2015 (5) TMI 929 - AT - Income Tax

Undisclosed income - receipt of on money - addition on seized materials and as admitted by the working partner of the assessee firm - Held that - The undisputed facts emerged from the above discussion is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench rendered in the case of ITO vs. Shri Siddharth S.Patel (2010 (4) TMI 1032 - ITAT AHMEDABAD). The provisions of section 2(47) would not be applicable. The assessee has disclosed the on money in the return of income in the year in which the sale-deed was executed. The Revenue has not rebutted this contention. Therefore, in the light of case of CIT vs. Motilal C.Patel and Co. (1988 (4) TMI 36 - GUJARAT High Court), such amount can be subjected to tax when sale-deed is actually executed. Since the Hon ble Gujarat High Court has held that the amount would become for the assessment year in which the sale transaction is completed. In the case in hand, it is not disputed that sale-deeds were executed in the year subsequent to the year under appeal. Therefore, in view of the binding precedent, we are of the considered view that the authorities below were not justified in taxing the amount including on money during the year under appeal. Further, the assessee has submitted that it has offered for tax the amount including on money in the year whenever sale-deed was executed. This fact is also not controverted by the Revenue by placing any contrary material on record. Therefore, the AO is hereby directed to verify whether the assessee has offered for taxing the amount as its income in the year when the sale-deed was executed. If it is found that the assessee has offered the amount in the year in which the sale-deed was executed, then the AO would delete the addition made in this year. We are conscious of the fact that this Tribunal had taken a contrary view, since now the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel is brought to our notice and no distinguishing fact is pointed out by the ld.Sr.D.R. In the light of the above discussion, the appeal of the assessee (in the case of M/s.Ohm Developers) is allowed for statistical purposes in the terms as indicated hereinabove. - Decided in favour of assesse for statistical purposes.

Summary

Issues Involved:
1. Reduction of undisclosed income by CIT(A).
2. Confirmation of additions by CIT(A) on account of alleged profits from construction and sale of flats.
3. Validity of time-barred assessment orders.

Detailed Analysis:

1. Reduction of Undisclosed Income by CIT(A):
The Revenue's appeal contested the reduction of undisclosed income from Rs. 3,08,01,600/- to Rs. 2,29,20,847/- by CIT(A). The Tribunal noted that the CIT(A) had based the reduction on the statement of a partner, Shri Ketan O. Der, who admitted to receiving 'on money' of Rs. 5,39,63,889/- and net profit of Rs. 2,29,20,847/-. The Tribunal upheld the CIT(A)'s decision, emphasizing that the seized documents and statements during the search corroborated the reduced figure. The Tribunal directed the AO to verify if the assessee had offered the amount in the year the sale-deed was executed and to delete the addition if verified.

2. Confirmation of Additions by CIT(A) on Account of Alleged Profits from Construction and Sale of Flats:
Both assessees appealed against the confirmation of additions by CIT(A) regarding profits from construction and sale of flats. The Tribunal examined whether the definitions of transfer under sections 2(47) and 269UA(f) of the Act applied and the correct year for taxing the receipt of 'on money'. It was argued that the income should be taxed when the sale-deed was executed, not when the 'on money' was received. The Tribunal cited precedents, including CIT vs. Ashaland Corporation and CIT vs. Motilal C. Patel & Co., concluding that the income should be taxed in the year the sale-deed was executed. The Tribunal directed the AO to verify if the income was offered in the correct year and to delete the addition if confirmed.

3. Validity of Time-Barred Assessment Orders:
The assessees argued that the assessment orders were time-barred and should be quashed. The Tribunal did not provide a detailed analysis on this issue within the summarized judgment, focusing instead on the substantive issues of undisclosed income and the timing of taxability.

Conclusion:
The appeals of the assessees were allowed for statistical purposes, directing the AO to verify the timing of income declaration and delete additions if the income was offered in the correct year. The Revenue's appeal was dismissed, upholding the CIT(A)'s reduction of undisclosed income. The Tribunal's decision emphasized adherence to legal precedents and proper verification of income declaration.