Income Tax Appellate Tribunal - Ahmedabad
Dcit, Central Circle-2,, Surat vs Brijwasi Developers Pvt.Ltd., Surat on 17 May, 2017
आयकर अपील य अ
धकरण, अहमदाबाद यायपीठ - अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
CAMP AT SURAT
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.290/Ahd/2013 and 3187/Ahd/2011
नधा रण वष /Asstt. Year: 2006-2007 and 2008-2009
आयकर अपील सं./ ITA No.1659/Ahd/2012
With
CO No.171/Ahd/2012
नधा रण वष /Asstt. Year: 2007-2008
AND
आयकर अपील सं./ ITA No.1660/Ahd/2012
With
CO No.172/Ahd/2012
नधा रण वष /Asstt. Year: 2009-2010
DCIT, Cent.Cir.2 Vs. Brijwasi Developers P.Ltd.
Surat. 102, Platinum Apartment
Brijwasi Estate
Nr. Gateway Hotel
Parle Point
Surat 395 003.
PAN : AACCB 5646 R
अपीलाथ / (Appellant) तयथ
् / (Respondent)
Revenue by : Shri Prasenjit Singh, CIT-DR with
Mr.Albinus Tirkey, Sr.DR
Assessee by : Shri Rasesh Shah, CA
सन
ु वाई क तार ख/Date of Hearing : 08/03/2017
घोषणा क तार ख /Date of Pronouncement: 17/05/2017
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
ITA No.3187/Ahd/2011 and 5 Others
2
Revenue is in appeal before the Tribunal against order of the ld.CIT(A) dated 19.11.2012, 17.5.2012, 20.10.2011 and 17.5.2012 passed in the Asstt.Years 2006-07 to 2009-10 respectively.
2. On receipt of notice in the Revenue's appeal for the Asstt.Year 2007-08 and 2009-10, the assessee has filed CO bearing no.171 and 172/Ahd/2012. Since common issues are involved in all these appeals, therefore, we deem it appropriate to dispose of them by this common order.
3. The ld.CIT(A) has decided the appeal for the Asstt.Year 2008-09 on 20.10.2011. This order was followed in rest of the assessment years. The ld.counels have also addressed their arguments in this assessment year. Therefore, for the facility of reference, we are taking up the fact mainly from this assessment year. In case we find any variation in the facts, then we will take those facts in those years.
4. Grounds of the appeal raised by the Revenue in the Asstt.Year 2008-09 read as under:
"1) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.5,08,84,180/- out of total addition of Rs.5,94,14,500/- made by the Assessing Officer on account of not showing "on-money" receipt from sale of flat.
2) The Ld.CIT(A) has erred in law and on facts in holding unilaterally that the on money of Rs.61,00,000/- represented cancellation and therefore cannot be taken as part of the "on-money" earned by the assessee without giving the Assessing Officer an opportunity in this respect.
3) The Ld.CIT(A) has erred in law and on facts in applying the rate of 16% to determine the unaccounted profit on the on-money ignoring that the assessee having declared a profit of Rs.15 crore on-on-money of Rs.36 crore in the course of survey thereby admitting his profit margin at 42%.
4) The Ld.CIT(A) while estimating the unaccounted profits erred in not applying the provisions of Section 40A(3) of the Act in respect of the expenditure incurred.
5) On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. ITA No.3187/Ahd/2011 and 5 Others 3
6) It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent."
5. A perusal of the above grounds will indicate that only one issue is involved in this appeal, and all other grounds taken by the Revenue are peripheral aspects of single issue involved in the appeal. The basic issue is whether "on-money receipt" admitted by the assessee and calculated on the basis of material found during the course of survey is to be taxed intoto or income is to be determined by applying a specific rate of profit out of this "on-money receipt".
6. Brief facts of the case are that the assessee has filed its return of income in Asstt.Year 2008-09 on 26.9.2008 declaring income at NIL. Survey under section 133A was conducted on 6.1.2010. During the course of survey statement of Shri Murarilal Agarwal was recorded. He was confronted with various incriminating documents related to the business which were impounded during the course of survey. In reply to question nos.7 & 8, he has admitted earning of unaccounted income and offered a sum of Rs.15 crores for assessment in different years. In this Rs.15 crores, he has disclosed that unaccounted income of earlier year is also involved. Before referring to the discussion made by the AO in different assessment years, we would like to make reference to the details tabulated by the ld.counsel for the assessee at the start of hearing. He pointed out that Rs.15 crores declared by the assessee has been offered for taxation and the status of the assessment has been compiled with. His noting reads as under:
"
Sr.No. A.Y. Addition Made Confirmed By Assessee's CIT(A) Admission -
1 2006-2007 88,29,000 Nil 1,86,00,000 2 2007-2008 9,05,40,625 39,72,502 39,72,502 ITA No.3187/Ahd/2011 and 5 Others 4 3 2008-2009 6,51,80,002 85,30,320 85,30,320 4 2009-2010 14,42,90,625 3,59,17,152 3,59,17,152 5 2010-2011 1,92,53,045 Pending 3,00,00,000 6 2011-2012 Pending Pending 2,30,00,000 7 2012-2013 Pending Pending 1,20,00,000 8 2013-2014 Pending Pending 1,49,80,026 onwards 14,70,00,000 Add. 2010-2011 for admission in the case of Brijwasi 30,00,000 Construction Rs.
Total Rs. 15,00,00,000 Notes:-
1. This search was conducted on 18.01.2006 and Assessee made declaration Rs.1.86 Crores. This declaration was reflected in return of Income filed after date of search.
2. Survey was conducted on 06.03.2010 and declaration of 15 Crores was made for various Years.
3. As returns of Income were already filed for A.Y.2007-2008 to A.Y.2009-2010, no declaration could be made in the return of Income but addition confirmed by CIT (A) accepted.
4. However the declaration was made in the return of Income for A.Y.2010-2011 &0nwards.
5. Assesses claimed telescoping of Rs.1.86 Cores declared at the time of search relevant to A.Y.2006-2007.
6. Revenue has filed the appeals before Hon'ble Tribunal for the A.Y.2006-2007 to 2009-2010,against the order of CIT (A) which are Pending.
7. The assessing officer taxed 100% on money for all years except for A.Y. 2008-09 on cash basis while for A.Y. 2008-09 AO taxed on accrual ITA No.3187/Ahd/2011 and 5 Others 5 basis. However, the learned CIT(A) taxed net profit against on money on accrual basis for all the years."
7. Referring back to the assessment order, it is being observed that notice under section 143(2) of the Act was issued on 26.8.2009. It was duly served upon the assessee. The ld.AO has observed that the assessee has developed various projects viz. Solitaire, Platinum, Radhapuram Residency and Brij Vasundhara. He has calculated project-wise, financial year-wise on-money receipts by the assessee and noticed these details on page no.2 of the assessment order, and thereafter, the ld.AO made reference to documents inventorised as Annexure B1-19, which is diary found during the course of survey containing details of flats sold by the assessee, price shown in the sale deed, actual price received and the difference between price mentioned in the sale deed viz. actual receipt by the assessee. With regard to the assessment year 2008-09 such details reads as under:
Sr. Name of the Flat Price as per Actual price Difference No. buyer No sale deed received 01 Anil Agrawal 801 33,00,000/- 2,06,71,500/- 1,73,71,500/-
02 Sumitra 901 33,00,000/- 2,67,71,500/- 2,34,71,500/-
Suresh Gupta 03 Chetan Mehta 701 33,00,000/- 2,18,71,500/- 1,85,71,500/-
99,00,000/- 6,93,14,500/- 5,94,14,500/-
The ld.AO made an addition of Rs.5,94,14,500/- on the strength of the statement given by Shri Murarilal Agarwal on behalf of whole group. Dissatisfied with the addition, the assessee carried the matter in appeal before the ld.CIT(A).
8. On appeal, the ld.CIT(A) has worked out an amount of Rs.5,08,84,180/- instead of Rs.5,94,14,500/- worked out by the AO.
ITA No.3187/Ahd/2011 and 5 Others 6Thereafter, the ld.CIT(A) has observed that only element of profit involved in these on-money is to be assessed as income of the assessee. The ld.CIT(A) has made reference to the cases of eight similarly situated assessees wherein net profit has been applied by the AO for working out taxable income on the basis of on-money received by them. All these assessees were assessed in similar range. The ld.CIT(A) made reference to the statement of Shri Murarilal Agarwal recorded during the course of survey. The finding of the ld.CIT(A) is worth to note in this connection. It reads as under:
"4.2 I have carefully considered the facts of the case, the order of the A.O. and the submissions of the appellant. In the present case, it is seen that that the appellant has been recognizing its revenue at the time of sale of flats and this method of accounting has been consistently followed by it and the same has even been accepted by the A.O. Further, it is seen that during the course of survey action, various incriminating evidences of not only unaccounted receipts i.e. on-money has been found but notings of even unaccounted expenditure incurred therefrom have been found and impounded. These details are available in Annexure B- 11and B-19 and the Id counsel for the appellant has filed some details of unaccounted expenditure.
After preliminary verification of the impounded material containing incomplete detail of unaccounted receipts as also unaccounted expenditure, Shri Murarilal Agarwal director of the appellant company, disclosed a net unaccounted income of Rs. 15 crores for the entire group, categorically stating that no expenditure is left to be incurred from the net unaccounted income of Rs. 15 crores and also stated to revise the returns of the earlier years filed prior to the date of survey i.e. 06-01-2010 by offering the proportionate disclosed income attributable to that year. However, the return of income for the year under consideration i.e. A.Y. 2008-09 was not revised and the disclosure attributable for the year under consideration, was not offered for tax.
During the course of assessment proceedings, the A.O. observed that the appellant had sold 3 flats of its project 'Platinum Apartment' during the year under consideration however, the disclosure portion thereof was not offered for tax in the return of income and accordingly, the A.O. made addition of ITA No.3187/Ahd/2011 and 5 Others 7 Rs. 5,94,14,500/- for the entire unaccounted receipts i.e. on- money of the said 3 flats.
On the basis of the facts of the case, the contentions raised by the appellant and the law as laid down by .various courts, the following three issues need consideration.
(i) The first issue is that whether the entire on-money receipts can be treated as the income of the appellant, when incomplete details of both unaccounted receipts and expenditure have been found and impounded.
(ii) The second issue is the applicability of Section 69C to the facts of the present case;
(iii) and If entire receipt can't be treated as net income then what would be the reasonable rate of profit which needs to be applied to the on-money to determine the income of the appellant in respect of the flats sold during the year under consideration.
As regards the first issue as to whether the entire on-money receipts could be treated as the income of the appellant, reference is first taken to the statement of the director Shri Murarilal Agarwal recorded on the date of survey, the relevant extract of which is reproduced herein below.
Relevant Extract of reply to Question No. 6 given by Shri Murarilal Agarwal in his statement recorded during the course of Survey "The explanation in respect of books and files inventorised as Annexure Bl is as follows.
6) BI-11 : This diary contains the nottings of project related payment of expenses.
..... ...... .....
10) BI-16 : This pad contains nottings of measurement related to construction work and details of expenditure.
13) BI-19 : This book contains the nottings of sale / booking of flats in various projects constructed by us as received in cash and cheque along with the name of the buyer, area of the flat and sale rate per sq. ft. The figures written in this book are in code and in some places full figures are written. Whatever figures are written in codes may be read in lacs. For example, the figure 97/00 written on page no. 1 means Rs. 97,00,000/- (Ninety Seven Lacs). In the same way, the figures 32/00, 60/00 and 18/00 as written on page no. 10 means Rs. 32 lacs, Rs. 60 lacs and Rs. 18 lacs. Whatever cash payment is noted in the said book has not been ITA No.3187/Ahd/2011 and 5 Others 8 recorded in the regular books whereas against cheque payment the word (P) has been written which means "Pakka" i.e. the said payment has been recorded in the regular books."
From the aforesaid statement it is apparent that during the course of survey action, evidences of both unaccounted income as also evidences of unaccounted expenditure incurred therefrom have been found and impounded.
Further, on going through the reply to Question No. 7 of the statement recorded during survey action, it can be seen that after considering all the impounded materials, Shri Murarilal Agarwal has made a disclosure of net unaccounted income of Rs. 15 crores by deducting all unaccounted expenditure from the unaccounted receipts and the relevant extract of the same is reproduced herein below:
Relevant Extract of reply to Question No. 7 given by Shri Murarilal Agarwal in his statement recorded during the course of Survey "After considering the papers impounded from the site office, Platinum Building office, the statements recorded of my sons as also my statement herein before -
I admit that till date we have earned net unaccounted income of Rs. 15,00,00,000/- (in words Rs. Fifteen Crores).
This unaccounted income of Rs. 15,00,00,000/- (Rs. Fifteen Crores) belongs to our group viz. Brijwasi Developers Pvt Ltd., Brijwasi Exim Pvt. Ltd. and family members which is over and above the regular business income and from this unaccounted income, no type of expenses is pending to be incurred.
In this unaccounted income of Rs. 15,00,00,000/- the unaccounted income of all the projects developed by M/s. Brijwasi Developers Pvt. Ltd. viz. Solitaire, Platinum Building, Astha Farm, Radha Puram Villa (the project of the partnership firm M/s. Brijwasi construction, Brij Vasundhara, Radha Puram Residency and purchase sale of land at Ubhrat Village is included.
In this admitted unaccounted income of Rs. 15,00,00,000/- unaccounted income of earlier years is also included. This unaccounted income of Rs. 15,00,00,000/- is declared voluntarily and therefore, I plead that I should be relived from the penalty proceedings and I will file the revise returns of the earlier years before 31-09-2010."ITA No.3187/Ahd/2011 and 5 Others 9
The appellant further submitted that even during the course of survey proceedings, the Departmental Officers were aware that the on-money receipts were of around Rs. 36 crores and even then, they have not put forth any further question as to why only net unaccounted income of Rs. 15 crores should be accepted, since, they were well aware that the impounded material also contained detail of unaccounted expenses. The appellant has pointed out the impounded material in the form of Annexure-BI- 19 which contains detail of both unaccounted receipts and unaccounted expenditure arid I thus, agree with the appellant that this is not a case where only evidence of on-money receipts have been found but this is a case where incomplete records of unaccounted receipts and expenditure have been found. .
Therefore, I am of the opinion that the A.O. has grossly erred in holding that the impounded material contain no details of unaccounted expenditure and therefore, his action of adding the entire on-money as income is contrary to the facts of the case.
It is thus an established fact that in the present case, incomplete details of unaccounted receipts (on-money) .and unaccounted expenditure have been found and the total income of the appellant could not be properly computed on the basis of such incomplete evidences and in such cases, it is a well established law that the entire undisclosed sales could not be added as income of the assessee but the addition could be made only to the extent of estimated profits embedded in such unaccounted sales for which a comparable net profit rate needs to be adopted. Even in a best judgement assessment assessee cannot be saddled with unjustifiable tax liability and an appellate authority can certainly set right injustice caused to the assessee.
The aforesaid view of bringing to tax the net profit is duly supported by the following decisions of the jurisdictional Tribunal and High Court, as also various; other courts, as is discussed herein below.
In the case of Kishor Mohanlal Telwala vs. ACIT (1999) 64 TTJ (Ahd) 543 the Ahmedabad Bench of the ITAT has held that what can be taxed is undisclosed income and not undisclosed receipt and the AO was not justified in making addition u/s. 158BC of the total undisclosed receipt on account of "on-money" admittedly charged by the assessee without giving deduction for unaccounted .payments shown to be have been made by the assessee.
ITA No.3187/Ahd/2011 and 5 Others 10Further, in the case of Abhishek Corporation V. DCIT" (1999) 63 TTJ (Ahd) 651 the Ahmedabad Bench of the I.T.A.T. has held that where the seized documents indicated that assessee was receiving premium/ 'on money' on booking of flats, the entire .premium charged by assessee cannot be treated as undisclosed income and only net profit rate can be applied on unaccounted sales/ receipts. The said decision of the I.T.A.T. Ahmedabad has also been upheld by the High Court of Gujarat and the decision of the High Court is cited at (2000) 158 CTR (Guj) 374.
Furthermore, the High Court of Gujarat in the case of CIT vs. Gurubachhan Singh J. Juneja (2008) 302 ITR (63) (Guj) has held that In absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales, the finding of the Tribunal that only the GP on the said amount can be brought to tax does not call for any interference.
Moreover, in the case of R.K. Corporation, the Ahmedabad Bench of the 1TAT in ITA No. 4940/1996 has held that the A.O. was not justified in making addition for the entire on-money and only the profit earned in relation to these receipts as per the profit rate declared in the books of accounts should be treated as undisclosed income of the assessee.
The High Court of Gujarat in the case of CIT vs. President Industries (2002) 258 ITR 654 (Guj) has held that the Tribunal was justified in holding that the entire undisclosed sales could not be added as income of the assessee but the addition could be made only to the extent of estimated profits embedded in sales for which the net profit rate was adopted and hence no referrable question of law arises. ;
Similar view has also been taken by the High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 610 (MP) and the Mumbai Bench of Tribunal in the case of ITO vs. Sai Krupa Construction (2007) 13 SOT 459 (Mumbai).
In view of the facts of the case and respectfully following the law laid down by the jurisdictional High Court and Tribunal, I am of the considered view that even in the present case, where there are incomplete evidences of both unaccounted income (on- money) and unaccounted expenditure incurred therefrom, the A.O. is not justified in making addition for the entire unaccounted receipts i.e. on-money in respect of 3 flats of 'Platinum ITA No.3187/Ahd/2011 and 5 Others 11 Apartment' sold during the year under consideration and therefore, I hold that the income in this regard needs to be computed by applying a comparable rate of net profit on the on- money received by the appellant on 3 flats sold during the year under consideration.
Now as regards the second issue of applicability of Section 69C to the facts of the present case, I am of the opinion that Section 69C can be invoked only when the appellant has incurred any expenditure for which he has no explanation regarding its source or the explanation offered by the appellant is not satisfactory in the opinion of the AO. However, in the present case, the impounded material contains the detail of unaccounted sales receipts i.e. on-money and unaccounted expenditure incurred out of the said on-money and thus, the source of unaccounted expenditure gets satisfactorily explained as being the on-money and hence, Section 69C is not at all applicable.
Further, the proviso to Section 69C states that when any unexplained expenditure is deemed to be the income of the assessee, then the said unexplained expenditure shall not be allowed as a deduction and in the present case, unexplained expenditure has not been deemed to be the income of the appellant by the A.O. and hence, the proviso to Section 69C is also not at all applicable in the present case.
Now as regards the third issue as to what would be the reasonable rate of profit which needs to be applied to determine the income of the appellant in respect of on-money received on flats sold during the year under consideration, I am of the opinion that comparable rates adopted in similar cases during the same period needs to be adopted and applied in the present case also.
During the course of appellate proceedings, it has been submitted by the appellant that it is being assessed in Central Range, Surat, wherein in the cases of other similar business and assesses engaged in same line of business and where incomplete evidences of unaccounted on-money and unaccounted expenditure have been found during the course of search / survey, the total income in such cases has been computed by adopting the reasonable profit rate at 15%.
One such case as relied upon by the appellant is M/s. Ashirwad Corporation, wherein for the same year i.e. A.Y. 2008- 09, the D.C.I.T., Central Circle-1, Surat, vide his order u/s. 143(3) dated 31-12-2009 has computed the income by applying reasonable profit rate @ 16%, which was subsequently reduced to ITA No.3187/Ahd/2011 and 5 Others 12 15% by my predecessor i.e. C.I.T.(A)-II, Ahmedabad, vide his order dated 22-3-2010 in Appeal No. C.I.T.(A)-II/CC.1/140/2009-
10. The stand taken by the A.O. in the assessment order in the case M/s. Ashirwad Corporation passed u/s. 143(3) on 31-12- 2009, is reproduced herein below.
Para 7.14 Page No. 31 of the assessment order of Ashirwad Corporation "Various Courts have ruled that what needs to be assessed after rejection of books of a/c is the true income of the assessee which should be the net profit from these unaccounted transactions.
The assessee has also cited several decisions in this regard. The assessee has also contended that if the incomplete evidences found are considered as evidences of 'on-money' for the entire project then similar incomplete evidences which have been found in respect of unaccounted expenditure should also be extrapolated to find out such expenditure for the entire project.
The assessee has also contended that the Department has not found any assets in excess of the disclosure made by the assessee.
The assessee has first of all denied having received any 'on- money' and incurred any unaccounted expenditure. However, while making alternative contention it has also contended that it has not maintained any record of unaccounted transactions and therefore it is not in a position to give the details of the unaccounted expenses.
It has also cited several decisions of I TAT in respect of estimation of net profit on the 'on-money' received. Some of them have also been confirmed by the jurisdictional High Court.
In view of the facts and circumstances of the case wherein neither the complete records have been maintained by the assessee nor the seized documents enable proper estimation of the unaccounted expenses of the assessee, the estimation of net profit based on similar cases appears to be best method of determining the true income of the assessee out of receipt of 'on-money'.
Following net profit rates on 'on-money' have been upheld in the following judicial decisions:-
No. Details of the case % of Net Remarks
Profit
ITA No.3187/Ahd/2011 and 5 Others
13
1. Naresh B. Agarwal (HUF) 15% Construction of
& Magatulal Harlalka commercial complex.
(HUF) -Gujarat High Reference by the
Court order dated 3/5/00 Department against
the order of ITAT rejected.
2. CIT v. 1.31% NP % is not comparable
Abhishek Corporation as the assessee was
(2000) 158 CTR (Guj) doing supervision of
374 - Gujarat High Court construction work.
rejected the reference of
the Department and
upheld the decision of IT
AT, Ahmedabad.
3. M/s. R. K. Corporation 20% The disclosure made
v. ACIT (ITA by the assessee worked
No. 4940/Ahd/1996) - out to 20% of 'on money'
Order dated 8/2/99 receipt.
No. Details of the case % of Net Remarks
Profit
4. Kishore Mohan Telwala v. 8% Residential project
ACIT (1999) 63 TTJ (Ahd.) taken over from Naresh
651 - Order dated 2/9/98 Agarwal who took up the
work of organizing and .
building activity of Hare
Krishna Apt.
5. DCIT v. S.P. 17% The assessee 's
Enterprises (IT[SS]A No. declaration worked out
58/Ahd/2003) -Order equal to 17% of 'on
dated 24/1 1/05 money' received.
It can be seen that only cases at S.No. 1, 3 and 5 can be taken as comparable cases as other cases are not similar to the case of the assessee as is clear from the 'Remarks' column.
Besides, in the following cases of builders assessed in the Central Range, following net profit rates have been estimated:-
A/o. Details of the Case % of Net Remarks
Profit
ITA No.3187/Ahd/2011 and 5 Others
14
1. S.P. Enterprise (Block 20% Commercial project.
period 1990-91 to 1999- IT AT sustained the net
2000) profit @ 15%
2. Shrinath corporation 20% 15% 20% for commercial
(Block period 1990-91 to project and 15% on
1999-2000) Residential project.
3. Jagdamba Corporation 15% Residential project.
(Block period 1990-91 to
1999-2000)
3. Dew Corporation (Block 15% Residential project.
period 1990-91 to 1999-
2000)
4. Manhar Kakadia (AOP) 12.5% Residential project.
A.Y.2004-05
5. Manhar Kakadia (AOP) 12.5% Residential project.
A.Y.2005-06
6. Navin aswani AY, 2005- 14.28% Residential project.
06 Reduced to 12% by
CIT(A)-II, Ahmedabad
8. Jaiprakash . Aswani 14.28% Residential project.
A.Y.2005-06
Brief discussion on the above mentioned cases is being given in the following paras :-
1. In the case of S.P. Enterprise (Block period 1990-91 to 1999-2000) assessed in the same charge i.e. in Central Circle-1, Surat, estimated the Net profit at 20% for commercial project, the ITAT Ahmedabad dismissed the revenue appeal and sustain the Net profit at 15%.
2. In the case of Shrinath Corporation (Block period 1990-91 to 1999-2000), assessed in the same charge i.e. in Central Circle-1, Surat estimate Net profit at 20% for commercial project and 15% on the Residential project.
3. In the case of M/s. Jagdamba Corporation (Block period 1990-91 to 1999-2000), assessed in the same charge i.e. in Central Circle-1, Surat, estimate Net profit at 15% on Residential project.
4. In the case of M/s. Devi Corporation (Block period 1990-91 to 1999-2000), assessed in the same charge i.e. in Central Circle-1, Surat, estimate Net profit at 15% on residential project.ITA No.3187/Ahd/2011 and 5 Others 15
5. In the earlier search assessment of Manhar Kakadia group only, the assessment order were finalized u/s. 153A r.w.s. 143(3) and estimated the net profit at 12.5%.
6. In the case of search assessments of Aswani group, the assessment orders were finalized u/s. 153A estimating the profit @ 14.28%. The same was reduced to 12% by CIT(A).
It can be seen from the above table that 15% is the normal rate adopted in the case of residential projects while 20% is the rate adopted in the case of commercial period, specially during the period from April 2003 to March 2008, there ,has been boom in property market because of following factors -
........... ...........
........... ...........
Hence, it can be safety assumed that profit percentage would be definitely more during this period from April 2003 to March 2008. Hence, during F.Y. 2007-08, adoption of a higher net profit % figure would be justified. Keeping in view entire facts and circumstances of the case, it would be reasonable to adopt net profit percentage figure of 16% of the total 'on-money received. This figure will be in addition to the profit disclosed by the assessee in its books of a/c which depict the picture of the accounts without considering the unaccounted receipts and unaccounted expenses."
From the above findings in the case of M/s. Ashirwad Corporation, it is seen that the A.O. in the same Central Range, Surat on similar facts has applied net profit rate of 16% on the on-money receipts, by respectfully following the decisions of the jurisdictional High Court and Tribunal, for the same assessment year and that too on much higher on-money receipts of Rs. 116.62 crores, which is a comparable case which can be applied to the present case.
Therefore, I hold that following the decisions in various similar cases by the hon'ble ITAT Ahmedabad as mentioned above and precedence as set by the A.Os. in the same Central Range, Surat, in other similar cases, for the same assessment year which were passed with the approval of the Range head of central Range Surat, the income of the appellant in respect of on-money received on sale of 3 residential flats of 'Platinum Apartment' also needs to be computed by adopting a net profit rate @ 16%.
ITA No.3187/Ahd/2011 and 5 Others 16Further, I also agree with the appellant that the actual price in respect of Flat No. 901 as noted down on the impounded paper Annexure-BI-19 Page No. 10 is Rs. 2,06,71,500/- and not Rs. 2,67,71,500/- since, there is a cross-mark against the differential amount of Rs.61 lacs mentioned in respect of a terrace indicating cancellation and the final total thereafter has again been worked out to Rs.2,06,71,500/- and not Rs. 2,67,71,500/-. The appellant has further submitted that the plans were revised and hence, Flat No. 901 has no attached terrace as on date after construction.
Accordingly, I hereby hold that the actual price of flat no. 901 should be taken at Rs. 2,06,71,500/- as being the correct price indicated in the impounded loose paper and not at Rs. 2,67,71,500/-.
In conclusion, I hold that the A.O. was not justified in making addition of the entire on-money of Rs. 5,94,14,500/- which infact is Rs. 5,33,14,500/- in respect of sale of 3 flats of 'Platinum Apartment' and accordingly, I hereby direct the A.O. to compute the income in respect of sale of 3 flats of 'Platinum Apartment' by adopting a net profit rate @ 16%, in the following manner.
Sr. Flat Price as Actual Price Difference Net Profit @
No. No. per sale as per (on-money) 16%
deed seized Actual as per
material loose paper
1 801 33,00,000 2,06,71,500 1,73,71,500 27,79,440
2 901 33,00,000- .2,06,71,50 1,73,71,500 27,79,440
0
3 701 33,00,000 2,18,71,500 1,85,71,500 29,71,440
Total
99,00,000 6,32,14,500 5,33,14,500 85,30,320
Accordingly, the addition of Rs. 5,08,84,180/- out of total addition of Rs.5,94,14,500/- as made by the A.O. is deleted and balance addition of Rs.85,30,320/- is sustained."
9. The ld.CIT-DR relied upon order of the AO. He contended that Shri Murarilal Agarwal admitted Rs.15 crores as net profit, meaning thereby, expenditures were also debited by the assessee in the profit & ITA No.3187/Ahd/2011 and 5 Others 17 loss which was disclosed to the department. The on-money receipts were unaccounted profit which is net of expenditure. Therefore, the ld.CIT(A) has erred in considering profit on alleged on-money in- between at the rate of 16%.
10. On the other hand, the ld.counsel for the assessee relied upon the orders of the ld.CIT(A). He contended that the assessee has already honoured statement of Shri Murarilal Agarwal. Group has offered Rs.15 crores for taxation in different assessment years. Additions sustained by the ld.CIT(A) are not being disputed. He further pointed out that during the course of survey, it emerges out that the Department has calculated alleged on-money receipts to the extent of Rs.36 crores, but they accepted net declaration of Rs.15 crores, meaning thereby, the department is having information about element of profit in these receipts. The ld.CIT(A) has taken cognizance of these specific fact. He further placed on record copy of assessment order passed in the case of Evergreen Industries P.Ltd. and submitted that this assessment order was passed by DCIT, Cent.Cir.1, Surat wherein profit rate on-money was applied. Similarly, he made reference to the finding of the ld.CIT(A) recorded in page no.16 and 17 of the impugned order. The ld.CIT(A) made reference to a large number of similarly situated assessees in whose cases net profit in between 12.5% to 20% has been worked out by the AO in the on-money receipts. He further placed on record copy of the Tribunal's order in the case of M/s.Jay Builders Vs. ACIT, 1821- 1822/Ahd/.2003 (Ahd Trib) wherein the Tribunal has upheld assessment of income at the rate of 15% embedded in the on-money receipts. The finding of the Tribunal in para-9 has been referred which reads as under:
"9. We have considered the rival submissions and perused the material on record. In our considered view it will not be proper to tax entire sum of 'on money' received in cash as income of the assessee. It is apparent that a parallel account of receipt and ITA No.3187/Ahd/2011 and 5 Others 18 expenditure is maintained which is not recorded in the books i.e. both the payments and receipts are in cash. It is not correct to presume that assessee has not incurred any expenditure out of cash amount. For getting clearance for the project assessee has to incur expenses in entertainment. It has to incur cash for getting vacant possession of the premises. Cash is also incurred for making labour payments and payments for purchasing raw materials. However, assessee saves substantial money as taxes etc. which are not paid on such 'on money'. Most of the expenditure are accounted for and is covered in the net profit applied on cheque amount. Considering the totality of the facts and circumstances of the case, we direct the AO to apply a net profit rate of 15% on the cash amount and treat the resultant figure as income of the assessee rather taxing entire sum of 'on money'. The AO will calculate the resultant addition for both the years. Thus both the appeals filed by the assessee are partly allowed."
11. We have duly considered rival contentions and gone through the record carefully. In the first ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs.5,08,84,180/- out of total addition of Rs.5,94,14,500/- made by the AO. A perusal of the ld.CIT(A)'s order would indicate that basically, the ld.CIT(A) has analysed these details with all possible angles. The ld.CIT(A) has observed that perusal of annexure B1-11 and annexure B1-19 found during the course of survey, total unaccounted on-money receipts was of Rs.36.52 crores received from sale of flats. These details also contained unaccounted expenditure of Rs.20.7 crores. Survey team was well aware about this aspect and that is why net income of Rs.15 crores was accepted as a declaration on behalf of the assessee. Had that not been in the knowledge of the Department, then the survey team would have emphasized the assessee to declare Rs.36.53 crores. Apart from the above facts, we further find that consistently approach of the Revenue was to work out profit element embedded in those on-money receipts. The Tribunal has also considered this aspect in the case of Jay Builders (supra). Thus, there was no clinching evidence with the Department to demonstrate that ITA No.3187/Ahd/2011 and 5 Others 19 gross-receipts of on-money calculated out of impounded material found during the course of survey is deserved to be considered as net profit. As far as statement of Shri Murarilal Agarwal, that statement has duly been considered by the ld.First Appellate Authority. Reply to question no.7 has been specifically dealt by the ld.CIT(A) on pages 8, 9 and 10 of the impugned order. In other words, it is a cumulative analysis of all the facts at the end of the First Appellate Authority to demonstrate that alleged calculation of gross on-money at the end of AO was not the income of the assessee. It contained certain expenditure also which are noted on those very pages and credit of those expenditure are also to be considered. Taking into consideration these aspects, books were not considered as reliable and profit element embedded in the receipts has been added. This profit has been calculated at the rate of 16%. Therefore, we do not find any error in the order of the ld.CIT(A), and first ground of appeal is rejected.
12. In ground no.2, grievance of the Revenue is that the ld.CIT(A) has erred in excluding a sum of Rs.61 lakhs from the total on-money calculated by the AO. With regard to this ground, we find discussion on page no.18 of the impugned order. It is pertinent to observe that with regard to flat no.901 a sum of Rs.2,67,71,500/- was mentioned in Annexure B1-19 page no.10. The AO took the figure of Rs.2,67,71,500/-. The ld.CIT(A) has observed that the AO has committed a mistake by not taking correct price indicated in the impounded loose paper. The Department was unable to controvert this finding of the fact recorded by the ld.CIT(A). The ground of appeal was taken merely for the sake of raising dispute, which has not been demonstrated before us, as to how the ld.CIT(A) has committed the mistake from taking correct figure in the impugned loose paper. We do not find any merit in ground no.2 also.
ITA No.3187/Ahd/2011 and 5 Others 2013. As far as ground no.3 and 6 are concerned, they are peripheral issues related to Ground no.1. In these grounds, grievance of the Revenue is that the ld.CIT(A) has erred in applying net profit rate at 16%. It should have been applied at the rate of 42%. We find that this rate has been applied by the ld.CIT(A) after taking into consideration comparable cases of eight assessees. Specific example has been given on page no.16 of the impugned order. Thus, in our opinion, the ld.CIT(A) has exercised his discretion after taking into consideration various other factors.
14. As far as ground no.4 is concerned, once income of the assessee has been estimated after rejection of the books of accounts, there cannot be other disallowance specifically under section 40A(2), 40A(3) etc. We do not find any error in the observation of the ld.CIT(A) in this regard. Therefore, this ground of appeal is also rejected.
15. Other grounds are general in nature which do not call for any specific adjudication. They are dismissed as such.
16. Now we take up ITA No.290/Ahd/2013 for Asstt. year 2006-07.
17. In ground no.1 and 2, Revenue has pleaded that the ld.CIT(A) has admitted various additional evidence/submissions without giving any opportunity to the AO, which is in contravention to Rule 46A of the Income Tax Rules, 1962.
18. A perusal of the record would indicate that the Ld.CIT(A) has not admitted any additional evidence. The assessee has pointed out how wrong calculations have been made by the AO from impounded material inventorised as Annexure-B1-19. During the course of hearing, the ld.DR was unable to controvert which document has been entertained by the ld.CIT(A) a fresh evidence. The assessee has filed submissions no-doubt. But the submissions are based on the impounded material ITA No.3187/Ahd/2011 and 5 Others 21 considered by the AO also. Thus, there was a construction or interpretation of the impounded material and not anything-else, therefore, we do not find any merit in these grounds of appeal. These are rejected.
19. Ground no.5 is general grounds of appeal, wherein the Revenue has pleaded that the order of the ld.CIT(A) be set aside and that of the AO would be restored. Since it is one of the peripheral arguments relating to other grounds, we do not deem it necessary to record any specific finding on this ground. It is rejected.
20. In ground no.4 Revenue has pleaded that the ld.CIT(A) has erred in law and on facts in holding that income has to be recognized on accrual basis i.e. at time of selling of flats as the assessee has been following this method of accountancy continuously.
21. With the assistance of the ld.representatives, we have gone through the record. The ld.CIT(A) while adjudicating the issue has formulated three questions which reads as under:
"(i) The first issue is that whether the entire on-money receipts can be treated as the income of the appellant, when incomplete details of both unaccounted receipts and expenditure have been found and impounded.
(ii) The second issue is whether the accounting method followed by the assessee regularly and consistently from year to year should be the basis or it has to be the year of receipt, for the taxing income embedded in the unaccounted on-money receipts.
(iii) The third issue is the applicability of section 68/69/69C to the facts of the present case more particularly if the INVESTMENT made by the appellant are finally in excess of THE INCOME ASSESSED OR ACCEPTED covering the entire project period up to the date of survey for AY 2006-07/2007-08/2008-09/2009-
10/2010-11."
ITA No.3187/Ahd/2011 and 5 Others 2222. So far as question no.1 is concerned, similar question was formulated in the Asstt.Year 2008-09 also, and we have extracted finding of the ld.CIT(A) which is verbatim same as well as details of unaccounted expenditure were found. As far as issue whether income has to be recognised on accrual basis, the case of the assessee was that it has been following mercantile system of accountancy, where income from construction activity would be offered after completion of projects. In other words, when the assessee hands over possessions of the flats or get sale deed registered, only then income embedded in on-money receipts would be taxed in the hands of the assessee. The ld.CIT(A) has accepted this stand of the assessee on the ground that in the Asstt.Year 2008-09, the AO himself has accepted this. In the Asstt.Year 2008-09 the AO has not rejected books of accounts. He computed profit from unaccounted business on the money attributable to the sale of flats during the year. Thus, in other words, according to the ld.CIT(A), the income of the assessee would be assessed on the method of accountancy followed by the assessee and the revenue would be recoginised in the year in which the sales have been made by the assessee. The AO in this assessment year also did not disturb the method of accountancy, but for the unaccounted income he has adopted a different method i.e. he assessed it on receipt basis. After taking into consideration finding of the ld.CIT(A), we do not find any error because the assessee itself has offered an income of Rs.15 crores in different years and recognized this income on sale of flats. In this year, the project was not completed. It was under construction, therefore, it cannot be said that the income has accrued to the assessee. In a given case, booking of flats may be canceled, advance taken by the assessee including on-money could be returned, therefore, the ld.CIT(A) has took a view in right perspective. We do not find any error in the finding of the ld.CIT(A) on this issue. Ground no.4 is rejected.
ITA No.3187/Ahd/2011 and 5 Others 2323. In ground no.3, the assessee has pleaded that the ld.CIT(A) has erred in deleting addition of Rs.88,29,000/- which included investment of Rs.51,80,000/- added under sections 69/69C and a sum of Rs.36,49,000/- added under section 68 of the Income Tax Act, 1961. Before recording any finding on this issue, in order to appreciate the facts, we would like to reproduce the discussion made by the ld.CIT(A) with regard to the facts in this assessment year. It read as under:
"However before corning to the conclusion it has to be ensured that the assessee had disclosed the relevant income embedded in the ON MONEY in the year of SALE. The assessee had submitted the following details in this regard along with the relevant documents and copy of assessment / CIT(A) order pertaining to AY 2007-08/2008-09/2009-10 and the relevant annual audited accounts pertaining to AY 2010-11.
FLAT Relevant Amount Date of YEAR in which
no/project Page No Document offered as Part
of BM9 of SALES
A-l/ 201 1 21,00,000 14/06/2006 AY 07-08
Solittaire
A-2/902 2B 17,29,000 25/09/2009 AY 10-11
Solittaire
A-2/1002 3B 50,00,000 21/07/2008 AY 09- 10
Solittaire
88,29,000
In the case of appellant itself in AY 2008-09 the Assessing Officer has added the on-money to the total income on sale of flats in the relevant accounting year only. The other on-money collected was not brought to tax on receipt basis in accordance with the method of accounting followed by the assessee. Considering the legal aspects of taxation, the submissions made by the appellant and the details of income offered with regard to the ON MONEY RECEIPTS of the year under consideration and the decision and findings given in AY 2008-09 by the AO as well as the CIT(A) and also decision and findings given in the CIT(A) Order of AY 2007-08 and 2009-10, I am of the view that the ON- MONEY though received in a particular year will partake the ITA No.3187/Ahd/2011 and 5 Others 24 character of the Income in the year of accrual as per the method of accounting followed by the appellant.
iii) Now as regards the third issue of the applicability of section 68/69/69C to the facts of the present case, I am of the opinion that Section 69C can be invoked only when the appellant has incurred any expenditure for which he has no explanation regarding its source or the explanation offered by the appellant is not satisfactory in the opinion of the A.O. However, in the present case, the impounded material contains the detail of unaccounted sales receipts i.e. on-money and unaccounted expenditure incurred out of the said on-money and thus, the source of unaccounted expenditure gets satisfactorily explained as being the on-money and hence, Section 69C is not at all applicable.
A Further, the proviso to Section 69C states that when any unexplained expenditure is deemed to be the income of the assessee, then the said unexplained expenditure shall not be allowed as a deduction and in the present case the unexplained expenditure has not been deemed to be the income of the appellant by the A.O. and hence, the proviso to Section 69C is also not at all applicable in the present case. Same way section 69 states that where the assessee made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the A.O. satisfactory, the value of such investments may be deemed to be the income of the assessee for such financial year. In the present case all the investments made are out of the ON-MONEY RECEIPTS and therefore the nature and the source of the investments are satisfactorily explained. The Ld Assessing Officer has also given finding that the TOTAL investments/expenditure (Rs 66,80,OOO/-) made are not in excess of the ON MONEY receipts of Rs 88,29,000/- available with the assessee. (Table 1 and Chart under para 9.3 of the Assessment order).
Further it has been submitted that even when the Income assessed/confirmed by CIT(A) is matched with the Final Investments on hand as on the date of survey, then also the investment is well within the Income assessed/confirmed by the CIT(A). The details submitted by the appellant are as under:
Investment on hand as on the date of SURVEY Page No Particulars Amount(Rs) Amount(Rs) ITA No.3187/Ahd/2011 and 5 Others 25 42 Trimurti Apartment 14,58,532 UB LAND 43 Jayanti bhai broker 1,10,000 46 Ushaben S NO 528 90,45,000 46B Hemal Bhai UB land 16,20,000 broker 47 SNo 519 32,50,000 47 S No 521 25,00,000 47B S No 517 1,77,20,000 3,42,45,000 Dharmin Bhai (including Rs 45,00,000/- paid during the year under consideration) 43B Mavji Bhai 22,25,000 61 Sachin Land 41,69,750 65 Pappu Bhai 22,00,000 65 Pappu Bhai Railway 17,77,500 63 Anuj Emb 5,00,000 61B Sanjay yarn 5,00,000 60B Ayush Bhai 4,76,000 57B Snehlata GK 5,00,000 48B Vishwakarma Sanghi 2,00,000 49 Sanjay Agarwal 1,00,000 TOTAL 4,83,51,682 ITA No.3187/Ahd/2011 and 5 Others 26 INCOME ASSESSED / CONFIRMED by CIT( A) /RETURNED A YEAR INCOME ASSESSED / CONFIRMED by CIT(A)/ as per RoI 2007-08 39,72,502 2008-09 85,30,320 2009-10 3,59,17,152 2010-11 3,00,00,000 TOTAL 7,84,19,974 Considering the factual status and the interpretation of sec 69/69C and the available funds in the form of ON MONEY during the year as well as the overall Income vis a vis investment, there is no justification in again considering the amount of Rs.51,80,000/- as unexplained Investment.
Hence the addition is deleted."
Further the Assessing Officer has considered an amount of Rs 36,49,000/- (88,29,000 - 51,80,000) as addition u/s 68 being unexplained cash credit for which no details has been provided by the assessee.
In this regard the appellant has submitted as under:
"(a) At the outset sec 68 is applicable only when there is a CREDIT in the books of account and the assessee is not in apposition to explain the same. The following decisions in this regard are relevant:
CIT vs TAJ BOREWELLS 210 CTR (Mad) 543 Income--Cash credit--Genuineness--Assessee firm did not maintain any books of account--It has shown the capital contributions of the partners in the P&L a/c and balance sheet--P&L a/c and balance sheet are not books of account as contemplated under the provisions of the Act ITA No.3187/Ahd/2011 and 5 Others 27 CIT vs Bhaichand H Gandhi 141 ITR 67 (BOM) Cash credits--Appearing in bank pass book -- Not in assessee's books -- Cash credit found only in bank pass book and not in the cash book maintained by assessee-- Would not be includible under s. 68 as pass book supplied by bank to assessee is not a book maintained by assessee.
(b) The Ld Assessing Officer himself has categorises the receipt as INCOME in the para reproduced above. Such portion has been underlined by the assessee for your honour's easy reference. The same is correct also because the nature of such receipts from the impounded material is very clear as ON MONEY RECEIPTS on account of various flat holders. The details of Flat holders are also available in the impounded material."
5. I have gone through the submission and find that once the nature of the receipt has been considered to be ON MONEY and the INCOME EMBEDDED therein has been already considered as part of the Income in the year of sale of specific fait, there is no substance in the addition thereof u/s 68. Sec 68 is squarely applicable only when the item of credit is not explained. In the instant case the CREDITS has been considered to be ON MONEY RECEIPTS with reference to specific flat as per details available in the impounded material by the Assessing Officer in the assessment order. The Assessing officer has not changed the colour of the receipts to be different than ON MONEY RECEIPT.
I therefore delete the addition of Rs 36,49,000/- made u/s 68 of the Act as the income embedded in the ton-money' is already assessed/offered From AY 2007-08 to 2010-11 as summarized in table of income assessed on page no.24 of this order. The addition of Rs.36,49,000 is accordingly deleted."
24. With the assistance of the ld.representatives, we have gone through the record carefully. There is no dispute with regard to the fact that the assessee had sold flats in project "Solitaire". It has received on-money of rs.88,29,000/-. Out of this on-money, assessee has incurred expenditure as well as investment. Such amounts have been calculated at Rs.51,80,000/-. He only observed that if investment was found to be more than the on-money receipts, then investment will be ITA No.3187/Ahd/2011 and 5 Others 28 added. The ld.AO treated on-money receipt of Rs.88,29,000/- as net income and observed that out of these net income, Rs.81,80,000/- was invested in profit making assets.
25. On appeal, the ld.CIT(A) has observed that receipts are there. Similarly, expenditure are there. Once the receipts are accounted, expenditure cannot be added. The source of expenditure is on-money receipts. Out of the on-money receipts, the income would be assessed in the year when the flats would be sold. Similarly, the ld.CIT(A) has observed that Rs.36.49 lakhs cannot be considered as cash credit because the assessee has already explained that these are on-money receipts. The assessee has also identified flat numbers against which such amounts have been received. Details have been noticed by the ld.CIT(A) on page no.21 extracted (supra). Therefore, considering well reasoned finding of the ld.CIT(A) extracted (supra), we do not find any error in it.
26. Now we take appeal for the Asstt.Year 2007-08 and 2009-10 together i.e ITA No.1660/Ahd/2002 and 1659/Ahd/2012.
27. A perusal of grounds of appeal would indict that almost verbatim grounds have been taken except variation in the amounts.
28. In ground no.1 and in both the years, Revenue has pleaded that the ld.CIT(A) has entertained additional evidence in violation of Rule, 46A of the Income Tax Rues.
29. With the assistance of the ld.representativs, we have gone through the record carefully. A perusal of the record would show that the AO has worked out the amount of investment plus expenditure of Rs.9,05,40,625/- in Asstt.Year 2007-08. Similarly, he worked out these unexplained investment plus expenditure at Rs.9,45,15,643/- in the Asstt.Year 2009-10. The assessee has pointed out to the ld.CIT(A) that ITA No.3187/Ahd/2011 and 5 Others 29 investment and expenditure in the Asstt.Year 2007-08 was of Rs.5,70,14,625/-. In the Asstt.Year 2009-10, the AO has worked out expenditure of Rs.9,45,15,643/-. The ld.CIT(A) has held that correct value of the investment plus expenditure worked out to Rs.3,92,89,163/- which is less than the gross-receipts. The grievance of the Revenue is that the ld.CIT(A) has calculated both these amounts after entertaining additional evidence which is in violation of Rule 46A of the Income Tax Rules, 1962 i.e. AO was not provided an opportunity of hearing on this issue.
30. We have perused the finding of the ld.CIT(A) from page no.24 to 29 and page no.35 in the Asstt.Year 2007-08 as well as at page no.25 to 29 in the Asstt.Year 2009-10. A perusal of the finding would indicate that the ld.CIT(A) has not entertained any additional evidence rather, re-appreciated the seized material. The assessee has prepared a chart explaining entries in the seized material which has been considered by the ld.CIT(A).
31. We have also gone through the material placed before the ld.CIT(A). Let us take first item considered by the AO in the Asstt.Year 2007-08. According to the assessee on page no.48 of the impounded diary B1-19 an entry of Rs.17,963/- was available which has been read by the ld.AO as "1,79,63,000/-" on receipt side. We have gone through photo-copy of this page, which is available at page no.189 of the paper book filed by the Revenue. Entry is "17963/00". After verifying this entry with related details, the ld.CIT(A) has observed that it is to be read as "17,963/'". After perusal of this entry, we are of the view that the ld.CIT(A) has not entertained any additional evidence, rather re- appreciated existing material available on the file of the AO. Thus, there is no force in both these grounds of appeal. They are rejected.
32. Ground nos.7 to 12 in the Asstt.Year 2007-08 and ground no.7 to 11 in the Asstt.Year 2009-10 are verbatim same. They are alternative ITA No.3187/Ahd/2011 and 5 Others 30 plea taken by the Revenue. In these grounds, grievance of the Revenue is that in case income of the assessee embedded in on-money receipts is to be estimated, then this should be estimated at the rate of 42% and not at the rate of 16.25% as done by the ld.CIT(A).
33. We have considered identical issue in the Asstt.Year 2008-09. We find that the ld.CIT(A) has adopted rates after taking into consideration relevant material and comparable cases. The ld.CIT(A) made reference to eight comparable cases before adopting percentage of 16% required to be applied on on-money receipts. Similarly, thereafter, the ld.CIT(A) made reference to order of the ITAT in different cases. Thus, we are of the view that the ld.CIT(A) has appreciated the facts and circumstances in right perspective and has applied pragmatic rate of profit on-money receipts. We do not find any merit in these grounds of appeal. They are rejected.
34. Grounds no.3 to 6 in both years are interconnected with each other. The grievance of the Revenue in these grounds is that the ld.CIT(A) has erred in law and on facts in arriving at the figure of unexplained investment/ expenditure at Rs.5,70,14,625/-, Rs.3,92,89,163/- as against figure of Rs.9,05,40,625/- and Rs.9,45,15,643/- in the Asstt.Year 2007-08 and 2009-10 respectively. According to the Revenue, the correct figure of unexplained investment/ expenditure should be added at figure calculated by the AO. We deem it appropriate to take note of the finding of the ld.CIT(A) on these issues in both the years.
Asstt.Year 2007-08 "v) As regards the fifth issue regarding mistakes claimed be the appellant in the Investment chart prepared by the Assessing Officer, the appellant had submitted a chart depicting the mistakes and wrong consideration of items:
ITA No.3187/Ahd/2011 and 5 Others 31Particulars Amount (Rs) Amount(Rs)
TOTAL of the TABLE 9,05,40,625
Less: Figures wrongly considered 1,79,45,037 1,79,45,037
as 1,79,63,000/- as against actual
figure of Rs 17,963/- on RECEIPT
Side Page No 48 (Page No 33 of
PB)
SUB TOTAL 7,25,95,588
LESS/ADD: Mistakes apparent
47B Dharmin Bhai- A land has 34,83,000
been purchased from this
person for Rs
1,77,20,000/- for which
45,00,000/- + 28,50,000/-
was paid in CASH Rest of
the payment was adjusted
against SALE of FLAT in
SOLITAIRE Apt Rs
1,24,40,000/-. There is
difference in calculation of
the amount by the AO. The
amount works out to Rs
1,03,70,000/- whereas the
AO has worked out Rs
1,38,53,000/-.
49 BHUSHA BHAI- This is 7,00,000
Land Purchased for
RADHAPURAM VARELI.
This is expenditure of the
project and not an
investment. There seems
to be a total mistake of Rs
7,00,000/-. The Total
Works out to Rs
2,44,98,625/- as against
Rs 2,51,98,626/-
considered by AO
ITA No.3187/Ahd/2011 and 5 Others
32
46 Usha Ben S NO 528. This 1,70,000
is a land Purchased for
investment. The total
amount paid is Rs
79,45,000/- whereas the
AO has considered Rs
77,75,000/-
44B Chintaminiji- The amount 5,00,000 45,13,000
of Rs 5,00,000 has been
considered twice on the
same page
SUB TOTAL 6,80,82,588
48B Sanjay Agarwal- This is
repayment received from
the party on a/c of LOAN
given in 2004 as is
evident from the noting.
This a RECEIPT 6,80,000
considered as PAYMENT
48 Janak Mistry VAT 17,963
Consultant- The receipt
item of Rs 17,963/-
considered as
1,79,63,000/-. Being
RECEIPT this is to be
reduced.
47B Dharmin Bhai- In this 1,03,70,000 1,10,67,963
case PAYMENT is only
made of Rs 73,50,000/-
(45+28.50) Rest of the
amount of Rs
1,03,70,0007- was not
paid but adjusted against
sale of FLAT
BALANCE 5,70,14,625
NET PAYMENT of INVESTMENT / EXPENDITURE 5,70,14,625
From the above table the Id AR submitted that the correct figure of investment + expenditure, works out to Rs 5,70,14,625/-.
ITA No.3187/Ahd/2011 and 5 Others 33The above chart is prepared from the items and entries picked up from the impounded material annexure B1-19. Each item of difference is verified and discussed with reference to the impounded annexure as under:
Page No 48 (Rs 1,79,63,000 + Rs 4,00,000): The Assessing Officer had considered this item of entry as investment at Rs 1,79,63,000/- (Receipt side Rs 17,963.00 considered as 1,79,63,000/-) + Payment side - Rs 1.00 (23/02/07) + Rs 3.00 (17/03/07) = Rs 1,83,63,000/- in the Table No 3 on page no 31-32 of the assessment order. The appellant has contended that for the item considered as Rs 1,79,63,000/- the actual amount is Rs 17.963/- only. In this matter a challan of Rs 2,82,037/- on a/c of VAT paid on 24/05/2007 has been produced and submitted at page no 36 of the PB.
The amount of Rs 17,963 + 2,82,037/- makes up a total of Rs 3,00,000/-. The concerned person JANAK MISTRY is a VAT consultant of the appellant company. He had returned a sum of Rs 17,963/- to the appellant so as to make a a/c of Rs 3,00,000/- in round up figure. RS. 3 Lacs was paid to ShriJanak Mistry on17-03-2007 which is entered on page number 30 of the paper book submitted by the appellant. Page number 33 contains details of payment made to Shri Janak Mistry on various dates and the same page contains details of VAT payment of Rs. 2 82037 and balance amount of Rs. 17,963/-which was considered by the AO as Rs 17963000/-. This is factual mistake committed by the learned AO. This - was contended before the Assessing Officer also that the amount is not Rs 1,79,63,000/- but actual figure of Rs 17,963/-. On going through the impounded serial no 33 and 48 and the challan on page 36 of PB as submitted by the appellant, it is found that the contention of the Appellant is correct and the amount is Rs 17,963/- only in real terms and not to be deciphered or decoded as Rs 1,79,63,000/- by suffixing '000 to the figure.
Page No 47B (Rs 1,38,53,000/-): The Assessing Officer had considered this item of entry as investment at Rs 1,38,53,000/- (Total of PAYMENT side is Rs 2,12,95,000/- out of which a sum of Rs 73,50,000/- has been reduced as the same is also considered just above this entry on the same page. Thus resulting into a balance of Rs 1,39,45,000/-. Further a sum of Rs 92,000/- was reduced to arrive at Rs 1,38,53,000/- as considered by the Assessing Officer. However it was submitted by the appellant that a land had been purchased from this person for Rs 1,77,20,000/- for which 45,00,000/- + 28,50,000/- was paid in CASH. Rest of the payment was adjusted against SALE of FLAT in SOLITAIRE Apt at Rs 1,24,40,000/-. Thus the differential amount which is required to be considered as PAYMENT is Rs 1,03,70,000/- (1,77,20,000 less 73,50,000). Therefore there is difference in calculation of the amount by the AO. The amount works out to Rs 1,03,70,000/- whereas the AO has worked out Rs 1,38,53,000/-. Thus a difference of Rs 34,83,000/- has been wrongly considered as unexplained investment by the Assessing Officer. I have gone through the impounded annexure and on verification found the facts stated by the appellant are found to be correct.
ITA No.3187/Ahd/2011 and 5 Others 34Page No 49 (Rs 2,51,98,625/-): The Assessing Officer had considered this item of entry as investment at Rs 2,51,98,625/-. The appellant submitted that this was a Land Purchased for RADHAPURAM VARELI project of the appellant. This was expenditure of the project and not an investment as held by the Assessing Officer. The total payment during the year works out to Rs 2,44,98,625/- as against Rs 2,51,98,625/- considered by AO. There seems to be a total mistake of Rs 7,00,000/-. The amounts from the impounded annexure were verified and the mistake in total was apparent.
Page No 46 (Rs 77,75,000/-): The Assessing Officer had considered this item of entry as investment at Rs 77,75,000/-. However the total investment is Rs 79,45,000/- and an amount of Rs 1,70,000/- of 04/04/206 is mistakenly not considered into totals. This will increase the investment. The amounts from the impounded annexure was verified and found to be Rs 79,45,000/-.
Page No 44B (Rs 5.00.000/-): The Assessing Officer had considered this item of entry as investment at Rs 5,00,000/-. The appellant submitted that this figure of Rs 5,00,000 has been considered twice on the same page. The amounts from the impounded annexure was verified and found to be taken twice.
Page No 48B (Rs 6,80,000/-): The Assessing Officer had considered this item of entry as investment at Rs 6,80,000/-. The appellant submitted that this is repayment received from the party on a/c of LOAN given in 2004 on different dates as mentioned in the impounded annexure. Subsequently this amount was received back during the year under consideration as is evident from the impounded annexure. Further this amount is of receipt and not of payment. The impounded annexure was verified and the submission of the appellant was found to be factually correct.
These Items have been wrongly treated as part of investment instead of receipts hence required to be reduced from the value of investment taken by the Assessing Officer. The correct value of investment + expenditure works out to Rs 5,70,14,625/-, which is less than the GROSS ON MONEY receipts, hence the source of investment + expenditure gets explained from the ON MONEY collected recorded in the same impounded annexure.
Thus, the appellant would get a relief of Rs.3,35,26,000/-on account of mistakes committed by the Assessing Officer, as discussed above in para 5.5(v), in working out the investment + expenditure (905,40,625- 57014,625)"
Asstt.Year 2009-10 "Further, the proviso to Section 69C states that when any unexplained expenditure is deemed to be the income of the assessee, then the said unexplained expenditure shall not be allowed as a deduction and in the present case the unexplained expenditure has not been deemed to be ITA No.3187/Ahd/2011 and 5 Others 35 the income of the appellant by the A.O. and hence, the proviso to Section 69C is also not at all applicable in the present case. Same way section 69 states that where the assessee made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the A.O. satisfactory, the value of such investments may be deemed to be the income of the assessee for such financial year. In the present case all the investments made are out of the ON-MONEY RECEIPTS and therefore the nature and the source of the investments are satisfactorily explained. The investments/ expenditure made are not in excess of the receipts available with the assessee which is clear from the following chart submitted by the appellant and verified with the relevant impounded annexure as mentioned in the next paragraph.
RECEIPTS PAYMENTS
Particulars Amount Rs Particulars Amount Rs
LOAN 1,10,004 Investment & 3,92,89,163
RECEIPTS- Expenditure
Offered forTAX
Sale of Shops & 3,48,60,480 BALANCING 9,90,84,307
Land FIGURE
AVAILABLE for
OTHER
EXPENSES
Sale of YARN 13,45,000
SUB TOTAL 4,72,09,480
ON MONEY from 9,11,63,930
PROJECTS as per
Table 2 of A Order
TOTAL 13,83,73,470 TOTAL 13,83,73,470
v) As regards the fifth issue regarding mistakes claimed be the appellant in the Investment chart prepared by the Assessing Officer, the appellant had submitted a chart depicting the mistakes and wrong consideration of items:
Particulars Amount (Rs) Amount(Rs) ITA No.3187/Ahd/2011 and 5 Others 36 TOTAL of the TABLE No 1 & 3 on 9,79,10,643 Page No 7-11 and 36-38 of the Asst Order Less: Item considered twice 54B- 1,14,12,000 1,14,12,000 Ghanshyam Bhai The transaction pertains to sale of GOLDEN PLAZA SHOPS which are considered at Page No 57B-Golden Plaza Shop SUB TOTAL 8,64,98,643 LESS: ITEMS of RECEIPTS considered by AO as investment. 66 Jayesh Bhai -Loan 8,00,000 receipts Page 187 of PB) SUB TOTAL of LOAN 8,00,000 RECEIPTS 59 Sanjay Bhai YARNWALA - 13,45,000 Sale of YARN receipts (Page 102 of PB) 51 Murli Jariwala - Sale of 10,50,000 VANTA Plotting (Page 98 ofPB) SUB TOTAL 31,95,000 31,95,000 BALANCE 8,33,03,643 LESS: OTHER ITEMS of RECEIPTS considered as PAYMENTS 43 GURUDUTT -LOAN 40,00,000 RECEIVED {Page 100 ofPB) 45 Girish Bhai -LOAN 11,00,000 RECEIVED (Page 105 of PB) 45B Pramod Babu -Loan 1,04,000 Received (Page 104 of PB) ITA No.3187/Ahd/2011 and 5 Others 37 59B Jain Saheb -Loan 50,00,000 Received (Page 186 of PB) SUB TOTAL of LOANS 1,02,04,000 57B Golden Plaza -Shop 1,14,12,000 SALE RECEIPTS (Page 103 ofPB) 58 G K Sania Land - Sale of 2,23,98,480 land receipts (Page 103 ofPB) SUB TOTAL 4,40,14,480 4,40,14,480 NET PAYMENT of INVESTMENT / EXPENDITURE 3,92,89,163
From the above table the Id AR submitted that the correct figure of investment + expenditure, excluding receipts, sale proceeds of shops and GK Saniya Land and LOAN amount, works out to only Rs 3,92,89,163/-.
The above chart is prepared from the items and entries picked up from the impounded material annexure BI-19. Each item of difference is verified and discussed with reference to the impounded annexure as under:
Page No 57B & 54B (Rs 1.14.12.000/-): The Assessing Officer had considered this item of entry as investment at TWO places in the Table No 3 on page no 36-38 of the assessment order. The appellant has contended that items are one and the same and need to be considered once only. On going through the impounded serial no 57B and 54B, it is found that the appellant has sold 18 shops in GOLDEN PLAZA. The amount mentioned marked page serial no 57B is 6 shops/33.00 and 12 Shops/ 80.81+0.31=81.12 and the total is put at 114.12. These very figures are also available on marked serial no 54B. Hence I find the contention of the appellant as correct.
The items, which are shown as RECEIPTS in the impounded annexure, had been considered as PAYMENTS is the contention of the appellant with regard to the following items of entries.
a) GURUDUTTii (LOAN a/c) Rs 40,00,000/- marked page serial no 43 (Page No 100 of PB): There is only one entry of Rs 40 00 of 24/12/08 on the receipt side of the note book. The contention of the appellant is therefore correct.
ITA No.3187/Ahd/2011 and 5 Others 38b) Girish bhai Rs 44,21,700/- marked as page serial no 45 (Page No 105 of PB): There is one entry on receipt side of 11 00 and three entries on the payment side being 23 00 (27/08/08), 7 00 (13/09/08) and 3 21700 (Int paid upto 31.12.08). The total of Receipt side + payment site works out to 44,21,700/-. Thus Rs 11 lacs is part of receipt side. The contention of the appellant is correct.
c) Pramod babu Rs 44,72,000/- marked serial no 45B (Page No 104 of PB): There are three entries on receipt side of 40 (5/08/08) + 64 (26/08/08) + 1 73 (Int 6.10.07 to 23/6/08) making a total of Rs 2.77.000/- and 6 entries on PAYMENT side 20 00 (23/06/08) + 300 (25/06/08) + 10 00 (17/07/08) + 337 (22/08/08) + 358 (26/08/08) + 200(29/08/08) = making a total of Rs 41.95.000/-. The total of Receipt side + payment site works out to 44,72,000/- which the Assessing Officer has considered as investment. Where as the amount of Rs 1,04,000/- is RECEIPT and Rs 1,73,000/- is CREDIT on a/c of Int paid. Thus Rs 1,04,000/- is RECEIPT but considered as PAYMENT. The contention of the appellant is correct.
d) Jain Saheb Rs 50,00,000/- marked serial no 59B (Page No 186 of PB):
There is only one entry of 50/00 (24/10/08) on the RECEIPT side of the note book. The amount is receipt and therefore the contention of the appellant is correct.
e) Sale of Golden Plaza Shop Rs 1,14,12.000/- marked serial no 57B (Page 1 . No 103 of PB). The PAYMENT side states 3300 (6 Shop value) and 8112 (12 Shop value- 80/81 + 0/31 donation) making a total of 114/12. This amount represents the sale value of shops which is to be recovered. Out of this amount a sum of Rs 85/03230 is mentioned on the RFECEIPT side stating total received up to 15/05/08. Thus the amount of Rs 85,03,230/- is required to be considered as RECEIPTS as against the contention of the appellant that a sum of Rs 1,14,12,000/- be treated as receipt.
f) G. K. Saniva land marked as serial no 58 (Page no 103 of PB) Rs 2,23,98,480/- is receipt side as is evident from the entries as 164/06480 received up to 15.5.08 + 50/00 19.5.08 = Total 214/06480 + 3.92 (****) + 600 23/03/09 totalling to Rs 2,23,98,480/-. The entries are receipt side and the contention of the appellant is correct.
These items have been wrongly treated as part of investment instead of receipts hence required to be reduced from the value of investment taken by the Assessing Officer. The correct value of investment + expenditure works out to Rs 3,92,89,163/-, which is less than the GROSS ON MONEY receipts, hence the source of investment + expenditure gets explained from the ON MONEY collected recorded in the same impounded annexure."
35. With the assistance of the ld.representatives, we have gone through the seized material. The stand of the Revenue is that unexplained investment plus expenditure should have been worked at ITA No.3187/Ahd/2011 and 5 Others 39 Rs.9,05,40,625/- in the Asstt.Year 2007-08 and Rs.9,45,15,643/- in the Asstt.Year 2009-10. However, a perusal of the CIT(A)'s finding extracted (supra) would indicate that figure adopted by the AO are not based on correct construction of seized material. The assessee has pointed out factual inaccuracy which has been considered by the ld.CIT(A). We have also noticed this aspect from the seized material. The assessee has pointed out that entry of Rs.1,14,12,000/- in the Asstt.Year 2009-10 has been made twice by the ld.AO in table no.3 on page 36-38 of the assessment order. This aspect has been appraised from the seized material also. The ld.CIT(A) has considered it an error at the end of the AO. No material was brought to our notice pointing out as to how the ld.CIT(A) has erred in construing this figure. Therefore, after going through the order of the ld.CIT(A), we do not see any error in it.
36. As far assessment of income from the on-money receipt is concerned, we have already adjudicated this issue in the Asstt.Year 2008-09, wherein we have upheld the finding of the ld.CIT(A) that gross-receipt of on-money cannot be taxed. Only income part embedded on this receipt is to be taxed. In view of our finding in the Asstt.Year 2008-09, we do not find any merit in other alternative arguments of the Revenue.
37. In the Asstt.Year 2009-10, Revenue has taken one more ground of appeal, whereby it has challenged deletion of Rs.5,37,50,000/- which was added by the AO with the aid of section 68 of the Income Tax Act, 1961. The assessee has received a share application money of Rs.5,37,50,000/- during the F.Y.2007-08 that is relevant to Asstt.Year 2008-09. It has allotted shares on 1.4.2008. The ld.AO treated this amount as unexplained cash credit and made addition. The ld.CIT(A) has deleted the addition on the ground that perusal of ledger account as well as bank account statement would indicate that these amounts have been received by the assessee in the accounting year relevant to ITA No.3187/Ahd/2011 and 5 Others 40 A.Y.2008-09. They cannot be taxed in the Asstt.Year 2009-10. The ld.CIT(A) has reproduced the details exhibiting the amounts received by the assessee.
38. Since this amount has not been received in this year and is not taxable in this year, therefore, the ld.CIT(A) has rightly deleted the addition. We do not find any error in this order of the ld.CIT(A). This ground of appeal is rejected.
39. The assessee did not press its cross-objections, hence, they are rejected.
40. In the result, appeals of the Revenue and the COs. of the assessee are dismissed.
Order pronounced in the Court on 17th May, 2017 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 17/05/2017