2014 (4) TMI 20 - AT - Income Tax

Addition made u/s 68 of the Act - Unaccounted cash payments Assessment u/s 153A of the Act - Held that - The denial by both the parties, consequent to impounding of the cash receipt from the assessee s premises was only self- serving - It is a business practice of paying amounts in cash in real estate transactions and evidencing them is generally not possible, unless there are receipts given by the parties affirming the receipt of cash - More so when cash was paid outside books of accounts. As seen from this transaction, even though a development agreement was entered in October, 2006, the transaction was not concluded and the owners who were supposed to get developed area towards their share could have asked for as compensation or for further payment in view of the enhanced values in the market. There could be re-negotiations and as part of that assessee could have paid the amounts - Since assessee admits that there was re- negotiations/settlement at that point of time, it has to be considered that assessee indeed paid the amount to the owners/consenting parties at that point of time and denial subsequently was certainly a self-serving one - The details of payments he could not confirm - paying amount to the owners by way of cash even when it is only a development agreement was not ruled out - a cash receipt was found in the course of proceedings in the assessee s premises, the assessee could have paid the amount out of its unaccounted sources and the receipt has to be believed as genuine payment of money thus, the order of the CIT(A) upheld Decided against Assessee. Addition made on account of low profitability Held that - As seen from the computation of income filed by the assessee there was no denial of rental income - The AO admitted the later figure while arriving at the income declared by the assessee whereas, according to the assessee, the gross income from the rental of the property was to be taken at Rs.1,54,65,736/-, as per the statement recorded in the course of search - Since the difference arose due to payment of municipal tax and statutory claim, the basis for making the addition by the A.O. itself was wrong - There is no other issue to be considered as the assessee has shown the profits and loss from various projects and also admitted an amount of Rs.70,00,000/- in the course of search - Just because there is a shortfall in declaring the income after claiming statutory deductions, the same cannot be considered as shortfall in declaration of the income when AO did not find any other shortfall or mistakes in the accounts maintained by the assessee thus, the contentions of the assessee are accepted and addition made by the AO set aside Decided in favour of Assessee.

Summary

Issues Involved:
1. Addition of Rs. 91,26,000/- on account of unaccounted cash payment for A.Y. 2009-2010.
2. Addition of Rs. 22,78,665/- due to alleged low profitability for A.Y. 2010-2011.

Issue 1: Addition of Rs. 91,26,000/- on account of unaccounted cash payment for A.Y. 2009-2010

The assessee filed its original return of income for A.Y. 2009-2010 on 29.09.2009 declaring income of Rs.3,13,64,528/-. Following a search in the residential premises of the Director and survey proceedings at the office premises, proceedings under section 153A were initiated. During reassessment, the A.O. added Rs.91,26,000/- as unaccounted cash payment based on a seized cash receipt dated 27.11.2008. The receipt was signed by Mr. M. Suveer Reddy and Mr. B.L. Shankar Lal Yadav, confirming the receipt of Rs.91,26,000/- in cash. The A.O. concluded that the statements denying the cash payment by the involved parties were unreliable, treating the amount as undisclosed income.

During the appeal, the assessee argued that the cash receipt was an advance receipt prepared to arrange funds, but no cash was actually paid. The CIT(A) rejected this explanation, stating that it was against human probabilities for a proper receipt to be given without actual payment. The CIT(A) upheld the addition, noting that the explanation lacked evidentiary support and the receipt indicated a genuine transaction.

In the tribunal, the assessee reiterated its arguments, emphasizing that the disputes over the land were unresolved, making cash payments improbable. The D.R. countered, asserting that the receipt was clear evidence of payment. The tribunal, after reviewing the evidence and considering the business practices in real estate, concluded that the assessee likely paid the amount out of unaccounted sources. The tribunal upheld the CIT(A)'s order, confirming the addition of Rs.91,26,000/- as undisclosed income.

Issue 2: Addition of Rs. 22,78,665/- due to alleged low profitability for A.Y. 2010-2011

In the course of a search, the assessee admitted Rs.70,00,000/- as undisclosed income, apart from Rs.1,45,74,785/- on which no advance tax was paid. The A.O. calculated the total amount to be disclosed at Rs.2,15,74,785/-. The assessee declared a loss in certain projects and filed a return showing an income of Rs.1,92,96,120/-, resulting in a shortfall of Rs.22,78,665/-, which the A.O. added to the returned income.

During the appeal, the assessee argued that the shortfall arose due to statutory deductions in house property income. The CIT(A) dismissed the appeal, stating that the assessee retracted from its earlier admission of additional income. The CIT(A) upheld the addition, finding no infirmity in the A.O.'s calculation.

In the tribunal, the assessee provided a reconciliation showing that the difference in income was due to the claim of municipal tax and statutory deduction under section 24. The tribunal found that the A.O.'s basis for the addition was incorrect, as the difference arose from legitimate statutory claims. The tribunal deleted the addition of Rs.22,78,665/-, accepting the assessee's contentions.

Conclusion:

The tribunal dismissed the appeal for A.Y. 2009-2010, confirming the addition of Rs.91,26,000/- as undisclosed income. For A.Y. 2010-2011, the tribunal allowed the appeal, deleting the addition of Rs.22,78,665/- due to alleged low profitability. The order was pronounced in the open court on 07.03.2014.