2018 (8) TMI 762 - HC - Income Tax

Assessment u/s 153C - Additions on the account of alleged unaccounted cash receipt - project completion method of accounting - Method of accounting, regularly followed by the Assessee - tribunal has observed that the issue of cash receipts and the project completion date are inter related and deleted the addition made by the Assessing Officer in both the counts. No substantial question of law - Decided against the revenue.

Summary

Issues involved:
1. Justification for deleting the addition of unaccounted cash receipt to the income of the assessee for the relevant Assessment Year.
2. Justification for deleting the addition to the income of the Assessee by accepting the project completion method of accounting regularly followed by the Assessee.

Analysis:
Issue 1:
The Respondent-Assessee was engaged in executing contracts for interior decoration and was subject to proceedings under Section 153C of the Income Tax Act for the Assessment Year 2007-08. The Assessing Officer made an addition of ?2.48 Crore as unaccounted cash receipts based on seized documents, alleging that 2/3rd of the contract amount was received in cash. The Tribunal, however, found that the amount received till December 22, 2005, could only be assessed for the previous year and not for the subject Assessment Year. The Tribunal emphasized that the evidence must be relied upon entirely and not selectively. The Revenue's argument that the amount should be taxed in the subject Assessment Year was dismissed, stating that if the income was chargeable for the previous year, appropriate proceedings should be initiated for that year. The Tribunal held that the Revenue's partial reliance on the Fund Flow Statement was impermissible, leading to the deletion of the addition.

Issue 2:
Regarding the addition of ?1.23 Crores to the income of the Assessee based on the project completion method, the Assessing Officer rejected the Books of Account and concluded that the project was completed in the previous year. The Tribunal found no evidence supporting the unaccounted cash receipts, noting a pending arbitration between the parties regarding payments. It was highlighted that neither party admitted to receiving or paying cash for the work done. The Tribunal dismissed the theory of artificially postponing the completion of the contract. The Revenue's reliance on the Assessing Officer and CIT(A) orders was rejected, as the Tribunal found no basis to hold that the income should be postponed to the next Assessment Year. The Tribunal's decision to delete the addition was upheld, emphasizing the lack of evidence supporting unaccounted cash receipts.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision to delete the additions to the income of the Assessee.