2022 (2) TMI 381 - AT - Income Tax

Tribunal upholds deletion of undisclosed expenses for colony development, citing lack of basis & proper accounting.

ACIT, Central-II, Indore Versus Vinod Garg, Mandsaur

The Tribunal upheld the CIT(A)'s decision to delete additions made by the Assessing Officer for undisclosed expenses on colony development. The Tribunal ... Undisclosed expenses incurred on development of colony - CIT-A deleted the addition - HELD THAT:- Assessee has duly provided complete details of development expenses as incurred by him and by the other family members before the assessing officer during the course of search assessment proceeding. We find that during the course of Assessment proceedings itself, the assessee has brought to the notice of AO, that he along with family members had entered into an agreement with Shri Mukesh Sangai for development of the colonies. The said agreements were also seized during the course of the search. All the different individuals have debited the development expenses in their books of accounts. The statement giving year wise development expenses incurred by the different individuals was furnished during the course of assessment as well as appellate proceedings. During the course appellate proceedings before the CIT(A), the copies of ledger accounts of the development expenditure along with the relevant bills and copy of bank statement reflecting the amount of development expenditure had been submitted and which were duly examined by her. We find that the Ld. CIT-DR, except placing his reliance on the findings of the Assessing Officer, could not justify the addition made by the Assessing Officer. AO has made the addition towards undisclosed development expenses @ 300/- per sq. ft. in respect of the three colonies on guess work and surmises which was not justified as the addition was purely on the estimations in absence of any incriminating document found and seized during the course of the search and more so, without bringing any cogent and corroborative material or adverse evidence on record. Thus, the Ld. CIT(A) rightly deleted the addition made by the A.O. Therefore, we do not find any reason to interfere with the findings of the Ld. CIT (A). Accordingly, the action of the Ld. CIT (A) in deleting the additions is confirmed. - Decided against revenue. Issues Involved:1. Deletion of additions made by the Assessing Officer (A.O.) on account of undisclosed expenses incurred on the development of colonies.Issue-wise Detailed Analysis:1. Deletion of Additions by CIT(A)The primary issue in the appeal was whether the CIT(A) erred in deleting the additions of Rs. 3,70,01,954/- made by the A.O. for undisclosed expenses on the development of colonies. The A.O. had estimated the development cost at Rs. 300/- per square foot, which led to the addition. The colonies in question were Keshav Kunj, Keshav Vihar, and Keshav Riddhi.The assessee, engaged in the real estate business, was subjected to search and seizure operations. Notices under sections 153A, 143(2), and 142(1) of the Income Tax Act were issued, and the assessee furnished the required returns. The A.O. requested details of development expenses, which the assessee provided, including year-wise and assesse-wise details. Despite this, the A.O. added Rs. 3,70,01,954/- by estimating the development cost at Rs. 300/- per square foot without any basis or logic.2. Justification by CIT(A)The CIT(A) deleted the addition, considering various documents submitted by the assessee. The CIT(A) observed that the land for the colonies was owned by different family members, all separately assessed to Income Tax. The development expenses were incurred through a contractor, and the agreements were seized during the search. The expenses were debited in the individual books of accounts of different family members, and the sale value of plots was accepted without any adverse view.The CIT(A) noted that the A.O. estimated the development cost without pointing out any discrepancies in the development expenses debited in the individual accounts. The estimation was done for the assessment year 2012-13, although the expenses were incurred in different financial years. The A.O. did not reject the books of accounts or find any incriminating evidence during the search.3. Arguments by Revenue and AssesseeThe CIT-DR argued in favor of the A.O.'s order, while the assessee's counsel relied on the CIT(A)'s findings. The counsel emphasized that the development expenses were incurred through a contractor and were properly accounted for in the books. The sale of plots was executed at prevailing market rates, and there was no justification for the A.O.'s estimation of Rs. 300/- per square foot.4. Tribunal's FindingsThe Tribunal reviewed the complete details of development expenses provided by the assessee and found that the A.O. made the addition based on guesswork and surmises. The development of Keshav Kunj and Keshav Vihar colonies was completed in earlier assessment years, and there was no justification for adding development expenses in the assessment year 2012-13. The Tribunal concluded that the addition was made without any incriminating document or corroborative evidence. Thus, the CIT(A) rightly deleted the addition, and the Tribunal confirmed the CIT(A)'s action.ConclusionThe appeal of the Revenue was dismissed, and the order of the CIT(A) deleting the additions made by the A.O. was upheld. The Tribunal found that the A.O.'s addition was based on estimations without any substantial evidence, and the development expenses were already accounted for in the books of the respective family members.