2023 (4) TMI 326 - AT - Income Tax

Tribunal rules in favor of assessee, deleting additions for unexplained expenditure and cash credits, remanding penalty decision.

Dev Bhoomi Apartments Versus The ACIT Central Circle-II Chandigarh, The DCIT Central Circle-II Chandigarh

Dev Bhoomi Apartments Versus The ACIT Central Circle-II Chandigarh, The DCIT Central Circle-II Chandigarh - TMI Issues Involved:1. Addition under Section 69C for unexplained expenditure.2. Estimation of Net Profit (N.P.) rate and consequential addition.3. Addition under Section 68 for unexplained cash credits.4. Levy of penalty under Section 271AAA.Detailed Analysis:1. Addition under Section 69C for unexplained expenditure:The first issue pertains to the addition of Rs. 7,40,704/- under Section 69C of the Income Tax Act for unexplained expenses related to the 'Power House' housing project. The Assessing Officer (AO) based this addition on a document seized during a survey, which the assessee failed to reconcile with his regular books of account. The AO treated these expenses as unexplained due to the lack of material evidence provided by the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, noting discrepancies in the affidavit provided by Shri Sanjeev Angra and the assessee's submissions. However, the Tribunal found merit in the assessee's explanation and affidavit, indicating that the expenses were related to additional kitchen work done by M/s Mehak Enterprises and not by the assessee. Consequently, the Tribunal deleted the addition, concluding that the paper seized could not be held against the assessee.2. Estimation of Net Profit (N.P.) rate and consequential addition:The second issue involves the addition of Rs. 4,48,754/- based on an estimated increase in the N.P. rate. The AO had enhanced the N.P. rate to 5.89%, similar to an addition made in the previous assessment year (A.Y. 2009-10). The Tribunal referred to its earlier decision in ITA No. 584/Chd/2013, where the addition based on estimated N.P. was deleted due to the lack of defects in the books of account and the unjustified basis for the estimation. Following the same rationale, the Tribunal deleted the addition for the current assessment year as well, noting that the facts and circumstances were identical to the previous year.3. Addition under Section 68 for unexplained cash credits:The third issue concerns the addition of Rs. 9,30,000/- under Section 68. The AO initially added Rs. 72,86,000/- based on seized documents, but the CIT(A) deleted Rs. 63,56,000/- and sustained Rs. 9,30,000/-. The Tribunal found that the amount of Rs. 9,30,000/- related to the sale of flats registered in A.Y. 2008-09, and therefore, could not be considered as income for A.Y. 2010-11. The Tribunal directed the deletion of this addition, agreeing with the assessee's contention that the payment was received prior to the registration of the sale deeds and thus pertained to an earlier assessment year.4. Levy of penalty under Section 271AAA:The fourth issue involves the levy of penalty under Section 271AAA for A.Y. 2010-11. The AO imposed a penalty of 10% on the surrendered Work in Progress (WIP) amounting to Rs. 25,00,000/-, which was declared in the income tax return and assessed by the AO. The Tribunal noted that the conditions for non-levy of penalty under Section 271AAA(2) were satisfied, as the surrendered income was disclosed during the search, the manner of earning was specified, and taxes were paid. Additionally, the Tribunal observed that the AO's order was non-speaking and lacked specific findings on the conditions for penalty. The Tribunal directed the AO to re-examine the matter and pass a detailed order considering the assessee's contentions and the Tribunal's findings in ITA No. 181/Chd/2014.Conclusion:The Tribunal allowed the appeal of the assessee for the addition under Section 69C and the estimation of N.P. rate, directing the deletion of these additions. For the addition under Section 68, the Tribunal concluded that the amount pertained to an earlier assessment year and directed its deletion. Regarding the penalty under Section 271AAA, the Tribunal remanded the matter to the AO for a fresh examination and a detailed order.