2018 (7) TMI 2036 - AT - Income Tax

Tribunal dismisses Revenue's appeal, partly allows assessee's appeal, directs AO to reconsider revised return

The appeal of the Revenue was dismissed, and the appeal of the assessee was partly allowed. The tribunal directed the AO to accept the revised return and ... Not comply with the notice u/s 142(1) - revised return filed - HELD THAT:- The return filed on 30.04.2009 is well within the time limit prescribed under the afore-stated provision. The date for filing the return was mentioned in the notice u/s 142(1) of the Act. But we find that the AO has categorically stated that no notice u/s 142(1) of the Act issued on 18.02.2009 is placed on record. This observation of the AO finds contradiction from the letter dated 26.03.2009 exhibited at page 1 of the paper book because in the said letter, the ACIT, Central Circle – 20, New Delhi has mentioned that a notice u/s 142(1) of the Act was issued on 18.02.2009. Though the period mentioned therein to file return of income was 27.2.2009, but since the AO has accepted the return filed on 30.04.2009, he cannot blow hot and cold at the same time for not treating the same as filed in pursuance to notice u/s 142(1) of the Act. Once the return has been accepted as being filed u/s 142(1) of the Act, there is no reason why the revised return filed on 20.08.2009 should not be accepted. We, accordingly, direct the AO to accept the revised return filed on 20.08.2009. Since we have directed the Assessing Officer to consider the revised return and decide the claim of expenses afresh, the income shown in the revised return of income, if accepted, shall be the starting point for computing the assessed income. We will now consider each addition mentioned hereinabove. For the sake of clarity, the ld. CIT(A) has deleted the additions made on account of rejection of books of account amounting to ₹ 6.40 crores, in reconciling cash in hand ₹ 10 crores, inadmissible compensation ₹ 7.31 crores and has given partial relief in respect of compensation paid to customers amounting to ₹ 63.47 lakhs. CIT(A) has confirmed the addition of ₹ 2.79 crores being unexplained investment for purchase of property from Verma family.The Revenue is in appeal against the deletion of the additions and the assessee is in appeal against the confirmation of additions. Rejection of books of account - HELD THAT:- Assessing Officer had no ground for rejecting the books of account or to estimate the g.p. rate. CIT(A) observed that the addition made by the Assessing Officer is neither based on any direct evidence nor any indirect or circumstantial evidence. Estimation of profit - There is no doubt that the Assessing Officer has rejected the books of account on frivolous grounds and vague observations. We find that during the course of appellate proceedings, the ld. CIT(A) called for certain information/details which were duly complied with. We also find that the ld. CIT(A) asked the Assessing Officer to be present to verify those documents alongwith the ld. CIT(A). But in his wisdom, the Assessing Officer did not care to examine the details/documents alongwith the first appellate authority. Considering the facts in totality, we agree with the ld. CIT(A) that there is no valid ground in rejecting the books of account and estimating the profit of the assessee. The ld. CIT(A) has rightly deled the addition of ₹ 6,40,21,407/- and therefore, no interference is called for. This ground in Revenue’s appeal is dismissed. Unreconciled cash in hand - As the findings of the first appellate authority are based on facts and as transactions mentioned by the ld. CIT(A) were done through banking channels, we do not find any reason to interfere with the findings of the ld. CIT(A). Addition of ₹ 10 crores has been deleted. This ground is also dismissed. Capital expenditure - Assessee has paid compensation to 51 flat owners, which, according to him, was a capital expenditure incurred by the assessee out of undisclosed income - HELD THAT:- It is true that notings were found in the impounded documents wherein it has been stated that some of the payments were made in respect of 51 plots. It is equally true that there is no evidence on record which could suggest that the assessee has actually bought back 51 plots and has paid compensation nor there is evidence to show that the assessee has actually done any transactions in respect of those 51 plots. It appears that the addition has been made only on the basis of notings found in the impounded sheet without there being any corroborative evidence on record. It is a settled proposition of law that additions cannot be made only on the basis of assumptions, surmises and conjectures. We, therefore, confirm the findings of the ld. CIT(A). Buy back transaction - HELD THAT:- if the factual matrix is understood in its true perspective, in the light of Arbitration Award, we find that there is no basis for assuming that the assessee has paid ₹ 17,500/- per sq ft. to Verma family as the transaction was finally settled through arbitration and the impugned area of 2797 sq ft which formed basis for making addition was, in fact, settled at 5594 sq. ft by the Arbitration Award. Considering the facts in totality, we do not find any basis for making the impugned addition. We accordingly direct the Assessing Officer to delete the addition of ₹ 2,79,70,000/-. This ground in assessee’s appeal is allowed. Compensation paid to customers - HELD THAT:- It is not in dispute that the assessee has been showing the amount received from its customers as advance. It is also not in dispute that the advance was refunded back to the customers on non allotment of the plots. As decided in own case [2013 (6) TMI 622 - ITAT DELHI] no error in the directions given by the ld. CIT(A). The Assessing Officer can revisit this issue afresh in the light of directions given by the first appellate authority. This ground is partly allowed. Upfront fee disallowance - HELD THAT:- We have already held that revised return filed by the assessee is a valid return and have directed the Assessing Officer to consider the claim of expenditure in the revised return afresh. This issue is embedded in the claims made in the revised return and shall be considered by the Assessing Officer while deciding the same. Issues Involved:1. Acceptance of the revised return of income.2. Survey operation and undisclosed income.3. Rejection of books of account and estimation of profit.4. Addition of unreconciled cash in hand.5. Addition of inadmissible compensation.6. Addition of unexplained investment for the purchase of property.7. Compensation paid to customers.8. Upfront fee disallowance.Detailed Analysis:1. Acceptance of the Revised Return of Income:The appellant-company, involved in real estate development, initially filed a return of income on 30.04.2009, which was revised on 20.08.2009. The AO did not accept the revised return, treating it as non-est since it was not filed within the prescribed time. However, the tribunal found contradictions in the AO's findings, noting that the return filed on 30.04.2009 was within the time limit prescribed under section 139(5) of the Act. The tribunal directed the AO to accept the revised return filed on 20.08.2009 and consider the claims made therein.2. Survey Operation and Undisclosed Income:During a survey operation on 04.02.2010, the appellant's representative admitted to an undisclosed income of Rs. 31 crores, including unexplained cash deposits in two bank accounts. The AO maintained the total offer amount at Rs. 31 crores despite the appellant's contention that the actual unexplained deposits aggregated to Rs. 28.30 crores. The tribunal agreed with the appellant, directing the AO to consider the surrendered amount of Rs. 28.30 crores only, as the offer made during the survey does not have any legal binding on the assessee.3. Rejection of Books of Account and Estimation of Profit:The AO rejected the books of account under section 145(3) of the Act, estimating the profit at Rs. 6,40,21,407/-, based on incomplete trial balances and non-maintenance of individual project-wise accounts. The CIT(A) deleted this addition, finding no valid ground for rejecting the books of account. The tribunal upheld the CIT(A)'s decision, noting that the AO's rejection was based on frivolous grounds and vague observations.4. Addition of Unreconciled Cash in Hand:The AO added Rs. 10 crores towards unexplained cash in hand, based on certain notings in impounded documents. The CIT(A) deleted this addition, finding that the said amount was actually transferred to M/s Kolina Developers Pvt. Ltd. The tribunal upheld the CIT(A)'s decision, noting that the transactions were done through banking channels and there was no factual error in the findings.5. Addition of Inadmissible Compensation:The AO added Rs. 7.31 crores, considering it as a capital expenditure incurred out of undisclosed income. The CIT(A) deleted this addition, observing that the AO did not verify whether any compensation was actually paid. The tribunal upheld the CIT(A)'s decision, noting that the addition was made on the basis of notings found in impounded documents without any corroborative evidence.6. Addition of Unexplained Investment for the Purchase of Property:The AO added Rs. 2.79 crores for the buyback of property from Verma family, considering it as an unexplained investment. The CIT(A) confirmed this addition. The tribunal, however, found that the transaction was settled through an Arbitration Award, and there was no basis for assuming that the assessee paid Rs. 17,500/- per sq ft. The tribunal directed the AO to delete the addition of Rs. 2.79 crores.7. Compensation Paid to Customers:The AO disallowed compensation paid to customers amounting to Rs. 48,24,444/- and Rs. 10,95,616/-. The CIT(A) deleted the addition of Rs. 10,95,616/-, but directed the AO to verify the transaction relating to Rs. 48,24,444/-. The tribunal upheld the CIT(A)'s decision, finding no error in the directions given.8. Upfront Fee Disallowance:The tribunal held that the revised return filed by the assessee is valid and directed the AO to consider the claim of expenditure in the revised return afresh. This issue is embedded in the claims made in the revised return and shall be considered by the AO while deciding the same.Conclusion:The appeal of the Revenue was dismissed, and the appeal of the assessee was partly allowed. The tribunal directed the AO to accept the revised return and reconsider the claims made therein, while also addressing specific additions and deletions as discussed.