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2022 (2) TMI 815 - AT - Income TaxAddition on account of unaccounted / suppressed sales - assessee was reflecting only 20% to 50% of actual sale consideration in the registered sale deeds - HELD THAT - Only on the basis of few instances, to presume that such concealment was done by the assessee in all the transactions, in a blanket manner, was not a correct presumption. It could also be seen that AO has also not considered the fact that the assessee might have incurred expenditure on cost of construction and other expenses in the same manner for which benefit should have been granted to the assessee. The sale figures could not be said to be the income of the assessee. It is trite law that only the real income earned by the assessee could be brought to tax. It is the finding that the assessee has sold developed sites during these years which would entail incurring of expenditure on the part of the assessee. Therefore, it would be in the fitness of things to estimate profit element embedded in unaccounted sale transactions since entire sales figures could not be held to be the income of the assessee. As per statutory mandate, a presumptive rate of 8% is applicable on civil construction business. Taking cue from the same, we apply the same rate to the unaccounted sales as computed by Ld. AO. Accordingly, Ld. AO is directed to estimate profit rate of 8% on unaccounted sales Unaccounted investment in Land - HELD THAT - To presume that the assessee would have paid 5 times of the registered sale deed value would not be correct particularly when there was no adverse material on record. The value of land would depend upon various factor such as location of site, extant market conditions, position of the parties, nature of sale etc. and all these relevant factors could not be brushed aside. Moreover, it was incumbent on Ld. AO to prove that extra money was paid by the assessee. There was no such finding on record. The extrapolation done by Ld. AO had no basis and the action of Ld. AO in estimating the additions could not be upheld. The action of Ld. AO was totally untenable and devoid of any merits for it was based on conjectures and surmises. Therefore, the addition made in all these three years was deleted. We find that the revenue has accepted the findings of Ld. CIT(A) for all the three years and the issue has thus, attained finality. Development Expenditure disallowance - HELD THAT - The assessee had brought tracts of land and developed the plots into saleable lay outs by converting these lands into plots. It could not be possible to have developed layouts without incurring any expenditure like clearing of debris, levelling of grounds, lay out of roads, installation of posts etc. The finding is also acceptable that some the activities would involve engagement of labour and service provider in unorganized sector. Therefore, a disallowance as high as 70% was not justified. The estimation of 40% as made by Ld. CIT(A), in our considered opinion, is quite reasonable and fair. Therefore, the same would not require any interference on our part. The grounds raised in assessee s appeal as well as revenue s appeal, on this issue, stand dismissed. Sales Commission disallowance - AO has estimated this disallowance @70% which has been confirmed by Ld. CIT(A) - HELD THAT - Most of the payment was stated to be below ₹ 5000/- which would not require TDS compliance on the part of the assessee. These payments were one-time payment as referral payment. Therefore, we estimate this disallowance @40% as done for development expenses. The Ld. AO is directed to restrict the disallowance to 40% as against 70% confirmed by Ld. CIT(A). The assessee s ground of appeal, for all the year, stand partly allowed.
Issues Involved:
1. Addition on account of unaccounted/suppressed sales. 2. Unaccounted investment in land. 3. Disallowance of development expenses. 4. Disallowance of sales commission expenses. Detailed Analysis: 1. Addition on Account of Unaccounted/Suppressed Sales: The assessee was found to have suppressed sales receipts based on incriminating documents discovered during a search operation. The Assessing Officer (AO) added the differential sale receipts to the assessee's income, estimating sales to be about 5 times the recorded sale price. The CIT(A) confirmed these additions for AYs 2013-14 and 2014-15 but deleted them for AYs 2009-10, 2010-11, and 2012-13 due to lack of specific material indicating unaccounted cash sales. The Tribunal found that the AO's approach of extrapolating sales based on a few instances was incorrect and directed the AO to estimate the profit rate at 8% on unaccounted sales for AYs 2013-14 and 2014-15. 2. Unaccounted Investment in Land: The AO made additions for unaccounted investments in land, alleging that the assessee paid 5 times the registered deed value. The CIT(A) deleted these additions for AYs 2009-10, 2012-13, and 2013-14, noting that there was no credible evidence or material on record to support the AO's allegations. The Tribunal upheld the CIT(A)'s findings, confirming that the additions were based on conjectures and lacked merit. 3. Disallowance of Development Expenses: The AO disallowed 70% of the development expenses claimed by the assessee, citing lack of satisfactory documentary evidence. The CIT(A) reduced the disallowance to 40%, acknowledging that while some expenses might involve unorganized sector services, the assessee failed to substantiate all expenditures. The Tribunal agreed with the CIT(A)'s partial relief, finding the 40% disallowance reasonable and fair. 4. Disallowance of Sales Commission Expenses: The AO estimated a 70% disallowance of sales commission expenses due to lack of TDS compliance and proper documentation. The CIT(A) confirmed this disallowance. The Tribunal, however, found that the assessee's payments were largely below ?5000 and did not require TDS compliance. It directed the AO to restrict the disallowance to 40%, similar to the development expenses. Summary of Judgments: The Tribunal partially allowed the assessee's appeals for AYs 2013-14 and 2014-15 by directing a profit rate estimation of 8% on unaccounted sales and restricting the sales commission disallowance to 40%. For AY 2015-16, similar adjudication was applied. The Tribunal dismissed the revenue's appeals and the assessee's cross-objections as infructuous. The disallowance of development expenses was confirmed at 40% for all years. The order was pronounced on 14th February 2022.
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