TaxTMI 
TaxTMI 
2022 (12) TMI 1601
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....ion of books u/s 145(3) was not justified without appreciating that assessing officer had brought out that seized material (diary) had been admitted both by Narendra Patel and Tushar Patel, under oath, belonging to Tushar Patel and relied upon seized material was also admitted to be in his handwriting and cheque entries were also admitted to be true and not only the seized material in hard copy but the seized digital data also corroborated the on-money receipts by assessee. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,31,44,3207/- without appreciating that assessing officer had brought out that seized material contained evidences of on-money receipts in respect of 5 units out of 32 units and hence estimation of gross profits @ 45% was correctly applied by AO. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O, 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. The only effective issue raised by the Revenue is that the learned CIT....
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....s expenses aggregating to Rs. 51,000/- approx. are made by office staff of Dev Arya which was signed by him and other office staff. With regard to noting on page no-2 he admitted that the cheque payment of Rs. 5,50,000/- paid for the booking of bungalow number 28 and noting has been made by him but he does not remember about cash payment of Rs. 55 lakh. The AO further found that survey number 409 at Jundal Khokrej has been purchased by Shri Narender Jivalal Patel & other who are part of the assessee firm for Rs. 78 lakh. Thus, the AO was of the view that noting made on page 1 for Rs. 20 lakh being "Jundal Khokrej Hwalo survey number 407" might be representing the payment made by Shri Tushar Rajivbhai Patel against the purchase of bungalow No. 28. Similarly, noting on page number 2 for cheque payment of Rs. 5.5 lakh found true. Thus, the AO concluded that Shri Tushar Rajivbhai has paid on money to the assessee firm for Bungalow no. 28 in the form cash of Rs. 55 Lakh and Rs. 20 lakh in connection with the purchase of land bearing survey no. 407 which was ultimately purchased by Shri Nrender Jivanlal Patel. 4.3 The AO further found that there was a hard disk seized from site office....
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.... lakhs was received at the time of registration of the conveyance deed through the banking channel. As regards the element of cash of Rs.55 lakhs, there was no material available on record evidencing that cash payment was made by Shri Tushar Rajivebhai Patel. Likewise, neither the assessee nor the partner anywhere in the statement has admitted to have made the payment in cash. Without prejudice, if it is assumed that the assessee has received cash of Rs. 55+ 20 lakhs on sale of bungalow no.28 then the unaccounted sale receipt will amount to 45% of total sale value/cost. Such exorbitant price is not possible against the sale of bungalow. 4.9 Regarding the information contained about the land cost, land area and construction cost on pages 36 to 37 of hard disk data recovered during search proceedings, it was submitted that the assessee has made the projections for making the sales of its different bungalows by incorporating the cost of land and the cost of construction. According to the assessee, it has sold its bungalows at the same price which was also matching with the documented price. As far as page 40 is concerned, it was submitted that the bungalow numbers 16, 17 and 42 wer....
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....ated by the evidences such as purchase of land at 407 at Jundal Khorej, cheque payment for the acquisition of the bungalow-28. Thus, in the light of the facts, the payment involving cash element of Rs.55 lakhs cannot be said as a dumbed information, particularly in a situation when the partner of the firm has duly admitted to have written the diary in his own handwriting. The pocket diary was duly signed and the staff of the assessee Shri Narendra Jivalal Patel has also admitted that the diary belongs to the partner Shri Tushar Rajivbhai Patel. Thus, once part of the transactions recorded in the seized documents are matching with the other transactions of the assessee, the noting of cash payment of Rs.55 lakhs recorded in the pocket diary cannot be overlooked merely saying that he does not know about such cash entry. 4.13 Likewise, the information contained on page 36, 37 and 40 of the seized hard disk represents the clinching evidences as it contains the financial data of the bungalows which have been sold to different parties. 4.14 Similarly, the provisions of section 292C of the Act provides presumptions with respect to the data seized during the search proceedings that th....
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.... the above discussion, the element of on money is clearly established. The ratio of on money works out around 45% (as per the seized material). The gross sales of units sold as per books, till the date of search (32 units) was _Rs 15,74,28,000/-. The assessee has offered profit of 15.31% as per its books. If the ratio of 45% on money factor is added to the total gross_ receipts as on the date of search the gross sales works out to Rs 28,62,32,7277/-. It is obvious that the assessee's profit on the on money element would be much higher than the profit as per books. This is because, most of the expenditure has already been booked. Hence, higher ratio of profit is required to be adopted on the on money component. Therefore profit @ 20% is adopted on the total gross sales of Rs 28,62,32,727/- which works out to Rs 5,72,46,5457/-. Against this, the assessee has already offered profit @ 15.31% on reported sales of Rs 15,74,28,0007/- which works out to Rs 2,41,02,2267/-. Hence, the difference profit of Rs 3,31,44,3207/- is added to the total income of the assessee being unaccounted profit earned from estate business, based on the seized materials found. 5. The aggrieved assessee ca....
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....mation purpose on the request of member holding bungalow Nos. 16, 17 and 42 as they wanted to resale their holdings. In this regard, the impugned member also filed affidavit but the AO ignored the same and drawn inference that same represents on money. The details of other two bungalow Nos. 12 and 12A were also representing the estimated price to make quotation to the prospective buyers. As such, the bungalow numbers 16,17 and 42 were sold in the year 2011 i.e. before the date of search to original members who were targeting to resale their bungalow but they did not get the estimated price. Hence the same were not resold. Likewise, the unsold bungalow numbers 12 and 12A also did not fetch the price as per page 40, therefore the same were sold after the date of search at the lower price which was duly recorded in the books of accounts. Therefore, no adverse inference can be drawn on the basis of page 40 of the hard disk data. 5.4 It was also contended that out of total units/bungalow i.e. 49 of the project "Dev Arya" 32 units/bungalow were sold till the date of search whereas the alleged incriminating documents on the basis of which the inference was drawn by AO for receipt of on....
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....e not comparable. The cost of construction written on page no.36 & 37 is Rs.9900/- per sq. mtr, whereas in page no.40 it comes to Rs. 16,000/- per sq.yard. When there is so much difference in cost of construction, difference of figures written on these pages is justified. Further, the affidavits filed by the appellant from the three buyers of bunglow no. 16, 17 & 42 have not been contradicted by the AO who confirmed the contention of the appellant that they put these bunglows for resale through the appellant and price written I expected consideration on re-sale. Bunglow No.12 & 12A(13) were not sold till the date of search, therefore, there is no question of receipt of any on-money on sale of these two bunglows. This is evident from the page no.36 & 37 which have been relied upon to reject the books of accounts of the appellant. Keeping in view the discussion above, the basis taken for rejection of books of accounts u/s. 145/3) by the AO is not found factually justified, therefore, this ground of appeal is allowed. On merit of addition: 5.2 The submissions of the appellant, facts mentioned in the assessment order, I the case laws cited upon and the statement recor....
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....on Civil Appeal No. 505 of 2015. These are reproduced as under :- " Coming to the evidentiary value of the impounded loose sheet mentioned elsewhere, the Hon'ble Supreme Court in the case of Common Cause (A Registered Society) and Others vs. Union of India and Others in Writ Petition Civil Appeal No. 505 of 2015 has observed as under :- 16. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of "Books of Accounts" and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible. 17. It has further been laid down in V.C. Shukla (Supra) as to the value of entries in the books of account, that such s....
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....that the rule as laid down in Section 34 of Tie Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the sailent proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It Is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts." 5.3 On going through the case laws mentioned above, it is found that the facts of the appellant's case are clearly covered by the above mentioned judgements, therefore, findings given on the basis of documents, which do not contain complete details of transactions are not found justified. Hence, keeping in view these binding judgements, the findings given on the basis of these papers are not found justified and deserves to be over ruled. Regarding the additions made on the basis of difference of value written in page no. 36, 37 & 40, it is found that the findings of the AO are....
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....he diary found in search showing suppression of sales for a particular period. The Hon'ble ITAT, Patna Bench in the case of Ramani D.N. Kamani HUF ( 70 ITD 77) held that documents regarding receipt of on money by assessee having been found in respect of sales of flats to one party, addition could not be made in respect of all the parties to whom assessee sold flats merely on the basis of presumption. The Hon'ble ITAT, Kolkata Bench has held in the case of Fort Projects Pvt Ltd (63 DTR 145) that AO was not justified in extrapolating few notings in a seized diary to balance flats in three projects given that no incriminating evidence pertaining thereto was found in the course of search. There are several other case laws in which it has been held that extrapolation is not permissible and additions should be restricted only to the contents found during the course of search. Keeping in view the discussion above, the additions made by the AO on the basis of seized documents, is found justified and hence, is deleted. This ground of appeal is allowed. 7. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 8. The learned DR before us....
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....The facts of the case have been elaborately discussed in the preceding paragraph and there is no ambiguity with respect to the same. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience. From the preceding discussion, the controversy arises whether action of the AO is justified for the rejection of the books of accounts under the provisions of section 145(3) of the Act in the given facts and circumstances. In this regard, we find that the AO rejected the books of accounts of the assessee on the reason that the assessee is in receipt of on money from the sale of its projects. There were two reasons to arrive at the conclusion that the assessee was in receipt of on money from the sale of its projects. Firstly, as per the pocket diary bearing page Nos. 1 and 2, containing financial transactions in cash i.e. payment in cash of Rs. 20 lakhs for the in connection with the land at Jundal khorej bearing survey no 407 by the group person of the assessee and receipt of Rs.55 lakhs from the sale of the bungalow bearing No. 28 which was sold to the partners namely Shri Tushar Rajivbhai Patel. Secondly, there was mismatch in the sale price of the bungalows, ....
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....ed to the assessee and various amounts entered therein were correct if three zeros were supplied. The absence of the name of the assessee, thus, got fully corroborated on the basis of said interpretation of the document. The document spoke of receipt in cash and by way of cheques. The receipts by way of cheques tallied with the books of account. Therefore, it was a natural consequence that the receipt by way of cash had also been made. The date of receipt of cash was not material for deciding the assessment year in which the profits embedded in such receipts were to be taxed. The assessee was following project-completion method and, therefore, all amounts, i.e., amounts, received in cash as well as amounts received by way of cheques, were taxable in the year in which project was completed or substantially completed. Therefore, the assessee's arguments as regards all three grounds had to fail. Accordingly, the document was not a dumb document but it was a speaking document and it pertained to the business transactions of the assessee. [Para 6.1] So far as the argument of the assessee that the impugned papers not only showed the receipts but also the expenditure and, the....
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....of accounts. Admittedly, the information contained in the seized document is providing some source or the base for carrying out further investigation in a particular direction so that the facts could be brought on the surface. For this purpose, the revenue authorities have been empowered under different provisions of the Act such as section 131, 133(6) of the Act. Thus, we are of the view that it will be inappropriate to draw an adverse conclusion merely on the basis of some information contained in the seized document with respect to the correctness of the books of accounts of the assessee. At this juncture, it is also important to note that the assessee is in the development of real estate project and the sale price shown by the assessee have been doubted for the year under consideration. Once the sale price of the project has been doubted then all the sales recorded by the assessee in connection with the impugned project in different assessment years should be in doubt. As such, the impugned project comprises of 49 bungalows. Out of 49 bungalows some of the bungalows have been sold in the year 2011, specifically bearing bungalow numbers 16, 17, and 42 but the AO has not brought ....
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.... 12A does not arise. Moving further, the bungalow bearing numbers 16, 17 and 42, in this regard we note that these bungalows were sold by the assessee in the earlier years i.e. 2011, in this regard the assessee claimed that the members holding impugned bungalow numbers approached for resale their holding and for that the purpose an estimation was made i.e. impugned page no. 40 of seized material to quote the price to prospective buyer. The claim of the assessee was also supported by the affidavit filed by the members holding the impugned bungalows nos. 16, 17 and 42. Thus we find force in the contention of the appellant assessee that noting on impugned page number 40 was an estimation only. Thus, merely the transactions recorded on any Excel sheet cannot be a basis to draw an inference that the assessee has received on money until and unless there is available some corroborative material. However, we do not find anything from the assessment order with respect to the difference in the sale prices as observed by the AO is based on any corroborative material. The document cannot be considered to draw any inference with respect to the financial transaction that such transaction represe....