Included in this update:
i) Mumbai bench ITAT section 14A/Rule 8D (controlling interest investment) no disallowance of general expense;
ii) Hyd bench ITAT real estate stock in trade: income recognition when possession handed over/constructed area sold;
iii) Hyd bench ITAT cash credit section 68 vis a vis cash sales books recorded (no addition possible);
iv) Hyd bench ITAT reopening on review of self same material not possible unless new tangible material there;
v) Hyd bench ITAT on community development expenses (CSR expenses)
Bombay high court in CROWN Consultants Pvt. WRIT PETITION NO.2595 OF 2013/14 FEBRUARY 2014
Held
Just as the revenue cannot improve upon its case for
reopening before the Court and but must stand or fall by the reasons
recorded for reopening the assessment, the same test would be
applicable in case of an assessee i.e. it must stand or fall by its
objection to the grounds for reopening of assessment. It is not open to
the assessee to urge fresh objections before the Court which the Assessing Officer had no occasion to deal with, unless of course the
notice to reopen is exfacie
without jurisdiction not requiring
consideration of any argument such as beyond limitation. In view of the
above, we find substance in the submissions on behalf of the revenue
that the Assessing Officer had tangible material to come to prima facie
view that income chargeable to tax has escaped assessment. (The petitioner in its objection has not categorically stated
that the amount of Rs.1,19, 42,900/which
the Assessing Officer calls
an undisclosed loan was in fact margin money and reflected as part of
Schedule 8 to the balance sheet.)
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “E”, MUMBAI ITA No. : 6704/Mum/2012
(Assessment year: 2009-10) Thermolab Sales & Services
Pvt Ltd, 15 -01-2014
The solitary issue pertains to disallowance of Rs. 2,09,804/- u/s
14A. Before us, the AR reiterated the submissions made before the revenue authorities and submitted that the assessee was not in the business of stocks & shares and was holding the investments to gain control on the clients of Korten Pharmaceuticals Pvt. Ltd. Wherein neither there was an intention to earn interest or dividend nor did the
assessee earn any income which was claimed to be exempt. The AR, therefore, submitted that the revenue authorities erred in computing the disallowance u/s 14A. The basic reliance of the revenue authorities is on section 14A(1) and the case of Godrej & Boyce and the case of Cheminvest.
When we analyse the submissions of the assessee, as reproduced by the CIT(A), we find that the assessee had referred to the wordings used in section 14A(1) which talks about earning of income which does not form part of the total income. The assessee submitted that disallowance could only be computed until and unless the
assessee earns exempt income, which, has been approved by the Hon’ble Bombay High Court in the CIT vs Delite Enterprises. In any case, the revenue authorities have not indicated anywhere, as to how the assessee could have incurred expenditure to
earn the exempt income. Unless the AO comes to a conclusion that for earning the exempt income some expenditure has been incurred, the disallowance cannot be sustained. Section 14A(2) is very specific that the disallowance must go through the books of account. It may also be mentioned that in the case of J K Investors
(Bombay) Ltd. in ITA no. 7858 and 7851/Mum/2011 (where one of us
was a party), it was held, “AO has not examined any expenditure claimed in P&L account so as to relate to exempt income, nor gave a finding that assessee’s claim is not correct for any reason. Rule 8D cannot be invoked directly, without satisfying about the claims or otherwise”. In these circumstances, we are of the considered opinion that
the revenue authorities erred in invoking the provisions of section 14A read with Rule 8D. We, therefore, set aside the orders of the revenue authorities on this issue, and direct the AO to delete the addition made as consequence of disallowance of expenses u/s 14A.
GARWARE WALL ROPES LIMITED (ITA 5408/D/2012) Date 15/1/2014 AY 2009-2010
1.1 The Ld. CIT (Appeals) – 9, Mumbai, erred in confirming an
additional disallowance of Rs. 7,79,654/- u/s 14A r.w. Rule 8D,
ignoring the fact that the appellant has voluntarily disallowed a sum of
Rs. 1,03,915/- as worked out U/R 8D at ½ % of the average value of
investment on which dividend is received.
1.2 The Ld. CIT (A) erred in not considering the fact that
disallowance U/R 8D cane be made on value of investments from where
tax-free dividend income is received and not on the total value of
investments. Therefore the further addition of Rs. 7,79,654/- is not
warranted for.
We find merit and substance in the contention of the
assessee on this point because the investment has been made by the assessee in the
group concern and not in the shares of any un-related party. Therefore, the primary
object of investment is holding controlling stake in the group concern and not earning
any income out of investment. Further the investment were made long back and not
in the year under consideration. Therefore, in view of the fact that the investment are
in the group concern we do not find any reason to believe that the assessee would
have incurred any administrative expenses in holding these investments
In the case in hand it is not the case of the revenue that the assessee has
incurred any direct expenditure or any interest expenditure for earning the exempt
income or keeping the investment in question. If there is expenditure directly or
indirectly incurred in relation to exempt income the same cannot be claimed against
the income which is taxable. For attracting the provisions of section 14A- “there
should be proximate cause for disallowance which has relationship with the tax
exempt income as held by the Hon’ble Supreme Court in case of CIT Vs. Walfort
Share and Stock Brokers P. Ltd. ( 326 ITR 1). Therefore, there should be a proximate
relationship between the expenditure and the income which does not form part of the
total income. In the case in hand the assessee has claimed that no expenditure has
been incurred for earning the exempt income, therefore, it was incumbent on the AO
to find out as to whether the assessee has incurred any expenditure in relation to
income which does not form part of the total income and if so to quantify the
expenditure of disallowance. The AO has not brought on record any fact or material
to show that any expenditure has been incurred on the activity which has resulted into
both taxable and non taxable income. Therefore, in our view when the assessee has prima facie brought out a case that no expenditure has been incurred for earning the
income which does not form part of the total income then in the absence of any
finding that expenditure has been incurred for earning the exempt income the
provisions of section 14A cannot be applied. Accordingly we delete the
addition/disallowance made by AO u/s 14A r.w. Rule 8D.
refer on section 14A/RULE 8d:
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘A’ : NEW DELHI ITA Nos.3463/Del/2011 & 4697/Del/2011
Assessment Years : 2007-08 & 2008-09 M/s ACB (India) Limited 17.01.2014
IN THE INCOME TAX APPELLATE TRIBUNALPUNE BENCHE “B”, PUNE ITA No.1733/PN/2012(Assessment Year : 2008-09) Kalyani Steels Ltd., Date of pronouncement : 30-01-2014
IN THE INCOME TAX APPELLATE TRIBUNAL ‘ C’ BENCH, CHENNAI ITA No. 305/Mds/2013 (Assessment Year: 2009-10) M/s. Allied Investments Housing P.Ltd., Date of Pronouncement : 7th November, 2013
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH “ C ” BENCH, AHMEDABAD I.T.A. No.1650/Ahd/2 Assessment Year : 2009-10 M/s.Corrtech Energy Pvt.Lt d Date of Pronouncement : 31/10/2013
delhi high court in HERO MANAGEMENT SERVICE LIMITED 23/9/2013 order & ii) P&h high court in case of deepak mittal on tight scope of section 14A disallowance order 3/9/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘B', HYDERABAD Shri Popuri Ankineedu 12.2.2014
We have heard both the parties and perused the material on record,
including the paper-book. We have gone through the written submissions and
the case-law relied upon by the parties. We have also gone through paper-book
filed by the assessee. It is an admitted fact that in these cases, regular
assessments have been made under S.143(3) of the Act, making certain
additions. By the impugned assessments under S.143(3) read with S.147 of the
Act, the Assessing Officer held that the assessee had claimed excess
depreciation than the eligible depreciation, and accordingly disallowing the
amounts of excess depreciation claimed made the additions for both the years.
The Assessing Officer also noticed difference in the incomes declared by the
assessee and as reflected in the TDS certificates, and accordingly brought to tax
the differential amount of income, proceeding on the basis of TDS certificates.
It is the case of the assessee that both the additions made as above, have been
made on the basis of very same material, which was already available even at
the time of regular assessment, and it is mere change of opinion that the
assessments completed earlier have been reopened. We find force in this
contention of the assessee. We find that in the present case, there is no new
material that has led to the Assessing Officer to come to the conclusion that there was escapement of income. Following the ratio laid down by the Apex Court in the above cases, it has
been consistently held by various High Courts, including the jurisdictional
High Court in the case of Mahalakshmi Motors Ltd. V/s. DCIT (265 ITR 53)
and the coordinate benches of the Tribunal in similar matters, that when
all the facts have been fully disclosed by the assessee, the notice of re-of
assessment is not valid. In the case of Ranjit Reddy (supra), it has been
held by the coordinate bench of this Tribunal that and unless there is
tangible new material based on which it could be believed there was
escapement of income, issuance of notice under S.148 of the Act is not
valid.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “A” : HYDERABAD ITA.No. 452 & 310/Hyd/2009
Assessment Years 2003-04 & 2005-06 M/s. AP Gas Power Corporation
Ltd. Date of pronouncement : 07.02.2014
We have heard the parties and perused the materials available on record. There is no dispute to the fact that the assessee has incurred the expenditure of
Rs.19,70,990/- for construction of a building to be used as a community hall by the villagers as well as by the employees of the assessee company. The only issue is, whether the
expenditure incurred is to be allowed as a revenue expenditure as claimed by the assessee or is a capital expenditure as held by the Assessing Officer. That besides, as has been rightly held by the CIT(A) social welfare expenditures incurred by a company
helps in improving the working with the native people of the nearby area and it also improves the condition of the area inhabited by its employees and others. Therefore, such social welfare expenditures are to be allowed as business expenditure. In case of CIT V/s. Karnataka Financial Corporation 326 ITR 355, the Hon’ble Karnataka High Court
held that the amount spent by the Corporation towards development of model villages has to be considered as expenditure incurred towards his business promotion and
therefore, allowable as a business expenditure. Therefore, considering the totality of facts and circumstances, we are of the view that the CIT(A) was justified in deleting the addition of Rs.19,70,990/-.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘A', HYDERABAD ITA No. 866/Hyd/2010
Assessment year 2008)09 M/s. S.P. Real Estate
Developers Pvt. Ltd. Date of pronouncement: 12.02.2014
In our opinion, the assessee has recognised the income in
accordance with the true terms of the agreement and if there
is any inconsistency in recognising the income then only
revenue authorities can disturb the same. Once the assessee
recognised the income in accordance with the agreements,
the AO cannot substitute his assessment to say that the assessee
has postponed the tax liability. There is no basic deviation in
the method followed by the assessee regarding recognising of
income. However, the AO was of the opinion that there is
basic flaw in the method followed by the assessee to recognise
the income. When there is no deviation in recognising the
income by the assessee, the AO cannot recompute the profit of the assessee by observing that there is basic flaw in the method
followed by the assessee.
45. In our opinion, income arising out of sale of flats to M/s.
Janapriya Engineers Syndicate in which constructed property
was sold by the assessee, profit on such transaction is to be
assessable not in the year of agreement and it should be
assessable proportionately in the previous years in which the
constructed area was sold by the assessee or constructed flats
were handed over by the assessee to the buyers.
This view of
ours is supported by the following decisions:
(a) R. Gopinath (HUF) vs. ACIT, 133 TTJ (Chennai) 595; (b) B.L. Subbaraya vs. DCIT, 9 SOT 297 (Bang); (c) Bhavesh Estates (India) (P) Ltd. vs. ITO, 1 DTR (Mum) (Trib) 366; (d) M/s. Neon Solutions Pvt. Ltd. vs. ITO in ITA Nos. 5032/Mum/2011 and
6222/Mum/2012 order dated 30.04.2013
In view of the above discussion, we are inclined to hold
that the CIT(A) is justified in deleting the addition made by the
AO as there is no income accrued to the assessee on the basis
of agreement entered by the assessee with M/s. Janapriya
Engineers Syndicate. We do not find any infirmity in the order of
the CIT(A) and the same is confirmed.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH “A”, HYDERABAD ITA No. 1051/Hyd/2013
Assessment Year : 2009-10 Sri Ramesh Veldi
Date of pronouncement 0 6 - 0 2-2014
This is a Revenue appeal against the order of CIT(A)-VI, dated
20/02/2013. Revenue is contesting that in the absence of proper
explanation of the unexplained credits to the tune of Rs. 17,23,600/-,
the CIT(A) ought to have upheld such addition made by AO.
On considering the rival contentions, we do not see any merit in
the ground raised by Revenue. Obviously, all the deposits in the Bank
account have flown from business and verifiable on the basis of books
of account. At the time of assessment, the AO considered the amount
as unexplained as Assessee did not reply. The assessment was
completed u/s 144. Before CIT(A), the details were furnished and a
remand was called for. Since, the facts are verified by the Ld. CIT(A),
we do not see any reason to interfere, as Revenue has not brought
anything on record to differ from the findings. The ground taken by
the Revenue is rejected.
Cit-A order:
Since the incorporation of bank transactions in the
books is established, the sales of the business and entries in
bank accounts gets integrated. Since the cash sales are
more than the cash credits, and
with no anomaly pointed as regard to the cash entries in
cash book and the bank credits, the cash deposits in the
bank account (Rs. 17,23,600/-) stand explained. On these
facts, it can be held that the credits into bank account,
stand established and explained. Accordingly, the addition of
Rs. 34,75,360/-, on account of treating the entire credits into
bank account, as unexplained credits, is not sustainable
since the entries by cheques/bank drafts as well as the cash
entries, into the bank account, at Axis Bank, Warangal, stand
explained.
i) Mumbai bench ITAT section 14A/Rule 8D (controlling interest investment) no disallowance of general expense;
ii) Hyd bench ITAT real estate stock in trade: income recognition when possession handed over/constructed area sold;
iii) Hyd bench ITAT cash credit section 68 vis a vis cash sales books recorded (no addition possible);
iv) Hyd bench ITAT reopening on review of self same material not possible unless new tangible material there;
v) Hyd bench ITAT on community development expenses (CSR expenses)
Bombay high court in CROWN Consultants Pvt. WRIT PETITION NO.2595 OF 2013/14 FEBRUARY 2014
Held
Just as the revenue cannot improve upon its case for
reopening before the Court and but must stand or fall by the reasons
recorded for reopening the assessment, the same test would be
applicable in case of an assessee i.e. it must stand or fall by its
objection to the grounds for reopening of assessment. It is not open to
the assessee to urge fresh objections before the Court which the Assessing Officer had no occasion to deal with, unless of course the
notice to reopen is exfacie
without jurisdiction not requiring
consideration of any argument such as beyond limitation. In view of the
above, we find substance in the submissions on behalf of the revenue
that the Assessing Officer had tangible material to come to prima facie
view that income chargeable to tax has escaped assessment. (The petitioner in its objection has not categorically stated
that the amount of Rs.1,19, 42,900/which
the Assessing Officer calls
an undisclosed loan was in fact margin money and reflected as part of
Schedule 8 to the balance sheet.)
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “E”, MUMBAI ITA No. : 6704/Mum/2012
(Assessment year: 2009-10) Thermolab Sales & Services
Pvt Ltd, 15 -01-2014
The solitary issue pertains to disallowance of Rs. 2,09,804/- u/s
14A. Before us, the AR reiterated the submissions made before the revenue authorities and submitted that the assessee was not in the business of stocks & shares and was holding the investments to gain control on the clients of Korten Pharmaceuticals Pvt. Ltd. Wherein neither there was an intention to earn interest or dividend nor did the
assessee earn any income which was claimed to be exempt. The AR, therefore, submitted that the revenue authorities erred in computing the disallowance u/s 14A. The basic reliance of the revenue authorities is on section 14A(1) and the case of Godrej & Boyce and the case of Cheminvest.
When we analyse the submissions of the assessee, as reproduced by the CIT(A), we find that the assessee had referred to the wordings used in section 14A(1) which talks about earning of income which does not form part of the total income. The assessee submitted that disallowance could only be computed until and unless the
assessee earns exempt income, which, has been approved by the Hon’ble Bombay High Court in the CIT vs Delite Enterprises. In any case, the revenue authorities have not indicated anywhere, as to how the assessee could have incurred expenditure to
earn the exempt income. Unless the AO comes to a conclusion that for earning the exempt income some expenditure has been incurred, the disallowance cannot be sustained. Section 14A(2) is very specific that the disallowance must go through the books of account. It may also be mentioned that in the case of J K Investors
(Bombay) Ltd. in ITA no. 7858 and 7851/Mum/2011 (where one of us
was a party), it was held, “AO has not examined any expenditure claimed in P&L account so as to relate to exempt income, nor gave a finding that assessee’s claim is not correct for any reason. Rule 8D cannot be invoked directly, without satisfying about the claims or otherwise”. In these circumstances, we are of the considered opinion that
the revenue authorities erred in invoking the provisions of section 14A read with Rule 8D. We, therefore, set aside the orders of the revenue authorities on this issue, and direct the AO to delete the addition made as consequence of disallowance of expenses u/s 14A.
GARWARE WALL ROPES LIMITED (ITA 5408/D/2012) Date 15/1/2014 AY 2009-2010
1.1 The Ld. CIT (Appeals) – 9, Mumbai, erred in confirming an
additional disallowance of Rs. 7,79,654/- u/s 14A r.w. Rule 8D,
ignoring the fact that the appellant has voluntarily disallowed a sum of
Rs. 1,03,915/- as worked out U/R 8D at ½ % of the average value of
investment on which dividend is received.
1.2 The Ld. CIT (A) erred in not considering the fact that
disallowance U/R 8D cane be made on value of investments from where
tax-free dividend income is received and not on the total value of
investments. Therefore the further addition of Rs. 7,79,654/- is not
warranted for.
We find merit and substance in the contention of the
assessee on this point because the investment has been made by the assessee in the
group concern and not in the shares of any un-related party. Therefore, the primary
object of investment is holding controlling stake in the group concern and not earning
any income out of investment. Further the investment were made long back and not
in the year under consideration. Therefore, in view of the fact that the investment are
in the group concern we do not find any reason to believe that the assessee would
have incurred any administrative expenses in holding these investments
In the case in hand it is not the case of the revenue that the assessee has
incurred any direct expenditure or any interest expenditure for earning the exempt
income or keeping the investment in question. If there is expenditure directly or
indirectly incurred in relation to exempt income the same cannot be claimed against
the income which is taxable. For attracting the provisions of section 14A- “there
should be proximate cause for disallowance which has relationship with the tax
exempt income as held by the Hon’ble Supreme Court in case of CIT Vs. Walfort
Share and Stock Brokers P. Ltd. ( 326 ITR 1). Therefore, there should be a proximate
relationship between the expenditure and the income which does not form part of the
total income. In the case in hand the assessee has claimed that no expenditure has
been incurred for earning the exempt income, therefore, it was incumbent on the AO
to find out as to whether the assessee has incurred any expenditure in relation to
income which does not form part of the total income and if so to quantify the
expenditure of disallowance. The AO has not brought on record any fact or material
to show that any expenditure has been incurred on the activity which has resulted into
both taxable and non taxable income. Therefore, in our view when the assessee has prima facie brought out a case that no expenditure has been incurred for earning the
income which does not form part of the total income then in the absence of any
finding that expenditure has been incurred for earning the exempt income the
provisions of section 14A cannot be applied. Accordingly we delete the
addition/disallowance made by AO u/s 14A r.w. Rule 8D.
refer on section 14A/RULE 8d:
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘A’ : NEW DELHI ITA Nos.3463/Del/2011 & 4697/Del/2011
Assessment Years : 2007-08 & 2008-09 M/s ACB (India) Limited 17.01.2014
IN THE INCOME TAX APPELLATE TRIBUNALPUNE BENCHE “B”, PUNE ITA No.1733/PN/2012(Assessment Year : 2008-09) Kalyani Steels Ltd., Date of pronouncement : 30-01-2014
IN THE INCOME TAX APPELLATE TRIBUNAL ‘ C’ BENCH, CHENNAI ITA No. 305/Mds/2013 (Assessment Year: 2009-10) M/s. Allied Investments Housing P.Ltd., Date of Pronouncement : 7th November, 2013
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH “ C ” BENCH, AHMEDABAD I.T.A. No.1650/Ahd/2 Assessment Year : 2009-10 M/s.Corrtech Energy Pvt.Lt d Date of Pronouncement : 31/10/2013
delhi high court in HERO MANAGEMENT SERVICE LIMITED 23/9/2013 order & ii) P&h high court in case of deepak mittal on tight scope of section 14A disallowance order 3/9/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘B', HYDERABAD Shri Popuri Ankineedu 12.2.2014
We have heard both the parties and perused the material on record,
including the paper-book. We have gone through the written submissions and
the case-law relied upon by the parties. We have also gone through paper-book
filed by the assessee. It is an admitted fact that in these cases, regular
assessments have been made under S.143(3) of the Act, making certain
additions. By the impugned assessments under S.143(3) read with S.147 of the
Act, the Assessing Officer held that the assessee had claimed excess
depreciation than the eligible depreciation, and accordingly disallowing the
amounts of excess depreciation claimed made the additions for both the years.
The Assessing Officer also noticed difference in the incomes declared by the
assessee and as reflected in the TDS certificates, and accordingly brought to tax
the differential amount of income, proceeding on the basis of TDS certificates.
It is the case of the assessee that both the additions made as above, have been
made on the basis of very same material, which was already available even at
the time of regular assessment, and it is mere change of opinion that the
assessments completed earlier have been reopened. We find force in this
contention of the assessee. We find that in the present case, there is no new
material that has led to the Assessing Officer to come to the conclusion that there was escapement of income. Following the ratio laid down by the Apex Court in the above cases, it has
been consistently held by various High Courts, including the jurisdictional
High Court in the case of Mahalakshmi Motors Ltd. V/s. DCIT (265 ITR 53)
and the coordinate benches of the Tribunal in similar matters, that when
all the facts have been fully disclosed by the assessee, the notice of re-of
assessment is not valid. In the case of Ranjit Reddy (supra), it has been
held by the coordinate bench of this Tribunal that and unless there is
tangible new material based on which it could be believed there was
escapement of income, issuance of notice under S.148 of the Act is not
valid.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “A” : HYDERABAD ITA.No. 452 & 310/Hyd/2009
Assessment Years 2003-04 & 2005-06 M/s. AP Gas Power Corporation
Ltd. Date of pronouncement : 07.02.2014
We have heard the parties and perused the materials available on record. There is no dispute to the fact that the assessee has incurred the expenditure of
Rs.19,70,990/- for construction of a building to be used as a community hall by the villagers as well as by the employees of the assessee company. The only issue is, whether the
expenditure incurred is to be allowed as a revenue expenditure as claimed by the assessee or is a capital expenditure as held by the Assessing Officer. That besides, as has been rightly held by the CIT(A) social welfare expenditures incurred by a company
helps in improving the working with the native people of the nearby area and it also improves the condition of the area inhabited by its employees and others. Therefore, such social welfare expenditures are to be allowed as business expenditure. In case of CIT V/s. Karnataka Financial Corporation 326 ITR 355, the Hon’ble Karnataka High Court
held that the amount spent by the Corporation towards development of model villages has to be considered as expenditure incurred towards his business promotion and
therefore, allowable as a business expenditure. Therefore, considering the totality of facts and circumstances, we are of the view that the CIT(A) was justified in deleting the addition of Rs.19,70,990/-.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘A', HYDERABAD ITA No. 866/Hyd/2010
Assessment year 2008)09 M/s. S.P. Real Estate
Developers Pvt. Ltd. Date of pronouncement: 12.02.2014
In our opinion, the assessee has recognised the income in
accordance with the true terms of the agreement and if there
is any inconsistency in recognising the income then only
revenue authorities can disturb the same. Once the assessee
recognised the income in accordance with the agreements,
the AO cannot substitute his assessment to say that the assessee
has postponed the tax liability. There is no basic deviation in
the method followed by the assessee regarding recognising of
income. However, the AO was of the opinion that there is
basic flaw in the method followed by the assessee to recognise
the income. When there is no deviation in recognising the
income by the assessee, the AO cannot recompute the profit of the assessee by observing that there is basic flaw in the method
followed by the assessee.
45. In our opinion, income arising out of sale of flats to M/s.
Janapriya Engineers Syndicate in which constructed property
was sold by the assessee, profit on such transaction is to be
assessable not in the year of agreement and it should be
assessable proportionately in the previous years in which the
constructed area was sold by the assessee or constructed flats
were handed over by the assessee to the buyers.
This view of
ours is supported by the following decisions:
(a) R. Gopinath (HUF) vs. ACIT, 133 TTJ (Chennai) 595; (b) B.L. Subbaraya vs. DCIT, 9 SOT 297 (Bang); (c) Bhavesh Estates (India) (P) Ltd. vs. ITO, 1 DTR (Mum) (Trib) 366; (d) M/s. Neon Solutions Pvt. Ltd. vs. ITO in ITA Nos. 5032/Mum/2011 and
6222/Mum/2012 order dated 30.04.2013
In view of the above discussion, we are inclined to hold
that the CIT(A) is justified in deleting the addition made by the
AO as there is no income accrued to the assessee on the basis
of agreement entered by the assessee with M/s. Janapriya
Engineers Syndicate. We do not find any infirmity in the order of
the CIT(A) and the same is confirmed.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH “A”, HYDERABAD ITA No. 1051/Hyd/2013
Assessment Year : 2009-10 Sri Ramesh Veldi
Date of pronouncement 0 6 - 0 2-2014
This is a Revenue appeal against the order of CIT(A)-VI, dated
20/02/2013. Revenue is contesting that in the absence of proper
explanation of the unexplained credits to the tune of Rs. 17,23,600/-,
the CIT(A) ought to have upheld such addition made by AO.
On considering the rival contentions, we do not see any merit in
the ground raised by Revenue. Obviously, all the deposits in the Bank
account have flown from business and verifiable on the basis of books
of account. At the time of assessment, the AO considered the amount
as unexplained as Assessee did not reply. The assessment was
completed u/s 144. Before CIT(A), the details were furnished and a
remand was called for. Since, the facts are verified by the Ld. CIT(A),
we do not see any reason to interfere, as Revenue has not brought
anything on record to differ from the findings. The ground taken by
the Revenue is rejected.
Cit-A order:
Since the incorporation of bank transactions in the
books is established, the sales of the business and entries in
bank accounts gets integrated. Since the cash sales are
more than the cash credits, and
with no anomaly pointed as regard to the cash entries in
cash book and the bank credits, the cash deposits in the
bank account (Rs. 17,23,600/-) stand explained. On these
facts, it can be held that the credits into bank account,
stand established and explained. Accordingly, the addition of
Rs. 34,75,360/-, on account of treating the entire credits into
bank account, as unexplained credits, is not sustainable
since the entries by cheques/bank drafts as well as the cash
entries, into the bank account, at Axis Bank, Warangal, stand
explained.
