2023 (1) TMI 360 - AT - Income Tax

Reopening of assessment - Cash receipt against booking of flats - cash receipt will be subject to tax - unaccounted income of the company for its Nehru Vikas Minar Project - AO made the impugned addition relying only on the provisions of sub-section (4A) of section 132 - HELD THAT - As observed that the company has denied the alleged cash receipt by it from the parties mentioned in xls sheet. AO made the impugned addition relying only on the provisions of sub-section (4A) of section 132 completely overlooking the fact that the presumption under section 132(4A) is rebuttable and where there is denial of such presumption, onus shifts to the Ld. AO to make further investigation which has not been done. No attempt has been made by the AO to examine the said parties to establish the veracity of the entries made in the xls sheet when their complete addresses have been mentioned therein. The records do not reveal that during re-assessment proceedings the assessee was confronted with the case of Shri I.E. Soomar in which on similar set of facts and circumstances, taxes have been paid on such cash investments. Record of the assessee needs to be examined as to whether in its case Percentage Completion Method (PCM) has been applied or assessment has been made on the basis of Project Completion Method. We are, therefore, of the view that it would be appropriate if the issue of the impugned addition is restored back to the file of the Ld. AO to carry out necessary investigation as to the receipt of the alleged cash by the assessee and arrive at the conclusion afresh in the light of the material gathered. Accordingly, we set aside the order of the Ld.CIT(A) on this issue and direct the Ld. AO to make reassessment afresh keeping in view the above directions. Appeal of the Revenue is treated as allowed for statistical purposes. Validity of the reassessment - It is observed that the CIT(A) has held that the reopening of the assessment is valid in the eyes of law for the reasons recorded in this behalf. We agree and reject this ground. Appeal of the assessee is dismissed.

Summary

Issues:
1. Validity of notice under section 148 for reopening the assessment.
2. Treatment of alleged cash receipt against booking of spaces at Nehru Vikas Minar Projects.

Issue 1: Validity of notice under section 148 for reopening the assessment:
The case involved challenges to the validity of the notice under section 148 for reopening the assessment. The Ld. CIT(A) rejected the objections raised by the assessee regarding the notice, stating that the notice was issued under the law and act, and no question arose on its validity. The Ld. CIT(A) also held that the objections raised by the assessee had been dealt with by the Ld. AO in a speaking order. Ultimately, the Tribunal agreed with the Ld. CIT(A) and rejected the ground challenging the validity of the reassessment.

Issue 2: Treatment of alleged cash receipt against booking of spaces at Nehru Vikas Minar Projects:
The dispute revolved around the treatment of an alleged cash receipt of Rs.2,23,71,700 against booking of spaces at Nehru Vikas Minar Projects. The Ld. AO treated this amount as unaccounted income of the assessee, adding it to the income under section 143(3) read with section 147 of the Act. However, the Ld. CIT(A) allowed the assessee's appeal, applying the Percentage Completion Method (PCM) for revenue recognition, based on the parameters set out in the accounting standards. The Ld. CIT(A) directed that the revenue of the assessee should be recognized as per the method adopted by the assessee for revenue recognition. The Tribunal, after careful consideration, observed that the Ld. AO had not sufficiently investigated the alleged cash receipt and the denial by the company. Therefore, the Tribunal set aside the Ld. CIT(A)'s order on this issue and directed the Ld. AO to conduct further investigation and reassessment. Consequently, the appeal of the Revenue was treated as allowed for statistical purposes, and the appeal of the assessee was dismissed.

In conclusion, the Tribunal addressed the issues of the validity of the notice for reassessment and the treatment of the alleged cash receipt against booking of spaces at Nehru Vikas Minar Projects. The judgment highlighted the importance of proper investigation and adherence to accounting standards in determining the tax implications of such transactions.