9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (11) TMI 1309 - AT - Income TaxMoney received without any consideration - taxablility under the provisions of section 56(2)(vi) - Held that -We do not find any merit in the findings of the A.O. for the reason that merely because the person, who paid the amount does not initiate any action for recovery of money should not be not a reason for making addition towards amount received as assessee s income. The AO has to prove beyond doubt a particular receipt is taxable in the given circumstances within the meaning of the said provision. In this case, the assessee has filed all details which prove that the company is in continuous contact with the assessee for procurement of land. We further notice that the company also filed a petition before Bombay High Court for recovery of money advanced to the assessee. The Hon ble Bombay High Court on 19th October, 2011 has passed a decree decreeing the suit on the basis of the consent terms filed by the parties and on the terms and conditions stated in the decree. As per the petition before the Hon ble Bombay High Court, both the parties agreed to settle the dispute as per which the assessee has agreed to refund the money along with interest which is evident from the order of decree passed by Hon ble Bombay High Court. We further notice that SPCL has filed an execution petition before Raigad Court for recovery of dues from the assessee. All these facts go to prove an undisputed fact that SPCL has paid advance to the assessee for procurement of land on certain terms and conditions. Therefore, we are of the considered view that the AO was erred in bringing to tax the impugned advance received from SPCL under the provisions of section 56(2)(vi). The CIT(A), without appreciating the fact has reiterated the findings of the AO to confirm the addition made by the AO. Therefore, we set aside the order passed by the CIT(A) and direct the AO to delete the addition made towards advance received from SPCL u/s 56(2)(vi) of the Act. - Decided in favour of assessee Addition u/s 68 - as per AO if the assessee taken a plea that the impugned amount revceived by the assessee is an advance, then the money received by the assessee represents loan which raises serious doubts about the genuineness of the transactions and section 68 of the Act come into operation - Held that - We do not find any merits in the observation of the AO for the reason that to make addition towards a particular receipt under the provisions of section 68, the AO has to examine three ingredients, i.e. identity, genuineness of transaction, and creditworthiness of the parties. In this case, the assessee has proved the identity of the parties, genuineness of transaction and creditworthiness of the parties which is evident from the fact that SPCL has filed all evidences to prove impugned amount is an advance paid for procurement of land. We further notice that SPCL has filed its financial statement wherein the money paid to the assessee has been disclosed as business advances. ITAT, in the case of SPCL 2015 (7) TMI 447 - ITAT MUMBAI has given a categorical finding that the impugned amount paid to the assessee is business advance and hence, the AO was incorrect in disallowing proportionate interest u/s 36(1)(iii) of the Act. Though the findings of the co-ordinate bench is under different aspect, the amount involved is the same which is paid to the assessee, therefore, once a particular finding has been reached by the Tribunal on facts, a different conclusion cannot be reached at this stage. Thus we are of the view that the AO was incorrect in making an alternate finding in the light of provisions of section 68, as well as section 28(iv) of the Act. Accordingly, we reject alternate findings of the A.O. to make additions - Decided in favour of assessee Income from other sources in respect of consultancy charges received from SDCL - AO has made addition on the ground that the assessee has failed to prove providing any consultancy services to SDCL - Held that - The evidences filed by the assessee in the form of appointment letter issued by SDCL dated 07-02-2007 and further consultancy agreement entered into between the parties on 29-08-2008 clearly goes to prove the undoubted fact that there existed a service agreement between the parties and that SDCL has paid consultancy fee. The agreement filed by the assessee has narrated the nature of service to be provided. In fact, SDCL has accepted before AO during the assessment proceedings that the assessee has provided consultancy services. We further notice that SDCL also deducted tax at source @10% on total payments. All these facts lead to an undoubted conclusion that the AO has made addition merely on the basis of conjectures and surmises without there being any material to show that amount received from SDCL is income of the assessee. Therefore, we are of the view that the AO was incorrect in treating the amount received from SDCL as income of the assessee under the head Income from other sources . The assessee has incurred various expenditures which have been debited to his P&L Account. Though, the assessee claims to have incurred various expenditures, failed to file complete details of expenditures incurred, to the satisfaction of the AO. Under these circumstances, what needs to be done is reasonable estimates of net profit from the business, taking into account the facts & circumstances. In this case, the assessee is in the business of providing consultancy services. In the case of professional and consultancy services, section 44AD provides for taxation of income from profits and gains of profession on presumptive basis. Though, provisions of section 44AD strictly not applicable to the present case, the analogy provided under the said provisions can be taken as basis for determining the profit. In the cases of profession, profit ranging from 10% to 25% is reasonable. Therefore, taking into account overall facts and circumstances of the case, we deem it appropriate to direct the AO to estimate net profit of 20% on total gross receipts received from SDCL. We, ordered accordingly. Addition towards opening capital - It is the contention of the assessee that he was earning since the age of 18, however, he did not file return of income because his income for the previous years was below the taxable limits - Held that - We do not find any merit in the arguments of the assessee for the reason that the assessee has filed to file any evidence to prove the existence of opening capital of ₹ 5 lakhs. The assessee has filed return of income for the first time, therefore, carry forward of opening balance of ₹ 5 lakhs is not justified with any evidence. Therefore, we are of the view that the AO was right in making addition towards opening capital u/s 68 of the Act. The CIT(A), after considering relevant submissions of the assessee has rightly upheld the addition made by the AO. We do not find any error or infirmity in the order of CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and reject ground raised by the assessee. Addition towards interest income from FD - Held that - We do not find any merits in the argument of the assessee for the reason that at no stretch of imagination, interest from FD can be considered as business receipts of the assessee. Though the assessee has earned interest income out of money received from the business, interest on FD is not generated from the core business activity of the assessee. Therefore, we are of the view that AO was right in treating interest on fixed deposit under the head Income from other sources . The CIT(A), after considering the relevant submissions has rightly upheld additions made by the AO. We do not find any error in the order of CIT(A). Hence, we are inclined to uphold the order of the CIT (A) and reject ground raised by the assessee. Denial of carry forward of closing work in progress - assessee has failed to prove any business activity - Held that - We find that the issue of carry forward emanates from the impugned issue of treatment of amount received from SDCL under the head Income from other sources . Since we have already given our finding in the preceding paragraph regardeing amount received from SDCL and directed the AO to estimate income from the receipts, the issue of carry forward of WIP becomes academic in nature. Hence, we reject grounds raised by the assessee.
Issues Involved:
1. Condonation of Delay in Filing Appeal 2. Addition of ?43,50,00,000 under Section 56(2)(vi) of the Income Tax Act 3. Addition of ?31,67,50,000 under the Head "Income from Other Sources" 4. Addition of ?5,00,000 as Unexplained Cash Credit under Section 68 5. Addition of ?21,71,627 as Interest Income from Fixed Deposits 6. Denial of Carry Forward of Work in Progress (WIP) of ?15,39,11,744 Detailed Analysis: 1. Condonation of Delay in Filing Appeal: The assessee filed an affidavit explaining the delay of 312 days in filing the appeal, attributing it to various personal and professional disruptions, including legal disputes and family issues. The Tribunal considered these reasons as reasonable and beyond the control of the assessee, emphasizing that substantial justice should prevail over technicalities. The Tribunal condoned the delay and admitted the appeal for adjudication on merits. 2. Addition of ?43,50,00,000 under Section 56(2)(vi) of the Income Tax Act: The assessee received ?43.50 crores from Shapoorji Pallonji & Co. Ltd. (SPCL) for procuring land. The Assessing Officer (AO) treated this amount as income under Section 56(2)(vi), arguing it was received without consideration. The Tribunal found that both the assessee and SPCL confirmed the amount was an advance for land procurement, supported by agreements and board resolutions. The Tribunal noted that the Bombay High Court had passed a consent decree for the recovery of this amount. The Tribunal held that the AO's addition was based on conjectures and surmises, lacking substantial evidence. The Tribunal directed the AO to delete the addition. 3. Addition of ?31,67,50,000 under the Head "Income from Other Sources": The assessee received ?31.67 crores from S.D. Corporation Pvt. Ltd. (SDCL) as consultancy charges. The AO treated this amount as income from other sources, doubting the genuineness of the consultancy services. The Tribunal found that the assessee had entered into a formal consultancy agreement with SDCL, which was confirmed by SDCL along with TDS deductions. The Tribunal directed the AO to treat the amount as business income and estimate a net profit of 20% on the gross receipts, considering the assessee's failure to provide complete expenditure details. 4. Addition of ?5,00,000 as Unexplained Cash Credit under Section 68: The AO added ?5,00,000 as unexplained cash credit, questioning the opening capital balance. The assessee claimed this amount was accumulated over years but failed to provide evidence. The Tribunal upheld the AO's addition, agreeing that the assessee did not substantiate the opening capital. 5. Addition of ?21,71,627 as Interest Income from Fixed Deposits: The AO treated ?21,71,627 as interest income from fixed deposits under the head "Income from Other Sources." The assessee argued this interest was related to business activities. The Tribunal upheld the AO's decision, stating that interest from fixed deposits cannot be considered business income. 6. Denial of Carry Forward of Work in Progress (WIP) of ?15,39,11,744: The AO denied the carry forward of WIP, doubting the assessee's business activities. The Tribunal found that the issue of carry forward became academic after directing the AO to estimate income on a yearly basis. Hence, the Tribunal did not adjudicate this issue specifically. Conclusion: The Tribunal partly allowed the appeals, condoning the delay in filing, directing the deletion of additions under Sections 56(2)(vi) and 68, treating consultancy receipts as business income with a 20% profit estimate, and upholding the additions of unexplained cash credit and interest income from fixed deposits.
|
