TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 207
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....e statutory prescription is completely unfounded, unjustified, and untenable in law. 2. FOR THAT the specious approach of the Ld. Commissioner of Income Tax (Appeals)-N.F.A,C. of misreading evidence, considering improper facts, failing to consider proper position in law and thus coming to an erroneous finding in impliedly sustaining the addition of Rs. 17,45,120/- made by the Ld. Assistant Commissioner of Income Tax, Circle 8(1), Kolkata without satisfying the elementary mandate of s, 145(3) of the Income Tax Act, 1961 thereby basing on considerations not relevant to the issue is wholly illegal, illegitimate, and infirm in law. 3. FOR THAT the Ld. Commissioner of Income Tax (Appeals), NFAC foiled to appreciate that none, of the conditions precedent existed for and/or were fulfilled by the Ld. Assistant Commissioner of Income Tax, Circle 8( 1), Kolkata for his specious action of assuming jurisdiction u/s 145(3| of the Income Tax Act, 1961 and thereby estimating an income of Rs. 1,20,47,747/- in a summary manner without adducing on record the genesis thereof and such addition impliedly sustained without any authority of law is therefore ab initio void, ultra vires and ex-facie nu....
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....er position in law and thus coming to an erroneous finding in impliedly sustaining the addition in the sum of Rs. 1,65,00,000/- made by the Ld Assistant Commissioner of Income Tax, Circle 8(1), Kolkata on the manifestly wrong application of the provisions of s. 68 of the Income Tax Act, 1961 basing on considerations not relevant to the issue is wholly illegal, illegitimate, and infirm in law." 3. Brief facts of the case are that the assessee is an individual engaged in business carried out in various fields. Income of Rs. 1,51,05,760/- declared in the e-return for Assessment Year 2017-18 filed on 28/03/2018. Case selected for scrutiny through CASS followed by service of notice u/s 143(2) and 142(1) of the Act. The ld. Assessing Officer observed that the assessee is into the construction business. The ld. Assessing Officer noticed that during the year certain flats have been sold by the assessee. Though the assessee was asked to explain the reason for the said difference, but in absence of proper reply, the ld. Assessing Officer made addition of Rs. 1,67,44,907/- on the ground that Section 43CA of the Act which is a deeming provision is applicable on the assessee and the difference....
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....s details in support of its grounds. The crux of the arguments as appearing in the written submissions are as follows:- i) No addition u/s 43CA of the Act is called for because though the sale deed of the flats have been registered during the year, but there agreement of sale were executed during FY 2011-12 and part of the consideration was received through account payee cheque and since Section 43CA of the Act has been brought into the statute from 01/04/2014, no addition is called for u/s 43CA of the Act. ii) As regards estimation of net profit of the business of development of real estate, ld. Assessing Officer has not rejected the book results u/s 145(3) of the Act and the estimation is merely based on surmises and conjectures. iii) Similar contentions have been made with regard to the estimation of net profit in liquor business where also, without rejecting the book results, the ld. Assessing Officer erred in estimating the profits. (iv) So far as the addition made for the cash deposited during the demonetisation period, it is submitted that the assessee was having sufficient cash in hand as on 08/11/2016, which was utilized for making the alleged deposits. The ld. Ass....
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.... ledger accounts have been filed. It thus shows that except the registering the sale deed during the year and accounting it in the books, the flats in question have been agreed to be sold during FY 2011-12 alongwith receiving part of the sale consideration through banking channel and, therefore, the valuation as per the stamp valuation authority should be adopted as applicable on the date of agreement to sale. However, since the assets in question are business assets, provisions of Section 50C of the Act have no applicability and Section 43CA of the Act has been inserted w.e.f. 01/04/2014 and, therefore, the same are not applicable on the transactions in question during the year. Similar issue came for our consideration in assessee's own case for Assessment Year 2016-17 and the finding of this Tribunal on this issue reads as follows:- "9. Ground No. 2 challenges the addition of Rs. 1,71,18,489/- made by the Assessing Officer invoking Section 43CA of the Act. The ld. Assessing Officer while examining the records of the assessee also possessed the individual transactions statement related to the assessee pertaining to 15 flats sold during the year of which market value was reported....
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....rms of agreement of sale affected in the FY 2012-13 and 2013- 14, as the case may be. In almost every case, the flat was booked much prior to the date of actual sale and some of the instalments were paid by cheque in pursuance to the respective agreement to sale but much before the date of execution of the sale deed. The purpose of requirement of payment by cheque vide sub-section (4) is to avoid the introduction of any bogus back-dated 'agreement to sell' to claim a lesser stamp duty value of a past date. The payment through cheque is required to ensure that the agreement to sell, if any, relied upon by the assessee has been actually executed and acted upon as back dated cheque payment cannot be claimed by an assessee. In the case in hand, though some of the parties had not made initial payment i.e. on or before the date of agreement through cheque/banking mode, however, the facts show that the some of the payments were made in each case much before the execution of the sale deed. Under the circumstances, it cannot be said that the 'agreement to sell' relied upon by the assessee are bogus, rather, the payment of consideration in this case has been settled and paid ....
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....een suppressed. According to him, the market rate nearest to that date is Rs. 8,992/- per sq.ft. and, thus, reassessed the sale of each of the twelve flats. This basis of the nearest market rate is not found in his order. Therefore, on this basis itself the assessment is bad. In any case, Mr. Sharma, the learned Counsel for the Revenue submits that the market rate is the stamp duty rate of registration. Therefore, the stamp duty rate is used as a means to consider proper sales value of transfer of the flats. At the relevant time i.e. for the assessment year 2005-06, the only provision for application of deemed value for consideration was found under Section 50C of the Act relating to capital assets. At the relevant time there was no provision in the Act for deeming the consideration received on sale of goods/assets other than capital assets on the basis of stamp duty valuation. However, this provision in the form of Section 43CA of the Act has been introduced with effect from 1 April 2014. The present case pertains to the assessment year 2005-06. Therefore, Section 43CA of the Act will have no application for the subject Assessment Year. 13. In the case of CIT v. Neelkamal Realto....
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.... could have been made a basis in the present case. 14. The Division Bench of this Court in the case of Zain Constructions v. ITO [2019] 107 taxmann.com 300/265 Taxman 82 (Mag.) has conclusively decided the issue as under: "8. In our opinion, the entire approach of the Assessing Officer is wholly incorrect. As is well known, Section 50C of the Act would enable the Revenue to bring to tax by way of deemed capital gain difference between the stamp valuation and the sale price of a capital asset. For obvious reasons, this provision would not apply in case of a builder for whom such immovable property is in nature of stock in trade and not capital asset. To overcome this difficulty the legislature had inserted Section 43CA under Finance Act, 2013 w.e.f 1.4.2014. This provision would enable the Revenue to tax the income arising out of sale of stock by a deeming fiction where subject to certain conditions, stamp valuation of such stock would substitute the actual receipt thereof. In absence of any such statutory provisions, giving rise to the deeming fiction, the Revenue cannot tax any amount which has not been received by a seller of an immovable property at the time of sale." (Empha....
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....s point alone. We order so. Consequently, the other arguments made by the assessee has become merely academic in nature." 11.1. It has been categorically held in the aforesaid decision of the Tribunal while placing reliance on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Swananda Properties (P) Ltd. (supra) that since the provisions to section 43CA have been introduced w.e.f. 01.04.2014 and the 'agreement to sell' was entered prior to the 1st April 2014 and therefore, the condition of payment or part payment of consideration on or before the date of agreement cannot be imposed back-dated as the assessee could not have foreseen the introduction of section 43CA. 12. In view of the above discussion, considering the peculiar facts and circumstances of the case and the decision of the co-ordinate bench of the Tribunal, the additions made by the Assessing Officer/CIT(A) on the above issue are not sustainable and the same are accordingly ordered to be deleted." 11. In light of the above decision and discussion made in the preceding paragraphs and the fact that flats appearing in the list from Serial No. 5 to 15, agreement to sale was prior to 01/....
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....then he referred to the total deposits in the bank account which can be on other account also and not only the sales. While taking this course, the ld. Assessing Officer has nowhere disputed the book results as the same has not be rejected and even considering the finding of the Assessing Officer, it indicates that the total cash deposits in the bank account is less than the total sales shown in the profit and loss account. 12.1. Therefore, in our considered view, it is not a case of suppressed sales and working made by the Assessing Officer is purely on surmises and conjectures and, therefore, the action of the Assessing Officer, applying gross profit rate on the alleged suppressed sales tis uncalled for. Addition of Rs. 4,52,731/- is deleted and the Ground No. 3 raised by the assessee is allowed." 11. Respectfully following the above and under the given facts and circumstances, we delete the addition of Rs. 17,45,120/- made by the ld. Assessing Officer estimating higher net profits without rejecting the books of accounts. Findings of the ld. CIT(A) is set aside. Ground No. 2 raised by the assessee is allowed. 12. Ground No. 3 is against the addition of Rs. 1,20,47,747/- made ....
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....13,86,52,917/- is reduced to Rs. 12,56,22,317/-(i.e. Rs. 13,86,52,917/- - Rs. 1,30,30,600/-). The assessee credited his profit & loss account of the proprietorship concerns other than C.S. Shop and Real Estate concern by Rs. 1,61,69,800/- . Hence, the assessee has to explain the difference of Rs. 10,94,52,517/- which is considered as unaccounted sale. It is mentioned in para 2 that an amount of Rs. 1,10,00,000 /- was transferred from the Account of S. Paik & Co. to Shri. Anil Kumar Paik's Account. It is therefore the total credit amount of Rs. 10,94,52,517/- is reduced to Rs. 9,84,52,521/- i.e. [Rs. 10,94,52,517/- - Rs. 1,10,00,000/-]. Finally, Rs. 9,84,52,571/- is considered as unaccounted sale. This amount of undisclosed sale carries with it cost of purchase of goods, materials, services & other related expenses. For the interest of natural justice as well as of revenue, it would be fair to estimate income from undisclosed sale applying the average G.P. ratio as is disclosed in the respective concerns. Name of the concern G.P. ratio M/s Gitanjali Enterprises 28.75 M/s Gitanjali Polyclinics & diagnostics 52.00 M/s Gitan....
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.... Officer opined that the total deposit of Rs. 2,77,63,546/- is not considered since the same is not included in the total deposits of Rs. 13,86,52,917/- and as such, the reconciliation is to the extent of Rs. 9,40,67,535/-. Thereafter, he deducted inter concern transactions of Rs. 30,600/- and Rs. 1,10,00,000/- from the total deposits assumed at Rs. 13,86,52,917/-. He also considered that the income of Rs. 1,61,69,800/- so earned from three concerns stands explained to such extent of deposits and accordingly, computed an amount of Rs. 9,84,52,571/- as unaccounted sale. 14.1. Thereafter, he applied a rule of thumb to impose an average gross profit ratio of 38.22% on such alleged unexplained sale to compute undisclosed profit of Rs. 3,76,28,573/-. In the first place, there cannot be any unexplained sale in respect of the activities carried out as C & F agents under the name and style of "Gitanjali Enterprises". Further, the income from the businesses carried on as "Gitanjali Polyclinic & Diagnostics" and "Gitanjali Chemists & Druggists" are offered u/s. 44AD of the Income Tax Act, 1961. Further, the bank statement in the case of "Gitanjali Enterprises" was duly explained with narra....
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....essing Officer in the present case. It is thus axiomatic that the prescription contained in the provision of s. 145(3) of the Income Tax Act, 1961 were not satisfied in the present context; therefore, action inviting the rigors of such provisions does not arise in the circumstances of the case and the Ld. Assessing Officer misread the essence of the statute in this regard and the Ld. Commissioner (Appeals) erred in upholding such impugned estimate made without rejecting the books of account and has thus misconstrued the law which is not in consonance with the legal position in this respect. 15. In view of the above decisions and considering the facts that the ld. Assessing Officer has not rejected the book results u/s 145(3) of the Act, nor any discrepancy has been noticed in the purchase and sales and expenses claimed and just certain figures have been jumbled up but the conclusion drawn by the Assessing Officer reaches nowhere and thus the impugned addition is purely based on a guess work and surmises and conjectures and deserves to be deleted. Thus, Ground No. 4 raised by the assessee is allowed." 13. Consistent with the view taken by this Tribunal, we delete the addition of ....
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....the assessee has suppressed the sales and thereby suppressed a net profit. Both the lower authorities have failed to consider the fact that one of the business of assessee is that of clearing and forwarding agent and he sells the goods of the companies for which he is acting as an agent. Since the assessee is liable to collect and deposit the value added tax, the details of such sales have been mentioned in the VAT return. However, for the purpose of income tax, assessee has to only account for the commission income earned for carrying out such business as a clearing and forwarding agent. Both the lower authorities missed to consider this fact. Assessee has filed complete reconciliation statement depicting that there is no suppressed sales and, therefore, the income estimated by the ld. Assessing Officer is merely on surmises and conjectures and have no legs to stand. The addition of Rs. 49,11,694/- is hereby deleted. Ground No. 6 raised by the assessee is allowed. 16. Ground No. 7 & 8 are against the addition u/s 68 of the Act at Rs. 1,65,00,000/-. Facts relevant to this issue are that the ld. Assessing Officer noticed during the year that there is a liability of Rs. 1,65,00,000/....