2016 (3) TMI 1418 - AT - Income Tax

Addition u/s 68 69 and 69C - assessee failed to offer an explanation regarding the source credited in its Books of account as WIP - during the course of Survey u/s.133A of the I.T.Act on 13.03.2008 the partners of the assessee firm accepted 3, 00, 00, 000/- as the receipt of the firm from undisclosed sources - As per AO unaccounted income offered by the assessee during the course of survey no expenses can be claimed in any manner whatsoever viz. by debiting corresponding expenses account and transferring it to work-in-progress account as done by the assessee - CIT-A deleted the addition - HELD THAT - Both types of receipts i.e. receipt through cheques and receipt through cash as on-money will arise as income to the assessee as soon as transfer of immovable property is executed and not before or possession thereof is handed over and for this it is necessary that such immovable property should be in existence. Therefore the Coordinate Bench in the case of M/s. D.R. Construction 2011 (4) TMI 1343 - ITAT AHMEDABAD was of the considered view that on-money received by the assessee did not have the character of income but was only an advance like the one received through cheque. Both will become part of the sale consideration to the assessee simultaneously on either handling over the possession of the flats or on execution of transfer-deed whichever happens earlier. In the instant case during the course of survey the partners of the assessee-firm had stated that the amounts so disclosed was the business receipts. The Revenue has not brought on record any contrary material to controvert such statement. - Decided against revenue.

Summary

Issues:
1. Addition of Rs. 3,00,00,000 made under sections 68, 69, and 69C of the Income Tax Act without explanation of source.
2. Justification of deletion of addition by the Commissioner of Income Tax (Appeals).

Analysis:

Issue 1:
The appeal by the Revenue challenged the deletion of the addition of Rs. 3,00,00,000 made under sections 68, 69, and 69C of the Income Tax Act without a proper explanation of the source. The case involved a survey action where the assessee disclosed unaccounted income of Rs. 3 crores. The Assessing Officer (AO) made the addition based on this disclosure, considering it unexplained investment. The Commissioner of Income Tax (Appeals) deleted this addition after the assessee's appeal. The Revenue argued that the deletion was unjustified, emphasizing the initial disclosure during the survey.

Issue 2:
The arguments presented by the Senior DR and the counsel for the assessee revolved around the legality of the CIT(A)'s decision. The Senior DR contended that the deletion of the addition was not justified, while the counsel for the assessee maintained that the CIT(A)'s order was in accordance with established legal principles. The AO's position was that the disclosed income should not be taxed as the project was incomplete, and no evidence showed the source of the disclosed income. However, the CIT(A) found that the income disclosure during the survey was the only basis for such income and no other evidence existed. The Tribunal's decision in a similar case supported the CIT(A)'s finding that the disclosed amount was business receipts and not taxable income until specific conditions were met. The Revenue failed to present contrary evidence to challenge this finding, leading to the upholding of the CIT(A)'s decision.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of the addition. The judgment was pronounced in Ahmedabad on March 9, 2016.