2024 (3) TMI 207 - AT - Income Tax

Addition made u/s 43CA - difference between the amount of sale consideration appearing in the conveyance deed and the value adopted by the stamp valuation authority - HELD THAT - Impugned addition is uncalled for as provisions of Section 43CA of the Act are not applicable to the transactions in question which we have been originally agreed to sell during FY 2011- 12 and part sale consideration have also been received. Accordingly the finding of the ld. CIT(A) is set aside and Ground No. 1 raised by the assessee is allowed. Addition on the income from real estate business - Estimation of profits of the assessee s business - AO has not rejected the book results and provisions of Section 145(3) of the Act has not been invoked - HELD THAT - We delete the addition made by the AOestimating higher net profits without rejecting the books of accounts. Findings of the ld. CIT(A) is set aside. Ground No. 2 raised by the assessee is allowed. Estimating the profits over and above the profits declared by the assessee in the liquor business carried out - AO again failed to reject the book results u/s 145(3) of the Act before estimating the profits of the liquor business declared by the assessee - HELD THAT - The estimation has been made by the ld. Assessing Officer mainly on surmises and conjectures without bringing any other evidence on record and such action of the Assessing Officer of assuming jurisdiction u/s 145(3) of the Act without rejecting the book results and without pinpointing the specific defects in the books of accounts regularly maintained and audited, cannot be held to be justified. Ground No. 3 raised by the assessee is allowed. Addition made for unexplained cash deposited during the demonetisation period - HELD THAT - Assessee is carrying out business of selling goods and providing services regularly and books of accounts of each of the concerns have been maintained. Financial statements are duly audited and profits from each of the concerns are declared. As per the consolidated cash statement as on 08/11/2016, there is a cash balance of Rs. 96,34,619/-, which is sufficient enough to explain the source of alleged cash deposit of Rs. 67,94,000/-. Where the nature and source of the cash credit is explained satisfactorily by the assessee and the Assessing Officer fails to find any defect or any inconsistency in such explanation then, provision of Section 68 of the Act cannot be invoked. We, therefore, hold that no addition is called for u/s 68 - Ground Nos. 4 5 raised by the assessee are allowed. Addition made for estimating the income for clearing and forwarding agent business - AO has taken the basis of the VAT returns to come to a conclusion that the assessee has suppressed the sales and thereby suppressed a net profit - HELD THAT - Both the lower authorities have failed to consider the fact that one of the business of assessee is that of clearing and forwarding agent and he sells the goods of the companies for which he is acting as an agent. Since the assessee is liable to collect and deposit the value added tax, the details of such sales have been mentioned in the VAT return. However, for the purpose of income tax, assessee has to only account for the commission income earned for carrying out such business as a clearing and forwarding agent. Both the lower authorities missed to consider this fact. Assessee has filed complete reconciliation statement depicting that there is no suppressed sales and, therefore, the income estimated by the ld. Assessing Officer is merely on surmises and conjectures and have no legs to stand. The addition is hereby deleted. Ground No. 6 raised by the assessee is allowed. Addition u/s 68 - Whether genuine transaction and the identity and creditworthiness of the creditor not proved? - onus to prove - HELD THAT - Funds which were actually required to be received in the account of M/s. Gitanjali Hotels and Inn Private Limited, were received by the assessee on behalf of M/s. Gitanjali Hotels and Inn Private Limited. The audited balance sheet of M/s. Gitanjali Hotels and Inn Private Limited has been filed in the alleged transaction has been mentioned therein both on the liability as well as the asset side. Since the asset owned by GHIPL was not transferred during the eyar, the same is duly regulated in balance sheet as on 31/03/2017. As well as the liability is concerned, the same are shown as advance against sale of land and so far as the asset side is concerned it is loan/advance to the assessee which in turn has been shown as liability in the books of the assessee. The complete details of the said transaction has been placed on record. We thus, find that the assessee has successfully explained the nature and source of the alleged sum and has discharged its burden casted u/s 68. Since the revenue authorities have failed to bring any contrary material on record, we find it to be a genuine transaction and the identity and creditworthiness of the creditor is not disputed. Thus, the addition u/s 68 of the Act, is uncalled for and the same is hereby deleted. Ground Nos. 7 8 of the assessee are allowed.

Summary

Issues Involved:
1. Addition under Section 43CA.
2. Estimation of net profit in real estate business.
3. Estimation of net profit in liquor business.
4. Addition for unexplained cash deposits during demonetization.
5. Estimation of income for clearing and forwarding agent business.
6. Addition under Section 68 for unexplained cash credit.

Summary:

1. Addition under Section 43CA:
The Tribunal found that the flats sold during the year were originally agreed to be sold during FY 2011-12, with part payment received through account payee cheques. Since Section 43CA of the Income Tax Act, 1961, was inserted w.e.f. 01/04/2014, it was not applicable to these transactions. The Tribunal deleted the addition of Rs. 1,67,44,907/-.

2. Estimation of net profit in real estate business:
The Tribunal noted that the Assessing Officer had not rejected the book results under Section 145(3) of the Act and had estimated the profits merely on surmises and conjectures. Consequently, the addition of Rs. 17,45,120/- was deleted.

3. Estimation of net profit in liquor business:
The Tribunal observed that the Assessing Officer failed to reject the book results before estimating the profits of the liquor business. The estimation was based on surmises and conjectures without evidence. The addition of Rs. 1,20,47,747/- was deleted.

4. Addition for unexplained cash deposits during demonetization:
The Tribunal found that the assessee had sufficient cash in hand as on 08/11/2016, which was utilized for making the deposits. The cash books were regularly maintained, and the nature and source of the cash credit were satisfactorily explained. The addition of Rs. 67,94,000/- was deleted.

5. Estimation of income for clearing and forwarding agent business:
The Tribunal noted that the assessee was a clearing and forwarding agent and only recorded commission income in books, while actual sales were accounted for in the books of the principal company. The addition of Rs. 49,11,694/- was based on surmises and conjectures and was deleted.

6. Addition under Section 68 for unexplained cash credit:
The Tribunal found that the assessee had successfully explained the nature and source of the alleged sum. The transaction was genuine, with the identity and creditworthiness of the creditor not disputed. The addition of Rs. 1.65 Crores under Section 68 was deleted.

Conclusion:
The appeal of the assessee was allowed, and all the additions made by the Assessing Officer were deleted.