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2022 (7) TMI 1209 - AT - Income TaxValidity of Assessment u/s 153A - Scope of amendment - HELD THAT - As the assessee not able to demonstrate how the condition laid down u/s 153A of the Act has not been fulfilled. More so assessee is dis-entitled to agitate the issue with regard to the validity of the search proceedings in view of the amendment to section 132 of the Act by insertion of explanation by Finance Act 2017 with retrospective effect from 1.4.1962 - In view of the above retrospective amendment we are inclined to hold that the assessee is precluded from challenging the validity of invoking jurisdiction u/s 153A of the Act. Accordingly this ground of assessee is dismissed. Addition of unproved debts - Addition u/s 68 - HELD THAT - Primarily u/s 68 of the Act assessee has to explain any credits found in the books of accounts maintained by assessee in the previous year relevant to the assessment year concerned and assessee not required to explain the credits which are not appearing in his books of accounts - assessee not required to explain the credits appearing in the books of accounts of some other party u/s 68. In the present case assessee has already explained the credits an amount of Rs.57.11 lakhs which is appearing in its books of accounts for which CIT(A) have no quarrel and he has accepted to that extent. He has sustained the addition over and above Rs.57.11 lakhs which has appeared in the books of accounts of the creditors. CIT(A) not justified in sustaining addition which is not appearing in the books of accounts of the assessee and which is appearing in the books of accounts of the creditors. Accordingly we delete the addition of Rs.17.64 lakhs also sustained by the Ld. CIT(A). Addition of unproved loans - HELD THAT - As these entries are wrongly posted to the account of Rajendra Runwal Bangalore and only a clerical mistake cropped up while maintaining the books of accounts of the assessee. The assessee produced a copy of ledger account and also confirmation letters which are kept on record - We have also carefully gone through the ledger account of Shri Rajendra Runwal. The assessee has to also explain from whom it has received this amount. Once the assessee proved that it is wrongly posted to the account of Mr. Rajendra Runwal instead of some other party the addition to be deleted. In view of this we delete this addition of Rs.51 lakhs. Accordingly this ground of appeal of assessee is allowed. Addition as income from sale of lands - HELD THAT - We are inclined to delete the addition on the reason that there was no cross examination of parties concerned and also AO relying on only oral statement of Shri Kuppendra Reddy to make this addition deleted. Accordingly the ground of assessee s appeal is allowed and revenue s appeal is dismissed. Addition of unproved loans in the name of Venkataramana without giving opportunity to the AO as required under Rule 46A of the I.T. Rules 1962 - HELD THAT - These facts have not been doubted by the AO. If he has any doubt regarding the genuineness of these credits he could have issued summons to the concerned party before making such addition. He has not carried out necessary enquiry and Shri Venkata Ramana was the representative of Sapphire Infrastructure company. The Ld. CIT(A) at first appellate stage considered confirmation letter from that party and to delete the addition. The assessee vide its letter dated 23.11.2011 filed before the CIT(A) confirmed that these details/information being submitted are the ones which were already filed/submitted during the search post search and assessment proceedings and no new details/information being filed. As such the evidence furnished by the assessee before CIT(A) cannot be considered as an additional evidence and on that basis the addition is deleted. Being so we do not find any infirmity in the order of Ld. CIT(A) and the same is confirmed. This ground of appeal of revenue is dismissed. Accrued income in the hands of the assessee - HELD THAT - The mere receiving of amount does not create any legal enforceable right to receive the same. Hence without any right to receive the said amount it cannot be treated as income of the assessee only on receipt basis. Such a right accrues only when the other party has either agreed to pay the amount in accordance with terms of MOU or as per verdict by an appropriate forum or arbitration only then the income could be charged to tax as there was accrual of income. Where an assessee does not have any legal enforceable claim on the amount so received the basis of taxability cannot be receipt basis. Even if the assessee treated it as income in its books of accounts it is not material where the income is not accrued to the assessee to tax the same on receipt basis. The conduct of the assessee in treating an income in a particular manner is a material fact whether income had accrued or not. Although the conduct of the assessee is relevant whether income had accrued or not yet the ipse dixit of the assessee cannot be the last word. What had accrued must be considered from the point of view of the probability of improbability of accrual in realistic manner. The amount if it is received without entitlement to receive the same it has to be held that there was no accrual of income to the assessee as the necessary events for accrual of income has not materialized. In the present case in our opinion it is to be held that the income will accrue to the assessee only when the assessee acquires right to receive that income by completion of project undertaken by the assessee and by simply receiving the amount from the parties itself cannot be treated as income of the assessee. It is only advance received by assessee which is nothing but liability and cannot be treated as income of the assessee in these asst. years. We are of the opinion that the lower authorities are not justified in taxing an amount of Rs.7 crores as accrued income in the hands of the assessee. The same is deleted and this ground of the appeal of the assessee is allowed. Addition towards sum received towards sale consideration - HELD THAT - These impugned receipts are part and parcel of consideration received from M/s. Shobha Developers as evidenced from MOU entered with M/s. Shobha Developers vide MOU cited (supra) wherein assessee received an amount and we have already held that this condition laid down in MOU has not been fulfilled and there is a pending litigation between the parties as discussed in immediate earlier ground with regard to deletion of addition of Rs.7 crores. On similar lines we are of the opinion that Ld. CIT(A) is justified in deleting the addition. Addition towards sale of land by Narasimha Murthy - A.O held that the appellant violated the provisions of section 40A(3) of the Act and allowed expenditure made disallowed - HELD THAT - Before the A.O. the assessee has accepted that it has been the transaction of assessee carried out by Sri C.N. Murthy on its behalf. The only argument of the assessee before the lower authorities that only the net income from this transaction is to be computed after working out the further expenditure of construction of road and also there are various other expenditure to be considered to arrive at net income from this transaction. In our opinion this plea of the assessee is valid. A.O. cannot overlook certain expenditure incurred relating to this transaction and he has to give due deduction to all the expenditure incurred in relation to the receipt of this sale consideration. A.R. submitted that the net income arouse from this transaction only at Rs.4 64, 635/-. We direct the AO to give due credence to the all expenditure incurred by assessee in relation to impugned property purchased by Smt. Rajya Lakshmi vide sale deed dated 27.7.2007. The assessee has to furnish all the details to the AO with regard to the expenditure incurred with regard to this receipt of Rs.26 lakhs. The AO has to decide it fresh after giving opportunity of hearing to the assessee and to tax the only net income arise out of this transaction This ground of appeal of assessee is partly allowed for statistical purposes. Net income on sale deed of said property - HELD THAT - As there was no execution of absolute sale deed in this case as such we direct the AO to tax the net income from this transaction only on actual registration of sale deed of said property. In our opinion since there was no registered sale deed was executed in the case of 3 acres and 8 guntas there is only registered sale agreement and execution of GPA along with handing over of possession of property. Thus after receiving entire sales consideration and execution of sale deed it is to be considered as a transfer and the gain on this account to be brought to tax in that assessment year only. However the lower authorities have been brought to tax the gain by in this assessment year under consideration which is incorrect. This part of the ground of appeal of the assessee is allowed. Addition on protective basis - HELD THAT - The contract between the assessee and M/s. Shobha Developers has not materialized and it is subject matter of litigation before arbitration and it is pending for award as such addition cannot be made even on protective basis. Accordingly we dismiss this ground raised by revenue.
Issues Involved:
1. Jurisdiction under Section 153A of the Income-tax Act. 2. Addition of unproved debts and credits. 3. Addition of unproved loans. 4. Addition related to sale of lands and nomination fees. 5. Deletion of additions made on protective basis. Detailed Analysis: Jurisdiction under Section 153A: Issue: The assessee challenged the jurisdiction invoked under Section 153A of the Income-tax Act, claiming the mandatory conditions were not met. Judgment: The Tribunal held that due to the retrospective amendment to Section 132 by Finance Act, 2017, with effect from 1.4.1962, the assessee is precluded from challenging the validity of invoking jurisdiction under Section 153A. Consequently, this ground was dismissed. Addition of Unproved Debts and Credits: Issue: The assessee contested the addition of Rs.17.64 lakhs as unproved debts, while the revenue challenged the deletion of Rs.39.47 lakhs out of Rs.57.11 lakhs. Judgment: The Tribunal noted that the difference between the amounts shown in the assessee's books and the creditor's books should not be considered unexplained under Section 68. The addition of Rs.17.64 lakhs was deleted, and the deletion of Rs.39.47 lakhs by the CIT(A) was upheld. Addition of Unproved Loans: Issue: The assessee contested the addition of Rs.51 lakhs related to unproved loans from Mr. Rajendra. Judgment: The Tribunal found that the amount was wrongly posted to Mr. Rajendra's account and should be deleted. The addition of Rs.51 lakhs was thus deleted. Addition Related to Sale of Lands and Nomination Fees: Issue: The assessee and revenue contested various additions related to the sale of lands and nomination fees. Judgment: - Sapphire Infrastructure Transaction: The Tribunal noted the lack of cross-examination opportunity regarding the oral statement of Mr. Kuppendra Reddy and deleted the addition of Rs.24,44,500/-. - Nomination Fees from R. Nataraj: The Tribunal found that the transaction with M/s. Shobha Developers was incomplete and under litigation, and thus, the addition of Rs.7 crores was deleted. - Sale of Land by Nanda Kumar and Narasimha Murthy: The Tribunal directed the AO to consider all related expenditures and only tax the net income. For the 3 acres and 8 guntas transaction, the Tribunal held that the gain should be taxed only upon actual registration of the sale deed. Deletion of Additions Made on Protective Basis: Issue: The revenue contested the deletion of Rs.3,09,40,750/- made on a protective basis. Judgment: The Tribunal upheld the deletion, noting the substantive addition was not based on any seized material and the protective addition was similarly unsupported. Conclusion: The Tribunal provided a detailed analysis for each issue, ensuring that additions were only sustained where legally justified and based on proper evidence. The judgments emphasized the importance of cross-examination, proper accounting, and the completion of transactions before recognizing income for tax purposes.
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