Income Tax Appellate Tribunal - Ahmedabad
M/S. Divya Reality,, Ahmedabad vs Pr. Cit-6,, Ahmedabad on 19 December, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH
(BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT
MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
ITA. No: 1153/AHD/2018
(Assessment Year: 2013-14)
M/s. Divya Reality Nr. V/S Income Tax Officer, Ward-
Ramkrishna Mission Hall 7 (2), Ahmedabad
Nr. L.G. Hospital Corner,
Maningar, Ahmedabad
(Appellant) (Respondent)
PAN: AAGFD 6939F
Appellant by : Shri S. N. Divetia, AR
Respondent by : Shri Alok Singh, CIT/ D.R.
(आदे श)/ORDER
Date of hearing : 10 -12-2019
Date of Pronouncement : 19 -12-2019
PER MAHAVIR PRASAD, JUDICIAL MEMBER
1. This appeal filed by the Assessee is directed against the order of the Ld. Pr. CIT(A)-6, Ahmedabad dated 27.03.2018 pertaining to A.Y. 2013-14 and following grounds have been taken:
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. A.Y. 2013-14
1.1 The order passed u/s.263 on 27.03.2018 for A.Y.2013-14 by Pr.CIT-6, Abad
setting aside the order of regular assessment passed u/s.143(3) on 31.08.2015 by AO with a direction to pass fresh order having regard to the points stated in the impugned order is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld. Pr. CIT has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced before AO. The Ld. Pr. CIT ought to have allowed sufficient time before passing the impugned order and thus there was violation of the principles of natural justice. 2.1 The Ld. Pr. CIT has grievously erred in law and on facts in holding that the order of regular assessment passed u/s.143(3) on 31.08.2015 by AO was erroneous and prejudicial to the interest of revenue and therefore the powers exercised u/s.263 were justified.
2.2 That in the facts and circumstances of the case as well as in law, the Ld. Pr. CIT ought not to have held that the order of regular assessment passed u/s.143(3) on 31.08.2015 by AO was erroneous and prejudicial to the interest of revenue and therefore the powers exercised u/s.263 were justified. 3.1 The Ld. Pr. CIT has grievously erred in law and on facts in holding that in view of the discrepancy of gross receipts between books and bank accounts, the loans and advances, the business expenses claimed etc. it required inquiry on part of AO to examine its genuineness.
It is, therefore, prayed that the order of revision passed u/s.263 by Pr. CIT was illegal and the same may be set aside.
2. Facts of the case are that the Assessee was asked to show cause as to why proceedings u/s.263 of the Act should not be initiated in this case. The relevant portions of the show cause notice are reproduced as under :-
"...a) On verification of records it is seen that, during the course of assessment proceedings, the assessee has submitted copies of bank account statements of two current bank accounts. The total deposits/receipts in both the banks is approximately 2,55,56,832/-, the bifurcation of the deposits in both the bank accounts is given below:-
The Mahila Vikas Co.op. Bank Ltd. Rs. 24,86,252/-
State Bank of India Rs.2.30,70.580/-
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. A.Y. 2013-14
Total deposits Rs.2,55,56,832/-
Whereas, the total receipts/turnover as per your return of income is Rs.96,93,700/-. The AO has failed to question about this discrepancy of Rs.l,58,63,132/- 'i.e. difference as per the total turnover shown by you and as per the total deposits/receipts reflected in both the bank accounts. If the amount of Rs. 1,58,63,132/- was added back to the total turnover/income of the assessee, the turnover of the firm exceeds Rs.1 crore, then the assessee was bound to get his books of accounts audited u/s.44AB as well-as its income to the extent 1,58,63,132/- escaped assessment...."
3. In response to show cause notice, the has furnished copy of bank statements of the The Manila Vikas Co.op. Bank Ltd and State Bank of India, Further it has stated that the variation in amount of deposition with bank accounts and turnover being various nature of receipt / deposit should be .considered, receipt against registered sale deed and other related revenue income should be considered as total turnover. Mere filing of copy of bank statement is not enough for verification of nature of transactions and its outcome. Thus this issue remains unexplained.
4. During the course of revision proceedings, i.e. on 13.03.2018, the assessee was requested to furnish Balance Sheet, Profit & Loss A/c with all Annexures for F.Y. 2011-12, 2012-13 and F.Y. 2013-14. The assessee was also requested to show that loans and advances are explained and also the capital account receipts are from sources having proper Identity, genuineness and creditworthiness. Similarly, the assessee was requested to explain why advances received from customers and shown in sales subsequently should not be considered as sales for the yea? since more than 90% (almost) of sales price have been received but agreement was not done. The next hearing was fixed for 16.03.2018.
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5. On 16.03.2018, the assessee filed submission and furnished copy of Balance Sheet, Profit & Loss A/c. However, other details as requested vide para 6 above .have not been filed by the assessee. Any adjournment was Iso not sought. Hence, it is held that the assessee has nothing to explain in respect of the various issues raised.
6. The facts of the case and the submissions made, in this case, have been carefully considered. There is no dispute on facts. Admittedly, the assessee has deposited Rs.2.56 crores in his bank account during the year and the sales shown as per accounts are Rs.96.90 lacs. The difference in deposits in bank account and the sale is explained to be the receipts other than the sale proceeds.
7. The assessee is in the business of construction and sales of real estates. Vide letter dated 13-03-2018, it is explained that during the year, sale of stock in trade has been accounted as per the rule on the basis of registered sale deed and other revenue receipts. However, capital account receipts such as, from partners, recovery against loan and advances, booking money from buyers, etc. have not been considered as turnover. All these was properly considered and examined by the AO before completing the assessment.
8. The assessee has also given details of capital account receipts credited in the bank account in Mahila Vikas Co.Op. Bank Ltd. totaling Rs.24.86 lacs. The assessee has also given the details of such capital account receipts deposited in State Bank of India - total receipts is Rs.2.31 crores. From the details of such receipts, sale account receipts are for Rs.65 lacs and the balance are capital account receipts mainly loans and advances. Thus, the assessee has given details 5 ITA No . 1153/Ahd/2018 . A.Y. 2013-14 of total credits in the bank account of Rs.2.56 crores which inclides sales receipts of only Rs.65 lacs and the balance are stated to be on capital account and mainly being loan and advances.
9. Total loans and advances as per the balance sheet as on 31-03-2018 consists mainly sundry creditors of Rs.8.23 crores. No other loan and advances is seen in the balance sheet. Sundry creditors as per the details furnished are from various persons but since the money has been received and credited in the bank account, it cannot be considered as sundry creditors because none of such credits as submitted are not on account of goods or material purchased or the expenses incurred for supplies received. This is the money received and deposited in the bank. Hence, the assessee has used a misleading nomenclature in respect of loan and advances in the balance sheet.
10. It may be mentioned that the purchases debited in the purchase and expenses debited in P. & L, Account is only about Rs.115 lacs against the sale receipts of Rs.96 lacs and closing stock of Rs.38.7 lacs. Further, the assessee has failed to justify the loan and advances by furnishing requisite information as requisitioned vide order sheet nottings dated 13-03-2018 to support the credits by giving proper evidence regarding identity of the sources, genuineness of the transactions and creditworthiness of the creditors.
11. The AO has also, during the assessment, not conducted any inquiry whatsoever in respect of such credits and genuineness thereof and in view of the fact that the sundry creditors shown in the balance sheet are not the creditors as the nomenclature implies rather they are loan creditors. Therefore, the assessment has been completed without conducting necessary inquiries in respect of 6 ITA No . 1153/Ahd/2018 . A.Y. 2013-14 identity of the creditors, genuineness of the transactions and the creditworthiness of the creditors and without verifying the total credits in banks and the disproportionate bank credits to sales. Moreover, the AO has also not conducted any inquiry in respect of the expenses debited in profit and loss account and whether the expenses so debited is matching with the income credited and the valuation of the closing stock. The AO has also not conducted any inquiry in respect of advances against property and verified whether advances received are substantial to treat it as sales even during the pendency of registration of agreement. The AO has also not considered the applicability of Section 53A of Transfer of Property Act as enshrined in Section 2(47) of the IT. Act. The AO has also not considered that whether the receipts shown as loans and advances are actually assessable as sale proceeds of property since more than 90% of sale price has been received by the assessee in several cases but agreement is not executed. In any case, it was imperative on the part of the AO to examine the credits in banks and their genuineness including taxability of the receipts u/s.68 or as the case may be u/s.28 of the I.T. Act, 1961.
12. In the reply on record, the assessee has furnished certain submissions and evidences which were neither before the A.O. during the assessment nor the A.O. examined them nor he has conducted any enquiry in respect of the issues raised in the notice u/s.263 issued and further queries raised during the revision proceedings. Hence, the assessment was completed in a summary manner without conducting necessary and proper enquiries as necessary on facts of the case.
13. In view of the above discussions, assessment order passed by the A.O. was made without making proper enquiry as necessary on facts of the case. Hence, 7 ITA No . 1153/Ahd/2018 . A.Y. 2013-14 it is held to be erroneous and prejudicial to the interest of revenue. The A.O. is directed to make necessary enquiries/investigations and examine the issues afresh after giving reasonable opportunity of being heard to the assessee and complete the assessment afresh, as per Income Tax Act, 1961. The order of the Assessing Officer u/s. 143(3) dated 31/08/2015 is hereby set aside to the file of A.O. and to be framed denovo.
14. Now assessee has come before us against the order of ld. Pr. CIT u/s. 263.
15. We have gone through the relevant record and impugned order. In this case, on verification of records, it is seen that, during the course of assessment proceedings, the assessee has submitted copies of bank account statements of two current back accounts. The total deposits/receipts in both the banks is approximately 2,55,56,832/-.
16. Where as the total receipts/turnover as per return of income is Rs. 96,93,700/-. As we can see, from the impugned order that Assessing Officer has failed to question about this discrepancy of Rs. 1,58,63,132/- i.e. difference as per total turnover shown by the assessee and as per total deposits/receipts reflected in bank accounts.
17. Before us, ld. A.R. could not explain any plausible explanation above this huge difference of deposits/ receipts.
18. In the case of CIT vs. R.S. Assoiartes [2014] 51 taxmann.com 201 (Allahabad) wherein in similar circumstances order of ld. CIT(A) u/s. 263 was sustained by the Hon'ble Allahabad High Court:
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3. The brief facts of the case are that the assessee is a firm of civil contractors consisting of five partners. During the assessment year under consideration, it has constructed 32 flats. On 23.2.2000, a survey was conducted at the business premises of the assessee. A trial balance sheet of the assessee was found indicating the cash in hand of Rs. 14.98 lakhs. But during the survey, no actual cash was found. It was alleged that the cash was taken by the partners, who have spended the same. The A.O. has accepted the explanation of the assessee.
However, the CIT has passed an order under Section 263 of the Income Tax Act, stating that the assessment order is erroneous and prejudicial to the interest of the revenue. So, he set aside the assessment order and directed the A.O. to make a fresh assessment order. Being aggrieved, the assessee has filed an appeal before the Tribunal, who has set aside the order passed by the CIT under Section 263 of the Income Tax Act. Not being satisfied, the Department has knocked the doors of this Court.
4. With this background heard Shri Dhananjay Awasthi, the learned counsel for the appellant-Department, who has justified the order passed by the CIT under Section 263 of the Income Tax Act. He submits that no details of "work in progress" were maintained. No inventory of closing stock in the form of semi finished buildings, finished buildings, raw materials etc. were found on record. The books of accounts were incomplete and the entries of vouchers regarding various expenses incurred were not made in the books of accounts. No cash was found of Rs. 14.98 lakhs, which was shown in the books of accounts.
5. He further submits that during the assessment year under consideration, the assessee has sold 30 flats whereas the cost of 32 flats has been deducted while working out the closing stock of Rs. 1,29,04,1077-. One Shri Suresh Kumar Rochlani, made a vague statement without knowing the facts, so CIT has rightly passed an order under Section 263 of the Income Tax Act.
6. On the other hand, Shri S.D. Singh, learned Senior Counsel assisted by Sri Krishna Dev Vyas, learned counsel for the assessee-respondent has justified the impugned order passed by the Tribunal. He submits that the assessment order was neither prejudicial to the interest of the revenue nor it was erroneous as mentioned by CIT in his order, passed under Section 263 of the Income Tax Act. For the purpose, he relied on the ratio laid down in the following cases :--
(i) Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC);
(ii) CITv. Max India Ltd. [2007] 295 ITR 282/[20081 166 Taxman 188 (SC): and
(iii) CIT v. Bagriel India Ltd. [19931 203 ITR 108/71 Taxman 585 (Bom.).
7. Lastly, he made a request to dismiss the appeal filed by the Department.
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8. We have heard both the parties at length and gone through the material available on record, from which it appears that the assessee has shown availability of cash of Rs. 14.98 lakhs, but the same was never found. The explanation given by the assessee that cash was taken by the partners, who have spended, is not acceptable. The money belongs to the firm and it was not the money of the partners. The accounts -were not completed at the time of survey. Vouchers regarding the various expenses were not available, so the books of accounts were likely to be rejected. But the A.O. has not done. Further out of sale of 30 flats against the consideration of Rs. 1,26,05,0007-, the assessee has shown the net profit of Rs. 71,89,057-, which is meager one and does not appear to be reasonable by looking the commercial reality. Most of the expenses were incurred in cash. It may be mentioned that the income has to be computed by applying a suitable net profit rate as per ratio laid down in the case of Saraya Engg. Works (P.) Ltd. v. CIT [1987] 168 ITR 455/31 Taxman 165 (All.)
9. Regarding the loan transactions, the identity, capacity of the deposits and genuineness of the transactions were not examined by the A.O. The A.O. has not obtained the complete name and address of the parties, their source of income and also the details of transactions. No confirmation letter was obtained.
10. In the circumstances mentioned above, we are of the view that the matter needs deep investigation. The CIT had rightly passed an order under Section 263 of the Income Tax Act, where he had directed the A.O. to make a fresh assessment order. Considering the peculiar facts and circumstances of the case, the same appears to be reasonable. The Tribunal has set aside the order nearly by discussing the case laws, but without examining the facts of the case. It may be mentioned that the assessee will get fresh opportunity before the A.O. at the time of framing the de novo assessment.
11. In the light of the above discussion, we set aside the impugned order passed by the Tribunal and restore the order dated 25.03.2003 passed by the CIT under Section 263 of the Income Tax Act. Being an old matter, it is expected that the A.O. will make a fresh assessment within a period of six months.
12. The answer to the substantial questions of law is in favour of the Department and against the assessee.
13. In the result, the appeal filed by the Department is allowed.
19. In similar facts and circumstances and Hon'ble High Court of Calcutta in the matter of Sushil Modi vs. CIT, Central-II [2015] 59 taxmann.com 63 (Calcutta) has decided matter in favour of Revenue:
10 ITA No . 1153/Ahd/2018 . A.Y. 2013-14 "Section 69 of the Income-tax Act, 1961 - Unexplained investment (Deposits) - Block period 1-4-1986 to 20-9-1996 - During search and seizure operation, assessee's saving bank account showed certain sum deposited in said bank account - Assessee contended that said deposits were made out of cash balance available - In absence of any proof with regard to such availability of funds, Assessing Officer treated said deposits as income from undisclosed sources - Assessee further contended that said deposits had been reflected in final accounts of assessment year 1987-88 but he did not produce his final accounts of said assessment year - Whether, on facts, Assessing Officer was justified in invoking provisions of section 69 - Held, yes [Paras 13 & 17] [In favour of revenue]"
20. In our considered opinion, we do not find any ambiguity in the order passed by the ld. Pr. CIT as he has directed the A.O. to make necessary enquiry /investigation examine the issues afresh as Assessing Officer has been failed to conduct proper enquiry. Therefore, appeal of the ld. Pr. CIT is upheld and same does not require any kind of interference at our end.
21. In the result, appeal filed by the Assessee is dismissed.
Order pronounced in Open Court on 19 - 12- 2019
Sd/- Sd/-
(PRADIP KUMAR KEDIA) (MAHAVIR PRASAD)
ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER
Ahmedabad: Dated 19/12/2019
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad