2014 (8) TMI 243 - AT - Income Tax

Advances received as unproved credits Held that - CIT(A) rightly was of the view that without bringing any cogent material on record, the AO could not have made the addition under challenge - There is nothing on record that the AO wanted the appellant to produce the prospective purchasers for his examination, so as to adhere to the principles of natural justice - There was no reason to interfere with the order of the CIT(A) as nothing was brought on record that the amount received as advance for sale of plot is in fact, unsecured loan - There is confirmation on record and the advances could have been settled at the time of sale of plots in the business in which assessee is indulging decided against Revenue. Gifts received from brother-in-law through others Held that - CIT(A) is rightly was of the view that the assessee has explained that the donee has given post -dated cheques to his father, who is a small time businessman- As advised by his son, he has sent one of his employees to withdraw the money by submitting post-dated cheques and that s why the difference in signatures, which explanation was not accepted by the AO during the assessment proceedings - Except for not accepting the explanation given by the appellant, no other cogent material has been brought on record by the AO in making the impugned addition - there was confirmation from the assessee s brother-in-law of the various amounts given to him - Since the source and the identity were established, there is no need to treat the amount as unexplained cash credit Decided against revenue. Restriction of development expenses Held that - There was no reason to interfere with the order of the CIT(A) - there is no basis for disallowing the entire development expenditure when assessee is in the business of plot development and sale thereafter - CIT(A) restricted the amount to 10% of the expenses incurred - Even though, the disallowance of expenditure is made under section 37(1) nothing was brought on record by Revenue why the entire amount should be disallowed thus, the order of the CIT(A) is upheld Decided against Revenue. Commission on sales to representatives Held that - There was no reason to interfere with the order of the CIT(A) - Payment of commission is an incidental expenditure in the business of real estate - Without even giving show cause notice or asking for the details AO disallowed the expenditure without any reason Decided against Revenue. Unexplained cash credit Held that - There was no reason to consider the Revenue ground as the AO and Ld. CIT should have accepted the mistake committed by the AO in making addition - Some of the amounts were already treated as income like gifts received from brother-in-law - there is certainly double addition by the AO - Just because assessee transferred funds from his business account to personal account, the same does not become unexplained cash credit Decided against Revenue.

Issues Involved:
1. Addition of Rs. 1,90,000/- as unproved credits.
2. Gift of Rs. 3,70,000/- received from brother-in-law.
3. Gifts of Rs. 3,25,000/- and Rs. 3,70,000/- received from brother-in-law.
4. Disallowance of development expenditure.
5. Disallowance of commission on sales to representatives.
6. Unexplained credit of Rs. 7,40,000/-.
7. Restriction of development expenditure to 10%.
8. Allowance of commission of Rs. 2,80,000/- to sales representatives.
9. Unexplained credit in the personal capital account of Rs. 1,22,000/-.

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,90,000/- as unproved credits:
The Assessing Officer (A.O.) added Rs. 1,90,000/- shown by the assessee as 'advance received for sale of plots' as unsecured loan due to lack of confirmation. The Ld. CIT(A) deleted the addition, noting that the A.O. had not requested such confirmations during the assessment proceedings. The Tribunal upheld the Ld. CIT(A)'s decision, stating there was no evidence to support the A.O.'s claim that the amount was an unsecured loan.

2. Gift of Rs. 3,70,000/- received from brother-in-law:
The A.O. disbelieved the gift and its confirmations. The Ld. CIT(A) deleted the addition, noting that the assessee provided confirmation from his brother-in-law, who worked in the USA, and the gift was from his NRE account. The Tribunal confirmed the Ld. CIT(A)'s decision, emphasizing the established source and identity of the donor.

3. Gifts of Rs. 3,25,000/- and Rs. 3,70,000/- received from brother-in-law:
For the A.Y. 2008-09, the Tribunal dismissed the Revenue's ground, reiterating the reasons stated for the gift of Rs. 3,70,000/- in the previous year. The assessee filed confirmations, and the gifts were consistently received from the same person.

4. Disallowance of development expenditure:
The A.O. disallowed the entire development expenditure of Rs. 23,35,000/- due to lack of material evidence. The Ld. CIT(A) restricted the disallowance to 10%, considering the nature of the business and the self-made vouchers. The Tribunal upheld this decision, finding it reasonable given the facts of the case.

5. Disallowance of commission on sales to representatives:
The A.O. disallowed Rs. 1,80,000/- paid as commission due to lack of supporting evidence and non-deduction of tax at source. The Ld. CIT(A) deleted the addition, noting that the assessee, being an individual, was not covered by TDS provisions and the A.O. had not requested evidence. The Tribunal upheld the Ld. CIT(A)'s decision, recognizing the incidental nature of such expenditure in real estate business.

6. Unexplained credit of Rs. 7,40,000/-:
The A.O. treated Rs. 7,40,000/- credited to the assessee's capital account as income. The Ld. CIT(A) deleted the addition, noting it resulted from a mistaken notion by the A.O. and would lead to double addition. The Tribunal confirmed this decision, acknowledging that some amounts were already treated as income and the transfer of funds from business to personal account did not constitute unexplained cash credit.

7. Restriction of development expenditure to 10%:
For A.Y. 2009-10, the Tribunal upheld the Ld. CIT(A)'s decision to restrict the disallowance of development expenditure to 10%, following the same reasoning as in A.Y. 2008-09.

8. Allowance of commission of Rs. 2,80,000/- to sales representatives:
For A.Y. 2009-10, the Tribunal upheld the Ld. CIT(A)'s decision to allow the commission paid to sales representatives, following the same reasoning as in A.Y. 2008-09.

9. Unexplained credit in the personal capital account of Rs. 1,22,000/-:
For A.Y. 2009-10, the Tribunal upheld the Ld. CIT(A)'s decision to delete the addition of Rs. 1,22,000/- as unexplained credit, following the same reasoning as in A.Y. 2008-09.

Conclusion:
The appeals of the Revenue were dismissed in all instances, with the Tribunal confirming the Ld. CIT(A)'s decisions on all issues. The Tribunal emphasized the importance of proper evidence and reasonable consideration of the facts in the assessment process.

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