Court rules TDR sale income non-taxable, disallows expenses, penalty not pursued.

The court ruled in favor of the assessee regarding the addition of income from the sale of Transferable Development Right (TDR), finding it non-taxable as the TDR was not in existence at the time of land purchase. However, the court sided with the revenue in disallowing 5% of expenses due to lack of third-party evidence. Penalty proceedings were not pursued as no penalty was levied. The appeal was partly allowed, with the decision announced on 19th August 2016.

---

---

Issues involved:
1. Addition of income on the sale of Transferable Development Right (TDR)
2. Disallowance of expenses at 5%
3. Penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961

Issue No.1:
The appeal challenged the addition of income amounting to Rs. 70,00,000 on the sale of TDR. The contention was that the TDR was accrued after the land purchase, making it non-taxable. The assessee relied on various legal precedents to support this argument. The department argued that the MOU for TDR sale indicated the purchase of TDR, justifying taxation. However, upon review, it was found that the TDR was not in existence at the time of the land purchase, and the right to eliminate was not taxable. As a result, the addition was deemed non-taxable, and the appeal was allowed in favor of the assessee.

Issue No.2:
The challenge here was the 5% disallowance on expenses totaling Rs. 42,06,947. The Assessing Officer disallowed 10% due to lack of third-party evidence and self-made vouchers. The CIT(A) reduced the disallowance to 5%, which was considered reasonable. Despite the absence of justifiable materials, the CIT(A)'s decision was upheld as the vouchers were deemed sufficient evidence. Consequently, this issue was decided in favor of the revenue and against the assessee.

Issue No.3:
As no penalty was levied, challenging the penalty proceedings was deemed unjustifiable, and thus, this issue did not require adjudication. The appeal was partly allowed, and the order was pronounced in open court on 19th August 2016.

---