TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 340
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the IT. Act. 2) The CIT(A) has erred in law and on fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 income could not be taxed, and only profit embedded therein shou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 admitted at the time of survey is also offered in P & L A/c for which sale dee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eipts 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 collection on the basis of execution of sale deeds in next years'. Thus, the appellant company has of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 not made any petition before the department of having made disclosure under pressure/coercive but has simply filed the return of income without taking into acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, 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 rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssued 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 that the amount declared / admitted at the time of survey is receipt and estimated net profits on such collections are approximately of Rs. 400 lac i.e. Rs. 4 corre, offered in the return of income filed. (iv) The accounts were finalized for the year 2011-12, the Auditors in Notes of Accounts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect, 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 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. Reply- The appellant admitted the members collection of Rs. 20.01 crore as income of AY 2012-13 and shown -willingness to pay taxes. Accordingly, following judicial decisions off Hon'ble Courts and Tribun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llant 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 of relevant decisions of Hon'ble Courts and Tribunals furnished and legal submission on unrecorded members collection admitted in survey as advance from members as per method of accounting followed and portion of such unaccounted collection is offered on year-to-year basis as per sale deed executed and the profit is offered on cost of project on the basis of relevant decisions of Hon'ble Courts and Tribunals furnished. These lega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 / outflow, the appellant company though the net profit ratio is 5.80%, has offered profits @ 20% on extra collection, as there are always higher profits in the extra work items and accordingly offered R$. 4 crore in Income tax return filed for A.Y, 2012-13, It is therefore prayed that the addition of entire extra receipts may kindly be restricted to the offer made by the appellant in Income tax returns." 10. After examining submissions of the assessee, remand report....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 held by the ld.CIT(A), only the profit element embedded in the total receipts is required to be taxed. Admitted facts are that survey was conducted at 501, 502, Safal Preclude, Prahaladnagar, Ahmedabad under section 133A of the Act on 24.10.2011. During the course of survey certain papers inventorised as Annexure A/1 to A/4 were impounded. Unaccounted receipts of Rs. 20.01 crores in respect of Stavan Alteza, Stavan Paradise and Stavan Arise schemes of the assessee company ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 30-09-2012 100 Total 450 Kindly consider our above submission sympathetically." 13. It is pertinent to note that both letters filed by the assessee were prior to return of income filed by it. The second letter referred by the AO dated 5.6.2012 would specifically exhibit the acceptance of Rs. 20.01 crores as income of the assessee, which would give rise to tax liability of Rs. 6 crores. This has also been recognized by the assessee; rather the assessee has proposed the payment of tax on alleged undisclosed income. However, wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rred 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 expenditure. The AO has specifically asked the assessee to give details of expenditure which were not incorporated in the books. He asked for flat-wise details of work done along with relevant measurement sheets/bills. In other words, the assessee must have maintained details for controlling overall expenditure. Those details might not be part of regular books of accounts, but they may goad the AO to estimate what is the nature of work; how much expenditure probably would have been incurred by the assessee; even under estimation. No such things were submitted by the assessee. To be more specific, there should be corresponding details of unaccounted expenditure. These de....