AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 1216
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.... of completion of the relevant project from where the same has been earned . 3) On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in an addition of Rs. 12,04,18,428/- as allegedly lower income on project completed, without considering the facts and circumstances of the case. 4) On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not appreciating the fact that the profits offered to tax during the course of the search action were merely estimated profits for the project." 2. Ground no.1 relates to the addition of Rs. 63,39,52,372/- alleging on money received on sale of flats. The brief facts of the case are that there had been search and seizure action u/s. 132 of the Ac,t on 17.11.2014, in the case of Runwal Group and assessee being the group company was also covered in the search action. The assessee filed its return on 31.10.2015 declaring total income of Rs. 13,48,82,480/-, which was revised to Rs. 13,45,71,200/- on 07.07.2016. Subsequently, on the basis of the documents seized during the co....
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....lars of sold premises / projects Name of the assessee in whose name such income is offered Additional income so offered (In Rs.) Financial year in which income is arising or accruing Runwal Anthurium - Shops Runwal Developers Pvt, Ltd. 7,36,15,000 2013-14 1,32,40,000 2014-15 R Square Runwal Developers Pvt. Ltd, 70,00,000 2014-15 Rynwal Anthurium residential premises Runwal Developers Pvt Ltd. 6,69,62,205 2014-15 Runwal Anthurium - flat No. T3-3101 & T3-3104 of Ramona in relation to which specific instances have been quoted by your goodself in the forgoing para of statement Runwal Developers Pvt. Ltd. 1.25,06,000 2014-15 Elegante Runwal Projects Pvt. Ltd. 18,82,59,020 2014-15 Olive Subhash Runwal 1,20,85,030 2014-15 Runwal Symphony Runwal Developers Pvt. Ltd. 70,00,000 2014-15 Total 38,06,61,255 It was also noted by the Assessing Officer that during the course of search action certain print out data was seized from the head office of the assessee, which contains most inventory list of the project Runwal Gree and Runwal Forest and has the details of the customers and the agreement value for sales booked. The Asse....
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....3502 20/04/2014 1,64 1.45 28 T4 3604 09/04/2014 3,17 3 29 T8 3S01 22/08/2014 2.47 1.9 30 T3 801 15/06/2014 1.99 1.45 31 Olive 1402 19/07/2014 1.43 1.11 32 Chestnut 504 07/02/2014 1.46 1.46 33 T3 3506 07/12/2014 2.47 1.98 34 T3 3SG4 06/05/2014 2.47 1.86 35 T1 3501 25/06/2014 1.66 1.32 36 Galleria 4 05/02/2014 1.92 1.35 On the basis of this data, the Assessing Officer was of the view that the assessee has taken on money component in cash and excluded the same while entering into an agreement with the respective customers. The Assessing Officer also noted that during the course of search when these evidence were confronted with Shri Subodh Runwal, he answered as under: "Ans to Q.16 "Sir as I have answered in earlier question I again reiterate that this project was a joint venture with HDFC Limited right from the inception till they exited. Subsequently to that the market has become very competitive and due to opening of a forest land we had to self aggressively to achieve the numbers from the calendar year 2014, I accommodated a few customers who wanted to pay part considerat....
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.... Rs.31,52,99,960/- Rs.63,39,52,372/- TOTAL: Rs.63,39,52,372/- 4. The learned AR, before us, vehemently contended that the addition has been made by the Assessing Officer merely on the basis of the statement of Shri Subodh Runwal. The assessee has agreed to surrender the said amount during the course of search under coercion from the Revenue just to buy peace. While stressing this fact, our attention was drawn towards answer to question no.17, which has been reproduced herein above. It was contended that the project Runwal Greens Tower- 1, 2 & 3 and Commercial has to be completed in the F.Y. 2016-17 and not in the impugned assessment year. Similarly, the project Runwal Greens Tower 4, 5, 6, 7 & 8 has also to be completed in the F.Y. 2016 and not in the impugned assessment year. Our attention was drawn towards the order of the CIT(A) and on that basis it was submitted that the assessee was consistently following the Project Completion Method. The project viz. Chestnut, was completed in the impugned assessment year, which due to oversight remained to be offered for taxation. Therefore, the assessee submitted a revised return and offered a sum of Rs. 72,50,000/- and....
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....eived during the A.Y. 2017-18. In respect of another project viz. Runwal Green Tower 4, 5, 6, 7 and 8 it was vehemently submitted that this project was also not completed during the impugned assessment year. Reliance was placed on the Special Bench decision of this Tribunal in the case of Wall Street Construction Ltd. & Anr. Vs. JCIT 101 ITD 156 (Mum) (SB), in which it was held that the assessee following project completion method of accounting, the income identifiable with that project should be allowed only in the year when the project is completed and the income from that project is offered for taxation. Our attention was also drawn towards the decisions of Mumbai Bench of the Tribunal in the case of ITO vs. Panchavati Developers 115 TTJ 139 (Mum) and that of JCIT vs. K Raheja (P) Ltd. 102 ITD 414 (Mum). Further attention was also drawn towards the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Advance Construction Co. (P) Ltd. 275 ITR 30 (Guj), wherein it was pointed out that Project Completion method has duly been accepted. Reliance was also placed on the decision of Dhanvarsha Builders & Developers (P) Ltd. vs. DCIT 102 ITD 375 (Pune), for the proposition o....
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....Assessing Officer has estimated it at Rs. 33,47,33,101 and 9,97,40450/- respectively. While estimating the on money for the flat the Assessing Officer has taken the rate @15,750/- per sq. ft for the flats and @ 26,000/- per sq. ft. for the shops. It was also contended that in fact, in the case of units found recorded in the seized documents as reproduced by the Assessing Officer in the assessment order at pages 11 and 12, there are various units where the sale value recorded in the books for particular unit is higher than the total revenue reported in the emails, which form part of the seized material. In this regard our attention was drawn towards the following instances: Sr. No. & Page No. of asst. Order Unit No. Value as per seize material Agreement value Pg. 125. No. 25 T8-3805 2,38,00,000 2,82,00,000 Pg. 12S. No. 3 F9 1,07,00,000 1,21,00,000 Pg. 13 S. No.17 T7-3301 157,00,000 171,00,000 Pg. 13SNo. 18 T7-3401 157,00,000 172,00,000 Pg. 135 No. 19 T6-1303 436,00,000 460,00,000 Pg. 135 No. 24 T2-3306 164,00,000 167,00,000 Pg. 13 5 No. 32 A1-504 1,46,00,000 1,46,00,000 On this basis, it was contended that this fact proves that the assessee has n....
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....8,92,500 1449,43,854 609,48,646 650,10,096 40,61,450 Total 10313,02,500 8650,69,416 1662,33,084 1994,78,821 332,45,737 Thus, it was contended, that the Assessing Officer be directed to work out the on money considering total revenue recorded in the books vis-à-vis total revenue as per seized material as per the aforesaid working. In this regard out attention was also drawn towards copies of agreement entered into by the assessee which are available on pages 122 to 378 of the paper-book. Further, it was contended that the receipt, if any on money has to be assessed, it is only the net income embedded therein that has to be added as on money representing the sale consideration and sale consideration cannot be equated with the net income of the assessee. In fact, during the search certain documents were found wherein the initial investor was paid compensation on surrender of their right and the Director of the assessee company has stated in the statement recorded u/s. 132(4) that due to increase in price, they compensated some of the parties on cancellation of their booking. Not only this, there as some payments to employees in cash which also reflected in the state....
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.... the Assessing Officer relying on the findings of the Assessing Officer as well as the statement recorded during the course of the search made by Shri Ravi Raichura, Sales Manager, Shri Anand Modi, Head of the Sales Runwal Group, Ms Sujata Rao, Sales and Customer Relation Management, Shri Kishore P Jain, Head of taxation, Shri Subodh Runwal, Director, and given the finding that Shri Subodh Runwal has clearly admitted a sum of Rs. 63,39,52,372/- as on money received by the assessee. Therefore, the said money has to be added in the impugned assessment year and the Assessing Officer, therefore, for not unfair and unjustifiable n adding the said on money. 7. We have heard the rival submissions and carefully considered the same along with the orders of tax authorities below. The first issue involved in this ground before us is whether the Assessing Officer was correct in law in adding a sum of Rs. 63,39,52,372/- as alleged on money received on sale of the flats and the second issue involved is if any addition has to be made during the impugned assessment year, whether the addition of the on money has to be made on the basis when the on money has been received or on the basis of the met....
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....vember 2014. The amount so worked out comes to Rs. 19,94,78,821/- as detailed under:- On-money of flats as per seized material - Rs. 13,44,68,725/- On-money of shops as per seized material - Rs. 6,50,10,096/- Out of the said sum Rs. 72,50,000/- has already been confirmed by us in the preceding paragraph, therefore, on-money on flats as per seized material remains at Rs. 19,22,28,821/-. We noted that the Assessing Officer on the basis of seized material found during the course of search relating to the period of March 2014 to November 2014 took the view that the assessee might have received on-money in all the bookings and therefore, he estimated cash portion on other units sold by taking the highest rate of sale of other units although no on-money evidence were found during the course of search. The Assessing Officer while confirming the addition relied on the statements of the staff of the assessee as well as the statement of the Director Shri Subodh Runwal, mainly in reply to question nos. 16, 17 and 18, which are reproduced as under: "Ans to Q.16 "Sir as I have answered in earlier question I again reiterate that this project was a joint venture with HDFC Limited righ....
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....nture with HDFC Limited. Subsequently, when the market has become more competitive and due to the opening of the forest land they had to sell aggressively, in order to achieve the numbers from the calendar year 2014 and, therefore, in order to accommodate few customers who wanted to pay part consideration in cash, they accepted cash for few units. He has categorically stated that prior to that date they have never accepted any cash. In reply to question no.17, he has categorically stated that he did not agree that in all cases cash bas been accepted over and above the agreement value but he agreed to surrender the difference as its additional income over and above the regular income for the respective years as on-money to avoid protracted litigations with the department and buy peace. On that basis the total on-money received was worked out at Rs. 63,39,52,372/- and added to the income of the assessee. It is undisputed fact that on the basis of the documents and evidence produced before us, the copy of which are available at pages 436 to 441 of the paper-book, the on money received, on the basis of the seized documents, by the assessee in respect of flats comes to Rs. 13,44,68,725/....
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....ts available on record, it is apparent that the Assessing Officer has estimated the booking amount and on that basis assumed that the assessee would have received the on-money. He made the presumption as if the assessee has sold all the flats @15750/- per sq. ft and the shops @26000/- per sq. ft. From the documents in the booking, it is evident that different flats and different shops have been booked at different rates by the assessee. From page 443 of the paper-book, as found during the course of search, the assessee has given discount on the bookings at different rates to different customers. We noted that in respect of two shops although the base rate has been mentioned @21,000 per sq. ft, the assessee has given discount around Rs. 4150 per sq. ft. and booked the shops @17500 per sq. ft including the club charges of Rs. 750/-. Similarly, in respect of flat also we noted that the base rate has been mentioned @12,000/- per sq. ft and after adding floor rise, club charges, infra charges etc., total rate came to Rs. 14375 per sq. ft. and the assessee has also given discount of Rs. 1000/- and ultimately booked the flat @13,350 per sq. ft. Even on the same very page had the details o....
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....worked out by the Assessing Officer and Excess on-money worked out by the Assessing Officer. The details are as under: Particulars Total Revenue as per seize material Total revenue as recorded in the books Difference (A-B) On-money worked out by AO Excess on-money worked out by AO (D-C) A B C D E For 36 flats 8254,10,000 7201,25,562 1052,84,438 1344,68,725 291,84,287 For 10 Shops 2058,92,500 1449,43,854 609,48,646 650,10,096 40,61,450 Total 10313,02,500 8650,69,416 1662,33,084 1994,78,821 332,45,737 The assessee has filed copies of agreement also before us from pages 128 to 378 of the paper book. In the agreement, we noted that these charges have specifically been mentioned. The assessee therefore before us submitted that the Assessing Officer has calculated excess on-money of Rs. 3,32,45,737/-. We, therefore, direct the Assessing Officer to verify this fact on the basis of the evidence submitted by the assessee. In case the Assessing Officer finds that the difference worked out by him in respect of the on-money received by the assessee at Rs. 19,94,78,821/- is not correct, this on-money be reduced by the amount as may be finally worked ....
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....other decisions i.e. CIT vs. Gurubachhan Singh J Juneja 302 ITR 63, DCIT vs. Panna Corporation 74 DTR 89 and CIT vs. President Industries 258 ITR 654, on which the learned AR has vehemently relied. In our opinion, these decisions will not assist the assessee. These decisions, in fact, relate to unaccounted sales and not onmoney received by the assessee. The learned AR must be aware that there is always a difference in suppression of consideration and undisclosed sales made outside the books of account. It is not a case where the assessee has booked the project outside the books of account so that expenses incurred could be allowed. There is evidence on record that the assessee has received on-money consideration for the booking of shops as well as flats. Therefore, to that extent, subject to our aforesaid directions, the addition has to be confirmed. The learned AR at this juncture has taken a argument that it is a case where the assessee was following project completion method. Project completion method has been followed consistently by the assessee. Both the projects relating to the flats and the shops in respect of which the evidence were found for receipt of on-money by the ass....
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....Cost Land Related Construction Cost 24.01 33.26 Other cost (Development, Selling and Admin cost) Finance Cost 10.64 5.46 Total Cost 73.37 Estimated Profits 25.46 The assessee offered the same for taxation. During the course of assessment, the Assessing Officer confronted the assessee but the assessee submitted that the estimated profits were firstly just estimates for the impugned project. It was submitted that the said project is actually a very large one comprising of nine buildings of which Chestnut is only one building, which was completed up to 31.03.2015. The estimated profit of the said project was required to be worked out then and there at the time of the search action from the pool of expenses that too without access to the systems at that time. Therefore, the figures of the expenses were not worked out accurately by the staff and some of the cost elements were missed out. Even there was cost escalation with respect to the said project executed as compared to the cost estimates projected earlier on the basis of which the profit of the project was offered at the time of search action. The details of the cost incurred and reasons of the cost escalatio....
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....were sold subsequently. However the fact remains that almost entire sale consideration of all these flats had been received by the assessee and therefore even if the registration or sale deed happens later, for all practical purposes the flats were sold and registration may have been done by the assessee with a viw to defer the tax liability. The important point remains that once the assessee had admitted certain income during the course of search, it should have honoured the same. Further various case laws relied upon by the assessee do not come to help to the assessee as firstly it is a search and seizure case and secondly hard evidence has been found against the assessee during the course of search, on the baisis of which the assessee admitted additional income of Rs. 100.96 cr . 15. In view of the above facts, I am of the considered opinion that the addition made by the AO is fully justified and is on the basis of assessee's own admission in sworn statement at the time of search and therefore does not call for any interference. The same is therefore, upheld. Consequently, ground No 3 & 4 are rejected." 12. We have heard the rival submissions and carefully considered the sa....
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....ed. The books of the assessee were not rejected by the Assessing Officer nor has he invoked the provisions of section 145(3) of the Act. Once, the Assessing Officer has not rejected the books of account, in our view, the Assessing Officer is bound to accept the profit shown in the books of account except making the disallowance of the expenses claimed by the assessee wherever he feels the assessee has not genuinely incurred the expenditure for which the onus lies on the assessee. It is not a case where the Assessing Officer has made the addition in respect of this project on the basis that the assessee has received the consideration much more than whatever has been disclosed in the regular books of account. The assessee has duly submitted the explanation for each and every difference item-wise in the following manner. : S. N. Particulars Cost Impact (In Cr.) Annexure 1 Contract of Civil works was awarded to contractor M Ramzan in November 2010 for tower & podium. However, the contractor was not performing as per expectations. Hence, his contract was terminated. Tower Area Contract (1,42,776 sq. ft.) was then awarded to Gammon India Ltd. in January 2012 and Con....
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.... However as per traffic analysis requirement it was necessary to put three elevators. The cost of one additional elevator & cost of necessary RCC work for the same was subsequently added to the budgeted estimates. The total cost impact was Rs. 34 lakhs (for the elevator) and Rs. 46 lakhs (for related additional RCC works) 0.80 E&H 9 For windows the quantity for UPVC windows Taken in budget was 1330. 83 m2 @ Rs. 3,228/- per m2 and quantity of aluminum windows was 1,598.5 m2 @ Rs. 3,120.40 for flat & 299.68 m2 @ Rs. 1,829.20 per m.2 for staircase & lobbies. However after finalization of design the quantum of aluminum windows was substantially reduced & quantum of the UPVC windows was increased. There was substantial increase in rates. For UPVC, actual labour rate incurred was Rs. 600/- psf instead of Rs. 300/- psf estimated earlier and for aluminum it was Rs. 300/- psf instead of Rs. 170/- psf considered earlier. This had a combined cost impact of Rs. 1.02 cr. Itemized break up is available in the budget sheet enclosed as proof of the same. 1.02 J, Finishing cost, 1 D 10 Earlier gypsum plaster was not considered for flats, kitchen, lobby futility, later on it was decided to b....
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....ted cost taken at the time of the search while working out the profit from this project at Rs. 25.46 crore, the assessee has explained and filed a reconciliation how the actual cost incurred by the assessee as per the audited Profit & loss account differ from the cost estimated at the time of the search. It is not denied that as on the date of the search, while estimating the profit At 25.46 crore, the assessee has shown the sales at 98.83 crore and estimated expenses at 73.37 crore but subsequently, as per the audited accounts the sales consideration realized by the assessee also increased from 98.83 crore to Rs. 107.56 crore. Simultaneously, there is also increase in the cost from 73.37 crore to 94.07 crore and, ultimately, the profit derived by the assessee came to 13.49 crore. We noted from the estimation of the profit at the time of search at Rs. 25.46 crores, the figures have been taken in rounded off while the real profit cannot be round off even from the working at the time of the search. It is apparent that the nomenclature is to estimate profit worked out in the estimated Profit and loss account for the F.Y 2014-15. We have also perused pages 25 to 127 of the paper-book, ....