2012 (2) TMI 686 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of Rs. 26,09,350/- as cash payment for Pratiksha Building.
2. Existence of cash payment of Rs. 26,09,350/- for Pratiksha Project.
3. Deletion of disallowance of Rs. 24,15,160/- made u/s 40A(3).
4. Disallowance as undisclosed income within the definition of Sec. 158B.
5. Disallowance u/s 40A(3) in block assessment outside the ambit of Chapter XIV-B.
6. Deletion of addition of Rs. 3,99,763/- for sale of Flat No. 10 in Pratiksha and Pranav Apartments.

Summary:

Ground Nos. 1 & 2:
The revenue questioned the deduction of Rs. 26,09,350/- as cash payment made to Shri Narendra Thakkar for Pratiksha Building. The assessee firm, engaged in the business of builders, was subjected to a search operation u/s 132, and certain documents were seized. The assessee claimed that cash payments were made to Shri Narendra Thakkar as on-money consideration for plot No. 33. The CIT(A) allowed the deduction, holding that the payments were evident from the seized documents. The Tribunal upheld the CIT(A)'s decision, stating that the nexus of transactions between the assessee and Shri Jitendra M. Thakker and his brother Shri Narendra M. Thakker was established, and the payments were evident from the seized documents. Thus, the grounds were rejected.

Ground Nos. 3 to 5:
The AO disallowed 20% of cash payments exceeding Rs. 20,000/- u/s 40A(3), amounting to Rs. 24,15,160/-, on the basis that the cash expenses would not have been revealed but for the search action. The CIT(A) deleted the disallowance, following the decision of the Nagpur Bench of the Tribunal in the case of Sadhuram Wadhwani, which held that disallowance u/s 40A(3) in block assessment was outside the ambit of Chapter XIV-B. The Tribunal upheld the CIT(A)'s decision, noting that different High Courts had expressed different views on the issue, and in the absence of a binding decision from the jurisdictional High Court, the view favorable to the assessee was adopted. Thus, the grounds were rejected.

Ground No. 6:
The AO estimated Rs. 3,99,763/- as on-money receipt for two flats sold by the assessee. The CIT(A) deleted the addition, stating that no addition could be made on estimation without support of any seized material. The Tribunal concurred with the CIT(A), noting that the assessee had recorded all transactions of on-money receipts in the seized records, and there was no reason for the assessee not to record on-money receipts for the two flats if it had actually received the same. The Tribunal upheld the CIT(A)'s decision, stating that the addition based on presumption and surmises was not in conformity with the provisions of Sec. 158BB. Thus, the ground was rejected.

Conclusion:
The appeal was dismissed, and the order was pronounced in the open Court on 13th February 2012.