2020 (4) TMI 165 - AT - Income Tax

Addition on Statement recorded during the course of survey u/s 133A - assessee itself has accepted the stand disclosed during the course of survey by partly admitting the income at ₹ 23 lakhs - HELD THAT - Information and not conclusive evidence on the basis of which addition can be made. But in the present case, this statement is to be appreciated keeping in mind that certain papers and diaries inventorised as Annexure-4, 5 and 6 were found and seized. The assessee itself did not dispute disclosure made by it during the course of survey, and honoured to the extent of ₹ 23 lakhs. On the strength of Hon ble Supreme Court decision in the case of S. Khader Khan Son 2013 (6) TMI 305 - SC ORDER the assessee cannot pleaded that for want of sufficiency of evidence about the acceptance of on-money by it, addition cannot be made. There is sufficient evidence which has been agreed by the assessee itself confirming partly in the return of income. Therefore, we do not find any merit in the first fold of contentions. As far second fold of contentions on-money received on booking of the flats/houses would partake character of business receipts and would be treated equivalent to the amount which assessee had charged from ultimate purchasers of the house/flat. Profit embedded in such receipts deserves to be assessed to tax. The assessee has produced comparative chart showing the profit rate at 5.4% in the Asstt.Year 2010- 11 and 4.33% in the Asstt.Year 2011-12 on the total receipt it has received. The assessee has already disclosed a sum of ₹ 23,00,000/- which is 33.57% of the total disclosed amount of ₹ 68,50,000/-. Even if this amount of ₹ 68.50 lakhs is accounted for, then the profit element on this amount would come only to ₹ 3,07,565/- if rate of profit disclosed by the assessee in this year is applied to this receipt. The assessee has already offered more than this amount i.e. ₹ 23 lakhs. Therefore, no further addition is required to be made and accordingly addition of ₹ 45,50,000/- is deleted. Since we have accepted one of the alternative contentions, therefore, we need not to examine whether the partners are entitled for remuneration from the business profit, and interest on their capital contribution, because these claims were not made by the assessee in the return, rather pleaded only before the ld.CIT(A). No finding recorded by the ld.CIT(A) on this aspect. Therefore, his last alternative contention is rejected. We delete addition made by the AO. No other relief is being granted to the assessee.

Summary

Issues:
Appeal against addition of undisclosed income of ?45,50,000.

Analysis:

Issue 1: Addition of undisclosed income
The assessee contested the addition of ?45,50,000 as undisclosed income, which was confirmed by the ld.CIT(A). The AO based the addition on a survey conducted at the business premises, where the assessee disclosed ?80.00 lakhs as undisclosed income, out of which only ?23,00,000 was disclosed. The assessee argued that the statement recorded during the survey is not admissible evidence as the authorized officer lacked jurisdiction to administer an oath. However, the Tribunal found that the assessee did not dispute the disclosure made during the survey and accepted ?23 lakhs. Therefore, the Tribunal upheld the addition based on sufficient evidence agreed upon by the assessee, rejecting the contention that the statement was inadmissible.

Issue 2: Treatment of on-money received
The assessee argued that the on-money received on booking of flats/houses should be treated as part of business receipts and taxed based on the profit element. The Tribunal considered the profit rate disclosed by the assessee and found that the disclosed amount of ?23,00,000 covered a significant portion of the total undisclosed amount. Applying the profit rate disclosed by the assessee, the Tribunal determined that no further addition was required. Consequently, the addition of ?45,50,000 was deleted based on the accepted contentions regarding the treatment of on-money as business income.

Issue 3: Entitlement of partners for remuneration
The assessee also claimed that partners were entitled to remuneration and interest against the undisclosed income. However, as these claims were not made in the return but only before the ld.CIT(A), and no findings were recorded on this aspect, the Tribunal rejected this contention. Since the Tribunal accepted the arguments related to the treatment of on-money, it did not delve into the issue of partners' entitlement to remuneration. The Tribunal, therefore, deleted the addition of ?45,50,000 and partly allowed the appeal of the assessee.

In conclusion, the Tribunal partially allowed the appeal, deleting the addition of undisclosed income based on the treatment of on-money received and the profit element involved. The Tribunal's decision was based on the evidence agreed upon by the assessee during the survey and the application of the disclosed profit rate to determine the tax liability.