2022 (9) TMI 34 - AT - Income Tax

Addition on account of certain loose slip found during the course of search - as contended that during the course of assessment proceedings, balance sheet duly disclosing the capital work-in-progress and amount payable towards such purchases was duly submitted - HELD THAT - CIT(A) has not accepted the contention of the assessee holding that no bills have been submitted in respect of purchases besides the assessee has failed to explain the source of making the payment in the next financial year. In our view, where the liability towards such purchases has been shown under the head capital work-in progress which corresponds to document found during the course of search and which continues to remain outstanding (and payment not being made during the year) in the books of accounts at the year end, it is a case where the assessee has neither claimed the expenditure during the year under consideration nor any payment has been made during the year under consideration, the question of disallowance or making an addition towards the same doesn t arise and is hereby directed to be deleted. In the result, the ground of appeal is allowed. Addition on account of non disclosure of work-in-progress in the Income Tax Return - HELD THAT - Firstly, regarding receipts from professional activities and from agricultural income, CIT(A) has not accepted the same holding that no documentary evidence has been filed in support thereof which has now been contested by the assessee stating that the said receipts have been duly disclosed in the return of income and has been accepted by the AO. We agree with the contention of the assessee that where the nature and source of receipt has been duly accepted by the Revenue, there is no basis to deny the claim of the assessee as the source of investment in his real estate projects and the addition is hereby directed to be deleted. Receipts on account of unsecured loan from three persons - The claim of the assessee has been denied by the CIT(A) holding that these transactions are not reflected under the head unsecured loans in the balance sheet as on 31.03.2018. The claim of the assessee however has been that these unsecured loans were taken in personal capacity by the assessee and the amount has been received in his saving bank account and thereafter, these amounts have been transferred by way of capital contribution to the account of M/s M.P Builders Developers and has been shown under the head capital contribution and form part of Rs 43.66 lacs capital contribution which is not under dispute. On perusal of the documents available on record, we believe that the assessee has sufficiently explained the source of investment in his real estate projects by way of loan taken in personal capacity which has been invested and show as capital contribution. In the result, the addition is directed to be deleted. In the result, the ground of appeal is allowed. Addition on account of alleged investment in jewellery - As contended that the value of jewellery found during the course of search is well within the limits as provided in CBDT Instruction no. 1916 dated 11.05.1994 as corroborated by the copy of panchnamas and department valuer report. The panchnamas and the department valuer report are part of the assessment records and the same can be verified to examine veracity of the contention so raised by the assessee. We accordingly set-aside the matter to the file of the AO to examine the said contention as per law after providing reasonable opportunity to the assessee. In the result, the ground of appeal is allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of Rs. 12,43,500/- on account of certain loose slips found during the course of search.
2. Addition of Rs. 11,17,400/- on account of alleged investment in jewellery.
3. Addition of Rs. 32,35,000/- on account of non-disclosure of work-in-progress in the Income Tax Return.

Detailed Analysis:

1. Addition of Rs. 12,43,500/- on account of certain loose slips found during the course of search:

The assessee contended that the loose slips found during the search related to purchases for real estate projects, which were under construction, and no income had accrued. The assessee argued that since no sales had taken place, there was no requirement to maintain books of account as per Section 44AA of the Act. The liability arising from these purchases was shown under "capital work-in-progress" in the balance sheet, and no expenditure was claimed or payment made during the year under consideration. The CIT(A) sustained the addition due to the lack of bills and unexplained sources of payment. However, the tribunal found that since the liability was shown under "capital work-in-progress" and no payment was made during the year, the addition was unwarranted and directed its deletion. The ground of appeal was allowed.

2. Addition of Rs. 11,17,400/- on account of alleged investment in jewellery:

The assessee argued that the jewellery found during the search was within the limits prescribed by CBDT Instruction No. 1916 dated 11.05.1994, considering the joint family structure. The total weight of gold jewellery was 1315 grams, which was within the permissible limit of 1400 grams. The CIT(A) did not properly consider the clarification provided by the assessee and sustained the addition for 370 grams of unexplained jewellery. The tribunal set aside the matter to the AO to verify the contention based on the panchnamas and department valuer report, directing a fresh examination as per law. The ground of appeal was allowed for statistical purposes.

3. Addition of Rs. 32,35,000/- on account of non-disclosure of work-in-progress in the Income Tax Return:

The AO made the addition due to unexplained sources of investment in the proprietorship concern and unsecured loans. The assessee contended that Rs. 9,35,000/- was from professional receipts and agricultural income, duly declared in the return of income. The tribunal agreed that the source was accepted by the Revenue and directed the deletion of this addition. Regarding Rs. 23,00,000/- from unsecured loans, the assessee claimed these were personal loans transferred as capital contribution to M/s M.P. Builders & Developers. The tribunal found the explanation satisfactory and directed the deletion of this addition as well. The ground of appeal was allowed.

Conclusion:

The tribunal allowed the appeal of the assessee, directing the deletion of the additions related to loose slips and non-disclosure of work-in-progress, while setting aside the matter regarding the jewellery addition for fresh examination by the AO. The order was pronounced on 30/08/2022.