TaxTMI 
TaxTMI 
2022 (1) TMI 340
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.... was effected upon the assessee with the help of the Department and panchnama submitted to this effect is available on record. In other words, this matter was listed for hearing on twenty seven times between 13th August, 2017 upto 28th October, 2021. On nine occasions Bench did not function, but on remaining occasions most of the time assessee sought adjournment. Experiencing non-cooperative attitude of the assessee, and its non-appearance in spite of repeated service of notices, we proceed to decide appeal ex parte qua the assessee. 3. Initially, Department has filed grounds of appeal, which are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. Thereafter, Revenue has filed concise grounds of appeal, which reads as under: "1) The Ld. CIT(A) has erred in law and on facts by deleting the addition made on account of unaccounted receipts of Rs. 16,01,00,000/- ignoring the material and documentary evidences found and also the admission of the undisclosed income over and above to the regular income by Shri Mihir P. Desai, Director of the company, during the course of survey u/s. 133A of th....
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....recorded in the books of accounts, and were noted in the impounded diaries. It further submitted that the assessee is following percentage of completion method and offering income on work-in-progress on estimate basis and declare profit on execution of sale deed of respective flats. Rs. 4.00 crores represented current year's income on extra construction receipts admitted during the survey. It further submitted that extra construction receipts admitted at the time of survey was not income of the assessee rather it was for the extra work and other expenses related to the project, which was otherwise required to be borne by the customers/ members. It reiterated that alleged unaccounted fund collected from the members were utilized for extra work of their flats and meeting other related expenses, and such works spread over two to three years, and after considering the price increase in the construction material, profit out of such extra work, was almost nil. However, in order to buy peace, an amount of Rs. 4 crores on such extra collection as profit in the return. Assessee has relied upon certain decision of higher authorities for the proposition of law that entire admitted undisclosed....
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.... AO for taxing the unaccounted collection from the members. They are recorded by the ld.CIT(A) in his impugned order at page no.31 which reads as under: Para No. AO's observation Rebuttal by appellant company 3.5 The assesses has itself submitted that out of unrecorded receipts of Rs. 20,01,00,000/- the assessee has offered Rs. 4,00,00, 000/-for the flats in respect of which sale deeds were executed during the year. The assessee has also stated that remaining portion of unrecorded receipts will be offered as income in the year in which corresponding sale deeds are executed. Thus, going by the submission of the assessee itself, the under dispute is year of taxability of entire income of Rs. 20,01,00,000/- and not element of income in the said amount. The unrecorded receipts as admitted by the appellant company are advance received from customers for extra work to be executed in the flats. As per method of accounting followed, the company has transferred advance collection from members as shown in liabilities in balance sheet to P & L A/c on flat sale as per documents executed as sales. Following the same method, portion of the unrecorded receipts from members as....
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....le deeds are executed. Thus, the company has offered portion of such admitted unaccounted receipts in profit & loss account in AY 2012-13 amounting to Rs. 4.00 crore, inAY2013-14 amounting to Rs. L20 crore and in AY 2014-15 will offer Rs. 7.23 crore in proportion to the sale deed executed in each year and the remaining amount will be offered in next years. 15. In view of the above facts of the case, it is submitted that the appellant company has recorded unaccounted collection from members as admitted in survey in books of account. Whereas, the Id. AO has taxed entire unaccounted receipts / collection in the year of survey. The company has offered portion of unaccounted members collection as per Method of Accounting on execution of sale deed of flats. According to method of accounting followed by company, accounted and unaccounted collection from members is to be recorded in Profit & Loss Account in the year when sale deeds are executed. Therefore, portion of unaccounted members collection offered in Profit & Loss A/c in AY 2012- 13 amounting to Rs. 4 crore, in AY2013-14 amounting to Rs. 1.20 crore, will offer in AY 2014-15 amounting to Rs. 7.23 crore and remaining coll....
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..... In the interest of natural justice, the assessee was given an opportunity vide this office letter dated 28. JO.2014 to produce necessary evidence to substantiate its claim for differing admitted undisclosed income to subsequent years. The assessee vide submission on 13.10.2014 and 04.02,2015 simply submitted the following :- 1. Copy of written submission before CJT(A). 2. Coy of ITR Ackn and Computation of total income for A. Y.2012-13. 3. Copy of WIP working submitted ClT(A)for A. Y.2012-13. 4. Copy of ITR Ackn and Computation of Total income for A.Y.2013-14. 5. Copy of Audited Balance and Profit and Loss Account for F. Y.2012-13. On perusal of the details, it is seen that there is no evidence to suggest that the assessee has been following percentage completion method. Hence, the contention cannot be accepted. Also, it is pertinent to mention that the assessee in its statement recorded during the course of survey has categorically disclosed the same as unaccounted income pertaining to the F.Y.2011-12 relevant to A, Y, 2012-13 and further admitted to pay the tax in the same year itself. Even after the survey, the assessee has....
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....with the theory put forwarded by the assessee of project percentage completion method and made the addition of remaining Rs. 16.01 crores to the total income of assessee. The assessee during the appellate proceedings had contemplated the same theory of percentage completion method before your honour and the issue was reminded to the undersigned for verification. In the interest of natural justice, the assessee was given an opportunity vide this office letter dated 28.10.2014 to produce necessary evidence to substantiate its claim for differing admitted undisclosed income to subsequent years. The assessee vide submission on 13.10.2014 and 04.02.2015 simply submitted the following: 1. Copy of written submission before CIT(A). 2. Copy of ITR Ackn aid Computation of total income for A. Y. 2012- 13. 3. Copy of WIP Working submitted CIT(A) for A.Y. 2012-13. 4. Copy of ITR Ackn and Computation of Total income for A. Y. 5. Copy of Audited Balance and Profit and Loss Account for F.Y. 2012-13 On perusal of the details, it is seen that there is no evidence to suggest that the assesse has been following percentage completion method. Hence, ....
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....will be paid before end of the financial year 2011-12 and not later than filing of return of income (Pg. 24)." Thus, the appellant categorically mentioned that the amount declared / admitted at the time of survey is receipt and not income. (iii) Thereafter, the AO issued u/s. 210(3) of the IT Act, in this connection the appellant has filed letter dated 30-03-2012, where in connection to payment of Advance tax, it was stated that: "3. During the survey on 24-10-2011, details of collection from members were found noted in diaries, such collection was amounted to Rs. 2001 lacs, such collection is to be reconcile from regular books, after receiving impounded material, as such collection includes notings of collection for flats as well as for extra work. 4. Collection for flats is fully recorded in the regular books, whereas extra work collection is not recorded, as the same is to be incurred at the time of completion of flats or the same is to be carried out by some other agencies, where the company is having middleman profit only. Estimated net profits on such collection are appx ofRs. 400 lacs (Pg- 25)." Thus, the appellant categorically mentioned ....
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....owing percentage completion method. Hence, the contention cannot be accepted. (ii) Reply: The AO is suppose to be most intelligent person as far as analyzing the facts and law is concerned. The construction companies normally follows either Percentage Completion Method or Project Completion Method. If, the finding of AO be considered as correct, the appellant is not liable to pay any tax on any amount as not following Percentage Completion Method, then the AO indirectly wants to say that the appellant company is following Project Completion Method. Under Project Completion Method, the income is to be offered only on completion of project and no income is offered in the years when construction activity is going on. Whereas, contrary to this, the appellant company has offered income on Percentage Completion Method, even though construction is in progress, profit is estimated and taxes are paid. Thus, if your honour rely on the Remand Report, your appellant is not liable to pay tax on single rupee in the year under consideration. (ii) Issue: it is pertinent to mention that the assessee in its statement recorded during the course of survey has categorically disclosed ....
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.... the Auditors in Notes of Accounts stated that "During the year proceedings ids. I33A of The Income tax Act, was carried out by IT Dept. During the course of said proceedings, additional receipt of Rs. 20.01 crores was admitted by the company. The management estimated profit of Rs. 4.00 crores on such additional receipts and shown the same as income in Profit & Loss account in the current year." Thus, the appellant categorically mentioned that the amount declared/admitted at the time of survey is receipt and estimated net profit on such collections of Rs. 4 crore is offered in the return of income filed. (iv) Issue: Therefore, as per the provisions of Rule 46A, the additional evidences submitted by the assessee should not be admitted. Therefore, in view of the facts brought out in the assessment order and the facts stated above, the additions made by the A.O. deserve to be upheld. Reply: The appellant has not submitted any additional evidence. Legal submission on offering of profits embedded in receipts on the basis of relevant decisions of Hon'ble Courts and Tribunals furnished, legal submission on offering of income admitted u/s. 133A on the basis o....
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....rs collection (accounted and unaccounted) on the basis of method of accounting / accounting policy of the company, which is followed by company prior to survey. The amount received as advance money against booking of flats (cheque and cash) is not assessable as income for the year, the same will be taxed in the year when the flats are sold, as the company is offering income In P &L A/c on estimation basis on cost of construction, even though there is negligible sale in the year. It is therefore prayed that portion of unaccounted members collection of Rs. 4 crore offered in AY 2012-13, offered on the basis of flat sale may kindly be considered as for the yew. The remaining collection is offered in next years' as per method of accounting followed by company, the addition made for remaining amount of Rs. 16.01 crores (admission in survey Rs. 20.01 crores less: amount offered in AY-2012-13 Rs. 4 crore) may kindly be deleted as the same is double taxation in the hands of company, being the same is offered in the later years. 8. In view of the above facts of the case, fundamentals of various decisions of Hon'ble Courts and Tribunals, to meet with the both ends of inflow ....
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....evenue is before the Tribunal. 11. Before us, none appeared on behalf of the assessee. The ld.DR while supporting order of the AO, contended that the approach of the ld.CIT(A) in allowing claim of the assessee was not based on the evidence, rather he was carried by generalizing the same from "macro perspective" angle. There were admitted proof of unaccounted receipts project-wise in form of impounded documents being annexure A/1, A/2, A/3 and A/4 but there was no iota of evidence to establish unaccounted expenditure, either during the survey proceedings or in the assessment proceedings. The ld.CIT(A) disregarded all this, and arrived at a erroneous conclusion. It is submitted by the ld.DR that admissions made by the assessee were voluntary and without any whisper of retraction, and thereafter agreed to pay tax thereon. In such circumstances, order of the ld.CIT(A) devoid of any merit for upholding the same. 12. We have heard submissions of the ld.DR and gone through the record. We have also gone through orders of both the authorities below. The issue before us, whether voluntary admission of unaccounted receipts from the members is to be assessed to tax on gross basis, or as ....
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.... the same is reproduced as under: "During the survey on 24-10-2011, details of collection from members were found as noted in diaries, such collection has amounted to Rs. 2001 lacs and such collection is unaccounted collection from members against booking of flats, which was -not recorded in the books of accounts. To give honour to the Income Tax Department's Proceedings and to cooperate the Department, to avoid prolong litigations and to have peace of mind. I, Mihir Desai, Director of the company, has categorically accepted the above mentioned unaccounted collection from members of Rs. 2001 lacs as unaccounted income for the F.Y. 2011-12. I further assure that on the disclosed income of Rs. 2001 lacs, the tax liability comes to Rs. 600 lacs (Approx). Out of which, my company has already paid advance tax of Rs. 1.53 crores. Further, I propose to make the remaining payment of tax on disclosed income as under: Balance taxes will be paid as under SN Date Amount (Rs. In lacs 1 15-05-2012 50 2 30-06-2012 50 3 16-07-2012 50 4 30-07-2012 50 5 15-08-2012 50 6 30-08-2012 50 7 15-09-2012 50 8 ....
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....s proposition is not available in the present case. Simple reason is that documentary evidence exhibiting acceptance of unaccounted receipts was found. This was admitted by the director of the assessee-company, therefore, cumulative setting of these two aspects, it suggests that there was unaccounted receipts. The AO is not harping upon statement of the Director only, which otherwise without oath. The assessee never disputed the discovery of unaccounted receipts. It disputed quantum of income embedded in those receipt. Therefore, these case laws do not help the assessee. This fact has been recognized by two letters written by the assessee-company and as referred by the AO. As far as the proposition that entire extra-collection should not be termed as profit of the assessee-company, rather profit embedded in such receipts is required to be assessed as income is concerned, we are of the view that there is no dispute with regard to the proposition that whenever unaccounted receipts unearthed during any investigation, then the gross receipts are not to be taxed. But this situation is applicable only when simultaneously some evidences are being found exhibiting unaccounted expenditur....