2018 (7) TMI 118 - AT - Income Tax

Addition being on-money received by the company from the sale of flats - Addition considering the statement u/s.133A of the director - Held that - The statement made is categorical based on a personal knowledge of the assessee. A departure therefrom for the purpose of quantification cannot be deciphered cursorily. Therefore, addition of ₹ 28 Lakhs (towards understatement of on-money of 4 flats) out of ₹ 70 Lakhs on this score requires to be confirmed and the order of the CIT(A) requires to be set aside to this extent. Action of the CIT(A) however appears justified with respect to deletion of addition to the extent of ₹ 42 Lakhs for the reasons given by the CIT(A). Flat sold earlier at a lower price was cancelled which was re-booked in the subsequent financial year at a price which is close to the price of the other flats. Thus, the preponderance of probabilities weigh in favour of the assessee and thus, action of the CIT(A) in this regard does not call for interference. In conclusion, the addition of ₹ 28 Lakhs out of ₹ 70 Lakhs by the AO concerning project Earth 12 deserves to be sustained and for remaining amount the deletion made by the CIT(A) is confirmed. Addition towards on-money of project Earth Errita - Held that - Assessee not explained as to what prompted him to make alleged wrong assertions before the survey team and repeated again before the DDIT (Inv.) after a gap of nearly three months on the factual aspect that six bungalows have already been booked at the time of survey as referred to in reply dated 25.07.2011 before the DDIT (Inv.) reproduced at page no.4 of the assessment order. The facts regarding disclosure of on-money, if any, concerning remaining 6 bungalows has not been examined by the CIT(A) to enable it to exclude the addition of ₹ 1.30 crores in respect of 2 bungalows. Issue regarding addition of ₹ 1.30 crores towards 2 bungalows requires to be remitted back to the file of the CIT(A) for de novo examination and for passing fresh order in accordance with law after giving reasonable opportunity to the assessee. We do not find any good reason to interfere with the order of the CIT(A) for accepting lower declaration by ₹ 4 Lakhs on sale of 4 bungalows for the reasons borne out from the order of the CIT(A) - Appeal of the Revenue is partly allowed.

Summary

Issues Involved:
1. Deletion of addition of ?70,00,000/- being on-money received by the company from the sale of flats.
2. Deletion of addition of ?1.34 crores being on-money received by the company from the sale of 2 bungalows.

Issue-Wise Detailed Analysis:

1. Deletion of addition of ?70,00,000/- being on-money received by the company from the sale of flats:

The Revenue challenged the CIT(A)'s decision to reverse the AO's addition of ?70,00,000/- as on-money received from the sale of flats in the 'Earth 12' project. The AO based the addition on a statement made by the Director during a survey under section 133A, where it was admitted that on-money of ?42 Lakhs per flat was received. The AO found discrepancies in the assessee's subsequent claims, which suggested that on-money was received at ?35 Lakhs for eight flats and ?42 Lakhs for three flats, with one flat's booking being canceled and re-booked later without on-money.

The CIT(A) deleted the addition, noting that the AO's reliance on the Director's statement was misplaced, as it was not corroborated by independent evidence. The CIT(A) observed that the statement was incoherent and contradictory, and the AO did not conduct further investigation to substantiate the addition. The CIT(A) accepted the assessee's explanation that on-money was received at ?35 Lakhs per flat, not ?42 Lakhs, and that the booking of Flat No. 101 was canceled and re-booked at a later date without on-money.

The Tribunal partially agreed with the CIT(A), confirming the deletion of ?42 Lakhs for Flat No. 101 but reinstating the addition of ?28 Lakhs for the four flats where on-money was understated. The Tribunal found that the Director's initial statement about receiving ?42 Lakhs on average was credible and that the assessee's later revision lacked corroboration.

2. Deletion of addition of ?1.34 crores being on-money received by the company from the sale of 2 bungalows:

The Revenue also contested the CIT(A)'s reversal of the AO's addition of ?1.34 crores as on-money from the sale of two bungalows in the 'Earth Errita' project. The AO's addition was based on the Director's admission during the survey that on-money of ?65 Lakhs per bungalow was received for six bungalows, totaling ?3.90 crores for the FY 2011-12. However, the assessee only declared ?2.56 crores for four bungalows in the return.

The CIT(A) accepted the assessee's explanation that the remaining ?1.30 crores was included in the income for AY 2013-14, supported by evidence from the IT return for that year. Additionally, the CIT(A) accepted the assessee's claim of short receipt of ?4 Lakhs due to concessions given for two bungalows.

The Tribunal found merit in the CIT(A)'s acceptance of the short receipt of ?4 Lakhs but remanded the issue of the ?1.30 crores addition back to the CIT(A) for further examination. The Tribunal noted that the CIT(A) did not fully investigate whether the on-money for the remaining six bungalows was properly accounted for in subsequent years. The Tribunal emphasized the need for a thorough examination of the facts to determine the correct assessment year for the on-money.

Conclusion:

The Tribunal partially allowed the Revenue's appeal. It reinstated the addition of ?28 Lakhs for the 'Earth 12' project while confirming the deletion of ?42 Lakhs for Flat No. 101. For the 'Earth Errita' project, the Tribunal upheld the deletion of ?4 Lakhs but remanded the issue of ?1.30 crores for further examination by the CIT(A).