2021 (3) TMI 1189 - AT - Income Tax

Unexplained deposits in bank accounts - HELD THAT - The addition was sustained by the ld. CIT(A) for the reason that compliance was not made during the original assessment proceedings and at remand stage. This cannot be a ground of making addition for the reasons that the Assessing Officer had made the addition on the ground that the deposits in bank accounts are not explained. Without a copy of the bank account, the Assessing Officer cannot come to a conclusion that the deposits made in a bank account are unexplained. All details including copies of bank accounts were furnished by the assessee. The evidence given by the assessee is not disputed by the revenue. The addition was confirmed in a summary manner, without reference to the facts. In view of the above discussion and finding of the Assessing Officer in the remand report extracted above, the addition in question, is hereby deleted. Disallowance of commission and development charges - HELD THAT - When the land is converted into plots by laying roads, building drains, developing common areas etc., as per the norms of the Urban Development Authority, and when plots are sold only after such development expenditure is bound to be incurred. It cannot be said that dry land of 10.69 acres can be sub-divided into house plots after development and sold as house plots without incurring any expenditure. The evidence in the form of development agreement dt. 15/06/2003, and payments made through account payee cheques and the fact of the development of the land into plots is sufficient evidence to prove the incurring of expenditure. Except for disbelieving the claim of the assessee, there is no adverse material collected by the assessing authorities. Confirmation letters from Shivaji Estates Constructions by Smt. Dantuluri Gita Kumari, wherein she had stated that the amount in question was offered to tax in her Income Tax Return and confirmation letters from one Mr. U. Prabhakar Rao, on the commission of ₹ 47,400/-, received/receivable by him, support of the contentions of the assessee. Thus, we uphold the contention of the assessee and allow the claim of the assessee of having been incurred development expenditure - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?15,20,000 as unexplained cash deposits.
2. Disallowance of commission and development charges amounting to ?66,09,875.

Detailed Analysis:

1. Addition of ?15,20,000 as Unexplained Cash Deposits:

The assessee filed a return declaring an income of ?18,50,776 for the Assessment Year 2005-06. The Assessing Officer (AO) completed the best judgment assessment under section 144 of the Income Tax Act, 1961, determining the total income at ?1,95,16,090, which included an addition of ?15,20,000 as unexplained cash deposits in IDBI Bank.

The assessee contested this addition before the CIT(A), who called for multiple remand reports from the AO. The AO, in his remand reports, initially acknowledged that the deposits were explained through corroborative evidence, including a complaint filed in court and details of transactions. However, the CIT(A) upheld the addition due to non-compliance during the original assessment and remand stages.

Upon appeal, it was noted that the AO's conclusion was based on incomplete information as the bank statement was not furnished initially. The Tribunal found that the evidence provided by the assessee, including bank account copies and remand report findings, were sufficient to explain the deposits. Thus, the addition of ?15,20,000 was deleted.

2. Disallowance of Commission and Development Charges:

The AO disallowed the commission and development charges totaling ?66,09,875, which included ?65,62,475 as development charges and ?47,000 as commission on sales. The AO's remand reports indicated that the payments were not substantiated with sufficient corroborative evidence, and a notice issued under section 133(6) to the recipient of the development charges was returned unserved.

The CIT(A) upheld the disallowance, citing a lack of evidence supporting the payments. However, the assessee provided an agreement dated 15/06/2003 with Smt. Dantuluri Gita Kumari for land development, which included laying roads, drainage, and other infrastructure as per Urban Development Authority norms. Payments were made through cheques, and the assessee argued that the notice issued after 10 years could not be used to draw adverse inferences.

The Tribunal found that the development of land into plots inherently involves such expenditures, and the evidence provided, including the development agreement and payment details, was adequate. The Tribunal also referenced the judgment in Diagnostics vs. CIT, which supports that non-receipt of a notice after several years does not imply the transaction is not genuine. Consequently, the disallowance of ?66,09,875 was deleted.

Conclusion:

The appeal of the assessee was allowed, with both the addition of ?15,20,000 as unexplained cash deposits and the disallowance of ?66,09,875 for commission and development charges being deleted. The Tribunal's decision was based on the adequacy of the evidence provided and the principles of natural justice.