TaxTMI 
TaxTMI 
2026 (3) TMI 796
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....from the computer of the assessee was meant only for limited purpose of negotiating the price with the customers, and, as such, no reliance can be placed on such unsigned 'welcome letters' (c) The Ld. CIT(A) has brushed aside the enquiries made by the investigation wing from the persons who had purchased he SCOs / DSS and nothing adverse has been admitted by such persons and there was no incriminating evidence with regard to the alleged suppression of sales price of SCOs / DSS. (d) Without prejudice to the above, said ground of appeal, Ld. CIT(A) has failed to appreciate that no compliance with Section 65B of the Indian Evidence Act in respect of digital data on the basis of which, certain uncalled for addition have been made and also at best for the sake of argument, it is stated that only appropriate net profit ratio could be applied on such alleged suppression of receipts, rather than confirming the entire addition of Rs. 13,02,90,000/-. 2.That the Ld. CIT(A) has erred in making the addition of Rs. 2,59,49,480/- on account of alleged unexplained expenditure on the construction of SCOs/DSS, disregarding the fact that no incriminating evidence was found ....
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....- 21 was to be considered as undisclosed income of the assessee. 2. Whether on the facts and circumstances of the case the Ld. CIT(A) failed to appreciate the fact that the assessee failed to declare the sale receipt of Rs. 9,99,86,930/- in the books of account for the said year. 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs. 15,25,03,772/- income from explained sources during the AY 2020-21 was to be considered as unexplained cash credit u/s 68 of the IT Act, 1961. 1.4 The Ld. AR advanced arguments on legal grounds as well as on merits by drawing our attention to various documents as placed on record. Reference has been made to various judicial decisions, the copies of which has been placed on record. The Ld. CIT-DR also advanced arguments supporting the assessment order of Ld. AO. These cross-appeals were heard along with cross-appeals for AYs 2019-20 & 2021-22. It was admitted position that the facts as well as issues are substantially the same and our adjudication in the lead appeal would have an equal application to these cross-appeals also. The lead order has been p....
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....only showing higher values to make better negotiations with the customers and strike good bargains with the customers, all these objections stood rejected by Ld. AO. Finally, this amount was added as undisclosed income of the assessee. 2.4 The Ld. AO, thereafter, went on to extrapolate similar findings for the remaining units also. The addition of Rs. 1302.90 Lacs covered 41 sale instances. The assessee had sold 126 units in the three years and similar estimation was to be made for remaining 85 sale instances also. The market price of the units was searched in the public domain website i.e., 99acres.com and average price per square yards was worked out at Rs. 1,35,000/- (approx.). The same was applied to remaining 85 units as well and sale suppression was worked out for all the three years for these units. The sale suppression for this year worked out to be Rs. 999.86 Lacs which was further added to assessee's income. 2.5 The third addition as made by Ld. AO was for Rs. 259.49 Lacs. The same was on the allegation that the assessee made unaccounted construction expenditure at Mohali Citi Centre. This addition stem from the fact that the assessee claimed to have sold the plots ....
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....the regular books and the difference was received in cash by the assessee. During assessment proceedings, the assessee stated that 29 units were constructed by it from two construction companies viz. M/s DS Construction and M/s DSC construction. The construction expenses were booked in the regular books of accounts. However, the case was referred by Ld. AO to DVO for valuation of the construction cost as declared by the assessee in the regular books of accounts. The report of DVO was received on 01-07-2022 who valued the construction cost at much higher figures than the recorded value. On the basis of the same, Ld. AO made allegation of unaccounted expenditure by the assessee. The assessee objected to valuation on the ground that while valuing CPWD rates were used instead of PWD rates. The Ld. AO rejected the same on the ground that valuation was done as per CBDT guidelines. The estimated difference was summarized as under:- Declared Cost Cost as per base of 2012 DVO estimation Difference Rs.94,91,575/- Rs.84,74,620/- Rs.3,44,24,100/- Rs.2,59,49,480/- After rejecting assessee's objection to valuation, the amount of Rs. 259.49 Lacs was added to the income ....
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....ned cash credit u/s 68 for Rs. 207.40 Lacs. It transpired that the assessee obtained unsecured loans from various entities. After rejecting assessee's submissions as well as documentary evidences, Ld. AO made addition of unexplained cash credit u/s 68 as tabulated below: - No. Name of Lender Amount of Loan (Rs.) Repayment during AY 2020-21 Repayment during AY 2021-22 1. Baljit Singh Rs.8.00 Lacs 2. Bharpur Singh Rs.25.00 Lacs 3. M/s Chandigarh Colonisers P. Ltd. Rs.50.00 Lacs Rs.50.00 Lacs 4. M/s Consort Builders Pvt. Ltd. Rs.49.00 Lacs Rs.49.00 Lacs 5. Gurdeep Singh Rs.10.00 Lacs 6. Gurmit Singh Rs.30.00 Lacs 7. Manjot Kaur Rs.20.00 Lacs 8. Master Craft Rs.0.40 Lacs 9. Tarun Arora Rs.5.00 Lacs 10. Vinod Kumar Rs.10.00 Lacs Total Rs.207.40 Lacs 2.8 Finally, the assessment was framed on 28-12-2022 which was subjected to assessee's challenge in first appeal. ....
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....ks of the assessee and the assessee is unable to explain its nature and source. The receipts under consideration were recorded sales proceeds. Their nature was known and their source was the trading activity of the assessee. Therefore, this addition was deleted against which the revenue is in further appeal before us. 3.4 On the issue of addition of unexplained cash credit u/s 68, the assessee contended that it furnished complete details of all the lenders including name, address, confirmation, PAN and bank statements. The loans were received through normal banking channels. There was no material to suggest that the same represent assessee's unaccounted money. No enquiry was made from any of the lender parties and there was no adverse material on record. However, Ld. CIT(A), at para 11.1.3, rejected the same on the ground that the assessee furnished partial documents only. Accordingly, the action of Ld. AO was endorsed against which the assessee is in further appeal before us. Our findings and Adjudication 4. The first two issues viz. receipt of alleged on-money on sale of units and addition on the basis of extrapolation has already been adjudicated by us in cross-appeals ....
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....at business premises so that the visiting customers could see that substantial advanced had already been received from other buyers thereby enhancing the confidence in the project. As per assessee, these letters were roughly drafted letters indicating higher amount of booking to build up confidence amongst customers regarding the demand of the project and so as to facilitate negotiations. These letters were used only as a marketing tool to demonstrate demand for SCOs / DSSs and to support negotiations. A sample copies of these welcome letters have already been extracted in the assessment order. Upon perusal of the same, it could be seen that there is no signature either of the assessee or of the customer and only certain rate and amount received has been mentioned. Pertinently, there is no mention of any cash component in the deal. The letter merely states the customer's name, unit number, rate and payment received. The same has not been acknowledged by any of the parties to the transaction. The same are not in the nature of any agreement, allotment letter, receipt or any legally enforceable document. No corroborative evidences such as cash receipt, bank trail, agreement to sale or....
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....y stated that the price quoted to him was only Rs. 115 Lacs and no brochure was shown to him. Shri Santokh Singh confirmed that DSS-99 was purchased by him for Rs. 73 Lacs only after negotiations and only that much of payment was made by him to the assessee. Initially, he was quoted a price of Rs. 1.15 Crores but he was able to arrange funds only up to 70-80 Lakh. He had returned home without making a deal and thereafter, he was invited to the office of the assessee wherein the deal was finalized by Shri Anil Goyal for Rs. 73 Lacs only for sale of plot and another Rs. 11.2 Lakh was to be paid towards construction component. Therefore, the whole case of Ld. AO that the welcome letters represent actual sale consideration by the assessee fall flat on the ground. On these facts, the argument that these welcome letters were merely a marketing and negotiation tool to create perception of demand and booking momentum amongst new customers in view of heavy financial burden of GMADA installment and development commitments is to be accepted. The same would also explain sale of units by the assessee at varied rates. It is not the case of the revenue that any of the unit was sold at a considera....
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....d from portal 99acres.com. As rightly observed by Ld. CIT(A), such an approach by Ld. AO is legally impermissible in the absence of any seized material or independent evidences. The Ld. AO has merely presumed that all the other sales suffered similar suppression and applied market rate to compute actual consideration. The rates have been applied mechanically whereas no buyer was examined. No incriminating document was available for these units. The presumption of Ld. AO was speculative and contrary to the principle that additions in search cases must be based on cogent material. The extrapolation was flawed in methodology. The Ld. AO effectively replaced the assessee's declared turnover for 85 units with an artificial figure without rejecting the books u/s 145(3). The absence of any direct evidence for the alleged suppression of sales in these sales instances render the addition unsustainable. The rates displayed on the property portal was not authenticated record of concluded transactions. These rates are posted by brokers, sellers or other users to advertise asking prices. There is no certainty that these rates correspond to actual deals and the rates are sensitive to range of va....
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.... made to the decision of Ahmedabad Tribunal in the case of CIT vs. Jayantilal T. Jariwala (IT (SS) No.65/Ahd/2009 dated 28-10-2015). It was finally held by the bench that the reference to DVO was not valid and the consequential addition purely on the basis of estimated report of DVO could not be sustained. This case law duly supports the case of the assessee. The case of the assessee is further supported by the fact that DVO has applied CPWD rates as against PWD rates which have difference of at least 25%. Further, the benefit of self-supervision has also not been granted. This is against the settled position that local PWD rates are to be preferred over CPWD rates and CPWD rates are generally higher than local PWD rates (as per decision of Hon'ble Apex Court in Sunita Mansingha 393 ITR 121; the decision of Hon'ble Punjab & Haryana Court in the case of Rajesh Mahajan 50 Taxmann.com 206). In the case of Rajesh Mahajan (supra), it was observed by Hon'ble Court that 15% of valuation could be allowed for personal supervision. It is another fact that the assessee has engaged two contractors for construction of 29 units. The payment to the two contractors form part of assessee's regul....
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....tock records. Therefore, the book results could not be discarded unless there was clear evidence of suppression of sales which was not the case. M/s KLG Jewellers was exclusive franchisee of Tanishq and was bound to sell branded products at fixed prices as determined by franchisor. Its margin structure, cost profile and pricing policy would entirely be different from that of an independent jewellery entity like the assessee who sells its own design and competes on prices in the open market. Therefore, M/s KLG Jewellers could not be said to be an independent retailer. It has finally been concluded that the allegation of Ld.AO had no foundation. Further, the provisions of Sec.68 would be attracted only when a credit entry is found in the books of the assessee and the assessee is unable to explain its nature and source. The receipts under consideration were recorded sales proceeds. Their nature was known and their source was the trading activity of the assessee. Therefore, in our considered opinion, this addition has rightly been deleted by Ld. CIT(A). By endorsing the adjudication of Ld. CIT(A), we dismiss the corresponding grounds of revenue's appeal. The revenue's appeal stands dis....
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....aced on Page Nos.35 to 44 along with Bank statements showing repayments of the loans. Accordingly, the loans for these entities are to be accepted as genuine one. The ledger extract of Master Craft has been placed on record at Page No. 35 of the paper-book. The assessee has obtained loan of Rs. 10 Lacs out of which substantial loan of Rs. 9.60 Lacs stood repaid during this year itself leaving a small closing balance of Rs. 0.40 Lacs. Similar is the case with loan of Shri Bharpur Singh wherein this loan has been liquidated partly during this year itself. All the other loans, as per reporting of Tax Auditor in Column No. 31(a) of Form No.3CD as placed on record, would show that all these loans have been received through Cheques or RTGS. No verification has been done by Ld. AO from any of the lender entities. There is no material on record to indicate that these loans represent unexplained cash credit. Therefore, all the other loans are to be accepted to be genuine. The addition stand deleted in toto. The assessee succeeds in its corresponding grounds of appeal. 7. In one of the grounds, the assessee has raised the issue of mechanical approval u/s 153D. On the issue of approval ....