2023 (7) TMI 161 - AT - Income Tax

Addition of on money - alternative plea of assessee that only percentage of profit can only be taxed from the alleged on-money ranging from 8% to 15% - CIT(A) deleted addition - HELD THAT - CIT(A) by referring the decision of President Industries 1999 (4) TMI 8 - GUJARAT HIGH COURT and in Abhishek Corporation 1998 (8) TMI 110 - ITAT AHMEDABAD-C and took his view that assessee has offered more than 30% of on-money in its return of income. CIT(A) held that over and above of such 30% income cannot be sustained. The declared income of Rs. 1.003 crore is more than 30%. Thus, the ld. CIT(A) deleted the entire addition. We find that in Greenfield Reality P Ltd. 2021 (7) TMI 1134 - ITAT AHMEDABAD sustained the addition to the extent of 8% on similar issue. In ACIT Vs Shoppers Buildcon Pvt. Ltd. 2022 (5) TMI 459 - ITAT AHMEDABAD Tribunal upheld the order of ld. CIT(A) in making addition of 20% on similar issue. Considering the consistent view we do not find any infirmity of illegality in the order passed by the ld. CIT(A) which we affirm. Disallowance u/s 40(a)(ia) - assessee has incurred various expenses and made the payment thereof without deducting tax at source - HELD THAT - CIT(A) after considering the remand report of AO held that during appellate stage, the assessee filed detailed written submissions, which were sent to AO for his comment. No adverse comment is made against the submission of assessee, by AO as found the submission of assessee in order. AO only objected that the assessee furnished additional evidence. CIT(A) held that once the AO is given opportunity to examine the nature of expenses and no adverse comment is made, accordingly, directed the Assessing Officer to delete the disallowance of cutting expenses, development expenses and professional fees. In our view, the ld. CIT(A) has passed the order after giving due opportunity to the AO which we affirm. In the result, ground No. 3 raised by the revenue is also dismissed. Admission of additional evidences by CIT(A) - allegation of violation of Rule 46A of the Income Tax Rules, 1962 - HELD THAT - AO was given full opportunity to submit his remand report. The Assessing Officer furnished his detailed remand report. Remand report of Assessing officer is referred and considered by the ld. CIT(A) while passing the order on merit. As decided in Dharmdev Finance P Ltd. 2014 (4) TMI 1005 - GUJARAT HIGH COURT that once remand report was obtained from the AO by giving opportunity to both the parties, there is no violation of Rule 46. No merit in revenue allegation - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition on account of "On Money" received.
2. Admission of additional evidence and compliance with Rule 46A of the Income Tax Rules, 1962.
3. Disallowance under Section 40(a)(ia) of the Income Tax Act.

Detailed Analysis:

1. Deletion of Addition on Account of "On Money" Received:
The Revenue challenged the deletion of an addition of Rs. 2,15,62,600/- made by the Assessing Officer (AO) on account of "On Money" received. The AO based the addition on a statement made by a partner of the assessee firm during a survey under Section 133A, where he admitted to receiving unaccounted money and declared it as additional income. The AO noted discrepancies between the declared amount and the amount shown in the books, leading to the addition.

The assessee argued that the quantification of "On Money" had no consistent basis and was not correlated with the impounded documents. The Ld. CIT(A) agreed with the assessee, noting that the statement made during the survey was inconsistent and lacked a uniform basis. The Ld. CIT(A) also considered that the assessee had already offered more than 30% of the "On Money" as income, which was a reasonable percentage as per legal precedents. Consequently, the addition over and above this amount was deleted.

The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that only the profit element embedded in the "On Money" could be taxed, not the entire amount. The Tribunal cited various case laws and found no infirmity in the Ld. CIT(A)'s order.

2. Admission of Additional Evidence and Compliance with Rule 46A:
The Revenue contended that the Ld. CIT(A) erred in admitting additional evidence without following Rule 46A of the Income Tax Rules, 1962. The AO argued that the assessee had ample opportunity to present this evidence during the assessment proceedings but failed to do so.

The Ld. CIT(A) admitted the additional evidence, noting that the AO was given full opportunity to examine and comment on it during the remand proceedings. The Tribunal found that the Ld. CIT(A) had complied with Rule 46A by obtaining a remand report from the AO, thus giving both parties a fair opportunity to present their case. The Tribunal upheld the Ld. CIT(A)'s decision, finding no violation of Rule 46A.

3. Disallowance under Section 40(a)(ia):
The AO disallowed certain expenses under Section 40(a)(ia) on the grounds that the assessee failed to deduct tax at source. The disallowed expenses included cutting material expenses, development charges, and professional fees.

The assessee argued that no TDS was required on these payments as they were either below the threshold limit or paid to entities not subject to TDS. The Ld. CIT(A) accepted the assessee's explanations and directed the AO to delete the disallowance. The Tribunal upheld the Ld. CIT(A)'s decision, noting that the AO had no adverse comments on the assessee's explanations during the remand proceedings.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decisions on all grounds. The additions on account of "On Money" were deleted, the additional evidence was admitted in compliance with Rule 46A, and the disallowance under Section 40(a)(ia) was directed to be deleted.