2011 (9) TMI 1045 - AT - Income Tax

Tribunal upholds CIT(A) decision in tax case, dismissing Revenue's appeal and assessee's Cross Objection.

Income-Tax Officer, Ward 6 (4), Surat. Versus Sanskruti Township, Surat

Income-Tax Officer, Ward 6 (4), Surat. Versus Sanskruti Township, Surat - TMI Issues Involved:1. Deletion of addition of Rs. 3,46,61,718/- made by the AO on account of receipt of on money and excess sale of 65 plots.2. Restriction of disallowance of Rs. 6,51,470/- out of total addition of Rs. 14,65,772/-.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 3,46,61,718/- on Account of Receipt of On Money and Excess Sale of 65 Plots:The Revenue challenged the deletion of the addition of Rs. 3,46,61,718/- made by the Assessing Officer (AO) on account of receipt of on money and excess sale of 65 plots. The AO based his conclusion on a survey conducted under Section 133A of the Act, during which incriminating documents were found. The AO observed that only 25 plots were unsold, implying that 65 plots were sold by the assessee. The AO also alleged that the assessee was not recording the full sale consideration in its books and was charging on money.The assessee contended that the AO's conclusion was based on a loose pamphlet used for advertisement purposes, which did not have any evidentiary value. The assessee argued that the pamphlet was a business strategy to attract customers and that the actual number of plots sold during the year was only 16, supported by conveyance deeds.The CIT(A) found the assessee's contention to be correct, noting that the AO did not consider the conveyance deeds for plots sold in subsequent years. The CIT(A) observed that the AO's conclusion was not supported by corroborative evidence, such as cash found or statements from buyers confirming the payment of on money. The CIT(A) concluded that the AO's reliance on loose papers without corroborative evidence was not justified and deleted the addition.The Tribunal upheld the CIT(A)'s decision, agreeing that the AO's conclusion was based on unsubstantiated notings on impounded material and that no incriminating evidence was found to support the allegation of on money. The Tribunal noted that the sale deeds were registered at the government-fixed rate of Rs. 400 per sq. yard, and no evidence was presented to show that similar plots were sold at higher rates.2. Restriction of Disallowance of Rs. 6,51,470/- out of Total Addition of Rs. 14,65,772/-:The AO observed that the assessee had incurred various expenditures amounting to Rs. 14,65,772/- as per impounded documents. The AO concluded that these expenditures were out of unexplained sources and made an addition of the entire amount.The assessee argued that the noted expenditures were only estimates for plot development and were not actually spent. The assessee also showed that a sum of Rs. 8,14,302/- was recorded as work in progress, funded by the partners.The CIT(A) agreed with the AO that the expenditures were actually incurred but noted that the amount of Rs. 8,14,302/- shown as work in progress could not be treated as unexplained. The CIT(A) restricted the addition to the balance amount of Rs. 6,51,470/-.The Tribunal upheld the CIT(A)'s decision, agreeing that the amount shown as work in progress should not be treated as unexplained and that the balance amount of Rs. 6,51,470/- was rightly considered as incurred from undisclosed sources.Conclusion:The Tribunal dismissed the Revenue's appeal and the assessee's Cross Objection, upholding the CIT(A)'s order in both issues. The deletion of the addition of Rs. 3,46,61,718/- on account of receipt of on money and excess sale of plots was justified due to lack of corroborative evidence. The restriction of disallowance to Rs. 6,51,470/- was also upheld, considering the documented work in progress.