2019 (3) TMI 682 - AT - Income Tax

Appeals Outcome: Assessee partially wins, Revenue appeals rejected. Tribunal emphasizes evidence over presumptions.

The appeals of the assessee were partly allowed, and the appeals of the revenue were dismissed. The Tribunal emphasized the need for actual evidence over ... Unexplained expenditure - alleged excess payments to landlords - agreement of sale entered by the assessee-company and its group concern with its landlords for purchase of lands - part of the payment was also paid through cash and cheque for which the landlords have given their acknowledgment of receipt - HELD THAT:- Department found agreement to sell with the schedule of payments. There is proof for payment of ₹ 15 lakhs in cash and ₹ 15 lakhs by cheque. Apart from that, there is no comparative evidence to show that assessee has actually made the payment except schedule of payment mentioned in the agreement. There is no absolute proof that assessee has made the payment. AO made this addition only on presumption that the payment must have been made. Assessee denies that it actually made any further payments and submits that the deal did not go through. But, no details were submitted. It is always subjective when the transactions involved are to do with cash. Department has not found anything to show that the landlords actually received the payments. The additions can be made only based on actual evidence and not based on presumptions. Particularly, when the deal is not through and department can always verify whether this agreement was acted upon and sale was completed by proper registration. Since allegedly the deal is not completed and there is no proof for making further payments, the evidence available on the agreement to sell alone can be considered as actual payment made relating to this deal. In the absence of any evidence, we have no choice, but, to accept the contention of the assessee and delete the addition Addition u/s 40(a)(ia) - Violation reported by the Special Auditor on no deduction of TDS and short deduction of TDS - scope of amendment in act - HELD THAT:- There is no dispute but the legislature has softened the stand on the default by the assessee subsequent to various judicial precedents and amended the sections like 40(a)(ia), 201(1), etc. The Courts have held that these amendments are retrospective in nature. Considering the subsequent amendments to the section 40(a)(ia), assessee has to prove that the recipient has declared the income in its gross income. Since, the AO has not initiated proceedings u/s 201(1), the assessee has not submitted any documents. At this juncture, i.e., after a lapse of a decade, there is no point in remitting the issue back to AO. Since, it is the responsibility of the assessee to collect the tax on behalf of Revenue, which assessee has failed, but, there is 99% chance that the recipient must have declared the same as income and paid the tax. There is no doubt that assessee has failed and assessee also accepts the same. At this stage, we can only direct the AO to delete the addition u/s 40(a)(ia) and calculate interest u/s 201(1A) for the period of default. This is in line with the direction of the Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverages Ltd. Vs. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA]. Ground raised by the assessee is partly allowed. Deduction u/s.80lB (10) - non-fulfilment of the precondition as detailed in the provisions of section 80IB(10), the assessee is not entitled to claim deduction of any part of its income u/s 80IB(10) - non furnishing of all the particulars of the housing project(s) which is claimed for deduction u/s 80IB, separate Profit & loss account for other projects, method of accounting, amount of WIP, accounting of the sale of flats, etc., vide notices given - HELD THAT:- We notice that assessee has only submitted the letters before CIT(A) to claim the deduction in pro-rata basis. As per the findings of ld. CIT(A), these letters do not give any details about the stage of completion, size of the flat to ascertain whether these projects satisfy the conditions specified in section 80IB(10). Therefore, we direct the AO to collect information about the stage of completion of the projects and size of the flats. If it is within the norms, AO should give pro-rata deduction u/s 80IB(10). This is accepted law as far as allowing pro-rata deduction u/s 80IB(10). With regard to completion certificates, it is enough that assessee files the completion certificate on block-wise or handing over proof to the flat owners. We direct the AO to decide the issue as per the above said directions and accordingly, ground raised by the assessee is allowed. Addition on account of unexplained investments - as during the search operations in the case of the assessee group, seized material in the nature of Agreements for Sale, Development Agreements, Sale Deeds, Receipts issued by land owners etc., were recovered - peak credit addition - HELD THAT:- We notice that AO has arrived the peak credit based on the information found during the search - assessee has submitted audited balance sheet and cash book. AO has to analyse the information based on the reliable sources offered by the assessee and the audited cash book. It is common that books are not complete at the time of search. Assessee should be given opportunity to submit proper information. In this case, assessee has submitted audited cash book. This should be considered and arrive at the peak credit as per cash flow or AO should take the reliable sources on record and make addition of unexplained cash outflow as unexplained investment in cash payments made to land owners. We direct the AO to verify the audited cash book entries with the payments to landlords and also the reliable source of cash available for such payments to landowners. Therefore, ground raised by the assessee is allowed for statistical purposes. Unexplained investment u/s 69B - HELD THAT:- As at the time of search, the department found two documents, one for the registered sale deed and another for agreement to sell. The consideration mentioned in both the documents are different. It is natural to presume that when the transaction is complete by registering the document, two parties must have exchanged the value as per the agreement to sell. This is the original arrangement between the parties. All the transactions i.e. three transactions are complete. CIT(A) has come to conclusion that assessee must have adhered to the clauses in the agreement to sell. AR brought to our notice in the case of Shri Lingala Senapati that the department has agreed the value of sale consideration as per the registered sale deed and completed the assessment. For the same transaction, the department cannot treat two different sale consideration. Therefore, we direct the AO to determine the sale consideration adopted for Shri Lingala Senapati and consider the same value as sale consideration in the case of assessee also. Also direct the AO to verify the other two cases also and determine the sale consideration adopted for the other two parties and determine the same sale consideration as the proper value of consideration in the case of assessee. Therefore, ground raised by the assessee is allowed for statistical purposes. Unexplained expenditure u/s 69C - HELD THAT:- We are of the view that the AO has already made addition in the hands of M/s Janapriya Engineers Syndicate and the same payments to land owners cannot be made as addition in the case of assessee on protective basis. Therefore, we are inclined to accept the findings of ld. CIT(A) and therefore grounds raised by the revenue in both the appeals are dismissed. Issues Involved:1. Condonation of delay in filing appeals.2. Addition of Rs. 1,05,00,000 as unexplained investment.3. Disallowance under section 40(a)(ia) of the Income Tax Act.4. Disallowance of claims under section 80IB for specific projects.5. Addition of Rs. 5,19,52,900 as unexplained investments.6. Additions under section 69B for purported on-money payments.7. Separate grounds raised by the revenue regarding deductions and disallowances.Detailed Analysis:1. Condonation of Delay:The assessee filed appeals with a delay of 128 days due to the medical condition of its Authorized Representative (AR). The Tribunal found the reason genuine and condoned the delay, admitting the appeals for hearing and adjudication.2. Addition of Rs. 1,05,00,000 as Unexplained Investment:The AO added Rs. 1,05,00,000 as unexplained investment based on an agreement of sale found during a search operation. The assessee contended that only Rs. 30,00,000 was paid, and the remaining amount was not paid due to legal issues with the property. The Tribunal found no corroborative evidence of the additional payments and deleted the addition, accepting the assessee’s contention.3. Disallowance under Section 40(a)(ia):The AO disallowed Rs. 5,04,59,157 due to non-deduction and short deduction of TDS. The CIT(A) directed the AO to verify if the amounts were unpaid at the end of the year and delete the disallowance accordingly. The Tribunal noted the retrospective amendment to section 40(a)(ia) and directed the AO to delete the addition, calculating interest under section 201(1A) for the default period.4. Disallowance of Claims under Section 80IB:The AO disallowed claims under section 80IB for JP Arcadia and JP Metropolis projects due to non-fulfillment of conditions. The CIT(A) upheld the disallowance, noting the lack of completion certificates and details about the size of the flats. The Tribunal directed the AO to verify the stage of completion and size of flats, allowing pro-rata deduction if within norms.5. Addition of Rs. 5,19,52,900 as Unexplained Investments:The AO added Rs. 6,46,57,900 as unexplained investment based on seized documents and negative cash balances. The CIT(A) restricted the addition to Rs. 5,19,52,900 after partially accepting the assessee’s explanation. The Tribunal directed the AO to verify the audited cash book and reliable sources of cash, allowing the ground for statistical purposes.6. Additions under Section 69B:The AO made additions for purported on-money payments to vendors based on agreements for sale showing higher consideration than registered sale deeds. The CIT(A) upheld the additions, noting the consistency between agreements and registered documents. The Tribunal directed the AO to verify the sale consideration adopted for vendors and consider the same for the assessee, allowing the ground for statistical purposes.7. Separate Grounds Raised by the Revenue:- Deduction under Section 80IB: The Tribunal dismissed the revenue’s grounds, following its conclusions in the assessee’s appeal.- Disallowance under Section 40(a)(ia): The Tribunal dismissed the revenue’s grounds, following its conclusions in the assessee’s appeal.- Addition under Section 69C: The Tribunal upheld the CIT(A)’s deletion of the addition, noting the same payments were already added in the hands of M/s Janapriya Engineers Syndicate.Conclusion:The appeals of the assessee were partly allowed, and the appeals of the revenue were dismissed. The Tribunal emphasized the need for actual evidence over presumptions and directed thorough verification of facts by the AO.