Tribunal Upheld Reopening & Additions, Partial Disallowances Deleted, Accounting Errors Corrected

M/s. Shree Gayatri Constructions & Developers Versus ITO 25 (2) (3), Mumbai

M/s. Shree Gayatri Constructions & Developers Versus ITO 25 (2) (3), Mumbai - Tmi Issues involved:
1. Validity of reopening of assessment and additions sustained by Ld CIT(A).
2. Disallowance made u/s 40(a)(ia) of the Act.
3. Disallowance of purchases.
4. Disallowance of purchases made from M/s Shri Parashprabhu Grani Marmo (P) Ltd.
5. Addition of unexplained purchases.
6. Relief granted by Ld CIT(A) in respect of unexplained purchases.
7. Addition pertaining to unaccounted sale of flats.

Issue 1: Validity of reopening of assessment and additions sustained by Ld CIT(A)
The cross appeals were directed against the order passed by Ld CIT(A) relating to the assessment year 2007-08. The revenue challenged the decision of Ld CIT(A) in granting reliefs to the assessee, while the assessee questioned the validity of reopening of assessment and the additions sustained by Ld CIT(A). The AO had listed various points in the reasons for reopening, indicating a prima facie case of income escapement. The Ld CIT(A) upheld the reopening, citing that audit objections can be a source of information for income escapement. The Tribunal agreed with Ld CIT(A) that the reopening was valid in law.

Issue 2: Disallowance made u/s 40(a)(ia) of the Act
The AO disallowed a sum under section 40(a)(ia) for failure to deduct tax at source. The assessee challenged this disallowance, providing detailed explanations for each payment. The Tribunal found that the tax authorities made additions without considering the explanations given by the assessee. Upon review, the Tribunal directed the AO to delete certain additions and restore other payments for fresh examination based on the assessee's explanations.

Issue 3: Disallowance of purchases
The AO disallowed a portion of the claimed purchases, citing lack of relevant details. The assessee explained the miscellaneous purchases as petty expenses of day-to-day operations, providing detailed breakdowns. The Tribunal found that the addition was made on surmises and conjectures, directing the AO to delete the entire amount related to miscellaneous purchases.

Issue 4: Disallowance of purchases made from M/s Shri Parashprabhu Grani Marmo (P) Ltd
The AO added a sum as bogus purchases, which the assessee explained as an accounting error rectified in the succeeding year. The Ld CIT(A) deleted this addition, and the Tribunal agreed, considering it a case of accounting error and justifying the deletion.

Issue 5: Addition of unexplained purchases
The AO added an amount as unexplained purchases based on discrepancies between the supplier's confirmation and the assessee's ledger account. The Ld CIT(A) deleted this addition, and the Tribunal upheld the decision, noting that the difference was accounted for in the succeeding year.

Issue 6: Relief granted by Ld CIT(A) in respect of unexplained purchases
The Ld CIT(A) granted relief in respect of unexplained purchases, which was upheld by the Tribunal based on the explanations provided by the assessee and the correct accounting treatment followed.

Issue 7: Addition pertaining to unaccounted sale of flats
The AO computed unaccounted sales value based on agreements for sale, but the Ld CIT(A) held that income accrues upon execution of sale deed, not agreement for sale. The Tribunal agreed that income accrual aligns with the accounting method followed by the assessee, directing the AO to delete the addition related to unaccounted sales.

In conclusion, the Tribunal dismissed the revenue's appeal and treated the assessee's appeal as allowed, providing detailed reasoning and analysis for each issue involved in the judgment.