2013 (6) TMI 103 - HC - Income Tax

Understatement of the sale proceeds - Search u/s 132 - A.O. had determined the income u/s 44 AD and has separately deducted the commission from it - Held that - Perusing the material in the matter it is found that there was no evidence in the matter that the excess amount, if any, was collected by M/s Goyal Builders or even if it was collected then it was passed on to the respondent. There was no search, survey or seizure of the premises of the assessee. Apart from this, the department had not examined any purchaser or flat owner to verify the correctness of the aforesaid noting that some higher amount was paid by the said purchaser to M/s Goyal Builders or the fact that actual price was much higher to the price which was recorded in the account books. The Tribunal have also found that if any amount was collected in excess to the agreed price then M/s Goyal Builders could have been liable for that and not the assessee which is reasonable. Though there may be some doubt about the price of the flats but until and unless it could have been proved by some evidence, aforesaid doubt cannot take place of proof. Until and unless such noting is corroborated by some material evidence, AO erred in making addition in the income. So far as the applicability of Clause 5 of Section 44 AD is concerned, when the assessee had maintained accounts books, vouchers and other documents as required under Section 2 Sub Section 44 AA and got them audited and furnished it alongwith audit report then such benefit should have been extended to the assessee. In the present case audited accounts books were maintained and there was no question of disbelieving them in absence of any cogent evidence. In favour of assessee.

Summary

Issues:
- Applicability of Section 44AD of the Income Tax Act, 1961
- Understatement of sale proceeds by the assessee
- Challenge to the findings of the Income Tax Commissioner
- Determination of total income by the Assessing Officer
- Discrepancies in the sale proceeds as per seized documents
- Assessment of income and deductions by the Assessing Officer
- Appeal before the ITAT, Indore
- Arguments regarding the application of Section 44AD
- Dispute over the correctness of sales proceeds figures
- Lack of evidence regarding excess amounts collected by Goyal Builders
- Liability of the assessee in case of excess payments
- Examination of evidence and reasoning by the Tribunal
- Compliance with accounting and auditing requirements under the Income Tax Act

Analysis:

The case involved an appeal under Section 260-A of the Income Tax Act, 1961, where the appellant challenged the order of the Appellate Tribunal, Income Tax, Indore, dismissing the Department's appeal. The dispute arose from the construction and sale of flats by the assessee through agreements with various parties. The Assessing Officer conducted a raid under Section 132 of the Act, leading to discrepancies in the sale proceeds as per seized documents compared to the amounts accounted for by the assessee.

The Assessing Officer determined the total income, alleging understatement of sale proceeds by the assessee. The matter was taken to the Commissioner of Income Tax (Appeals) [CITA], who partially allowed the appeal, disagreeing with the application of Section 44AD by the Assessing Officer. This decision was challenged before the ITAT, Indore, resulting in conflicting findings between the Department and the assessee.

The key contention revolved around the applicability of Section 44AD, with the Department arguing for its relevance based on the seized documents. Conversely, the assessee maintained that the provisions were not applicable, as the books of accounts were duly audited and maintained. The Tribunal supported the assessee's position, emphasizing the lack of evidence regarding excess amounts collected by Goyal Builders and the absence of proof linking such amounts to the assessee.

The High Court, after thorough examination of the evidence and reasoning provided by the Tribunal, affirmed the decision, emphasizing the importance of compliance with accounting and auditing requirements under the Income Tax Act. The Court found no merit in the appeal and dismissed it accordingly, with no order as to costs.

This detailed analysis highlights the complexities surrounding the application of tax provisions, the importance of maintaining accurate financial records, and the burden of proof in tax disputes, ultimately culminating in the dismissal of the appeal by the High Court.