2015 (10) TMI 2315 - AT - Income Tax

Tribunal Decides in Favor of Assessee on Document Ownership and Accounting Method

The Tribunal allowed the assessee's appeals in part, dismissing the revenue's appeals. The Tribunal upheld the assessee's position on the ownership of ... Addition made on account of entries contained in hand written sheet found during the course of search - Held that:- Once the assessee is not carrying on any construction work, then the natural corollary is that it would not make any payment for the purpose of construction and when hand written sheet depicted construction payments, the same could not be treated as the document belonging to the assessee. Further the assessee clearly pointed out that the name of the person on the said sheet was Mr.Sajjan Jain, who was employee of M/s Goel Construction Co.Pvt. Ltd. and the said facts could have been verified by the Assessing Officer, but the Assessing Officer had failed to discharge his onus and in the said circumstances there is no merit in the addition made in the hands of the assessee. Further the assessee has also filed affidavit to the effect that the said document was not in his hand writing or in the hand writing of his employees and also Shri Sajjan Jain was not in his employment and belonged to M/s Goel Construction Co.Pvt. Ltd. In the entirety of the facts and circumstances, we delete the addition - Decided in favour of assessee. Undisclosed income of the assessee - assessee had failed to furnish any proof that the cheques issued by Shri Chhabra had bounced again and again - Held that:- no merit in the claim of the assessee in this regard and in the absence of the assessee having furnished any evidence to prove its case that sum of ₹ 5 lacs was offered against cheuqes being dishonoured, does not establish the case of the assessee. In case the cheques were being dishonoured then how the total of ₹ 7,89,760/- has been taken and it does not talk of any dishonour of cheques. In the absence of any evidence filed to prove its case we find no merit in the plea of the assessee and we uphold the addition of ₹ 5 lacs in the hands of the assessee as income from undisclosed sources. - Decided against assessee. Addition on entries contained in seized papers A-l page 44 - assessee pleads that the said amounts have been considered by Shri J.C.Bansal in his computation filed before the Hon'ble Settlement Commission - Held that:- Where the applicant had also offered additional income before the Settlement Commission in the hands of Maa Saraswati Educatiional and Social Welfare Trust, we find no merit in the so called addition made in the hands of the assessee totaling ₹ 19,95,000/-. Accordingly, we direct Assessing Officer to delete the addition of ₹ 19,95,000/-. Further addition of ₹ 5,11,373/- was made in the hands of the assessee on protective basis. In view of the settlement petition having been filed by Shri J.C.Bansal before the Settlement Commission, the Settlement Commission has already decided the issue in the hands of Maa Saraswati Educatiional and Social Welfare Trust and which also incorporates the additional income offered by Shri J.C.Bansal and further being assessed in his hands. In view thereof, we find no merit in the said addition of ₹ 511,373/- and the same is directed to be deleted - Decided in favour of assessee. Disallowance of deduction under section 80IB - amount declared during the course of survey as additional income - Held that:- In view of the ratio being settled by the Hon'ble Punjab & Haryana High Court in the in National Legguard Works Vs CIT and another (2006 (9) TMI 100 - PUNJAB AND HARYANA HIGH COURT), M/s Tudor Knitting Works Pvt. Ltd. Vs CIT (2013 (10) TMI 1171 - PUNJAB & HARYANA HIGH COURT ), M/s Kim Pharma (P) Ltd. V CIT (2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT) we hold that the assessee is not entitled to the deduction under section 80IB of the Act on the surrendered income - Decided against assessee. Addition based on the seized document - Held that:- As per tabulated details at page 14, the amount credited/paid totaled to ₹ 46,43,115/- and the balance on each page was shown as receivable by Mr. Monga and his family members from the assessee vide letter dated 10.08.2008. Further sum of ₹ 13,00,000/- is mentioned in the said letter placed at page 67 as having been received by him. In totality thus, the total payments made by the assessee were of ₹ 46,43,115/- + ₹ 13,00,000/- and the addition is to be restricted to ₹ 59,43,115/- as held by the Commissioner of Income Tax (Appeals). The balance being the amount payable by the assessee to Shri Monga and his family members is not includible as income of the assessee. Accordingly, we uphold the addition of ₹ 59,43,115/- in the hands of the assessee and dismiss the grounds of appeal raised by both assessee and the revenue in this regard. Percentage completion method rejected by CIT(A) - determination of profit from the real estate business of assessee - Held that:- Where the assessee was following a particular method of accounting consistently, which has been accepted by the department from year to year and in the absence of any defect being pointed out by the Assessing Officer that by following such method, income had escaped assessment, we find no merit in the order of the Assessing Officer in holding that percentage completion method should be applied to the assessee for the year under consideration. It is the prerogative of the assessee to arrange its affairs in such a manner and follow any recognized method of accounting to compute its profits. In view thereof, we find no merit in the order of the Assessing Officer in re-computing the income in the hands of the assessee. Upholding the order of Commissioner of Income Tax (Appeals) - Decided against revenue. Issues Involved:1. Addition based on handwritten sheets.2. Addition based on seized documents.3. Non-allowance of deduction under section 80IB.4. Method of revenue recognition (percentage completion method vs. project completion method).Issue-wise Detailed Analysis:1. Addition Based on Handwritten Sheets:- Ground No. 2: The assessee contested the addition of Rs. 12,30,767/- based on handwritten sheets found during the search. The sheets allegedly showed transactions related to construction expenses by M/s Goel Construction Co. Pvt. Ltd. The assessee argued that the documents did not belong to them but to the contractor. The CIT (Appeals) upheld the addition, stating the assessee failed to provide cogent explanations or produce the contractor for examination. However, the Tribunal found that the assessee had discharged its onus by proving the documents did not belong to them and directed the deletion of the addition.- Ground No. 3: The assessee contested the addition of Rs. 5 lakhs based on another handwritten sheet showing transactions with customers. The CIT (Appeals) upheld the addition, citing the assessee's failure to substantiate their claims. The Tribunal found no merit in the assessee's claim and upheld the addition as income from undisclosed sources.2. Addition Based on Seized Documents:- Ground No. 1 & 2 (A.Y. 2008-09): The assessee contested the additions of Rs. 19,95,000/- and Rs. 5,11,373/- based on seized documents. The CIT (Appeals) upheld the additions, rejecting the assessee's claim that the amounts were part of a settlement petition before the Settlement Commission. The Tribunal directed the deletion of these additions, noting that the amounts were already considered in the settlement petition.- Ground No. 1 (A.Y. 2009-10): The assessee contested the addition of Rs. 59,43,115/- out of Rs. 1.28 Cr based on seized documents showing transactions with Mr. Monga. The CIT (Appeals) restricted the addition to Rs. 59,43,115/-, which the Tribunal upheld, finding the balance amount was not includible as income.3. Non-Allowance of Deduction Under Section 80IB:- Ground No. 3 (A.Y. 2008-09): The assessee contested the non-allowance of deduction under section 80IB on additional income declared during a survey. The CIT (Appeals) upheld the disallowance, citing jurisdictional High Court decisions that surrendered income cannot form part of business income for deduction purposes. The Tribunal upheld this decision, finding no merit in the assessee's claim.4. Method of Revenue Recognition:- Revenue's Appeal (A.Y. 2007-08): The revenue contested the rejection of the percentage completion method adopted by the Assessing Officer. The CIT (Appeals) upheld the assessee's use of the project completion method, noting it was consistently followed and accepted by the department. The Tribunal upheld this decision, citing the Supreme Court's stance that both methods are recognized and the department cannot insist on a change without proving distortion of profits.Conclusion:- The assessee's appeals were partly allowed, and the revenue's appeals were dismissed. The Tribunal found merit in the assessee's claims regarding the ownership of documents and the method of accounting, while upholding the revenue's stance on the non-allowance of deduction under section 80IB.