2011 (1) TMI 1412 - AT - Income Tax

Summary

Issues Involved:
1. Conditional Addition in Computation of Income
2. Initiation of Penalty Proceedings under Section 271(1)(c)
3. Charging of Interest under Section 234B
4. Deduction under Section 43B on PF and ESI
5. Land Survey Expenditure
6. Difference in Valuation of Land as Unexplained Investment

Issue-wise Detailed Analysis:

1. Conditional Addition in Computation of Income:
The first issue in the assessee's appeal concerns the CIT(A)'s confirmation of the AO's action in not reducing the conditional addition of Rs. 362.50 lakhs in the computation of income. The Tribunal referenced a prior decision in the assessee's own case for AY 2006-07, where it was held that no incriminating documents were found during the survey under Section 133A, and the voluntary disclosure made by the assessee was to avoid prolonged litigation and maintain peace with the Department. The Tribunal concluded that the voluntary disclosure could not be sustained without correlating it with undisclosed income from the impounded materials. Consequently, the Tribunal allowed the assessee's claim, noting that the AO had not found any discrepancies in the impounded documents.

2. Initiation of Penalty Proceedings under Section 271(1)(c):
The ground regarding the initiation of penalty proceedings under Section 271(1)(c) was deemed premature and dismissed by the Tribunal.

3. Charging of Interest under Section 234B:
The issue of charging interest under Section 234B was considered consequential and required no adjudication.

4. Deduction under Section 43B on PF and ESI:
In the Revenue's appeal, the first issue was the CIT(A)'s direction to the AO to allow a deduction of Rs. 42,964 under Section 43B for PF and ESI contributions. The Tribunal found that the payments were made within the due date for filing the return of income, referencing the Delhi High Court's decision in CIT v. P.M. Electronics Ltd., which held that such payments are deductible if made before the return filing due date. The Tribunal dismissed the Revenue's appeal on this issue.

5. Land Survey Expenditure:
The second issue in the Revenue's appeal was the CIT(A)'s deletion of the disallowance of Rs. 57.04 lakh for land survey expenditure. The Tribunal cited the jurisdictional High Court's decision in the assessee's own case, which held that survey expenses for determining land suitability for windmill installation are revenue expenditures. The Tribunal upheld the CIT(A)'s decision, noting that the land was part of the assessee's stock-in-trade, and the survey expenses were essential for the business.

6. Difference in Valuation of Land as Unexplained Investment:
The third issue in the Revenue's appeal concerned the CIT(A)'s deletion of an addition of Rs. 34,09,400 for unexplained investment based on a difference in land valuation. The Tribunal referenced consistent decisions, including its own in M/s. Jalaram & Co., which held that Section 50C applies only to sellers and not purchasers. The Tribunal upheld the CIT(A)'s decision, noting that the AO could not establish that the assessee paid more than the recorded price.

Conclusion:
The Tribunal allowed the assessee's appeal partly, specifically on the issue of conditional addition in computation of income, and dismissed the Revenue's appeal on all grounds. The order was pronounced in open court on 21/01/2011.