AO held correct in not allowing surrendered amt. as project cost, ITAT

Facts in Brief:

1. Assessee was engaged in developing a residential project during the year.

2. Survey under section 133A (of Income Tax Act, 1961) was carried out at its premises.

3. During the course of survey, certain incriminating documents were found and the assessee surrendered an amount of Rs.5,12,00,000/- at the time of survey.

4. The assessee disclosed the same in its return of income.

5. However, the assessee showed this amount of Rs.5,12,00,000/- as its project cost.

6. Assessing Officer reduced this amount from the total project cost shown by the assessee.

7. On appeal, CIT(A) viewed, surrendered amount can be treated as part of project cost only if the amount has been utilized towards purchase of material/land for the project or expenditure incurred for the project.

8. Since the assessee had not explained so, the action of the Assessing Officer was confirmed by the learned CIT (Appeals).

On appeal ITAT held,

9. we do not find any infirmity in the order of the learned CIT (Appeals), since the undisputed facts of the case are that the additional income of Rs.5,12,00,000/- was surrendered during the course of survey as the surrender was made on the basis of certain documents found during the course of survey. These documents are referred to as Annexure A-I, A-II, A- III, A-V, A-8, A-9 and A-12 in the order of the learned CIT (Appeals).

10. This fact has not been controverted even at the time of hearing before us. Even in the surrender letter filed by the assessee itself, it is mentioned that few documents and papers are not readily explainable. Section 292C (of Income Tax Act, 1961) is quite clear that in case of any document found during the course of survey, the presumption is against the assessee to consider that the document is owned by the assessee.

11. Though the presumption is a rebuttable one, but in the present case, nowhere at any stage the assessee had even tried to rebut the same. So far, the assessee is right in adding the said amount in its return of income. However, adding the said amount in its project cost will amount to taking the fact of surrendering the income to an unreal extent.

12. The amount is considered to be of the nature of unexplained expenditure, the expenditure which were not recorded in the books of accounts, once the amount expanded were out of an undisclosed income of the assessee, the assessee after surrendering the same cannot ask for increase in project cost by this amount.

13. The contention of the learned D.R. that by adding the surrendered income in the project cost on the one hand and paying taxes on such income on the other hand, would amount to nullifying the effect of surrender, as the assessee will take benefit of the same in succeeding year, is correct. In view of the above, the action of the Assessing Officer in not allowing the surrendered amount to be considered as project cost is found to be correct.

14. In the result, the appeal of the assessee is dismissed.