2019 (12) TMI 686 - AT - Income Tax

Addition in respect of receipt of on-money - HELD THAT - It is undisputed fact that the assessee has received on money to the extent of ₹ 76,20,000/-. It is not clear neither from the order of the Assessing Officer nor from order of the ld.CIT(A) that this amount is received by the assessee over and above the sale consideration and in which mode. Therefore, we are of the opinion that the Assessing Officer cannot make the entire addition, only profit has to be estimated. Accordingly, we set aside the order of the ld. CIT(A) and remit the matter back to the Assessing Officer to consider the details filed by the assessee and decide the case in accordance with law. Thus, this ground of appeal raised by the assessee is allowed for statistical purpose. Estimation of profit - AO estimated the profit at 20%, which the ld. CIT(A) reduced to 16% - HELD THAT - Assessee has submitted that the assessee is a small assessee and section 44AD applies to him and therefore estimation may be made at 8%. We find that this case is covered by section 44AD, hence, estimation of profit at 8% is sufficient to meet the ends of justice. Accordingly, the estimation is scaled down to 8%. Thus, this ground of appeal raised by the assessee is partly allowed. Unexplained investment in purchase of property - HELD THAT - assessee has pointed out from the paper book at page No. 17 wherein the advance site at BS Layout 305 sq.yds. for an amount of ₹ 56.70 lakhs clearly mentioned in the balance sheet. Keeping in view of the disclosure made by the partner Sri Kotagri Suryanarayana Murthy, in our opinion the addition cannot be survived. Accordingly, the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is deleted. Thus, this ground of appeal raised by the assessee is allowed. Addition u/sec. 40A(3) as the payment or aggregate payments were made to a person in a single day in cash - HELD THAT - The case of the assessee is that once income of the assessee is estimated, no separate addition can be made on account of expenditure incurred by the assessee. It is further submitted that the alleged cash payments were made towards various works like brick centering, mason, concrete and transportation charges against representing the persons who have received the payment on behalf of the entire team of the workers. Thus, the assessee contended that payments cannot be treated as paid to a single person. We find that the assessee has not given any proper explanation in respect of source of expenditure to the tune of ₹ 34.73 lakhs before the Assessing Officer and even before the ld. CIT(A) also. Before us also no proper explanation is given. We find that Assessing Officer is justified in making the addition. Undisclosed contract receipts - HELD THAT - assessee filed return of income on 15/04/2017 disclosing gross receipts of ₹ 4,63,50,000/- whereas information gathered u/sec. 133(6) of the Act, it was found that assessee has executed total contract of ₹ 4,66,93,000/-, thereby there is undisclosed income of ₹ 3,43,000/- (₹ 4,66,93,000 ₹ 4,63,50,000). The same discrepancy was apprised to the assessee vide this office show cause dated 02/11/2017, but failed to submit any explanation, therefore the Assessing Officer has made the addition of ₹ 3,43,000/- in the hands of the assessee. Even before the ld.CIT(A) no explanation is given. Even before us no satisfactory explanation is offered, therefore we find no reason to interfere with the order passed by the ld.CIT(A). Thus, this ground of appeal raised by the assessee is dismissed.

Issues Involved:
1. Sustaining the addition of ?76,20,000 towards on-money received on the sale of flats.
2. Estimation of profit at 8% in respect of ?3,22,560 received from a buyer.
3. Addition of ?56,70,000 towards unexplained investment in the purchase of property.
4. Sustaining the addition of ?25,28,000 towards alleged on-money received on the sale of flats.
5. Addition of ?9,38,000 under Section 69C of the Act towards unexplained expenditure.
6. Sustaining the addition of ?34,73,000 under Section 69C of the Act towards unexplained expenditure.
7. Sustaining the addition of ?3,43,000 towards undisclosed contract receipts.

Issue-wise Detailed Analysis:

1. Sustaining the addition of ?76,20,000 towards on-money received on the sale of flats:
The assessee, a partnership firm, was subject to a survey where incriminating materials were found, indicating receipt of on-money on the sale of flats. The Assessing Officer (AO) added ?76,20,000 to the income, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal noted that the assessee received on-money, but it was unclear whether this amount was over and above the sale consideration. The Tribunal remitted the matter back to the AO to consider the details and decide the case in accordance with the law, directing that only the profit should be estimated rather than the entire amount being added.

2. Estimation of profit at 8% in respect of ?3,22,560 received from a buyer:
The AO estimated the profit at 20%, which the CIT(A) reduced to 16%. The Tribunal, noting that the case falls under Section 44AD, found that an 8% estimation of profit was sufficient. Thus, the estimation was scaled down to 8%.

3. Addition of ?56,70,000 towards unexplained investment in the purchase of property:
During the survey, a sale deed indicating cash payments totaling ?56.70 lakhs was found. The AO added this amount as unexplained investment since the partner, Sri Kotagri Suryanarayana Murthy, failed to substantiate the source of investment. The CIT(A) confirmed this addition. However, the Tribunal found that the partner had disclosed this amount in his balance sheet, and thus, the addition could not be sustained. The Tribunal deleted the addition.

4. Sustaining the addition of ?25,28,000 towards alleged on-money received on the sale of flats:
The AO added ?25.28 lakhs as on-money received for the sale of flats, which the CIT(A) confirmed due to a lack of evidence from the assessee. The Tribunal found no reason to interfere with the CIT(A)'s order as the assessee failed to substantiate the addition.

5. Addition of ?9,38,000 under Section 69C of the Act towards unexplained expenditure:
The AO inferred that the expenditure of ?9,38,000 was from unaccounted sources and in violation of Section 40A(3). The CIT(A) confirmed this addition. The Tribunal found the AO justified in making the addition as the assessee failed to provide a proper explanation.

6. Sustaining the addition of ?34,73,000 under Section 69C of the Act towards unexplained expenditure:
The AO noted cash payments totaling ?34.73 lakhs, which were not reflected in the books of account. The CIT(A) confirmed the addition. The Tribunal found that the assessee failed to substantiate the source of expenditure and upheld the AO's addition.

7. Sustaining the addition of ?3,43,000 towards undisclosed contract receipts:
The AO added ?3,43,000 as undisclosed contract receipts based on information gathered under Section 133(6). The CIT(A) confirmed this addition. The Tribunal found no reason to interfere as the assessee failed to provide a satisfactory explanation.

Conclusion:
The appeals were partly allowed for statistical purposes, and the stay applications were dismissed as infructuous. The Tribunal directed the AO to reconsider certain additions based on the evidence provided by the assessee and to estimate profits appropriately under Section 44AD.

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