2013 (12) TMI 411 - AT - Income Tax

Addition on account of cost of land and estimation of profit @ 15% of turnover Held that - The CIT(A) has not considered the books of accounts maintained by the assessee while estimating the income @15% of turnover These books were impounded during the course of survey u/s 133A - The books impounded were ignored and the cost of land declared in these books was not considered The issue was set aside for fresh adjudication.

Summary

Issues:
1. Disallowance of site development expenses.
2. Disallowance under section 40(a)(ia) for marketing commission, office expenses, advertisement, and commission.
3. Addition towards inflation of cost of land.

Issue 1: Disallowance of site development expenses:
The CIT(A) held that no further disallowance of expenses is warranted since the books of account were directed to be estimated. Consequently, the CIT(A) directed the AO to delete the disallowance of 20% of site development expenses amounting to Rs. 8,55,754.

Issue 2: Disallowance under section 40(a)(ia) for marketing commission, office expenses, advertisement, and commission:
The CIT(A) deleted the disallowances made by the AO under section 40(a)(ia) based on the argument that the expenses had already been paid during the year and were not payable as of 31st March. The CIT(A) relied on a decision of the ITAT, Vizag Special Bench to support this stance.

Issue 3: Addition towards inflation of cost of land:
The AO added Rs. 25,97,005 to the income of the assessee due to the discrepancy between the amount debited in the P&L account for the cost of land and the actual cost as per the sale deed. The CIT(A) rejected the books of account and estimated the income of the assessee at 15% of the turnover, allowing for deductions towards remuneration and interest to partners.

The revenue raised objections to the CIT(A)'s decision, arguing that the profit should have been estimated based on the registered document value of the land purchased. The assessee also contested the estimation of net profit at 15% of turnover, highlighting the financial position and expenses incurred. The Tribunal set aside the appeal for statistical purposes, directing the AO to reexamine the cost of land based on impounded documents and statements made by partners during the survey. Consequently, both appeals were allowed for statistical purposes.