2012 (12) TMI 199 - AT - Income Tax

Addition on account of cancellation charges realized from clients default in payments of installments Held that - Assessee has filed conformation from all the buyers whose booking were cancelled during the year under consideration. All these buyers have confirmed the receipt of the entire booking amount through account payee cheques without deducting any cancellation charges - Since the assessee has discharged its onus by filing their confirmations from the buyers in respect of the amount received after cancellation without charging any cancellation charges, therefore - addition deleted Addition on account of interest on account of delayed payments alleged that assessee group is having the practice of charging interest payments on delayed payments of ground rent and installments - addition was made on the basis of statement of Jaideep recorded by Investigation Wing on 3.08.2007 wherein he has admitted to have paid interest of Rs.6,500/- in cash to the assessee Held that - Statement recorded before the Investigation Wing does not corroborate with the seized material where the interest payment shown as Rs.49,783/- whereas Jaideep only admitted Rs.6,500/- as interest - no opportunity was provided to cross examine matter remanded to Assessing Officer - appeal is allowed for statistical purposes

Issues Involved:
1. Deletion of addition on account of cancellation charges.
2. Deletion of addition on account of realization of statutory ground rent and interest.
3. Deletion of addition on account of interest on delayed payments.
4. Deletion of addition on account of registration and electrification charges.
5. Deletion of addition on account of undisclosed transfer charges.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Cancellation Charges:
The revenue challenged the deletion of additions related to cancellation charges realized from clients for defaulting on payments. The Assessing Officer (AO) had added these charges to the income of the assessee based on seized documents indicating a 25% forfeiture policy. However, the CIT (A) granted relief, noting the lack of evidence that these charges were received and not recorded in the books. The CIT (A) emphasized that the onus to prove receipt of cancellation charges outside the books was on the revenue, which it failed to discharge. The Tribunal upheld the CIT (A)'s decision, noting that no incriminating documents were found during the search, and the presumption of a 25% charge lacked evidentiary support. The Tribunal also referenced a similar decision in the case of a sister concern, Manish Buildwell Pvt. Ltd., where the AO's assumptions were dismissed as he cannot step into the shoes of a businessman.

2. Deletion of Addition on Account of Realization of Statutory Ground Rent and Interest:
The revenue's appeal against the deletion of additions related to statutory ground rent and interest realized on behalf of the DDA was dismissed. The CIT (A) and Tribunal found that these amounts were collected and paid to the DDA, and the assessee had not claimed them as revenue expenditure. The Tribunal referenced a similar case involving Manish Buildwell (P) Ltd., where the Hon'ble Delhi High Court upheld the Tribunal's decision that such amounts, shown as recoverable in the balance sheet, do not constitute taxable income.

3. Deletion of Addition on Account of Interest on Delayed Payments:
The AO added Rs.5,00,000/- annually, estimating interest on delayed payments based on seized documents and a statement from a buyer, Jaideep, who admitted to paying interest in cash. The CIT (A) deleted the addition, noting discrepancies between the seized documents and Jaideep's statement and the lack of opportunity for the assessee to cross-examine Jaideep. The Tribunal restored the issue to the AO for fresh adjudication, emphasizing the need for a fair opportunity for the assessee to cross-examine the witness.

4. Deletion of Addition on Account of Registration and Electrification Charges:
The revenue's appeal against the deletion of additions related to registration and electrification charges was dismissed. The CIT (A) and Tribunal found that these charges, shown as recoverable in the balance sheet, were not claimed as revenue expenditure by the assessee. The Tribunal referenced the Hon'ble Delhi High Court's decision in the case of Manish Buildwell (P) Ltd., which held that such amounts, if not claimed as expenses, do not constitute taxable income.

5. Deletion of Addition on Account of Undisclosed Transfer Charges:
The AO added undisclosed transfer charges based on a seized receipt indicating a 3.6% charge on property transfers. The CIT (A) deleted the addition, noting that the receipt did not mention the assessee as the recipient of the charges. The Tribunal upheld the CIT (A)'s decision, referencing the Hon'ble Delhi High Court's decision in the case of Manish Buildwell (P) Ltd., which found no evidence to support the addition based on a single transaction.

Conclusion:
The Tribunal dismissed most of the revenue's appeals, upholding the CIT (A)'s deletions of various additions due to lack of evidence and reliance on presumptions. The only issue restored for fresh adjudication was the addition related to interest on delayed payments, emphasizing the need for a fair opportunity for the assessee to cross-examine the witness.

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