2014 (2) TMI 374 - AT - Income Tax

Addition on estimated sale from project - Held that - As per the facts compiled, the total sale consideration Rs.345 lakhs has been correctly disclosed in the audited accounts as on March 31, 2007 - The income stated as per the statement recorded on March 13, 2007, has been approximately 95 lakhs as against returned taxable income at Rs.99 lakhs - The AO has not correctly appreciated the facts while estimating the income by ignoring the audited book - The Ld.CIT(A) is not justified in confirming the impugned addition made by the AO on account of estimated sale profits from the project - Decided in favour of assessee. Disallowance of cost of project - Held that - The cost of project land was disallowed by the AO on the basis of the sheet of paper Annexure A found during the survey which contained the estimated account for the period 14.03.2006 to 31.03.2007 and as on the date of survey, the accounts are not complete - The authorities are not justified to make/confirm the disallowance on the false presumption based on the said sheet of paper found during the survey when the assessee is entitled for deducting the cost of acquisition the project land - Decided in favour of assessee.

Issues Involved:
1. Determination of total income by AO and confirmed by Ld.CIT(A) based on additions from estimated sale profits and disallowance of project cost.
2. Validity of additions made by AO and confirmed by Ld.CIT(A) in the assessment for the year 2007-08.
3. Justification of the actions taken by the authorities based on the evidence found during the survey under section 133A.
4. Assessment of estimated profits and disallowance of project cost against the actual facts presented by the assessee.
5. Correct interpretation of the evidence and statements recorded during the survey proceedings.

Analysis:

1. The appeal concerned the determination of total income for the Assessment Year 2007-08, where the AO assessed the total income higher than the returned income, incorporating additions of estimated sale profits and disallowance of project cost. The Ld.CIT(A) upheld these additions, leading to the appeal before the Appellate Tribunal.

2. The AO based the additions on evidence found during a survey, including a sheet of paper marked as "Annexure A" and a statement of the Managing Partner of the firm. The Ld.CIT(A) affirmed the AO's decision. The Tribunal analyzed the evidence and the explanations provided by the assessee to determine the correctness of the additions.

3. The Tribunal noted discrepancies in the AO's estimation of income, especially regarding the estimated sale profits from the project. The Tribunal found that the assessee's explanations and supporting documents contradicted the AO's assumptions, leading to the deletion of the addition related to estimated sale profits.

4. Regarding the disallowance of project cost, the Tribunal observed that the AO's decision was based on incomplete information and false presumptions from the evidence found during the survey. The Tribunal concluded that the disallowance was unjustified, as the assessee had the right to deduct the cost of acquisition of the project land.

5. Ultimately, the Tribunal allowed the appeal filed by the assessee, overturning the additions made by the AO and confirmed by the Ld.CIT(A). The Tribunal emphasized the importance of correctly appreciating the facts and evidence presented, highlighting the need for a thorough assessment based on accurate information.

This detailed analysis showcases the Tribunal's meticulous review of the evidence, statements, and legal provisions involved in the case, leading to the decision to allow the appeal and delete the additions made to the total income.

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