Income Tax Appellate Tribunal - Mumbai
Income-Tax Officer vs W.D. Estate (P.) Ltd. on 3 November, 1992
Equivalent citations: [1993]45ITD473(MUM)
ORDER
N.R. Prabhu, Accountant Member
1. These are appeals by the department and cross appeals by the assessee. For the sake of convenience the appeals are consolidated and disposed of by this common order.
2. I.T.A. Nos. 3754 & 4008/Bom/1988 There is an appeal by the department and one by the assessee. The appeals relate to assessment year 1982-83.
3. Assessee is a limited company engaged in construction work. It had secured from the Government of Maharashtra a plot of land No. 211 at Nariman Point on lease and had started construction a multi-storeyed building from 1978. Initially, the booking rate per square feet was Rs. 130. This was raised to Rs. 140 and Rs. 150 and much later the sale fetched as high an amount as Rs. 612 per sq. ft. Assessee was following the project completion method of accounting and filed the return for the year under appeal disclosing an income of Rs. 35,39,408. It has to be remembered in this connection that there was a raid at the premises of the assessee and in the course of the raid a table diary maintained by one Shri R.T. Sharma and a file, were seized. Shri R.T. Sharma was the accountant of the assessee at the relevant time and it was the submission of the assessee before the revenue authorities that Shri R.T. Sharma was a disgruntled employee who wanted to black-mail the assessee and squeeze some amount out of the assessee. The file seized in the course of the search gave names of the parties to whom sales were made up to middle of the year 1980, the rate at which the sales were effected and also the amount received by way of 'on-money'. These documents were seized from the drawer of Shri Gehani, an employee of D & H Sechron Electrodes Ltd., a sister concern of the assessee. It was based on these documents the additions were made by the Assessing Officer aggregating to Rs. 2,11,00,650. When the matter was carried in appeal, the Commissioner of Income-tax (Appeals) retained the additions to the extent of Rs. 45 lakhs. This was done by the CIT (Appeals) as, according to him, it would be difficult to substantiate the additions of on-money up to 11-6-1980. He was persuaded in coming to this conclusion because the additions made in the case of M/s. Mohanlal Vasvani Family Trust which was one of the buyers from the assessee, of a sum of Rs. 20,32,640 was deleted by the CIT (Appeals). Further, the CIT (Appeals) has observed that one Shri Poonamchand Shah had filed a case against the assessee claiming rights in plot No. 211 and this claim was finally settled only on 22-8-1980. Because of the dispute raised by Shri Poonamchand Shah, the CIT (Appeals) had surmised that the prospective buyer's would have been deterred or would be reluctant to come forward for purchase of flats by paying "on-money". The CIT (Appeals) while retaining an addition of Rs. 45 lakhs was influenced by a report published by National Institute of Public Finance and Policy in March 1985 titled "Aspects of the Black Economy in India". The report had discussed the prevalence of notorious practice of payment of black money in real estate transactions in the Metropolitan city of Bombay. The black money payments, according to the report, varied from 35 per cent in 1978-79 to 114 per cent in 1981-82. In 1982-83, according to the report, such black money payment whs 65 per cent. It is with this as background the CIT (Appeals) estimated the on-money at 40 per cent of the sale price shown in respect of sales effected after the cut off date fixed by him as 11-6-1980. This resulted in an addition of Rs. 29,39,760 on sale of flats. As regards the godowns he has observed that the sale consideration shown was Rs. 150 per sq. ft. The allied concern of the assessee had shown sale consideration of Rs. 250 per sq. ft. He, in the light of this fact, estimated the sale consideration of godowns at Rs. 300 per sq. ft. as against Rs. 150 disclosed by the assessee. This resulted in a further addition of Rs. 15,73,650. The two additions together came to Rs. 45,00,000.
4. It is contended on behalf of the assessee that the additions made by the Assessing Officer, part of which was retained by the CIT (Appeals), has absolutely no basis. Such additions are based on hear-say evidence. The CIT (Appeals) had been totally inconsistent in his approach. At one stage he has observed that in the line of business carried on by the assessee there could be no direct evidence of passing of on-money. Even so based on the decision of his colleague in the case of buyers he deletes a major chunk of the addition made by the Assessing Officer. However, for no apparent reasons he decides to retain a sum of Rs. 45 lakhs. In doing so, he merely relies on report published by National Institute of Public Finance and Policy which had only disclosed a trend in metropolitan towns and cities in India. Apart from stating that there was circumstantial evidence and overwhelming surrounding circumstances indicating payment of on money the CIT (Appeals) has no material to fall back upon to support part of the addition retained by him. There was a raid at the premises of the assessee and in the course of the raid nothing incriminating was found. The only material seized in this connection was a table diary and a file containing the names of the parties to whom assessee had sold the flats, the rate at which they were sold and the alleged on money received. These papers were signed by Shri R.T. Sharma a totally disgruntled employee of assessee-company. The papers were in fact found in the drawer of Mr. Gehani an employee of D & H Sechron Electrodes P. Ltd., which is a sister concern of the assessee. Both according to the assessee were criminal in arms out to black-mail the assessee. The papers, in fact, were planted by Shri R.T. Sharma who thereafter alerted the tax authorities. That Shri R.T. Sharma was a disgruntled employee trying to black-mail the assessee is clear from the affidavit sworn before a Judicial Magistrate by Shri Nari Dalamal one of the directors of the company. The said affidavit was sworn before the metropolitan Magistrate with a view to taking criminal action against Shri R.T. Sharma. The affidavit was sworn long before the raid was conducted and, therefore, it would be impossible for the department to allege that it was a self-serving statement. No criminal action, in fact, was taken against Shri R.T. Sharma on grounds of compassion and also because he did apologise to Shri Nari Dalamal. But he fell back to his old ways later on. As a matter of fact in the statement given by Shri Kripalani, the constituted local Attorney of the partners of assessee firm in the course of the raid he had adverted to this affidavit and also the fact that Shri R.T. Sharma covertly with Shri Gehani was trying to black-mail the members of the Dalamal family. In the absence of any direct or circumstantial evidence there could be no addition at all. To support the addition on the basis of what the department describes as a notorious practice of passing on of on money in the real estate business would be travesty of justice. The report of the National Institute of Public Finance and Policy cannot be a substitute for evidence. It only adverts to the prevalence of passing of on money in real estates and it can at best provoke an enquiry. The report does not in any way indict the assessee. The addition, therefore, requires to be deleted. The department, in fact, had made elaborate enquiries from all purchasers. Not a single purchaser had come forward and admitted having paid on money. Whenever the department made additions of 'on money' in the case of purchasers, the same were deleted by the appellate authorities. Based on such appellate order, the CIT (Appeals), who passed this order, deleted a major chunk of the addition.
5. The learned Departmental Representative, on the other hand, contends that the surrounding circumstances and the indirect evidence is so strong and persuasive that if the addition made by the Assessing Officer in full is not restored, it would be destructive of social justice. He submits that the Tribunal should take judicial note of the practice of payment of on money. The courts, in fact, have advised the Tribunal and the revenue authorities to take into consideration the prevalence of a practice formed in the business world. The statement of Shri R.T. Sharma is a clinching evidence against the assessee. He had, in fact, submitted to the Assessing Officer a tape-recorded conversion which he had with Shri Bhaiya who was a trusted employee of the Dalamals and also with Sri Kripalani, the constituted attorney of the non-resident parties. This conversion gives a strong flavour of the notorious activities carried on by the partners of the firm. It is an admitted fact that the partners did not have any income in India except their share income from this firm. Even so one of the partners had filed a revised return disclosing substantial additional income. This, according to the Departmental Representative, is indicative of the on money that the firm had been receiving on the sale of the flats. The booking rate initially was of Rs. 130 per sq.ft. and this probably was an amount which could not meet even the cost of construction. Then again, the Government and Semi-Government concerns were unable to get any premises in Dalamal Towers and the obvious reason was there for anybody to see. The ECGC could not get any premises directly in Dalamal Towers but had to take it on a rent from VDM family trust and this was done by paying a huge amount free of interest in the form of future rent. Shri Poonamchand Shah had raised a dispute in regard to this plot of land and the assessee was offered a large sum of money. The matter, however, was settled by the assessee out of the court. This would go to indicate that income disclosed by the assessee was a measly sum and that a major part was concealed from the revenue authorities. One entry in the table diary found in the course of the raid indicated transfer of seven bags through Shri Methani, a close relation of one of the partners. The entries were decoded by the department and the bags mentioned in the diary could refer only to the amounts in lakhs which the assessee had sent away to foreign countries. The source of this amount could only be the on money received. It was then pointed out that after Chapter XXVIII of Income-tax Act was amended, the booking rates of flats all over Bombay started shooting up. The amendment brought about by the Finance Act, 1984 empowered the department to acquire apartments in multistoreyed buildings by payment of a solatium. The stiff rise in prices was on account of the fact that the builders and purchasers of the flats/apartments became apprehensive and the black money transaction started tampering of. The Departmental Representative thereafter has taken us through the several decisions of the High Courts and Supreme Court which are as under :
Kashi Ram v. CIT [1971] 82 ITR 401 (All.), Singh Engg. Works v. CIT [1953] 24 ITR 93 (All.), Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC), CIT v. Nathulal Agarwala & Sons [1985] 153 ITR 292 (Pat.)(FB), Neroth Oil Mills Co. Ltd. v. CIT [1987] 166 ITR 418 (Ker.) and Addl. CIT v. Bihar State Co-operative Marketing Union Ltd. [1987] 163 ITR 450 (Pat.).
According to the Departmental Representative the wisdom imparted by these decisions is to the effect that where direct evidence is not capable of forthcoming the revenue authorities and the Tribunal could take note of the widespread prevalence of a practice in the business world. It is this practice which has been highlighted in the report titled "Aspects of Black Economy in India" published by Ministry of Finance - Government of India. The Assessing Officer has also given a few instances of comparable cases which would go to establish that the assessee had, in fact, received on money payments on the sale of the flats. The fact that the additions made in the case of the buyers have been deleted by the appellate authorities should not detract from the merits of the revenue's case.
6. In reply, the learned counsel for the assessee submits that it would be evident that the assessee for this year had filed a return of income disclosing over Rs. 35 lakhs. No other builder probably had disclosed amounts of such great magnitude. Such disclosure would not have been possible if, as alleged by the revenue authorities, assessee had received substantial amounts as black money. The Assessing Officer has, no doubt, alleged that the cost of construction was probably more than the initial booking rate. But this is a matter which has not been accepted by the CIT (Appeals) because it was proved to his satisfaction that the cost of construction was much less than the initial booking rate. If, what the Assessing Officer has alleged is correct the project would not have ended with the profit of Rs. 35 lakhs to the assessee. It is then submitted that there has been no single case where a buyer had come forward and reported to the Assessing Officer that he, in fact, paid on money for the purchase of a flat. In such circumstances, merely to depend on a report published by the Ministry of Finance would be totally incorrect. The CIT (Appeals) himself has admitted that the study was based on incomplete information which handicapped the analysis found therein. There was contemporaneous construction in the vicinity of the building constructed by the assessee. One was known as Tulsiani Chambers and another was known as Maker Towers. In the case of Tulsiani Chambers where the construction work started one year before the assessee started its construction, the booking rate was Rs. 130 to Rs. 160 per sq.ft. in the year 1978 and that was on the basis of built up area. In the year 1977 it was as low as Rs. 110 in some cases of sale. In such circumstances for the Assessing Officer to allege that the prevailing rate was much higher than what was disclosed by the assessee to the department would not be justified. It is then submitted that the so called tape-recorded statements which were in the possession of the department has nowhere revealed that the assessee, in fact, had received any on money. As a matter of fact the Assessing Officer himself has stated in his order that he did not rely too much on the tape-recorded statement. One of the tapes was a recorded conversation between Shri R.T. Sharma, an ex-employee and blackmailer and one Sri Bhaiya who is a low paid employee of the assessee-firm. The other tape was a record of conversation between Mr. Kripalani and Shri R.T. Sharma. From the recorded conversation it could only be inferred that Shri R.T. Sharma was demanding a part of what he considered as a booty received by the partners of the assessee firm. No addition based on such conversation could stand the test of scrutiny and it was probably for that reason the Assessing Officer had not laid a lot of store by the tape-recorded conversation. The contention raised by the department that the public sector undertakings could not get any office space in the building constructed by the assessee and that, was because of the inability of the public sector undertakings to pay 'on money' has to be merely stated to be rejected. The public sector undertakings are so slow to react and the escalating cost makes it impossible for them to acquire flats because by the time a decision is taken the cost had already shot-up. In any case, that cannot be urged as a ground for making an addition.
7. We have heard the parties to the dispute and in our view the appeal by the assessee has to succeed. It would be observed from the discussion above that the CIT (Appeals) had deleted a major part of the addition made by the Assessing Officer and that was for the reason that the additions made in the case of the buyers were also deleted by the CIT (Appeals) in their respective appeals. The same yard-stick should have been applied by the CIT (Appeals) in judging whether on money has been received on the sales after the so called cut off date. There is absolutely no evidence to show that the assessee, in fact, had received on-money payments whether before or after the cut off date. We are not for a moment suggesting that there was no prevalence of on-money payments in the real estate business. But additions on account of on-money payments, to our mind, would not be Justified even if we take Judicial note of what is described by the revenue authorities as notorious practice in the absence of tangible evidence. The only evidence available in this case is a statement prepared and signed by Shri R.T. Sharma. There is evidence to show that Shri R.T. Sharma is a disgruntled employee. We have to bear in mind that there were proceedings against the assessee under the provisions of Section 132 of the Act and no incriminating documents suggesting receipt of'on money' payments were seized in the course of the search. That Shri R.T. Sharma was a disgruntled employee is evident from the affidavit sworn before the metropolitan Magistrate by one of the partners and this affidavit was sworn much before the department stepped-in and raided the premises of the firm. In such circumstances, the affidavit cannot be treated as a self-serving document. The tape-recorded statements were played in the court. Most of it was incoherent. Besides, there was no indication that 'on money' was received by the partners of the assessee-firm except a suggestion by Shri R.T. Sharma while he was talking to Shri Kripalani and that suggestion was in the form of a demand for a share of booty collected by the partners of the assessee-firm. The booking rates, disclosed by the assessee also suggested if due allowance is made to the time-lag and the like that they are comparable to the rates in Tulsiani Chambers and Maker Towers, two of the buildings situated in vicinity. Therefore, the allegation that comparable cases do suggest receipt of on money, has to be rejected. That the Government departments were unable to avail themselves of any space in Dalamal Towers need not necessarily go to show that such a situation was on account of the inability of the Government departments to pay on money that was necessary for such acquisition. There is no conclusive evidence that the Government departments had approached the assessee when space was available in the building constructed by the assessee. A lot of reliance has been placed by the Departmental Representative on the amnesty returns filed by one of the lady partners. That amnesty return, it appears, was filed by a lady partner only to explain some items of jewellery which were considered as unexplained in the course of the search by the revenue authorities. That cannot in any way be taken as evidence that on money had passed hands in the sale transactions. Similarly, the tape-recorded conversation, though referred to in the assessment order but not relied upon, throws no light on the on-money transaction. As observed earlier, the nearest that the conversation could take us is a suggestion by Shri R.T. Sharma that he should also be considered as a beneficiary in the black money collected by the partners of the assessee firm. When such are the facts, an addition based on a report, though prepared by the experts of the Ministry of Finance, cannot be upheld. It may be mentioned in this connection that the reason that persuaded the CIT (Appeals) to confirm a minor part of the addition made by the Assessing Officer, was this report published by the Ministry of Finance and also the so-called comparable cases. In any case a survey report which has only highlighted the prevailing practice cannot be an adequate substitute for tangible evidence. The suit filed by Shri Poonam-chand Shah making various claims against the assessee also does not in any way support the case of the revenue. Assessee had initially agreed to transfer the leasehold rights to Shri Poonamchand Shah, but nothing materialised out of the same. The suit filed by Shri Poonamchand Shah against the assessee was for damages and before the court Shri Poonamchand Shah made an offer to purchase the entire building of Dalamal Towers under construction at the rate of Rs. 290 per sq. ft. of built-up area. The assessee asked Shri P. Shah to deposit the amount and it appears that even he could not even deposit the earnest money of Rs. 21 lakhs. The Poonamchand episode has, in fact, been used by the assessee in the course of the arguments before the Tribunal to support its case. According to the assessee, this earned for it a bad name and there was a delay in construction and consequently escalation of the cost. Thus, it would be seen that no tangible evidence has been relied upon to make the impugned additions. As has been rightly contended by the assessee there has been no action against any buyer for inclusion of the so-called 'on money' paid by them for acquisition of premises and wherever such action had been taken, additions made have been deleted by the appellate authorities. When such is the position, we are of the view that the addition made by the Assessing Officer cannot be sustained even if we take into consideration the prevailing practice of payment of on money in real estate transactions. This takes care of the appeal filed by the assessee and cross appeal filed by the department against the addition of Rs. 45 lakhs made by the revenue authorities.
8. The next ground in assessee's appeal is that the CIT(A) erred in rejecting the claim of the loss of Rs. 1,85,000 in respect of assignment of Plot No. 206 to M/s W.D. Estates Pvt. Ltd. There is a cross appeal by the department on this very issue and that is that the CIT(A) erred in deleting an addition of Rs. 39,85,892 out of Rs. 44,98,655 assessed as business income on the sale of Powai land.
9. To appreciate the issue in these cross appeals it would be necessary for us to set out the facts in detail. On 10-6-1964 Shri Wadhumal Dalamal & Others acquired from one Mr. Ramnath Grover 157120 sq. yds. for a total consideration of Rs. 1,72,08,220. This purchase was for the purpose of Powai project. A deed of partnership was entered into by Shri Wadhumal Dalamal and Seven Others for execution of what was called the Powai project in partnership. This was on 1-12-1966. On 9-6-1987 a notification under Section 4 of the Land Acquisition Act was published in which it was stated that Powai land was likely to be needed for public purpose of housing scheme for Maharashtra Housing. There was a further notification on 6-8-1970 under Section 6 of the Act that the land was so required. It has to be remembered that in the meantime the land had already become property of the partnership executed on 1-12-1966 and this partnership firm was carrying on among other things, the business of construction. On 12-6-1972 assessee received a letter from Government of Maharashtra that it had been decided in principle to allot to the assessee the unreclaimed plot No. 196 in Backbay Reclamations on a lease of 99 years in exchange of land in Powai. Thereafter instead of plot No. 196, Plot No. 206 was allotted to the assessee on 17-3-1973. The Powai land was taken over by the Government and this process was completed by 31-7-1973. The possession of the land at Plot No. 206, Nariman Point, was given on 16-8-1973. It was the claim of the assessee before the department that on 1-4-1977 assessee had converted its investment in Powai land into stock-in-trade. This land obtained in exchange in fact, was transferred to W.D. Estates Pvt. Ltd. and a loss of Rs. 1,85,000 claimed as a deduction by the assessee was the result of this transaction. The department has, in fact, sought to tax the difference between the price realised by the assessee and the cost of the assets to the assessee as the income of the assessee for the year under consideration. This was the dispute that the CIT (Appeals) was required to resolve. The CIT (Appeals) took the view that it was a sale of stock-in-trade and the surplus in principle was liable to be added as business profits accruing to the assessee and assessable as such. He has, however, granted the assessee a relief of Rs. 39,85,892 because that was the amount which was taxed as business income for the assessment year 1974-75. He has further observed that if the additions for the year 1974-75 are confirmed, the addition for this year would be only of a sum of Rs. 5,12,743.
10. We have heard the parties to the dispute and in our view the surplus has to be taxed in the year under consideration. The admitted position is that the plot No. 206 was a part of the project which culminated in the construction and sale of Dalamal Towers and consistent with the method of accounting followed by the assessee the surplus on the deficit on the transfer of plot No. 206 was taxable only in the year 1982-83 and it was precisely for this reason the loss alleged to have been suffered in the transfer of this land was disclosed in the return for this year. We are also of the view that this amount cannot be assessed in the assessment year 1974-75 as no development had taken place in that year which could have brought this amount to tax. In the assessment year 1974-75 what had happened was only the takeover of the Powai land and granting of plot No. 206 at Nariman Point. Though there was an exchange, the exchange was of stock-in-trade and not of a capital asset. We are not impressed by the argument of the assessee that the Powai land/plot No. 206 remained as an investment till it was converted into stock-in-trade by the assessee on 1-4-1977. As observed earlier, the Powai land had become the property of the partnership, no sooner the deed was executed and it had always been the stock-in-trade of the assessee. The land received in exchange retained the character of stock-in-trade. There was, therefore, no question of a conversion into sotck-in-trade of a capital asset at any stage. What happened in the year under consideration was that the project started by the assessee was completed in the sense that the construction of a multi-storeyed building and the sale of apartments/flats therein was completed so also the sale of plot No. 206. The reliance placed by the assessee on D.L.F. Housing & Construction (P.) Ltd. v. CTT [1983] 141 ITR 806 (Delhi), to our mind, is totally misplaced. That was the case where the assessee-company carried on the business of colonisation. During the year 1955-56, assessee purchased lands in two villages and developed them into residential colonies. Subsequently, in 1957 assessee in the course of its business also purchased about 300 bighas of agricultural land and raised an agricultural farm. The land though was shown by the assessee in its account under the head stock-in-trade he did not take any steps to develop the land in question and carve out plots. However, substantial amounts were spent on the agricultural farm and agricultural income was received therefrom. Out of this land, the Government compulsorily acquired nearly 300 bighas and a profit of Rs. 1,65,660 had resulted to the assessee. The Tribunal held that the land was a trading asset and the profit bore the character of income but it represented agricultural income and was, therefore, exempt from tax. In reference the High Court held that since at no stage the assessee had made an attempt to convert or alter the character of land and had used it for agriculture alone, it was not a trading asset and it was in that context the compensation received was held to be capital receipt. We fail to understand how this decision could lend any support to the assessee. The Powai land though acquired by Wadhumal Dalamal & Others became a property of the partnership firm, viz., assessee, only for the purpose of executing what was called as the Powai project. This is where the real distinction lies. In D.L. F. Housing & Construction (P.) Ltd.'s case (supra) the land developer acquired the agricultural land, carried on agricultural operations and spent large sums on agricultural farm. He, however, did not make any attempt to carve out the plots of land and developed it. It was in that context that the Delhi High Court held that the amount was in the nature of capital receipt only and further the mere description of the land as stock-in-trade in the books of accounts was not decisive. We feel that the surplus realised by the assessee was the surplus realised on the sale of stock and such surplus is exigible to tax as business income in the year of completion of the project. However, the surplus has not been computed by the revenue authorities in a proper manner. The Assessing Officer and for that matter the CIT (Appeals) has not allowed the assessee the cost of reclamation and other expenses connected with the land. The surplus shall be redetermined by the Assessing Officer after adding to the cost of the land-the expenses incurred for reclamation and other expenses connected with the land.
11. The next ground in assessee's appeal is that the CIT (Appeals) erred in not allowing the expenses incurred by the assessee of a sum of Rs. 5,83,905 during the period 1977-78 to 1981-82. Details of these expenses have been given by the assessee at page 563 of the paper book. The expenses have been disallowed by the Assessing Officer on an estimated basis. There are obvious disallowable items like income-tax of Rs. 8,575 for the year 1980-81 and Rs. 2,368 for 1981-82. The expenses also include legal expenses of Rs. 2,10,000 and Rs. 22,000 incurred during the years 1978-79 and 1979-80. The assessee has not been able to provide any details regarding these expenses and, therefore, it is not possible to establish any nexus between the legal expenses incurred and the execution of the project. Similarly, donations have to be completely disallowed. Thus, there is justification to disallow a major part of the sum of Rs. 5,83,905. However, certain items like car expenses, brokerage paid to family members and the like have been disallowed by the Assessing Officer without adequate reasons. We, after hearing the parties to the dispute, shall allow the assessee a relief of Rs. 50,000 on an estimated basis.
12. The next ground of appeal regarding disallowance of expenses of Rs. 85,000 relating to premises in Dalamal Towers and Rs. 1,79,000 relating to premises in Dalamal House was not pressed at the time of appeal hearing.
13. The next ground of appeal is that the CIT (Appeals) erred in upholding Rs. 15,000 out of the claim of Rs. 55,343 in respect of telephone expenses.
We have heard the parties to the dispute. Having regard to the fact that most of the partners are living abroad the amount disallowed by the revenue authorities would appear to be on the high side. We shall, after taking into consideration the submissions made by the parties to the dispute, uphold the disallowance of Rs. 7,500 only.
14. The last ground of appeal is against the disallowance of Rs. 8,148 out of motor car expenses which is about 1/3rd of the total expenses. We would hold that a disallowance of 1/5th of the total expenses would meet the ends of justice.
15. In the result, appeals are allowed in part.
16. ITA No. 3753/Bom/88 - Assessment year 1974-75 The only ground of appeal in this case is that the CIT (Appeals) erred in upholding the addition of Rs. 39,85,892 being alleged business income on the sale of Powai land. The question whether the surplus on the sale of land in Powai was assessable to tax had come up for adjudication in assessee's own case for the year 1982-83. We have for that year held vide our order of even date that such surplus realised on the sale of Powai land was in the nature of surplus on the Sale of stock-in-trade and, therefore was exigible to tax. Since the same has been held to be taxable in the year 1982-83, there would be no justification for taxing that amount in the year under consideration. It may not be out of place to mention that this surplus was realised on the sale of plot No. 206 at Nariman Point, which according to the assessee was part of the project for which the income has been declared by the assessee on the project completion method in 1982-83.
17. Appeal for 1974-75 in ITA No. 3753/Bom./88 is allowed.
18. FTA Nos. 4007/Bom/88 and 3538/Bom./88 Here also there is an appeal by the department and cross appeal by the assessee. They relate to assessment year 1982-83. The common issue involved is that the CIT (Appeals) erred in confirming the addition of Rs. 15,45,000 as estimated on money received by the assessee.
19. The assessee is a limited company engaged in the business of construction of multi-storeyed buildings. Assessee follows the project completion method. It had constructed a building by name "Dalamal House" on Plot No. 206 at Nariman Point, Bombay. This plot was acquired by the assessee from M/s. Dalamal Sons Investment Co. The return of income for this year was filed by the assessee disclosing an income of Rs. 34,97,041. The Assessing Officer completed the assessment on total income of Rs. 2,04,43,353. The difference between the returned income and the assessed income was on account of addition of alleged on money received by the assessee on the sale of flats/commercial premises. When the matter came up in appeal, the CIT (Appeals) observed that in respect of sales up to 30-5-1970, it could be safely said that there was no passing of on money. That was the date on which the sale of one premises to one M/s. P.T.M. Family Trust was effected by the assessee. It may be stated in this connection that he had obtained remand report from the Assessing Officer and part of the relief granted by him was based on the remand report. M/s. P.T.M. Family Trust in turn had given their flat on lease to ECGC, a Government agency. In the sales effected thereafter the CIT (Appeals) estimated the receipt of on money of Rs. 15,45,000 and sustained the same. In this connection he has also relied on his own order in the case of Dalamal & Sons Investment Co. The evidences relied upon by the Assessing Officer in making the additions and the CIT (Appeals) while giving the relief are same or similar to the evidences in Dalamal Towers. In the case of Dalamal & Sons Investment Co. we have held that there is no case for addition of on money. For the same reasons as in that case, we shall hold that even the addition of Rs. 15,45,000 does not deserve to be retained and we, accordingly, delete the entire amount.
20. In the result, the appeal by the assessee is allowed and that by the department is dismissed.