2014 (7) TMI 420 - AT - Income Tax

Deletion of addition made during search - The assessee is a partnership firm falling within M/s Pathnik Constructions Group and is engaged in the business of building construction and development Held that - The addition of ₹ 1,44,36,000/- was made by the AO on the basis of the incriminating document found at the residence of Shri Ramesh Nakrani - The question about the entries found noted in the document was asked to him only and he has only decoded the coded entries found - the aggregate amount of consideration noted in that document was found to be ₹ 3,42,63,000/-, yet the AO accepted the deposition made by Shri Ramesh Nakrani that the actual consideration was ₹ 309.36 crores - the explanation about the land deal and involvement of on money payment have been admitted by Shri Ramesh Nakrani only - The incriminating document was also found at his residence only - Shri Ramesh Nakrani has admitted that the cash portion amount (on money) was paid by him only. The profit sharing ratio of each partner, which is RKN-50%, RDN-30% and PVP-20% and the investments were made in that ratio - there is no reason to doubt his statement that the unaccounted amount was contributed by him out of his undisclosed sources - all the documents proves the contention of the assessee that the unaccounted payment involved in the land deal was financed to the extent of ₹ 1.00 crore by the undisclosed income declared by Shri Ramesh Nakrani in his hands - there was no reason to reject the submissions of the assessee firm that the unaccounted portion involved in the land deal was met out of undisclosed income delared by Shri Ramesh Nakrani - the assessee has explained the sources for making payment to the extent of ₹ 1.00 crore in respect of the land deal - CIT(A) was justified in giving credit of ₹ 1.00 crore against the addition of ₹ 1,44,36,000/- made by the AO. There should not be any doubt that the suppressed amount of consideration should be arrived at by comparing the actual consideration with the accounted consideration - the AO has adopted the figure of ₹ 1,65,00,000/- as accounted consideration and accordingly computed the suppressed amount - the claim of the assessee is admissible under Rule 27 of Appellate Tribunal Rules, 1963 the contention related to computation of unaccounted income only - the contentions require factual verification at the end of the AO - Decided against Revenue.

Issues Involved:
1. Condonation of delay in filing the cross-objection by the assessee.
2. Addition of Rs. 1,44,36,000/- made by the AO as unexplained expenditure under Section 69C of the Income Tax Act, 1961.
3. Credit of Rs. 1.00 crore offered by Shri Ramesh Nakrani as his undisclosed income.
4. Assessment of the balance amount of Rs. 44,36,000/-.

Detailed Analysis:

1. Condonation of Delay:
The cross-objection filed by the assessee was delayed by 217 days. The assessee attributed the delay to an oversight by the previous authorized representative (AR). However, the Tribunal found this explanation unconvincing, noting that the same AR, Shri D.C. Sejpal, was involved throughout the proceedings. The Tribunal emphasized that the assessee was aware of the appeal dates but chose to file the cross-objection only on 26.08.2013. The Tribunal concluded that the assessee failed to provide a valid reason for the delay and dismissed the cross-objection in limine.

2. Addition of Rs. 1,44,36,000/-:
The AO made an addition of Rs. 1,44,36,000/- as unexplained expenditure under Section 69C, based on a seized document indicating payments for a plot at Ulwe. The document showed a total consideration of Rs. 3,09,36,000/-, while the sale agreement mentioned only Rs. 1,65,00,000/-. The AO considered the difference as unaccounted cash payment. The assessee contended that Rs. 1.00 crore of this amount was already offered by Shri Ramesh Nakrani as his undisclosed income. However, the AO rejected this explanation, stating that the assessee failed to prove that the Rs. 1.00 crore offered by Nakrani was used for the unaccounted payment.

3. Credit of Rs. 1.00 Crore:
The Ld CIT(A) granted relief of Rs. 1.00 crore to the assessee, accepting that this amount was offered by Shri Ramesh Nakrani as his undisclosed income. The Tribunal upheld this decision, noting that the seized document was found at Nakrani's residence and he had admitted to making the unaccounted payment. The Tribunal found no reason to reject Nakrani's sworn statement and noted that the assessee firm had accounted for this amount in its books by crediting Nakrani's capital account and debiting the land account.

4. Assessment of Rs. 44,36,000/-:
The Ld CIT(A) confirmed the addition of Rs. 44,36,000/-, as neither the assessee firm nor Nakrani provided any explanation for this amount. The Tribunal agreed with this conclusion, stating that the assessee failed to offer any valid explanation for the balance amount.

Additional Consideration:
The assessee argued that the AO incorrectly computed the unaccounted amount by considering Rs. 1,65,00,000/- as the accounted consideration, whereas the actual accounted amount was Rs. 1,75,15,280/-. The Tribunal found merit in this contention and directed the AO to verify the books of account and recompute the unaccounted amount accordingly.

Conclusion:
The Tribunal dismissed the revenue's appeal and the assessee's cross-objection. It upheld the Ld CIT(A)'s decision to grant credit of Rs. 1.00 crore offered by Nakrani as his undisclosed income but confirmed the addition of Rs. 44,36,000/-. The Tribunal also directed the AO to verify the actual accounted consideration and recompute the unaccounted amount based on the books of account. The order was pronounced in the open court on 25th June, 2014.

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