2018 (1) TMI 656 - AT - Income Tax

Receipt of on money for sale of flats - sworn statement of the assessee u/s 132(4) - Held that - Claim of the assessee was not accepted by the assessing officer in view of clear evidences found during the course of search operation which were duly signed by the parties concerned in the presence of witnesses and the fact that the noting in the seized documents pertained to both accounted and unaccounted receipts. The sworn statement of the assessee has neither been retracted nor contradicted either during the course of assessment proceedings or before the first appellate authority. The assessee had explicitly conceded and confessed in the sworn statement(supra) that those receipts in cash have not been recorded in the books of account or accounted for, Such being the case, the Assessing Officer and CIT(A) is justified in treating the same as on money for sale of flats. The learned AR has also contended that the only net profit element in undisclosed sale is to be taxed. This contention of the learned Counsel is devoid of any merit since the assessee is unable to prove any expenditure is incurred for the receipt of on money for the sale of the flats. Therefore, this ground raised by the assessee is rejected. - Decided against assessee.

Summary

Issues Involved:
1. Receipt of 'on money' for sale of flats.
2. Taxation of gross amount versus income element on sale.

Detailed Analysis:

1. Receipt of 'on money' for sale of flats:

The assessee, engaged in manufacturing incense sticks and real estate development, faced a search operation on 18.06.2010. The AO found that the assessee had received 'on money' for the sale of flats in projects Jasmine, Amythest, and KRSNA. Incriminating material, including a computer printout, indicated unaccounted cash receipts. The AO added these amounts to the assessee's income for the relevant assessment years (2008-09 to 2011-12).

The CIT(A) confirmed the AO's findings for certain flats but deleted additions for others, stating that 'on money' should be taxed in the year the income from the sale of flats is declared. The assessee appealed, arguing that the AO's conclusions were based on loose papers and unsubstantiated assumptions. The assessee also contended that no extra cash or assets were found during the search, and the signatures on the loose papers did not match those of the buyers.

The Tribunal upheld the AO's findings, noting that the assessee admitted to receiving unaccounted cash in a sworn statement and failed to provide documentary evidence to rebut the AO's observations. The Tribunal found no merit in the assessee's arguments and dismissed the appeals for all assessment years under dispute.

2. Taxation of gross amount versus income element on sale:

The assessee argued that only the net profit element in the undisclosed sale should be taxed, not the gross amount. The Tribunal rejected this contention, stating that the assessee failed to prove any expenditure incurred for the receipt of 'on money'. Therefore, the entire amount of 'on money' was rightly added to the assessee's income.

Conclusion:

The Tribunal dismissed the appeals for all assessment years (2008-09 to 2011-12), sustaining the AO's additions of 'on money' to the assessee's income. The Tribunal also dismissed the ground of appeal regarding the charging of interest under sections 234A, 234B, and 234C of the Act as not maintainable. The order was pronounced on 03rd November 2017.