TaxTMI 
TaxTMI 
2018 (12) TMI 898
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....acts necessary for the disposal of the appeal are stated in brief. 2. The assessee is a firm engaged in construction of apartments. In respect of Assessment Year 2012-13 the assessee declared total income of Rs. 13,62,270/- on 20.12.2012. For the Assessment Year 2013-14 the assessee declared total income of Rs. 29,53,880/- on 20.12.2013. Survey action u/s 133A took place on 21.12.2012. During the course of survey operations the authorities found certain incriminating material relating to Sai Soudha Towers wherein certain receipts have not passed through books of account. The partner of the firm Sri M. Hari Premnath admitted, during the course of survey, that the receipts were not recorded in the books of account. He also offered a sum of Rs. 50 lakhs as undisclosed income for the A.Y. 2012-13 and Rs. 1 Cr for the A.Y. 2013-14, apart from regular income. Question No.13 and Answer to the said question are extracted for immediate reference:- Q. 13. I am showing you classmate note book S No. 17 containing the accounts of various buyers, on a randam check up of three accounts namely P. Lakshmi Kumari, J V Rama Krishna and L. Sreedhar Reddy, the cash receipts amounting to Rs.....
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....penditure was also not passed through books. 5. The A.O. observed that the assessee having not filed the revised return on his own, but only after survey u/s 133A, the same cannot be accepted. He accordingly did not take into consideration the revised return and proceeded to make the impugned addition on the basis of original return of income. 6. Vide letter dated 13.03.2015 the assessee submitted that the difference is only in construction of Sai Soudha Towers, Ongole. The assessee undertook construction during the year 2011-2012 relevant to the A.Y. 2012-13. In the original return, gross receipts of Rs. 1.51 Crs was admitted. On account of discrepancies, a revised return was filed declaring full consideration of Rs. 1,86,56,000/-, thus the difference is only Rs. 34,84,000/- in sale consideration. It was contended that for understatement of sales to the extent of Rs. 34,84,000/- for the A.Y. 2012-2013, income cannot be earned to the tune of Rs. 50 lakhs. Further, it was contended that the entire sales, which was not admitted,will not become income since expenditure has to be incurred against such sales. In respect of A.Y. 2013-14, the assessee contended that the full conside....
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....ng valuation report in respect of the flats or assets which are in the nature of stock-in-trade. He was therefore of the view that the entire additional receipts have to be separately taxed. 10. It was also noticed that the assessee did not deduct tax at source from the interest paid to certain parties, to the tune of Rs. 2,94,633/- as per sub-Rule 3 of Rule 29C of the IT Rules read with the provisions of section 197A (1A) of the Act. The assessee should not only obtain Form 15G but it should be forwarded to the CCIT or CIT whereas in the instant case the assessee having not forwarded the same to the CCIT or CIT A.O. invoked the provisions of section 40(a)(ia) of the Act and disallowed an amount of Rs. 2,94,633/- for the A.Y. 2012-13. 11. Similarly, for the A.Y. 2013-14, the case of the assessee was that the total gross bills for the assessment years under consideration from Sai Soudha Towers is Rs. 2,60,83,000/-, and hence there is no suppression in admission of gross bills. The A.O. on the other hand observed that the consideration from the buyers was received by the assessee and all the expenditure was incurred by the said date and the assessee could not produce any cas....
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....2-13, can be only to the extent of Rs. 34,84,000/- and this figure refers to the difference in turnover and not profits since the assessee cannot make such huge profit from construction of flats as a developer. It was also contended that the amount received from the customers was recorded in a separate sheet which was impounded during the course of survey. The customers accounts to be cross-verified and they need to be produced to the customers wherein the amount receivable or received will be recorded whereas the bills of expenditure not recorded in the books of accounts need not be maintained by the assessee as they are not liable to be shown to anybody but that fact should not imply that the entire additional expenditure should be disallowed on the ground of non-availability of the bills. In fact to overcome this deficiency, the registered valuer's report was placed on record wherein the cost of construction was estimated and on this the A.O. has not made any comments and there was also no reference to DVO. It was also stated that the profit made from this venture works out to 3.72% of the turnover whereas the assessee had taken into consideration additional turnover and admitte....
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....re the Tribunal. For the A.Y. 2012-13 the assessee filed cross objection on the limited ground that the income having been estimated, provisions of section 40(a)(ia) are not applicable and further submitted that the Commissioner of Income Tax is not justified in directing the A.O. to initiate penalty proceedings u/s 271A(2)(f) of the Act. 19. In the appeal for the A.Y. 2012-2013, the Revenue mainly contends that the Ld. CIT(A) failed to appreciate the provisions of section 197A(1A) of the Act and further contended that the assessee having admitted additional income of Rs. 50 lakhs during survey proceedings towards under-reporting of gross receipts, the finding that the Assessing Officer has not given sufficient opportunity is not correct and in fact there was no evidence in respect of alleged expenditure related to unrecorded gross bills. Similarly, for the A.Y. 2013-14, the contention of the Revenue is that the assessee having admitted unaccounted gross receipts there cannot be any estimate of income and the A.O. wasjustified in treating the same as additional income, which was not passed through the books of account and in the absence of proof that some additional expenditure ....
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....sessee. Even otherwise, after appropriate reconciliation, the actual difference in turnover was shown at Rs. 34,84,000/- only and no prudent person could have given any declaration to admit an additional income of Rs. 50 lakhs. It was also submitted that in the case of estimation of income, only profit element can be taxed on the finally quantified and disclosed turnover. He relied upon the decision of the Hon'ble A.P. High Court in the case of CIT vs. Ravi Foods (P) Ltd in ITA No.35/15, dated 16.06.2015 wherein the Hon'ble Court estimated the net profit at 3.91% of the finally quantified undisclosed turnover. Learned Counsel for the Assessee also submitted that in fact the assessee, in the revised return, declared 8% income on the total turnover whereas the percentage of profit declared in the original return was much less. It was also submitted that though the variance in turnover, as indicated in the impounded material, is with regard to one venture only i.e., Sai Soudha Towers but the appellant had made higher estimate of 8% in respect of the turnover related to other ventures also and hence separate addition cannot be made in the absence of any allegation of overall suppres....
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....but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales. The Tribunal also found that there is no material on the record to suggest that the assessee made any investment outside the books of account to make alleged unaccounted sales in respect of the aforesaid appellate order. The applicant made an application under section 256(1) for referring the aforesaid two questions said to be arising out of the Tribunal's order.(Emphasis Supplied) Having perused the assessment order made by the assessing officer, the order made by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisationof excess over the cost incurred that only forms part of the....
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.... 153A and made addition in respect of cash entries noted on the loose sheets. The assessee submitted that ownership over those documents was that of the plot owners and not of it. The seized papers did not carry any signatures of directors or of its staff but they were typed pages. AO held that the amount received by the assessee from the purchasers, which had not been recorded in the books of account of the assessee was the total income of unrecorded sales consideration. Held: According to the nature of the assessee's business of purchase and sale of real estate and flats, Tribunal was justified in treating 25 per cent of sale proceeds received in cash as income of the assessee, instead of making addition of the entire amount of sale proceeds received in cash. The learned Tribunal considered the matter in detail and allowed the appeal in part. Paras 10 and 11 are relevant, which read as under: "10. So far as merit of addition is concerned, we found that the assessing officer has added the entire amount of sale proceeds of plots received in cash in the income of the assessee. Honble jurisdictional High Court in case of CIT v. Balchand Ajit Kumar (2003) 263 ITR....
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....case before us, the assessee was engaged in the business of real estate, wherein part of the amount of sale consideration was received through cheque and balance in cash and only cheque amount was entered in the regular books. The assessing officer added entire amount of sales received in cash in assessees income. The crux of the arguments of the learned Authorized Representative was that only profit element embedded in the sale proceeds received in cash, should be added in the assessees income and not the entire sale proceeds. As per our considered opinion adding entire amount of sale consideration received in cash will not serve the end of justice. Sale proceeds comprise of cost, expenses and profits. Out ofentire sale proceeds, only profit element is liable to tax. When the assessee is found to have not incorporated entire sale proceeds in the regular books of account and the assessing officer is not satisfied about the correctness and completeness of the accounts of assessee, the same are liable to be rejected. Under these circumstances estimation of profit is to be made in respect of sale proceeds not accounted for. Accordingly, profit element in the unaccounted sale ....
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..... However, on appeal by the taxpayer, the CIT(A) deleted the addition after estimating the gross profit on the suppressed sales turnover. According to the Id DR, the entire difference ought to have been taken as profit of the taxpayer. The CIT(A) after placing reliance on the judgment of the Gujarat High Court in CIT vs President Industries 258 ITR 654 (Guj) and CIT vs Abhishek Corporation 158 CTR (Guj) 374 found that the assessing officer estimated the profit excessively. In this case also it is not in dispute that the purchase made by the taxpayer was recorded in the books of account. It is not the case of the revenue that the taxpayer has purchased any IMFL outside the books of account. Therefore, there is no investment outside the books of account. As found by the Gujarat High Court what is to be taken is only the profit element embedded in such suppressed turnover. The CIT(A) has rightly found that what is to be added is only the profit element embedded in such transaction and not the entire turnover. Therefore, this Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed. DCIT Vs Havc Systems (P) Lt....
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....ich, in our view, are applicable to the facts of the case on hand. "(Para. 5. 3. 2) "In the case on hand, the grievance of the revenue is that the assessee has not shown that it has incurred expenditure in respect of undisclosed/suppressed sales. The learned CIT(A) has proceeded to estimate the assessee's profit @18% of the turnover after recording that entities in the same line of business, as that of the assessee in the case on hand, have shown lesser profits in the region of 9% to 12% of turnover. Merely because the expenditure incurred by the assessee in respect of this turnover has not been proved does not mean that there was no expenditure incurred at all and such a plea cannot be accepted. In such circumstances, an estimate of the probable profit has to be made having regard to the surrounding circumstances, ground realities, corroborative evidence in the form of profits shown in comparative cases and other factors that are relevant to determine the real income of the assessee. We are of the view, that in the facts and circumstances of the case as laid out above, the learned CIT(A) has followed the correct and reasonable approach in estimating the profit on the ....
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....ing Officer u/s 40(a)(ia) of the Act. The case of the assessee, vide Cross Objections, was that in the case of estimate of income, all other disallowances are deemed to have been taken care and hence no separate addition is maintainable in the light of the decision of A.P. High Court in the case of Indwell Constructions (supra). It may be noticed that the Revenue preferred appeal against the order passed by CIT (A) on the ground that mere obtaining Form 15G is not a sufficient compliance u/s 194A read with section 197A(1A)of the Act and it is a duty of the assessee to submit the declarations to the CIT within the stipulated time. 32. Ld. CIT(A) observed that there is a sufficient compliance if the declarations are obtained in Form 15G from the payees and even though the assessee has not forwarded the same to the CIT. 33. In our considered opinion, the Ld. CIT(A) has committed an error in appreciating the provisions of section 197A(1A) of the Act. The Legislature in its wisdom thought it fit to enforce deduction of tax at source by the payer who is an income tax assessee and in exceptional circumstances, where the recipients are not income tax assessees, a procedure is prescri....