2017 (10) TMI 1528 - AT - Income Tax

Undisclosed sale - AO estimated the unaccounted receipts on estimate basis - HELD THAT - Before the ld CIT(A) the assessee submitted that full details of such advances were filed by the assessee and ld Assessing Officer issued notices u/s 133(6) of the Income Tax Act to various parties from whom advances have been received. The assessee has further stated before ld CIT(A) that replies were also received from the buyers. However, even before the ld CIT(A) the details called for by the AO were not submitted. CIT(A) deleted the addition stating that the Assessing Officer has assumed that there may be more salable area and therefore there may be more booking amount in cash. We do not find any infirmity in such assumption by the ld Assessing Officer because the assessee has not supplied any information about the total area and list of advances received from parties. It is also surprising that the assessee has stated before the ld CIT(A) that AO has made enquiry u/s 133(6) of the Act and buyers have confirmed. No such evidences have been placed either before the ld CIT(A) or before us or no such reference could be found from the assessment orders itself. We agree with the ld CIT(A) that AO cannot arrive at any figure without any basis by adopting an arbitrary method of calculation. Therefore, even the AO is not justified in assuming the impugned figure of cash sale out of the books. In view of this we set aside the whole issue of this addition covered in ground No. 1 of the appeal of the Revenue back to the file of the Assessing Officer with the direction to the assessee to submit the details called for by the Assessing Officer about the total salable area of the project and the persons who have booked the space. Addition of inadmissible expenses - HELD THAT - No doubt that if claim has arisen during the course of the business of the assessee same is allowable however, with respect to the above claim no details are furnished before the ld Assessing Officer and CIT(A) has also deleted the above disallowance without recording a finding that by which date the possession was to be given, what was the amount received at the time of original booking. Whether such claim has also arisen during the course of business vis a vis with respect to other buyers and whether at the time of booking of such space there was an agreement to pay such compensation. Before the ld Assessing Officer no details were furnished and the ld CIT(A) has not examined the claim of the assessee from above aspect. In view of this we set aside this ground of appeal to the file of the ld Assessing Officer to decide the issue of the claim afresh. Appeal of the revenue allowed for statistical purposes.

Summary

Issues:
- Addition of undisclosed sale amount
- Disallowance of inadmissible expenses

Analysis:

Issue 1: Addition of undisclosed sale amount
The case involved an appeal by the revenue against the order of the ld CIT(A)-II for the Assessment Year 2008-09. The assessee, a real estate company, had undertaken two projects and during assessment, it was found that there were undisclosed receipts over and above the booking amount. The Assessing Officer estimated unaccounted receipts based on incomplete information provided by the assessee, resulting in additions of ?20 crores. The ld CIT(A) deleted the addition, stating that it was based on imaginary figures. However, the tribunal found that the Assessing Officer's assumption was not entirely baseless as the assessee failed to provide crucial details like total area constructed and list of bookings. The tribunal set aside the issue for fresh examination, directing the assessee to submit the required details for proper verification by the Assessing Officer.

Issue 2: Disallowance of inadmissible expenses
Another aspect of the case involved the disallowance of expenses claimed as compensation, where details were not furnished to the Assessing Officer. The ld CIT(A) allowed the claim without proper examination. The tribunal observed that essential details regarding the compensation claim were missing, and the ld CIT(A) did not adequately analyze the claim. Therefore, the tribunal set aside this issue as well, directing the Assessing Officer to re-examine the claim with proper enquiry and granting the assessee an opportunity to be heard. Consequently, the appeal of the revenue was allowed on both grounds with directions for further proceedings.

In conclusion, the tribunal's detailed analysis of the issues highlighted the importance of providing complete and accurate information during assessments to avoid arbitrary estimations and ensure fair decisions. The judgment emphasized the need for thorough examination and proper verification of claims to uphold the principles of tax assessment and fairness in legal proceedings.