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2023 (8) TMI 330 - AT - Income TaxIncome from other sources u/s 56 or unexplained cash receipts u/s 69A - cash seized during the search and seizure operation - assessee stated that these receipts have been received on account of advance received from the customers and as no sale has been booked - AO disagreed with assessee and made addition observing that it is only due to search that these cash receipts have been noticed and found that the same have not been recorded in the books of account, thus made addition u/s 69A - CIT(A) concluded that the income from regular business transaction has to be taxed under the business head income from unaccounted/ undisclosed business transactions are not mandated by the law and are to be treated differently and taxed under the head income from other sources. HELD THAT - Undisputedly the assessee entered the amounts of cash receipts in the books of account as advance from customers but in fact these amounts were on money receipt in cash against the sale of flats and never intended to be accounted for by the assessee in its books of account. Therefore, when the transactions of sale of flats have attained finality then it is obvious that all the amounts receipt by the assessee and recorded in the books of account of the assessee as advance from customers has to be set off and included in the turnover of the assessee. At the same time when the amounts received in cash against the same transaction of sale of flats which have not been recorded in the books of account of the assessee at the time of search and seizure operation and subsequently recorded in the books as advance from customers is nothing but an eye wash to supplement the explanation of the assessee regarding the cash receipts. We are unable to agree with the contention and submission of the assessee placed before the authorities below and at the same time we are inclined to agree with the findings recorded by the CIT(A) as noted above, while confirming the addition are correct but his findings towards change of charging section from 69A to 56 are not correct. Therefore we are inclined to hold that the addition made by the AO deserves to be confirmed in the hands of the assessee u/s 69A of the Act. Unexplained expenditure u/s. 69C - HELD THAT - The tax authorities should have examined and verified the contention of the assessee that the source is cash receipt against the bills and the same was again utilized for incurring expenditure on commission and payment by way of examination of books of account and relevant bank accounts of assessee as to how the cash was generated and Revenue-deposited for making further payments and incurring expenditure. CIT(A) is directed to adjudicate the issue afresh after allowing due opportunity of hearing to the assessee and without being influenced with the earlier first appellate order. Accordingly, ground no. 3 of revenue is allowed for statistical purposes. Inclusion of bogus purchases and to add the same to work in progress - bogus claim unearth and found during the course of search and seizure operation and post search enquiry and outcome of survey operation on the related parties which were found to be in the business of providing bogus purchases entries and with whom the assessee undertaken purchases and added the same to the work in progress - HELD THAT - Assessee is not deserve to be allowed to show an include bogus purchases and to add the same to work in progress with an intention to increase the cost of construction and consequently reducing the profit therefrom. AO has made detailed enquiry and thereafter recorded a clear findings, as has been reproduced hereinabove then the ld. CIT(A) cannot be held as correct and justified in dismissing the action of the AO which reduced work in progress shown by the assessee in the books of accounts. The bogus purchases cannot be allowed to be continued and to be shown as part of work in progress till the project is completed and sale is affected. When the Assessing Officer has found that the purchases are bogus and work in progress has been enhanced with the aid of bogus purchases then the same has to be reduced instantly in the year in which these were shown and recorded in the books of accounts and particularly in the work in progress account. Action of the Assessing Officer in reducing work in progress by the amount of work in progress is restored. Accordingly ground no. 4 of revenue is allowed.
Issues Involved:
1. Addition of Rs. 38,78,388/- as income from other sources. 2. Addition of Rs. 1,50,49,000/- on a protective basis. 3. Legality and jurisdiction of the assessment order u/s 143(3) rw.s. 153A. 4. Deletion of addition of Rs. 38,78,388/- made by AO u/s 69. 5. Deletion of addition of Rs. 5,57,50,000/- on account of "unexplained expenditure". 6. Direction to cancel the reduction in closing work-in-progress on account of bogus purchases of Rs. 26,12,41,822/-. Summary: Issue 1: Addition of Rs. 38,78,388/- as income from other sources The Tribunal upheld the addition of Rs. 38,78,388/- as income from other sources. The assessee claimed these receipts were advances from customers, but they were not recorded in the books of account at the time of the search. The Tribunal agreed with the CIT(A) that these amounts were on money received in cash against the sale of flats and were not intended to be accounted for. Thus, the addition made by the AO u/s 69A of the Act was confirmed. Issue 2: Addition of Rs. 1,50,49,000/- on a protective basis The Tribunal did not specifically address this issue in the provided text, as it was not pressed by the assessee. Issue 3: Legality and jurisdiction of the assessment order u/s 143(3) rw.s. 153A The Tribunal did not specifically address this issue in the provided text, as it was not pressed by the assessee. Issue 4: Deletion of addition of Rs. 38,78,388/- made by AO u/s 69 The Tribunal reversed the CIT(A)'s decision to delete the addition made by the AO u/s 69A. The Tribunal held that the amounts were not recorded in the books of accounts at the time of the search and were subsequently recorded as advances from customers. The addition was confirmed u/s 69A of the Act. Issue 5: Deletion of addition of Rs. 5,57,50,000/- on account of "unexplained expenditure" The Tribunal found that the CIT(A) did not properly verify the source of the payments and the nature of the expenses. The Tribunal set aside the CIT(A)'s decision and directed a fresh adjudication after examining the books of account and relevant bank accounts of the assessee. Issue 6: Direction to cancel the reduction in closing work-in-progress on account of bogus purchases of Rs. 26,12,41,822/- The Tribunal reversed the CIT(A)'s decision to cancel the reduction in closing work-in-progress. The Tribunal held that the bogus purchases should not be allowed to be included in the work-in-progress to inflate the cost of construction. The action of the AO in reducing the work-in-progress by the amount of bogus purchases was restored. Conclusion: The appeal of the assessee was dismissed, and the appeal of the revenue was partly allowed for grounds 2 and 4, and partly allowed for statistical purposes on ground 3. The Tribunal confirmed the addition of Rs. 38,78,388/- as income from other sources and upheld the AO's action in reducing work-in-progress by the amount of bogus purchases. The Tribunal directed a fresh adjudication on the issue of unexplained expenditure after proper verification.
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