TaxTMI 
TaxTMI 
2021 (6) TMI 1150
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.... Rs. 8,33,10,000/- on account of Unexplained cash credits 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 s....
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....14 wherein the Assessee company was also covered. The assessee filed returns of income for 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,....
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....investments made by the assessee company and its subsequent sale as under: Particulars Remarks Date of incorporation of appellant company 05.02.1998 Date of first share 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. (....
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.... Kolkata upto FY 2006-07/ and such costs of investments were appearing in Audited Annual Accounts of Appellant Company upto A.Y. 2011-12. The assessment u/s 143(3) of the Act was passed in case of Appellant for A.Y. 2007-08 wherein cost of investments was accepted as genuine. The Appellant Company has sold these investments 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/documen....
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....essment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the far end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit 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....
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....hladbhai Modi, dated 18th April, 2018, relevant parts of which are reproduced hereunder: "7. During the course of the assessment proceedings, the assessees did disclose sizeable unaccounted cash receipts which was duly taxed. However, with respect to several land dealings the assessees contended that the final sales did not materialize and therefore, there was no 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 s....
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....itself constitute incriminating material. Further reliance is also placed on decision of Delhi ITAT in the case of Moon Beverages ITA No. 7374/Del/2017 dated 7& June, 2018. The AO has made addition u/s 68 of the Act for Rs.l 1,85,00,000/- based upon enquiries conducted and statement recorded of various persons u/s 132(4) of the Act. The Assessee could not produce the investor company and since its returned income 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 ha....
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....ingly, the addition made by the Assessing Officer and upheld by the Id. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted." Considering these facts and following the decisions referred supra, which are binding in nature, additions 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. Further 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 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.....
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....ddition has been worked out as under: Sr. No. Particulars Assessment Year 2011-12 2012-13 2013-14 '2014-15 (i) Considering rate of sale @ Rs. 2500 per sq. ft. as per statement of Site Supervisor, Shri Sudhir Brahmbhatt 60,92,500 1,36,56,500 2,48,64,000 1,27,14,000 (ii) Considering unsold units as per excel sheet found from the residence of Shri Rajesh Bafna (22 units @15 lacs per unit) 0 0 0 3,30,00,000 Total (Rs.) 60,92,500 1,36,56,500 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 estim....
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..... However, this contention of Appellant cannot be accepted as one of the directors of Appellant Company being Mr. Omprakash Bengani in. his statement. recorded u/s 132(4) of the Act on 7th January, 2014 has stated that, flats/units are booked at Rs. 2,100/- per sq. ft. in project developed by the Appellant. It is found that the Appellant in many ca.ses has shown sale value below such amount as admitted by director hence such onmoney is required to be taxed in the case of Appellant. So far as reliance placed on the statement of site 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.....
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....nce in any case on-money cannot be taxed in these Assessment Years. It is observed that contention of the Appellant is found to be correct as Audited Annual Accounts which are already part of original return of income filed prior to date of search clearly state that the Appellant has shown entire construction expenditure as part of closing stock and booking amounts received in cheque have been shown as liability. While passing the Assessment Order the AO has not disputed such fact nor taxed collection received in cheque in the year in which it is received. 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 r....
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.... 502 1750 1451 25 40 000 2014-15 19 2011-12 A 503 1750 Part of stock i.e not sold yet 20 2011-12 A 502 1270 1449 18 40 000 2015-16 21 2012-13 A 105 1270 2331 29 61 000 2015-16 The AO is directed to verify above working and make appropriate addition in the year in which sale is recognised as per the provisions of law as narrated before. 5.3 With regard to observation of AO that on-money is required to be taxed for 22 unsold units computed based upon excel sheet found during the course of search at the premises of Shri Rajesh Bafna, it is found that Group concerns of Appellant being M/s. Autocare Services and M/s. Sumangal Enterprise have also filed Settlement Petitions before Hon'ble ITSC wherein the Department in Rule 9 Report referred to such loose sheet. However, Hon'ble Settlement 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.....
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....ax Appeal No, 323 of 2000 dated 16th June, 2012. The AO is directed to verify the above working and re-compute the addition in case of Appellant as under AY Turnover in books of account (Rs.) On money (Rs.) Total (Rs.) Profit before Tax in accounts (Rs.) Net Profit @ 17.5% on total (Rs.) Addition sustained (Rs.) 1 2 3 4=2+3 5 6=4*17.5% 7=6-5 2014-15 8,39,29,001 1,84,97,000 10,24,26,001 60,05,022 1,79,24,550 1,19,19,528 6. To sum up, the position that now stands is that out of additions made by the AO for 51 units in AY 2014-15, the amount worked (subject to verification by the AO) out above for 30 units only remains for A.Y. 2014-15, the amount to be worked out for 18 units and 2 units as discussed before are to be taxed in A.Y. 2015-16 and A.Y. 2016-17 respectively and the amount to be worked out for remaining/unsold 1 unit is to be taxed in the year when it may 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 expen....
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..... CIT(A) restricted the addition @ 17.5% on the basis of Income Tax Settlement Commission in the case of land group of another project namely 'Param Enterprise, Dharanidhar Realty etc. wherein Income Tax Settlement Commission has estimated net profit of the project @ 17.5% of both accounted and unaccounted turnover and on the basis. 24. It will settled law that On-money is required to be taxed in the year in which amount received On-money is taxable on receipt basis. 25. We have heard both the parties and given thoughtful consideration and we are of the opinion that there is no ambiguity in the order passed by the Ld. CIT(A) and he has passed detailed and reasoned order and same does not require any interference at our end. Thus this ground of appeal of the Revenue is dismissed. 26. In the result, all four appeals of the Revenue are dismissed. 27. Now we come to Asessee's appeal in ITA No. 2013/Ahd/2018 for A.Y. 2014-15, the assessee has taken following grounds of appeal: 1. In law and in the facts and circumstances of Appellant's case, the Learned CIT (Appeals) has erred in upholding action of AO for making addition to the extent of Rs. 1,84,97,000 in curr....