COMMISSIONER OF INCOME TAX (CENTRAL) SURAT vs. HAPPY HOME CORPORATION

TAXAP/465/2018HC GujaratGJHC24024937201809 May 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no error in the view of the Tribunal. The Tribunal had accepted the assessee's contention that since the firm followed the Project Completion Method of accounting, the income would be subjected to tax upon completion of sale, even if the amount was received earlier. The Court noted that the partner's statement, while admitting the sum as undisclosed income for the current year, contained a crucial clarification that it would be subject to the execution of sale deeds. The Revenue did not dispute the Project Completion Method or the fact that the income was offered in later years upon execution of sale deeds. Therefore, the deletion of the addition by the CIT(A) and confirmed by the Tribunal was upheld.

What were the facts?

The assessee, Happy Home Corporation, engaged in the construction business, was subjected to a survey under Section 133A of the Income Tax Act, 1961, on October 18, 2010. During the survey, incriminating documents were impounded, and the partner, Shri Mukesh Patel, stated that the firm had received Rs. 26,05,00,000 which was undisclosed income for the current year, subject to the registration of sale deeds. The Assessing Officer added this entire amount to the assessee's income for the assessment year. The Commissioner of Income Tax (Appeals) deleted the addition, a decision confirmed by the Income Tax Appellate Tribunal. The Revenue has appealed this decision to the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in confirming the deletion of the addition made by the Assessing Officer on account of undisclosed income to the tune of Rs. 26,05,00,000 disclosed during the course of survey under Section 133A of the Income Tax Act, 1961? Assessee's Contention: The assessee contended that it follows the Project Completion Method of accounting, and income is offered to tax upon registration of final sale deeds. The partner's statement, while admitting the amount as undisclosed income, was qualified by the condition of sale deed registration. The assessee offered only Rs. 1 crore during the year under consideration and subsequently offered the remaining income in later years as sale deeds were executed. Revenue's Contention: The Revenue's sole objection was to the assessee's stand, arguing that the partner's statement in which he admitted the entire amount as income of the current year should be binding. The Revenue did not object to the Project Completion Method of accounting or the fact that the income was offered in later years.

Which sections of the Income-tax Act were involved?

Section 133A

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Cause title — parties, addresses and appearances
C/TAXAP/465/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 465 of 2018 ========================================================== COMMISSIONER OF INCOME TAX (CENTRAL) SURAT Versus HAPPY HOME CORPORATION ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 09/05/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   01.06.2017 raising following question for our consideration: “Whether on the facts and the circumstances of   the   case   and   in   law,   the   Appellate Tribunal   was   justified   in   confirming   the findings   of   the   CIT(A)   in   respect   of deleting the addition made by the Assessing Officer on account of undisclosed income to the   tune   of   Rs.26,05,00,000/­   disclosed during the

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