2016 (1) TMI 360 - AT - Income Tax

Addition towards undisclosed sale of two flats - Held that - There is no case for making any addition towards undisclosed sale of two flats and profits derived thereon on an estimated basis as the contention of the assessee with regard to the gifts given by him to the widow of his younger brother has been accepted as genuine by the Learned AO in Asst Year 2005-06. Hence we find no infirmity in the order of the Learned CITA in this regard. - Decided in favour of assessee Addition made on an estimated basis for sale of car parking spaces - Held that - There is no case for making any addition towards undisclosed sale of two car parking spaces and profits derived thereon on an estimated basis. - Decided in favour of assessee Addition towards advance received on sale of flat - Held that - As find from the statement of the Learned AR that the said sum is offered to tax by the assessee in Asst Year 2009-10. Hence we direct the Learned AO to delete the same in Asst Year 2009-10 in order to avoid double taxation of the same amount - Decided in favour of assessee Addition on account of labour charges - non deduction of tds - Held that - TDS provisions are applicable to the assessee for Asst Year 2006-07 and hence section 40(a)(ia) of the Act has been rightly invoked on the assessee for Asst Year 2006-07. However, we find that the second proviso to section 40(a)(ia) of the Act which is introduced in the statute with effect from 1.4.2013 has been held to be retrospective in operation by the recent decision of Hon ble Delhi High Court in the case of CIT vs Ansal Land Mark Township P Ltd reported (2015 (9) TMI 79 - DELHI HIGH COURT). Accordingly, we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to examine the issue in the light of the decision rendered by the Hon ble Delhi High Court as stated supra and decide the issue in accordance with law. The assessee is also directed to provide necessary evidences and documents to prove that the payee had duly disclosed the subject mentioned receipt of labour charges in their respective returns and paid the due taxes thereon. - Decided in favour of revenue for statistical purposes. Addition being the difference between the deposits and withdrawals - Held that - We find that the entire books of accounts have been produced by the assessee before the Learned AO which fact is also mentioned in the assessment order. It is not the case of the assessing officer that the transactions in the said two bank accounts were not reflected in the books of accounts of the assessee as the Learned AO himself states that the total deposits includes a sum of ₹ 10 lacs received by assessee from Sri K.S.Panja towards advance for flat. We also find that the assessee had carried on his business transactions with the said two bank accounts and accounts have been duly audited u/s 44AB of the Act by an independent chartered accountant and books of accounts were not rejected by the Learned AO. Hence there is no case for making any independent addition in this regard.- Decided in favour of assessee Addition towards interest on bank loan - Held that - We find from the balance sheet of the assesssee, the break up of loans and advances (asset) as reflected in the balance sheet is not available on records. We also find that assessee is also having some own funds which would definitely explain the interest free advances given by him to various parties. Hence in the facts and circumstances of the case, we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to the limited extent of ascertaining whether the advances given to Sri Amal Chakraborty and M/s Akash Associates were for the purpose of business. We make it very clear that if the advances made to these two parties are less than the own funds available with the assessee, then no disallowance of interest should be made.- Decided in favour of revenue for statistical purposes. Addition on account of various expenditures - Held that - The assessee had reported transportation income in his return and hence the aforesaid expenditures are allowable even against that income - Decided in favour of assessee

Summary

Issues Involved:
1. Estimated additions of Rs. 1,76,113/- and Rs. 24,240/-.
2. Addition of Rs. 11,00,000/- towards advance received on sale of flat.
3. Addition of Rs. 3,76,538/- on account of labor charges.
4. Addition of Rs. 3,21,845/- due to the difference between deposits and withdrawals.
5. Addition of Rs. 1,37,692/- towards interest on bank loan.
6. Addition of Rs. 37,173/- on account of various expenditures.

Issue-wise Detailed Analysis:

1. Estimated Additions of Rs. 1,76,113/- and Rs. 24,240/-:
The assessee, a real estate promoter and developer, constructed a residential apartment and maintained comprehensive books of accounts. The AO disputed the assessee's claim of gifting two flats to his brother's widow and not showing closing stock, resulting in an estimated profit addition of Rs. 1,76,113/-. Similarly, an estimated profit of Rs. 24,240/- was added for alleged car parking space sales. The CIT(A) deleted these additions, and the Tribunal upheld this deletion, noting the AO's acceptance of the gift in a reopened assessment for AY 2005-06. Hence, the revenue's grounds were dismissed.

2. Addition of Rs. 11,00,000/- towards Advance Received on Sale of Flat:
The AO added Rs. 11,00,000/- as undisclosed income for an unapproved 13th flat, considering it fully constructed and handed over. The CIT(A) deleted the addition, accepting the assessee's claim of offering the income in AY 2009-10. The Tribunal held that the transfer was complete in AY 2006-07 as possession and payment were made, directing the AO to avoid double taxation by deleting the amount in AY 2009-10. Thus, this ground was allowed.

3. Addition of Rs. 3,76,538/- on Account of Labor Charges:
The AO disallowed labor charges due to non-deduction of TDS, as the assessee's gross receipts exceeded Rs. 40 lakhs in the previous year. The CIT(A) deleted the addition, stating AY 2006-07 was the first tax audit year for the assessee. The Tribunal, referencing the Delhi High Court's decision in CIT vs. Ansal Land Mark Township P Ltd, deemed the second proviso to Section 40(a)(ia) retrospective and directed the AO to verify if the payees had disclosed the income and paid taxes. Thus, this ground was allowed for statistical purposes.

4. Addition of Rs. 3,21,845/- due to Difference Between Deposits and Withdrawals:
The AO added the difference between deposits and withdrawals in the assessee's bank accounts as unexplained cash deposits. The CIT(A) deleted the addition, noting the transactions were reflected in the audited accounts. The Tribunal upheld the CIT(A)'s decision, finding no basis for a separate addition as the books were not rejected. Hence, this ground was dismissed.

5. Addition of Rs. 1,37,692/- towards Interest on Bank Loan:
The AO disallowed interest on bank loans, alleging diversion of borrowed funds for non-business purposes. The CIT(A) found no nexus between borrowed funds and interest-free advances and deleted the disallowance. The Tribunal partially upheld the CIT(A)'s decision but remanded the issue to the AO to verify the business purpose of advances to specific parties. Thus, this ground was allowed for statistical purposes.

6. Addition of Rs. 37,173/- on Account of Various Expenditures:
The AO disallowed various expenses due to lack of substantiation. The CIT(A) allowed these expenses except for personal expenses, recognizing them as business expenditures. The Tribunal found no reason to interfere with the CIT(A)'s decision, hence, this ground was dismissed.

Conclusion:
The revenue's appeal was partly allowed, and the assessee's cross-objection was dismissed. The Tribunal's order was pronounced in open court on 18/11/2015.