TaxTMI 
TaxTMI 
2020 (4) TMI 844
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.... of reference we are referring facts from the assessment year 2012-13 as well as assessment year 2015- 16, because Asstt.Year 2012-13 is the first assessment year in this group, and Asstt.Year 2015-16 is the last assessment year. 3. The assessee has filed an application for permission to admit additional grounds. This application was allowed vide order dated 8.1.2020. The grounds were taken up on record for adjudication. Order dated 8.1.2020 reads as under: "08.01.2020 Present : Shri S.N. Soparkar, AR Shri Subhash Bains, CIT-DR Present six cross appeals for the Asstt.Years 2012-13 to 2015-16 came up for hearing. In the Asstt.Year 2012-13, the assessee has filed an application in IT(SS)A.no.289/Ahd./2018 for permission to raise additional grounds of appeal. It has sought to raise the following two grounds: 1. Both the lower authorities erred in law and on facts in framing assessment under section 143(3) r.w.s. 153A ignoring fact that material relied on making addition is found from the premises of third person and addition was made without recording satisfaction in case of third person and also in case of the appellant and accordingly assessment is requir....
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....p; Sd/- (AM) (JM) WSA &....
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....as purchased by Anushthan Buildcon Pvt. Ltd. in piecemeal from F.Y. 2011-12 to F.Y. 2013-14. Thus, Anushthan Buildcon Pvt. Ltd. is 91.12% holding company of the appellant company. The Directors of the appellant company are as under:- List of directors of Greenfield Reality Pvt. Ltd. is as under:- Sr. No. Name of Director 1 Mr. AshitHaribhaiVora 2 Mr. SanketJitendrabhai Shah 3 Mr. AnkitSureshbhai Shah 4 Mr. DarshitJayeshbhai Shah 5 Mr.BhaveshbhaiLaljibhaiPansuriya 6 Mr. NitinbhaiKalubhai Desai 7 Mr. Karan Pankajbhai Shah The shareholders and directors of Anushthan Buildcon Pvt. Ltd. is as under:- List of directors of Anushthan Buildcon Pvt. Ltd. is as under:- Sr. No. Name of Director 1 Mr. AshitHaribhaiVora '2 Mr. SanketJitendrabhai Shah 3 Mr. AnkitSureshbhai Shah 4 Mr. DarshitJayeshbhai Shah List of shareholders of Anushthan Buildcon Pvt. Ltd. is as under:- Sr. No. Name of Shareholder No. of shares Shareholding (in %) 1 AtuI Hiralal Shah 5000 50.00 -- 2 Anil Hiralal Shah 700 3 AnkitSureshbhai Shah 3800 38.00 4 DarshitJayeshbhai Shah 500 5.00 TOTAL 100 The project for the constructi....
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....elate to both the projects. 3. Detailed discussion on the Seize Material / Explanation for seized papers The appellant company submits that in the course of search action, loose papers pages no. 1 to 5 of Annexure A-3 & page no. 36, 37, 38, 39, 43, 44, 46, 47 of Annexure A-l and pages 10 to 12 of Annexure A-10 were seized from the residence of Shri Ashit Hirabhai Vora, one of the Directors of the appellant company. The appellant company submits that as per pages 2 & 5 of Annexure A-3, the purchase cost of the land is noted at Rs. 42,68,00,000/- (total land 8220 sq. yards). Further, on page no. 5 of seized annexure A3, the details of amounts collected by the group members towards booking receipts as well as the booking details of the 14 units have been mentioned and noted and also on the same page the land cost of Rs. 42,68,00,00/- is ' also mentioned and the aggregate amount is stated at Rs. 48,65,76,625/- . The appellant company submits that the payment for land in cash of Rs. 22.75 crores is made out of the booking amount for the project received in cash. The appellant company submits that the seized papers also give details of the aggregate amount of on money receive....
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....trarily only considered the unaccounted receipt for framing the Assessment orders which is unjustified and bad in law. Page No.43 Details of booking receipts in cash and various expenses incurred on building and developing Shiv Kartik Enclave scheme at Vesu till 18/04/2012. The appellant would like to state the expenses regarding the registration, salary , legal, commission etc have been clearly mentioned and the same justifies that against the uaccounted booking receipts there were unaccounted expenses which have been clearly mentioned in the seize material which also have to be considered by the A.O. Page No.46 Details of various expenses incurred on building and developing Shiv Kartik Enclave scheme at Vesu till 17/05/2012. The appellant would like to state the expenses regarding the registration, salary , legal, commission etc have been clearly mentioned and the same justifies that against the uaccounted booking receipts there were unaccounted expenses which have been clearly mentioned in the seize material which also have to be considered by the A.O. Seize Annexure A3 Page No.03 Working of 14 Units Sold of Shiv Kartik Enclave developed by the appellant company ....
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...., the assessee failed to provide proper evidence to convey the basis for estimating profit at 8% on total receipt of Vesu project. In any case, until & unless assessee provides details (PAN, Name, address etc.) with confirmations from parties to whom payments/expenses have been made out of this unaccounted money, no benefit of deductions can be allowed to assessee. The assessee failed to produce cash book of the project in support of its claim. Without prejudice to above, even if the claim of assessee for expenses is considered, the same is not allowable as per section 40A of the IT Act. 9.1 It is evident from the seized material and submission of the assessee that assessee had received cash of Rs. 66,40,00,0007- on sale of property of Vesu project. Assessee had submitted flat/shop wise details of cash receipt, cash flow and copy of cash voucher only on 27.02.2017 which is after 80 days of issuance of final show cause notice. This proves that such details were prepared in haste in support of its claim and without any documentary evidence. Also from the submission dated 27.02.2017, following fact emerges: * Assessee shows booking of 15 crore in FY 2011-12, however, assessee ha....
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.... that assessee has been changing its stand continuously. Even as per this new stand of assessee, the unaccounted receipt of the assessee for A.Y. 2012-13 comes to Rs. 15,25,00,000/- which is not shown by assessee in its books of accounts and also not offered in return of income. Also, the same is not substantiated with any supportive evidence. On the other hand, the seized documents clearly shows that no project was initiated during AY 2012-13 and assessee had itself shown booking from AY 2014-15 onwards as tabulated above. Since assessee had itself claimed total on-money receipt of Rs. 15,25,00,000/-during AY 2012-13 and substantive additions for receipt of on-money has been made in AY 2014-15 to 2015-16, protective addition of Rs. 15,25,00,000/- is made on this ground as unexplained money from unaccounted receipt as discussed in preceding para. I am satisfied that assessee has concealed the particulars of its' income and also furnished inaccurate particulars of its income by not recording above discussed cash transaction and therefore, this is a fit case for initiating penalty proceedings. Penalty proceeding u/s.271 r.w.s. 274 are separately initiated for levy of u/s. 2....
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.... 12 of Annexure A-10 were found & seized. In the above mentioned pages, details of "Vesu" Project are mentioned. This project has been under taken by the appellant, therefore, proceedings u/s. 153A of the Act were initiated by issuing notice dated 22.07.2015, which was duly served upon the appellant. Vide letter dated 26.10.2016, the appellant stated that return filed on 29.09.2012 may be considered as return filed in response to notice issued u/s. 153C of the Act. The notice u/s.143(2) dated 26.10.2016 was issued & served upon the appellant. Meanwhile the appellant filed appeal before the Settlement Commission, Mumbai vide application dated 20.12.2016 for AY 2012-13 to 2015-16. But the same was rejected by the Settlement Commission vide order dated 02.01.2017. Hence fresh opportunity of being heard was provided by the AO to the appellant and assessment was finalized vide order dated 01.03.2017. The appellant is in appeal against the additions made in the said assessment order. 6. The First ground of appeal is against the additions of Rs. 2,92,76,625/- made by the AO as unexplained expenditure incurred in cash by the appellant for the project. The AO stated that as per the se....
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.... However, if the unaccounted income from this project is to be determined on the basis of all unaccounted cash receipts and all the expenditure' including the unexplained expenditure incurred in cash has been taken care of while determining the unaccounted income from this project, as mentioned in para 7, no separate addition is required to be made on this account. Thus this addition is deleted. This ground of appeal is allowed. 7. The Second ground of appeal is against the additions of Rs. 15.25 core on protective basis made by the AO considering the receipts as unaccounted for this year. The AO stated that out of total cash amount of Rs. 66.40 crore received by the appellant on booking/sale of units of the project, Rs. 15.25 Or. has been estimated for this year on this proportionate basis of amount shown in regular books of accounts. The receipts of Rs. 15.25 crore remain unaccounted in the hands of the appellant, thus, it was added on protective basis till the appellant provides details (PAN, Name, address etc) with confirmation from the parties to whom payment/expenses have been made out of this unaccounted money, no benefit of the deduction can be allowed. The AO rejec....
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.... hands of the appellant for the year under consideration. But additions cannot be made considering the total on money receipt as income of the appellant for the year. The seized documents proved that the appellant had paid Rs. 42.68 crore in cash for purchase of land, which also remain unaccounted. Thus, receipts of on money and payment for purchase of land in cash, both remain out of the regular books of accounts. It is legally settled principle that the real income should be taxed and not the notional income. It has been held in several judgements delivered by the higher judicial authorities that some percentage should be taken as income from the total on money receipts. It has been held reasonable to consider income from 12.5% to 20% of the total on money receipt as income of the appellant. The basis for taking percentage as income of the total amount is that the assessee has to incur expenditure in purchasing land & for other items, which also remain out of books. Keeping in view the facts of the case in totality, it is reasonable to consider 20% of the total on money receipts as income of the appellant for the year under consideration. The appellant itself has shown 8% of tota....
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....towards the order of the ITAT, Ahmedabad Bench in the case of Kishor Mohanlal Telwala, 64 TTJ 543 = 107 taxman 86 (Ahd). He submitted that in this case a search was carried out at the residence of the assessee on 6.10.1995. During the course of search a piece of paper was found exhibiting the fact that in the project, "Hare Krishna Apartment" the assessee has received on-money on sale of flats. The alternative contention was raised before the Tribunal whereby it was contended that only element of profit in the alleged on-money is to be assessed as income of the assessee. He took us through paragraph 4.1 where this pleading was raised by the assessee before the Tribunal. Thereafter, he took us through paragraph 6 of the Tribunal's order wherein the Tribunal has accepted the assessment of income out of such on-money at 8%. The Tribunal took guidance in section 44AD whereby it has been provided that in case of civil contractor, if the gross receipts are less than Rs. 40 lakhs, then income of such assessee should be taken at 8%. Since this was the rate provided by the Legislature for small assessees the Tribunal took guidance from this for estimating the income. This order of the Tri....
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....gment. He took us through the following question of law. Hon'ble High Court after taking into consideration its judgment in the case of Koshor Mohanlal Telwala (supra) upheld order of the ITAT, and held that element of profit is to be identified in on-money receipts. We have been taken through the following finding of the Hon'ble High Court: "14. We may recall that the Tribunal, in the impugned judgement, relied on its previous judgement in case of Kishor Mohanlal Telwala. The said judgement of the Tribunal was apparently carried in appeal by the revenue. The High Court by a speaking order dated 24.4.2000, dismissed the appeal holding that no question of law was involved. Significantly, in case or Kishor Mohanlal Telwala, the assessee was engaged in the business of construction. In his case, unaccounted receipt of Rs. 1.47 crores was detected. In this background, the Division Bench confirmed the view of the Tribunal and did not accept the contention of the revenue that as no accounts had been maintained to substantiate the expenditure incurred by the assessee, the entire amount received by the respondent should be treated as income. The Court concluded that the Tribunal was just....
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....n an analysis of the record, it would reveal that during the course of search not only details of on-money received by the assessee on booking of flats and shops in "Vesu Project" was found, but details of certain expenditure, which are not recorded in the books were also found. This included cash payment for purchase of land. Therefore, the ld.CIT(A) has rightly observed that the gross on-money noticed on the seized paper cannot be considered as income of the assessee. There are certain expenditures which were not recorded in the books. Those expenditure must have been made from this on-money. Therefore, after going through the well reasoned order of the ld.CIT(A), and in the light of judgment of Hon'ble jurisdictional High Court in the case of Panna Corporation (supra) as well as Koshor Mohanlal Telwala (supra), we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in "Vesu Project" is required to be assessed in its hand in all these years. 17. Next question arose, what is the element of income involved in this on-money. On one hand, the assessee is showing income at 8%, on the other hand, the ld.CIT(A) is e....
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....tion 144 would suggest that in order to estimate income, learned Assessing Officer has to exercise his discretion which should be in consonance with best of his judgment. We are conscious of the fact that in various authoritative pronouncements, it has been propounded that in making a best judgment assessment, the Assessing Officer must not act dishonestly or vindictively or capriciously. He must make, what he honestly believe to be a fair estimate of the proper figure of assessment and for this purpose he must be able to take into consideration, local knowledge, reputation of the assessee about his business, the previous history of the assessee or the similarly situated assessee. It is also pertinent to mention that judgment is a faculty to decide matter with wisdom, truly and legally. Judgment does not depend upon the arbitrary, caprice of an adjudicator, but on settled and invariably principles of justice. Thus, in a best judgment, even if, there is an element of guess work, it should not be a wild one, but shall have reasonable nexus to the available material and circumstances of each assessee. 20. During the course of hearing, we have confronted the ld.counsel for the assesse....
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....e Revenue are rejected. 21. Now we take ground no.1 of Revenue's appeal in the Asstt.Year 2012-13 and 2014-15. In this ground of appeal, Revenue has pleaded that the ld.CIT(A) has erred in deleting the addition of Rs. 2,92,76,625/- and Rs. 3,05,00,000/- in the Asstt.Years 2012-13 and Rs. 13-14. While dealing with the first issue, we have extracted complete order of the ld.CIT(A) in the Asstt.Year 2012-13 in para-6 of the impugned order where the ld.CIT(A) has discussed this issue. 22. Brief facts of the case are that during the course of search certain loose papers were found and seized. According to the AO a perusal of those loose papers would indicate that the assessee has incurred expenditure of Rs. 5,97,76,625/- in cash. Out of the above expenditure Rs. 2,92,76,625/- were alleged to be found incurred for the Asstt.Year 2012-13. The remaining amounts were found to be incurred for the Asstt.Year 2013-14. The AO has made addition on account of unexplained expenditure. In other words, according to him, the assessee failed to explain the source of expenditure. On appeal, the ld.CIT(A) deleted such addition on the ground that the income of the assessee is being estimated at a parti....
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....through the details deleted the addition by recording the following finding in the Asstt.Year 2014-15. The facts in the Asstt.Year 2015-16 are identical. The assessee has alleged that these are booking amount of Rs. 16,81,600/-. The AO has treated it has unexplained cash credit. 27. With the assistance of the ld.representatives, we have gone through the record carefully. The ld.CIT(A) has recorded a finding that the assessee has submitted confirmation from each person from whom booking amount was taken which also contained PAN, addresses et. It was also contended that these amounts were received through account payee cheques and the details of their returns were also filed. The ld.CIT(A) was of the view that initial burden under section 68 of the Act was discharged by the assessee by filing all these details. After considering the details furnished by the assessee, the ld.CIT(A) deleted the impugned addition. The relevant part of his order reads as under: "7. The Second ground of appeal is against the additions of Rs. 26,49,500/- made by the AO considering loan as unexplained credit u/s. 68 of the Act. During the year, the appellant had shown loan of Rs. 26,49,500/- from various....