Undisclosed development expenses rejected where books, bills and bank records were produced and no corroborative search evidence existed.

Addition for alleged undisclosed development expenses was unsustainable where the assessee produced regular books of account, bills, bank statements and supporting material, and the search yielded no incriminating material or cogent corroborative evidence. The Tribunal noted that the development es were already recorded year-wise, the work was shown to have been executed under a development agreement, and the sale consideration of plots had been accepted. An estimate based on Rs. 300 per sq. ft. was held to be unsupported, made on a presumptive basis without rejecting the books, and the entire amount could not be brought to one assessment year. The deletion of the addition was upheld.

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Issues: Whether the addition made on account of alleged undisclosed development expenses for the colonies was sustainable when the assessee had furnished books of account, bills, bank statements and other supporting material, and no incriminating material or cogent corroborative evidence was found in the search.

Analysis: The assessee had disclosed the development expenses in the regular books and explained that the work was carried out through a contractor under a development agreement, which was also stated to have been seized during search. The record showed that year-wise expenditure was already reflected in the accounts of the assessee and family members, and the sale consideration of plots had been accepted. The estimated rate of Rs. 300 per sq. ft. was found to be without basis, and the addition was made on a presumptive approach without rejecting the books of account or bringing any cogent material to support the estimate. The Tribunal also noted that the development expenditure pertained to different years and that making the entire addition in one assessment year was not justified.

Conclusion: The deletion of the addition was upheld and the Revenue's challenge failed.

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