2023 (6) TMI 1418 - AT - Income Tax

Addition of unaccounted cash received by the assesse over and above the registered sale value of plots - as argued assessee after the survey proceedings has already disclosed profit @15% of the turnover to coverup the discrepancy, only a percentage should be adopted for the cash receipts and the entire amount cannot be added - HELD THAT - It is an admitted fact that the assessee in the revised return filed on 30.12.2015 has declared profit @ 15% on the turnover despite no incriminating evidences being found, a statement made during the course of assessment proceedings and not controverted by the AO. The case of the AO is that the earlier disclosure made for the reasons best known to the assessee cannot be treated as permanent immunity in all unaccounted payments. Contention of the assessee that the unaccounted receipt from Mr. Mazaharuddin are only advances during the impugned A.Y and the registrations were completed in the A.Y 2009-10 and such income was also offered to tax in A.Y 2009-10 was summarily rejected by the CIT (A) in absence of balance sheet of the respective A.Y. Observation of the CIT (A) that the assessee has to explain the unaccounted payments made to Shah Group during the impugned A.Y. During the course of hearing before the Tribunal, the learned Counsel for the assessee drew the attention of the Bench to the Annexure enclosed to the assessment order and demonstrated before us certain sale deeds for which cash was received during the impugned A.Y, were actually registered in A.Y 2009-10 and therefore, these are only advances. It is also his submission that given an opportunity, he can substantiate that there is no unaccounted receipt during the year and the earlier amount of advance has been offered to tax in the A.Y 2009-10. Considering the fact that the assessee has declared additional income @ 15% of the turnover to explain the source of certain payments during the impugned A.Y and considering the fact that certain sale deeds were registered in A.Y 2009-10 for which the assessee has received certain amounts which according to him are advances received during the year, therefore, we deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh. The grounds raised by the assessee are accordingly allowed for statistical purposes.

Issues Involved:
1. Validity of reassessment proceedings.
2. Addition of unaccounted cash receipts.
3. Telescoping of additional income.
4. Double addition of income.
5. Cross-examination of witnesses.
6. Percentage of unaccounted receipts considered as income.
7. Deficit cash calculation.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The assessee challenged the validity of the reassessment proceedings initiated by the AO based on fresh information received from Addl. CIT, Central Range-1, Hyderabad, regarding unaccounted cash receipts from Mr. Mir Mazharuddin. The CIT(A) dismissed the legal grounds challenging the reassessment proceedings, and the Tribunal upheld this decision.

2. Addition of Unaccounted Cash Receipts:
The AO added Rs. 67,15,000/- to the assessee's income, being unaccounted cash received from Mr. Mir Mazharuddin and others. The AO found that the assessee did not reflect these cash payments in its books of account despite evidence found during the search. The CIT(A) upheld this addition, noting that the unaccounted receipts and payments were correctly considered in the respective assessment years (AYs). The Tribunal found some merit in the assessee's argument that these amounts were advances and not sales, and therefore restored the issue to the AO for fresh adjudication.

3. Telescoping of Additional Income:
The assessee argued for telescoping the additional income admitted in the revised return of income after the survey, citing that the additional income was admitted due to cash receipts outside the books of account. The CIT(A) and AO did not accept this argument. The Tribunal directed the AO to re-examine this issue, considering the assessee's claim that the cash receipts were advances.

4. Double Addition of Income:
The assessee contended that the same income was being assessed twice, once in the AYs 2004-05 to 2006-07 and again in AY 2009-10, based on the registration of plots. The CIT(A) dismissed this argument, stating that the unaccounted receipts pertained to earlier years and were correctly assessed. The Tribunal found some force in the assessee's argument and directed the AO to reconsider the issue, allowing the assessee to substantiate its claim.

5. Cross-Examination of Witnesses:
The assessee argued that it was not allowed to cross-examine Mr. Mir Mazharuddin, whose statement was relied upon by the AO. The CIT(A) dismissed this ground, and the Tribunal did not specifically address this issue in its final order, focusing instead on the broader issues of unaccounted receipts and their treatment.

6. Percentage of Unaccounted Receipts Considered as Income:
The assessee argued that only a percentage of the unaccounted receipts should be considered as income, citing various judicial precedents. The AO and CIT(A) did not accept this argument, treating the entire amount as unaccounted income. The Tribunal found merit in the assessee's argument and directed the AO to reconsider the issue, potentially applying a percentage of the unaccounted receipts as income.

7. Deficit Cash Calculation:
In AY 2005-06, the assessee raised an additional ground regarding the deficit cash calculation, arguing that the AO did not consider the addition of on-money made in the earlier year. The Tribunal did not specifically address this issue, focusing on the broader issue of unaccounted receipts and their treatment.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the AO to re-examine the issues of unaccounted cash receipts, the treatment of these receipts as advances, and the application of a percentage of the unaccounted receipts as income. The AO was instructed to provide the assessee with a fresh opportunity to substantiate its claims and decide the issues as per fact and law.

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