2016 (6) TMI 554 - AT - Income Tax

Addition to surrendered income during the course of survey - sale of property - bifurcation of consideration into two assessment years - Held that - The records before us reveals that the declaration was made for the entire project and since some shops and flats remained unsold during the assessment year 2007-08 and therefore some money for the flats was not received and therefore the income of ₹ 35 lakhs was credited in the books of the assessee as per the terms of declaration made by the assessee during the course of survey action. The First Appellate Authority has clearly observed that the assessee has not retracted from the statement made during the course of survey proceedings. As noted hereinabove the assessee during the course of survey made the disclosure over a period of two years i.e. AY 2006-07 and 2007-08. In respect of assessment year 2007-08, the disclosure was made on the condition that the entire income would be disclosed if the assessee succeeded in the selling of flats and shops in that year. But if some stocks in the form of shops and flats remain to be sold then the same would be carried forward and the additional income qua those flats and shops as sold in the next year would be shown accordingly. Accordingly, the ld. CIT(A) further observed that the income of ₹ 90 lakhs was further spread over the period of 2 years and ₹ 35 lakhs was offered for tax in the assessment year 2007-08 and the balance addition income of ₹ 55 lakhs declared during the year 2008-09 and thus entire income of ₹ 90 lakhs stood offered to tax in two years. We are in complete agreement with the observations of the ld CIT(A) that unless and until there was a sale of property there could not be a question of payment of any tax on amount of unrealized sale price. Further, the AO in order to bring the amount of ₹ 90 lakhs in the assessment year 2007-08 had to bring on record evidences that the assessee had sold the area of 250000 sq. ft in that year. We therefore after considering the facts and circumstances of the case and the order of first appellate authority are of the opinion that the assessee s additional income of ₹ 90 lakhs was duly assessed and offered to tax in the assessment years 2007-08 and 2008-09 and therefore, the addition as made by the AO is wrong and unwarranted - Decided in favour of assessee

Summary

Issues:
Deletion of additions of ?55 lakhs by CIT(A) - Surrendered amount during survey - Short return by ?55 lakhs - Assessment year 2007-08.

Analysis:
The appeal was against the order of CIT(A) for assessment year 2007-08. The assessee did not appear during the hearing due to an incomplete address. The common issue raised was the deletion of additions of ?55 lakhs by CIT(A) which was added by the AO as the assessee surrendered ?90 lakhs during a survey but disclosed only ?35 lakhs in the return. The assessee, a builder and developer, made a disclosure during a survey regarding cash money accepted at the sale of flats. The AO noticed a shortfall of ?55 lakhs in the income declared by the assessee. The AO rejected the assessee's explanation and made an addition of ?55 lakhs to the income. The assessee contended that the entire project was not sold in the assessment year, hence the income was credited to the profit and loss account based on the survey disclosure. The AO framed the assessment, adding ?55 lakhs. The CIT(A) provided relief to the assessee, leading to the revenue's appeal.

The assessee surrendered ?105 lakhs over two years, with ?90 lakhs for the assessment year 2007-08. The declaration was for the entire project, with a note stating that if some flats/shops remained unsold, the profit would be declared in the next year without tax. The CIT(A) observed that the assessee did not retract the statement made during the survey. The income of ?90 lakhs was spread over two years, with ?35 lakhs offered for tax in 2007-08 and the balance in 2008-09. The Tribunal agreed with the CIT(A) that the entire income of ?90 lakhs was assessed and offered to tax in two years. Without evidence of property sale, there could be no tax on unrealized sale price. The addition made by the AO was deemed wrong and unwarranted, upholding the CIT(A)'s order and dismissing the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s decision.