TaxTMI 
TaxTMI 
TaxTMI 
2021 (6) TMI 1150
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....edits u/s 68 of the I.T. Act and of Rs. 41,65,500/- on account of unexplained expenditure for A.Y.2011-12 by not appreciating the fact involved in this case that exit / accommodation entries provider of the assessee company were non- existent and only paper based entities and also such exit providers companies as well as the assessee company miserably failed to prove creditworthiness and genuineness of transactions. 2. On the facts and in the circumstances of the case and in law, the decision of the Id. CIT(A) is perverse in holding that no incriminating material was found during search proceedings for A.Y.2011-12, though the Ld. CIT(A) at para No.3.8 of his decision has recorded that "the A.O. at Para 4.8 of his Assessment Order has referred to statement of partners/directors recorded under section 132(4) of the Act in post-search proceedings regarding admission of unaccounted money in the form of on-money from sale of flats, shops, offices etc., and applied the same in receiving accommodation entries in the form of unsecured loan and long term capital gain whereas the addition referred supra is not based upon any such statement". Here, it is important to mention that the statem....
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....r A.Ys. 2011-12 to 2013-14 in response to notice issued u/s 153A of the Act. The assessee filed regular return of income for A.Y. 2014-15 on 27.09.2014. The details showing income as per original return u/s 139, dates of filing such returns of income, returned income u/s 153A, details of additions made by A.O. and assessed income for the assessment years in appeal are tabulated as under: Particulars Assessment Years 2011-12 2012-13 2013-14 2014-15 Total income as per return u/s 139 (Rs.) Date of filing of original return of income 28/09/2011 27/09/2012 26/09/2013 27/09/2014 Total income as per return u/s 153A (Rs.) 1,37,700 5,74,140 5,95,530 89,71,800 Additions : Unexplained cash credit u/s 68 (Rs.) 8,33,10,000 1,62,40,000 Unexplained expenditure (Rs.) 41,65,500 8,12,000 Undisclosed sale receipts (Rs.) 60,92,500 1,36,56,500 2,48,64,000 4,57,14,000 Assessed Total Income (Rs.) 9,37,05,700 3,12,82,640 2,54,59,530 5,46,85,800 4. As per Ld. A.O., the Company M/s. Safal Nirman Pvt. Ltd. does not have any physical presence on its given address at Howrah and it is found that it never exi....
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....with premium allotted* 1998* When shares were transferred other party at cost of Rs. 10* 22.09.2009* Investment made by Safal Nirman* On numerous dated before 2006 reflected in Balance Sheet for FY 2006-07 onwards. Assessment order u/s 143(3) passed wherein genuineness of purchase has been accepted. When Directors purchased shares 30.09.2009 Shares purchased at book value being Rs. 10 per share When first sale of investment made 12.06.2010 When last sale of investment made 03.11.2011 * Prior to acquisition of the appellant company by the Bafna Panchal Group of persons On the basis of above tabular chart the Ld. ARs of the Appellant have argued that sale consideration received on sale of investments (in shares) by the Appellant Company cannot be held as non-genuine on following grounds: (i) Statements of buyers of shares have not been recorded by Assessing Officer to prove that they are exit providers and sale of shares is non genuine. (ii) The Assessing Officer has neither established that cash deposited in the account of third parties (which are sources of funds in the hands of the buyers/exit providers) belong to the appellant nor disproved the capacity of bu....
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....estments in A.Y. 2011-12 and 2012-13 to various companies having addresses at Kolkata. The sale consideration being cost value of investments received during the year through account payee cheques have been taxed as undisclosed income of Appellant in both the Assessment Years on the ground that Appellant has obtained them as accommodative entries. With this background, it is pertinent to note that search was carried out in the Bafna Panchal Group of cases on 7th January, 2014 and Appellant had already filed their original returns of income for A.Yrs. 2011-12 to 2013-14. The time limit for issuance of notice under Section 143(2) of the Act had already expired on the date of search. On careful consideration of entire Assessment Order (for A.Yrs. 2011-12 ad 2012-13), it is found that while making above additions, the A.O. has not referred to any loose paper/documents found during the search to prove that the appellant has obtained accommodative entries by way of sale of investments. The sale realizations were already recorded in books of account prior to search and such fact is not disputed by the AO. The Assessing Officer has not referred to any incriminating material to prove that....
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....t for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs. 11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under ....
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....o on money receipts by the assesses 10. CIT(Appeals) re-examined the issue by giving independent reasons. However on similar factors, he confirmed the additions, upon which, the assessee went in further appeal before the Tribunal. 12. We may take the case of Vejalpur land as a test case. CTTfAppeals) has also recorded that for such land, the assessees had paid through cheques a total sum of Rs. 22,02,100/to one Sherin Co. Op. Hsg. Sac. Ltd. during the period between 28.7.2003 to 31.1.2005. CIT(Appeals) also noted that entire amount was repaid by Sherin Co. Op. Hsg. Soc. Ltd. in different cheques during the period between 2.6.2005 to 5.12.2005. The Revenue did not have any further material to suggest that though the assessee might have exited from the land deal, Sherin Co. Op. Hsg. Soc. Ltd. had eventually sold the land to third party and in the process, the assessee had extracted its share of profit. The Tribunal therefore, accepted the assessees' contention that the loose documents did not refer to the actual receipt of on money since the documents itself carried a title "PROJECTIONS" and further that the Assessing Officer had nothing to discard the assessees' theory tha....
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....ome is meagre considering the huge investment made by it in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly attracted. On these very facts the Hon'ble ITAT has deleted addition made u/s 153A of the Act and has held that- ".............................. 42. As mentioned earlier, the addition of Rs. 11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. 43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not known in the course of original assessment. Following the above decision, the....
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....enditure for Rs. 41,65,500/- and Rs. 8,12,000/- in both, the Assessment Years are also required to be deleted. As issue has been decided in favour of the Appellant following decisions referred supra on the ground that these additions are beyond the scope of Assessment Order passed u/s 153A of the Act, grounds raised by Appellant challenging merits of the addition have become infructuous hence same are not being adjudicated. In nutshell, the additions made u/s 68 and unexplained expenditure for both the Assessment Years (A.Y. 2011-12 and A.Y. 2012-13) are deleted. 10. Thereafter ld. CIT(A) considering the several case laws and facts in details it is held that addition made u/s 68 of the Act for Rs. 8,33,10,000/- in A.Y. 2011-12 and Rs. 1,62,40,000/- in A.Y. 2012-13 cannot be upheld and are required to be deleted. And further additions made by Ld. A.O. by estimating unexplained expenditure for Rs. 41,65,500/- and Rs. 8,12,000/- in both the Assessment Years are also required to be deleted and held that these additions are beyond the scope of Assessment Order passed u/s 153A of the Act and finally addition made u/s 68 and unexplained expenditure for both the Assessment Years were dele....
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....500 2,48,64,000 4,57,14,000 18. On the other hand, assessee contention was that Site Supervisor statement cannot be relied upon as he was not responsible for handling sales. And alternatively contended that even if rate as per statement is applied, the same should be applied to sale made in the year in which statement is recorded and should not be applied to the preceding years. And assessee contended before the Ld. CIT(A) that Assessing Officer did not provide an opportunity to cross examine of Shri Sudhir Brahmbhatt site supervisor which is against the principle of natural justice. And assessee contended before the ld. CIT(A) that sale of all units cannot be estimated at a flat rate since there are various factors which affect the rarte, some of them being the location of the unit being sold, urgency of funds required at a particular point of time, time of booking, duration of payment, references/negotiations involved etc. 19. And assessee contended that no sale has been offered in books of account in A.Yrs. 2011-12 to 2013-14 which is accepted by the A.O. while passing the Assessment Order hence on-money addition cannot be made in these three Assessment Years on the ground....
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....ite supervisor is concerned, such statement cannot be made applicable when the Director of the Appellant Company himself has admitted sale rate at Rs. 2,100/- per sq. ft. which is more reliable. Even the above site supervisor has joined the Appellant Company in March, 2013 and even he has left it in July 2014 which suggests that he was not a permanent employee of the Company. He was not an authorised person looking after the affairs of the company or bookings made by it. Hence the AO was incorrect in adopting sale rate of Rs. 2,500/- per sq. ft. while arriving at on-money receipts. The Director of Appellant, has admitted sale value at Rs. 2,100/- per sq. ft. and such statement has not been retracted later on and in Assessment Proceedings hence on-money in the case of Appellant is required to be re- computed based upon actual admitted sale value at Rs. 2,100/- per sq. ft. So far as the argument of Appellant that there cannot be any uniformity of sale value for all the four Assessment Years, it is observed that the Appellant has not submitted any scientific method of working on-money and even rate mentioned by the Director is a general average selling price of units sold by Appellant....
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....ceived. It is a settled law that onmoney would be taxed in the year in which regular income is taxed. Reliance is placed on decision of Hon'ble Ahmedabad ITAT in the case of PR Construction V/s ITO (ITA No. 2735/Ahd/2010, dated 8th April, 2011) wherein it is held that accrual of cheque/cash against sale of flat will not arise on receipt but will arise when flats are transferred to buyers. The Hon'ble Pune ITAT in the case of Ranade Dighe V/s ITO (466/Pn/2010, dated 26th August, 2011 has held that on-rnoney cannot be taxed_on_cash basis.as cash receipts do not partake different character from cheque receipt merely because it was received in cash and possibly because there is intention to evade its disclosure to the Department. It is pertinent to note that similar contention has been accepted by undersigned in group case being Lupin Enterprise for AY 2012-13 to 2014-15 in appellate order dated 14th March, 2018. Considering these facts it is held that AO was not justified in making addition of undisclosed sale receipts for Rs. 60,92,500/- in A.Y. 2011-12, Rs. 1,36,56,500;- in A.Y. 2012-13 and Rs. 2,48,64,000/- in A.Y. 2013-14. Thus, to that extent additions made in three Asses....
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....t Commission has not taken any adverse view considering above loose sheet. It is pertinent to note that in preceding para I have already held that on-money is required to be taxed in the year in which sales are recognised in books of account hence in any case AO is not justified in taxing Rs. 3,30,00,000/- being estimated on-money receipts in AY 2014-15. Thus, to that extent addition made by AO is required to be deleted from AY 2014-15. 5.4 It is pertinent to note that while making the addition of on-money, the AO has stated that modus operandi for collection of money towards sale of units is similar to that of M/s. Dharnidhar Realty, M/s. Sumangal Enterprise, M/s. Autocare Services etc. It is observed that these three group companies of the Appellant have preferred settlement applications wherein they had made disclosure considering average Net Profit @ 16% for projects and while applying such net profit, they had considered both disclosed sales and undisclosed sales found during the course of search. It is observed that disclosure was arrived at after reducing net profit before interest & remuneration as shown in the audited annual accounts. The above method was also accepted b....
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....y be sold. 7, Considering the above facts and discussion, additions made u/3 68 of the Act for Rs. 8,33,10,000/- in A.Y. 2011-12 and Rs. 1,62,40,000/- in A.Y. 2012-13 are deleted. Consequently additions made by AO by estimating unexplained expenditure for Rs. 41.65,500/- and Rs. 8,12,000/- in both the Assessment Years are also deleted. Further, additions of undisclosed sale receipts for Rs. 60,92,500/- in A.Y. 2011-12, Rs. 1,36,56,500/- in A.Y. 2012-13 and Rs. 2,48,64,000/- in A.Y. 2013-14 are also deleted. The addition made in A.Y.2014-15 for Rs. 4,57,14,000/- is restricted to Rs. 1,19,19,528 subject to verification of the calculations by the AO as stated herein above. The additions of the amount to be worked out for 18 units and 2 units are to be taxed in A.Y. 2015-16 and A.Y. 2016-17 respectively and the amount to be worked out for the remaining 1 unit will taxed in the year when it may be sold. The AO is directed to take appropriate action in A.Y.2015-16 and A.Y.2016-17 and any other assessment year(s). 21. We have heard both the parties and given thoughtful consideration and gone through the several case law of Hon'ble High Courts . In our considered opinion, Ld. CIT(A) has p....