TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 2058
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.... infact offered the realized profit from the said project of Rs. 19,74,387/- for A.Y.2009-10 and Rs. 69, 7701- for A.Y.2010-11 in its return of income for the relevant years. 2. The assessee is engaged in the business of builder and developer and is following project completion methodof accounting.. It completed project namely " Acme Center" at Ahmadabad, Gujarat. 2.1 A search was carried at the premises of the assessee and Acme Group on 24/07/2008. During the course of search statement of Shri Ketan Mehta was recorded on 18/09/2008, in which unaccounted income of Rs. 22.88 crores was disclosed in respect of Acme Group of companies which inter-alia include undisclosed income of Rs. 70.00 lacs in respect of assessee's project namely "Acme Center" at Ahmadabad for assessment year 2009-10. However, during the assessment proceedings the AO noticed that assessee had disclosed only a sum of Rs. 19,74,387/- as against Rs. 70.00 lacs declared during the course of search. The assessee was required to explain as to why entire amount of Rs. 70.00 lacs was not declared and why the same should not be assessed. In response, it was submitted that due to recession in real estate market in finan....
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....see had estimated that the project will fetch the higher rate from the sale and thus, assessee had estimated the profit and offered the income for tax in statement of Shri Ketan Mehta. It was submitted that assessee could not fetch the expected project sale price due to fall in the property market and also over all recession in economy during the financial year 2008-09. It was further submitted that the assessee at the outset objected to the addition made by the AO, which is made merely on the basis of statement of Shri Ketan Mehta on 18/9/2008. Till that date assessee had sold two shops out of total five shops. One shop at 4th floor admeasuring 1800 sq.fts. was sold to Shri Jayesh Desai on 18/07/2008 for a consideration of Rs. 75,60.000/- i.e. @ 4200 per sq.ft. Another shop at second floor admeasuring 3950 sq.fts. was sold to Hind Freight Services Pvt. Ltd. on 12/09/2008 for a total consideration of Rs. 1,10,60,000/-. Based on the sale of above two shops the assessee estimated the profit from the project on adhoc basis at Rs. 70.00 lacs and declared for tax in the statement of Shri Ketan Mehta recorded under section 132(4) of the Act. It was submitted that due to global recession ....
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....ons of the assessee Ld. CIT(A) has recorded the following findings. (i) that profit of "Acme Center" was not included in the return of income by the assessee probably because the project was not completed till date of search. (ii) According to Question No0. 9,10 & 11 recorded at the time of search on 18/9/2008 the assessee through their authorized persons admitted the income earned in the above Ahmadabad Project and such admission was made under section 132(4) of the Act. By admitting disclosure the assessee had altered the position of the Department. According to which Department did not pursue the matter further and thus, assessee cannot put the Department at disadvantageous stage by not disclosing the amount offered during the course of search. (iii) Assessee did not retract the said statement till the date of furnishing the return of income which was dated 23/9/2009. (iv) The contention of the assessee that there was recession in the real estate market is not substantiated by any statistical data or market research or by any other material evidence. In fact, there was no slump in the real estate market. According to data furnished by the assessee, in fact the sale rate of i....
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....n credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments . Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of survey/operations or thereafter while framing the relevant assessment order. (emphasis provided). 4.2 Referring to above circular it was submitted by Ld. AR that the said circular was prevailing on the date when search was made and also on the date when assessment was framed by AO. It was submitted that it has been clearly mandated that the focus and ....
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.... further observed that it is not as if the retraction from a statement by an assessee would put the end to the procedure that ensued on accounted survey or search. The AO can very well support his finding on the basis of other material. If he did not have any other material, in a way, it reflects upon the very perfunctory nature of the survey and for this their Lordships have referred to the aforementioned circular issued by the CBDT dated 10/3/2003, which is taken exception to the initiation of proceedings on the basis of retracted statement. 2. CIT vs. Ashok Kumar Soni, 291 ITR 172 (Raj) - In the said case, during the course of search, it was admitted that a total sum of Rs. 14,50,000/- was invested in the construction of house property as against which only a sum of Rs. 7,50,000/- was disclosed and balance amount of Rs. 7,50,000/- was offered in the statement recorded under section 132(4) of the Act. The said statement was retracted by filing of the return. However, the AO made addition of Rs. 7,50,000/- on the basis of statement. The addition was deleted by the Tribunal. The Department challenged the said order of the Tribunal. Their Lordships have observed that admissions ar....
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....r expenditure incurred by the assessee has been doubted. Reference in this regard was made to para-4 of the said order, which read as under: "4. Further, the assessee company follows project completion method of accounting. On its completed project 'Acme Centre' at Ahmedabad, the assessee company declared a total revenue recognition at Rs. 51,488,750/- out of which Rs. 49,605,750/- is claimed to have been duly accounted for during the immediately preceding assessment year 2009-10 and as such, the company has credited its profit & loss a/c. by balance amount of Rs. 1,883,000/- and accordingly, offered a total income of Rs. 69,770/- for the previous year concerned. After perusal of documents available on record and discussion with the authorized representative of the assessee, the total income as per return is accepted. Total income : Rs. 69,770/- Assessee u/s. 143(3) of the Act at a total income of Rs. 69,770/-. The necessary details/ documents are perused, verified on test check and kept on record. Credit for prepaid taxes has been given after due verification. Interest applicable as per law charged. Demand note and challan issued accordingly." 4.5 Thus, it was submitted by....
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....O. The relevant portion of the assessment order has already been reproduced. The AO did not doubt the receipts of the assessee as well as expenditure incurred on project but he has made the addition simply on the basis of statement which was recorded under section 132(4) of the Act. The assessee retracted the statement by filing the return of income and this fact has also been admitted by Ld. CIT(A) with the following words" "Secondly, in this case although the search & seizure was carried out in the premises of the appellant on 24-07-2008, the appellant never retracted the statement recorded u/s. 132(4) of the Act till the date of furnishing of return of income on 23-09-2009." 6.1 Under these facts and circumstances of the case we have to examine that whether sustenance of impugned addition is in accordance with law or not. The law in this regard has already been described in the above part of this order and reference can be made to the decision of Hon'ble Telungana & Andhra Pradesh High Court in the case of Gajjam Chinna Yellapa vs. ITO(supra), where their Lordships have observed that in case statement is retracted then totally different consideration altogether will ensue an....