2018 (11) TMI 1116 - AT - Income Tax

Tribunal upholds CIT(A)'s decision in property developer's advance income dispute

The Income Tax Officer-26 (2) (5), MUMBAI Versus Shri Rakesh Srinath Dubey

The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO in a case involving a dispute over the treatment of advances received by a ... Addition made in respect to difference between AIR details and the transactions disclosed in the income tax returns - AO treated 50% of the advances received by the assessee as income from other sources by invoking the provisions of Section 56(2)(vi) - AO also treated these advances received from buyers of the flats as business receipt by invoking the deemed provisions of Section 28(iv) - Held that:- We find that the assessee is promoter of the building ‘Harmony’ along with the other co-owner Shri Prithvijeet Rajaram Chavan and both as coowner has carried out this construction activity. We find from records that the assessee as well as Shri Prithvijeet Rajaram Chavan has offered the income from this project at ₹57,14,251/- in each case in respective returns of income for AY. 2011-12. We are of the view that the AO has not appreciated the AIR information which is merely carried out the details of receipts from the buyers. The property was sold in next year when the project got completed and both the joint co-owner has disclosed their respective income in their returns of income earned from this project. We have verified this fact as noted by the CIT(A) also that the income from this project has already been disclosed by assessee as well as Shri Prithvijeet Rajaram Chavan in their respective returns of income. We find no infirmity in the order of the CIT(A) in deleting the addition - decided against revenue Issues Involved:- Appeal against order of CIT(A) deleting addition made by AO in respect to difference between AIR details and transactions disclosed in income tax returns.Analysis:1. The appeal filed by the Revenue challenged the order of the CIT(A) deleting the addition made by the AO regarding the variance between AIR details and transactions disclosed in the income tax returns. The Revenue raised five grounds of appeal, arguing that the CIT(A) erred in deleting the addition of a specific amount made by the AO. The Revenue contended that the assessee had not declared income from the sale of residential flats in the return for AY 2010-11 despite admitting to the sale in a statement recorded during assessment proceedings. The Revenue also argued that the project completion method should have necessitated the income to be taxed in the relevant year itself.2. The assessee, engaged in property development, received advances against the sale of flats during the previous year relevant to AY 2010-11. The AO treated 50% of these advances as income from other sources and business receipts under specific sections of the Income Tax Act. The CIT(A), after considering additional evidences, concluded that the advances were not business income or income from other sources but were merely advances. The CIT(A) noted that the assessee had disclosed income on a project completion basis in AY 2011-12 and had offered a specific amount as income for that year.3. The Tribunal analyzed the case, noting that the project was a joint venture between the assessee and another individual, with construction starting in 2006 and completing in 2012. The AO's addition was based on the assessee offering 50% of the total receipts from the project as income for AY 2010-11. However, the Tribunal found that the assessee followed the project completion method of accounting and had disclosed the income in AY 2011-12. Both the assessee and the co-owner had offered income from the project in their respective returns for AY 2011-12. The Tribunal concluded that the CIT(A)'s decision to delete the addition was justified as the income had already been disclosed by the parties in their returns.4. In the final judgment, the Tribunal confirmed the CIT(A)'s order and dismissed the Revenue's appeal. The Tribunal emphasized that the income from the project had been properly disclosed by the parties in their respective returns for the relevant assessment year. The Tribunal found no fault in the CIT(A)'s decision to delete the addition made by the AO, thereby upholding the order in favor of the assessee.