RAMARAJ VARMA JOINT VENTURES, ,VISAKHAPATNAM vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1), , VISAKHAPATNAM

All the grounds of appeal are related to the addition of Rs.13,06,104/- relating to the disallowance of lay out development expenditure. The assessee is an AOP engaged in the business of development of residential layouts, filed its return of income admitting total income of 88,30,120/- on 25.09.2015. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’) by an order dated 23.10.2017 on total income of Rs.1,01,36,224/-. The Assessing Officer (AO) made the addition of Rs.13,06,104/- relating to lay out development expenses. According to the AO, the assessee debited a sum of Rs.59,81,390/- on account of lay out development expenses and the TDS was deducted on the amount of Rs.46,75,286/- and the remaining balance of Rs.13,06,104/- was booked as a provision for damages incurred due to the cyclone HudHud during the year. Since the assessee did not make the disallowance of the said expenditure for non deduction of tax at source, the AO made the addition stating that the assessee had given consent for addition of Rs.13,06,104/-.

Against the order of the Ld.CIT(A), the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that there was a mistake on the part of the AO in observing that the assessee had given consent for the addition. The Ld.AR further submitted that the assessee did not accept the addition at any stage of assessment and the Ld.AR of the assessee also has not given consent for addition. The AO passed the order under the mistaken impression that the assessee had given consent for addition. The Ld.AR also filed an affidavit from the authorized representative who appeared before the AO for assessment, stating that he has not accepted the addition during the assessment proceedings. Therefore, the Ld.AR argued that since there was no consent for the addition from the authorized representative of the assessee and the Ld.CIT(A) proceeded on the premise that the assessee had given consent for the addition, the issue needs to be referred back to the AO to examine the disallowance and to adjudicate the issue afresh on merits.

We have heard both the parties and perused the material placed on record. In the instant case, the AO made the addition on the premise that the AR of the assessee had given consent for making the addition. However, the Ld.AR filed an affidavit stating that he has not given consent for making the addition. Therefore, there was an error in the order of the AO with regard to the consent of the AR of the assessee for disallowance of expenditure. The Ld.CIT(A) also confirmed the addition on assumption that the Ld.AR of the assessee gave consent for addition. Due to the misunderstanding of the AO addition was made without the detailed verification of the expenses claimed. Hence, this issue needs to be examined in detail and decide the outcome. facts. Therefore, we set aside the orders of the lower authorities and remit the matter back to the file of the AO for denovo consideration of the entire issue. The AO is directed to examine the issue in detail and decide the issue afresh on merits. It is needless to say that the AO required to give sufficient opportunity to the assessee. Accordingly, the appeal of the assessee is allowed for statistical purpose.

In the result, appeal of the assessee is allowed for statistical purposes and the stay application of the assessee is dismissed.