2015 (9) TMI 959 - AT - Income Tax

Estimation of sales consideration - unaccounted business in the real estate activity - CIT(A) directed AO to adopt the profit as the profit from real estate business and other activities which remain to be accounted in the books of accounts and restrict the addition - Held that - computation of the income of the assessee is based on substantial evidence provided by the assessee and explanation given for the same. The Assessing Officer in the remand report has no material to suggest the gross income from the sale of plot at ₹ 5,68,02,885/- and contrary to this, the Assessing Officer estimated the sale value of the property without any supportive material on his hand. In our opinion, the assessee s version of gross receipt from the sale of property is based on evidence brought on record and further loan amount considered by the Assessing Officer as unexplained income to the tune of ₹ 44,50,000/- was considered by the Commissioner of Income Tax (Appeals) and there is no reason to doubt the same and it is to be considered as explained credit only. Further, it is noted that the Assessing Officer even at the assessment stage accepted the total receipt of the plot at ₹ 2,71,16,000/-. However, the Assessing Officer was not ready to compute the income on the basis of investment method instead he adopted the income on the estimation basis. In our opinion, when the material brought on record suggests the correct state of affairs of the assessee, it is not appropriate to estimate the income of the assessee on the basis of irrelevant consideration. Hence, the Assessing Officer cannot substitute his own view to the results show in the books of accounts. - Decided against revenue. Payment of scrap sales to Mrs. Vijayalakshmi - CIT(a) deleted the addition - Held that - In this case, the Commissioner of Income Tax (Appeals) deleted the addition on the reason that it was paid out of unaccounted income generated and such income was confirmed by the Commissioner of Income Tax (Appeals) for the assessment year 2008-2009 at ₹ 87,24,139/-. Thus, the Commissioner of Income Tax (Appeals) gave a telescopic benefit out of the addition made in the earlier assessment year towards unexplained investment of ₹ 57,00,000/-. Being so, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) on this issue and the ground of the Revenue is dismissed.- Decided against revenue. Sale proceeds of scrap from Sri Mahendran to build up source - CIT(Appeals) confirmed only ₹ 1,27,000/- as commission from scrap sales - Held that - It is an admitted fact that the assessee had obtained power of attorney from Mrs. Vijayalakshmi and the assessee was thereby authorized to dispose the scrap on behalf of Mrs. Vijayalakshmi. The special power of attorney dated 21.05.2008 specifically stating that the assessee was agent to manage the share of Vijayalakshmi s properties in M/s. Standard Steel Rolling Mills, a partnership firm. Consequent to the power of attorney the assessee sold scrap on 12.02.2009 at ₹ 67,25,000/-. This fact is not disputed by the Revenue authorities. The assessee is entitled to receive commission at ₹ 1,27,000/- from this transaction and the same was offered to tax. Considering these facts the Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer to the tune of ₹ 67,25,000/-. The contention of the department is that cash flow statement shows ₹ 67,25,000/- as receipt. The assessee admitted to have received this money on behalf of Mrs. Vijayalakshmi, it should be shown as receipts and not to be shown as application of money in the cash flow statement. We do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) - Decided against revenue.

Summary

Issues Involved:
1. Failure to consider remand report.
2. Suppression of real sale price of plots.
3. Difference in sale price shown by assessee and real market price.
4. Summoning and recording statements from plot buyers.
5. Decision based on cash flow statement rather than sale price.
6. Fresh evidence allowed in violation of Rule 46A.
7. Tax treatment of scrap sales.

Issue-wise Detailed Analysis:

1. Failure to Consider Remand Report:
The Revenue argued that the Commissioner of Income Tax (Appeals) did not consider the remand report submitted by the Assessing Officer, which detailed how income from real estate business was calculated. The Tribunal found that the Commissioner of Income Tax (Appeals) had indeed considered the findings of the Assessing Officer, including the remand report and submissions by the assessee.

2. Suppression of Real Sale Price of Plots:
The Revenue contended that the assessee purchased land at a lower cost and sold it at a higher price than declared, suppressing the real sale price. The Tribunal noted that the assessee admitted to receiving cash over and above the registered price and deposited all receipts in the bank. The Commissioner of Income Tax (Appeals) computed the profit based on the actual bank deposits and not on the estimated sale consideration provided by the Assessing Officer.

3. Difference in Sale Price Shown by Assessee and Real Market Price:
The Revenue highlighted the discrepancy between the sale price shown by the assessee and the real market price. The Tribunal supported the Commissioner of Income Tax (Appeals) in considering the actual deposits in the bank accounts as the basis for determining the sale price, which was more reliable than the estimated figures provided by the Assessing Officer.

4. Summoning and Recording Statements from Plot Buyers:
The Assessing Officer summoned 53 buyers and recorded statements from 23, which indicated higher sale prices than declared. The Tribunal found that some buyers later clarified that additional amounts included costs for construction and approvals, not just the plot price. The Commissioner of Income Tax (Appeals) considered these clarifications and adjusted the income accordingly.

5. Decision Based on Cash Flow Statement Rather Than Sale Price:
The Revenue criticized the decision based on the cash flow statement rather than the estimated sale price. The Tribunal agreed with the Commissioner of Income Tax (Appeals) that the cash flow statement provided a more accurate reflection of the actual transactions and income, leading to a more precise profit calculation.

6. Fresh Evidence Allowed in Violation of Rule 46A:
For the assessment year 2009-2010, the Revenue argued that the Commissioner of Income Tax (Appeals) allowed fresh evidence regarding the payment for scrap sales, violating Rule 46A. The Tribunal found that the Commissioner of Income Tax (Appeals) had correctly given credit for the unaccounted income generated in the previous year, which was used for the payment.

7. Tax Treatment of Scrap Sales:
The Revenue contended that the assessee received Rs. 67,25,000 from scrap sales but only declared Rs. 1,27,000 as commission. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision that the assessee acted as an agent for Mrs. Vijayalakshmi, selling the scrap on her behalf and earning a commission of Rs. 1,27,000. The remaining amount was not considered the assessee's income.

Conclusion:
The Tribunal dismissed the appeals of the Revenue, confirming the decisions of the Commissioner of Income Tax (Appeals) in both assessment years. The Tribunal found that the income computation based on the cash flow statement and actual bank deposits was more reliable than the estimated figures provided by the Assessing Officer. The Tribunal also upheld the treatment of the scrap sales and the acceptance of fresh evidence in the context of the unaccounted income generated in the previous year.