TaxTMI 
TaxTMI 
2013 (5) TMI 301
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....e IT Act, using such statement in the assessment proceedings is bad in law. 4. The learned CIT(A) ought to have held that if the statement recorded which has become basis for assessing the income, which by itself is against Board Circular, is kept aside, the assessing officer has no other material/ incriminating material at his disposal warranting to disturb the returned income. 5. The learned CIT(A) and as well as the learned Assessing Officer failed to consider and examine the claim of expenditure as recorded in books of account in the right perspective, instead, simply brushed aside the explanations, only to see that the alleged profit admitted in the statement recorded during survey is sustained. 6. For these and other reasons that are to be urged at the time of hearing of the case, the assessee prays that the order passed by the Assessing Officer and confirmed by learned CIT(A) is against the facts of the case and provisions of law which is to be quashed in the interest of justice. 3. Brief facts of the case are that the assessee is engaged in the business of developing and selling of lands. A survey under sec. 133A of the Act had been conducted in the business pre....
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....sidered only up to the date of survey. The assessee submitted that some other expenses pertaining to the period were not considered and no provision was created for expenses like salaries, administrative expenses, general expenses, commission on sale, etc., to be incurred up to the end of the financial year. 8. The learned AR submitted that the expenditure had been claimed in the P & L account in line with the provisions of the Act only, as the same was incurred during the relevant previous year itself. It is contended that all of such expenditure may be allowed, as claimed in view of the generally accepted accounting principles and may not be allocated amongst the total area available for sale. 9. The learned AR submitted that on a consideration of facts, the Assessing Officer noted that the profit rate of Rs. 1853/- per sq. yard had been determined after taking into consideration, the cost of acquisition and all overheads, incidentals to sales. He, therefore, opined that no further expenditure was to be allowed there from. Besides, he observed that such determination of profit had been accepted by the assessee also at the time of survey. Accordingly, he concluded that the i....
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....f Rs. 3146.95 during the survey, all the costs, including selling and administrative costs had been apportioned over entire area of 60,742 sq. yards as under:- S. No. Name of the head Cost for the venture (Rs.) Cost per sq. yard (Rs.) 1. Cost of the purchase 10,93,35,600 1,800.00 2. Development cost payable to contractor 4,61,45,550 760.00 3. Cost of settlement 1,50,00,000 246.95 4. Marketing cost 1,21,48,400 200.00 5. Administrative cost 85,00,000 140.00 Total 19,11,29,550 3,146.95 12. The AR explained that since the sale price per sq. yard had been admitted by the assessee company at Rs. 5000/-, the difference between sale price and the above cost, being Rs. 1853/- per sq. yard was held to be profit per sq. yard and the same was accepted by the department. 13. The AR submitted that the assessee had purchased 60,748/- sq. yards of plotted area @ Rs. 1800/- per sq. yard and, therefore, the purchase cost was Rs. 10,93,35,600/-. As per the agreement entered into with the landlords, the assessee had to undertake development of entire area of 1,67,802 sq. yards for which the assessee had gi....
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.... of Rs. 3,68,19,684/- has been arrived at after applying the rate of Rs. 1800/- only for 20,455 sq. yards. The AR submitted that as against the development costs accepted at Rs. 4,61,35,550/- for 60,742 sq. yards during the survey, the actual development cost incurred for 20,455 sq. yards came to Rs. 1,64,43,712/-, as apart from the development costs of Rs. 760/- per sq. yard paid to M/s. Somasila Infrastructure, the assessee had also incurred additional cost of Rs. 8,97,912/-. 16. The AR contended that besides the settlement compensation of Rs. 1.5 crores paid to M/s. AMR Constructions Ltd., mentioned above, details whereof were submitted during the survey proceedings, the assessee also incurred additional compensation of Rs. 1 crore, which was paid to 16 parties. He contended that the assessee had further plans of investment in land and had accordingly entered into agreements for further purchases. Few advances had also been given in order to freeze the deals. However, due to Telangana issue and sudden fall in the real estate sector, land prices went down drastically. Therefore, the assessee had no choice but to renegotiate the prices with the vendors. However, as the agreemen....
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....er consideration. He also relied on the judgement of Supreme court in the case of CIT vs. S. Khader Khan Son (79 DTR 184) wherein the Supreme court granted leave in Civil Appeal No. 6747 of 2012 dated 20th September, 2012. The AR further submitted that as per the judgement of Supreme Court section 133A does not empower any IT authority to examine any person on oath and, therefore, any admission made in a statement recorded during the survey cannot by itself be made the basis for addition. 19. The AR relied on the judgement of Delhi High Court in the case of CIT vs. Citi Financiqal Consumer Fin. Ltd. (335 ITR 29) wherein it was observed that the entire expenditure of publicity and advertisement incurred by the assessee is allowable in the year in which it was incurred, there was no advantage which has accrued to the assessee in the capital field and there is no concept of deferred expenditure in the IT Act and the expenditure has to be allowed if a test laid down in section 37 is fulfilled. 20. The learned AR relied on the judgement of Supreme Court in the case of Pullangode Rubber & Produce Company Ltd v. Stte of Kerala (91 ITR 18) wherein the Apex Court held that "An admissi....
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....e net profit rate of 1853/- per sq. yard was admitted during the survey in a hurry and that it was only an estimation. However, it is clear that the assessee had admitted the profit of Rs. 1853/- per sq. yard after considering not only the cost of acquisition and other overheads but even other incidentals to sales. Neither during the assessment proceedings, nor in the course of appellate proceedings, the assessee has been able to explain and establish as to which expenses were not considered for admitting the above profit. On the other hand, it is seen that the survey was conducted on the last day of the month of February, 2008. Accordingly, it is clear that majority of the expenses already stood incurred by the said date, and therefore, the assessee indeed had a correct estimate of the profits made during the year, which it admitted at Rs. 1853/- per sq. yard. 25. The DR submitted regarding the cost of purchase that it is not in dispute that the same was Rs. 3,68,19,684/- for 20,455 sq. yards. Likewise, there is no dispute respect of the development cost payable to the contractor of Rs .1,64,43,712/- As regards the cost of settlement of Rs. 1,50,00,000/-, the same has already b....
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....d both the parties and perused the material on record. There was a survey in the case of the assessee on 28.2.2008. During the course of survey the assessee admitted profit of Rs. 1853 per sq. yard. However, the assessee offered income at Rs. 757 per sq. yard in the return of income. The assessee pleaded before the lower authorities that the offer of income at Rs. 1853 per sq. yard during the course of was at higher side and there was no proper quantification of income and the income was offered in a hurried manner and there were no provisions for certain expenditures like salary, administrative expenses, general expenses, commission on sale and the expenditures were provided in the final accounts and the same were claimed. But the facts brought on record suggest that on the date of survey on 28.2.2008 the assessee's profit was Rs. 1853 per sq. yard. However, within a month's time the assessee booked expenditure and reduced the same to Rs. 757 per sq. yard which was very low as compared to the offer of the assessee. On examination of books of account the Assessing Officer was of the opinion that the assessee has inflated the expenditures. Being so, he was forced to reject the books....
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....e present case the facts brought on record show that the assessee is not keeping books of account to show correct income. In such circumstances, the lower authorities have no alternative to stick to the income declared by the assessee. The learned AR made a plea that the statement recorded during the course of survey or admission in the course of the survey cannot be considered as basis for addition. In our opinion, there is provision for making use of the material collected during the course of survey. The Supreme Court in the case of Pooranmal vs. DIT(E) (93 ITR 505) held that material obtained in search made in contravention of the provisions can be used for assessment. Being so, the Assessing Officer can use the material collected during the course of survey for making assessment. Further in the case of Dr. Pratap Singh vs. Director of Investigation (155 ITR 166) (SC) it was held that illegality of search does not vitiate the evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence brought is to be cautious and circumspect in dealing with such material or evidence. Considering the judgement of ....