2014 (8) TMI 156 - AT - Income Tax

Unaccounted payment for land Evidentiary value of seized documents - Whether the consideration paid by the assessee for the purchase of Boricha land is ₹ 71 lakhs or ₹ 51 lakhs Held that - The amount under the column Spent Till date not only includes the amount which is actually paid, but it also includes the amount of liability which is incurred but not yet paid - the amount was on account of construction expenses alone, which is an ongoing and continuous expense for the company, for which the construction work is done by the contractor and bill for the same is to be raised by him - the amount is known by the assessee to be paid to the contractor but since the bill is not raised, the amount is not recorded in the books of accounts - no undisclosed cash has been found on the basis of which the AO could have inferred that the assessee company keeps unaccounted cash from which it makes payments which are not recorded in its books of accounts - the amount of difference is only due to an actual liability of 51 lakhs which has not actually been paid but is to be paid subsequently there was no reason to make the addition by invoking section 69C of Act Decided in favour of Assessee.

Summary

Issues:
1. Addition of undisclosed payment for Boricha Land in the assessment year 2005-06.
2. Addition of unexplained expenditure in the assessment year 2007-08.

Issue 1: Addition of undisclosed payment for Boricha Land in the assessment year 2005-06:

The appeal for the assessment year 2005-06 involved the confirmation of an addition of Rs. 20,00,000 on substantive basis by the Ld.CIT(A), related to an alleged unaccounted payment for Boricha Land. The AO invoked section 69 of the Act to add the amount as undisclosed investment. The key contention was whether the consideration paid by the assessee for the land was Rs. 71 lakhs as per seized documents or Rs. 51 lakhs as per the agreement. The ITAT observed that the seized papers did not conclusively prove the actual payment of Rs. 71 lakhs, as it included estimated budget figures. The ITAT further noted discrepancies in the AO's assumptions regarding other land estimates in the seized documents, emphasizing that no evidence of actual undisclosed payment was found during the search. Ultimately, the ITAT reversed the Ld.CIT(A)'s decision, deleting the added amount of Rs. 20 lakhs.

Issue 2: Addition of unexplained expenditure in the assessment year 2007-08:

In the appeal for the assessment year 2007-08, the AO added Rs. 51,00,000 as unexplained expenditure under section 69C. This addition was based on a difference between construction expenses shown in seized papers and the books of account. The ITAT noted that the difference was due to ongoing construction expenses, which included liabilities not yet paid. The expenses were incurred through resources or co-venturers and were reflected in statements sent to stakeholders. The ITAT highlighted that the unexplained amount was a known liability to be paid subsequently, not reflecting undisclosed cash. Consequently, the ITAT overturned the Ld.CIT(A)'s decision, deleting the added expenditure of Rs. 51 lakhs.

In conclusion, the ITAT allowed both appeals filed by the assessee, reversing the decisions on the additions of undisclosed payment for Boricha Land in the assessment year 2005-06 and unexplained expenditure in the assessment year 2007-08.