AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 584
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....by the appellant. 2. The CIT(A) has gone wrong in estimating the collection of cash outside the books of accounts at Rs. 32,87,986/- without the support of any seized documents. 3. The appeals for the assessment years 2014-15, 2015-16 and 2016-17 are computed by the CIT(A) and found the total surplus at Rs. 8,72,43,520/-. The CIT(A) has gone wrong in arriving at the net surplus without considering the construction expenses of Rs. 16,11,88,680/- spent by the appellant up to 31- 03-2016 (relating to assessment year 2016-17). 4. The assessee has also raised common additional ground of appeals as follows: Whether the AO is justified in making assessment under the provisions of section 153A of the Act, which requires the carrying out of the search u/s. 132 of the Act in compliance of the Income Tax Rules 112. In the absence of any search conducted on the appellant, the assessment u/s. 153A is illegal and void. The representation of the revenue has given a copy of search warrant in Form No.45 dated 26/02/2016 but no search was conducted by the authorized officer in the Appellants premises but at the same time authorization for survey is given on 26/....
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....r investigation into the facts. This power of Tribunal is spelt out in r. 11 of ITAT Rules, 1963. Hon'ble Punjab & Haryana High Court has held in the case of Vijay Kumar Jain vs. CIT (1975) (99 ITR 349) (P&H) that the Tribunal may allow a party to press a ground which he does not press before the first appellate authority although he has taken and included in the grounds of the first appeal. The proposition of law on the issue of admission of additional or new grounds by first appellate authority was laid down by the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) (187 ITR 688) (SC) and Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (229 ITR 383) held that the same will apply to appeal before Tribunal Hon'ble Allahabad High Court in the case of CIT vs. Mohd. Ayyub & Sons Agency (1992) 197 ITR 637 (All) has held that the power of the Tribunal to permit any party to the appeal to raise the question of jurisdiction, which goes to the root of the matter and does not involve further investigation into facts, cannot be disputed on the plain reading of r. 11 of the ITAT Rules, 1963. In....
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....e off the powers of the Tribunal." 4.4 Thus, the settled legal position, which emerges from the aforesaid judicial pronouncements, is that the purpose of assessment proceeding is to tax/assess the taxable liability/income of the assessee correctly in accordance with law and if the assessee is entitled to certain relief, deduction or benefit, the assessee should not be denied or deprived of it, even if the claim pertaining to the same is made for the first time before the Tribunal during pendency of appeal before it. In the present case, the issue raised in additional ground is legal issue which goes to the root of the matter and for deciding the legal issue no new facts are required to be considered as all the facts are already recorded in the orders of the authorities below. Admittedly, at the time of hearing of this appeal by this Tribunal on 09/03/2020, the Ld. AR handed over a copy of search warrant issued to the assessee. On earlier occasion, at the time of execution of search warrant, the copy of the same was not furnished to the assessee and only acknowledgment was obtained at the back of the search warrant on 29/02/2016. Hence, there is merit in the argument of the Ld. A....
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....Nil 08/11/2017 07 2016-17 25.09.2017 13.09.2017 (-)26,81,692 27/10/2017 The Assessing Officer observed that as per section 153A of the I.T. Act, where search is initiated u/s. 132 in the case of a person, the Assessing Officer shall issue notice to such person and assess or reassess his total income in respect of each of six assessment years preceding the assessment year relevant to previous year in which search is conducted. Thus, after going through the seized material as well as documents collected during the search u/s. 133A of the I.T. Act, the Assessing Officer completed the assessments u/s. 143(3) r.w.s. 153A of the I.T. Act for A.Ys 2014-15 to 2016-17 vide order dated 30/12/2017 as per details given below: Assessment Year Total Income Tax demanded 2014-15 28,56,35,976 15,53,40,290 2015-16 15,17,67,094 7,30,79,550 2016-17 1,11,37,131 48,97,400 Total 44,85,40,201 23,33,17,240 5.1.1 On appeal, the CIT(A) observed that during search proceedings on a group of assesses and premises, both proceedings u/s. 133A and 132 of the I.T. Act are a common phenomenon. Where commercial enterprises/premises, not involving se....
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....d conducted the search on 29-02-2016 as per Rule 112 of I.T.Rules, 1962 and the survey, as per order dt.26-02-2016, was conducted on the assessee company on 29-02-2016. Hence, the claim of the Assessing Officer that the search was conducted in the assessee's business premises was not justified. According to the Ld. AR, there were no impounded documents indicating any concealment of income received from the assessee's premises by the survey u/s.133A of the Act, but two sheets of papers were received from the residence of Sri Mohammedkutty Haji regarding the receipt of consideration by cheque and cash in respect of 20 agreements for the sale of shop rooms. The Ld. AR submitted that the assessments were completed without any reference to the seized document and the assessments were completed on the presumption that entire building was sold for a consideration of Rs. 62,47,79,873/- and a Net Profit of Rs. 45,77,22,783/- was treated as income of the assessee company. 5.3 The Ld. AR submitted that as per the search warrant, no search was carried out in the assessee company's premises as claimed by the Assessing Officer, no search warrant was issued on 19-04-2016 and no search was cond....
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....usiness premises of the assessee company and the residences of the Directors of the Group concern. According to the Ld. DR, the contention of the Ld. AR is totally misconstrued and this additional ground is to be rejected. The Ld. DR submitted that there was search action u/s. 132 of the I.T. Act along with survey u/s. 133A of the I.T. Act on 29/02/2016. and the materials gathered during the course of survey u/s. 133A of the I.T. Act could also be used while making assessment u/s. 153A of the I.T. Act. The Ld. DR relied on the following cases laws: 1. CIT vs. S. AjitKumar(102 CCH 0002) wherein the Supreme Court held that any material or evidence found/collected in Survey which had been simultaneously made at premises of connected person could be utilized while making block assessment in respect of assessee u/s. 158BB. 2. CIT vs. Devesh Singh (24 taxmann.com 26) (All.) (FB) wherein the Allahabad High Court held that assessment in individual capacity of each person named in warrant of authorization which was issued in joint names, is perfectly within jurisdiction of assessing authority. 5.5 Regarding joint warrant, the Ld. DR submitted that there is specific p....
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.... basis of following materials: Sl. No. Impounded/seized material Number Description 1. CHN/ADI/CLT/23/CM/A-4 pages 2 to 12, impounded from the office of M/s. Tharif Builders Pvt. Ltd., Kozhikode Registration Form/term sheet/Customer Data Sheet used by M/s. Nue Town for booking shop rooms 2. CHN/IT-CLT/023/CS-01 page 98, seized from the residential premises of Shri Mohammedkutty Haji, Tirur Computer printout having breakup of amount received in cash and cheque for the sale of shop rooms 3. CHN/IT-CLT/023/CS-01 page 158, seized from the residential premises of Shri Mohammedkutty Haji, Tirur Manuscript table data showing breakup of cash and cheque portion adopted in the sale of shop rooms in Tharif Mall 5.7 In our opinion, there is no error in framing assessments u/s. 153A of the I.T. Act on the basis of the seized records. The assessments were framed by the Assessing Officer on the basis of the incriminated documents found during the search and statement recorded during the course of search. Being so, the Assessing Officer is completely justified in framing the assessments u/s. 153A of the I.T. Act. For this proposition, reliance is placed on th....
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....sessee was engaged in the business of builder and developer. During the period under consideration the assessee had undertaken construction and sale of a commercial building by the name of Tharif Mall at Tirur. The assessee had entered into 'development agreement' dated 18/12/2012 for constructing a shopping mall on the land belonging to M/s. Ponmundam Properties Pvt. Ltd., a group concern of the assessee company. Both these companies had common Directors, viz. Shri P.K. Mohammedkutty Haji, Shri Hamza, son of Shri P.K. Mohammedkutty Haji. As per the development agreement, 67 shop rooms having total saleable area of 8214.08 sq. ft./78,624.28 sq ft were to be constructed and the land owner was entitled to get possession of 27% of total saleable area on first and second floor of the Mall as consideration for its land and the sale of shops in the Mall was entrusted by the assessee builder vide agreement dated 10/03/2014 to a exclusive broker M/s. Neu Town Property Management & Developers for marketing and identifying potential customers, negotiating and finalizing terms and conditions for sale of shops in the Mall. After analysis of the seized documents, statements of directors and bro....
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....8120 2439551 4677671 9125.03 Jayarajnarangoli 5 ground 559.34 2577780 2809778 5387558 9631.9 Average sq ft rate applicable in ground floor 2799.49 12586667 13723233 26309900 9398.1 Chonori Ahamed Haneefa 1A First 493.43 2300000 2517789 4817789 9763.88 9000 47.74 Abdul Rahiman Mele Veetil 212 second 419.85 1565000 1635000 3200000 7621.77 A H Kochumon 2 second 550.79 2300000 2527794 4827794 8765.22 Mohammed Koya K.V. 4 second 605.5 2540981 2795079 5336060 8812.65 Average sq ft rate applicable in second floor second 1576.14 6405981 6957873 13363854 8478.88 7600 47.94 Antony Phillip&Marykutty K.J. 304 third 587.48 1972000 2239405 4211405 7168.59 Ali Yusuf Kunchu 1A third 493.25 1800000 1981601 3781601 7666.23 Ali Yusuf Kunchu 1B third 494.82 1800000 1993405 ....
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....mpany for the construction of mall 16,11,88,680/- E Cost of land 35,01,250/- F Gross profit (accounted portion)(C-(D+E) 14,28,73,743/- G Less commission paid in cash to selling agent (1%) 35,00,000/- H Net profit (in the books of accounts) (F-G) 13,93,73,743/- J Cash Portion 31,83,49,040/- Total Income (H + J) 45,77,22,783/- A.Ys-wise sales AY Value (Rs.) Profits Profit recognized by Assessee Difference (Rs.) 2014-15 39,24,98,837 23,12,16,375 13,55,106 28,61,95,226 2015-16 21,12,16,375 15,47,40,175 29,73,081 15,17,67,094 2016-17 2,10,64,661 16,13,453 1,38,18,823 Total 62,47,79,873 45,77,22,783 59,41,640 45,17,81,143 7. On appeal, the CIT(A) found that in the case of the assessee-company, the Assessing Officer had assumed that the full constructed area of 78624.28 sq. ft. of constructed area in the ground floor, 1st floor, 2nd floor, 3rd floor and 4th floor was not only sold during the assessment years 2014-15, 2015-16 and 2016-17, but also the construction was completed. According to the CIT(A), the Assessing Officer estimated the t....
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.... 11,094.00 5,904.07 1,068.33 Second floor 17,105.75 - 5,207.13 804.62 Third floor 15,696.74 - 4,869.15 10,827.59 Fourth floor 12,247.05 - 2,706.08 9,540.97 Total 78,624.28 22,188.00 25,971.79 30,464.49 7.3 Therefore, the CIT(A) held that the computation adopted by the Assessing Officer was not consistent with the facts of the case as the entire building floor area of 78624.28 sq. ft. was not sold during the A.Y. 2014-15, 2015-16 and 2016-17. The floor area sold up to 31/03/2016 was 25971.79. According to the CIT(A) the area of 22188 sq. ft. was not handed over to the land owner in the completed condition, as per the development agreement with the land owner up to 31.03.2016. The balance floor area of 30464.49 owned by the assessee remained unsold as on 31/03/2016. This is evidenced by the occupancy certificate in respect of first and the second floor of the building which was received only on 09/11/2016 (A.Y. 2017-18). The CIT(A) observed that major works were still pending as on 15/01/2019 and the assessee had been following an accounting system wherein the expenditure and the revenue after routing through t....
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.... Work 18 False Ceiling work 19 VDF flooring in parking area including painting 20 Structural Glazing work & glass work 21 Interlock 22 Outside cladding work 23 Poster Box 24 Seating Plaza 25 FTTH 26 Electrical building & STP Tank 27 Compound wall 28 Biogas 29 MS Structural Steel work DG 30 Drainage 31 Escalator cladding 32 Cabling work of CCTV & PA System 33 Plumbing Work 34 STP Work 35 Toilet PD Door work 36 Hand Rail - Stairs 37 Plumbing Work 38 LPG line 39 Housekeeping machines 40 Signage including parking floor 41 Boom barrio, Metal detector, Traffic mirror, Air curtain, Walky talky 42 Opening doors - Stair & Toilet entry 43 AC/LED PLATFORM SETTING INSIDE FALSE CEILINGS 44 Light String work 45 Water treatment plant 46 Glass bridge 47 Cabling Work FTTH 48 Motor 49 Well 50 Groove work 51 Shop front glass supported work 52 Pathway 53 SS cladding in lift 54 External Signage 7.5 Thus, it was submitted before the CIT(A) that the Assessing Officer assumed that the....
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....n the books of accounts of the assessee company. Since the whole amount of cash money was received by the assessee at the time of signing of the agreement to sale, the CIT(A) computed the floor wise cheque amount received, % of sale proceeds collected in cash and the total sale proceeds collected in cash for each A.Ys as follows: Summary of Total Collection in Cash Assessment years 2014-15 2015-16 2016-17 Total amount received in cash (5+7+9 10 Sl. No. Floor 1 Cheque % 2 % of sale proceeds collected in sale 3 Cheque amount received 4 Sale proceeds collected in cash (4/2*3)5 Cheque amount received 6 Sale proceeds collected in cash (6/2*3) 7 Cheque amount received 8 Sale proceeds collected in cash (8/2*3) 9 1a Ground Floor 52.16 47.84 - - 31288966 28697548.6 - - 1b. First Floor 52.26 47.74 - - 1739112 15887747.8 2802586 2560188.59 18447936.4 2a Second Floor 52.06 47.94 6979542 6427184.85 6915583 68287.53 1781210 1640246.01 144357.18 2b Third Floor 52.69 47.31 2054500 184472....
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....ubmitted that the assessee is a private limited company engaged in the development of commercial building with several shop rooms. The Ld. AR submitted that the land of the project belonged to Ponmundam Properties Pvt. Ltd. and the building construction was done as per development agreement between the land owner and the assessee company. It was submitted that in respect of the landowner, Ponmundam Properties Pvt Ltd, the Assessing Officer completed the assessment on the assumption that the full properties were sold as per the development agreement. According to the Ld. AR, the property was given to the developer, the assessee company only for the purpose of construction and no sale of the land-right had taken place. The Ld. AR submitted that the Assessing Officer overlooked the fact that no registration or transfer was done by the land owner to any person. The Ld. AR submitted that the Ponmundam Properties Pvt Ltd had filed appeal before the Commissioner of Income Tax (Appeals)-III, Kochi and entire assessment was cancelled, as per order dated 10-04-2019 in ITA No. 46,47,48/C/CIT (A)-III/ 2018- 19 for the reason that there was no transfer of property and the income fixed at Rs.....
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....of any registered document. The CIT(A) found that 50 agreements were entered with the customers for the sale of the floor area, even before the completion of the project as under: Assessment year No of Agreement Total Area in Sq.ft 2014-15 3 2694.96 2015-16 37 18848.72 2016-17 10 4428.11 Total 50 25971.79 8.7 The Ld. AR submitted that out of the above 50 agreements the details of sale and receipt of consideration by cheque and cash are found in respect of 20agreements only, from the documents seized at the time of search, from the residence of Shri P.K.Mohammedkutty Haji, the Chairman of the company. In respect of these 20 agreements for a total of 9471.43sq.ft. as detailed below Rs. 3,52,21,109/- was received by cheque and Rs. 3,60,42,509/- was received by cash and the total amount received is Rs. 7,12,63,618/- in respect of the floor area as under: Details in respect of 20 agreements A. Y Sq ft sold By cheque as per books By cash as per seized documents AY 2014-15 587 20,54,500 19,72,000 AY 2015-16 4456.32 1,84,28,528 1,75,50,673 AY 2016-17 4428.11 1,47,38,081 1,65,19,836 Total ....
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....d that the 8% profit was credited to Profit and loss account under the head income recognized from Tharif Mall and the same amount was debited to building work in progress. The Ld. AR drew our attention to the following amount of current liabilities exhibited in the Balance Sheet of the company: A.Y. Land value Construction Value As on 31-03-2014 24,39,190 65,94,852 As on 31-03-2015 2,12,51,511 5,74,57,854 As on 31-03-2016 2,52,33,239 6,82,14,207 8.9.2 The Ld. AR referred to the details of income recognized by crediting Profit and Loss account and debiting work in progress are as under: Assessment Year Income Recognized AY 2014-15 13,55,106 AY 2015-16 29,73,081 AY 2016-17 16,13,453 Total 59,41,640 8.9.3 The ld. AR submitted that the Project expenses was Rs. 16,13,58,086/-. The total expenditure incurred by the assessee for the 4 assessment years are as under: Assessment Year Total 2013-14 2014-15 2015-16 2016-17 1) Cost of Construction 1,43,06,630 5,92,72,040 5,03,28,871 3,13,39,499 15,52,47,040 2) Indirect Expenses - 7,95,816 4,25,068 3,90,630 16,....
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....5-16 29,73,081 2016-17 16,13,453 Total 59,41,640 8.9.5 The Ld. AR submitted that since substantial portion of the building is yet to be completed, the net difference between total collection and expenditure Rs. 1,93,32,886/- is not a profit. According to the Ld. AR, the profit portion is estimated @8% of Rs. 1,93,32,886/- is Rs. 15,44,631/-. It was submitted that the remaining amount is to be treated only as advance from the customers for the future expenditure for the completion of building. The additional profit to be considered only 8% of Rs. 1,93,32,886/- Rs. 15,46,631/- as shown above. The amount to be divided for the assessment years as follows: Assessment Years Profit 2014-15 131,464 2015-16 10,42,429 2016-17 3,72,738 Total 15,46,631 8.9.6 In view of the above, the Ld. AR submitted that the adoption of Rs. 8,72,43,526/- as the income is incorrect and the above amounts may be accepted. 8.9.7 The Ld. AR further submitted that the assessee received the amount by way of cash towards sale of shops and there is proportionate cost of construction incurred by the assessee which is to be given deduction. Further, he submitted that....
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....e will be recognized only on completion of project and registration of sale deed in favor of the purchaser. He also submitted that the assessee has not obtained occupancy certificate and the major works are pending for completion. 11. Thus, it was submitted that the Assessing Officer assumed that the full area of 78,624.28 sq ft are completed during the AY 2014-15, 2015-16 and 2016-17 and estimated the sale value at Rs. 62,47,79,878/- which is not justified. 12. The Ld. DR submitted there is valid seized materials for estimating the collection of cash outside the books of accounts at Rs. 32,87,986/- and also no deduction could be given towards any expenditure incurred by the assessee as the additions was made u/s 69A of the I.T. Act and entire unaccounted cash collections to be considered as income of assessee. 13. We have heard the rival submissions and perused the record. In the present case, the assessee has collected unaccounted sale receipts in the form of cash for the assessment years 2014-15 to 2016-17. The CIT(A) extrapolated the income on the basis of the seized documents in respect of 50 agreements and estimated the undisclosed income for these assessment years. ....
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....nd expenditure including depreciation is as follows: (in Rs.) Assessment Year Total 2013-14 2014-15 2015-16 2016-17 1) Cost of Construction 1,43,06,630 5,92,72,040 5,03,28,871 3,13,39,499 15,52,47,040 2) Indirect Expenses - 7,95,816 4,25,068 3,90,630 16,11,514 3)Depreciation - 13,01,688 19,05,472 12,92,372 44,99,532 Total (D) 1,43,06,630 6,13,69,544 5,26,59,411 3,30,22,501 16,13,58,086 13.2 In our opinion, it is proper to consider the above cost of construction after due verification of it by assessing officer with WIP disclosed by assessee. Accordingly, we direct the Assessing Officer to give due credit towards cost of construction relating to the unaccounted sale receipts collected by the assessee which was included in the work in progress that was shown by the assessee in its balance sheet. With this observation, we remit the issue in dispute to the file of the Assessing Officer for limited purpose of re-quantification of the addition in respect of unaccounted cash receipts unearthed by the Department during the course of search/survey action. The Assessing Officer is direct....