TaxTMI 
TaxTMI 
2025 (12) TMI 594
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....d. under which the assessee was to receive 37% of the revenue arising from the sale of the developed flats. The Assessing Officer treated this arrangement as a business activity and concluded that the assessee was engaged in the business of property development. The Assessing Officer further held that the land in question was being exploited commercially and should, therefore, be treated as stock-in-trade rather than as a capital asset. 3. On this basis, the Assessing Officer held that the amounts received during the year under the joint development agreement, amounting to Rs.13,87,39,209, represented business receipts liable to tax in the year of receipt. After allowing what he considered to be project- related expenses of Rs.9,79,54,204, he computed the taxable income at Rs.4,07,85,005 and added the same to the returned income. 4. The learned CIT(A), however, after examining the materials on record and considering the assessee's detailed submissions, reached a completely different conclusion. He observed that the assessee had consistently disclosed the land as a fixed asset in his balance sheet and had never treated it as stock-in-trade. He held that merely entering into a ....
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.... opinion, the statement recorded u/s 132(4) of the Act is not conclusive and it is rebuttable. For this proposition, we place reliance on the decision rendered by Hon'ble Supreme Court in the case of Pullangode Rubber Product Co. Vs. State of Kerala (91 ITR ITA Nos.542 to 544/Bang/2021 & CO Nos.17 to 19/Bang/2021 Sri Mathikere Ramaiah Seetharam, Bangalore Page 80 of 96 18) (SC), wherein it was held that the admission may be an important piece of evidence, but the same is not conclusive. It is open to the person who made the admission to show that it was incorrect. We may also refer to the decision rendered by Hon'ble Supreme Court in the case of CIT vs. V. MR.P Firm (1965) 56 ITR 67, wherein it was held that the principle of estoppels will not against the Income tax Act. The relevant observations are extracted below: "The contention is that the assessees having opted to accept the scheme, derived benefit there-under, and agreed to have their discharged debts excluded from the assets side in the balance-sheet subject to the condition that subsequent recoveries by them would be taxable income, they are now precluded, on the principle of "approbate and reprobate", from pleadin....
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....ory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field." 8.30. The Hon'ble Calcutta High court in case of CIT V. Bhaskar Mitter (73 Taxmann 437) has held as under: "8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now wellsettled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can....
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....asis of sworn statement recorded u/s 132(4) as well as 131 of the Act without valid seized material. In our opinion, that should be a valid seized material found during the course of search and the sworn statement of the Directors cannot substitute this seized material found during the course of search, though sworn statement is a piece of evidence to frame the assessment but it is not conclusive evidence to frame the assessment or sustain the addition. 8.32 For the assessment year 2015-16 and 2016-17, these assessments were framed u/s 143(3) r.w.s. 153D of the Act and there was no valid seized material found during the course of search to frame the assessment. The ld. AO cannot rely only on the sworn statement recorded from Shri M.R. Seetharam to frame the assessment. In our opinion, as discussed in earlier para, sworn statement is not conclusive evidence to frame the assessment or to sustain the addition. The addition shall be based on the evidence found during the course of search action or during the course of assessment. 8.33 The learned CIT(A) after verifying the detailed submissions, had allowed the appeals filed by the Respondent holding that the sale of f....
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....t similar to the previous year, where the assessee had shown a profit. The AO observed that the major reason for the loss in the current year was a very steep increase in interest expenditure from about Rs.39 lakh in the previous year to more than Rs.3.10 crore in this year. Since there was no significant change in the business activities that could justify such a large rise in interest cost, the AO sought an explanation. 13. The assessee explained that the overdraft account was fully used in AY 2020-21, unlike the earlier year, and therefore the interest burden increased. However, the AO found that the assessee had also used borrowed funds for increasing inventory and giving advances for land acquisition. Because these assets/ projects were not yet completed or ready for sale, the AO held that the interest should not have been claimed as an expense but should have been capitalized into Work-inProgress (WIP) and advances as per accounting standards. The AO further noted that the assessee's claim of loss on sale of sites was not supported by any evidence that the sites were sold below cost for genuine business reasons. After re-working the profit and loss account, the AO rejected....
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....ax-neutral because the WIP would be recognized as income in later years. The ld. AR argued that no part of the interest was used for non-business purposes and requested that the claim be allowed. 17. On the other hand, the DR supported the orders of the AO and CIT(A). He stated that the assessee had not completed the projects and therefore interest must be capitalised. He submitted that the assessee's explanations were contradictory and that the assessee had not proved the loss on sale of sites. The ld. DR argued that the AO's disallowance was justified and the appeal should be dismissed. 18. We have carefully considered the submissions and examined the records placed before us. The assessee has provided a clear break-up of the interest amounts and has demonstrated that out of the total interest incurred, a substantial part has already been capitalised to the project under development and a further portion has been transferred to the proprietor's capital account. Only the balance interest of Rs.3.10 crore has been claimed as revenue expenditure, and this interest relates entirely to inventory and business advances. These items form part of the regular operating cycle of the a....