Income Tax Appellate Tribunal - Ahmedabad
Shri Mohanbhai D. Bharwad ,, Ahmedabad vs The Dy.Cit, Central Circle-2(4),, ... on 19 December, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
Before: Shri Amarjit Singh, Accountant Member
And Ms. Madhumita Roy, Judicial Member
IT(SS)A No. 190 &191 /Ahd/2015
Assessment Year 2010-11 to 2011-12
Mohan D. Bharwad The DCIT,
S/1, New U mang Society, Central Circle-2(4),
Opp. Madhav Baug, Vs Ahmedabad
Nirnaynagar, Ahmedabad (Respondent)
PAN: ADDPB0907D
(Appellant)
IT(SS)A No. 188 &189 /Ahd/2015
Assessment Year 2010-11 to 2011-12
M/s. Sanghvi Developers, The DCIT,
B/34, Dhaval Avenue, Central Circle-2(4),
Beside Associate Petrol Vs Ahmedabad
Pump, C.G. Road, (Respondent)
Ahmedabad
PAN: ABVFS7887F
(Appellant)
Revenue by: Shri O.P. Sharma, CIT-D.R.
Assessee by: Shri P.M. Mehta, A.R.
Date of hearing : 23-10-2019
Date of pronounce ment : 19-12-2019
आदेश /ORDER
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 2
M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
These four appeal filed by two different assessees for A.Y. 2010-11 & 2011-12, arise from order of the CIT(A)-12, Ahmedabad dated 27-03- 2015, in proceedings under section 153A r.w.s. 143(3) & 143(3) r.w.s. 153B(1)(b) of the Income Tax Act, 1961; in short "the Act".
2. These four appeals of two different assessees are based on issues arised from identical facts, therefore, for the sake of convenience, all these four appeals are adjudicated together by this common order.
IT(SS)A Nos. 190 & 191/Ahd/2015 A.Y. 2010-11 & 2011-12
3. The assessee has raised following grounds of appeal:-
"1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT (Appeals) has grossly erred in rejecting Grounds No. 1 and 2 of the appellant's appeal before him challenging the validity of the assessment order passed u/s. 153C r.w.s 153A r.w.s 143(3) of the Income-tax Act, 1961.
2. In law and in facts and circumstances of the case, the Ld. CIT (Appeals) has erred in confirming the addition of Rs. 5,00,000/- as profit out of undisclosed receipts of "Dharabhai Complex" when no such addition is) called for.
3. In law and in facts and circumstances of the case, the Ld. CIT (Appeals) has erred in not acknowledging the fact that no real income had accrued to the appellant for the present assessment year as the project of Dharabhai Complex was started in the current year, was in its initial stage and very meager amount realized by way booking in the current year.
4. In law and in facts and circumstances of the case, the Ld. CIT (Appeals) has erred in not accepting the contention of the appellant that on-money receipt is required to be taxed as per method of accounting followed by appellant. The Ld. CIT (Appeals) ought to have accepted that on money should be taxed in the year in which sales in respect of cheque component is offered for tax.
5. Without prejudice to the above, in law and in facts and circumstances of the case, the Ld. CIT (Appeals) has erred in estimating profit from the project of "Dharabhai Complex" at the netjgrofit rate of 50% as against 15% offered by the appellant when the Ld. Assessing Officer has accepted the net profit rate of 15% together with the method of accounting followed for the same project in Assessment Year 2012-13."
4. The fact in brief is that a search action u/s. 132 of the act was conducted in group cases of Sanghvi Group on 9th March, 2011. During the course of search, one loose paper file as per annexure A-2 was found and I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 3 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT seized consisting of 42 pages. These documents were related to the assessee Shri Mohan Bharwad. The assessing officer stated that pages from 39 to 40 and 42 provide detail of cash and cheque receipt in respect of sale of shops belonged to the assessee, therefore, notice u/s. 153C of the act was issued to the assessee. In response to the notice, the assessee has filed return of income on 22nd Nov, 2012 declaring income of Rs. 1,46,900/-. The assessee has also raised objection regarding issue of notice u/s. 153C which the assessing officer had stated that it was rebutted vide letter dated 11th December, 2011. The assessing officer stated that loose paper file inventoried as annexure A-2 page no. 40 seized from the residence of Shri Dhirajlal V. Sanghvi was pertained to the detail of transaction in respect of cash as well as cheque on sale of shop in respect of Dharabhai Complex developed on a plot of land belong to the assessee. M/s. Sanghvi Developers has developed a commercial cum residential building namely the Dharabhai Complex at Navabadaj/Ahmedabad on the land belonging to the assessee. Shri Dhirajlal Sanghvi in his statement recorded u/s. 131 admitted that the figure written on right hand side of the pages 1 to 7 related to the cash portion of the actual sales consideration. The assessing officer has summarized the such detail in the assessment order in para 5 as under:-
Sr. Shop No. Name of the purchaser date Cash element of actual cheque No. sale consideration 1 G-l (Ground Pareshbhai 50000- in F.Y Rs.24,00,000/- 200000 floor) 2009-10 450000 in F.Y. 2010-11 2 G-2 Chetanbhai 200000 in F.Y Rs.24,00,000/- 2500000 2010-11 3 G-3 Rs.24,00,000/-
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 4 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT 4 G-4 Dineshbhai 50000- in F.Y Rs.24,00,000/-
2009-10
450000 in F.Y 150000
2010.-11
5 G-5 Rajubhai Morakhia 50000- in F.Y Rs.23,51,000/-
2009-10
500000 in F.Y 20 100000
lO-ll
6 F - 1 (First Shaileshbhai Parikh 2,00,000 in F.Y Rs. 10,00,000/-
Floor) 2010-11
7 F-2, 3, 4, 5 Parikhbhai (Mumbai) 800000 in F.Y Rs.40,00,000/- 400000
2009-10
12,00,000 in F.Y
2010-11
Total Rs. 1,69,51,000/-
As per detail given above, the total cash portion in the sale consideration was to the amount of Rs. 1,69,51,000/-. Considering the above detail the assessing officer has asked the assessee to explain why not the aforesaid amount be considered as his unaccounted receipt after excluding the amount payable to Sanghvi Developers. It was submitted that 12.5% of the total collection was to be paid to M/s. Sanghvi Developer towards development charges and the remaining part of cash collection of 87.5%was pertained to the assessee Mohan D. Bharwad. The assessee submitted that he has offered the income @ 15% of the over and above income @ 12.5% offered by Sanghvi Developers. It was also submitted that assessee Shri Mohan Bhadwad had followed percentage completion method. It was also submitted that income has accrued in F.Y. 2010-11 and 2011-12 and I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 5 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT submitted computation of income for F.Y. 2011-12. It was submitted that the assessing officer had made addition in the present assessment year whereas such income had already been taxed in subsequent assessment year, therefore, the same would amount to double taxation. The assessee has also explained that the documents were executed in F.Y. 2011-12 and all the income which had been offered in F.Y. 2010-11 should be taken to F.Y. 2011-12. The assessing officer had not accepted the reply of the assessee stating that cash component for the sale of shop of Rs.1,69,51,000/- was required to be considered for taxation in current assessment year as most of the cheque payment had been received in the current year. The assessing officer was of the view that percentage completion method was not applicable with regard to on money receipt and the same was required to be taxed in the year of receipt. The assessing officer stated that amount of Rs. 9 lacs received in the F.Y. 2009-10 was related to assessment year 2010-11 and the amount of Rs. 1,60,51,000/- was considered in the current assessment year. The assessing officer observed that as per development agreement with Sanghvi Developer 12.5% of Rs. 1,60,51,000/- to the amount of Rs. 20,06,375/- was considered income belonging to Sanghiv Developer and the remaining part of receipt of Rs. 1,40,44,625/- was taxed in the hand of the assessee.
Name A.Y Total Cash Element in Taxed in the Income Balance to be
actual Consideration Sanghvi Offered by taxed
Developers Assessee
Mohan Bharwad 2010-11 9,00,000 1,12,500 7,87,500
2011-12 1,60,51,000/- 20,06,375 7,05,000 1,33,39,625
Total 169,51,000 21,18,875 7,05,000 141,27,125-
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 6
M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT
As reported in the chart a sum of Rs. 141,27,125/- was added to the total income of the assessee in assessment year 2010-11 and 2011-12.
5. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The relevant part of decision of ld. CIT(A) is reproduced as under:-
"Decision
9. I have carefully considered the assessment order, submission of the appellant and material available on record. The following facts are observed from the above- 9.1 Sanghvi Group was searched u/s 132 of the IT Act on 09.03.2011. During the course of Search in Sanghvi group, 2 loose paper files containing document of the appellant was found and seized and inventorised as A-2 and A-29,The file. A- 2 contained hand written noting of cash and cheque amount received towards sale of shops at ttDharabhai Complex"The file A-29 contained the details of above shop allotted/sold to various persons i.e. name ,shop allotted and cash and cheque component . As the documents pertaining to the appellant were found in the search in sanghvi group therefore after recording the satisfaction notice u/s 153C was issued in the case of the appellant.
9.2 The appellant and M/s Sanghvi Developer were involved in developing the project "Dharabhai Complex", Sh. Dhlrajlal V. Sanghvi in his statement admitted that the cash component for sale of 10 shops in "Dharabhai Complex" . was Rs 1,69,51,000/-. Sh. Dhiraj Lal Sanghvi in statement u/s 131 admitted that noting on paper is genuine out of cash component of Rs. 1,69,51,000 of Dharabhai Complex, cash of Rs. 39y51,000/- was received and the balance was yet to be received on that date.
9.3 As per these documents, out of 1,69,51,000/- cash receipt in AY 2010-11 and AY 2011-12 was of Rs. 9,00,000/- and Rs.30,50,000/-respectively and the balance of Rs. 1,30,01,000/- was outstanding out of cash receipt. The assessing officer on the basis of these documents found that 12.5% fee was payable to the Sanghvi Developers therefore out of totaf amount of Rs. 1,69,51,0007- divided the receipt in the ratio of 87.5% and 12.5% in the hands of the appellant and Sanghvi developers. The AO taxed the above amount in AY 2010-11 and AY 2011-12 on the receipt basis as under:
A.Y. Total Cash Element Taxed in Sanghvi Income Offered Balance to be in actual Developers by Assessee taxed Consideration 2010-11 9,00,000 1,12,500 - 7,87,500 2011-12 1,60,51,000/- 20,06,375 7,05,000 1,33,39,625 Total 169,51,000 21,18,875 7,05,000 141,27,125
10. However the appellant submitted a different status of on money received. According to him actual cash receipt in AY 2010-11 and AY 2011-12 was much more than noted in the document found and seized by the department and outstanding amount was less. As. per the appellant actual cash, receipt was Rs. 11 lakhs in AY 2010-11 and Rs. 59 lakhs in AY 2011- . 12 as against Rs. 9 lakhs in AY 2010-11 and Rs. 30.50 lakhs in AY 2011-12 written/noted in the document found. 10.1 During the assessment proceeding the appellant claimed that the outstanding cash of Rs. 99.51 lakhs and other cash receipt of Rs. 7.00 lakhs was received in AY 2012-13 and same was I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 7 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT offered for taxation <a 15% on basis of percentage completion method after deducting the fee paid to Sanghvi Developers @ 12.5% of the gross receipt. He further argued that the assessing officer has erred in observing that there cannot percentage completion method for on money receipt since the accounting method has to be applied for the project and there cannot be pick and chose for certain portion of the receipt and different treatment for other portion of the receipt.
11. In view of the facts given above, contention of the appellant are not accepted as discussed below-
11.1 It is undisputed fact that the appellant engaged M/s Sanghvi developer for Dharabhai complex as developer for developing the plots and supervise the construction and to sell shops after negotiation with prospective buyers. The document found clearjy^og^ntioned that for sale of 10 shops cheque amount was Rs. 11 lakhs and cash component was Rs. 1,69,51,000/-. . 11.2 It is seen from the copies of the document seized that seized papers number 40 and the other seized paper marked 1,4,5,6 and 7 reflect bifurcations of date wise cash and cheque receipt however there are some difference found as few details of receipt are missing.which are contradiction in the explanation given. These document do not reflect the detail of shop number 3 , shop number 4 cash amount is shown as five Lacs and summary shows 4.5Qlacs and in summary nowhere cheque amount is mentioned. Like wise against shop number 5 Rs. 5.51 lakhs receipt out of total of Rs. 21 Lakhs however outstanding payment shown of Rs. 18 lakhs. These facts are discussed to show that these documents are small part of the complete documents of actual transaction of cash and cheque collection and there may be some other documents which are having the remaining details of the transaction but could not be find by the department during the search.
11.3 This finding is also get strength and proved from the reply of the appellant where the appellant himself has admitted that the actual cash receipt in AY 2010-11 was Rs. 11 iakhs and in AY 11-12 it was of Rs. 59 lakhs as against Rs, 9-00 laks and Rs, 30.5 Lacs noted/written in documents found. It is seen that during the assessment proceeding the appellant submitted and claimed that remaining outstanding cash as written In the seized document of Rs, 99.00 lacs and 7.00 Lacs were received in AY 12-13 but no document or evidence was filed In support of the claim thus it is based on presumption only.
11.4 The above submission of the appellant clearly contradicts, the document found and seized during the search and is sufficient to prove that the document found during the search, were incomplete and not containing the complete details of cash receipt of the Dharabhai project.
There were many other entries/ details of cash receipt which has been admitted by the appellant during the assessment proceeding but unfortunately same could not be detected by the Department. Thus it 'established that the appellant received/earned/collected much more cash other than the noted in the document which was found during the search. Therefore, in absence of any evidence /circumstantial evidence/document, the appellant cannot be allowed to claim that the remaining cash of rs. 1,06,51,000/- was received in AY 12-13 this adhoc disclouser / presumption is not acceptable.
11.5 The appellant further mention that he has paid supervision charges at the rate of 12.5% to Sanghvi developer and also estimated and offered 15% of net profit over and above the 12.5% fee payment to Sanghvi developer. Thus a total of 27.5% has already been offered as income/profit from the business and profession and argued that 27.5% profit is highly reasonable as compared to the generally accepted rate of profit in the real estate business. The appellant also submitted that he follows percentage completion method and already submitted, detail of completion of the project and accordingly offered the income for taxation.
11.6 The above contentions of the appellant is considered and found not acceptable as it is factually incorrect and misrepresentation of fact. It is wrong on the part of the appellant to claim that he has offered 27.5% as profit, out of the total cash receipt for taxation. As per the terms and conditions submitted in the statement of facts on page 3 , it is mentioned that Sanghvi developer shall be entitled to development fees computed at the rate of 12.5% of the total collection. This clause itself is sufficient to prove that the fee payment to Sanghvi developer was an expenditure and not sharing of the profit Thus the contention of the .appellant that he has I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 8 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT offered the profit at the rate of 27.5% is not accepted. This also established that the appellant was having details of 12.5% expenditure only as against 87.5% claimed by him. Thus it is factually wrong that the appellant has already offered 27.5% profit for taxation out of undisclosed receipt.
11.7 Besides this the appellant also claimed that since he was following the percentage completion method therefore the on money cash collection was also offered for taxation as per the percentage completion of method. Therefore during the appellate proceeding it was asked to explain that as per the accounting standard, the percentage completion method can be applied for transaction-recorded in the books of account than how the percentage completion method shall be applicable for on money receipt in cash and why the on money/ cash receipt should not be treated income of that year as treated by the AO.
11.8 The appellant only submitted that on money receipt is required to be taxed as per the method of accounting followed by the appellant and there cannot be 2 method for recognizing the revenue for on money and the disclosed money in books of account. Further argued that accounting method has to be applied for the project and there cannot be pick and choose for certain portion of the receipt and different treatment for other portion of the receipt and AO is not justified in taxing the entire on money in AY 2010-11 and AY 11-12 . The appellant further relied on the decision of the ITAT Calcutta A Bench in the case of Fort Projects Private Limited vs DCIT 29 taxman.com 84, discussed the issue of determination of the price of the flat which are different from the facts of the appeal under consideration.
12. I have carefully considered the contention of the appellant and the various issues arising there from. The fact that the appellant is relying on the seized document wherein according to him it has been mentioned that the cash is yet to be received and therefore need to be taxed on the receipt basis. I do not find any merit in the argument of the appellant for the simple reason that the appellant is maintaining Its books of account on mercantile basis and the income accruing or arising to the appellant is to be taxed on receipt/accrual basis. The moment appellant entered into an agreement with the prospective buyers to .sell the property at a particular price, the income accruing to the appellant and is therefore liable for tax. Moreover, the fact that the appellant received the money has not been denied by it in the search proceedings as well as during the assessment/ appellate proceedings. In view of the above I am of the considered opinion that the on .money received by the appellant has to be taxed in the year in which it was received and percentage completion method will not apply for the simple reason that the income accrues to the appellant on the day when it entered into an agreement with the prospective buyers. The question of receipt of money especially the money in cash component in such transactions are received well before entering into a final agreement. To say that it is not been received is therefore not supported by any documentary evidences on record therefore the same is to be taxed on the basis of information obtained during the course of search proceedings and available on record. 12.1 It is also a matter of fact that the appellant has not been able to demonstrate that the. document seized by the Department during the course of the search proceedings reflects the complete . picture of the entire transactions. It is very difficult to inferred from the aforesaid document that the money was received subsequently however it can be inferred that the money was received in cash and the total amount of the money received is also indicated therein. Therefore it is difficult to accept the proposition of the appellant that the money in question was received in the AY 12-13 as there is nothing on record to substantiate such an assertion of the appellant. Therefore, the addition made by the AO on this count is sustainable both on facts and law and is accordingly upheld. This ground of appeal is thus dismissed.
13. The appellant further argued that only the profit element from the on money can be taxed in view of the decision of Gujarat High Court in the case of C1T versus Abhishek Corporation where it is held that -
"15.it can thus be seen that consistently, this court and some other courts have been following the principle that even, upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipt and not the entire receipts themselves, if that be the legal position what should be estimated as a I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 9 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT reasonable profit out of such receipt, must be an element of estimation. 16. in view of the legal position that not the entire receipts but the profit element embedded in such receipt can be brought to tax, In our view no inferences called for in the decision of the tribunal accepting such element of profit at Rs. 26 Lakhs out of total undisclosed receipt of Rs. 62 Lakhs. In other words, we accept the legal proposition, the tribunal accepting Rs. 26 Lakhs disclosed by the assessee as profit out of the total undisclosed receipt ofRs. 62 Lakhs, would not give rise to any question of law."
13.1 The aforesaid proposition of law as laid down by the Hon'ble Gujarat High Court clearly revealed that what need to be taxed in a transaction is the profit element involved in it and not the entire value of the transaction. It is also been accepted by the Hon'ble High Court that in such transactions the profit can only be estimated with some reasonable estimation however such estimation will be higher than the profit shown in the regular books of account. In the above referred case the profit was estimated at Rs. 26 lakhs out of undisclosed receipts of Rs. 62 lakhs which comes to 42%. Obviously the said ratio of profit is much higher than what has been shown, during the normal course of business. Therefore, in view of the practice followed in the real estate business, a reasonable profit estimation @ 50% out of on money receipt is justified keeping in view the finding of the jurisdictional high court. 13.2 It must be understood that against the disclosed income the appellant must have claimed/debited all expenses in books of account allowable as per the IT Act. Besides this, section 37 of the IT Act specifically laid down very strict and unambiguous condition for claiming the expenses under this head stating interalia that the expenditure must not be in the nature of capital / personal expenses of the appellant and must have been expended wholly and exclusively for the purposes of appellant's business and must not have incurred for the purpose of any offence and not prohibited by any low of the land.
13.3 Thus the primary condition/rider clarify that if any expenditure is of capital or personal nature or not incurred wholly or exclusively for the business purpose or incurred for any purpose which is an offence or which is prohibited by Jaw shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. However the appellant has not submitted any details of expenditure and just claimed 85% lump sum amount incurred for expenditure without any supporting details/evidence. In absence of details and evidence , possibilities of capital/personal/non genuine and bogus / inflated / non business expenses or expenses incurred for offence or having nature of prohibited by .law cannot be ruled out. Therefore, the complete 85% expenses as claimed by the appellant cannot be allowed. The calculation and working of profit @15% is only self serving estimation calculated on presumption basis. As per the appellant the basis of estimated cash expenditure is only ratio of expenditure claimed in books of account. Thus the same ratio cannot be accepted as there is stark difference between the expenses incurred in cash and accounted for in the books of account.
14. In view of the facts and legal position discussed above and following the spirit of the Hon'ble Gujrat High Court decision as relied upon by the appellant, I am of the considered opinion that it will meet to the end of the justice if 50% expanses out of unaccounted on money received are allowed as incurred for business purpose and remaining 50% out of the unaccounted cash receipt is treated as net profit of the appellant.
15. Since the appellant himself has admitted that in AY 2010-11 actual cash receipt was Rs. 11,00,000/- instead of found in document of Rs. 9,00,000/-. Therefore out of the addition made by the A.O. of Rs. 7,87,500/- the addition of Rs. 5,00,000/- on account of 50% profit out of total undisclosed receipt of 11,00,000/- is confirmed. Thus the appeal for AY 2010-11 is partly a11owed.
16. The appellant has raised similar ground in A.Y.2011-12 and also raised one additional ground that the AO has grossly erred in not considering the income component for cash element involved in. the actual sale consideration which has been offered in A.Y. 2012-13 and non consideration of the same has resulted into double taxation. All grounds are emerging from the addition on account of unaccounted receipt of Rs. 1,76,51,000/-for Dharabhai Project. Thus the same is taken together and decided as per the decision given In A.Y. 2010-11. The appellant himself has I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 10 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT admitted that actual total cash receipt from Dharabhai project was Rs. 1,76,51,000/-instead of document found during the search of Rs. 1,69,51,000/-. He has admitted that out of Rs. 1,76,51,000/- , Rs. 11,00,00/-was received in AY 2010-11 thus the balance of Rs. 1,65,51,000/- is considered to be received in AY 2011-12.
17. In view of the factual and legal positron discussed above, Rs, 82,75,500/- being 50% of total cash receipt of Rs. 1,65,51,000/- in A.Y. 2011-12, is treated as profit earned out of undisclosed receipt. As the appellant has already offered Rs.7,05,000/- in A.Y. 2011-12 as income out of undisclosed receipt, therefore, the same is reduced from the profit determined as above, and balance amount of Rs,75,70,500/- is confirmed as profit out of undisclosed receipt of A.Y. 2011-
12.
18. It is seen from reply of the appellant that he has offered income from the undisclosed cash receipt of Rs. 1,06,51,000/- in A.Y, 2012-13. However, the profit out of undisclosed cash receipt have already been confirmed in the appeal of the appellant in A.Ys. 2010-11 and 2011-12, therefore, the AO is directed to give credit for the same in A.Y. 12-13."
IT(SS)A Nos. 188 & 189/Ahd/2015 A.Y. 2010-11 & 2011-12
6. On the similar fact as reiterated above in the case of Mohan Bhadwad vide IT(SS)A Nos. 190 & 191/Ahd/2015 that cash component to the amount of Rs. 1,69,51,000/- was received as per the loose paper contained in the file marked as annexure A-2 seized from the residence of Dhirajbhai Sanghvi and 12.5% of the claim received was pertained to Shri Dhirajlal V. Sanghvi towards development supervision charges in respect of development carried out by him at the Dharabhai Complex Nava Vadaj. Considering the transaction recorded in the seized paper, the assessing officer has computed the income to be taxed in the hand of Shri Dhirajlal Sanghvi in the assessment year 2010-11 at Rs. 1,12,500/- @ 12.5% on amount of Rs. 9 lacs received in F.Y. 2009-10 and an amount of Rs. 20,06,375/- as 12.5% of Rs. 1,60,51,000/- to be taxed in assessment year 2011-12. The assessing officer has also made addition on protective basis in the hand of Shri Dhirajlal Sanghvi of the same income which was added in the hand of Shri Mohan Bhadwad on substantial basis. The relevant part of computation made by the assessing officer reproduced as under:-
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 11 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT Name A.Y Total Cash Element in Taxed in the Taxed in the Income Income Offered Addition on protective basis.
actual Consideration hands hands of Mohan Offered by by Sanghvi
Sanghvi Bharwad Shri mohan developers
Developers
Sanghvi 2010-11 9,00,000 1,12,500 787500 - - 787500
Developer
s
2011-12 1,60,51,000/- 20,06,375 14044,625 7,05,000 8,75,000 1,2464625
Total 169,51,000 21,18,875 14832125 7,05,000 8,75,000 13252125
7. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld.
CIT(A) has deleted the addition made on protective basis in the case of the assessee, however, sustained the addition as development fees @ 12.5% on balance of unaccounted on money. The relevant part of the decision of ld. CIT(A) is reproduced as under:-
"Decision
8. I have carefully considered the assessment order and submissions of the appellant. The appellant has raised two effective grounds of appeal which are emerging from the common issue of undisclosed cash receipt found during the course of search. The appellant agitated that the AO made addition of Rs.1,12,500/- on account of fee received @ 12.5% out of cash receipt of Rs.9 lakhs found during the search pertaining to A.Y.2010-11 and also made protective addition of Rs. Rs.7,87,500/-in A,Y. 2010-11 for the balance 87.5% cash receipt as the same amount was added substantively in the hand of Shri Mohan Bharwad. Thus both the grounds are interrelated and emerging from the common issue of undisclosed cash receipt of Rs.9.00 lakhs in A.Y. 2010-
11. 8.1 It is seen that the appellant has not offered any income on account of fee received in cash , in the year under consideration and submitted that the same has been offered in AY 2011-12 and AY 2012-13. The issue, year of taxability of receipt from the undisclosed on money receipt, has been discussed In detail and decided in the case of Shri Mohan Bharward in appeal for A.Ys. 2010-1l & 2011-12 having similar issue. Accordingly 12.5 % development fee of on money of Rs. 11,00,000/- and the balance amount of Rs, 1,65,51,000/- is treated taxable In AY 2010-11 and 11-12 respectively.
8.2 The appellant has submitted that actual cash collection for the Dharabhai project in A,Y, 2010-11 was Rs. 11 lakhs instead of Rs. 9 lakhs found during the. search as adopted by the A.O. Thus during the year, the fee development charges received by the appellant works out to be Rs. 1,37,500/- out of the total cash collection of on money of Rs. 11,00,000/-for Dharabhai Project from Mohan Bharwad. The year of taxability of undisclosed receipt has been discussed in detail and decided in appeal in the case of Shri Mohan Bharwada In A.Y. 2010-11 by the undersigned vide order dtd.27.03.2015 in Appeal No.CIT(A)-12/157&158/DCIT/CC-2(4)/13-
14. Accordingly, the AO is directed to re-compute the development fee @ 12.5% of the total unaccounted money of Rs. 11 lakhs admitted by the appellant as well as Shri Mohan Bharwad. Thus the ground of appeal is dismissed.
9. On similar facts the AO has made addition of Rs. 11,31,375/- in A.Y. 2011-12 on account of unaccounted fee received for Dharabhai Project from Shri Mohan Bharwad. However, the appellant has admitted the cash receipt of Rs.59 lakhs in A.Y. 2011-12 as against the document of I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 12 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT cash receipt of Rs.30.50 lakhs found during the search. Besides this, the appellant has also admitted cash receipt of Rs.7 lakhs over and above the document of Rs. 1,69,51,000/- found during the search thus admitted the total cash receipt of Rs. 1,76,5 1,000/- for the Dharabhai Project. The year of taxability of Rs.l,76,51,000/- has already been discussed in detail and decided in appeal in the case of Shri Mohan Bharwad in A.Y. 2010-11 by the undersigned vide order dtd.27.03,2015 in Appeal No.CrT(A)-12/157&158/DCIT/CC-2(4)/13-14. Thus in A.Y. 2011-12 remaining on money in cash was received Rs.1,65,51,000/- (Rs. 1,76,51,000/- - Rs. 11,00,000/-) and on this amount 12.5% development fee was received by the appellant which comes to Rs 20,68,875/-. Accordingly, the AO is directed to recompute the development fee @ 12:5% of the balance unaccounted on money of Rs.1,65,51,000/- admitted by the appellant as well as Shri Mohan Bharwad. Thus the ground of appeal is dismissed.
10. It is seen from reply of the appellant that he has offered fee/development charges of Rs. 17,56,375/- as income in A.Y. 2012-13. However, the additions on account of entire fee/development charges @ 12.5% have already been confirmed in appeals for A.Ys.2010-11 and 2011-12, therefore, the AO is directed to give credit for the same in A.Y. 12-13.
11. The ground of protective addition is also emerging from the issue discussed above. It is seen that though the appellant has not earned/received cash of Rs.7,87,500/- in A.Y.2010-11, the A.O. has made addition of this amount as unaccounted receipt in the hands of the appellant on protective basis and the same addition was made in the case of Shri Mohan Bharwad on substantive basis in A.Y, 2010-11.
11.1 The substantive addition made on account of undisclosed receipt In the hands of Shri Mohan Bharwad in A.Y, 2010-11 has already been confirmed by the undersigned vide order dtd.27.03.2015 m Appeal No.aT(A)-12/157&158/DCIT/CC-2(4)/13-14. Therefore, the addition of Rs.7,87,500/- made in the case of the appellant on protective basis Is hereby deleted and the grounds of appeal is allowed.
12. On similar facts the AO has made addition of Rs.1,31,69,625/- in A.Y. 2011-12 on protective basis. The substantive addition made on account of undisclosed receipt in the hands of Shri Mohan Bharwad in A.Y. 2011-12 has already been confirmed by the undersigned vide order dtd.27.03.2015 in Appeal No. CIT(A)-12/157&158/DCIT/CC-2(4)/13-l4. Therefore, the addition of Rs. 1,31,69,625/- made in the case of the appellant on protective basis is hereby deleted and the grounds of appeal is allowed."
8. During the course of appellate proceedings before us, ld. counsel has filed compilation in the form of paper book 1 to 3 comprising particulars of income tax return filed for assessment year 2010-11, 2011-12 and assessment year 2012-13, copy of statement recorded u/s. 131 of Dhirajlal V. Sanghvi and copies of seized material referred in the assessment order. The ld. counsel has also filed copy of development agreement dated 25th March, 2011 executed between the assessee and Shri Dhirajlal V. Sanghvi. At the outset, the ld. counsel has challenged the validity of the assessment order passed u/s. 153C r.w.s. 153A contending that assessing officer has not recorded the satisfaction before transmitting the record as stipulated by the I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 13 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT CBDT vide Circular No. 24/2015 dated 31st December, 2015 on the issue of satisfaction to be recorded of the person searched. To support this contention, the ld. counsel has also placed reliance on the following decisions:-
1. Decision dt 14-8-2016 of ITAT, Delhi Bench "E" in case of Satkar Roadlines Pvt. Ltd. reported in 62 Taxmann.com 327 Del. Tri.
2. Decision dt 11-9-2015 of ITAT, Ahmedabad Bench "A" in consolidated order vide IT(SS)A Nos. 28 to 58 & 60 to 73/Ahd/2012 45 cases, Parshwa Corporation, Shvi Builders, Padmavati Construction & others.
On merit also, the ld. counsel has reiterated the submission along with detail furnished before the lower authorities that income has been taxed in subsequent year therefore the same would amount to double taxation in view of the fact that the documents were executed in F.Y. 2010-11. It is pleaded that without considering the fact that assessee has offered the income on percentage completion the assessing officer has adopted wrong assumption that on money receipt need to be taxed in the year of receipt without considering the fact that major part of on money was not received in the year in which the assessing officer has added for tax purposes. On the other hand, ld. departmental representative has contended that assessing officer in the case of the person in whose case search was conducted and in the case of person in whose case assessment proceedings u/s. 153C was initiated was the same therefore no separate satisfaction note was required. On the merit, departmental representative has supported the order of ld. CIT(A). I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 14 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT
9. We have heard both the sides and perused the material on record carefully. At the outset, the ld. counsel has contended that assessing officer of the searched person in this case has not recorded any satisfaction before handing over the seized material to the assessing officer of the assessee in this case. The ld. counsel has also submitted that even if the assessing officer of the person searched and such other person may be the same, it is required that first the assessing officer of the person searched has to record the satisfaction during the course of assessment proceedings of the person searched. Therefore, the ld. counsel has submitted that notice issued to assessee u/s. 153C was not valid. In this regard, we have gone through the judicial pronouncements on which reliance was placed by the ld. counsel. The ld. counsel has placed reliance on the decision of ITAT, Delhi Bench in the case of DCIT vs. Satkar Roadline Pvt. (2015) 62 taxman.com 327 wherein on similar facts and circumstances it is held by the ITAT Delhi that where assessing officer of searched person and such other person is same, the assessing officer has to carry out dual exercise first as assessing officer of other person searched in which he has to record satisfaction during the course of assessment order proceeding of person searched and second as assessing officer of other person. After perusal of the aforesaid judgment, the relevant part of the judgment as per para 19 is reproduced as under:-
"19. In the light of the case laws cited above and on a reading of section 153A and 153C the exercise that .5 required to be done by the AO has-been spelt out by the Coordinate Bench of this Tribunal in the case :: DSL Properties (P.) Ltd, (supra) vide para 15 has held that if the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money bullion, jewellery or other valuable article or thing or books of account or documents belonged to the person other than the person searched. Then the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of the person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 15 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT other person, he has to issue the notice u/s 153 A, read with section 153C. The Assessing Officer of the searched person and such other person may be the same but these are two different assessees and therefore the Assessing Officer has to carry out the dual exercise first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment order proceedings of the person searched. We concur with the said view of the coordinate Bench and would like to add that this satisfaction must be an objective satisfaction based on an enquiry by the AO to establish that the documents referred to in section 153C which is found during the search u/s. 132, which are seized or requisitioned belongs to a person other than the person searched; and there should be a clear finding to that effect based on which only satisfaction as envisaged u/s. 153C can be inferred. Such a finding by the AO is required for attaining the said satisfaction and then it should be recorded in the file of the assessee which is a 'sine qua non' to trigger the jurisdiction for the AO to proceed against such other person. In this case this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out and the satisfaction does not satisfy the requirement of section 153C. We could not find any mention of any seized materials like valuable articles or things or any books of account or documents have been referred even in the impugned assessment orders. The AO lacks jurisdiction to initiate proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void and therefore quashed. Consequently, the impugned assessment order passed u/s. 153C is also a nullity."
We have also gone through the decision of the Co-ordinate Bench Ahmedabad on which ld. counsel has also placed reliance. The Co-ordinate Bench of Ahmedabad vide ITA Nos. 28 to 58 & 60 to 73/Ahd/2012 in the case of Parshwa Corporation and other asseessees on similar issue and facts has held that notice u/s. 153C is invalid as the basic condition for issuing of notice u/s. 153C is not satisfied as no satisfaction has been recorded by the assessing officer of the person searched. We have gone through the above referred decision of the Co-ordinate Bench of ITAT and relevant part of the decision is reproduced as under:-
"18. From the above, it is clear no satisfaction is recorded by the Assessing Officer of person searched. The Assessing Officer of assessee did not record any satisfaction prior to issue of notice u/s 153C. The so-called satisfaction recorded in the notice u/s 153C is totally vague. It has not specified which valuable articles/things/books of accounts/documents were found from Shri Rameshbhai B. Shah which belongs to the assessee. In the assessment order the Assessing Officer has mentioned that in the laptop of Shri Rameshbhai B. Shah the data pertaining to the assessee were found and on that basis notices u/s 153C have been issued. However, in the notice u/s 153C, wherein the Assessing Officer is claimed to have been recorded the satisfaction for issue of the notice, I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 16 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT there is no mention about such laptop or the alleged data in such laptop which is claimed to be belonged to the assessee. In view of above, we have no hesitation to hold that the basic condition for issue of notice u/s 153C has not been satisfied.
19. The ld. CIT-DR has claimed that any procedural irregularity in the issuance of notice u/s 153C is a curable defect as provided in Section 292B of the Income-tax Act. We are unable to agree with this contention of the ld. Departmental Representative. Section 292B reads as under:-
"292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act."
20. From the above, it is evident that as per Section 292B, any notice, summons or other proceeding would not be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding provided such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. However, before issuing of notice u/s 153C, the satisfaction of the Assessing Officer of the person searched is essential for assuming the jurisdiction u/s 153C by the Assessing Officer of such other person. Therefore, in the absence of satisfaction by the Assessing Officer of the person searched, the Assessing Officer of the present assessee does not get any jurisdiction to issue such notice. Accordingly, notice u/s 153C issued by the Assessing Officer of the person searched lacks jurisdiction which is not curable by virtue of provision of Section 292B. In view of above, we respectfully following the decision of Hon'ble Apex Court in the case of Manish Maheshwari (supra) and decision of Hon'ble jurisdictional High Court in the case of Lalitkumar M. Patel (supra), hold that the notices issued u/s 153C were invalid; accordingly the same are quashed. Consequently, the assessment orders framed u/s 153C r.w.s. 153A are also quashed. Since the assessment order itself has been quashed, the other grounds of the assessee's appeal which is with regard to determination of the income of the assessee needs no adjudication.
IT(SS)A Nos. 28 to 31/Ahd/2012 - Assessee: Shiv Builders IT(SS)A Nos. 32 to 35/Ahd/2012- Assessee: M/s. Padmavati Construction IT(SS)A Nos. 36 to 41/Ahd/2012 - Assessee: M/s. Siddhgiri Developers IT(SS)A Nos. 42 to 47/Ahd/2012 - Assessee: M/s. Parshwa Construction IT(SS)A Nos. 48 to 52/Ahd/2012 - Assessee: M/s. R.B. Construction IT(SS)A Nos. 53 to 56/Ahd/2012 - Assessee: M/s. Dharnendra Developers IT(SS)A Nos. 57 to 58/Ahd/2012- Assessee: M /s. Mahavir Construction IT(SS)A Nos. 60 to 63/Ahd/2012 - Assessee: M/s. Darshan Associates I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 17 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT IT(SS)A Nos. 64 to 67/Ahd/2012 - Assessee: M/s. Sagar Developers
21. In all the above appeals by the assessee, there is a common ground with regard to validity of notice u/s 153C. Both the parties fairly agreed that the facts in the case of all the above assessees' in all the assessment years are identical to the facts in the case of M/s. Parshwa Corporation in as much as the notices have been issued on the basis of data of above assessees found in the laptop of Shri Rameshbhai B. Shah. Identically worded notices u/s 153C have been issued in the case of all the above assesses'. Therefore, for the detailed discussion in the case of M/s. Parshwa Corporation above, we quash the notices issued u/s 153C and consequently, the assessment orders completed u/s 153C r.w.s. 153A of the Income-tax Act. As the assessment order itself has been quashed, the other grounds of the assessees' appeals, which is with regard to the determination of income, does not require any adjudication."
In addition to above judicial pronouncements, the assesse has also placed reliance on the CBDT Circular No. 24/2015 dated 31st December, 2015 on the issue of satisfaction to be recorded of the person searched. We have gone through the above referred circular issued by CBDT and the contents of the same are reproduced as under:-
"The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation.
2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No. 3958 of 2014 dated 12-3-2014 [2014] 43 taxmann.com 446 (SC) (available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages:
(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or
(b) in the course of the assessment proceedings under section 158BC of the Act; or
(c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. "
3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.
4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts.
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 18 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT
5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court."
In the light of the above facts and judicial findings, it is observed that in the case of the assessee the search action was taken place at the residential premises of Shri Dhirajlal V. Sanghvi on 9th March, 2011. During the course of search, one loose paper file consisting of 42 pages was found. The assessing officer has stated that these pages no. 1 to 36 were original receipts towards sale of premises at Darabhai Complex and allotment letters relating to sale of shops. It is also stated that all these documents were signed by Shri Mohanbhai D. Bhadwad. Thereafter, a notice u/s. 153C of the act dated 15th October, 2012 was issued. The relevant part of the notice issued u/s. 153C is reproduced as under:-
"To, Shri Mohan D. Bharwad 748, Bharwad Vas, Gopal Chowk Nava Vadaj Ahmedabad Sir/Madam.
A search u/s. 132 of the Income-tax Act was conducted in the case of Sanghvi Group ( Shri Dhirajlal Sanghvi and others) on 09.03.2011. The income-txx of-six assessment years immediately preceding the assessment year relevant to previous year in which the search conducted i.e. from A.Y. 2005-06 to 2010-11 is required to be assessed/re- assessed in your case. You are, therefore, required to furnish the return of your income u/s. 153C r.w.s. 153A(a) of the Income-tax Act, 1961 for A.Y. 2010-11 being one out of the above six assessment years in respect of which you are assessable under the income- tax Act, 1961. The return should be filed in the appropriate form, as prescribed in Rule 12 of the income-tax Rules, 1962. It should be duly verified and signed in accordance with the provisions of section 140 of the said Act and delivered at my office as mentioned above within fifteen days from the service of the notice.
Sd/-
(LEENA LAL) Asstt. Commissioner of Income-tax Central Circle-2(4), Ahmedabad.
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 19 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT During the course appellate proceedings before us, in spite of giving a number of opportunities, the Revenue has failed to furnish the documentary evidences demonstrating that satisfaction of the assessing officer of the search person was recorded as stipulated per provisions of section 153C of the act. In view of the above facts, it is clear that no satisfaction was recorded by the assessing officer of the searched person in this case. In this regard, we have gone through the provision of section 153C which are reproduced as under:-
"153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,--
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A:"
On perusal of provision of section 153C as reproduced above, it is clear that before handing over the seized documents to the assessing officer of other person a satisfaction has to be recorded by the assessing officer of the searched person and the assessing officer of other person can acquire jurisdiction to assess or re-assess income of the other person only when the assessing officer of the searched person record satisfaction in the case. We find that the CBDT vide circular no. 24/2015 as elaborated above in this I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 20 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT order clearly laid down at para 4 of the circular that even if assessing officer of the searched person and the other person is one and the same then also he is required to record his satisfaction as has been held by the courts. We have also gone through the decision of Hon'ble High Court of Andhra Pradesh in the case of CIT-3 vs. Shettys Pharmaceutical and Biological Ltd. vide 57 taxman.com 282 wherein the following question of law was adjudicated in this regard. The Hon'ble High Court has held as under:-
"2. In the facts and circumstances of the case, whether the Honble Tribunal (ITAT) is correct in law in quashing the assessment framed under Section 153C of the Income Tax Act 1961 on the ground that there is no satisfaction recorded by the Assessing Officer having jurisdiction over the searched person despite the fact that the Assessing Officer of the Respondent assessee and the Assessing Officer of the searched assessee are one and the same and the satisfaction recorded by the common Assessing Officer before issue of notice under Section 153C of the Income Tax Act, 1961 is sufficiently valid to finalize the assessment under Section 153C of the Income Tax Act?
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7. The aforesaid Section mandates recording of satisfaction of the Assessing Officer(s) is a pre-condition for invoking jurisdiction and it is not a mere formality because recording of satisfaction postulates application of mind consciously as the documents seized must be belonging to the any other person other than the person referred to in Section 153-A of the Act. It is contended that the same Assessing Officer is involved in the matter. This fact does not dispense with above requirement. It is settled position of law that when a thing is to be done in one particular manner under law this has to be done in that manner alone and not other way (See Nazir Ahmed v. King Emperor}. We think the learned Tribunal has correctly followed the principle. We do not find any element of law to be decided."
Even the Hon'ble Supreme Court in the case of ACIT vs. Pepsi Foods (P) Ltd. vide (2018) 89 taxman.com 10 (SC) has dismissed the SLP filed by the Revenue against the decision of Hon'ble Court of Delhi in the case of Pepsi Foods (P) Ltd. Vs. ACIT vide (2014) 52 taxmann.com 220 (Delhi) wherein it is held that the satisfaction note itself must display the reasons or basis for the conclusion that the assessing officer of the searched person is satisfied that the seized document belong to a person other than the searched person.
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 21 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT In the light of the above facts and legal finding of various courts, Benches of ITAT and after respectfully following the decision of CO- ordinate Bench of ITAT in the case of Parshwa supra , it is clear that in the case of the assessee no satisfaction was recorded by the assessing officer of the person searched. Therefore, respectfully following the decision of Co- ordinate Bench , we consider that condition for issuing of notice u/s. 153C were not satisfied, therefore, the notices issued for both the assessment years in the case of the assessee are quashed. Since the assessment order itself has been quashed, the other grounds of appeals do not require any adjudication. In the result, both the appeals of the assessee are allowed.
IT(SS)A Nos. 188 & 189/Ahd/2015 A.Y. 2010-11 & 2011-12
10. We have heard rival contention and perusal the material on record. During the course of search at the residential premises of the assessee loose paper file documents belonging to Shri Mohan D. Bhadwad were found and seized. Without repeating the facts as cited supra in this order the seized documents was related to the transaction relating to sale of property named Darabhai Complex developed by the assessee on the land belonging to Shri Mohan D. Bhadwad. The total cash component for the sale of shops at the Darabhai Complex was determined at Rs. 1,69,51,000/-. Out of which the assessee has received 12.5% as development charges. In assessment year 2010-11, the assessing officer has stated that an amount of Rs. 9 lacs were received in the F.Y. 2009-10. Therefore, 12.5% of this amount which comes to Rs. 1,12,500/- was added to the income of the assessee as unaccounted receipt for Darabhai Complex for assessment year 2010-11. The assessing officer has assessed the remaining part of the receipt in assessment year I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 22 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT 2011-12 @ 12.5% of such receipt to the amount of Rs. 11,31,375/- in the hand of the assessee . The assessee filed appeal before the ld. CIT(A) but without any success. During the course of appellate proceedings before us, the ld. counsel has contended that assessee was entitled to development charges @ 12.5% of the total collection received from the members. The ld. counsel has brought to the notice of the lower authorities that as on 31st March, 2010 only 5% of the project work was completed, therefore, the income from development fees was offered in subsequently assessment year 2011-12 to the amount of Rs. 1,37,500/- however the same was assessed by the assessing officer in the assessment year 2010-11. It is submitted that assessing officer had erred in presuming that entire cash component of 1,65,51,000/- was received during the assessment year 2010-11 and assessment year 2011-12. The ld. counsel vehemently contended that actually major part of the cash component was received in assessment year 2012-13. It was also submitted that portion of the cash which was received in assessment year 2012-13 had been offered for tax in the assessment year 2012-13. It is also submitted that out of total cheque consideration of Rs. 43 lacs only Rs. 9 lacs was received in assessment year 2011-12 and the balance of Rs. 34 lacs (79%) was received in assessment year 2012-13. After considering the submission of the assessee that he has offered fee/development on account of entire fee/development charges of Rs. 17,56,375/- as income in A.Y. 2012-13 the ld. CIT(A) has also directed the assessing officer to give credit for the same in assessment year 2012-13.
In the light of the above facts and circumstances, we observe that the assessing officer has not specifically examined/verified the claim of the assessee that assessee has already offered the income in the assessment year I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 23 M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT 2011-12 which was assessed by the assessing officer in the assessment year 2010-11 and the claim of the assessee that it had offered the income in the return of income filed for assessment year 2012-13 which was assessed by the assessing officer in the assessment year 2011-12. Therefore, we are of the view that it will be appropriate to restore both the assessment years 2010-11 and 2011-12 to the file of assessing officer for deciding the issue of relevancy of assessment year to which the disclosed income appertioned afresh objectively after verification and examination of the details and materials reckoned by the assessee. It is needless to say that observation made by us will not injure or impair the case of the assessing officer and will not cause any prejudice to the defence explanation of the assessee. Therefore, these two appeals of the assessee are allowed for statistical purposes.
11. In the result, appeal ITA 190 & 191/Ahd/2015 are allowed and appeal ITA 188 & 189/Ahd/2015 are allowed for statistical purposes.
Order pronounced in the open court on 19-12-2019
Sd/- Sd/-
(MADHUMITA ROY) (AMARJIT SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 19/12/2019
आदेश क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
I.T(SS).A No. 188,189,190 & 191/Ahd/2015 A.Y. 2010-11 to 2011-12 Page No 24
M/s. Sanghvi Developers & Mohan D. Bharwad vs. DCIT
By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण,
अहमदाबाद