2018 (1) TMI 1436 - AT - Income Tax

Addition of suppressed sales made by the AO - Held that - Even though the assessee had disclosed 1.7% net profit against the total sales of ₹ 71.99 lakhs, in view of the facts and circumstances of the case and the detailed finding of Ld. CIT(A) which goes un-rebutted at the end of both the parties, we find merit in the finding of Ld. CIT(A) estimating net profit @ of 8% on the Bhoomiyaji Land & Finance 9 sales of ₹ 1 crore which takes care of suppressed portion of sales unearthed by the Ld. AO on the basis of his investigation and estimating of higher profit earned on the suppressed sales. We therefore, in the given facts and circumstances of the case find no reason to interfere in the finding of the Ld. CIT(A) deleting the addition of ₹ 1,00,19,593/- in sustaining the addition at ₹ 6,29,657/-. Unproved creditors - advance receipts for plot booking - Genuineness of the transactions - Held that - In the case of assessee for A.Y. 2005-06 2011 (3) TMI 1771 - ITAT INDORE decided in favour of the assessee on the issue of advance receipts for plot booking by holding that the booking amounts were not purely in the nature of cash credit for which the assessee was required to prove the creditworthiness of the persons who books the plot with him. CIT(A) examined the issue in detail by verifying respective registry placed on records and details mentioned in the registry duly tallied with the payments shown by the assessee. Genuineness of the transactions stands proved with the copies of registries and the amounts refunded through banking channels. We, therefore, respectfully following the decision of coordinate bench in assessee s own case for A.Y. 2005-06, detailed finding of CIT(A) which goes uncontroverted by the Revenue as well as in the given facts and circumstances of the case and the documents placed before the lower authorities, find no reason to interfere in the finding of Ld. CIT(A), deleting the addition. Addition on account of alleged extra cash found during the course of survey u/s 133A - Held that - As during the course of survey proceedings inventory of cash found at the business premises was made and cash of ₹ 814340/- was found. ₹ 11198/- was cash in hand in the books of assessee as on 15.03.2007. The partner of the assessee firm could not explain the excess cash found at ₹ 803142/- in light of these facts the contention of the assessee as well as the Ld. Counsel before the lower authorities and before us that no cash was found during the course of survey is not accepted. We therefore, uphold the view taken by the ld. CIT(A) and confirm the addition of ₹ 803142/-. Ground No.1 of assessee s appeal is dismissed. Addition confirmed u/s 68 on account of unexplained cash credit - Held that - Letters were issued u/s 133(6) of the Act, by the AO on the address provided by the assessee as in turn provided by the prospective buyers. Coordinate bench, Indore in the case of assessee for A.Y. 2005-06(supra) also held in the favour of assessee that if address given by the prospective buyers were not correct or they have not responded in proper manner to the AO then the assessee could not be penalized for their action. Genuineness of the transactions stands proved with the copies of registries. Assessee has been unable to prove source of cash credit of ₹ 35,37,500/- even up to the stage of appellate proceedings before first appellate authority and nor any substantial evidence has been placed before us. Disallowance of refund of advance money and cancellation charges paid by the assessee to its customers - Held that - From perusal of the records we find that the forfeiture of the amount was as per the agreement and in the independent enquiry conducted by the AO during the remand proceedings the customers have confirmed to have received back the amount. Further the assessee recognizes the sale on the date of registry of sale deed and the amount received as advance on account of plot booking is being capitalized and shown as liability in the balance sheet till the date of sale. During the year under appeal the assessee has returned the advance to difference customers and reduced the liability to that extent. The view taken by the CIT(A) deleting the addition of ₹ 39,71,000/- being the repayment of advance of plot booking received by the assessee in earlier years and the same has been duly proved by the assessee with documentary evidences. Cancellation charges allowability - extra payment over and above the advance for plot booking - Held that - We are unable to support the contentions of the Ld. Counsel, because the assessee has paid extra payment over and above the advance for plot booking. There is no clause in the agreement about payment of extra amount. The plot booking has been cancelled after substantial time gap of 2 to 3 years. As there was no clause in the agreement for payment of cancellation charges, by debiting the extra amount of plot booking charges in trading account the assessee has increased the purchase cost reduced the gross profit. We, therefore, agree with the view taken by the Ld. CIT(A) that as the assessee has capitalized the amount of advance and recognized sales on the date of registry for sale deed the amount paid over and above the advance amount should be in the nature of capital expenditure and not Revenue expenditure. Disallowance u/s 80IB(10) - Held that - The assessee executed 127 sale deeds and to sale the plots it had to incur the expenses at various stages. Out of the 127 sale deeds, 28 pertained to the Gaurav Nagar Extension for which the assessee is eligible for deduction u/s 80IB(10). We therefore, find substance in the finding of Ld. CIT(A) adopting 25% of total expenses for Gaurav Nagar Extension project because 28 sale deeds were of Gaurav Nagar Extension out of the total 127 sale deeds. The Ld. CIT(A) has given detailed working for each expenses in his findings in para 4.1 of his appellate order and accordingly sustained the disallowance at ₹ 5,25,614/-. Disallowance on account of plot booking cancellation - Held that - We find that this issue of plot booking cancellation came up in the appeal for A.Y. 2008-09 also. The assessee has furnished the party wise list of plot cancelled and the same forms part of appellate order of Ld. CIT(A). These details have been examined by the first appellate authority. The Ld. counsel for the assessee has been unable to controvert the finding of Ld. CIT(A). It is not disputed that assessee has furnished the list of plots to the AO for examination and is also offered the revenue from sale of these plots for taxation. In backdrop of these facts we uphold the finding of Ld. CIT(A) deleting the addition. TDS liability on on account of supervision charges and towards electrification work and system development - addition u/s 40(a)(ia) - Held that - This fact is not in dispute that M/s. MPPKVV Co. Ltd. is a State Government undertaking and Ld. CIT(A) deleted the disallowance for the very reasons that the amount was paid to State Government undertaking. The Ld. DR could not controvert this finding of Ld. CIT(A). We therefore confirm the finding of Ld. CIT(A) that no disallowance was called for as payment was made to the electricity company for various charges and tax was not required to be deducted and therefore, no disallowance was called for u/s 40(a)(ia)

Summary

Issues Involved:

1. Alleged unaccounted sales addition.
2. Unproved creditors.
3. Addition of suppressed sales.
4. Alleged extra cash found during the course of the survey.
5. Addition confirmed under Section 68 on account of unexplained cash credit.
6. Deletion of addition of unexplained investment.
7. Disallowance of refund of advance money and cancellation charges.
8. Estimation of net profit on total sales.
9. Disallowance under Section 80IB(10).
10. Deletion of disallowance on account of plot booking cancellation.
11. Deletion of disallowance under Section 40(a)(ia).

Detailed Analysis:

1. Alleged Unaccounted Sales Addition:
The AO added ?1,06,49,250/- for suppression of sales based on discrepancies and statements from buyers. The CIT(A) estimated sales at ?1 crore and applied a profit rate of 8%. The Tribunal upheld CIT(A)'s decision, confirming the addition of ?6,29,657/- and deleting ?1,00,19,593/-.

2. Unproved Creditors:
The AO added ?28,66,250/- for unproved creditors. The CIT(A) deleted this addition, noting the advances were for plot bookings and not unsecured loans, thus not requiring proof of creditworthiness. The Tribunal upheld CIT(A)'s decision, confirming the deletion.

3. Addition of Suppressed Sales:
For A.Y. 2007-08, the AO added ?3,72,79,410/- for suppressed sales. CIT(A) estimated sales at ?2.5 crores and applied an 8% profit rate, sustaining ?17,05,082/- and deleting ?3,55,74,328/-. The Tribunal upheld CIT(A)'s decision.

4. Alleged Extra Cash Found During Survey:
During the survey, ?8,14,340/- was found, with only ?11,198/- recorded in books. The Tribunal upheld CIT(A)'s decision to confirm the addition of ?8,03,142/- due to unexplained excess cash.

5. Addition Confirmed Under Section 68:
The AO added ?35,37,500/- and ?3,30,000/- for unexplained cash credits. CIT(A) confirmed these additions due to the assessee's failure to provide sufficient evidence. The Tribunal upheld CIT(A)'s decision.

6. Deletion of Addition of Unexplained Investment:
The AO added ?23,02,500/- and ?28,97,500/- based on stamp valuation differences and a partner's retracted statement. CIT(A) deleted these additions, noting no incriminating evidence was found. The Tribunal upheld CIT(A)'s decision.

7. Disallowance of Refund of Advance Money and Cancellation Charges:
The AO added ?45,13,000/-, which included ?10,37,000/- as cancellation charges. CIT(A) deleted ?39,71,000/- but confirmed ?10,37,000/-. The Tribunal upheld CIT(A)'s decision.

8. Estimation of Net Profit on Total Sales:
For A.Y. 2008-09, the AO estimated net profit at 8%, adding ?10,86,557/-. CIT(A) deleted this addition. The Tribunal, following past consistency, upheld the AO's estimation and confirmed the addition.

9. Disallowance Under Section 80IB(10):
The AO disallowed ?16,86,083/- of the claimed deduction. CIT(A) reduced the disallowance to ?5,25,614/-. The Tribunal upheld CIT(A)'s decision.

10. Deletion of Disallowance on Account of Plot Booking Cancellation:
The AO added ?20,27,000/- for plot booking cancellation. CIT(A) deleted this addition after verifying the details. The Tribunal upheld CIT(A)'s decision.

11. Deletion of Disallowance Under Section 40(a)(ia):
The AO disallowed ?4,32,745/- for non-deduction of TDS. CIT(A) deleted this disallowance, noting the payment was to a state government undertaking. The Tribunal upheld CIT(A)'s decision.

Conclusion:
The Tribunal dismissed the cross appeals for A.Y. 2006-07 and 2007-08, the assessee's appeal for A.Y. 2008-09, and the Revenue's appeal for A.Y. 2010-11. The Revenue's appeal for A.Y. 2008-09 was partly allowed.