2024 (12) TMI 374 - AT - Income Tax

Addition on account of understatement of revenue - AO had mechanically and erroneously concluded that the receipt was in respect of consultancy services rendered by the assessee in respect of construction business - HELD THAT - AO had no evidence of any consultancy services rendered by the assessee so as to treat the receipt as income of the assessee. As no TDS was deducted on this amount there was no reason to conclude that this amount was consultancy receipt. The Ld. CIT(A) has correctly held that this amount was in respect of booking advance and there was no understatement of revenue. As GST was applicable on booking amounts the assessee had reported this amount in the GST return. A mere reporting in the GST return doesn t make the amount taxable as per the provisions of the Income Tax Act. AO, rather than examining whether the income was correctly reported in accordance with percentage completion method, had erroneously held the entire booking advance receipt as income of the assessee, which can t be held as correct. The Revenue has not controverted the findings as given by the CIT(A) in this regard. Therefore, the order of the CIT(A) on this issue is upheld. The ground taken by the Revenue is dismissed. Addition on account of over-statement of purchase - AO had made the addition for the reason that the difference in the sundry creditor balance was not explained - HELD THAT - CIT(A) has correctly allowed relief after considering the explanation of the assessee. He has also given a finding that there was no disparity between the data from the books of account and the details as presented regarding these sundry creditors. Since, CIT(A) has allowed the relief after correctly appreciating the facts of the case, the ground taken by the revenue is dismissed. Addition on account of unexplained expenditure - CIT(A) has given a categorical finding that Upon reviewing the information, it is evident that the appellant made payments to parties through the banking channel which is also evidenced from the chart submitted by the appellant - HELD THAT - The chart for repayment of loans is also found reproduced in the order of the Ld. CIT(A). The Revenue has not controverted this finding of fact as given by the Ld. CIT(A). It is not that this finding was given on the basis of any additional evidence. The chart for repayment of loans was prepared only on the basis of bank statements which were also filed before the AO in the course of assessment proceeding. We don t appreciate the ground taken by the Revenue challenging the finding of fact recorded by the Ld. CIT(A), without controverting his findings. When the Ld. CIT(A) had given a categorical finding that all the repayments of loans were reflected in the bank statement, the Revenue shouldn t have challenged this finding without bringing any material to show that the finding of the Ld. CIT(A) was incorrect. Since the Revenue has not brought anything on record to controvert the findings of Ld. CIT(A), we don t find any reason to interfere with his order. The ground taken by the Revenue is dismissed.

Summary

Issues Involved:

1. Understatement of revenue amounting to Rs. 8,77,60,800/-.
2. Overstatement of purchase amounting to Rs. 39,52,298/-.
3. Unexplained expenditure amounting to Rs. 1,04,98,344/-.

Issue-wise Detailed Analysis:

1. Understatement of Revenue:

The first issue concerns the addition of Rs. 8,77,60,800/- on account of understatement of revenue. The Revenue argued that as per the GST return, the assessee disclosed receipt of this amount as service income, which was not reflected in the Profit & Loss account. The assessee contended that this amount was not for services rendered but was an advance from prospective buyers for flat bookings, appearing as current liabilities in the balance sheet. The assessee followed the project completion method, and thus, the advance was not recognized as revenue for the year under consideration. The CIT(A) found that the AO erroneously assumed this amount as consultancy service income without evidence and correctly concluded that it was an advance for flat bookings. The CIT(A) emphasized that the amount was shown under current liabilities and was subject to GST as an advance booking, not as consultancy fees. The Tribunal upheld the CIT(A)'s decision, noting that the AO had no evidence of consultancy services and that the amount was correctly treated as an advance, not taxable under the Income Tax Act for the year in question.

2. Overstatement of Purchase:

The second issue pertains to the addition of Rs. 39,52,298/- due to alleged overstatement of purchase. The AO identified a discrepancy between the sundry creditor balance in the balance sheet and the GST return, suggesting inflated purchases. The assessee explained that the GST return covered only nine months (post-GST implementation), whereas the balance sheet covered the entire fiscal year. The CIT(A) accepted this explanation, noting no disparity between the book data and GST details. The Tribunal agreed with the CIT(A), finding the explanation plausible and the addition unjustified, thus dismissing the Revenue's ground.

3. Unexplained Expenditure:

The third issue involves an addition of Rs. 1,04,98,344/- for unexplained expenditure. The AO found a mismatch between loan repayments and bank statements, treating the unexplained difference as deemed income under Section 69C. The assessee argued that all loan repayments were made through banking channels, supported by bank statements from Vijay Bank and Central Bank of India. The CIT(A) confirmed that the repayments were indeed reflected in the bank statements, dismissing the AO's addition. The Tribunal found no reason to disturb the CIT(A)'s findings, as the Revenue failed to provide evidence contradicting the CIT(A)'s conclusion that all transactions were accounted for through bank channels.

Conclusion:

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on all grounds. The Tribunal found that the CIT(A) had correctly appreciated the facts and provided appropriate relief to the assessee on all issues of understatement of revenue, overstatement of purchase, and unexplained expenditure.