2021 (3) TMI 518 - AT - Income Tax

Assessment u/s 153A - Addition u/s 68 - HELD THAT - Since no incriminating material was found in the assessee s case, no addition can be made in the present case. Besides this, the assessee has made investment in prior period and sold the said investment in this particular year which was clearly set out from the submissions and the evidences produced before the Assessing Officer and the CIT(A). Therefore, the appeal of the assessee allowed. Disallowance u/s 40A(3) - assessee had purchased land and made part payment in cash - disallowance made by the Assessing Officer, confirmed by the CIT(A) was deleted by accepting the plea of assessee since assessee has neither debited the amount of cost of land in Profit and Loss account nor claimed any deduction in respect of cost of land through computation - HELD THAT - Assessee has received reimbursement of all amounts paid related to transaction of purchase of land, stamp duty, Registration Charges as per Clause 3(b) of Collaboration Agreement. Bases on the agreement the assessee showed the income by way of fees at ₹ 35,000/- per acre in the year in which license on said land was received. While making the addition the Assessing Officer has totally ignored para 3.3 (b) of the Collaboration Agreement which clearly shows that Countrywide Promoters Pvt. Ltd. shall reimbursement of cost and expenses incurred by the assessee with respect to acquisition of land. The assessee has maintained proper books of accounts and all these transactions along with expenses were thoroughly shows in the books of accounts specially that of reimbursement as well. AO at no point of time rejected the books of accounts of the assessee. Though the finding of the Assessing Officer as well as CIT(A) is that the assessee was carrying business of development of real estate. From the perusal of record, it can be seen that these facts are not correct. The assessee is only carrying out acquisition of land and he expenses incurred on transactions of purchase of lands. As decided in WESTLAND DEVELOPERS PVT. LTD. VERSUS ACIT, CENTRAL CIRCLE-23, NEW DELHI 2014 (12) TMI 254 - ITAT DELHI Tribunal has dealt this issue and allowed the similar issue relating to reimbursement made by the Country Wide Promoters Pvt. Ltd. The Ld. DR could not point out the distinguishing facts. Thus, the facts of the present case are also identical. Therefore, Ground No. 4 4.1 are allowed. Disallowance u/s 37 on account of additional payments for the purchase of land - assessee had challenged before the CIT(A) that the deduction of the purchase of land having not been claimed by the appellant, no disallowance could be made- HELD THAT - As payments/transactions which were duly recorded in books of account. As the facts of the present assessee are identical to that of the group of companies in case of Westland Developers Pvt. Ltd 2014 (12) TMI 254 - ITAT DELHI and M/s Vasundhara Promoters Pvt. Ltd. 2018 (6) TMI 74 - DELHI HIGH COURT the issue is allowed. The DR could not distinguish any facts for the present assessment year. In fact, the assessee having not claimed the expenditure, the same cannot be disallowed under Section 37 of the Act on account of additional payment for the purchase of land. - Decided in favour of assessee.

Issues Involved:
1. Incriminating documents and additions under Section 153A.
2. Violation of principles of natural justice.
3. Addition of ?30,00,000 as income from undisclosed sources.
4. Utilization of seized material not belonging to the appellant.
5. Interest on post-dated cheques (PDCs) and undisclosed income.
6. Disallowance under Section 40A(3) of the IT Act.
7. Disallowance of additional payments under Section 37(1) of the IT Act.

Detailed Analysis:

1. Incriminating Documents and Additions under Section 153A:
The assessee argued that no incriminating documents were seized during the search under Section 132 on 07.12.2010, thus the addition of ?30,00,000 was not permissible under Section 153A. The Tribunal agreed, citing the Delhi High Court's decision in Kabul Chawla which held that in the absence of any incriminating material, no additions could be made to completed assessments. Since no incriminating material was found, the addition was deleted.

2. Violation of Principles of Natural Justice:
The assessee claimed that the assessment order violated principles of natural justice and denied the opportunity of being heard, rendering the assessment void ab initio. However, this issue was not elaborated upon in the judgment, suggesting it was not a primary ground for the Tribunal's decision.

3. Addition of ?30,00,000 as Income from Undisclosed Sources:
The assessee contended that the ?30,00,000 was received from the sale of shares of M/s Alliance Buildcon (India) Pvt. Ltd. to M/s Namrata Marketing Pvt. Ltd., and the proceeds were received by cheque. The Tribunal found that the source of the amount was traced back to a preceding year, and since no incriminating material was found, the addition was not justified. The appeal for A.Y. 2005-06 was allowed.

4. Utilization of Seized Material Not Belonging to the Appellant:
The CIT(A) utilized material seized from BPTP group cases, which did not belong to the appellant. The Tribunal did not specifically address this issue in detail, indicating that it was not a decisive factor in their ruling.

5. Interest on Post-Dated Cheques (PDCs) and Undisclosed Income:
The CIT(A) held that interest on PDCs should be treated as undisclosed income. The Tribunal noted that no inquiries were made from the alleged recipients of the interest, and the addition was based on conjectures without independent evidence. This ground was dismissed as it was not pressed by the assessee.

6. Disallowance under Section 40A(3) of the IT Act:
The assessee argued that the disallowance of ?4,08,490 under Section 40A(3) was incorrect as no deduction was claimed in the computation of income. The Tribunal agreed, citing that the cost of land was reimbursed by M/s Countrywide Promoters Pvt. Ltd. and thus, not an expenditure in the assessee's hands. The disallowance was deleted, following the precedent set in M/s Westland Developers Pvt. Ltd.

7. Disallowance of Additional Payments under Section 37(1) of the IT Act:
The assessee contended that no disallowance could be made as the additional payments were not claimed as deductions. The Tribunal agreed, following the decision in M/s Westland Developers Pvt. Ltd., and noted that the payments were duly recorded in the books of account. The disallowance was deleted, and the appeal for A.Y. 2006-07 was allowed.

Conclusion:
Both appeals filed by the assessee were allowed. The Tribunal ruled that no incriminating material was found during the search, and the additions made by the Assessing Officer were not justified. The disallowances under Sections 40A(3) and 37(1) were also deleted, following precedents and established legal principles. The orders of the CIT(A) were overturned, and the appeals were decided in favor of the assessee.

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