TaxTMI 
TaxTMI 
2020 (12) TMI 19
X X X X Extracts X X X X
X X X X Extracts X X X X
....le to both the assessment years except the change in amounts. 3. Facts of the case for the A.Y. 2015-16 in brief are that assessee filed his return of income admitting total income of Rs. 23,36,850/-. A search u/sec. 132 was conducted in the 'Premier Group' cases on 29/11/2017.Premier group is in the business of construction of apartments and completed 18 projects in the brand name of 'Bommarillu'. In the case of HUF status also, the assessee carried on construction activity in the name of M/s.Premier Projects and Shri Paruchuru Satish Kumar is the main person of the group. During the course of search, it was observed by the department from Whatsapp messages of the assessee's accountant Shri Motamarri Naga Anil Kumar receipt of unaccounted sale consideration in respect of some flats. A statement u/sec. 131 was recorded on 29/11/2017 from Shri Motamarri Naga Anil Kumar, the accountant of the firm, wherein he stated that Whatsapp messages represent the cash received by the group over and above the sale consideration. The Authorised officer during the search found two different amounts on whatsapp message in respect of Flat sold to one of the buyers by name Shri T. Hanumantha Rao i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... additional income for taxation for various assessment years. The AO subsequently conducted enquiries with flat buyers in Bommarillu Amaravati Project and their statements were recorded u/sec. 131 of the Act. A similar enquiries were conducted in Bommarillu@ IPD colony, Bommarillu Nehrunagar Project, Bommarillu@ Old Pattabhipuram and Bommarillu Vallurivari Thota Project etc. in each project, the department had selected 5-6 names of the flat buyers and recorded their statements and collected the information with regard to total consideration and the amount in the sale deed. Accordingly, the said statements were confronted with the assessee and the assessee has admitted the additional receipts of Rs. 2,34,30,000/- for the A.Y. 2015-16 and Rs. 2,58,75,000/- for the A.Y. 2016-17. Subsequently, the AO has issued the notice u/sec. 148 on 03/04/2019 with a direction to the assessee to furnish the return of income within 30 days. Since there was no response from the assessee, the AO issued notice u/sec. 142(1). In response to the notice issued u/sec. 142(1) the assessee filed return of income admitting additional income of Rs. 70,29,000/- estimating the profit @ 30% on additional work r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was recorded u/sec. 132(4) from the assessee where the assessee has accepted the receipt of cash over and above the registered sale consideration and also acceptedthe additional income of Rs. 10.00 crores for various assessment years as evident from the statement recorded u/sec. 132(4) of the Act which was reproduced in page No.4 of the assessment order. The assessee also quantified the additional income year wise in page No.11 in response to question No.12 of the statement. Since the statement was recorded u/sec. 132(4), the same is binding on the assessee. The contention of the assessee that he had admitted the additional receipts for additional works is an afterthought which deserves to be rejected. Ld.DR further submitted that the average difference of cash receipt over and above the registered value worked out to Rs. 1,460/- per sq.ft. as per question No.5 of the statement recorded u/sec. 131. However, the assessee had accepted the sum Rs. 750/- per sq.ft as additional income, which covers additional expenditure also, hence, argued that the entire additional receipts offered by the assessee required to be taxed as additional income which was rightly brought to tax by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e considered for estimation the income. Therefore, submitted that taking into consideration of all the aspects, the assessee honoured the commitment given by him and admitted the additional receipts and estimated the income @ 30% to avoid protracted litigation which is fair and reasonable and no interference is called for in the order of the Ld.CIT(A)hence, requested to dismiss the appeal of the Revenue. 9. We have heard rival contentions and perused the material placed on record. 10. In the group of 'Premier' a search u/sec. 132 was conducted and during the course of search information was found from the mobile phone of Shri Motamarri Naga Anil Kumar in the form of Whatsapp messages evidencing unaccounted cash receipts on which the department has recorded the statement u/sec. 131 on 29/11/2017 from Shri Anil Kumar wherein stated that the Whatsapp messages represent the information regarding the flat sold to Shri T. Hanumantha Rao, SBI, Sattenapalli. As per the Whatsapp messages the consideration as per registered sale deed was Rs. 29,92,500/- and the cash receipt of Rs. 27,82,500/-, the additional amount of Rs. 27,82,500/- represented the charges for additional works of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er incidental expenses related to sale of flat and the profit thereon. Similarly, in case of land taken on development the assessee has to incur the expenditure in respect of the entire building which includes the land owners share as well as the assessee's share for ascertaining true and correct profit. Therefore, it is incumbent upon the AO, to ascertain the actual expenditure and determine the profit thereon from the gross receipts received by the assessee including the receipts received by the assessee over and above the registered value. No such exercise was made by the AO. The AO simply ascertained the total consideration as per statement recorded u/sec. 131 from the flat buyers and the consideration recorded in the sale deed and the difference amount was treated as income. The AO ought to have ascertained whether the land was own land if so the cost of land, cost of construction of the building and other incidental expenditure and the profit in case of land taken on development the expenditure incurred for construction of the entire building and the assessee's share and land owners share the gross receipts representing the assessee's share minus expenditure is the profit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the basis of statement u/s.132(4) which was given on erroneous assumption. The appellant has incurred expenditure in executing the additional works undertaken/assigned to them. The appellant contends that they offered income thereon @30% which is reasonable and the same be accepted. The appellant relied on various decisions in support of their contention. 6.2.1) A statement from Mr. Motamarri Naga Anil Kumar, accountant of the appellant was recorded on 29.11.2017, i.e on the day of Search itself before the appellant was even examined. In the statement which is reproduced in the order, it is clearly stated that (Answer to question 9) the additional amount is towards additional works. 6.2.2) The statements recorded from the buyers also reaffirms the same. The additional amount paid is for additional works and the appellant has executed the additional works in relation to the flat purchased. 6.2.3) The appellant during the various statements recorded on 29.11.2017,08.12.2017, 12.01.2018, 24.01.2018 and 02.02.2018 has made disclosure of Rs. 10,00,56,250/- said to be on account of receipts for additional works. The fact of additional work being carrie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the assessment u/sec. 147 in ground Nos. 2 & 3. The assessee contended that this issue was raised before the ld. CIT(A) in ground Nos. 2 & 3 which was addressed by the ld. CIT(A) in para 5. The arguments placed by the assessee before the ld. CIT(A) was reproduced by the ld. CIT(A) in para 5 which reads as under:- "The Assessee is a separate legal entity and no Search U/s 132 or Survey proceedings U/s 133A were conducted on the Business premises of the Assessee. Then initiation of action i.e. u/s 148 for the Asst Year 2017-18 is against the law and more specifically no information in the form of material was found during search proceedings conducted on the sister concerns of the Assessee. On the legality of the statement recorded u/s 132(4) of the I.T.Act, reference is invited to the following cases on the subject. The Telangana & Andhra Pradesh High Court in the case of C.I.T Vs. Naresh Kumaf Agarwal reported in 369 ITR 171 @ pages 177 to 179 held as under: "11. The mandate under sub section (4) gets honoured only when there is no other version from the assessee, vis-à-vis the statement. In such a case, the statement would constitute the basis fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee." "19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceed further under the Act even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee cannot constitute the basis for an order under section I588C of the Act. Kind attention is invited to another judgment of the Madras High Court in the case of C.I.T. Vs. Smt.S.JayalakshmiAmmal reported in 390 ITR 189. The observations of the Hon'ble Madras High Court at page 197 are extracted below for kind consideration of the Hon'ble Court "If there is no corroborating documentary evidence, then statement recorded under section 132(4) of the Income tax Act, 1961, alone should not be the basis, or arriving at any adverse decision against the assessee. If the authorities under the Income tax Act, 1961, have to be conferred....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... That kind of live link was absent. Therefore the notice under section 148 read with section 147 of the Act was to be quashed. The statements recorded from third parties and the reliance on the statement for reassessment is against law. As the income of the assessee cannot be known to the third party that to that particular income has been escaped. The statement recorded from the third party without linkage of evidence found in the premises of the assessee and relying on such statement is against the provisions of law. The department has also not identified any asset which was not recorded in the books of accounts during the search proceedings. IT: Merely because during search, assessee surrendered an amount in stipulation that details of same would be given in due course of time, but no such assets were ever found/identified by authorities, no addition could be made to assessee's income [2019] 104 taxmann.com 371 (Allahabad) HIGH COURT OF ALLAHABAD Commissioner of Income-tax V. Dilbagh Rai Arora BHARATI SAPRU AND PIYUSH AGRA WAL, JJ, IT APPEAL NO. 304 OF 2009 MARCH 15, 2019 Section 69, read with section 143of the Income-tax....