2014 (11) TMI 835 - AT - Income Tax

Addition out of land development expenses Held that - The assessee had produced complete books of account before the AO - Details of land development expenses incurred were even produced before the CIT(A) - No substantiating evidence by way of bills or vouchers has been submitted either during the assessment proceedings or during the appellate proceedings to justify this claim of expenditure - this addition is not warranted because it is beyond the scope of provision of section 153A of the Act because this expenditure had been claimed even in the original return and was rightly allowed - The assessee did not get this work done through any sub-contractor - Therefore, no question of deducting any TDS - there is no specific objection made by the AO regarding any particular expenditure - The AO has accepted the expenditure in principle and there is no reason for making adhoc disallowance of 50% expenditure claimed by the assessee the addition is to be set aside Decided in favour of assessee. Unexplained investments - Purchase of residential plot in Balaji Nagar Yojna Held that - As per the sale deed, investment only to the extent of ₹ 1,26,000/- is found to be incurred as investment in purchase of house and beyond that there is no evidence - The assessee claimed that the above investment of ₹ 1,26,000/- was made by the assessee, though the same was not appearing in the balance sheet but it is submitted that no addition can be made as the investment in the plot was made out of savings - The DLC value of the land could not be adopted for the purposes of considering the investment in the land - There is no provision like 50C for considering the sale consideration in section 69/69A - The assessee has claimed that this investment is out of her past savings, although there is no evidence the order of the CIT(A) is upheld Decided against revenue. Addition made u/s 40A(3) deleted - purchase of agricultural land Held that - The payment to agriculturists were made under circumstances which are excluded under the provisions of Rules - The agricultural land cannot be converted to stock in trade until permission is obtained and the provisions of section 40A(3) of the Act cannot be invoked - Principles of section 40A(3) of the Act cannot be invoked in respect of agricultural land relying upon 1960 (9) TMI 11 - SUPREME Court the addition is set aside Decided in favour of assessee.

Summary

Issues Involved:
1. Disposal of two appeals of the same assessee arising from separate orders of ld. CIT(A)-I, Jaipur, for A.Ys. 2008-09 and 2009-10.
2. Addition of Rs. 21,14,745/- out of land development expenses.
3. Invalidity of addition of Rs. 1,26,000/- made for unexplained investment in the purchase of a residential plot.
4. Addition of Rs. 4,80,000/- for alleged violation of section 40A(3) of the Act for the purchase of agricultural land.
5. Telescoping effect against sustained additions.

Analysis:

1. Disposal of Appeals:
The Appellate Tribunal ITAT JODHPUR disposed of two appeals of the same assessee arising from separate orders of ld. CIT(A)-I, Jaipur, for A.Ys. 2008-09 and 2009-10 by a common order for the sake of brevity and convenience.

2. Addition of Rs. 21,14,745/- out of Land Development Expenses:
The AO disallowed 50% of the claimed land development expenses resulting in an addition of Rs. 21,14,745. The assessee contended that the expenses were genuine and fully evident from the regular books of account. The Tribunal noted that the expenditure had been claimed in the original return and was rightly allowed, with no specific objection raised by the AO. Consequently, the addition was deleted.

3. Invalidity of Addition of Rs. 1,26,000/- for Unexplained Investment:
The AO made an addition of Rs. 1,26,000 out of Rs. 3,56,250 for alleged unexplained investment in the purchase of a residential plot. The Tribunal found that only Rs. 1,26,000 was proved to be incurred as an investment, and the rest lacked evidence. The investment was claimed to be from past savings, but without proof, leading to the dismissal of this ground.

4. Addition of Rs. 4,80,000/- for Violation of Section 40A(3):
The AO disallowed Rs. 4,80,000 for the purchase of agricultural land citing a violation of section 40A(3) due to cash payments exceeding Rs. 20,000. The Tribunal held that agricultural land cannot be converted to stock in trade until certain conditions are met, and the provisions of section 40A(3) do not apply to such transactions. Consequently, the addition was deleted.

5. Telescoping Effect Against Sustained Additions:
The Tribunal allowed telescoping effect against sustained additions, ensuring that the source of unexplained investment is considered. This led to the allowance of Ground No. 5 of the appeal.

In conclusion, both appeals were partly allowed by the Tribunal, addressing the issues raised by the assessee regarding various additions made by the AO. The judgments provided detailed reasoning for the disposal of each issue, ensuring a fair and comprehensive assessment of the legal matters at hand.