TaxTMI 
TaxTMI 
2013 (11) TMI 893
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....ed in law and in the facts in partly confirming the order passed by the Ld AO. 2. The Ld CIT (A) has erred in law and in facts in holding that the principles of natural justice has been followed by the AO. The appellant was not apprised about the proposed addition and the case was not made out in spite of specific requests made in this respect. 3. The Ld CIT (A) has erred in law and in facts in confirming the addition of Rs. 4,64,31,144/- being alleged cash receipt on account of booking of units in the project "Prime Mall". 4. The Ld CIT (A) has erred in law and in facts in confirming the taxing of alleged cash receipt in the year of booking in total disregard to the "Project Completion Method of Accounting" followed by the appellant and accepted by the Department. 5. The Ld CIT (A) has erred in law and in facts in enhancing the income of Rs. 1,62,50,900/- being alleged on money computed @ 40% of sales as per books of accounts amounting to Rs. 4,06,27,251/-. 6. The Ld CIT (A) has erred in law and in facts in not granting the appropriate set off of returned income of the project amounting to Rs. 5,11,69,416/- before partner's remuneration....
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....e and if the 40% of the same is rightly taken as the profits earned out of the project; (b) if the project completion method adopted by the assessee is rightly rejected; (c) if the denial of statutory deduction ie remuneration, interest etc out of the estimated profits is rightly done etc. (ii) if the issue of sale of the car parking is rightly decided; (iii) confirming of the addition of Rs 2,85,000/- being alleged unexplained credits u/s 68 of the Act in respect of loan taken from Nenbai Gala; (iv) allowability of deduction of Rs. 4,55,000/- being compensation charges. The issues relating to enhancement by the CIT(A) and failure to grant set off towards the income offered by the assessee in other AYs are consequential in nature. However, the core issue mentioned at sl no (i) above is commonly agitated in appeals by the assessee as well as the revenue. 5. Briefly stated, relevant facts relating to all the appeals under consideration are that the assessee belongs to the Prime Group of cases which is engaged in the business of construction. During the years, the assessee undertook the project of construction of 'Prime Mall'. There was search and seizure action u/s 132 of the Inco....
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.... Prime Mall (Numbering 53 shops) showing the same shops sold to different persons; Annexure-C shows the list of 34 shops; Annexure-D gives details of sales as on 31.03.2007 referring to 356 shops; Annexure-E relates to shops from L-1 to L-116 and G-1 to G-112 ('L' refers to lower ground floor and 'G' refers to upper ground floor) showing the carpet area and super built area. It also mentions purchase rates and name of the parties. Annexure-F refers to sales of shops and their rates etc. Annexure-G refers to correspondence between the assessee and Shri Surendra Rikibda, Pune in connection with Shop No. F-72; Annexure-H refers to Shop Nos. L-83 and L-92 involving Anil and Augustin; Annexure-I relates to list of shops for which allotment letter was issued and it contains the area, total consideration and rate per sq.ft. Annexure-J is hand written details relating to some shops giving particulars of value of the shop, due, received and balance. Annexure-K is a provisional statement of Estimated Conservative Profitability of the Project 'Prime Mall' showing estimated net profit of the project and the percentage thereof at Rs 38.73 Cr and 47.41%. the figure of 47.41% is wrongly calculate....
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....A-1 H 8 25 TO 27 A-3 I 9 79 AND 80 A-3 K 8. Further, AO made elaborate discussion in her order granting detailed insight into the 'modus operandi' or manner of earning of 'on money' out of the transaction of sale of the shops/units. She also mentioned specific cases of transactions for affirming the conclusion that the assessee suppressed the turnover of sales to the tune of 65% of the actual sales turnover. The contents of para 6 with its sub-paras running into (i) to (xxv) are exhaustive and it is space consuming to narrate the same here in this order. To sum up the findings of the AO, we rely on the following conclusions as summed up by the CIT (A) vide para 3.20 of the impugned order. They are as under: "The basis of huge addition made by the AO is mainly based on the allegations mentioned herein below:- i) The appellant is engaged in selling the units on super built-up basis where as loading on carpet area is 100% and that the agreement is made for carpet area. The loading to carpet area is nothing but alleged on-money received. ii) Based on the impugned loose papers, the AO has drawn presumption that alleged on-money is....
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.... acceptance of part of the sale consideration in cash by the assessee, relates to various shops and is respect of sale transactions executed at various points of time. Thus it is not a case where the assessee has received on-money only in respect of a particular sale transaction or in respect of sales affected during a particular point of time. The clinching evidences gathered by the search parties (which contains entries in respect of sale transactions effected over a period of time, right from the year 2004 onwards) clearly indicate the general modus operandi adopted by the assessee while effecting sale of shops ( ie acceptance of a considerable portion of the sale consideration in cash). It is for this reason that the addition on account of receipt of on-money is being made in all the AYs, where the assessee has declared sale of shops." 10. In view of the above discussion, the unrecorded component of the sale consideration is being added back to the total income of the various AYs concerned as under: (column 4 of this modified table is relevant) AY No. of units sold Sales as per Books of account (Rs.) On money received @65% of total sales (Rs.) Gross sale....
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....7,00,000/- Total income Rs.34,81,39,394/-" 11. Thus, to sum up, relying on the discoveries in the search, AO brought out a patter on the way the assessee sells 'super built up area' to the customers and accounts only the sales relatable to the 'carpet area' and not the sale relatable to the super built up area. Based on the seized papers appended to the assessment order, AO made out that the assessee collects the unaccounted portion in cash and outside the books and further, AO quantified such unaccounted segment of the sales at 65% of the total sales ie accounted and unaccounted sale consideration. In obsolete figures, such unaccounted sale turnover works out to Rs 108,70,22,577. AO apportioned the same among four AYs, which are under consideration. AY wise unaccounted sale turnover/profits are mentioned in the table above (vide column 4 of the table). AO rejected the assessee' method of recognizing income ie Project completion method and invoked the 'percentage completion method' instead. Aggrieved with the above assessment orders, assessee filed the appeals before CIT (A). 12. During the proceedings before the CIT(A), assessee made various submissions....
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....r the AY 2004-2005, 2005-2006, 20062007 and 2007-2008 have been made on presumptions making huge additions of Rs. 112.02 Cr as tabulated herein below. The Assessing Officer deemed it very convenient to adopt short cut to estimate income on percentage basis on the year wise sales of the units in the project 'Prime Mall'. Assessment Year Accounted Sales in Rs. Addition of income @ 65% of total sales.... 2004-05 4,06,27,251 7,54,50,609 2005-06 2,70,35,000 5,02,07,857 2006-07 33,42,79,998 62,08,05,711 2007-08 18,33,77,600 34,05 58,400 Total 58,53,19,849 108,70,22,577 Add:2004-05 Alleged sale of car parking 3,00,00,000 2004-05 2006-07 Alleged unexplained credits in respect of unsecured loans 2,85,00012,48,150 2007-08 Alleged unexplained cash in search....added protectively 17,00,000 GROSS TOTAL 112,02,55,727 14. Further, based on the seized material/ incriminating material annexed to A to L, the CIT (A) discussed the extent of on-money ie generated in this project and arrived at a figure of Rs. 21,34,48,983/- and the reliance is place on the Annexures A, B, C, F, H in this regard....
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....Taxman (Mag.) 123); 8% of the gross profit unaccounted income instead of fully taxing it in the absence of evidences of expenditure ie decision of Hon'ble Gujarat High Court in the case of ITO vs. Anand Builders (ITA No. 52 of 2002), the Revenue's SLP was dismissed as reported in 265 ITR 337 (Statutes); 15% profit rate of on-money is reasonable rate as held in the case of Nalini V Shah vs. ACIT vide ITA No. 6183/M/2006 dated 20.5.2009. Considering the above submissions of the assessee, CIT (A) examined the same and rejected the assessee's proposals of the profit rates @ 5%, 8% and 15% mentioning that the facts of each case are different and therefore, the percentages are varying from case to case and held that "the profit out of on-money has to be estimated as per the material found during the search and seizure operation and replies filed by the assessee from time to time." Finally, he proceeded to estimate the profits of the assessee on the total accounted income as well as unaccounted turnover 40% of the sale consideration received, accounted and unaccounted income of the assessee, after allowing the set off of the unaccounted expenditure of the assessee. 15. The relevant dis....
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.... quantifying the unaccounted sales at Rs. 108,70,22,577/-. However, he departed from the AO's working that the total 65% of unaccounted sales is the income of the assessee. He arrived at the taxable profits of the project for the AY 2004-05 to 2007-08 at Rs. 66,89,36,953/- adopting the 40% as the net profit. In the process, the CIT (A) allowed 60% of the total sales towards expenditure of every account discussed above. Further, the CIT (A) is in tune with the settled judicial proposition that the assessee need not have to establish the genuineness of the expenditure with evidences. CIT (A) also worked out year wise addition vide col 5 of table modified: AY No. of units sold Sales as per Books of account (Rs.) On money received @ 65% of total sales (Rs) Gross sales (Rs.) Addition Sustained @ 40% of sales 1 2 3 4 5 5 2004-05 14 4,06,27,251 7,54,50,609 11,60,77,860 4,64,31,144 2005-06 63 2,70,35,000 5,02,07,857 7,72,42,857 3,08,97,142 2006-07 208 33,42,79,998 62,08,05,711 95,50,85,669 38,20,34,267 2007-08 70 18,33,77,600 34,05,58,400 52,39,36,000 20,95,74,400 Total ....
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....the AO and CIT(A) based on the incomplete and incomprehensive data available from these questionable Annexures-A to L. Annexure wise submission of Ld Counsel is briefly discussed in the succeeding paragraphs. 20.1. Regarding Annexure-A, which is a letter of the assessee dated 6.6.2005, addressed to Mr. Bhushan Sheth, a proposed buyer of the shop, contains reference to cash of Rs. 4.76 lacs. AO alleged that the cash referred in the letters relates to the on-money segment relatable to the loaded super build up area of the shop No 15 purchased by Mr Sheth. In this regard, Ld Counsel submitted that the said letter is a normal business letter written to the proposed buyer for collection of the outstanding dues on account of sales as per agreement of sale in respect of unit No. G-15. The said party was defaulted in making payment at various instances. However, no alleged cash has been received from Mr. Bhushan Sheth. The entire consideration of Rs. 13,24,000/- received by cheque on different dates between 17.3.2004 and 25.3.2008. One cheque was received before search instead of cash. Whereas, as per letter (seized document) only Rs. 50,000/-is to be received in cheque. No enquiry has ....
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....essee submitted that in a project like 'Mall' there will be heavy loading on carpet area of shops because of large commonly used space by the public. But that does not prove that the assessee has earned on-money by selling common areas and submitted that the sale of shops was on super built up area. 20.5. Regarding Annexure-F, AO alleged that the amount mentioned under the year '70%' was nothing but alleged on-money to the extent of 70%. In this regard, assessee submitted that the said annexure was found from the project site office belonging to the site contractor, Mr. Jaysukhlal Sapra and the said page is not in the hand writing of any of the partner or of the employee of the firm. The transactions mentioned in the said annexure have not been carried out. 20.6. Regarding Annexure-G, the AO alleged that shop No. 72 was first sold to Mr. Surendra Rikibda for consideration of Rs. 52,50,000/- and the same was later sold to Mr. Hiral Engineering for Rs. 24,00,000/- in AY 2007-08. In this regard assessee submitted that the said letter was an offer of sale of unit to Mr. Surendra Rikibda, which was not materialized and later the same was sold to M/s. Minal Engineering for Rs. 24 l....
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....ale of car parking" is not real entry as the car parking was never sold in the commercial projects of this kind. With the exception of these papers, there is no evidence what so ever to demonstrate that the car parking is sold by the assessee and received 'on money' on this account. Refuting the AO's allegation that the assessee has sold car parking area for a consideration of Rs. 3 Cr, Ld Counsel for the assessee submitted that the entire car parking of the Mall is meant for common use of the general public and was neither salable nor sold. He also mentioned that after examination of the seized papers, CIT(A) deleted the addition. Therefore, the said percentage of 28.18% is required to be further adjusted downwards. 21. Thus, Ld Counsel for the assessee attempted to demonstrate that the said Annexures relied heavily by the revenue are not free from debate and dispute. They are not credible. Ex consequenti, allegation of loading of carpet area, on money receipts, extrapolation/multiplication to the entire project, rejection of books of accounts duly audited by the statutory auditors, generation of 65%:35% formula for unaccounted sales: accounted sales of the gross sales turnover....
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....es in determining the number of shops sold in each year and filed a copy showing correct number of shops sold in each of the assessment year under consideration. 24. In support of his argument in favour of 8% of the turnover as profits of the project, Ld Counsel relied on various decisions. Ld Counsel relied on the decision of Ahmedabad Bench of this Tribunal in the case of Kishore Mohanlal Teliwala vs. ACIT 64 TTJ 543, in which 8% of the unaccounted turnover has been found reasonable by the ITAT. Further, the assessee has also relied on the decision of Bombay Bench, ITAT in the case Mrs. Mehroo N Irani vs. ACIT 75 Taxman (Mag.) 123, wherein the Tribunal held that 5% of the gross receipts was found reasonable for determining the income of the assessee on account of the unaccounted turnover. Further, assessee also relied on the judgment of the Hon'ble Gujarat High Court in the case of ITO vs. Anand Builders vide ITA No. 52 of 2002 in which, the High Court upheld the order of the ITAT, directing the AO to consider only 8% of the unaccounted money received as income of the assessee instead of treating the whole of the unaccounted turnover. It is also brought to our notice that the ....
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.... adopted by the CIT(A) to 15% at the maximum and sought for bringing finality on the litigation. Otherwise, the assessee prayed for deciding the reasonable net profit percentage of the project - Prime Mall. As per the assessee, normally, 8% to 15% are the most accepted reasonable percentages which are relied upon by the assessee in all the proceedings ie assessment and first appellate proceedings. 28. Further, mentioning that the assessee offered profit percentages of the project for the AY 2006-07 and 2007-08 at the rate of 15.50% and 11.76% respectively and justified the same on the grounds of full disclosures attributable to the search action. These returns are filed after the search action in April 2006. Arguments of the DR 29. Per contra, Ld DR for the revenue relied vehemently relied on the AO's order and prayed for confirming the whole of addition of Rs 108.70 cr as the income earned from the project-Prime Mall. To start with, Ld DR mentioned that assessee was non-cooperative all through the assessment proceedings and the information was not forthcoming. Further, he mentioned that the unaccounted sales turnover of Rs 108.7 Cr was determined by the AO should be taken....
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....35 formula of unaccounted sales: accounted sales turnover and therefore, for deeming of Rs 167.23 cr as the actual sales turnover of the assessee out of the project. Otherwise, the Annexures K and L, under the sub-heading C relating to "profitability" contains repeated reference to the figure of Rs 120,41,80,000/-, which is less than the deemed sales turnover figure of Rs 167.23 cr. Undisputedly, the figures of cost of project, amount spent, profitability percentages appearing on these Annexures, being compiled during the construction period and not on completion of the project, are mere provisional figures and inconclusive. Undisputedly, these Annexures K and L mention of estimated NP of the project in percentages and the as per the Annexure L, which is latest in time, the NP is 28.18%. The assessee sums up that the final figures relating to (a) actual cost of project and (b) actual sales turnover being different, need to be considered for working out the reasonable NP and in that sense of the matter, the said NP needs downwards revisions to 15.50% or 11.76% as the case may be, as per the discussion given above. b. Disputed facts/Conclusions - Summaries of the party's stand ....
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....llaneous disputes too. 32. At the end of the first appellate proceedings, the assessee got partial relief on some of the disputed facts narrated above. So far as the disputes at (i) to (iv) above are concerned, the assessee has not got any relief and to that extent, the assessee is still aggrieved. On the disputed narrated at (v) and (vii), ie considering part of the on money as the profits relatable to the unaccounted turnover, relying on the judgmental law, the CIT(A) held that the considering 40% of the grossed up turnover of Rs 167.23 cr ie accounted and unaccounted sales (Rs 58.53 cr+Rs 108.70cr) as profits of the project, is held reasonable. In the process, the CIT(A) granted relief of Rs 41.81 crore towards to hidden expenditure. Otherwise, there is direct evidence of such hidden expenditure only to the tune of Rs 4.55 lakhs only. Of course, the CIT(A) granted relief in matters of taxing of the notional sales of parking space too. The assessee's proposal to restrict the addition computing the NP at 8% on the unaccounted turnover of Rs 21,34,48,984/- only, which is worked out based on the transaction qua the tainted shops/units is also in dispute. This offer was rejected b....
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....in disputes. Further, we have also considered the concessions offered by Ld Counsel for the assessee. On considering the same, we find that what constitutes reasonable percentage of net profit is a matter of dispute and the same varies from one case to the other and the one business to the other and from city to city. Therefore, in principle, we cannot entertain this conditional offer of 15% as the NP of the impugned project and proceed to decide the issue based on the facts available on records only. 37. For adjudication of the core issue, we need to address to various related issues and the issue wise adjudication is provided in the succeeding paragraphs of this order. a. Does the Annexure A to L is proper basis for inferring the unaccounted turnover of Rs 108.70 crores by way of principle of Extrapolation: 38. Ld Assessee's counsel has laboured a lot in attempting to show that the said annexure A to L does not conclusively demonstrate that the assessee has not collected larger part of the sales proceeds in cash. Details of the arguments are given in the arguments section of this order. Per contra, the inference of the AO and CIT(A) on these documents are entirely opposi....
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....t of 'Held' portion is extracted as under: "In estimating any escaped turn, it is inevitable that there is some guess work. The AO while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not any one else's. ... 39. Therefore, we approve the best judgment of the AO in arriving at the said turnover of Rs 167.23 Cr following the formula of 35:65 of accounted and unaccounted sales turnovers. As such assessee gave in writing in favour of adopting Rs 167.23cr as the gross turnover too. Thus, the exercise of extrapolation is justified and reasonable. Therefore, the determination of the unaccounted sales turnover at Rs 108.70 cr is proper and it does not call for any interference. Next we shall take up the other related issues. b. What is reasonable profit of the projec....
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....nt but it should be based on some material either produced by the assessee or collected by the Investigation wing or AO. It should be based on fair and reasonable basis. The Court would not call for proof for establishing the nexus between the estimation of income and the facts of the case. The judgments in the case of HM Esufali & H M Abdulali reported in 90 ITR 271, Laxminarayana Badridas reported in 5 ITR 170 (PC); Maharaja Sri B P Singh Deo 76 ITR275(SC); R Narayana Rao and Others reported in 338 ITR 625 (AP) etc supports the above. Thus, the bottom-line is that the AO/CIT(A) must have some material/data to support the estimation of the Net profit of the Project. Other side of determination of material based net profit is obviously granting of relief on account of the hidden expenditure for earning of said net profit of the project. The legal scope on this topic is discussed in the next paragraphs. 42. Scope of Reasonable Expenditure: Assessee needs to expend in order to earn income/profit and it is basic and universal principle in any business. This principle applies to both accounted and unaccounted profits. In a case of unaccounted profits, due to its very nature of unacc....
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....se of R Narayana Rao and Others reported in 338 ITR 625 (AP). In this regard, although an element of guess work is part of such best judgment assessment, AO must desist from being arbitrary and AO must ensure that his judgment has some basis by way of tangible material/document to justify his best judgment to avoid arbitrariness. Of course, the comparable cases help in such cases. However, it is nothing like having documents/material as a base. In our opinion, if some data or document belonging to the assessee giving details of the Net Profit percentages, the same should be preferred over the other sources. On the reasonableness issue, we find that the CIT(A) has not based his 40% on any comparable case or material seized during the search action. The contents of para 4.56 of the impugned order is relevant the same read as under: 4.56. ...... Examination of seized material it is found that the appellant has received on money of Rs 21.34,48,984/- as per Annexure A to L of assessment order. The appellant itself worked out unaccounted turnover of Rs 21,60,80,933/- but stated that profit should be estimated @ 8% of unaccounted turnover, which cannot be accepted as discussed ab....
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....'s decision of considering 65% of the total sales as the income of the assessee is also arbitray and irrational and hence, the same is not approved. Having held 40% as unreasonable due to the arbitrary and irrational nature, we need to fish out reasonable net profit percentage. The same is taken up on the subsequent paragraphs. 45. It is surprising to note that the Annexures K and L, ie Provisional Statements showing the NP workings of the Prime Mall project, undisputedly make clear references to percentage of Net Profits, and they are completely ignored as evident from the orders. These NP% could have been made use of either by the AO or by the CIT(A) to ascribe 'reasonability', which is an important facet of such unspecified best judgment assessments. In our opinion, the search material based-NP percentage stands on higher pedestal and hence superior and credible in quality and acceptability vis a vis the 40% picked up by the CIT(A) from nowhere and without any basis. In that sense, the basic requirements relating to best judgment assessments are out of their mind when they considered both Rs 108.70 cr or 40% of Rs 167.23 cr as the assessable income of the project -Prime Mall.....
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....nservative Profitability of the Project", Project - Prime Mall of M/s Prime Developers. These statements contain exhaustive working on the profitability qua the gross sale consideration. Prima facie, it is obvious that Annexure L with NP of 28.18% is made subsequent in time qua to Annexure with NP of 47.41%. We ignore the NP data on Annexure K for the following reasons namely, (a) it should lapse when Annexure L is prepared; (b). While Ann K is made on the day when the "amount spent is only Rs 26.06 cr" where as the Ann-L is made on the day when the "amount spent is higher and the same Rs 28.56 cr"; (c) 47.41% is not the case of the revenue and if now considered by us, it may amount to enhancement of income by the Tribunal, which does not have such power. Hence, the data on Annexure L becomes significant and consists of three segments namely A. COST OF THE PROJECT (Rs 86.49 cr); B. AMOUNT SPENT ON THE PROJECT (Rs 28.56 cr); C PROFITABILITY (Rs 33.93 cr). The 'percentage of Net Profit to the cost of project' (sic-read as 'sales') is worked out at 28.18%. 48. Contents of Annexure L: For the sake of completeness of the order, Annexure L which is latest in time is extracted and inse....
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....for ascribing 'reasonability' to the data from Annexure-L. 51. Reasonable NP of the Project = Average of Returns based NPs & Adjusted NP from Annex-L: In the preceding paragraphs, we have discussed occurrence of various NP percentages from at least three different sources namely (a) average NP% at 13.74% (NPs of AY 2006-07 and 2007-08 are 15.50% and 11.76% respectively) having source base in the assessee's books of accounts; (b) NP as per Ann L after allowing a couple of adjustments having regard to the seized material; and (c) Minimum and Maximum NPs of 5% to 15% having source base in different judgmental case laws cited above. Net profit percentage of any comparable case may help for arriving at reasonable profit of the project. But there is no such data before us for use. Further, from the case laws cited by Ld Counsel, we find that none of them relates to mall-based shops of commercial nature and therefore we agree with the CIT(A) in rejecting the 8% and further, we also reject the 15.50% or 15% admitted by the assessee in the return or during the appellate proceedings considering the provisional workings of the assessee in Ann-L. Further, we also reject the 40% which basica....
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.... related conclusions in the order while giving effect to the order. That leaves the other dispute relating to allowing deduction in respect of the statutory deduction u/s 40b of the Act from the estimated profit. 53. Statutory Deductions u/s 40b of the Act- Remuneration & Interest to Partners: During the proceedings before us, referring to ground no 6 of the appeal of the assessee, Ld Counsel mentioned that the assessee is entitled to allowing of statutory deduction. In this regard, Ld Counsel filed copies of various decisions to demonstrate that, in cases of estimation of net profits of this nature, the deduction towards remuneration and interest must be granted as per the provisions of section 40b of the Act. Ld DR relied on the orders of the AO and CIT(A) in the matter. 54. We have perused the cited orders on the issue and find in principle, the ratio of Rajasthan High court decision in the case of Shri Ram Jhanwar Lal Vs. ITO & Ors. 321 ITR 400 helps the assessee. Para 6 to 8 are relevant in this case which are as under: 6. The grievance of the appellant is, that when the best judgment assessment of net profit is made, thereafter, depreciation is required to be a....
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....ievances raised in its ground 1 and 2 that the Rs 108.70 cr should be the profits of the assessee's project-Prime Mall and against the grant of set off of the unaccounted expenditure against the estimated income of the project without support of evidences are dismissed. 57. Accordingly, from the assessee's appeal, the grounds 1, 4, 8 and 12 are dismissed either as academic or not pressed or as consequential, as the case may be. Grounds 2,3,5,6 and 7 relating to the core issue are allowed. Ground 11 is allowed for statistical purpose. Other Issues Belonging to Cross appeals for AY 2004-05 58. In the assessee's appeal for the AY 2004 - 05, the only other stand alone issue left for adjudication relates to addition of Rs 2.85 lakhs on account of unexplained credits u/s 68 of the Act and the Grounds 9 & 10 of the appeal vide ITA No. 175/M/2010 are relevant. 59. During the assessment proceedings, AO observed an unsecured loans of Rs. 2,85,000/- claimed in the name of Smt. Nenbai L Gala. As per AO, assessee failed to explain the identity, creditworthiness of the lender and genuineness of the transactions. Accordingly, he made an addition of Rs. 2,85,000/- u/s 68 of the Act. On....
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.... Rs.3,00,00,000/- on account of undisclosed sale of car parking. Para 11 of the assessment is relevant and the same read as under: 11. Moreover, ... the seized materials clearly indicate that the assessee has sold the parking lot of the Mall for the total consideration of Rs 3 crores. However, the sale of such parking has not been disclosed in the books of accounts. Also, stock of the parking space does not appear in the closing stock statement submitted by the assessee. This being so, the entire consideration of Rs 3 cr is being added in the first year when the sale of shops had commenced. Accordingly, in the AY 2004-05, ....a further addition of Rs 3 cr is being made on account of undisclosed sale of car parking area" 63. Aggrieved with the above conclusion of the AO, the assessee filed appeal before the CIT(A). During the proceedings, refuting the AO's allegation that the assessee has sold car parking area for a consideration of Rs. 3 Cr, Ld Counsel for the assessee submitted that the entire car parking of the Mall is meant for common use of the general public who visit the malls for shopping and was neither saleable nor sold. On considering the fact that the referen....
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.... the revenue and the annexures appended to the assessment order. With the exception of Annexure K and L, there is no other source of information to the AO relating to the impugned issue relating to 'sale of the car parking'. Based on the scanty information, AO made the said addition of Rs 3 crores merely based on the said provisional statement and the entries therein. Thus, there is neither clinching evidence nor the corroborative evidences to suggest the sale of the car parking areas. We have examined the relevant entry in this regard appeared on Annexures K and L and as stated in the earlier paragraphs, we find the said statements are made in the initial stages of the project and not at the time of sale of the shops. Such unsubstantiated data or information which prima facie constitutes provisional and uncorroborated data, which should be dismissed as done by the CIT(A), with which we agree. Therefore, AO is not justified in making such additions and therefore, order of CIT(A) does not call for any interference. Accordingly, the grounds raised by the revenue in this regard are dismissed. 67. In the result, the appeal of the assessee for AY 2004-05 is partly allowed and the app....
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.... vide para 5.3 of his order which is reproduced here under: "5.3. I have considered the reply of the appellant and perused the assessment order. The appellant has failed to produce the confirmation of the creditor, Mr. Kishore Lehrani during the assessment proceeding before the Assessing Officer and also in the appellate proceeding before me. In absence of any confirmation of the party, identity of the creditor, its creditworthiness and genuineness of the transaction cannot be stated as proved. The appellant has given reason for non-filing of confirmation on the ground that the party is not available and not contactable. It is strange that the party who has given loan of Rs. 12,48,150/- is not contactable and not traceable. This shown that neither the identity of the creditor not its creditworthiness and genuineness of the transaction has been proved by the appellant. In view of the above, the AO is justified in making addition of Rs. 12,48,150/- u/s 68 of the IT Act to the income of the appellant. The addition made by the AO is confirmed. This ground of appeal is not allowed." 71. From the above, it is evident that the assessee has not been able to discharge his onus i....
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.... T Shah in AY 2007-2008 as unexplained cash found during the search on substantive basis. This addition of Rs. 50,00,000/- also include cash of Rs. 17,00,000/- pertain to the appellant, which has been claimed in the assessment proceeding in the case of Shri Premji T Shah. But the Assessing Officer has not accepted this explanation being afterthought and made substantive addition in the hands of Shri Premji T Shah. In view of this fact, since cash of Rs. 19,49,727/- was available with the appellant at the time of search as per its cash book, therefore no addition on account of unexplained cash for Rs. 17,00,000/- can be made in the hands of the assessee that too on protective basis. Since, the addition of Rs. 50,00,000/- has been confirmed in the appeal in the hands of Shri Premji T Shah in AY 2007-2008 on substantive basis, therefore, the Assessing Officer is directed to delete the addition of Rs. 17,00,000/- on protective basis in the income of the appellant. The appellant would get relief of Rs. 17,00,000/-. This ground of appeal is allowed." 73. Considering the above, we are of the opinion that as per the books of account shows the cash balance of Rs. 19,49,727/- which is ava....