TaxTMI 
TaxTMI 
2022 (11) TMI 1127
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....red during the course of survey, whether it pertains to business income or not? (Grounds 3 to 8) 3. The brief facts of the case are as follows: The assessee is a partnership firm engaged in the business of construction of residential and commercial buildings. It also undertakes development of layouts. A survey u/s. 133A of the I.T. Act was conducted on 22.12.2015 at the business premises of the assessee. A statement on oath was recorded from the partner of the assessee, Mr. Vimal Chand Pukhraj Telisara. During the course of survey, the Assessing Officer found a valuation report, wherein the cost of construction per square feet was mentioned at Rs. 3,200, whereas the assessee had entered into sale agreement at an average rate of Rs. 2,375 per sq.ft. The partner was confronted with the aforesaid valuation report. It was stated that the valuation report did not disclose the true and fair market value of the flat, however, the partner in order to buy peace with the Department, voluntarily offered a sum of Rs. 2 crore as on-money received on account of 22 sale agreement, token advance for 14 flats and sale of open sites for the relevant assessment year 2016-2017. The assessee in the r....
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....dated 22.12.2015, lias voluntarily admitted Rs. 2,00,00,000/- additional income on account of 'on money', being difference of sell value and actual valuation report of flats at RT Enclave. The assessee has admitted Rs. 800/- per square feet on money for total average constructed area of 25,000/- square feet in respect of 22 fiats at RT enclave. Thereafter, the assessee has never disputed from his declaration or retracted from the statement u/s. 131 (3) tendered by its partner, since last two years. Further, he has declared his additional income of Rs. 2,00,00,000/- in his return of income for A.Y. 2016-17 as indirect income. During the course of Assessment proceedings, the assessee was given multiple opportunity but he never contended or disputed his additional income of Rs. 2,00,00,000/- declared during the course of survey. Therefore, the said income of Rs. 2,00,00,000/- can not be treated as regular book profit and the same is liable to be taxed u/s. 115BBE. Thus, no remuneration or allowance is allowed against the survey declaration of Rs. 2,00,00,000/-. The assessee was given opportunity vide notice u/s. 142(1) dated 04.12.2018 before disallowance of remuneration pai....
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....2 crore, which is nothing but business income arising out of the construction activities undertaken by the assessee. It was contended that the valuation arrived in the cost of construction is as per the industrial standards and there is no infirmity in the books of account of the assessee. It was contended that the possibility of receiving additional income due to the increase in the rate of construction cannot be ruled out in future years and it is in this context, a sum of Rs. 2 crore was disclosed. Therefore, it is submitted that the same is to be treated as business income and no inference could be drawn that additional income was unexplained. It is further submitted that there was no cash or incriminating documents found in the premises of the assessee to draw inference that there was unexplained receipts in the nature of income warranting invocation of section 115BBE of the I.T. Act. Further, it was contended that there was no loss to the Revenue, since the partners salary has been taxed at the maximum marginal rate. Lastly, it was contended that the partners salary was a mandatory charge on the profits and a permissible deduction u/s. 40(b)(v) of the I.T. Act. In other words....
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....oans from financial institution and could not be construed to be price of the units accruing to the assessee. It is further to be noticed that the survey u/s. 133A of the I.T. Act was conducted on 22.12.2015 and the assessment year under consideration, i.e., A.Y. 2016-2017, was not complete. The manner of computation by the assessee in arriving at the additional income of Rs. 2 crore as per the sworn statement demonstrate that it is directly relatable to the construction of flats, and hence, deem to accrue as part of the consideration of sale of flats and thus the income is to be treated as income from business of the assessee. The surrendered income disclosed by the assessee are part of the business activities and as mentioned earlier no other activities were carried on by the assessee, nor has the Revenue brought on record any contrary material for the aforesaid conclusion. Moreover, the Revenue has not found any money during the course of survey. Further, the tax rate specified u/s. 115BBE of the I.T. Act for assessment year 2016-2017 is at 30% (same as the normal rate) and the partners of the assessee after considering the remuneration have discharged tax liability more or less....
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.... the profit and loss. In the circumstances, we are of the opinion that on facts the revenue has no case on the merits. So far as the question of law is concerned, we have to answer the same in favour of the revenue. 6. Hence, these appeals deserve to be dismissed by upholding the orders passed by the Income-tax Appellate Tribunal and they are dismissed." 12. The facts of the instant case are similar to the judgment rendered by the Hon'ble jurisdictional High Court (supra). Since we have held that the additional income offered as part of the business income, the assessee would be entitled to deduction as per the provisions of section 40(b)(v) of the I.T. Act. It is ordered accordingly. 13. Hence, grounds 3 to 8 are allowed. URD Purchases (Grounds 11 to 13) 14. The A.O. in the assessment completed, had disallowed on ad hoc basis, a sum of Rs. 3,31,868 being 20% of the URD purchases amounting to Rs. 16,59,344. The view taken by the A.O. was confirmed by the CIT(A). The relevant finding of the CIT(A) reads as follows:- "9.1. The report of the AO was duly confronted to the appellant. In response to the same the appellant has submitted that the disallowance is excessive and t....