2015 (10) TMI 2430 - AT - Income Tax

Addition on net profit on account of money receipts - sale of bogus tenancy flat - CIT(A) deleted the addition - Held that - There is uncontroverted finding in the impugned order that the assessee sold the flats at the market rates and there was no proof that on money was received by the assessee on sale of flats/from tenants, thus, no presumption can be drawn, in the absence of any material, that any under hand money transacted between the assessee and the tenants. As mentioned earlier the tenants were certified by MHADA, which rather contains more tenants, therefore, the allegation of creation of bogus tenancy is not substantiated. Neither before the Assessing Officer nor before the ld. Commissioner of Income Tax (Appeals) and even before this Tribunal no material was produced at any stage that the assessee received on money/under hand money, thus, merely, on the basis of statement of one or two person, the addition made on presumptive basis cannot be sustained. Even otherwise, presumption cannot take the shape of evidence, however it strong may be. It is also noted that even the ld. Assessing Officer vide his remand report dated 11/01/2011 categorically stated that the impugned five parties were actually given possession of the property in lieu of the surrender of the tenancy rights. Even in the remand report, it has been concluded the by Assessing Officer that the noting on the seized paper and the agreement does not tally and rather the parties received the area as per the agreement, thus, the totality of facts, clearly indicates that the addition was merely made on presumptive basis, which cannot stand on its legs, therefore, the addition was rightly deleted, consequently, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue Net profit on sale of bogus tenancy of 22 flat in Siddesh apartment and shop in riddhi apartment - CIT(A) deleted the addition - Held that - Because the addition was made merely on the basis of certain statements and without corroborating the same with the material whereas, as mentioned earlier, as per the MHADA the actual tenants were 101, whereas, as per the assessee, they were only 97, thus, there is no question of bogus tenancy, more specifically when alternate accommodation was provided to, claimed, 97 persons in lieu of surrender of their tenancy rights. So far as, seizure of incriminating material from the residence of Ms. Chola Joshi is concerned, we have already deliberated upon the same in preceding para of this order. It is also worth mentioning that while deliberating upon the issue, the ld. Commissioner of Income Tax (Appeals) has already placed reliance upon various judicial pronouncements, therefore, the same are not being repeated, being, matter of record and may be considered to be looked upon/considered by us. Thus, on this ground, we find no merit, in the appeal of the Revenue, consequently, we affirm the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue

Issues Involved:
1. Legitimacy of the addition of on-money receipts.
2. Allegation of creation of bogus tenancy rights.
3. Method of accounting followed by the assessee.
4. Condonation of delay in filing cross objections.

Issue-Wise Detailed Analysis:

1. Legitimacy of the Addition of On-Money Receipts:
The Revenue contended that the assessee received on-money from various parties, based on seized documents and statements during a search operation. The Commissioner of Income Tax (Appeals) (CIT(A)) found that the seized documents and statements did not match the actual area given to concerned parties as per agreements. The CIT(A) noted that the tenants certified by MHADA, a government agency, were more than those claimed by the assessee, refuting the allegation of bogus tenancy. The CIT(A) concluded that no material evidence indicated receipt of on-money, and the addition based on presumptive calculations was unsustainable. The Tribunal upheld the CIT(A)'s decision, emphasizing that presumptive additions without corroborative evidence cannot stand.

2. Allegation of Creation of Bogus Tenancy Rights:
The Revenue alleged that the assessee inflated the number of tenants to create bogus tenancy rights, resulting in additional Floor Space Index (FSI). The CIT(A) found that the tenants were certified by MHADA, which included more tenants than claimed by the assessee, thus refuting the allegation of bogus tenancy. The CIT(A) also noted that the addition was based on incorrect facts and rough notings on seized papers, which did not represent the factual position. The Tribunal upheld the CIT(A)'s decision, stating that the addition based on unverified and incorrect notings could not be sustained.

3. Method of Accounting Followed by the Assessee:
The assessee followed the project completion method of accounting, offering income for taxation in the year of substantial completion of the project. The CIT(A) accepted this method, citing various judicial pronouncements that upheld the project completion method as an appropriate method of computing income. The Tribunal concurred, noting that the method consistently followed by the assessee and in accordance with accounting standards could not be questioned unless it resulted in distortion of profits.

4. Condonation of Delay in Filing Cross Objections:
The assessee filed cross objections with a delay of 289 days. The Tribunal considered the reasons for the delay and noted that a liberal approach should be adopted in matters of condonation of delay to further the cause of substantial justice. Citing judicial precedents, the Tribunal condoned the delay, emphasizing that sufficient cause should receive liberal construction to advance substantial justice.

Conclusion:
The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s decisions, finding no merit in the Revenue's contentions. The Tribunal also dismissed the assessee's cross objections as not pressed or being infructuous.

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