2023 (10) TMI 1137 - AT - Income Tax

Bogus advances receipts - advances against sale of flats which have been shown under the head unsecured loans and advances from the parties - AO held that the advances from these parties were not proved - HELD THAT - We have perused and examined the profit and loss account for the FY ending 31.03.2012 and found that the assessee has shown sales of flats which is in agreement with the details furnished by the assessee in which the amount received from party was duly adjusted and shown as sale. We note that the assessee has sold these flats in the subsequent years and the sale has duly been shown in the books of accounts and due taxes have also been paid. We are surprised to note that the AO has treated the advances as bogus in respect of which the sale deeds were executed in the subsequent years. We direct the AO to delete the addition. Project expenses disallowed - addition by CIT(A) as made by the AO on estimated basis by adding 25% of the total project expenses claimed by the assessee - HELD THAT - After examining profit and loss account, the vouchers filed by the assessee, we note that these were expenses incurred in connection with the construction of the flats project which were duly supported with the bills and vouchers and has been correctly shown in the expenses side of the profit and loss account. We note that the substantial part of the project expenses has gone into closing work-in-progress which was carried forward to the subsequent year as closing stock as there were 14 unsold flats in hand. We note that the AO has not given any reason for disallowing 25% of the project expenses and only cited the non-production of bills and vouchers whereas on the other hand the assessee has filed all the evidences before us and we note that all these expenses were genuinely incurred for the project of construction of flats. Accordingly, we are not in a position to sustain the ad-hoc disallowance of expenses that too without any basis - Decided in favour of assessee.

Summary

Issues involved:
The appeal against the order of Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi for the Assessment Year 2012-13.

Issue 1: Addition of Rs. 14,71,000
The AO added Rs. 14.71 Lakh to the income of the assessee on the ground that advances from certain parties were not proved. The Ld. CIT(A) affirmed this addition. However, upon review, it was found that the assessee had constructed flats and received advances from parties, with proper documentation. The sales of flats were duly recorded in subsequent years. The tribunal concluded that the AO's treatment of the advances as bogus was incorrect, as the sale deeds were executed in later years. The order of Ld. CIT(A) was set aside, directing the AO to delete the addition of Rs. 14.71 Lakh.

Issue 2: Addition of Rs. 16,75,860
The AO added Rs. 16,75,860 on an estimated basis by disallowing 25% of the total project expenses claimed by the assessee. The Ld. CIT(A) upheld this addition, citing that a major part of the expenses was related to unsold flats. Upon examination of the profit and loss account and supporting documents, it was revealed that the expenses were genuine and properly accounted for in connection with the construction project. The tribunal found the disallowance without basis and unsupported by evidence. Therefore, the order of Ld. CIT(A) was set aside, directing the AO to delete the addition of Rs. 16,75,860.

Other Issues:
Ground nos. 3, 4 & 5 were dismissed as not pressed. Ground nos. 6 & 7, being general in nature, required no adjudication.

In conclusion, the appeal by the assessee was partly allowed, with the tribunal ruling in favor of the assessee on both the issues of addition of Rs. 14,71,000 and Rs. 16,75,860.