ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 13(1), CHENNAI vs. S.MAINRAJ, CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-14, Chennai, dated 14.06.2017 and pertains to assessment year 2013-14.

Ms. S. Vijayaprabha, the Ld. Departmental Representative, submitted that the Assessing Officer made an addition of ₹58,08,352/- towards suppression of sale. The CIT(Appeals) without any material available on record deleted the addition made by the Assessing Officer. According to the Ld. D.R., as per the sale deeds, the total sale during the year under consideration comes to ₹2,26,43,128/-. However, the assessee disclosed only ₹1,68,34,776/-. Therefore, according to the Ld. D.R., the difference of ₹58,08,352/- was added as suppression of sales. The CIT(Appeals), however, deleted the addition made by the Assessing Officer on the ground that the amount received by the assessee is advance. According to the Ld. D.R., the assessee was following mercantile system of accounting, therefore, even the advance received by the assessee has to be construed as income of the assessee.

On the contrary, Shri K. Doraisamy, the Ld. senior counsel for the assessee, submitted that the assessee being an individual, is following cash system of accounting. The Assessing Officer totally went on wrong presumption that the assessee was following mercantile system of accounting. During the year under consideration, according to the Ld. senior counsel, the assessee received ₹58,08,352/- as advance for sale of plot, which was duly disclosed by the assessee. The Assessing Officer misconstrued the method of accounting followed by the assessee and taken the advance received as income of the assessee. According to the senior counsel, the advance received by the assessee cannot be construed as income, therefore, the CIT(Appeals) has rightly deleted the addition.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee being an individual, has choice of following any method. Under Section 4 and 5 of the Income-tax Act, 1961 (in short 'the Act'), the income received or accrued to the assessee has to be assessed. All receipts cannot accrue to the assessee. When the assessee received advance of ₹58,08,352/- for sale of plots, the right to receive the money accrues to the assessee only on the date of sale. There may be instances where the agreement to sell the plot may be cancelled and the assessee may require to refund the advance so received. Therefore, irrespective of the method of accounting followed by the assessee, the right to receive the money may not accrue to the assessee when the amount was received as advance for sale of plot. In those circumstances, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that there was no suppression of sale and the amount of ₹58,08,352/- does not accrue to the assessee. therefore, the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

In the result, the appeal filed by the Revenue stands dismissed.