TaxTMI 
TaxTMI 
2016 (3) TMI 1226
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....preciation claimed by the assessee appeallant on building." 5. Briefly stated, the facts of the case are that search & seizure operation under section 132(1) of the Income Tax Act, 1961 (in short 'the Act'), was conducted on 8.10.2010 in Popli Group of cases. The assessee filed his original return of income under section 139(1) of the Act, on 25.9.2008 declaring total income at Rs. 16,42,204/-. After the search, a notice dated 15.2.2012 under section 153A(1) of the Act, was issued to the assessee requiring him to submit his return of income for six immediately preceding assessment years relating to previous year, in which search took place. In response to the said notice, the assessee submitted his return of income on 14.6.2012 declaring total income at Rs. 16,42,204/-. Thereafter, statutory notices under section 143(2) and 142(1) of the Act, were issued to the assessee. In the return of income, the assessee claimed depreciation on building. In this regard, the assessee had submitted that from financial years 2004-05 to 2010-11, he was engaged in the business of execution of work contracts. The Assessing Officer noticed that the assessee was also engaged in the business of const....
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....uthorities. During the course of assessment proceedings for the year 2007-08, the assessee admitted in his letter dated 27.11.2009 that the building in question is a residential house and one floor of which was sold during the year and the proceeds from the sale were invested in construction of other floors of the building. The Assessing Officer disallowed a sum of Rs. 1,09,873/- on account of depreciation claimed on the building in question. There is no evidence on record to show that there was a change in the user of building. It is also clear that the assessee has accepted the order passed by the Income Tax Authorities for the assessment year 2007-08. Considering the entire facts and circumstances of the present case, we do not find any merit in this ground of appeal and accordingly, the same is dismissed. 8. Ground Nos.2 and 3 of appeal raised by the assessee read as under : "2. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) in not justified in upholding the treating of income from the sale of property as income from business and profession. The fact of the matter is that the same should have been assessed as capital gain....
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....be treated as his business income. The Assessing Officer also rejected the other contention of the assessee regarding estimation of profit @ 30%. The Assessing Officer noted that the said estimation was based on the profit earned in similar kind of construction business. Therefore, the profit on sale of property has been worked out at Rs. 2,70,000/- by the Assessing Officer and the same was treated as undisclosed income of the assessee. This amount of Rs. 2,70,000/- was added to the total income of the assessee. 11. On appeal, the learned CIT (Appeals) upheld the addition for the reasons stated in para 6.1 of the impugned order and, hence the assessee is in appeal before the Tribunal. 12. We have heard the rival submissions and perused the materials available on record. Shri Vishal Mohan, learned counsel for the assessee vehemently argued that the discretion to determine the gross profit rate must necessarily be exercised on the basis of relevant factors. According to him, the Assessing Officer has not considered the past history of the assessee, the nature of assessee's business, prevailing economic conditions vis-à vis the assessee's business. He has also pointed out....
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....ropriate to clarify that the word similar is not synonymous with the word 'identical'. Factors referred to above are merely illustrative and not exhaustive of the circumstances that may or may not be taken into consideration. At this stage, it would be appropriate to reproduce a few words from Dhakeswari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775 (SC) so as to place our conclusions in their correct perspective:- ".....The Income Tax Officer is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under subs. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under S. 23(3). In this case the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the Departmental Representative. Next, it did not give any opportunity to the company to rebut the material furnished to ....
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.... and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; though there must necessarily be guess work in the matter, it must be honest guess work. In that sense, too, the assessment must be to some extent arbitrary. Their Lordships think that the section places the officer in the position of a person whose decision as to amount is final and subject to no appeal, bust whose decision if it can be shown to have been arrived at without an honest exercise of judgment, may be revised or reviewed by the Commissioner under the powers conferred upon that official by section 33." 12. It would also be necessary to refer to another judgment in State of Kerala Vs. C. Velukutty, 1966 ITR Vol. (LX) 239, wherein while dealing with the expression 'best of his judgment', it has been held that the discretion to determine net profit rate vests in the authorities but discretion shall not be arbitrary and should have a reasonable nexus to the available material and the circumstances of the case, followed by reason....
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....there that the gross profit rate cannot be uniform in all the years and the profit rate depends on many factors. Therefore, the gross profit rate of 21% for the year under consideration should not be guiding factor in other years. Accordingly, we direct the Assessing Officer to apply a profit rate of 21% as against 30% applied by the revenue authorities. The Assessing Officer should give a relief to the assessee accordingly. Thus, ground Nos.2 and 3 of the appeal are allowed partly. 14. The ground Nos.4 of appeal raised by the assessee reads as under : "4. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in upholding the adding back a sum of 5,01,860/-made under section 69C of the Income Tax Act.1961 treating the same as unexplained expenditure." 15. The Assessing Officer noted that the assessee had spent an amount of Rs. 5,01,860/- on construction of immovable property during the year under consideration. According to the Assessing Officer, no documentary evidence regarding the source of such expenses incurred on construction of building was furnished by the assessee. When the assessee was confronted, the a....
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....dition of Rs. 102102/- made under section 68 of the Income Tax Act, 1961 as un unexplained cash credit." 19. The Assessing Officer made the addition of Rs. 1,02,102/- under section 68 of the Act. The Assessing Officer noted that during the course of assessment proceedings, it was found that the assessee had made deposits in bank account No.4500000100019347 with PNB, New Shimla to the extent of Rs. 1,02,102/-, the source of which has not been explained. Consequently, the Assessing Officer made the addition under section 68 of the Act. On appeal, the learned CIT (Appeals) confirmed the order of the Assessing Officer. 20. After hearing the learned representatives of both the parties, we do not find any merit in this ground of appeal. The learned CIT (Appeals) while confirming the addition, has observed as under : "8.1 I have considered the submission of the assessee and impugned assessment order. The AO has prepared a chart, at para 7, depicting the credit entries/deposits in the bank account of the assessee from AY 2005-06 to AY 2010 11, which totals Rs. 8,15,371/-. The amount involved for the instant year is Rs. 1,02,102/-. It is seen that the AO resorted to section 6....
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..... 9 lacs. In order to substantiate his claim the assessee submitted a copy of the registered sale deed before the Assessing Officer. The Assessing Officer observed that no documentary evidence was furnished by the assessee in support of his submission. He, therefore, issued a notice to the assessee to show cause as to why the difference of Rs. 16,50,000/- (Rs.25,50,000/- - Rs. 9,00,000/-) should not be treated as undisclosed sales proceeds in respect of plot No.138 referred to above. The assessee vide his reply dated 27.12.2013 submitted as under : "That initially the property being a flat I building B-38 was agreed to be sold to Dr.K.S. Larzoo for a total consideration of Rs. 25,50,000/ - the said flat was to be sold fully furnished with modern amenities. That eventually it was agreed interse the parties to amend the said agreement to the extent that the property shall be sold in a raw manner and so the said consideration was reduced to Rs. 9 lacs the payment of which stands received by the assessee through account payee cheques which were duly deposited by him in Vijay Bank the copy of which has already been placed on record. As the consideration of Rs. 9,00,000/- was on....
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....h Comprising of ground floor, parking floor, first floor, second floor, and attic along with other mandatory requirements as such as rain water harvesting structure as per the approved plan sanctioned by the Member Secretary SADA, Kasumpti, ShimIa-9 on the above said plot. Contd...2 "Whereas the First party/seller/transferor has agreed to sell the ground floor of the said building, finished in all respect, as per the specifications attached in annexure-A with this agreement, signed by the parties of the above said flat built on plot no.38 Type-B, Lane-II, Sector-I, NEW Shimla,-9, H.P., plot area of about 118 sq.mts. having each slab area of about 825 sq, fts, and second party/purchaser is interested to purchase the said floor complete in al respect on the following terms and conditions. 1. That the first party/seller has agreed to sell and second party/purchaser has agreed to purchase the said property for a total consideration of Rs. 2550000 only (Rupees twenty five lakhs fifty thousand only). 2. That this agreement to sell has been entered into by the second party/purchaser on the first party/seller holding on that he, the seller is the absolut....
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....t party/seller has right to forfeit the earnest money. In case first / seller backs out from the deal second party/purchaser had right to get the property registered in his name through the court of law or specific performance of law. 9. That the First Party/ Seller has assured second party that the above property in question is free from all sort of liens encumbrances litigation dispute of every nature and any of these are found to be incorrect the First party will indemnify the second party against all loses claims and damages arising on this account. 10. That the First Party/ seller ere by under takes an agree to sign all relevant documents for the transfer of ownership of the said property in favor of the second party purchaser, here by agree to sell in all other authorities and all records. 11. That the second party/ Purchaser will get his own water, electricity connections and the First Party/ Seller will provide NOC from the concerned authorities, along with completion certificate for the same. 12. That First party shall deposit all the previous and outstanding dues if any and get the permission to sell the said second floor from the H.P H....
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....d and instead of finished flat, only structure was sold and renegotiated price of Rs. 9 lacs was agreed upon, as is evident from the copy of the conveyance deed and the relevant portion of which reads as under : "And whereas the seller has agreed to sell and the purchaser has also agreed to purchase the entire ground floor RCC framed structure having an area 76 sq meters alongwith one car parking slot in the parking floor of the building built on the plot no. B-38 Type B measuring 118.3 sq meters...." 29. Further, para 10 of the sale deed reads as under: "That the purchaser has right to construct the said floor according to the approved map and also have the right to make addition/ alteration inside the said property hereby sold without causing any damage to the basic structure of the building and the seller will not change the outlook of the said building." 30. From the above, it is clear that the property agreed to be sold and the property actually sold were not the same. According to the learned counsel for the assessee, the property agreed to be purchased and the property sold are entirely different in nature, which is the sole reason for decrease in the....
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....is ground of appeal is similar to ground No.4 of the appeal raised in ITA No.1163/Chd/2013 relating to assessment year 2008-09. The facts are similar and, therefore, the findings given in ITA No.1163/Chd/2013 shall also apply to this ground of appeal with equal force. Consequently, this ground of appeal is allowed. 36. The ground No.4 of appeal raised by the assessee reads as under : "4. That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the addition of Rs. 6,65,000/- as income from undisclosed sales proceeds on account of sales of flat to on Dr Harjinder Singh." 37. The Assessing Officer noted that two agreements to sell in respect of property, dated 6.6.2007 for Rs. 24,65,000/- and dated 1.8.2009 for Rs. 18 lacs between the assessee and Dr.Harjinder Singh were found during the course of search. The explanation of the assessee was that the property was eventually sold at Rs. 17,70,000/- and commission of Rs. 30,000/- was also paid. The conveyance deed dated 16.10.2009 was filed before the Assessing Officer. The Assessing Officer was not convinced with the explanation of the assessee and, therefo....
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....s as under : Financial year Total amount credited 2009-10 Rs.2,45,784/- 44. The Assessing Officer asked the assessee to show cause as to why a sum of Rs. 2,45,784/- should not be treated as unexplained cash credit under section 68 of the Act. In response to the said query, the assessee submitted reply on 27.2.20013, which reads as under : " It is admitted that a sum of Rs. 2,45,784/- was deposited in the savings bank account of Master Sanchit Popli bearing account No. 09250110004692. The source of the deposits made in the said account is being narrated as under- Date Amount Narrations 04/08/2009 Rs.145784 The same represents the depositing of the closure proceeds of RD and the copy of certificates issued in respect of the same is being placed on record for your kind perusal. 29/12/2009 Rs.49000/- The same was deposited out of the money withdrawn on 19/12/2009 which was not spent. 02/02/2010 Rs.30000/- The same was deposited out of the money withdrawn on 19/12/2009 which was not spent. 06/07/2010 Rs.3333/- Interest credited by the bank 05/01/2011 Rs.1969/- Interest credited by the bank 45. The Assessing Offic....