TaxTMI 
TaxTMI 
2017 (5) TMI 1741
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....n this assessment year. Therefore, for the facility of reference, we are taking up the fact mainly from this assessment year. In case we find any variation in the facts, then we will take those facts in those years. 4. Grounds of the appeal raised by the Revenue in the Asstt.Year 2008-09 read as under: "1) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 5,08,84,180/- out of total addition of Rs. 5,94,14,500/- made by the Assessing Officer on account of not showing "on-money" receipt from sale of flat. 2) The Ld.CIT(A) has erred in law and on facts in holding unilaterally that the on money of Rs. 61,00,000/- represented cancellation and therefore cannot be taken as part of the "on-money" earned by the assessee without giving the Assessing Officer an opportunity in this respect. 3) The Ld.CIT(A) has erred in law and on facts in applying the rate of 16% to determine the unaccounted profit on the on-money ignoring that the assessee having declared a profit of Rs. 15 crore on-on-money of Rs. 36 crore in the course of survey thereby admitting his profit margin at 42%. 4) The Ld.CIT(A) while estimating the unaccounted prof....
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....g Pending 1,49,80,026 14,70,00,000 Add. 2010-2011 for admission in the case of Brijwasi Construction Rs. 30,00,000 Total Rs. 15,00,00,000 Notes:- 1. This search was conducted on 18.01.2006 and Assessee made declaration Rs. 1.86 Crores. This declaration was reflected in return of Income filed after date of search. 2. Survey was conducted on 06.03.2010 and declaration of 15 Crores was made for various Years. 3. As returns of Income were already filed for A.Y.2007-2008 to A.Y.2009-2010, no declaration could be made in the return of Income but addition confirmed by CIT (A) accepted. 4. However the declaration was made in the return of Income for A.Y.2010-2011 &0nwards. 5. Assesses claimed telescoping of Rs. 1.86 Cores declared at the time of search relevant to A.Y.2006-2007. 6. Revenue has filed the appeals before Hon'ble Tribunal for the A.Y.2006-2007 to 2009-2010,against the order of CIT (A) which are Pending. 7. The assessing officer taxed 100% on money for all years except for A.Y. 2008-09 on cash basis while for A.Y.....
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.... "4.2 I have carefully considered the facts of the case, the order of the A.O. and the submissions of the appellant. In the present case, it is seen that that the appellant has been recognizing its revenue at the time of sale of flats and this method of accounting has been consistently followed by it and the same has even been accepted by the A.O. Further, it is seen that during the course of survey action, various incriminating evidences of not only unaccounted receipts i.e. on-money has been found but notings of even unaccounted expenditure incurred therefrom have been found and impounded. These details are available in Annexure B11and B-19 and the Id counsel for the appellant has filed some details of unaccounted expenditure. After preliminary verification of the impounded material containing incomplete detail of unaccounted receipts as also unaccounted expenditure, Shri Murarilal Agarwal director of the appellant company, disclosed a net unaccounted income of Rs. 15 crores for the entire group, categorically stating that no expenditure is left to be incurred from the net unaccounted income of Rs. 15 crores and also stated to revise the returns of the earlier years fil....
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....d in cash and cheque along with the name of the buyer, area of the flat and sale rate per sq. ft. The figures written in this book are in code and in some places full figures are written. Whatever figures are written in codes may be read in lacs. For example, the figure 97/00 written on page no. 1 means Rs. 97,00,000/- (Ninety Seven Lacs). In the same way, the figures 32/00, 60/00 and 18/00 as written on page no. 10 means Rs. 32 lacs, Rs. 60 lacs and Rs. 18 lacs. Whatever cash payment is noted in the said book has not been recorded in the regular books whereas against cheque payment the word (P) has been written which means "Pakka" i.e. the said payment has been recorded in the regular books." From the aforesaid statement it is apparent that during the course of survey action, evidences of both unaccounted income as also evidences of unaccounted expenditure incurred therefrom have been found and impounded. Further, on going through the reply to Question No. 7 of the statement recorded during survey action, it can be seen that after considering all the impounded materials, Shri Murarilal Agarwal has made a disclosure of net unaccounted income of Rs. 15 crores by de....
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.... Therefore, I am of the opinion that the A.O. has grossly erred in holding that the impounded material contain no details of unaccounted expenditure and therefore, his action of adding the entire on-money as income is contrary to the facts of the case. It is thus an established fact that in the present case, incomplete details of unaccounted receipts (on-money) .and unaccounted expenditure have been found and the total income of the appellant could not be properly computed on the basis of such incomplete evidences and in such cases, it is a well established law that the entire undisclosed sales could not be added as income of the assessee but the addition could be made only to the extent of estimated profits embedded in such unaccounted sales for which a comparable net profit rate needs to be adopted. Even in a best judgement assessment assessee cannot be saddled with unjustifiable tax liability and an appellate authority can certainly set right injustice caused to the assessee. The aforesaid view of bringing to tax the net profit is duly supported by the following decisions of the jurisdictional Tribunal and High Court, as also various; other courts, as is discu....
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....ribunal in the case of ITO vs. Sai Krupa Construction (2007) 13 SOT 459 (Mumbai). In view of the facts of the case and respectfully following the law laid down by the jurisdictional High Court and Tribunal, I am of the considered view that even in the present case, where there are incomplete evidences of both unaccounted income (onmoney) and unaccounted expenditure incurred therefrom, the A.O. is not justified in making addition for the entire unaccounted receipts i.e. on-money in respect of 3 flats of 'Platinum Apartment' sold during the year under consideration and therefore, I hold that the income in this regard needs to be computed by applying a comparable rate of net profit on the onmoney received by the appellant on 3 flats sold during the year under consideration. Now as regards the second issue of applicability of Section 69C to the facts of the present case, I am of the opinion that Section 69C can be invoked only when the appellant has incurred any expenditure for which he has no explanation regarding its source or the explanation offered by the appellant is not satisfactory in the opinion of the AO. However, in the present case, the impounded ma....
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....from these unaccounted transactions. The assessee has also cited several decisions in this regard. The assessee has also contended that if the incomplete evidences found are considered as evidences of 'on-money' for the entire project then similar incomplete evidences which have been found in respect of unaccounted expenditure should also be extrapolated to find out such expenditure for the entire project. The assessee has also contended that the Department has not found any assets in excess of the disclosure made by the assessee. The assessee has first of all denied having received any 'onmoney' and incurred any unaccounted expenditure. However, while making alternative contention it has also contended that it has not maintained any record of unaccounted transactions and therefore it is not in a position to give the details of the unaccounted expenses. It has also cited several decisions of I TAT in respect of estimation of net profit on the 'on-money' received. Some of them have also been confirmed by the jurisdictional High Court. In view of the facts and circumstances of the case wherein neither the comp....
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....r Kakadia (AOP) A.Y.2004-05 12.5% Residential project. 5. Manhar Kakadia (AOP) A.Y.2005-06 12.5% Residential project. 6. Navin aswani AY, 2005-06 14.28% Residential project. Reduced to 12% by CIT(A)-II, Ahmedabad 8. Jaiprakash . Aswani A.Y.2005-06 14.28% Residential project. Brief discussion on the above mentioned cases is being given in the following paras :- 1. In the case of S.P. Enterprise (Block period 1990-91 to 1999-2000) assessed in the same charge i.e. in Central Circle-1, Surat, estimated the Net profit at 20% for commercial project, the ITAT Ahmedabad dismissed the revenue appeal and sustain the Net profit at 15%. 2. In the case of Shrinath Corporation (Block period 1990-91 to 1999-2000), assessed in the same charge i.e. in Central Circle-1, Surat estimate Net profit at 20% for commercial project and 15% on the Residential project. 3. In the case of M/s. Jagdamba Corporation (Block period 1990-91 to 1999-2000), assessed in the same charge i.e. in Central Circle-1, Surat, estimate Net profit at 15% on Residential project. 4. In the case of M/s. Devi Corporation (Block period 1990-91 to ....
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.... be computed by adopting a net profit rate @ 16%. Further, I also agree with the appellant that the actual price in respect of Flat No. 901 as noted down on the impounded paper Annexure-BI-19 Page No. 10 is Rs. 2,06,71,500/- and not Rs. 2,67,71,500/- since, there is a cross-mark against the differential amount of Rs. 61 lacs mentioned in respect of a terrace indicating cancellation and the final total thereafter has again been worked out to Rs. 2,06,71,500/- and not Rs. 2,67,71,500/-. The appellant has further submitted that the plans were revised and hence, Flat No. 901 has no attached terrace as on date after construction. Accordingly, I hereby hold that the actual price of flat no. 901 should be taken at Rs. 2,06,71,500/- as being the correct price indicated in the impounded loose paper and not at Rs. 2,67,71,500/-. In conclusion, I hold that the A.O. was not justified in making addition of the entire on-money of Rs. 5,94,14,500/- which infact is Rs. 5,33,14,500/- in respect of sale of 3 flats of 'Platinum Apartment' and accordingly, I hereby direct the A.O. to compute the income in respect of sale of 3 flats of 'Platinum Apartment' by ....
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....he case of M/s.Jay Builders Vs. ACIT, 18211822/Ahd/.2003 (Ahd Trib) wherein the Tribunal has upheld assessment of income at the rate of 15% embedded in the on-money receipts. The finding of the Tribunal in para-9 has been referred which reads as under: "9. We have considered the rival submissions and perused the material on record. In our considered view it will not be proper to tax entire sum of 'on money' received in cash as income of the assessee. It is apparent that a parallel account of receipt and expenditure is maintained which is not recorded in the books i.e. both the payments and receipts are in cash. It is not correct to presume that assessee has not incurred any expenditure out of cash amount. For getting clearance for the project assessee has to incur expenses in entertainment. It has to incur cash for getting vacant possession of the premises. Cash is also incurred for making labour payments and payments for purchasing raw materials. However, assessee saves substantial money as taxes etc. which are not paid on such 'on money'. Most of the expenditure are accounted for and is covered in the net profit applied on cheque amount. Considering the t....
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....spects, books were not considered as reliable and profit element embedded in the receipts has been added. This profit has been calculated at the rate of 16%. Therefore, we do not find any error in the order of the ld.CIT(A), and first ground of appeal is rejected. 12. In ground no.2, grievance of the Revenue is that the ld.CIT(A) has erred in excluding a sum of Rs. 61 lakhs from the total on-money calculated by the AO. With regard to this ground, we find discussion on page no.18 of the impugned order. It is pertinent to observe that with regard to flat no.901 a sum of Rs. 2,67,71,500/- was mentioned in Annexure B1-19 page no.10. The AO took the figure of Rs. 2,67,71,500/-. The ld.CIT(A) has observed that the AO has committed a mistake by not taking correct price indicated in the impounded loose paper. The Department was unable to controvert this finding of the fact recorded by the ld.CIT(A). The ground of appeal was taken merely for the sake of raising dispute, which has not been demonstrated before us, as to how the ld.CIT(A) has committed the mistake from taking correct figure in the impugned loose paper. We do not find any merit in ground no.2 also. 13. As far as ground no....
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....and on facts in holding that income has to be recognized on accrual basis i.e. at time of selling of flats as the assessee has been following this method of accountancy continuously. 21. With the assistance of the ld.representatives, we have gone through the record. The ld.CIT(A) while adjudicating the issue has formulated three questions which reads as under: "(i) The first issue is that whether the entire on-money receipts can be treated as the income of the appellant, when incomplete details of both unaccounted receipts and expenditure have been found and impounded. (ii) The second issue is whether the accounting method followed by the assessee regularly and consistently from year to year should be the basis or it has to be the year of receipt, for the taxing income embedded in the unaccounted on-money receipts. (iii) The third issue is the applicability of section 68/69/69C to the facts of the present case more particularly if the INVESTMENT made by the appellant are finally in excess of THE INCOME ASSESSED OR ACCEPTED covering the entire project period up to the date of survey for AY 2006-07/2007-08/2008-09/200910/2010-11." 22. So far as questi....
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....reproduce the discussion made by the ld.CIT(A) with regard to the facts in this assessment year. It read as under: "However before corning to the conclusion it has to be ensured that the assessee had disclosed the relevant income embedded in the ON MONEY in the year of SALE. The assessee had submitted the following details in this regard along with the relevant documents and copy of assessment / CIT(A) order pertaining to AY 2007-08/2008-09/2009-10 and the relevant annual audited accounts pertaining to AY 2010-11. FLAT no/project Relevant Page No of BM9 Amount Date of Document YEAR in which offered as Part of SALES A-l/ 201 Solittaire 1 21,00,000 14/06/2006 AY 07-08 A-2/902 Solittaire 2B 17,29,000 25/09/2009 AY 10-11 A-2/1002 Solittaire 3B 50,00,000 21/07/2008 AY 09- 10 88,29,000 In the case of appellant itself in AY 2008-09 the Assessing Officer has added the on-money to the total income on sale of flats in the relevant accounting year only. The other on-money collected was not brought to tax on receipt basis in accordance with the method of accounting followed ....
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....in excess of the ON MONEY receipts of Rs. 88,29,000/- available with the assessee. (Table 1 and Chart under para 9.3 of the Assessment order). Further it has been submitted that even when the Income assessed/confirmed by CIT(A) is matched with the Final Investments on hand as on the date of survey, then also the investment is well within the Income assessed/confirmed by the CIT(A). The details submitted by the appellant are as under: Investment on hand as on the date of SURVEY Page No Particulars Amount(Rs) Amount(Rs) 42 Trimurti Apartment 14,58,532 UB LAND 43 Jayanti bhai broker 1,10,000 46 Ushaben S NO 528 90,45,000 46B Hemal Bhai UB land broker 16,20,000 47 SNo 519 32,50,000 47 S No 521 25,00,000 47B S No 517 Dharmin Bhai (including Rs. 45,00,000/- paid during the year under consideration) 1,77,20,000 3,42,45,000 43B Mavji Bhai 22,25,000 61 Sachin Land 41,69,750 65 Pappu Bhai 22,00,000 65 Pappu Bhai Railway 17,77,500 ....
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....erial is very clear as ON MONEY RECEIPTS on account of various flat holders. The details of Flat holders are also available in the impounded material." 5. I have gone through the submission and find that once the nature of the receipt has been considered to be ON MONEY and the INCOME EMBEDDED therein has been already considered as part of the Income in the year of sale of specific fait, there is no substance in the addition thereof u/s 68. Sec 68 is squarely applicable only when the item of credit is not explained. In the instant case the CREDITS has been considered to be ON MONEY RECEIPTS with reference to specific flat as per details available in the impounded material by the Assessing Officer in the assessment order. The Assessing officer has not changed the colour of the receipts to be different than ON MONEY RECEIPT. I therefore delete the addition of Rs. 36,49,000/- made u/s 68 of the Act as the income embedded in the ton-money' is already assessed/offered From AY 2007-08 to 2010-11 as summarized in table of income assessed on page no.24 of this order. The addition of Rs. 36,49,000 is accordingly deleted." 24. With the assistance of the ld.repre....
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....that correct value of the investment plus expenditure worked out to Rs. 3,92,89,163/- which is less than the gross-receipts. The grievance of the Revenue is that the ld.CIT(A) has calculated both these amounts after entertaining additional evidence which is in violation of Rule 46A of the Income Tax Rules, 1962 i.e. AO was not provided an opportunity of hearing on this issue. 30. We have perused the finding of the ld.CIT(A) from page no.24 to 29 and page no.35 in the Asstt.Year 2007-08 as well as at page no.25 to 29 in the Asstt.Year 2009-10. A perusal of the finding would indicate that the ld.CIT(A) has not entertained any additional evidence rather, re-appreciated the seized material. The assessee has prepared a chart explaining entries in the seized material which has been considered by the ld.CIT(A). 31. We have also gone through the material placed before the ld.CIT(A). Let us take first item considered by the AO in the Asstt.Year 2007-08. According to the assessee on page no.48 of the impounded diary B1-19 an entry of Rs. 17,963/- was available which has been read by the ld.AO as "1,79,63,000/-" on receipt side. We have gone through photo-copy of this page, which is ava....
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....ars Amount (Rs) Amount(Rs) TOTAL of the TABLE 9,05,40,625 Less: Figures wrongly considered as 1,79,63,000/- as against actual figure of Rs. 17,963/- on RECEIPT Side Page No 48 (Page No 33 of PB) 1,79,45,037 1,79,45,037 SUB TOTAL 7,25,95,588 LESS/ADD: Mistakes apparent 47B Dharmin Bhai- A land has been purchased from this person for Rs. 1,77,20,000/- for which 45,00,000/- + 28,50,000/was paid in CASH Rest of the payment was adjusted against SALE of FLAT in SOLITAIRE Apt Rs. 1,24,40,000/-. There is difference in calculation of the amount by the AO. The amount works out to Rs. 1,03,70,000/- whereas the AO has worked out Rs. 1,38,53,000/-. 34,83,000 49 BHUSHA BHAI- This is Land Purchased for RADHAPURAM VARELI. This is expenditure of the project and not an investment. There seems to be a total mistake of Rs. 7,00,000/-. The Total Works out to Rs. 2,44,98,625/- as against Rs. 2,51,98,626/considered by AO 7,00,000 46 Usha Ben S NO 528. This is a land Purchased for investment. The total amount paid is Rs. 79,45,000/- whereas the AO has co....
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....7 and balance amount of Rs. 17,963/-which was considered by the AO as Rs. 17963000/-. This is factual mistake committed by the learned AO. This - was contended before the Assessing Officer also that the amount is not Rs. 1,79,63,000/- but actual figure of Rs. 17,963/-. On going through the impounded serial no 33 and 48 and the challan on page 36 of PB as submitted by the appellant, it is found that the contention of the Appellant is correct and the amount is Rs. 17,963/- only in real terms and not to be deciphered or decoded as Rs. 1,79,63,000/- by suffixing '000 to the figure. Page No 47B (Rs. 1,38,53,000/-): The Assessing Officer had considered this item of entry as investment at Rs. 1,38,53,000/- (Total of PAYMENT side is Rs. 2,12,95,000/- out of which a sum of Rs. 73,50,000/- has been reduced as the same is also considered just above this entry on the same page. Thus resulting into a balance of Rs. 1,39,45,000/-. Further a sum of Rs. 92,000/- was reduced to arrive at Rs. 1,38,53,000/- as considered by the Assessing Officer. However it was submitted by the appellant that a land had been purchased from this person for Rs. 1,77,20,000/- for which 45,00,000/- + 28,50,000/- w....
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....nd the submission of the appellant was found to be factually correct. These Items have been wrongly treated as part of investment instead of receipts hence required to be reduced from the value of investment taken by the Assessing Officer. The correct value of investment + expenditure works out to Rs. 5,70,14,625/-, which is less than the GROSS ON MONEY receipts, hence the source of investment + expenditure gets explained from the ON MONEY collected recorded in the same impounded annexure. Thus, the appellant would get a relief of Rs. 3,35,26,000/-on account of mistakes committed by the Assessing Officer, as discussed above in para 5.5(v), in working out the investment + expenditure (905,40,625-57014,625)" Asstt.Year 2009-10 "Further, the proviso to Section 69C states that when any unexplained expenditure is deemed to be the income of the assessee, then the said unexplained expenditure shall not be allowed as a deduction and in the present case the unexplained expenditure has not been deemed to be the income of the appellant by the A.O. and hence, the proviso to Section 69C is also not at all applicable in the present case. Same way section 69 states that where th....
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....LESS: OTHER ITEMS of RECEIPTS considered as PAYMENTS 43 GURUDUTT -LOAN RECEIVED {Page 100 ofPB) 40,00,000 45 Girish Bhai -LOAN RECEIVED (Page 105 of PB) 11,00,000 45B Pramod Babu -Loan Received (Page 104 of PB) 1,04,000 59B Jain Saheb -Loan Received (Page 186 of PB) 50,00,000 SUB TOTAL of LOANS 1,02,04,000 57B Golden Plaza -Shop SALE RECEIPTS (Page 103 ofPB) 1,14,12,000 58 G K Sania Land - Sale of land receipts (Page 103 ofPB) 2,23,98,480 SUB TOTAL 4,40,14,480 4,40,14,480 NET PAYMENT of INVESTMENT / EXPENDITURE 3,92,89,163 From the above table the Id AR submitted that the correct figure of investment + expenditure, excluding receipts, sale proceeds of shops and GK Saniya Land and LOAN amount, works out to only Rs. 3,92,89,163/-. The above chart is prepared from the items and entries picked up from the impounded material annexure BI-19. Each item of difference is verified and discussed with reference to the impounded annexure as under: Page No 57B & 54B (Rs. 1.14.12.000/-)....
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....s. 1,14,12.000/- marked serial no 57B (Page 1 . No 103 of PB). The PAYMENT side states 3300 (6 Shop value) and 8112 (12 Shop value- 80/81 + 0/31 donation) making a total of 114/12. This amount represents the sale value of shops which is to be recovered. Out of this amount a sum of Rs. 85/03230 is mentioned on the RFECEIPT side stating total received up to 15/05/08. Thus the amount of Rs. 85,03,230/- is required to be considered as RECEIPTS as against the contention of the appellant that a sum of Rs. 1,14,12,000/- be treated as receipt. f) G. K. Saniva land marked as serial no 58 (Page no 103 of PB) Rs. 2,23,98,480/- is receipt side as is evident from the entries as 164/06480 received up to 15.5.08 + 50/00 19.5.08 = Total 214/06480 + 3.92 (****) + 600 23/03/09 totalling to Rs. 2,23,98,480/-. The entries are receipt side and the contention of the appellant is correct. These items have been wrongly treated as part of investment instead of receipts hence required to be reduced from the value of investment taken by the Assessing Officer. The correct value of investment + expenditure works out to Rs. 3,92,89,163/-, which is less than the GROSS ON MONEY receipts, hence the sou....