the facts observed by the ld.CIT(A) in his order - In these circumstances the matter may be remitted back to the file of the ld.AO for de novo consideration with respect to the loan issue of purchase of property in Peenya. In the event the assessee claims that he has not purchased the property as revealed in the AIR before the ld.AO then it would be proper for the ld.AO to obtain the Sale Deed from the Sub Registrar s office to prove the revenue s claim. Assessment order based only on the AIR report will not stand in the eye of law. The appeal of the revenue and the cross-objections of the assessee are allowed for statistical purposes.

Summary

Issues:
Appeal by Revenue against CIT(A) order for A.Y. 2006-07 regarding deletion of addition for undisclosed investment in property in "Peenya" based on AIR information. Cross Objection by assessee (with delay condonation) against same order.

Analysis:
1. Grounds of Appeal by Revenue: Revenue raised five grounds in appeal, focusing on deletion of addition for undisclosed investment in "Peenya" property. Ld. CIT(A) was accused of error for deleting the addition based on AIR information without adequate evidence from the assessee's books of accounts.

2. Cross-Objection by Assessee: Assessee raised three grounds, emphasizing that CIT(A) rightly deleted the impugned addition after assessing the evidences provided. Assessee argued against AO's conclusion and supported CIT(A)'s decision.

3. Facts and Assessment: Assessee, a real estate developer, filed return for A.Y. 2006-07 admitting income. Revenue discovered property purchases in Bangalore and Madurai through AIR. Discrepancy arose regarding Peenya property. Assessee initially failed to provide fixed assets schedule but later demonstrated inclusion of Madurai property in balance sheet.

4. CIT(A) Decision: CIT(A) analyzed evidence, concluding that investment in Khata No.337 was properly reflected in accounts as construction cost. Disallowed addition of Rs. 76,30,000 due to lack of evidence against the expenditure. Ordered AO to delete the addition.

5. Arguments and Remittance: Assessee's representative argued that no Peenya property was purchased, challenging AO's reliance on AIR. Requested remittance to AO for further verification. Revenue supported AO's decision based on AIR report.

6. Tribunal Decision: Tribunal reviewed CIT(A)'s order and arguments. Noted discrepancies between parties' claims. Directed remittance to AO for de novo consideration on Peenya property purchase issue. Emphasized the need for substantiating claims with proper documentation.

7. Conclusion: Tribunal allowed appeal by Revenue and cross-objections by assessee for statistical purposes. Directed remittance to AO for thorough examination of Peenya property purchase claim. Acknowledged the importance of substantiating claims with supporting documents for fair assessment.