2011 (11) TMI 809 - AT - Income Tax

2017 (5) TMI 1581 - HC

Issues Involved:
1. Addition of Rs. 40,54,325 and Rs. 60,75,000 under Section 69 as unexplained investment for the assessment year 2004-05.
2. Disallowance of 1/3rd development expenses for Govind Vatika Project.
3. Addition of Rs. 1,24,00,000 under Section 69 as unexplained investment for Gokul Vihar Project for the assessment year 2005-06.
4. Addition of Rs. 40,51,000 as unexplained investment for Brij Vihar Project for the assessment year 2005-06.
5. Estimation of profits for Brij Vihar Project and Gokul Vihar Project for the assessment year 2005-06.
6. Addition of Rs. 1,10,00,000 as unexplained investment for Shubham Vihar Project for the assessment year 2006-07.
7. Addition of Rs. 21,00,000 as unexplained investment for land at Begus for the assessment year 2006-07.
8. Addition of Rs. 9,58,500 as unexplained cash found during search for the assessment year 2008-09.
9. Estimation of profits for Shubham Vihar Project for the assessment years 2006-07, 2007-08, and 2008-09.
10. Addition of Rs. 23,75,000 as unexplained investment for land at Machwa for the assessment year 2007-08.

Detailed Analysis:

1. Addition of Rs. 40,54,325 and Rs. 60,75,000 under Section 69 as unexplained investment for the assessment year 2004-05:
The Tribunal observed that the assessee, a land developer, used to prepare two types of agreements for land purchases. The first agreement reflected the actual sale consideration, while the second showed a suppressed amount. The assessee explained that funds for land purchases were sourced from advances received from plot bookings. The Tribunal found that the seized documents corroborated the assessee's explanation, showing both receipts and payments. Hence, the additions of Rs. 40,54,325 and Rs. 60,75,000 were deleted.

2. Disallowance of 1/3rd development expenses for Govind Vatika Project:
The AO disallowed 1/3rd of the development expenses, estimating the profit at Rs. 19,98,070 and apportioning it over three years. The CIT(A) upheld the disallowance but directed the AO to give credit for the profit already shown by the assessee. The Tribunal found the disallowance excessive and reduced it, estimating the disallowance at Rs. 1,12,485 for 2004-05 and Rs. 1,77,765 for 2005-06.

3. Addition of Rs. 1,24,00,000 under Section 69 as unexplained investment for Gokul Vihar Project for the assessment year 2005-06:
The AO added Rs. 1,24,00,000 as unexplained investment. The assessee explained that funds were sourced from advances received from bulk and retail purchasers. The Tribunal accepted the assessee's explanation, noting the modus operandi of the business and the corroborative evidence from the Govind Vatika Project. Hence, the addition was deleted.

4. Addition of Rs. 40,51,000 as unexplained investment for Brij Vihar Project for the assessment year 2005-06:
Following the same reasoning as for the Gokul Vihar Project, the Tribunal deleted the addition of Rs. 40,51,000, accepting the assessee's explanation of sourcing funds from advances received from purchasers.

5. Estimation of profits for Brij Vihar Project and Gokul Vihar Project for the assessment year 2005-06:
The AO estimated profits at higher rates, which the CIT(A) partly upheld. The Tribunal found the estimates excessive and reduced the additions, estimating the disallowance at 1/3rd of the profit shown by the assessee. For Brij Vihar Project, the addition was reduced to Rs. 4,010 for 2005-06 and Rs. 62,486 for 2006-07. For Gokul Vihar Project, the addition was reduced to Rs. 1,33,090.

6. Addition of Rs. 1,10,00,000 as unexplained investment for Shubham Vihar Project for the assessment year 2006-07:
The Tribunal accepted the assessee's explanation that funds were sourced from advances received from purchasers, following the same reasoning as for other projects. Hence, the addition of Rs. 1,10,00,000 was deleted.

7. Addition of Rs. 21,00,000 as unexplained investment for land at Begus for the assessment year 2006-07:
The Tribunal noted that the agreement was in the name of the assessee's HUF and the payment was made from the HUF's bank account. The issue was restored to the AO for verification, and the addition was deleted.

8. Addition of Rs. 9,58,500 as unexplained cash found during search for the assessment year 2008-09:
The assessee initially stated that the cash was received from 7-8 persons but later explained it was from a single person, Shri Leela Dhar. The Tribunal found the explanation credible, supported by the statement and bank account of Shri Leela Dhar. Hence, the addition was deleted.

9. Estimation of profits for Shubham Vihar Project for the assessment years 2006-07, 2007-08, and 2008-09:
The Tribunal found the AO's estimates excessive and reduced the additions, estimating the disallowance at 1/3rd of the profit shown by the assessee. For 2006-07, the addition was reduced to Rs. 1,72,692; for 2007-08, to Rs. 33,315; and for 2008-09, to Rs. 97,069.

10. Addition of Rs. 23,75,000 as unexplained investment for land at Machwa for the assessment year 2007-08:
The Tribunal noted that the agreement indicated an advance payment of Rs. 3,75,000, with no evidence of further payment. The addition of Rs. 20,00,000 was deleted, and the addition of Rs. 3,75,000 was also deleted, as the source was explained through the disclosed profits.

Conclusion:
The Tribunal partly allowed the appeals filed by the assessee and partly allowed the appeals of the Revenue for the assessment years 2005-06 and 2006-07, while dismissing the appeal for the assessment year 2007-08.

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