2021 (4) TMI 667 - AT - Income Tax

Addition on account of estimation of net taxable profit earned on the total 'on money' - difference in the sale price - AO made addition by assuming that during the survey, the partner of the firm stated that the project consists of 288 flats and 30 shops and booked 18 shops at 2000 per sq ft upper ground floor in Vaishnodevi Heights on the basis of statement of two flats buyers comparing to booking of the project calculated 'on money - CIT(A) held that no document proof 'on money' receipt was recovered from the possession of the firm of partner during the search/survey proceedings. The basic evidence on which the AO relied and made estimated figure of 'on money' are the statement of two buyers namely Shri Anand Gaur and Sudhirbhai Parikh recorded during the survey - HELD THAT - CIT(A) after considering the submission of assessee, working of AO and the statement of parties held that there is no documentary evidence to substantiate, the receipt of 'on money'. No documents were recovered from the position of firm during the search or survey proceedings. The AO estimated the figures of 'on money' on the basis of statements of two buyers namely Shri Anand Gaur and Sudhirbhai Parikh, recorded during the survey. We have further noted that ld. CIT(A) independently examined the statement of both these two flat buyers, the ld. CIT(A) on examination of their statement held that both the parties stated about the rate of flat booking, payment terms, money paid from time to time both the buyers nowhere asked in the statement that they have made 'on money' payment. The statement of purchaser cannot alone prove that they were having any agreement with the assessee regarding any payment made outside books of accounts. The contention of assessee that both the buyers paid extra money for extra work agreement is also proved by proof of disbursal of bank loans as well as by extra work agreements. The ld. CIT(A) further noted that if the extra work doubted by search or survey party, no further investigation was made against those flats owners. The adoption of huge 'on money' without iota of evidence is not justified and deleted the entire addition. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition on account of estimation of net taxable profit earned on the total 'on money'.
2. Whether the CIT(A) should have upheld the Assessing Officer's order.
3. Request to set aside the CIT(A)'s order and restore the Assessing Officer's order.

Issue-Wise Detailed Analysis:

1. Deletion of Addition on Account of Estimation of Net Taxable Profit Earned on the Total 'On Money':

The Revenue contested the deletion of ?5,20,95,322/- by the CIT(A) on account of the estimation of net taxable profit earned from 'on money'. The assessee, a construction firm, had its premises searched under section 132 of the Act, revealing certain incriminating documents and statements indicating unaccounted income. The Assessing Officer (AO) estimated 'on money' based on statements from two buyers and the partner of the firm, leading to an addition of ?22.83 crore in unaccounted income. The AO applied a 25% profit rate, resulting in an addition of ?5,70,95,322/-, and after accounting for ?50 lakhs already declared by the assessee, the net addition was ?5,20,95,322/-.

2. Whether the CIT(A) Should Have Upheld the Assessing Officer's Order:

The CIT(A) reviewed the submissions and evidence provided by the assessee, which included statements from buyers and the partner, and found no documentary proof of 'on money' transactions. The CIT(A) noted that the statements of the buyers did not mention any 'on money' payments, and the difference in rates was attributed to extra work done on the flats. The CIT(A) concluded that the AO's estimation was based on assumptions and lacked concrete evidence, leading to the deletion of the addition.

3. Request to Set Aside the CIT(A)'s Order and Restore the Assessing Officer's Order:

The Revenue argued that the AO's estimation was reasonable and based on incriminating material found during the search. The CIT-DR supported the AO's findings, stating that the statements of the buyers and the partner indicated variations in booking prices and cash payments. However, the assessee's representative countered that the AO's addition was purely based on estimation without any substantial evidence of 'on money'. The representative highlighted that the extra payments were for additional work, supported by agreements and bank loan documents.

Tribunal's Findings:

The Tribunal considered the rival submissions and the lower authorities' orders. It noted that the AO's addition was based on assumptions and lacked documentary evidence. The CIT(A) had independently examined the statements and found no proof of 'on money' payments. The Tribunal affirmed the CIT(A)'s order, stating that the adoption of a significant 'on money' amount without evidence was unjustified. Consequently, the appeal of the Revenue was dismissed.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the addition of ?5,20,95,322/- on account of 'on money', finding that the AO's estimation was based on assumptions without concrete evidence. The Revenue's appeal was dismissed, and the CIT(A)'s order was affirmed.