Income Tax Appellate Tribunal - Mumbai
Royal Palms (I) P.Ltd, Mumbai vs Dcit 13(3)(1), Mumbai on 22 September, 2017
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ "डी", मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL BENCH "D" MUMBAI BEFORE SHRI D.T.GARASIA, JM AND SHRI RAJESH KUMAR, AM I.T.A. No.1478/Mum/2017 (निर्धारण वर्ा / Assessment Year: 2012-13) M/s Royal Palms (I) Pvt Ltd., Income Tax Officer 13(3)(1), Royal Palm Estate, Aayakar Bhavan, Survey No.169, बनाम/ M K Road, Aarey Milk Colony, Vs. Mumbai-400020 Goregaon East, Mumbai-400065 स्थायी ऱेखा सं ./ PAN : AABCR9424R (अपीऱाथी /Appellant) : (प्रत्यथी / Respondent) अपीऱाथी की ओर से / Assessee by : Shri Haridas Bhatt प्रत्यथी की ओर से/ Revenue by : Shri V Justin सुनवाई की तारीख /Da te o f He a r in g : 7.7.2017 घोषणा की तारीख /Da te o f Pro n ou n ce me nt : 22.09.2017 आदे श / O R D E R PER RAJESH KUMAR, A. M:
The captioned is appeal by the assessee pertaining to assessment year 2012-13. The appeal is directed against the order of the CIT(A)-21, Mumbai, dated 16.1.2017 which in turn have arisen from an order passed by the Assessing Officer dated 31.3.2015 under section 143(3) of the Income Tax Act, 1961(in short 'the Act).
2. The various grounds of appeal taken by the assessee are as under :
2I.T.A. No.1478/Mum/2017 "Ground No. I: On the facts and circumstances of the case and in law the eld.CIT(A) erred in confirming the addition of Rs.5.47 crores on account of impounded file No.A-9 on the basis of the jotting on the loose paper and diary and the stamen recorded u/s 133A of the Act; Ground No.II: On the facts and circumstances of the case and in law the eld.CIT(A) erred in confirming the alleged addition of Rs.4.94 crores as unexplained cash credit on account of impounded file No.A-10, merely on the basis of statement recorded u/s 133A of the Act. Ground No.III: On the facts and circumstances of the case and in law the eld.CIT(A) erred in confirming the addition of Rs.2.53 crores on the basis of a diary A-8 without appreciating he fact that the entries does not belong to the impugned assessment year;
Ground No.IV: On the facts and circumstances of the case and in law the eld.CIT(A) erred in confirming the addition of Rs.2.88 crores on account of advances received from Golden Isle and Thai House merely on the basis of statements made during the survey;
Ground No.V: On the facts and circumstances of the case and in law the eld.CIT(A) erred in confirming the addition of Rs.7.42 crores on account of advances from other projects on the basis of derails of balance of advances as on date of survey.
Ground No.VI: On the facts and circumstances of the case and in law the ld.CIT(A) erred in confirming the addition of Rs.9.75 crores on account of advances received from ORM project without appreciating that ORM-B Project was not fully completed during the relevant year; Ground No.VII: On the facts and circumstances of the case and in law the ld.CIT(A) erred in confirming the addition of Rs.2.51 crores on account of alleged bogus purchase from Pride Steel P Ltd.
Without prejudice to above, The additions on account of alleged bogus purchase may please be limited to 12.5% of the purchases made from Price Steel P Ltd"
3. The assessee filed return of income on 30.7.2013 declaring total income of Rs.8,41,47,650/-. The return was processed under section 143(1). Thereafter the case was selected for scrutiny and notices under section 143(2) dated 3 I.T.A. No.1478/Mum/2017 3.9.20014 and under section 142(1) were issued and served upon the assessee.
Pertinent to state that a survey was conducted on the assessee in the financial year 2011-12 on 23.1.2012 during which certain documents like loose papers and diaries were found ,seized marked marked as A-6 and A-9 relating to sums received by the assessee against the sale of flats and plots to various parties during the financial year 2010-11 to 2012-13 and accordingly the assessee was called upon by the AO vide letter dated 25.2.2014 to explain the transactions found recorded in the impounded diary marked as A-6 and A-9. Further, a the statement was also recorded under section 131 of the Act during the course of survey of Shri Amir Nensey director of the assessee wherein he voluntarily offered an amount of Rs.6,13,86,090/- in three years while replying to querry no. 19, the details whereof are as under :
F. Y.2010-11 Rs.47,00,000
F. Y.2011-12 Rs.5,47,15,089
F.Y.2009-10 RS.19,71,001
Total Rs.6,13,86,090
The ld. Counsel, during the course of assessment proceedings submitted before the bench that the assessee vide letter dated 18.3.2015 clarified before the AO that the various entries as found in the A-6 & A9 were duly accounted for in the books of account by giving entry-wise details which has been incorporated in the assessment order para 5.3 as under :
4I.T.A. No.1478/Mum/2017 5.3 The AR of the assessee vide letter dated 18th March, 2015, has submitted explanation regarding the above mentioned entries/ notings, wherein he has mainly contended as under:
i) In respect of various amounts, the same are not cash receipt but are received by way of cheque and duly accounted for.
ii) In respect of two instances, sums are received in cash and duly accounted for;
iii) The entries made in page 41, 42 & 43 are actually duplication of entries made in page no.52 & 53.
iv. In respect of impounded diary A-6, it is submitted that these are not cash receipts but actually notings related to handling of cash by MD & JMD of the assessee company. Further, the same has already been added as income for A. Y. 2011-12.
v. During the survey, the disclosure of Rs.5,47,15,089/- made for A. Y. 2012-13, is out of the alleged cash receipts as per the loose paper folder A-9"
Consequently the assessee withdrew the above amount of surrender. Having briefly discussing the facts of the case, the various grounds of appeals by the revenue are disposed of as under:-
4. The issue raised in ground no. 1 is against the confirmation of addition of Rs. 5,47,15,089/- by the CIT(A) as made by the AO on the ground that the amount was surrendered by the AO during the survey in respect of entries found in the loose papers/diary.
4.1. The AO, after considering the contentions and submissions of the assessee observed that the A-6 and A-9 were found from the possession of the assessee 5 I.T.A. No.1478/Mum/2017 and the assessee has not explained the entries with reference to books of account as the onus was on the assessee to explain all these transactions. The AO rejected the explanation offered by the assessee during the assessment proceedings. Finally the AO added a sum of Rs.5,47,15,089/- to the total income of the assessee u/s 68 of the Act being unexplained cash credit on the ground that that the same has been accepted by the assessee during the course of survey while accepting the contentions of the assessee that the entries at pages 41 to 43 were actually duplication of entries made in pages no.52 and 53.
4.2. Before the ld.CIT(A), the assessee submitted that survey u/s 133A of the Act was conducted in the afternoon of 23.1.2012 and concluded at the midnight of the 24th Jan 2012. During the survey certain papers comprising loose papers and diary were found and seized. A statement of the director of the assessee Shri Amir Nensey u/s 131 of the Act was recorded in the late hours on the conclusion of survey during which the assessee voluntarily agreed to surrender some income to buy peace of mind and finally to conclude the survey. It was also contended that no cash was found from the premises surveyed except the some transactions noted in diaries which represented day to day cash transactions as well as cheques receipts undertaken in the normal course of business by the assessee. It was also submitted that during the course of survey proceedings no unaccounted cash was found in corroboration of entries in the diaries/loose papers which further reinforces the stand of the assessee. It was also stated that 6 I.T.A. No.1478/Mum/2017 a statement recorded during the survey u/s 133A of the Act has no evidentiary value unless corroborated by other evidences and therefore not sustainable in the eyes of law by relying on the decision of the apex court in the case of CIT Vs Kadar Khan & Sons(2008)300 ITR 0157(SC) . It was also submitted by the ld.AR that the addition of Rs.5,47,15,089/- has been made by the AO on the basis of the jottings on the loose papers and diary found in the survey proceedings which were either duly explained by the assessee to have been recorded in the books of accounts of the assessee during the assessment proceedings or the deal not materializing. The ld.CIT(A) during the appellate proceeding called for the remand report from the AO vide letter dated 11.5.2016 on the entries in the loose papers/diary which were not recorded in the books of account of the assessee and the AO filed the remand report vide letter dated 8.8.2016 which stands incorporated at para 4.5 of the appellate order from pages 8 to 13. The ld.
CIT(A) tabulated the explanation of the appellant offered for each and every entry in the loose papers/diary offered in the assessment proceedings and comments of the AO which has been incorporated in para 4.12 of the appellate order and is also extracted below (4.12 to 22.36 of CIT(A):
Sr Flat Client Name Amount of' Date Assessee's Explanation Comments No no/plot Cash no. Received (RS.) 1 Plot Vijay J Shah 3,25,000 The amount of Rs. Entry appears on 1OA & 325000/- was not page 42 of A-9. Bank Nalini Shah Cash receipts, it is statement and copy received by Cheque No. of sale agreement / 020845 on 20.5-2011 and registered produced.
duly recorded in our Hence claim is not
7
I.T.A. No.1478/Mum/2017
Books of Account (Copy of established
Ledger account
is enclosed
highlighting the amount
received from party by
cheque), hence we say
that this was not a cash
transaction.
2 Plot 138 Sarla Sharma 26,66,833 The amount written was Entry appears on
and Krishna an expected receivable page 42 of A-9. Copy from the party against of sale agreement/ plot, however actually registered is not received was produced to confirm Rs.39,16,833/-instead of what is being Rs. 2666833/- contended. There is and the same were duly no identity of the accounted for on 07-03- amount in loose 2011 (Copy of ledger papers and what is account is enclosed claimed as per highlighting the amount books.Hence claim is received from party not established.
cheque), hence we say that this was not a cash transaction.
3 Plot 69 Ashok Kumar 10,00,000 The amount of Rs. Entry appears on
1000000/- was not page 42 of A-9. Bank
Cash receipts, it statement and copy
is received by of sale agreement/
Cheque No. 5912080 on registered is not
20.5.2011and duly produced. Hence
recorded in our claim is not
books of established.
Account (copy of ledger
account is enclosed
highlighting the amount
received from party by
cheque), hence we say
that this was not a rash
transaction,
4 Plot Govind 20,75,000 The amount of Rs. Entry appears on
No.130 Uttam 1000000/- was not page 42 of A-9. Bank Chandani Cash receipts, it statement and copy is received by Cheque No. of sale agreement/ 066850 on 19.5-2011 and registered is not duly recorded in our produced. Hence Books of Account (Copy of claim is not Ledger account established is enclosed highlighting the amount received from party by cheque), hence we say that this was not a cash transaction.
5 Plot Ketan 40,00,000 The amount written was Entry appears on 8 I.T.A. No.1478/Mum/2017 No.186 Belsare expected cash flow from page 42 of A-9. Bank the said party, and the statement and copy same were received by of sale agreement/ Cheques registered is not No.000078,000079,00008 produced. Hence 0 and 000081 of claim is not Rs.1000000/- each established totaling each totaling to Rs.40,00,000/- and duly recorded in our books of account (copy of ledger account is enclosed highlighting the amount received from party by cheque), hence we say that this was not a cash transaction 6 Plot No. 1 Mahendra 10,00,000 The amount of Entry appears on and 2 Tools and Rs.1000000/- was not page 42 of A-9. Bank Machine cash receipt, it is statement and copy expected amount of sale agreement/ receivable and actually registered is not received by cheque no. produced. Hence 5627 on 7.5.2011 and duly claim is not recorded in our books of established account (copy of ledger account is enclosed highlighting the amount received from party by cheque), hence we say that this was not a cash transaction 7 Plot No. 1 Mahendra 10,00,000 The amount of Entry appears on and 2 Tools and Rs.1000000/- was not page 42 of A-9.Cash Machine cash receipt, it is is mentioned expected amount specifically in the receivable and actually loose paper. Bank received by cheque no. statement and copy 5627 on 7.5.2011 and duly of sale agreement/ recorded in our books of registered is not account (copy of ledger produced. Hence account is enclosed claim is not highlighting the amount established received from party by cheque), hence we say that this was not a cash transaction 8 Plot No. Vinayak 5,00,000 The amount of Entry appears on 159 Lomate Rs.500000/- was not cash page 42 of A-9. Cash receipt, it is expected is mentioned amount receivable and specifically in the actually received by loose paper. Bank cheque no. 10309 on statement and copy 2.6.2011 and duly of sale agreement/ 9 I.T.A. No.1478/Mum/2017 recorded in our books of registered is not account (copy of ledger produced. Hence account is enclosed claim is not highlighting the amount established. In fact received from party by there is another cheque), hence we say entry for cheque of that this was not a cash Rs.4,00,000/- dated transaction 23.4.2011 which is not reflected in the ledger account submitted by appellant.
9 Plot No. 1 Mahendra 10,00,000 11.6. The amount written was Entry appears on and 2 Tools and 2011 expected receivable from page 42 of A-9. Cash Machine the said party, against the is mentioned plot, however actually specifically in the received was Rs.500000/- loose paper. Bank only instead of statement and copy Rs.10,00,000/- and the of sale agreement/ same were duly registered is not accounted for 14.6.2011 produced. Hence (copy of ledger account is claim is not enclosed highlighting the established. In fact amount received from the amount received party by cheque), hence as cheque on we say that this was not 11.6.2011 for a cash Rs.5,00,000/- in the transaction loose paper does find a mention in the ledger as per appellant. It is only cash that does not find any mention and is unaccounted.
10 Plot No. Ashok Kumar 10,00,000 12.06. The amount of Entry appears on 69 2011 Rs.10,00,000/- was not page 42 of A-9. Cash cash receipt, it is is mentioned expected amount specifically in the receivable on 12.6.2011 loose paper. Bank and actually received by statement and copy cheque No.591239 on of sale agreement/ 2.9.2011 and duly registered is not recorded in our books of produced. Hence account (copy of ledger claim is not account is enclosed established.
highlighting the amount Appellant is falsely
received from party by attempting to link it
cheque), hence we say to a payment
that this was not a cash received by cheque
transaction on a later date.
11 ORM/1 Sunita 10,00,000 16.6. The amount written was Entry appears on
03/104 Rathod 2011 expected receivable page 42 of A-9. Cash against the sale of ORMB- is mentioned 103 against this we had specifically in the 10 I.T.A. No.1478/Mum/2017 only Rs.100000/- on loose paper. Bank 20.6.2011/- and duly statement and copy accounted for in our books of sale agreement/ (copy of ledger account is registered is not enclosed highlighting the produced. Hence amount received from claim is not party by cheque), hence established.
we say that this was not Appellant is falsely
a cash attempting to link it
transaction to a payment
received by cheque
of Rs.1,00,000/- is
not reflected in the
ledger copy filed.
12 Plot Balchandra 9,95,000 15.6. We had sold two plots Entry appears on
no.160/ Alwe/ 2011 bearing no.160 and 161 to page 42 of A-9. Cash 161 Harvinder thee parties for a total is mentioned Singh consideration of Rs.50 specifically in the lakhs each and we had loose paper. Copy of total amount by cheques sale agreement/ only against these plots, registered is not the amount written may produced. Even the be expected cash flow copy of ledger shown as cash till it account is not filed.
receive either by cash or Hence claim is not
by cheque. established.
13 Plot Sandeep 65,00,000 16.6. The amount written was Entry appears on
No.134A Chikhalikar 2011 negotiated total value of page 42 of A-9. Cash plot no.134A, out of that is mentioned till 31.3.2012 we had specifically in the received Rs.40,05,000/- loose paper. Copy of only and the same were sale duly accounted for in our agreement/registere books of account, no cash d is not produced.
amount had been Hence claim is not
received by us(copy of established. r copy
ledger account is enclosed filed.
showing amount received
till 31.3.2012 from party)
14 Plot Bindra 10,00,000 15.6. We had sold two plots Entry appears on
no.160/ 2011 bearing no.160 and 161 to page 42 of A-9. Cash 161 thee parties for a total is mentioned consideration of Rs.50 specifically in the lakhs each and we had loose paper. Bank total amount by cheques statement and copy only against these plots, of sale agreement/ the amount written may registered is not be expected cash flow produced. Hence shown as cash till it claim is not receive either by cash or established.
by cheque.
15 176 Aditya 30,00,000 30.7. The amount written was Entry appears on Saiprasad 2011 expected receivable on page 42 of A-9. Cash Samant 30.7..2011/- against sale is mentioned 11 I.T.A. No.1478/Mum/2017 of plot 176, however we specifically in the had actually Rs.4100000/- loose paper. The sale on 1.8.2011 by cheque paper also has an No.29096 and duly amount of accounted for in our books Rs.41,00,000/-
(copy of ledger account is mentioned in cheque
enclosed highlighting the payment on ....2011
amount received from which finds a menion
party by cheque), hence in the leder paper
we say that this was not books of appellant.
a cash Bank statement and
transaction copy of sale
agreement/
registered is not
produced. Hence
claim is not
established.
16 Plot Janvi Nitin 23,00,000 20.7. The amount was a Entry appears on
No.91 Bhosle 2011 negotiation for sale of plot page 42 of A-9. Cash no.91, and expected flow. is mentioned However, the transaction specifically in the could not be took place loose paper. Ledger with said party-Janvi Nitin account, bank Bhosle hence question of statement and copy any cash receipt from here of sale agreement/ does not arise. We further registered agreement say that plot no.91 was is not produced. The ultimately agreed to be person is not sold in the month of March produced and 2012 to Mr.Upendra Patel address is not and we had started provided. No receiving amount from contemporaneous them from March, 2012 record of onwards (copy of ledger negotiations is filed.
account showing sale of Hence claim is not
plot to Upendra Patel is established.
enclosed highlighting the
amount received from
party by cheque), hence
we say that this was not
a cash
transaction
17 Atul Garg 10,00,000 The amount of Entry appears on
Rs.10,00,000/- was not page 41 of A-9. Cash cash receipt, it is is mentioned expected amount specifically in the receivable against plot loose paper. Bank no.102 and actually statement and copy received by cheque of sale agreement/ No.RTGS on 5.5.2010 and registered is not duly recorded in our books produced. The of account (copy of ledger amount received in account is enclosed cash is not the same highlighting the amount that is received by 12 I.T.A. No.1478/Mum/2017 received from party by cheque. Hence claim cheque), hence we say is not established.
that this was not a cash transaction 18 Plot Bindra 10,00,000 2.8. We had sold two plots Entry appears on no.160/ 2011 bearing no.160 and 161 to page 41 of A-9. Cash 161 these parties for a total is mentioned consideration of Rs.50 specifically in the lakhs each and we had loose paper. Copy of total amount by cheques sale agreement/ only against these plots, registered is not the amount written may produced. Hence be expected cash flow claim is not shown as cash till it established.
received either by cash or by cheque.
19 Plot Prabha 34,00,000 28.8. We had sold two plots Entry appears on no.187 Shyam Nair 2011 bearing no.186 and 187 to page 41 of A-9. Cash (134) this party and received is mentioned initial payment of specifically in the Rs.4500000/- on loose paper.The 13.10.2009, the amount of amount mentioned Rs.34,00000/- written was as cash is very expected cash flow from different from party which till 31.3.2011 amount claimed to not received either cash or be received by by chequee. cheque. Ledger account, bank statement and copy of sale agreement/ registered is not produced. Hence claim is not established.
20 Plot Bindra 7,50,000 3.9. We had sold two plots Entry appears on no.160/ 2011 bearing no.160 and 161 to page 41 of A-9. Cash 161 these parties for a total is mentioned consideration of Rs.50 specifically in the lakhs each and we had loose paper. Bank total amount by cheques statement and copy only against these plots, of sale agreement/ the amount written may registered is not be expected cash flow produced. The shown as cash till it amount received in received either by cash or cash is not the same by cheque. that is received by cheque. Hence claim is not established.
21 Plot Bindra 10,00,000 2.8. We had sold two plots Entry appears on no.160/ 2011 bearing no.160 and 161 to page 41 of A-9. Cash 161 these parties for a total is mentioned consideration of Rs.50 specifically in the lakhs each and we had loose paper. Bank total amount by cheques statement and copy 13 I.T.A. No.1478/Mum/2017 only against these plots, of sale agreement/ the amount written may registered is not be 3.Expected cash flow produced. Hence shown as cash till it claim is not received either by cash or established.
by cheque.
22 Plot Prabha 34,00,000 28.8. We had sold two plots Entry appears on no.187 Shyam Nair 2011 bearing no.186 and 187 to page 41 of A-9. Cash (134) this party and received is mentioned initial payment of specifically in the Rs.4500000/-on loose paper. The 13.10.2009, the amount of amount mentioned Rs.34,00000/- written was as cash is very expected cash flow from different from party which till 31.3.2011 amount claimed to not received either cash or be received by by chequee. cheque. Ledger account, bank statement and copy of sale agreement/ registered is not produced. Hence claim is not established.
23 Plot Bindra 7,50,000 3.9. We had sold two plots Entry appears on no.160/ 2011 bearing no.160 and 161 to page 41 of A-9. Cash 161 these parties for a total is mentioned consideration of Rs.50 specifically in the lakhs each and we had loose paper. Bank total amount by cheques statement and copy only against these plots, of sale agreement/ the amount written may registered is not be expected cash flow produced. Hence shown as cash till it claim is not received either by cash or established.
by cheque.
24 Plot No. Vinayak 20,00,000 3.9.2011 We had sold plot bearing Entry appears on 159 Lomate no.159 to this party for a page 41 of A-9. Cash total consideration of is mentioned Rs.51 lakhs each and we specifically in the have received total loose paper. Bank amount by cheques only statement and copy against this plot, the of sale agreement/ amount written may be registered is not expected cash flow shown produced. Hence as cash till it received claim is not either by cash or by established.
cheque 25 Plot Bindra 30,80,000 9.9. We had sold two plots Entry appears on no.160/ 2011 bearing no.160 and 161 to page 41 of A-9. Cash 161 these parties for a total is mentioned consideration of Rs.50 specifically in the lakhs each and we had loose paper. Bank total amount by cheques statement and copy 14 I.T.A. No.1478/Mum/2017 only against these plots, of sale agreement/ the amount written may registered is not be expected cash flow produced. Hence shown as cash till it claim is not received either by cash or established.
by cheque.
26 Plot Rahul Paralia 25,00,000 20.9. The amount written was Entry appears on no.105 2011 expected receivable on page 41 of A-9. Cash 30.7.2011/- against sale of is mentioned plot 176, however we had specifically in the actually Rs.2000000/- on loose paper. The 26.11.2011 by cheque amount mentioned No.003161 and 003162 as cash is very and duly accounted for in different from our books (copy of ledger amount claimed to account is enclosed be received by highlighting the amount cheque. The bank received from party by statement and copy cheque), hence we say of sale agreement/ that this was not a cash registered is not transaction produced. Hence claim is not established.
27 Plot Nitin Bhosale 86,00,000 19.9. This amount of Entry appears on no.14/15 2011 Rs.86,00,000/- must be page 40 of A-9. Cash commer- price negotiated for plots is mentioned cial to party on 19.9.2011. specifically in the However, nothing was loose paper. The received by us till 2011. In amount mentioned the January 2012 onwards as cash is very we had started received different from he amount an till March amount claimed to 2012 total receipts was be received by Rs.6000000/- which is duly cheque. The bank accounted for in our books statement and copy (copy of ledger account is of sale agreement/ enclosed highlighting the registered is not amount received from produced. Hence party by cheque), hence claim is not we say that this was not established.
a cash
transaction.
28 Plot Zeenat Banu 2,00,000 28.9. This cash amount of Entry appears on
no.119 2011 Rs.2,00,000/- received by page 40 of A-9. Cash us against sale of plot is mentioned no.119 and duly recorded specifically in the in the books of account on loose paper. The 29.9.2011 (copy of ledger bank statement and reflecting cash receipt and copy of sale accounted for enclosed.y agreement/ cheque), hence we say registered is not that this was not a cash produced. It is not transaction. proved that the entire consideration 15 I.T.A. No.1478/Mum/2017 including amount received in cash is reflected as income out of sale proceeds.
Hence claim is not established.
29 Plot Jayesh Saini 9,23,000 11.10. The amount was a token Entry appears on no.148/ 2011 to be received on page 40 of A-9. Cash 149 negotiation for sale of plot is mentioned no.148/149 and expected specifically in the flow. However the loose paper. The tansactin could not take person is not place with said party- produced and the Jayesh Saini hence address is also not question of any cash mentioned. No receipt from him does not contemporaneous arise. record is filed of any We further ay that plot such claimed no.148 was ultimately negotiations. Hence agreed to be sold in he claim is not month of May 2011 to Mr. established.
Kamal Ramesh Panchal and we had started received amount from them from May, 2011 onward (copy of ledger account sown sale of plot to Kamal Ramesh Panchal is enclosed highlighting the amount received from party by cheque) hence we say that this was not a cash transaction.
30 Plot No. Vinayak 10,00,000 25.10. We had sold plot bearing Entry appears on 159 Lomate 2011 no.159 to this party we page 40 of A-9. Cash had received by cheques is mentioned only against this plot, the specifically in the amount written may be loose paper. The expected cash flow shown amount mentioned is as cash till it received not same as that either by cash or by received by cheque.
cheque. Bank statement and
copy of sale
agreement/
registered is not
produced. Hence
claim is not
established.
31 Plot No. Vijay J Shah 9,00,000 26.10. We had sold plot bearing Entry appears on
10A and Nalini 2011 no.10A to this party we page 40 of A-9. Cash Shah had received amount by is mentioned cheques only against said specifically in the plot, the amount written loose paper. The 16 I.T.A. No.1478/Mum/2017 may be expected cash amount mentioned is flow shown as cash till it not same as that received either by cash or received by cheque.
cheque. Bank statement and
copy of sale
agreement/
registered is not
produced. Hence
claim is not
established.
Total 5,47,15,089
4.3. After considering, the contentions and submissions of the assessee the CIT(A) concluded that some names were appearing repeatedly such as Bindra, Vijay Shah and Lomate in loose papers and came to the conclusion that transactions reflected in the loose papers were carried out chronologically and these transactions were not shown in the books of account as narrated above and according upheld the addition made by the AO by dismissing the ground raised by the assessee. Aggrieved by the order of CIT(A) , the assessee is in appeal before us.
4.4. The ld.AR vehemently submitted that despite furnishing of all the necessary documents and evidences explaining the entries in the loose papers and diary found during survey as duly accounted for in the books of accounts, the ld.
CIT(A) wrongly upheld the addition of Rs.5.47 crores. The ld. AR took us through the chart prepared and submitted by the assessee explaining the entries as to how these were accounted for by the assessee on various dates before the ld.CIT(A) which has been incorporated in para 4.12 of the appellate order. The ld. AR argued that since the assessee has explained the entries in cash and by 17 I.T.A. No.1478/Mum/2017 cheques duly recorded in the books of accounts by stating that in some cases, the amounts were wrongly stated to be received in cash whereas as a matter of fact these were received through cheques and have been duly recorded in the books of account and adequately explained before the authorities below. The ld. AR further submitted that comments as given by First Appellate Authority in the table appended in para 4.12 were never discussed nor any documentary evidences were called for by the ld.CIT(A) during the course of appellate proceedings whereas the assessee furnished the necessary books of accounts and also showed the entries duly recorded in the books of accounts. While taking us through each and every entry found in the seized materials and explanation offered, the ld AR also pointed out that some were even duplication of entries on the basis of which the addition of Rs. 5.45 Cr was calculated and made by specifically pointing out to those entries. The AR contended that the entire amount of addition of Rs. 5.47 Cr was based upon the wrong appreciation of facts and also on whims, fancies and presumptions of the lower authorities. Finally the ld AR prayed that the addition of Rs. 5.47 Cr should be deleted as the assessee has duly explained all the entries in the impounded papers as duly recorded in the books of accounts.
4.5. The ld. DR heavily relied upon the orders of authorities below and submitted that the explanation submitted by the assessee was mere after thought and therefore the order of the CIT(A) be confirmed as the additions were 18 I.T.A. No.1478/Mum/2017 confirmed by the CIT(A) after the assessee failed offer any valid explanations about entries/notings in the loose papers.
4.6. We have carefully considered the rival contentions and perused the relevant materials placed before us including the orders of authorities below. Upon perusal of para 4.12 of the appellate order in which the explanations by the assessee of various entries in the A-6 and A-9 vis a vis comments have been appended , we observe that in some cases the assessee has exactly explained the notings/entries to be duly accounted for in the books of accounts and in some case the deals were not matured. We also find that some duplication of entries was also there resulting into double additions of the same entry and of course in some cases the explanation offered by the assessee was not satisfactory and convincing. After carefully examining and analyzing the entries found in the loose papers , we observe that amounts/entries at sr. no. 1, 2, 3, 4, 5, 6,7,8,9,10, 11, 13, 16, 17, 27,28 and 29 of the table reproduced in para 4.2 supra were explained by the assessee to have been duly accounted for in the books of accounts and therefore we are not in agreement with the findings of ld CIT(A). Amounts/entries at sr no 18 and 21, sr no. 19 and 22 & sr no 20 and 23 are duplicate and has resulted in double addition of the same enter/amount. So we are not in agreement with the ld CIT(A) that all the notings/entries in the impounded diaries were not accounted for in the books of the assessee. In some cases appearing at sr no. 12, 14,15,18,19,20, 24,25,26,30 and 31 the assessee's explanation that these were 19 I.T.A. No.1478/Mum/2017 expected cash flows from the persons whose names were mentioned across the said notings seemed to be not tenable at the most. Therefore, the entries as stated above have been explained by furnishing the bank statement, copy of ledger account, cheque No. etc and therefore, in view of this factual position, the addition as sustained by the ld.CIT(A) of Rs.5.47 crores is not correct and has to be restricted to the unaccounted entries in the diaries and loose papers found during the course of survey as not explained or explanation was not convincing , the additions to that extent needs to be sustained. After examining the records, arguments of the counsel we find that the following entries remained unexplained as under:
Plot no.160/169 Balchandra Alwe/ Rs.9.95 lakhs Harvinder Singh Plot No.160/161 Bindra 15.6.2011 Rs.10 lakhs Plot No.176 Aditya Saiprasad Samant 30.7.2011 Rs.30 Lakhs Plot No.160 Bindra 2.8.2011 Rs.10 lakhs Plot No.187/134 Prabha Shyam Nair 28.8.11 Rs.34 lakhs Plot No.160/161 Bindra 3.9.2011 Rs.7.5 lakhs Plot no.159 Vinay Lomte 3.9.2011 Rs.50 lakhs plot No.160/161 Bindra 9.9.2011 Rs.30.80 lakhs Plot no.105 Rahul Paralia 20.9.2011 Rs.25 lakhs Plot no.159 Vinay Lomte 25.10.2011 Rs.10 lakhs Plot no.10A Vinay Shah and Nalini Rs.9 lakhs Shah26.10.2011 226.25 lacs Therefore, considering the facts and observations as made hereinabove, we direct the AO to delete the addition of Rs 320.90 lacs whereas the addition to the 20 I.T.A. No.1478/Mum/2017 tune of Rs 226.25 Lacs is sustained and affirmed. Accordingly the ground raised by the assessee is partly allowed.
5. Ground No.II is in respect of confirmation of addition of Rs.4.94 crores by CIT(A) as made by the AO by extrapolating and estimating receipts from 8 plots on the ground that these were sold during the year on the basis of statement of the assessee and a agreement found in respect of one plot no 58 during the survey.
5.1. Facts of the case in brief are that during the year the assessee has 8 plots.
During the year the assessee entered into an agreement to sell with Shri Himmatbhai for sale of plot no 58 for a consideration of Rs. 45,00,000/-however the said plot was stated to be sold at Rs. 1,11,00,000/- in the loose papers found during the survey. According to the AO the assessee received Rs. 66,00,000/-
over above the agreement price. Out of the above 8 plots , the assessee showed the sale of 3 plots in the AY 2013-14 and remaining 5 were still unsold till 31.3.2016. However, on the basis of said agreement the AO concluded that the assessee has sold these plots at lower price than the fair market value and cash was received over and above the value. The assessee in response to query no.21 replied that plot of Shri Himmatbai A Patel was sold for a total consideration of Rs.1,11,00,000/- and the agreement was made only for Rs.45 lakhs. The AO, on the basis of said facts, put a query to the assessee that in view of the suppression of the sale consideration of plot to the extent of 60% and the assessee offered 21 I.T.A. No.1478/Mum/2017 Rs.4.28 crores + Rs.66 lakhs totaling to Rs.4.94 crores as additional income on account of sale of 8 plots. However, the assessee by a letter dated 18.3.2015 submitted before the AO that in respect of Shri Himmatbai A Patel the actual consideration was Rs.88,25,000/- and not Rs.1,11,00,000/- and the amount was received was Rs.45 lakhs during the year which was duly reflected in the books of account. The AO also required the assessee to produce agreement in respect of 7 plots sold to various parties which were not furnished by the assessee.
Finally, the AO added a sum of Rs.4.94 crores to the income of the assessee under section 68 of the Act by estimating the total consideration received for the 7 remaining plot. The AO came to the conclusion on the basis of some impounded papers during the course of survey that the assessee has sold plots to various parties at lower value than the FMV and has received cash over and above the agreement value. Accordingly, the AR was asked vide letter dated 25/2/2014 to explain the transaction found in the impounded file A-10. The query no.21 and answer thereto and question no.23 and answer thereto are reproduced at page 10 of the assessment order :-
Q.21: Please refer to page No. 9 of file No.A-10 wherein for sale of plot no.58 to one Shri Himmatbai A. Patel for showing cost of Rs.1, 11,00,000/- is mentioned. In this regard, I am showing you the page No. 210 of the said file wherein agreement for plot sold to Shri Himmatbai A. Patel shows sale value of Rs.45 lakhs. Please explain this variation between cost shown at page No.9 and at page No.21O?
Ans: The agreement value for plot sold to Shri Himmatbai A.Patel is Rs. 45, 00, 000/ as against which payment received from Shri Himmatbai A. Patel is Rs.1,11,00,000/- the difference of Rs.66,00,000/- is the Patel in cash 22 I.T.A. No.1478/Mum/2017 which is over and above the sale value reflected in the books of the company i.e. RPIPL.
Q.23. Considering your aforementioned answer regarding suppression of 60% of sales proceeds from plots, the total amount of sales which is no accounted in your books of accounts on account of transactions mentioned at page No.9 of file No.A-9 comes to Rs.4.28 crores excluding the suppression on the sale of plot to Shri Himmaibai A. Pate1, which was separately quantified in question No.19. What would you have to say about it?
Ans: I voluntarily offer an amount of Rs.4.28 crores Plus Rs.66,00,000 totaling Rs.4.94 crores as my additional income by way of sale of plots received in cash over and above the sale reflected in company's books of accounts for AY2012-13"
(i) In respect of sale made to Himmatbhai, it is submitted that Actual sale consideration was Rs.88,25,000/- and not Rs.1,11,00,000/-. Amount received as on date of survey was Rs.45,00,000/-.
ii. It has received Rs.45,00,000/- till that time, which is duly reflected in its books of account and which is only 25% of so called agreed amount of RS.88,25,000/-.
iii. In respect of other parties, no explanation has been offered.
Finally, the AO not accepting the contention and submissions of the assessee came to the conclusion that actual receipt of one plot was Rs. 1,11,00,000/-and not Rs. 88,25,000/-. Out of which Rs.45,00,000/- was stated to be received and were accounted for in the books of accounts and finally added an amount of Rs.4.94 crores under section 68 as unexplained cash credit on account of sale consideration received by the assessee over and above sale consideration of plots.
23I.T.A. No.1478/Mum/2017
6. In the appellate proceedings, before the ld.CIT(A), the ld.AR submitted that the addition could not be made on the basis of statement recorded u/s 131 of the Act as the same has no evidentiary value. The ld. AR further submitted that the addition was based on surmises and conjectures that all the plots were sold during the year and cash element involved in the same transaction was also received was factually incorrect as by the end of the financial year only one plot was sold which was handed over to the buyer in the next year and therefore the addition was wrong and contrary to facts on record. The ld. AR submitted before the appellate authority. Finally, the ld. CIT(A) upheld the addition vide para 5.3 to 5.7 of the appellate order:
"5.3. I have considered the facts on record and contentions of the appellant carefully. It is seen that in the statement recorded u/s 131 of Shri Amir Nensey, Director and promoter of the appellant company; dated 24.01.2012, in the course of survey action u/s.133A, in answer questions Q. No. 21 to 23 the answers were as follows :-
Q.21: Please refer to page No. 9 of file No.A-10 wherein for sale of plot no.58 to one Shri Himmatbai A. Patel for showing cost of Rs.1, 11,00,000/- is mentioned. In this regard, I am showing you the page No. 210 of the said file wherein agreement for plot sold to Shri Himmatbai A. Patel shows sale value of Rs.45 lakhs. Please explain this variation between cost shown at page No.9 and at page No.21O?
Ans: The agreement value for plot sold to Shri Himmatbai A.Patel is Rs. 45, 00, 000/ as against which payment received from Shri Himmatbai A. Patel is Rs.1,11,00,000/- the difference of Rs.66,00,000/- is the Patel in cash which is over and above the sale value reflected in the books of the company i.e. RPIPL.
Q.22 From the above, it is seen that nearly 60% of the sale proceeds from the sale of plot no.58 is received in cash and not accounted as part of your sales. From the above, it is seen that 60% of your sales 24 I.T.A. No.1478/Mum/2017 from various plots mentioned at page no.9 of file No.A-9 is suppressed. Please explain?
Ans: I confirm that in the transactions regarding sale of plot mentioned at page 9 of file No.A-9, 60% of the total cost is received in cash over and above the sales figure of the said plots as reflected in my books of accounts.
Q.23. Considering your aforementioned answer regarding suppression of 60% of sales proceeds from plots, the total amount of sales which is no accounted in your books of accounts on account of transactions mentioned at page No.9 of file No.A-9 comes to Rs.4.28 crores excluding the suppression on the sale of plot to Shri Himmaibai A. Pate1, which was separately quantified in question No.19. What would you have to say about it?
Ans: I voluntarily offer an amount of Rs.4.28 crores Plus Rs.66,00,000 totaling Rs.4.94 crores as my additional income by way of sale of plots received in cash over and above the sale reflected in company's books of accounts for AY2012-13"
5.4 Perusal of the above extract of statement of Shri Amir Nensey shows that there were advances of cash received out of books specifically in the case of Shri Himmatbai A Patel. Shri Nensey, Director also admitted that 60% of the amount is received in cash over and above the sales figure of the said plots as reflected in books of accounts. Thus, an amount of Rs.4.28 crores was offered as additional income by way of sale of plots received in cash over and above sales reflected I books of accounts for AY 2012-13 5.5. Though it is contended that adequate opportunity was not granted in assessment proceedings, I find that there is nothing additional filed or stated which was not there before the assessing officer.
5.6. It is seen that on page 9 of A-10, the details of plots, name of customers, the actual value of sale and the amount received is mentioned. For instance for Plot 58 of area 2755 sq. ft. for client Himmatbhai K Patel, the sales value (referred to as total cost) is Rs 1,11,00,000 against which Rs 2776000 is received and is stated to be 25 % recvd. Thus the amount shown as received is actually 25% of the sales value and thus the actual 25 I.T.A. No.1478/Mum/2017 sale value is authenticated. Identical is the fact in respect of Plot 57 of area 2755 sq. ft. for client Kailashben V. Patel, the sales value (referred to as total cost) is Rs 1,11,00,000 against which Rs 2776000 is received and is stated to be 25 % recvd. At pages 89 to 114 of A-10, is the agreement for sale for Plot 57. On page 113 which is. receipt for stamp duty, the agreement value is mentioned as R~ 45,00,000 whereas the fair market value is Rs 87,04,000/ - Thus clearly the agreement is shown at lower value of Rs 45,00,000 than the real value of Rs 111,00,000/- On page 46 of A 10 is the ledger account in respect of Kailashben V Patel which shows the sale of plot as Rs 45,00,000 and is identical to the ledger account in case of Himmatbhai K Patel at page 29 of A 10. The sale agreement in respect of Plot 58 is at pages 189 to 214. Here also the agreement vales is Rs.45,00,000 and market value of stamp duty purposes is Rs 87,04,000/- Thus the suppression on receipts on account of sale is clear. The cash receipt is not accounted in regular books. Agreement value t Rs 45 lakhs is 40% of the real sale value. of Rs 111,00,000/- The balance 60% is obviously received in cash. It is standard practice to collect the cash portion upfront before any booking is made and agreement is entered into. Page 9 of A 10 gives list of parties from whom consideration is received. So obviously the cash was received. Without producing the parties and furnishing complete details, the appellant cannot claim that the sale did not take place .
5.7 The addition made is therefore upheld and ground of appeal no.II is dismissed."
7. The ld. AR submitted that none of the plots was sold and registered during the year. The plots no. 57, 58 and 59 were sold in the assessment year 2013-14 and were duly shown in the return of income accordingly. Therefore, the addition of Rs.4.94 crores made by the AO on the basis of admission by the assessee during the course of survey proceedings was wrong and against the facts of the case. The ld counsel of the assessee contended that if the addition was affirmed the same would result into double taxation. The ld. CIT(A) also failed to appreciate the fact that the addition based upon the estimation and extrapolation 26 I.T.A. No.1478/Mum/2017 only. The ld.AR submitted that the plot no.56, 57 and 58 were sold in the next financial year whereas remaining five plots remained unsold till 31.3.2016 and only advances taken as token money from the buyers. The ld.AR also submitted that the AO, on its own imagined that there were two parties in the impounded papers whereas only one agreement was found in the survey. However, no query was ever put during the assessment proceedings by the AO qua these parties.
The ld. AR further stated that the income could not be assessed on the basis of extrapollation, surmises, conjectures and premises specifically when there were no sale of any of the plots during the year and the plots remained unsold.
Therefore, the ld.AR submitted that the addition made by the AO on this account may be deleted.
8. The ld.DR, on the other hand , reiterated the facts as narrated before the lower authorities and heavily relied on the orders of authorities below by submitting that the assessee himself during the course of survey proceedings admitted the addition and accordingly addition was made by the AO and upheld by the ld.CIT(A). The ld. DR, further, controverting the arguments of the ld.AR submitted that the assessee has not explained before the AO that the position of plots sold and therefore the AO has to estimate the income from these plots.
Finally the ld.DR prayed before the Bench that the order of ld.CIT(A) be upheld.
9. We have carefully considered the rival submissions, perused the material placed before us including the impugned orders on the issue. We find that during 27 I.T.A. No.1478/Mum/2017 the course of survey the assessee admitted the addition to the tune of Rs.4.94 crores on account of 8 plots, whereas in the subsequent correspondence to the AO, the ld.AR brought to the notice of the AO that during only one plot was agreed to be sold during the year and the two were sold in the next year and remaining 5 plots were unsold even till 31.3.2016. The income of the assessee has to be assessed on the basis of actual sale when the plots handed over to the buyer and sales consideration received or there is part performance as contemplated u/s 53A of the Transfer of Property Act and not on hypothesis and extrapolation basis or merely on the basis of any admission by the assessee during survey especially when the same stands retracted afterwards. We are therefore of the view that the addition of Rs. 4.94 Cr can not be sustained when the assessee has not sold the plots during the year. However the claim of the assessee that it has shown the sale of 3 plots no 57,58 & 59 in the AY 2013-14 needs verification at the level of the AO. As regards the cash received by the assessee over and above the agreement value , we find that during the course of survey only one agreement in respect of Shri Himmatbhai A. Patel was found recorded in A-10 and therefore the addition has to be restricted to Rs.
66,00,000/- which was also partly denied by the assessee vide letter dated 18.3.2015. Since the said plot no 58 has been shown as sold in AY 2013-14 the addition of Rs.66.00,000/- should be made in the AY 2013-14 only. In view of the facts and our observations as stated above, the addition of Rs. 4.94 Cr is directed 28 I.T.A. No.1478/Mum/2017 to be deleted. Accordingly we restore the issue back to the file of the AO to verify the fact that the assessee has shown the sale of 3 plots in assessment year 2013- 14 by setting aside the order of CIT(A) on this issue and if so AO is directed to make the addition of Rs. 66,00,000/- in respect of plot no 58 in AY 2013-14.
Accordingly we restore the issue back to the file of the AO to be decided according to our observations made hereinabove. The ground allowed for statistical purposes.
10. The issue raised in grounds of appeal no.III is against the upholding the addition of Rs.2.53 crores by ld.CIT(A) as made by the AO on the basis of diary no.8 seized during the course of survey operation.
11. The facts in brief are that a diary no A-8 was found during the course of survey proceedings which contained entries and notings relating to AY 2010-11 and 2011-12. In the said diary the entries relating to AY 2010-11 were Rs.
37,17,056/- whereas the notings relating to 2011-12 were Rs. 6,17,52,284/-. In AY 2010-11 ,Rs. 21,66,242/- was added to the income of the assessee on the basis of peak theory after examining all the notings/entries of 37,17,0596. In AY 2011-12 an addition was made of Rs. 4,80,43,104/- after making allowance of payments made to MD and JMD after examining the notings in respect of amount of 6,17,52,284/-. Thus the additions were made in the respective years based on these entries and the matter attained finality. However the AO on the basis of 29 I.T.A. No.1478/Mum/2017 statement of the assessee recorded during survey made the addition of Rs.
2,53,34,950/- by subtracting the additions of Rs. 21,66,242/- made in AY 2010-11 & Rs. 4,80,43,104/- made in AY 2011-12 from Rs. 7,55,44,296/- by brushing aside the contentions and submissions of the assessee.
12. In the Appellate proceedings before the CIT(A) , the ground challenging the addition has been dismissed by the CIT(A) after rejecting the various arguments raised by the ld AR of the assessee by observing and holding as under:-
"I have considered the facts on records and submissions of the appellate carefully.The appellant has only stated that amounts in respect of A-6 and A-8 were offered to tax in the earlier years AY 2010-11 and 2011-12. No reconciliation of the amounts of receipts totaling to Rs. 7,55,44,296 has been furnished. It is therefore not clear where and how the balance of Rs. 2,53,34,950/- has been considered for taxation in the earlier years. After all, Mr Nensey offered it as income in AY and as per the appellant , it has been assessed in the earlier years. Even if it were to be considered that addition can not be made in AY 2012-13, the same may have to be assessed in earlier year, if not assessed by reason of error or mistake. The assessing officer is therefore directed to verify this aspect and ensure that the correct amount is assessed in the appropriate year. For technical purposes the ground III is dismissed"
13. The ld AR vehemently submitted before us that the entries/notings were related to AY 2010-11 & 2011-12 and were dealt with in the respective years after examining the entries vis a vis the contentions of the assessee. The ld. AR submitted that in the assessment year 2010-11 the entry was of Rs.37,17,056/-
and the addition was made of Rs.21,66,242/- on the basis of peak theory so the issue of entries of Rs. 37,17,056/- were settled. Similarly in the assessment year 30 I.T.A. No.1478/Mum/2017 2011-12 out of entries of Rs.6,17,52,284/- , an addition of Rs.4,80,43,104/- was made after reducing the payments made to Managing Director and Joint Managing Director and thus, the income on account of entries in the diary stands fully offered to tax in the said year.The ld AR argued that after examining all these entries ,the additions which were to be made were actually added to the income of the assessee by giving reasons for that and thus stands assessed in the earlier years. Whereas, the AO wrongly totaled up the entries relating to two years i.e assessment years 2010-11 and 2011-12 at Rs.7,55,44,296/- and after reducing the amounts assessed in the assessment year 2010-11 of Rs.21,66,242/- and in the assessment year 2011-12 Rs.4,80,43,104/-, added the difference of Rs.2,53,34,950/- in the current year on presumptions and surmises that same was to be assessed in the current year. The ld. AR contended that in the assessment year 2010-11 out of the diary entries an amount of Rs.37,17,056/- , a sum of Rs.21,46,244/- was added after making necessary adjustments in the assessment year 2011-12 out of diary entries and in AY 2011- 12 out of the entries of Rs. 6,17,52,284/- an amount of Rs.4,80,43,104/- was added after making the deductions/allowance qua payments to Managing Director and Joint Managing Director. The ld. AR contended that this has resulted in income being assessed twice and therefore should be deleted as the ld.CIT(A) has wrongly upheld the order of the AO on this point on the 31 I.T.A. No.1478/Mum/2017 presumption and surmises by dismissing the ground instead of giving a clearcut findings on the issue.
14. The ld. DR on the other hand relied on the orders of authorities below.
15. Having perused the material on record and considering the contentions put forth by the rival parties, we find that the amount of Rs.37,17,056/- and Rs.6,17,52,284 stands assessed in AY 2010-11 and 2011-12 respectively as these entries pertained to these years after making necessary adjustments and allowances at the time of assessments of the respective years. In our opinion, the addition of Rs.2,53,34,950/- is not justified at all as the AO has just reduced the amounts in the diary that too relating to AY 2010-11 and 2011-12 from Rs.7,55,44,296/- and added the difference in the current year on the presumption basis. Besides , there were some calculations mistakes also in arriving at the amount of addition made by the AO such as total of all entries in diary pertaining to both the assessment years i.e 2010-11 and AY 2011-12 comes to Rs.6,54,69,340/- and not Rs.75,544,296/- as has been done by the AO. From the records before us we observe that entries in both the earlier years were explained and additions were made accordingly in those respective years and therefore the order of CIT(A) is not correct in just giving a direction to the AO that the addition has to be made in either of years when the facts are clear from the records that the incomes were assessed in earlier years. In view of the facts narrated hereinabove and oour observations , we set aside the order of CIT(A) on 32 I.T.A. No.1478/Mum/2017 this issue and direct the AO to delete the addition of Rs.2,53,34,950/- . The ground is allowed.
16. The issue challenged by the assessee in ground no IV, V and V are against the confirmation of additions on account of advances standing in the books of the assessee of Rs.2,88,49,438/- in respect of Golden Isle Thai House, Rs.
7,42,51,249/- for other projects and Rs. 9,75,32,090/- in respect of ORM projects which were added to the income of the assessee in complete disregard and violation of the method of accounting (percentage completion method)followed by the assessee.
17. The facts in brief are that during the course of survey , it was observed by the survey team that the assessee was having advances received against various projects as appearing in the books of the assessee. Accordingly to the assessee , these advances were already subjected to tax as the same were offered to the tax in the earlier years on the basis of percentage completion method. However the AO added the same to the income of the assessee on the ground that these are being shown as advances received from the customers under the head other liabilities and has not filed any reconciliation.
18. The ld CIT(A) also dismissed the appeal of the assessee by rejecting the contentions and submissions of the assessee that the same stands assessed to tax in the earlier years as per percentage completion method by observing and holding as under (7.3 to 7.6, 8.3 to 8.5 and 9.4 to 9.6 CIT(A):-
33I.T.A. No.1478/Mum/2017 "7.3. In the appellate proceeding, it was submitted that the income was already offered for tax in financial statement and that no addition can be made only on the basis advance receipt..
7.4 . On being remanded to the Assessing Officer in his report, the Assessing Officer- merely reproduce the. assessment order and merely stated that addition of Rs.2,88,49,438/- has been correctly made as projects are completed.
7.5. In the appellate proceedings, the Ld AR was asked to furnish the profit working on the various projects clearly showing year wise profits offered to tax, the sales value as per bookings, receipts from customers and the amount shown as advances from customers. This was to be reconciled with the audited profit and loss accounts for each year. This was called at hearing held on 9.9.2016. This was called for to verify the contention of the appellant that income had already been offered earlier.
However, despite subsequent opportunities, adjournments were sought on 5.10.16 and 4.11.16 but no such workings were filed.
7.6. It is an admitted fact that the Shri Nensey accepted that the income in respect of advances shown for the two completed projects Thai House and Golden Isle projects had not been offered and were to form part of returned income for AY 2012-13. On failure of offering the same, and in light of the failure on the part of appellant to substantiate its contention made in the appellate proceedings, no relief can be given.
7.7. The addition made is therefore upheld and ground of appeal no IV is dismissed.
8.3. I find that this issue is similar to the preceding ground IV in respect of Thai House and Golden Isle projects. In the appellate proceedings, the Ld AR was asked to furnish the profit working on the various projects clearly showing year wise profits offered to tax, the sales value as per bookings, receipts from customers and the amount shown as advances from customers. This was to be reconciled with the audited profit and loss accounts for each year. This was called at hearing held on 9.9.2016. This was called for to verify the contention of the appellant that income had already been offered earlier. However, despite subsequent opportunities, adjournments were sought on 5.10.16 and 4.11.16 but no such workings were filed.
34I.T.A. No.1478/Mum/2017 8.4. It is an admitted fact that the Shri Nensey accepted that the income in respect of advances shown for the other completed projects had not been offered and were to form part of returned income for AY 2012-13. On failure of offering the same, and in light of the failure on the part of appellant to substantiate its contention made in the appellate proceedings, no relief can be given.
8.5. The addition made is therefore upheld and ground of appeal no V is dismissed.
9.4. In the appellate proceeding, it was submitted that the assessee consistently following its method of accounting for recognizing revenue year after year on basis of project completion, however, the assessee offers on percentage basis certain profits of ongoing projects which is yet to be completed. Additions have been made without any evidences or proper reasoning.
9.5. I have considered the submissions. As already noted and mentioned earlier, the appellant had been asked to furnish details project wise of the sales booked. amount of advances received, completion of the respective projects, amounts offered as income reconciled with the audited accounts for each year. This was not furnished. Thus, the appellant has not been able to substantiate its contentions.
9.6. The addition made is therefore upheld and ground of appeal no VI is dismissed"
19. We have heard the rival submissions and perused the materials on records along with the impugned order. With regard to the grounds of appeal No.IV,V, and VI, the ld.AR submitted before us that the assessee was following the system of percentage completion method and has been offering to tax the income from the ongoing projects at the rate of 10% of the total addition/accretion in the work-in-progress in each and every year. The ld. AR contended that in every year whatever work was done was offered to tax at the rate of 10% and therefore in the year of sale/completion of entire project, the profit was finally 35 I.T.A. No.1478/Mum/2017 adjusted which could be more or less than the percentage of 10% declared in the earlier years. The ld. AR submitted that the system of accounting has been accepted by the department in the earlier years and also in the current year and even the AO during the course of assessment proceedings allowed the credit of profit already declared by the assessee. The said facts has been accepted by the revenue authorities also while making the addition of Rs. Rs.2,88,49,438/-. The said amount of addition has been calculated by the AO by deducting a sum of Rs.1,23,29,645/- which represented the sales of Thai Vila and Rs.1,60,44,734/- the sale from Golden Isle project from Rs.5,72,23,817/- which represented the total amount of advances received from the said projects on the belief that profit was declared in earlier years. The additions made, therefore, amounting to Rs.2,88,49,438/- in respect of advances received from Golden Isle and Thai House, Rs.7,42,51,249/- on account of advances from other projects and Rs.9,75,32,090/- towards advances received from ORM projects were totally wrong and against the system of accounting followed by the assessee and has resulted into double taxation. The ld. AR submitted that once the department accepted the method of completion to assess the profit of assessee, the advances received by the assessee in respect of various projects could not be assessed as this would amount to double taxation of same income and in violation of principle of method of accounting regularly followed and accepted by the department. We also note that Rs.2,88,49,438/- related to the Golden Isle 36 I.T.A. No.1478/Mum/2017 and Thai House project which was completed during the year and offered to tax at the end of the year. Similarly, the advance of Rs.7,44,40,249/- of advances received from other projects and Rs.9,75,74,090/- which standing on the date of survey, the assessee offered only the income of percentage completion method by applying the same accretion in work-in-progress and therefore conclusion drawn by the ld.CIT(A) was wrong and against the facts of the case as it is adequately clear from the facts on records all the work done on various projects is offered at the rate of 10% in every year with final adjustment in the year of completion. We, therefore, set aside the order of ld.CIT(A) and direct the AO to delete the additions of Rs. 2,88,49,438/-, Rs.7,42,51,249/- and Rs. 9,75,32,090/-. The ground no IV, V VI are allowed.
20. The issue raised in Grounds of appeal No.VII is with regard to confirmation of addition of Rs.2,51,86,010/- on account of bogus purchases from Pride Steel P Ltd.
21. Having heard, the ld. counsel of the assessee and the ld.DR and on perusal of the record placed before us including the impugned order, we find that the AO has made disallowance of Rs.2,51,86,010/- on the ground that notice u/s 133(6) of the Act sent to the parties could not be served and the assessee failed to produce the parties before the AO which was a hawala party. The undisputed facts are that the assessee filed the necessary bills of the supplier and payments details. The FAA also confirmed the addition made by the AO on the ground that 37 I.T.A. No.1478/Mum/2017 the assessee could not prove the genuineness of the material purchased as no confirmation was filed or the supplier was produced, no stock tally was furbished etc and finally the party was not traceable. We further find that the ld.AR before the FAA has made alternative submissions that the addition be restricted to 12.5% of the total purchases made from the hawala operators. In our opinion, the total disallowance of purchases is not justified specially when the payment of suppliers made by account payee cheques and merely on the basis of the party is declared by the State Sales Department as hawala operators. In such a cases the assessee makes the purchases from the grey market and thereby makes savings of VAT and other incidental levies. In the similar cases the coordinate benches in a number of decisions taken a view that additions @ 12.5% shoud be made to cover the leakages and savings of Vat etc. In our opinion, it would be reasonable and justified if the addition is restricted to the extent of 12.5% of the total bogus purchases made from the hawala dealer which works out to Rs.31,48,250/-. Accordingly, we partly allow the grounds of appeal No.VII.
22. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 22nd Sept, 2017.
Sd sd
(D.T.GARASIA) (RAJESH KUMAR)
Judicial Member Accountant Member
मुंबई Mumbai; ददन ुंक Dated :.22.9.2017
Sr.PS:SRL:
38
I.T.A. No.1478/Mum/2017
आदे श की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to :
1. अपीऱाथी / The Appellant
2. प्रत्यथी / The Respondent
3. आयकर आयुक्त(अपीऱ) / The CIT(A)
4. आयकर आयुक्त / CIT - concerned
5. ववभागीय प्रतततनधि, आयकर अपीऱीय अधिकरण, मुंबई / DR, ITAT, Mumbai
6. गाडड फाईऱ / Guard File आदे श नस र/ BY ORDER, True copy उि/सह यक िुंजीक र (Dy./Asstt. Registrar) आयकर अिीऱीय अधिकरण, मुंबई / ITAT, Mumbai