TaxTMI 
TaxTMI 
2018 (7) TMI 48
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act were initiated and various notices have been issued. Assessee has declared only salary and interest incomes and has not disclosed income from development of property. AO has pursued the investigation diligently and came to know that assessee has purchased a site at Green Glen Layout, Bellandhur, Bangalore, constructed 12 flats and one penthouse, borrowed funds from State Financial Corporation and repaid the loans and also had different bank accounts in which sale proceeds have been deposited and expenditures have been incurred. After enquiry from the banks and from other officers at Bangalore, AO has completed the assessments in respective assessment years. In the course of assessment proceedings, assessee had admitted incomes on the turnover at about 17% in AYs. 2008-09, 2009-10 & AY. 2010-11. However, AO did not consider the profit earned method but completed the assessment on the basis of unexplained assets and expenditure. Accordingly in AY. 2008-09, AO has brought to tax an amount of Rs. 48,90,343/- by stating as under: Rs. Total loan from K.S.F.C (8/07) 49,50,000 Less: Paid for purchase 29,45,316 20,04,684 Less: Re-paid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the profit at 20% of the sale consideration in all the three assessment years as against 17% adopted by assessee in the revised computations. While doing so, Ld.CIT(A), however, did not consider the objections on the sales turnover raised by assessee. Further, while directing the AO to adopt the rate of profit at 20%, Ld.CIT(A) also brought to tax an amount of Rs. 40 Lakhs stated to be certain cash credits, which was enquired by AO and but did not consider for addition in the assessment order. He also confirmed the disallowance u/s. 40(a)(ia) in AY. 2009-10. Assessee is aggrieved on the estimation of income at 20%,non-adjudication on sale consideration and disallowance u/s. 40(a)(ia) in the three impugned assessment years. Revenue is aggrieved on the change of method of assessment by the CIT(A) contending that the AO's method should be allowed. 5. We have heard Ld. Counsel for assessee, Ld.DR and perused the paper book placed on record. Their arguments are incorporated as and when required in this order. Issue of estimation of profit: 6. Assessee even though did not disclose the entire business of construction of houses when AO has enquired and found various bank accounts and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red profit of 17% on the sale consideration indicates that he has earned substantial profits, more than similarly placed building contractors. Therefore, the contention raised that the determination of profit should be at 17% on the sale consideration cannot be accepted. Since there are many lapses on the part of assessee and AO had to enquire and find out various transactions of assessee, we are of the opinion that estimation of profit at 20% on the sale consideration is reasonable and accordingly, the estimation by Ld.CIT(A) is upheld. Grounds on this issue in all the three assessment years are rejected as assessee's main contention is only on the rate of profit. The rate of profit at 20% is confirmed. Difference in sale consideration: 7. One of the contentions of assessee before the Ld.CIT(A) was that there was difference in sale consideration adopted by AO in the order. It was pointed out that actual sale consideration to be considered for the AY. 2008-09 was Rs. 89,16,318/- as against Rs. 90,78,000/-. Similarly in AY. 2009- 10, the turnover should be at 1,87,76,650/- as against Rs. 1,90,78,000/-. Ld. Counsel brought to our notice the following reconciliation furnished: AY ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee to explain various transactions. Assessee has recasted the accounts and prepared cash book and statements. An amount of Rs. 40 Lakhs was shown as advance received in the cash book so prepared and AO noticed without that Rs. 40 Lakhs, assessee's cash book shows negative balance from 05- 05-2007 to 10-08-2007. Without mentioning how much the negative cash balance was, AO enquired about the receipt of Rs. 40 Lakhs introduced on 11-04-2007. Assessee has submitted an un-registered agreement dt. 11-04-2007 supposed to have been for selling property. Even though AO enquired and those parties have confirmed, AO noticed that the parties are relatives of assessee, the property was not disclosed in earlier years and assessee has furnished another document of similar nature and gave findings that assessee has furnished bogus documents in order to explain the cash receipt on that date. However, AO ultimately concluded that the cash book cannot be relied upon. The findings in para 28 on this issue are as under: "It is pertinent to mention here that even though advance of Uttarhalli land is entered in the re-casted cash book for the AY. 2008-09. In view of the above detailed reasons, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of Rs. 45 lakhs, the impugned creditors have paid Rs. 40 lakhs in 2007 itself and they are still awaiting for transfer of the impugned property. Then, the appellant submitted that there was some document problem and that's why the impugned property could not be transferred to the impugned creditors. However, he finds other persons, once again family members, in the year 2013 and proposes to sell it for Rs. 60 lakhs, claimed to have obtained Rs. 35 lakhs and repaid all the original creditors in the year 2013 without any interest or compensation. This defy the human probabilities. The original creditors were claimed to have paid Rs. 40 lakhs in 2007, and just awaiting for the transfer of property just Rs. 5 laks only. If this claim is true, then the advance made by them almost at the time when the real estate boom began, could have appreciated, conservatively, anything between 200 to 300 % in 2013. They would not have settled for anything less than the impugned property or its equivalent property. The AO has clearly pointed out various inconsistencies elaborately in her order and rejected the appellant's claim. On the overall facts and circumstance, it is clear that the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO. Since the income is based on estimation, the re-casted cash book need not be considered for the purpose of making addition u/s. 68 of the Act. It is true that law permits addition u/s. 68 of the Act even when books are rejected, but in the peculiar facts of the case, where assessee has prepared the cash book on the basis of the information received on enquiries caused by the AO, the so called cash credit of Rs. 40 Lakhs on 11-04-2007 need not be brought to tax separately as the income was declared at 20% on the sales turnover, rejecting statements prepared by assessee. In view of that, we are of the opinion that the addition by the CIT(A) of an amount which was not added by the AO is not warranted on the facts of the case and hence AO is directed to delete the same. The order of CIT(A) to that extent is modified. Grounds are allowed. Addition of Rs. 1,29,600/- u/s. 40(a)(ia) : 9. This issue arises in AY. 2009-10. After rejecting the books of account and making assessment on the method followed by the AO, AO made an addition u/s. 40(a)(ia) on the interest payment reflected by assessee in the cash flow statement. AO brought this amount separately to tax as discussed in the com....