2021 (7) TMI 483 - AT - Income Tax

Addition on account of undisclosed sales - year of taxability - HELD THAT - M/s Nirman Trimurti Developers the co-developer of the project has offered the sales receipts to tax in AY 2016-17. We find that the assessee has not furnished documentary evidences before the AO or the CIT(A) to substantiate that the assessee has received its share of 35% of sales receipts in the period relevant to AY 2017-18. Considering the fact that this factual aspect is required to be examined, we deem it appropriate to restore this issue back to the file of AO for denovo examination. AO shall tax the assessee s share in sale considered from the project in the year of actual receipt. Ground of the appeal are allowed for statistical purpose.

Summary

Issues:
1. Addition of undisclosed sales in the assessment year 2016-17.
2. Dispute regarding the year of taxability of the sales receipts.
3. Issuance of penalty notice under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:

Issue 1: Addition of Undisclosed Sales
The primary issue in this appeal was the addition of ?23,62,069 on account of undisclosed sales in the assessment year 2016-17. The appellant, engaged in real estate development, had a development agreement with another party for a project in Pune. The appellant contended that the amount received was for the assessment year 2017-18 and had been offered in the return for that year. However, the AO held that since the other party had offered the sales receipt in 2016-17, the appellant's share should also be taxed in that year. The appellant argued that no TDS amount was credited to their account for 2016-17. The tribunal observed the lack of documentary evidence to prove the actual receipt by the appellant in 2017-18. Consequently, the issue was remanded to the AO for further examination to tax the appellant's share in the year of actual receipt.

Issue 2: Dispute on Year of Taxability
The dispute revolved around the year of taxability of the sales receipts. The co-developer of the project had offered the sales receipts to tax in the assessment year 2016-17. The appellant failed to provide documentary evidence to substantiate the receipt of their share in 2017-18. Due to this factual aspect requiring examination, the tribunal decided to send the issue back to the AO for a fresh assessment. The tribunal directed the AO to tax the appellant's share in the year of actual receipt, thereby allowing the appeal for statistical purposes on grounds 1 to 3.

Issue 3: Penalty Notice under Section 271(1)(c)
The appellant challenged the issuance of a penalty notice under section 271(1)(c) of the Income-tax Act, 1961. The tribunal deemed the challenge premature at this stage and dismissed the appeal on this ground. Consequently, the appeal was partly allowed for statistical purposes based on the decisions regarding the undisclosed sales and the penalty notice.

In conclusion, the tribunal remanded the issue of undisclosed sales for further examination to determine the correct year of taxability, dismissed the challenge against the penalty notice as premature, and partly allowed the appeal for statistical purposes.