2014 (4) TMI 354 - AT - Income Tax

Addition made on account of unaccounted cash receipts Cash receipts of brokerage Sale of car parking charges - Held that - The decision in M/s. Sai Shiv Developers 2014 (4) TMI 153 - ITAT MUMBAI followed Without any evidence in the year for receipt of on-money the addition cannot be sustained there is no documentary evidence with respect to the sale of car parking area except the document no.15 of the documents - there is no basis for making addition for each flat for car parking - The AO had not made any inquiry or verification to examine the facts regarding the rate of sale, area, on money payment of brokerage charges and car parking charges from any of the available sources including the buyers of flats as none of the buyers of the flats was examined by the department to verify the involvement of on-money payment and other charges as alleged by the revenue - Even the understatement of area is not examined by the AO at any stage of proceedings - it cannot be presumed that all the flats were sold by the assessee through the real estate agent and involved brokerage charges. When the statements u/s 133A were recorded at back of the assessee and were subsequently retracted by the witnesses have no evidentiary value to the extent of contents whichever corroborated by documents impounded during the survey proceedings thus, no addition is warranted with regard to the area, parking charges and brokerage - The addition regarding rate is sustainable only to the extent of rates mentioned in the documents thus, the order of the CIT(A) upheld Decided against Revenue. Ad-hoc Deletion made - Material, transport and labour charges Held that - The CIT(A) has analysed the ledger account of material purchases wherein the entire details like name of the parties, bill number, date and item purchases were mentioned - most of the payments have been made through cheques and in case of labour payments to the contractors, TDS has also been deducted - The AO has neither identified any specific details nor asked the assessee to produce specific bills or vouchers for any particular items of purchase and in the absence of such exercise being done by the Assessing Officer, no ad-hoc disallowance can be made CIT(A) has also analysed the working of the profit to highlight the fact that the assessee had shown a high margin of profit in this year - the assessee s purchases cannot be doubted on ad-hoc basis the items of expenditures are direct expenses and once the high margin of net profit has been accepted, then such a disallowance will go to enhance the profit by further percentage thus, there is no reason to interfere in the findings of the CIT(A) - when all the details of direct expenses have been maintained and no discrepancies therein have been found, then any kind of estimate or ad-hoc disallowance should not have been made Decided against Revenue. Deletion of travelling expenses Held that - CIT(A) was of the view that the travel to Rajasthan may be justified in connection with purchase of marbles but no specific arguments to justify the travel to other places like Ahmadabad and Bangalore has been given - Considering the fact that FBT has also been paid and visits to Rajasthan do appear to be for business purposes, entire disallowance of travelling expenses is highly excessive - the reasoning given by the CIT(A) for restricting the disallowance of expenditure @ 20% is quite reasonable and no further disallowance is called for Decided against Revenue.

Issues Involved:
1. Deletion of addition made on account of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.
2. Addition of unaccounted cash receipts of brokerage and car parking charges.
3. Deletion of addition made on account of material, transport, and labour charges.
4. Deletion of addition made on account of traveling expenses.

Detailed Analysis:

1. Deletion of Addition Made on Account of Deemed Dividend:
The Revenue challenged the deletion of the addition made by the Assessing Officer (A.O.) on account of deemed dividend under Section 2(22)(e) for the assessment years 2005-06 and 2006-07. The Tribunal noted that the orders passed under Section 263 by the Commissioner were canceled by the Tribunal for both assessment years, rendering the present appeals infructuous. The Commissioner (Appeals) had also acknowledged that the assessment orders passed in pursuance to the order under Section 263 would become non-est if the order under Section 263 was set aside. Consequently, the additions for deemed dividend were directed to be deleted as the assessment orders had abated.

2. Addition of Unaccounted Cash Receipts of Brokerage and Car Parking Charges:
For the assessment year 2009-10, the Revenue raised grounds regarding the addition of unaccounted cash receipts of brokerage and car parking charges. The Tribunal observed that similar issues had been decided in favor of the assessee in the assessee's own case for the assessment years 2006-07 and 2007-08. The A.O. had based the additions on the statement of a broker recorded during a survey, which indicated the receipt of on-money and brokerage charges. However, the Tribunal noted that there was no documentary evidence to support these additions, and the A.O. had not conducted any inquiry or verification from the buyers of flats. The Tribunal upheld the deletion of these additions by the Commissioner (Appeals), who had followed the earlier orders of the Tribunal and found no evidence for receipt of on-money in the current year.

3. Deletion of Addition Made on Account of Material, Transport, and Labour Charges:
The A.O. made an ad-hoc addition of Rs. 9,54,511 on account of material, transport, and labour charges, citing the assessee's failure to produce bills and vouchers for verification. The Commissioner (Appeals) deleted the addition, noting that the assessee had provided ledger accounts of material purchases and details of parties from whom purchases were made. The Commissioner (Appeals) found that most payments were made by cheques and TDS was deducted for labour payments. The Tribunal affirmed the deletion, agreeing that the A.O. had not identified specific discrepancies or requested specific bills for verification, and the assessee had shown a reasonable profit margin.

4. Deletion of Addition Made on Account of Traveling Expenses:
The A.O. disallowed the entire traveling expenses of Rs. 6,58,860, questioning the business purpose of travel to places like Ahmedabad, Rajasthan, and Bangalore. The Commissioner (Appeals) restricted the disallowance to 20% of the expenses, acknowledging that travel to Rajasthan for marble purchases was justified and FBT had been paid. The Tribunal upheld this decision, finding the restriction to 20% reasonable and no further disallowance warranted.

Conclusion:
The Tribunal dismissed the Revenue's appeals for all the assessment years, affirming the deletion of additions made on account of deemed dividend, unaccounted cash receipts, material, transport, and labour charges, and traveling expenses. The order was pronounced in the open Court on 28th March 2014.

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