TaxTMI 
TaxTMI 
2022 (2) TMI 311
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....ars. Therefore, these are clubbed together for sake of brevity, convenience and adjudication. For the purpose of the order, the facts stated in the appeal of the assessee bearing ITA No. 1916/AHD/2011 for A.Y. 1995-96 are adopted for the purpose of adjudication. The assessee has raised the following grounds of appeal: 1. The Ld. Commissioner of Income Tax (Appeals)-III, Baroda has grossly erred in law and in facts in holding that the directions of the Hon'ble ITAT by its order in I.T.A. No. 192/Ahd/1999 and 752/Ahd/1999 for the relevant year in deciding the appeal afresh do not entail jurisdiction to him. According to the Ld. CIT(A)-III, Baroda, the jurisdiction could be assumed only if the appellant's application was pending before the Settlement Commission. Since there was no application made by the appellant to the Settlement Commission, no valid and lawful jurisdiction could be exercised by him. The action of the Ld. CIT(A) in holding so is in defiance of the direction of the Hon'ble ITAT and that the Ld. CIT(A) ought to have decided the appeals afresh. 2. The Ld. Commissioner of Income Tax (Appeals)-III, Baroda has further erred in law and in facts in holding t....
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....al herein above contained. 3. The issue raised by the assessee in first and second ground of appeal is that the Ld. CIT-A erred in holding that he had no jurisdiction to adjudicate the issue afresh in line with the directions of Hon'ble ITAT given in ITA No. 192/AHD/1999 and 752/AHD/1999 on the reasoning that the appellant had not filed any application before the settlement commission. Accordingly, the grounds of appeal decided by his predecessor will prevail. 4. At the outset, we note that similar issue has been decided by the Hon'ble ITAT Ahmedabad Bench in the case of Chandrakanta Jashbhai Patel vs ITO in ITA No. 1912/AHD/2011 vide order dated 22-12-2014 where it was observed that the Ld. CIT-A had no jurisdiction to adjudicate the issue afresh due to the reason that the appellant has not filed any application before the Settlement Commission. Therefore, there is no question of having any order of Settlement Commission. Accordingly the Ld. CIT-A was unable to follow the direction given by the ITAT. For the sake of better understanding the relevant finding of the Hon'ble bench is reproduced hereunder: "Since, there was no application to the Settlement Commission with regards ....
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....arious incriminating documents were found from the premises of Ashok C Patel which were depicting the fact that MOPL has received on money which was not recorded in the regular books of accounts. Likewise, there were certain incriminating documents showing the utilization of on money which were not recorded in the books of accounts. The year wise details of the on money stand as under: A.Y. Amount 1992-93 8,22,088 1993-94 31,67,270 1994-95 1,45,15,601 1995-96 1,28,37,963 3,13,42,924 6.4 The fact of receiving the on money was duly accepted by the directors of the company including the director namely Shri Ashok C Patel who is a common director in both the companies i.e. assessee as well as MOPL in a statement furnished under section 132(4) of the Act. 6.5 However, the assessee, with respect to on money received, contended during the assessment proceedings that it had not received any on money. Therefore, it had no control of whatsoever on the money received by MOPL. Furthermore, the on money was not utilized in its business activities. As such, the on money was utilized by MOPL substantially. Likewise, the shareholders and the Board of Directors of the asse....
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....details such as the name and addresses of the parties to whom the payments were made. Likewise, there was no evidence filed by the assessee that such expenses were incurred in connection with the construction activity. Furthermore, the expenditure relating to constructions have already been recorded in the regular books of accounts. b- That most of the expenses were incurred in cash in violation of the provisions of section 40A(3) of the Act. c- That some of the expenditures were incurred out of such on money for unlawful activities which is against the public policy. d- That certain expenditures which were capital in nature such as payments in cash out of the on money to acquire the shares from the previous directors, repaid the deposits to the previous depositors. e- That certain payments were made in advance to suppliers and labour contractors which were subsequently taken back after making payments through cheque. f- That non-furnishing of details and proper explanation to justify the claim of expenditure. 6.11 The AO thus was of the view that such expenditure does not substantiate that it is related to the business of the assessee. Thus, the AO in view of the above ....
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....espective of the fact whether the project was completed or not in the year under consideration. But the assessee has shown nil income in the year under consideration. ii. There was on money received by the assessee which were not recorded in the books of accounts. Therefore, the books of accounts maintained by the assessee were not depicting the correct income. As such the books of accounts were not complete. iii. The DVO has valued the cost of the project up-to March 1996 at Rs. 10,79,97,700/- whereas the assessee has shown the project cost in the books of accounts at Rs. 8,63,98,852/- only. Similarly, the DVO has valued the cost of construction for the year under consideration at Rs. 3,41,14,353/- whereas the assessee has shown the cost of construction for the year under consideration at Rs. 2,71,34,604/- only. iv. The assessee has not provided the quantitative details for the purchase of materials. The assessee is also not maintaining day-to-day stock register and the necessary details for the payment made to the labour contractors. 6.15 In view of the above the AO invoked the provisions of section 145(3) of the Act and rejected the books of accounts of the assessee. Furt....
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....accounts can be made under the provisions of section 40A(3) of the Act. 8.2 Without prejudice to the above, the assessee submitted that the receipt shown in the seized documents represents the business receipts. Against such receipts the assessee has incurred the expenses. Therefore, the entire amount cannot be treated as income. In this regard various decisions have been taken by the Hon'ble Court by determining the income on estimated basis i.e. 10% of such receipts. 8.3 The learned CIT (A) during the proceedings observed that during the survey operation dated 11th October, 1994, and search operation the income from the on money was disclosed in the hands of MOPL. The same was the position even during the assessment proceedings. Furthermore, the assessee has never disputed the fact that income from the unaccounted on money should be treated as its income. It was also observed that both the assessee and MOPL are body corporates. Thus, it does not make any difference even the income is included in either of the hands. Likewise, the assessee was not in a position to recover the on money from MOPL legally, except the money which was in pursuance to the agreement entered between the....
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....ney receipts as it was recorded on same set of seized papers. The assessee also submits the detailed explanations of these payments before the Ld. CIT-A. 8.8 The ld. CIT-A regarding the unexplained payment of Rs. 42.12 lacs noted that nothing has been brought on record that such payments were made other than out of the on-money receipts. Similarly, the date of receipts of on money and date of expenditure had not been recorded. Therefore cash flow statement could also not be possible to prepare. Thus the Ld. CIT-A, deleted the addition of unexplained payments/investment for the sum of Rs. 42,12,125/- made by the AO. 8.9 The assessee regarding the rejection of the accounts contended that there was no defect pointed out by the AO therein. Therefore, the books cannot be rejected. 8.10 The assessee regarding the accounted receipts submitted that it started its project in the year 1992 and it booked the flat at a very low rate. But by the time the project was under progress the cost of the project has gone high which will eventually result in negative income. The assessee also assailed that the margin prevailing in the similar kind of business vary from 6 to 10% only. The assessee sub....
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....ncome on 'on-money' has to be taxed in the hands of project consultant and booking agent, M/s.Madhav Organizers Pvt.Ltd. 2. On the facts and in the circumstances of the case and in law, t\ e Id. CIT (Appeals) erred in deleting the addition of Rs. 42,12,125/- on account of unexplained payment without appreciating that the expenditure as recorded i i the seized material were unaccounted investment of the assessee company. 3. On the facts and in the circumstances of the case and in law, the Id. CIT (Appeals) erred in restricting the addition of 25% of the receipts mace by rejecting the book results to 10% of the receipts. 4. The appellant craves leave to add to, amend or alter the aoove grounds as may be deemed necessary. 11. The learned AR before us filed from pages 1 to 823 and contended that the rate of profit determined by the learned CIT (A) being 10% of the gross receipt is on the much higher side. 12. On the other hand, the learned DR before us filed a paper book running from pages 1 to 263 and contended that the assessee was the ultimate beneficiary of the on money as it relates to its real estate project. Thus, the same should be taxed in the hands of the asse....
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....rs, all of them were buying the property in the project of the assessee. Thus, what is transpired is this that the transaction with respect to which the on money was collected was related to the flats/shops which were constructed by the assessee. Therefore, in our considered view, this collection of the on money was not possible without the business activity of the assessee. Accordingly, it seems to us the substance of the transaction if viewed on the parameters of risk and reward, the on money belongs to the assessee. It is for the reason that the entire risk for constructing the project was undertaken by the assessee. In the construction project, there is an investment of huge money which was invested by the assessee. There was no investment made by MOPL in the construction project of the assessee. The role of MOPL was limited to the extent of booking the flats/shops on behalf of the assessee which was not possible without the project which was constructed by the assessee. Even if we see the seized documents, we find that most of the expenditures were incurred which were related to the construction activities barring one exception such as deposit of money in the bank account of M....
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.... deduction of the expenditure recorded in the seized documents. It is a fact on records that on money was reflecting in the seized documents. Such seized document was the basis of making the addition of such on money. It is also a fact on record that there were expenditures incurred against the on money as evident from the same set of seized documents. In our considered view these documents should be read as a whole. Such seized documents cannot be used as the basis for making the addition without giving the deduction of the expenses appearing in the seized documents. We note that the Hon'ble Supreme Court in the case of CIT vs S C Kothari reported in 82 ITR 794 held as under; "If the business is illegal neither the profits earned nor the losses incurred would be enforceable in law. But, that does not take the profits out of the taxing statute. Similarly, the taint of illegality of the business cannot detract from the losses being taken into account for computation of the amount which can be subjected to tax as "profits" under section 10(1) of the Act of 1922. The tax collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax profits of a trade....
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....se of Vijay Protein Ltd. vs. CIT reported in 58 taxmann.com 44 where the Hon'ble court held as under: 8. We are broadly in agreement with the view of the Commissioner of Income Tax (Appeals) as confirmed by the Tribunal. When the Assessing Officer had doubted the genuineness of the expenditure, he would require bringing to tax the profit element so avoided by the assessee. As noted, the Commissioner of Income Tax (Appeals) while limiting the additions, brought the assessee's declared gross profit ratio at the same rate as in the previous year which was even otherwise in tune with the percentage of the assessee's doubtful purchases. 14.7 The principles laid down by the Hon'ble Gujarat High Court as discussed above are based on different set of facts but the ratio laid down therein can be applied to the present facts of the case. Accordingly, we do not find any infirmity in the order of the learned CIT (A) so far, to determine the income of on money receipts on the percentage basis is concern. Now the next controversy with respect to the determination of percentage to be applied on the on money. In this regard we note that indeed, there is no standard jacket formula to wor....
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....ances and facts of the case i.e. AS-7 cannot be made applicable. Accounting standard AS-9 which has been reproduced by the Ld. CIT(A) and has been discussed at pages 4-8 of his order is applicable in the present circumstances and facts of the case. Moreover, it has not been controverted by the Ld. DR appearing for the Revenue that the assessee had awarded the contractors to various other contractors. Also it has not been controverted that there is no construction activity carried out by the assessee during the year and there was a dispute of the parties who had filed civil suit in Mumbai civil court. The assessee had received the advances which are duly reflected in the balance-sheet of the assessee. There is no certainty of the Revenue recognition at this stage. Moreover, all the significant risks and the ownership at this juncture vest in the hands of the owner i.e. the assessee and they have not been transferred to the buyer or the proposed buyer. Therefore, in the circumstance and facts of the case, we find no infirmity in the order of Ld. CIT(A), which appears to be quite reasoned one and he has justified in reversing the order of the AO on the issue. Thus, ground No. 1 of the....
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.... any separate adjudication. Thus, the issue raised by the assessee becomes infructuous. Accordingly, we dismiss the same. 14.13 In the result the appeal filed by the assessee is partly allowed whereas the appeal filed by the Revenue is hereby dismissed. Coming to ITA No. 1915/AHD/2011 an appeal by assessee for the AY 1994-95. 15. The assessee has raised the following grounds of appeal; 1. The Ld. Commissioner of Income Tax (Appeals)-! II, Baroda has grossly erred in law / and in facts in holding that the directions of the Hon'ble ITAT by its order in I.T.A. No. 988/Ahd/2001 and 1163/Ahd/2001 for the relevant year in deciding the appeal afresh do not entail jurisdiction to him. According to the Ld. CIT(A)-III, Baroda, the jurisdiction could be assumed only if the appellant's application was pending before the Settlement Commission. Since there was no application made by the appellant to the Settlement Commission, no valid and lawful jurisdiction could be exercised by him. The action of the Ld. CIT(A) in holding so is in defiance of the direction of the Hon'ble ITAT and that the Ld. CIT(A) ought to have decided the appeals afresh. 2. The Ld. Commissioner of Income ....
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.... of the grounds of appeal herein above contained. The Ld. CIT(A) may please be directed to adjudicate and decide the above grounds. 4. Your appellant craves liberty to add, alter, delete or substitute any of the grounds of appeal herein above contained. 16. The issue raised by the assessee in the first and second ground of appeal is that the Ld. CIT-A erred in holding that he had no jurisdiction to adjudicate the issue afresh in line with the directions of Hon'ble ITAT given in ITA No. 988/AHD/2001 and 1163/AHD/2001 on reasoning that the appellant had not filed any application before the settlement commission. Accordingly the grounds of appeal decided by the predecessor will prevail. 17. At the outset we note that the issue raised by the assessee in its grounds of appeal for the year under consideration is identical to the issue raised by the assessee in ITA No. 1916/AHD/2011 for the assessment year 1995-96. Therefore, the finding given in ITA no. 1916/AHD/2011 shall also be applicable for the year under consideration i.e. A.Y. 1994-95. The appeal of the assessee for the A.Y. 1995-96 has been decided by us vide paragraph No. 4 of this order against the assessee. Hence, the gr....
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..... The Ld. CIT (Appeals) IV, Baroda has erred in law and in facts in upholding the action of the ACIT, Central 2, Baroda in disregarding the existence of various legally enforceable agreement with Madhav Organisers Pvt. Ltd., the project consultant and booking agent while misinterpreting the modus operandi of the schemed of the Avishkar Project and therefore it deserves to be held that the appellant's modus operandi of the scheme is to be accepted and it's to be held that the status of the appellant being that of a mutual society no tax can be levied. 2. The Ld. CIT (Appeals)-IV, Baroda has erred in law and in facts in confirming the action of the ACIT, Central 2, Baroda in holding that the appellant is engaged in the business of real estate / construction and not a non-profit making entity and it is to be held that the appellant's entity is that of a nonprofit making entity. 3. The Ld. CIT (Appeals)-IV, Baroda has erred in law and in facts in disregarding that the appellant is following the completed method of contracts basis for accounting and accordingly even if the profit is to be estimated / quantified and taxed the same can be recognized only when the project i....
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....ITA no. 1916/AHD/2011 shall also be applicable for the year under consideration i.e. A.Y. 1993-94. The appeal of the assessee for the A.Y. 1995-96 has been decided by us vide paragraph No. 14 of this order by allowing the appeal of the assessee in its favour in part. Hence, the ground of appeal filed by the assessee is partly allowed. 24.1 In the result, the appeal of the assessee is partly allowed. Coming to ITA No. 1913/AHD/2011 an appeal by assessee for the AY 1992-93. 25. The assessee has raised the following grounds of appeal; 1. The Ld. Commissioner of Income Tax (Appeals)-III, Baroda has grossly erred in law and in facts in holding that the directions of the Hon'ble 1TAT by its order in I.T.A. No. 190/Ahd/1999 and 750/Ahd/1999 for the relevant year in deciding the appeal afresh do not entail jurisdiction to him. According to the Ld. CIT(A)-III, Baroda, the jurisdiction could be assumed only if the appellant's application was pending before the Settlement Commission. Since there was no application made by the appellant to the Settlement Commission, no valid and lawful jurisdiction could be exercised by him. The action of the Ld. CIT(A) in holding so is in defianc....
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....nds of appeal herein above contained. The Ld. CIT(A) may please be directed to adjudicate and decide the above grounds. 4. Your appellant craves liberty to add, alter, delete or substitute any of the grounds of appeal herein above contained. 26. The issue raised by the assessee in first and second ground of appeal is that the Ld. CIT-A erred in holding that he had no jurisdiction to adjudicate the issue afresh in line with the directions of Hon'ble ITAT given in ITA No. 190/AHD/1999 and 750/AHD/1999 on the reasoning that the appellant had not filed application before the Settlement Commission. Accordingly, the grounds of appeal decided by his predecessor shall prevail. 27. At the outset we note that the issue raised by the assessee in its grounds of appeal for the year under consideration is identical to the issue raised by the assessee in ITA No. 1916/AHD/2011 for the assessment year 1995-96. Therefore, the finding given in ITA no. 1916/AHD/2011 shall also be applicable for the year under consideration i.e. A.Y. 1992-93. The appeal of the assessee for the A.Y. 1995-96 has been decided by us vide paragraph No.4 of this order against the assessee. Hence, the ground of appeal f....
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.... expenditure. 32. At the outset we note that, the issue raised by the Revenue is identical to the issue raised by it in ITA No. 1808/AHD/2011 for A.Y. 1995-96. Therefore, the finding given in ITA No. 1808/AHD/2011 for AY 1995-96 shall also be applicable for the year under consideration i.e. A.Y. 1994-95. The appeal of the Revenue has already been adjudicated along with the appeal of M/s Kotel Properties Private Limited bearing ITA No. 1916/AHD/2011 for the assessment year 1995-96 wherein the ground of appeal of the Revenue was dismissed. For the detailed discussion, please refer the relevant paragraph number 14 of this order. Thus, the ground of appeal raised by the Revenue is dismissed. 33. The issue raised in ground No. (iii) of appeal filed by the Revenue is that the Ld. CIT-A erred deleting the addition of Rs. 37,55,020/- on account of unexplained peak cash loan. 34. The AO during the assessment proceedings based on the seized documents found that the assessee has incurred/paid the interest expenses of Rs. 9,01,205/- on the money borrowed in cash. These transactions were not recorded in the regular books of accounts. Thus, the AO worked out the amount of cash loan taken by t....
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....d on such interest, was not recorded in the regular books of accounts. Therefore, in our considered view the impugned amount of loan not recorded in the regular books of accounts cannot attract the provisions of section 68 of the Act. Hence, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly, we uphold the same. Likewise, on the same reasoning the income added by the AO on protective basis in the hands of MOPL is also liable to be deleted. Thus, the ground of appeal raised by the Revenue is dismissed. 41. The issue raised by the Revenue in ground no. (v) is that the Ld. CIT-A erred in deleting the addition of Rs. 80,62,470/- on account of difference in cost of construction determined by the DVO and recorded by the assessee in the books of account. 41.1 The AO during the assessment proceedings found that the assessee has incurred huge investment in the construction of the project namely "Avishkar". Accordingly, the AO in order to determine the actual value of the project of the assessee referred the matter to the DVO for the purpose of the valuation. The DVO determined the value of the project at certain amount which was not matching with the....
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.... not find any reason to interfere in the finding of the learned CIT (A). Accordingly, we uphold the same. Likewise, on the same reasoning the income added by the AO on protective basis in the hands of MOPL is also liable to be deleted. Hence the ground of appeal of the revenue is dismissed. 46.1 In the result the appeal of the Revenue is dismissed. Coming to ITA No. 1920/AHD/2011 in the case of Madhav Organizers Pvt. Ltd. an appeal by assessee for the AY 1995-96. 47. The assessee has raised the following grounds of appeal; 1 The Ld. Commissioner of Income Tax (Appeals)-lll, Baroda has grossly erred in law and in facts in holding that the directions of the Hon'ble ITAT by its order in I.T.A. No. 187/Ahd/1999 and 749/Ahd/1999 for the relevant year in deciding the appeal afresh do not entail jurisdiction to him. According to the Ld. CIT(A)-III, Baroda, the jurisdiction could be assumed only if the appellant's application was pending before the Settlement Commission. Since there was no application made by the appellant to the Settlement Commission, no valid and lawful jurisdiction could be exercised by him. The action of the Ld. CIT(A) in holding so is in defiance of the d....
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....plus out of such receipts can be taxed only when the project, which it was managing as consultant and agent, is complete. 5. The Ld C/T (Appeals), Baroda has erred in law and in facts that of the on money as determined above the appellant has earned an income of Rs. 25,67,593/- being 20% of the total on money while disregarding the claim of the appellant that the on money to the extent of Rs. 304 lakhs is utilised/incurred as expense out of the total on money of Rs. 313 lakhs received upon the date of search and therefore the determination of income @ 20% is excessive and deserves to be deleted. 6. The Ld. C/T (Appeals) IV, Baroda has erred in law and in facts in confirming the action of the ACIT, Central Circle 2, Baroda in making an addition of Rs. 82,060/-. The addition being contrary to facts and law deserves to be deleted. 7 Your appellant craves liberty to add, alter, delete or substitute to any of the grounds of appeal hereinabove contained. The Ld. CIT(A) may please be directed to adjudicate and decide the above grounds. 4. Your appellant craves liberty to add, alter, delete or substitute any of the grounds of appeal herein above contained. 48. The issue raised b....
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....us. 56. The learned AR before us submitted that the impugned cash has already been considered as part of unaccounted receipts. Therefore, the same cannot be added to the total income of the assessee. 57. On the contrary, the learned DR before us vehemently supported the order of the authorities below. 58. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there was the cash found from the premises of the assessee during the search proceedings. The onus lies upon the assessee to explain the source of the same. However, we find that the assessee failed to offer the source of the same, therefore the addition was made by the AO which was subsequently confirmed by the learned CIT (A). At the time of hearing the learned AR has not brought anything on record about the source of cash. Accordingly we do not find any reason to interfere in the finding of the authorities below. Hence the ground of appeal of the assessee is dismissed. 58.1 In the result, appeal of the assessee is partly allowed. Coming to ITA No. 1919/AHD/2011 and 1918/AHD/2011 and 1917/AHD/2011, appeals by assessee for the AY ....
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....by the Revenue in ground No. 1 and its sub grounds number (ii) is that the Ld. CIT-A erred in deleting the addition of Rs. 37,55,020/- on account of cash loan. 64. At the outset we note that, the issue raised by the Revenue has already been adjudicated along with the appeal of M/s Kotel Properties Private Limited bearing ITA No. 1807/AHD/2011 for the assessment year 1994-95 wherein the ground of appeal of the Revenue was dismissed. For the detailed discussion, please refer the relevant paragraph number 39-40 of that order. Thus, the ground of appeal raised by the Revenue is dismissed. 65. The next issue raised by the Revenue in ground No. 1 and its sub grounds number (iii) is that the Ld. CIT-A erred deleting the addition of Rs. 41,08,402/- holding that addition made on substantive basis in the hands of KPPL. 66. At the outset we note that, the issue raised by the Revenue has already been adjudicated along with the appeal of M/s Kotel Properties Private Limited bearing ITA No. 1916/AHD/2011 for the assessment year 1995-96 wherein the ground of appeal of the Revenue was dismissed. For the detailed discussion, please refer the relevant paragraph number 14 of that order. Thus, the ....