TaxTMI 
TaxTMI 
2008 (10) TMI 300
X X X X Extracts X X X X
X X X X Extracts X X X X
....oticed that during the course of search operation a note book showing details of shops/flats marked as Annexure A/2 was seized. This note book contained details of shop/flat numbers, its area and its dimensions, its members, name and address of the persons who had booked the flats. In another seized record marked as Annexure A/3 named "Mehta Delux Collection Book" details of amount received from sale of shop/flat have been entered. The actual cost of the shop/flat and payments received on difference dates are mentioned. At the left hand bottom of the page of this ledger, the figures of "on-money" received are written in coded form. On the basis of the above documents/ diary it was held by the Assessing Officer that the assessee is selling the shops taking on money at the rate of Rs. 800 per sq. ft. whereas the assessee is accounting for Rs. 400 per sq. ft. in the books of account. Accordingly, after further verification of the Annexure, it was concluded by the Assessing Officer that the actual cost comes to Rs. 1,05,58,800 whereas the assessee has shown this amount at Rs. 42,69,751. Thus, the difference amount not accounted comes to Rs. 62,89,049. The Assessing Officer on the basis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(A) the appellant submitted that the affidavits of some of the members produced before the Assessing Officer clearly indicate that the sum paid by them by way of cheques and cash tallies with the cash book i.e., Annexure A/3. The Assessing Officer, therefore, overlooked such a good piece of evidence and seized materials. 4. The CIT(A) after considering the submissions of the assessee deleted the addition by observing to quote as under: "3.5 I have carefully gone through the observation of the Assessing Officer as well as the copies of the relevant seized documents and the arguments of the appellant. I am of the opinion that the Assessing Officer has found out a formula on the basis of which he made the addition by ignoring the actual seized materials during the course of search. In para 5.2 of the assessment order, he has mentioned this fact by stating that "this according to the formula employed by the assessee the cash receipts would be twice the cheques receipts and they constitute the on-money receipt towards this sale". In my opinion there is no need of following any formula when the actual unaccounted books are available and seized. Annexure A/3 is the most important ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the assessee was receiving premium/on-money on booking of flats belonging to third parties, entire receipts of on-money/premium cannot be treated as undisclosed income of the appellant only net profit rate can be applied on unaccounted sales/receipts for making addition. In this case, the Hon'ble Members have discussed a case where they decided that the net profit rate of earlier year should be applied for this purpose. The net percentage in this case comes to 19 per cent. Whereas in the instant case, the appellant has shown 32 per cent which is quite high. 3.9 After careful consideration of the argument of the appellant and perusal of the case laws cited by him I am of the opinion that the Assessing Officer was not justified in making any addition and the result shown by the appellant are very reasonable in these type of businesses and the same has been shown on the basis of the seized materials found at the time of search. In view of the foregoing discussion, the addition made by the Assessing Officer is deleted." 5. The learned DR supported the order of the Assessing Officer and submitted that details of on-money accepted by the assessee for Rs. 11.50 lakhs should hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ur considered opinion the CIT(A) was not justified in directing the Assessing Officer to accept the income at 32 per cent of the aforesaid amount as disclosed by the assessee in the block return. Hence, we modify the order of the CIT(A) and direct the Assessing Officer to take the entire amount of Rs. 11.50 lakhs as the income of the assessee from on-money. Thus, the ground of appeal of the revenue is allowed as above. 8. In the result, the appeal of the revenue is partly allowed as above. Per I.S. Verma, Judicial Member.-I have gone through the draft order proposed by the ld. Brother Shri N.S. Saini, Accountant Member, wherein he has proposed the confirmation of an addition of Rs. 11.50 lakhs accepting the assessee's version that the total on-money received by the assessee during the block period was only Rs. 11.50 lakhs and has rejected the plea that taxable income, out of 'on-money' of Rs. 11.5 lakhs, was only Rs. 3,60,000 [as accepted by the CIT (Appeals)], but as explained hereinafter, I have not been able to persuade myself to agree with the ld. AM and, therefore, proceed to pass a separate order. 2. The brief facts as have been revealed from the records and are rele....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is concerned it was recorded in the books of account at the rate of Rs. 400 per Sq. yds. The payments received over and above the said rate (on-money) had been utilized for majority unaccounted expenses incurred." 4.1 The Assessing Officer, therefore, computed the 'on-money' at Rs. 55,63,200 and the relevant calculation appearing at page No. 5 of the assessment order, which are in the following terms:- ----------------------------------------------------------------- "1. Total No. of shops 52 ----------------------------------------------------------------- 2. Total area of shops 9035 sq. ft. ----------------------------------------------------------------- 3. Total sale consideration of Rs. 1,05,58,800 the 52 shops (as per Ann. A-3) ----------------------------------------------------------------- 4. Quantum of on-money in total 1,05,58,800X2/3 Rs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on by a cryptic and non-speaking order, which reads as under:- "3.9 After careful consideration of the argument of the appellant and perusal of the case laws cited by him I am of the opinion that the Assessing Officer was not justified in making any addition and the result shown by the appellant are very reasonable in these type of businesses and the same has been shown on the basis of the seized materials found at the time of search. In view of the foregoing discussion, the addition made by the Assessing Officer is deleted." 6. Revenue is aggrieved with the order of the CIT (Appeals). 7. At the time of hearing, the ld. DR objected to the order of the CIT (Appeals) deleting the addition of Rs. 52,03,200 by submitting that the Assessing Officer having computed the 'on-money' on the basis of assessee's acceptance with regard to the quantum of 'on-money', it was not justified on the part of the CIT (Appeals) to accept the assessee's plea that gross 'on-money' was only Rs. 11,50,000 and, consequently, the undisclosed income was at Rs. 3,60,000. Alternatively, the ld. DR has submitted that, in case, the gross 'on-money' is found to be at Rs. 11,50,000, then the Tribunal should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the matter, which relates as to whether the whole of the 'on-money' should be considered as undisclosed income or not, I am of the opinion that since the issue relating to gross 'on-money' itself is being remanded back to the file of the CIT (Appeals), this issue should also be remanded back to the CIT (Appeals) for fresh determination in accordance with law, after allowing the assessee an opportunity of being heard. 14. As a result, the issue relating to assessee's undisclosed income on account of 'on-money' received on sale of shops, etc., is being restored back to the file of CIT (Appeals) for fresh disposal in accordance with, after allowing the assessee an opportunity of being heard with the directions as hereinbefore. 15. In the result, the revenue's appeal is treated as allowed for statistical purposes. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is a difference of opinion between the Judicial Member and the Accountant Member with respect to outcome of revenue's appeal under reference, the matter is being referred to the Hon'ble President of ITAT with a request that following questions may be referred to a Third Member or pass such order as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the revenue's appeal is as under:- "The Ld. CIT(A) erred in law and on facts in granting relief of Rs. 52,03,200 on account of 'on-money' receipts on total sale consideration." 4. Before I proceed to resolve on the point of difference, I would like to mention that vis-a-vis the facts of the case, there is no difference of opinion between the learned Members constituting the Division Bench, but for brevity and summarization, it becomes necessary on my part to mention brief facts as available from the material on record. 5. Brief facts of the case are that assessee-firm consists of seven partners engaged in the business of construction and development of housing project and shops in Ranip area, Ahmedabad since December, 1998. A search action was conducted on 28-6-2000 at the business premises and residential premises of partners of the group called "Super Marble Group". After conclusion of the search, block assessment proceedings were initiated as per the provisions of Chapter XIV-B of the Income-tax Act, 1961. A notice under section 158BC of the Act was issued on 6-11-2001. In response to the notice, assessee filed the return of income for the block period on 7-2-2002....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness. This being the fact, 'on-money' could hardly be Rs. 11.5 lakhs (approx) only so there is no any question of difference of Rs. 62.94 lakhs and odd. Further it was clarified that description shown in the seized item No. 'A/2' was nothing but the total area of shops and the rate of Rs. 1,200 fixed at the time of initial booking, hence, the figures shown in the said seized item are not pertaining to actual collections from the respective shops members. Thus, the difference as pointed out is not difference of accounted collections and unaccounted collections. It was further stated during the course of recording of statement that rate of shop was fixed at the rate of Rs. 1,200 per sq. ft. at the initial stage, but due to trade depression it was recorded in the books at the rate of Rs. 400 per sq. yard. The payments received over and above utilized for mainly for unaccounted expenses. On further query, assessee also furnished details of collection from the persons have purchased shops. 8. The Assessing Officer did not accept the contentions of the assessee and held that the assessee failed to substantiate his submissions with any evidences. Annexure 'A/3' was explicit document wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hops where already entire receipt have been shown in the books (shop Nos. 14, 22, 33, 35, 38, 39) On-money element estimated on the Total sales consideration shown @ 1200 10,08,800X2/3 x 6,72,000 ----------------------------------------------------------------- Net undisclosed on money Rs. 55,63,200 ----------------------------------------------------------------- 9. Aggrieved by this addition made by the Assessing Officer, the assessee went in first appeal before the CIT(A) who restricted the addition by following findings and observations: "3.5 I have carefully gone through the observation of the Assessing Officer as well as copies of the relevant seized materials and the arguments of the appellant. I am of the opinion that the Assessing Officer has found out a formula on the basis of which he made the addition by igno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons of section 44AB and comparable cases. 3.8 In this connection, the appellant had relied on the order of Hon'ble ITAT Ahmedabad Bench in the case of Abhishek Corporation v. Dy. CIT [1999] 63 TTJ (Ahd.) 651. In this case, the Hon'ble Members have decided that "the entire premium charged by the assessee cannot be treated as undisclosed income for the block period". The Hon'ble Members have concluded that even though it is established from the seized documents that the assessee was receiving premium/on-money on booking of lasts belonging to third parties, entire receipts of on-money/premium cannot be treated as undisclosed income of the assessee only net profit rate can be applied on unaccounted sales/receipts for making addition. In this case, the Hon'ble Members have discussed a case where they decided that the net profit rate of earlier year should be applied for this purpose. The net percentage in this case comes to 19 per cent whereas in the instant case, the appellant has shown 32 per cent which is quite high. 3.9 After careful consideration of the argument of the appellant and perusal of the case law cited by him, I am of the opinion that the Assessing Officer was not j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f NA/NOC, plan, procedure. etc., without any material. The CIT(A) also could not cite any comparable case facts of which were similar to the facts of the instant case. In view of the above facts and circumstances of the case as there was no evidence or material to show that any expenditure was incurred out of the on-money of Rs. 11.50 lakhs received by the assessee, in our considered opinion the CIT(A) was not justified in directing the Assessing Officer to accept the income at 32 per cent of the aforesaid amount as disclosed by the assessee in the block return. Hence, we modify the order of the CIT(A) and direct the Assessing Officer to take the entire amount of Rs. 11.50 lakhs as the income of the assessee from on-money. Thus, the ground of appeal of the revenue is allowed above." 11. The learned JM however, did not subscribe to the view expressed by the learned AM. The learned JM is of the view that there two issues which are to be considered by the Tribunal, viz., (i) What was the gross 'on-money' received by the assessee during the block period and (ii) what should be the assessee's undisclosed income out of such 'on-money' received by it for the block period? After discuss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndisclosed income or not, I am of the opinion that since the issue relating to gross 'on-money' itself is being remanded back to the file of the CIT(A), this issue should also be remanded back to the CIT(A) for fresh determination in accordance with law, after allowing the assessee an opportunity of being heard: 12. Before me the both the parties reiterated the arguments advanced before the tax authorities and subsequently before the Division Bench. The issue before me is restricted to determine whether quantum of gross 'on-money' and net 'on-money' should be remanded back to the file CIT(A) for fresh consideration or net 'on-money' should be accepted as gross 'on-money' as per the seized documents 'A/2 and A/3' in the absence of any evidence of incurring of such expenses. 13. In this regard learned AR contended that the undisclosed income must be ascertained on the basis of seized materials and books. The transactions disclosed in regular bank account/books must be deducted from the gross amount as per provisions of section 158BB of the Income-tax Act. It is further contended that assessee collected a small portion of on-money for incurring some unaccounted construction expe....