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2016 (12) TMI 1013 - AT - Income TaxIncome accrual - Addition of commission as an advance in AY. 2003-04 but offered to tax in AY. 2008-09 - Held that:- The Hon'ble Supreme Court in the above case of CIT Vs. Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] has held that ‘it is well settled that income tax cannot be levied on hypothetical income. Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount only, then can it be said that for the purpose of taxability that the income is not hypothetical and it has really accrued to the assessee’. Keeping the principles in mind, we are of the opinion that the advance receipt of commission cannot be brought to tax in AY. 2003-04 and assessee has correctly accounted for the same in AY. 2008-09. In view of that, AO is directed to delete the said addition made in this assessment year. The grounds raised by assessee on this issue are accordingly allowed. In case, AO gave relief in AY 2008-09 consequent to Ld.CIT(A) order the same can be modified. Partial confirmation of election expenditure - Held that:- CIT(A) has accepted only the amounts pertaining to Sri Teju Maaraju, Sri Rana Pratapu Maaraju and Sri Sukhender Reddy, whereas Sri Muralidhar Reddy, Shri Yadi Reddy and Raghuveer Singh also have contributed to an extent of ₹ 24 Lakhs. Accordingly, no amount could be brought to tax in the hands of assessee. Moreover, assessee has admitted an amount of ₹ 9 Lakhs in his cash flow statements which the AO has not given credit. Even if the amount of ₹ 19 Lakhs is to be considered as expenditure spent by assessee towards election, the amount of ₹ 9 Lakhs which he himself has admitted should have been given credit. That leaves us with a balance of ₹ 10 Lakhs for which the entries in the diary itself shown that he has received more than ₹ 24 Lakhs from others. In view of this, we are of the opinion that no amount can be brought to tax in the hands of assessee. In view of that, grounds raised by assessee are allowed. AO is directed to delete the amount of ₹ 19 Lakhs as the same was received from others as noted in the diary. Unexplained investment in the house - Held that:- Bringing the entire amount to tax in this assessment year per se is not correct. Moreover, the building was constructed in the village and assessee being Sarpanch of the village could have invested less, so his claim for rebate not only on the rates for valuation adopted by the CPWD but also on the personal supervision are appropriate. We are unable to understand, why Ld.CIT(A) restricted the rebate for the rates adopted by the CPWD to 5% when ITAT in various cases was allowing 15% rebate. Following the Co-ordinate Bench decision, we direct the AO to reduce the valuation by 15% from the CPWD rates and by 10% for the personal supervision already granted by the CIT(A). Thereafter, only proportionate investment pertains to this year should be considered as ‘unexplained’. To that extent, the addition is sustained. Assessee gets relief partially on the grounds. AO is directed to re-work out the unexplained investment accordingly. With these directions, the grounds in this appeal are partly allowed.
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