Income Tax Appellate Tribunal - Ahmedabad
Acit.Cent.Circle-1,, Surat vs Saraswat Enterprise,, Surat on 27 April, 2017
*,* अहमदाबाद ।
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
सव ी izeksn dqekj, लेखा सद
य एवं महावीर साद, या यक सद
य के सम ।
BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER And
SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
(i). आयकर अपील सं./I.T.A. No. 2879/Ahd/2013 for A.Y. 2011-12
(ii). आयकर अपील सं./I.T.A. No. 2880/Ahd/2013 for A.Y. 2011-12
(i) The Asstt. Commissioner of बनाम/ (i) M/s. Saraswat
Income Tax, Central Circle-1, Enterprise
Vs.
Surat. 3 r d Floor, Sargam
House,
Opp. Andhjan School,
Ghod Dod Road, Surat
(ii) The Asstt. Commissioner of (ii) M/s. Milestone
Income Tax, Central Circle-1, Enterprise
Surat.
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAOFM 0120 H
(अपीलाथ% /Appellants) .. ( &यथ% / Respondents)
Assessee by : Shri K. Madhusudan, Sr. D.R.
Revenue by : Shri R.B. Shah, A.R.
ु वाई क* तार,ख /
सन Date of Hearing 07/02/2017
घोषणा क* तार,ख /Date of Pronounce ment 27/04/2017
आदे श / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER :
These two appeals have been filed by the Revenue respectively are commonly directed against the order of the Commissioner of Income Tax(Appeals)-II, Ahmedabad, dated 20/09/2013 for the Assessment Year (AY) 2011-12.
-2-2. Revenue's Grounds of appeal in ITA No.2879/Ahd/2013 for A.Y. 2011-12:-
The learned CIT(A) erred in law and on facts in deleting addition of Rs.4,90,00,000/- made on account of disallowance of deduction u/s 80IB(10) of the Act, ignoring the fact that the assessee did not produce any supporting evidences which can prove that the unaccounted income was actually received from the project of the assessee.
3. The relevant facts as culled out from the materials on record are as under:-
In this case, a search action was carried out of 19.01.2011 and assessment u/s 143(3) of the IT. Act had been completed on 28.02.2013 by restricted deduction u/s. 80IB at Rs. 80,03,155/- and remaining deduction of Rs. 4,90,00,000/- was disallowed.
4. During search one small note book was seized which was inventoried as per Annexure BS-2 of the Panchnama. On the basis of the contents of the said page, the main person of the group Shri Karsanbhai M.Prajapati was confronted and in answer to Q.No.5 of his statement on oath, he admitted that the entries on the said page are date-wise, concern- wise details of unaccounted money received by the members of the concerns. Shri Prajapati unequivocally and categorically admitted in reply to Q.No.6 that the aggregate sum of Rs.23.69 crores declared by him represented unaccounted and unexplained net income of concerns earned outside books of accounts and the total income of Rs.23.96 crores was offered for taxation as income of the year under consideration i.e. -3- A.Y.2001-02; The details of disclosure year-wise, project-wise were as under:
Sr. Name of construction Name of Firm Unaccounted No. Project taxable income (In cr.)
1. Swastik Residency Sarswat Enterprise 4.9
2. Swastik Milestone Milestone Enterprise 3.9
3. Swastik woods Woods Enterprse 3.3
4. Swastik Vihar Vihar Enterprise 2.3
5. Swastik Universal Vibhuti Organiser 9.29 Pvt. Ltd.
Total 23.69 Crore
5. It is seen from the above that in the case of assessee firm, the undisclosed income offered was Rs.4.09 crores. From the statement of Shri Prajapati, it was clear that the offered undisclosed income was unexplained income earned outside the books of accounts pertaining to the firm.
6. The Assessing Officer also observed that the claim was made by the assessee u/s.80IB amounting to Rs. 5,70,03,155/- during the year under consideration and the said deduction was claimed on the offered and disclosed income of Rs.4.9 crores. The Assessing Officer vide show cause notice dtd. 14.02.2013 asked the assessee firm to furnish full particulars/information in respect of 'on money' received on sale of flats of Swastik Residency in the prescribed format i.e. it was asked to furnish name and address of the purchaser, name of the scheme, flat No. and the area in sq. ft., date of sale deed executed/sale agreement, amount of sale declared in the registered document, amount of on money received and -4- the date wise details of 'on money' received. The Assessing Office was of the view that if the assessee failed to submit the required details, it will be presumed that said unaccounted income was not received from the business activities i.e. selling of the flats and the unaccounted income declared would be taxed under the year "Income from other sources"
instead of "Business Income".
7. The assessee, during the assessment proceedings furnished the reply mentioning that the disclosure of Rs.23.69 crores was related to the income of the firm based on diary/note book impounded as per Annexure BS-2. The said diary/note book contained the details of 'on money' received on the different projects. It was submitted that the assessee firm had undertaken the project of "Swastik Residency" and on page 6 to 10 of the said diary/note book, the details of 'on money' received aggregating to Rs.4.9 crores in respect of said project were mentioned and the assessee firm did not carry any other activity/business other than the project of Swastik Residency. It was further submitted that the details such as name and address of the purchaser, flat No. etc. were not available and could not be complied with from the said record. The A.R. of the appellant contended that the project Swastik Residency was an eligible project for deduction u/s.80IB and since the additional undisclosed income of Rs.4.9 crores pertained to the said eligible project, the assessee was entitled to deduction u/s.80IB of the Act.
8. The Assessing Officer also observed that the assessee firm itself has admitted that no details were mentioned in the pages of diary which -5- proved that the assessee had no supporting evidence to support its arguments. The Assessing Officer, however, agreed that "Swastik Residency Project" is an eligible project and deduction u/s.80IB is allowable in respect of business income excluding offered undisclosed income of Rs.4.9 crores. He has concluded that since the assessee failed in proving the said offered income as earned as 'on money' from the project of the assessee firm, it could not be said that undisclosed income was 'business income' of the assessee and according to him it was liable to be taxed under the head "Income from other sources" where the deduction u/s.80IB could not be allowed.
9. The Assessing Officer, thus has held that out of total profit of Rs.5,70,03,155/-the only business income of Rs.80,03,155/- (Rs.5,70,03,155 - Rs.4,90,00,000] is eligible for deduction u/s.80IB of the I.T. Act.
10. On the other hand assessee contended that the during the course of search, one of the partner of the firm Late Shri Karshanbhai Prajapati has made total disclosure of Rs.23,69,00,000/- in case of firms' business including disclosure of Rs.4,90,00,000/- in the firm based on the diary/note book sized during the search in 'Sargam group being income/receipt of the project 'Swastik Residency' belonging to the firm.
11. The Assessee's only source of income is income from the development of project namely 'Swastik Residency'. This income of this project is eligible for deduction u/s 80IB(10). The deduction has been -6- allowed in AY 2010-11 after due verification and there is no dispute about the eligibility of deduction of the project u/s 801B(10). The assessee has claimed deduction of Rs.5,70,03,155/- u/s 801B(10) including disclosure income of Rs. 4,90,00,000/- being project 'Swastik Residency' eligible housing project u/s 80IB(10). The Assessing Officer has treated disclosure income of Rs.4,90,00,000/- as other income and disallowed deduction u/s 80IB(10).
12. The Assessee is a firm engaged in business of development, construction of flats etc. Its only source of income is from the development of project namely 'Swastik Residency'. Income of Rs. 4,90,00,000/- has been disclosed based on the diary/note book sized during the search in 'Sargam' group being income/receipt of the project 'Swastik Residency' belonging to the firm. The diary records receipt transactions of the various projects of the group including project of the firm 'Swastik Residency'. All circumstances suggest and lead to the unequivocal decision that income of disclosure of Rs. 4,90,00,000/- is the project income/business income.
13. Details of disclosure made on the basis of diary are as below:
Name of Name of firm Amount Remark
Project
Swastik Sarswat 4,90,00,000/- 80IB project. Disclosure
Residency Enterprise amount treated as other
income and 80IB deduction is
disallowed for disclosed
amount.
Swastik Milestone 3,90,00,000/- 80IB project. Disclosure
Milestone Enterprise amount treated as other
-7-
income and 80IB deduction is
disallowed for disclosed
amount.
Swastik Woods 3,30,00,000/- Non 80IB project. Disclosure
Woods Enterprise amount treated as business
income.
Swastik Vihar 2,30,00,000/- Non 80IB project. Disclosure
Vihar Enterprise amount treated as business
income.
Swastik Vibhuti 9,29,00,000/- Non 80IB project. Disclosure
Universal Organiser Pvt. amount treated as business
Ltd. income.
14. From the above table, it can be seen that out of 5 firms in which disclosures are made, only in case of 2 firms in which deduction u/s 80IB(10) is claimed, amount of disclosure is taxed under the head 'Income From Other Sources' and in other 3 assesses, the same is taxed as business income.
15. Late Shri Karshanbhai Prajapati in his statement very categorically stated that the source is the project.
16. In case of ACIT Central Circle 1, Surat vs. Padmavati Developers (ITA 268/Ahd/2010 order dtd. 21/09/2012) very categorically held that if the amount of disclosure had direct and proximate connection with the normal business of construction activity, the disclosed income is from the business and is eligible for deduction u/s 801B.
17. In the case of the CIT vs. Suman Paper and Board Ltd. [2009] 314 ITR 119 (Guj.) an observation has been made that manufacturing and -8- sale of Board paper and craft paper happened to be the only source of income of the assessee, therefore, the amount disclosed consequence upon the search partakes the character of business income and eligible for the deduction U/S.801B/80IA of the l.T. Act.
18. In case of Virat Gems vs. Department of Income tax (ITA 3541 & 3756/Ahd/2008 order dtd. 15/11/2010) it is held that income disclosed by the assessee during in course of search is a business income and not income from other sources.
19. Hon'ble jurisdictional High Court in the case of ACIT vs. Prabhudas Parekh Case No, 18759/2001 decided on 27-06-2001 has dismissed the appeal of the Revenue filed against the order of the Tribunal and in this case The Tribunal in ITA No.2408/Ahd/1993 vide order dated 19-12-1999 while dismissing the appeal of the Revenue has held as follows:-
"Therefore, as laid down by Hon'ble Supreme Court in the case of mentioned above, the practical noting must be applied to find out the head of income. The head of income has to be determined from the nature of the business the assessee was carrying on at the time of search. In this particular case, the assessee was not carrying on any other activity for earning the income. Therefore, the income disclosed by the assessee u/s.132(4) has to be assessed under business income from the common notion of a practical man. The head "income from other sources" is a residual head and the income has to be assessed under that head only if the same is not covered under any other head."
20. In case of CIT vs. M/s. Sheth Developers (P) Ltd. in Income Tax Appeal No.3724 of 2010 dated 27/07/2012, Bombay High held that -9- income disclosed during search is business income as the assessee is engaged business of construction.
21. It was observed by the learned CIT that the main issue of contention on which the entire discussion has been made, is the notings on Page No.6 to 10 of the diary/note book seized during the course of search in the case of appellant group of concerns and the statement of late Shri Karsanbhai Prajapati, the main person of the group. It is seen that the disclosure made by Shri Prajapati on behalf of the different concerns of the appellant group was mainly based on the notings made in the different pages of the said diary. It is seen from the perusal of the pages of the said diary that on page from 6 to 10, there is a mention of "SR" below which the dates are mentioned against which the amounts received such as:-
SR Page No.612.05.2010 8,50,000 15.5 12,40,000 20.5 10,50,000 25.5 9,50,000 7.6 10,50,000 15.6 15,05,000
22.6 14,75,000
22. The first noting on page No.6 is dated 12th May, 2010 and the last noting is dtd. 22nd June,.2011. On other pages also i.e. No.7, 8, 9 & 10, similar notings have been done and last entry i.e. on page No.10, is dated 6th January,2011 for amount of Rs.10,85,000/-. The period falls in accounting year 2010-11 i.e. A.Y.2011-12 and the total sums mentioned comes to Rs.4.9 crores on the basis of which Shri Prajapati declared that
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the unaccounted income was earned in respect of Swastik Residency (SR). It is seen that on other pages also, similar details are mentioned e.g. from page 1 to 5 "SM", page 11 to 14 "SW", page 15 to 18 "Vihar" and from page 19 to 21 "SU" where the similar details like dates and amounts are mentioned. These details are identical as in the case of the appellant firm and the name of other concerns of the group can be easily deciphered like Swastik Milestone(SM), Swastik Woods (SW), Swastik Vihar(SV), and Swastik Universal(SU) etc. The entries mentioned in the relevant pages (in the case of the appellant from 6 to 10), clearly indicate that the appellant firm earned the said income out of the 'Swastik Residency Project', and total of such unaccounted income entered in these pages, was Rs.4.9 crores for the year under consideration which was admitted as unexplained income earned outside the books of accounts pertaining to the firm.
23. Learned CIT further held that he is of the considered view that income of Rs. 4.9 crores disclosed in the course of search of the appellant firm, is to treated as "Business Income" from the construction activity is to be taxed under the head only "Business Income". As regards the deduction u/s. 80IB, the Assessing Officer, himself has admitted that the Project Swastik Residency is eligible project for deduction u/s. 80IB of the Act. Therefore, the Assessing Officer was directed to allow deduction u/s. 80IB provided that other conditions mentioned in section 80IB(10) are fulfilled. Accordingly, the disallowance made by the CIT is deleted.
- 11 -
24. We have gone through the relevant record and impugned order and paper book filed by the rival parties. It is clear that Assessee is not having any other source of income except income from construction and development of the housing project. In the course of survey no evidence was found that assessee is carrying on business other than construction of the housing project viz. Swastik Residency.
25. Even the details such as names of the purchasers, 'on money' on each flat, date of sale deed were not submitted by the appellant, it could not be denied that the entire amounts mentioned against different dates represented the total amount of 'on money' received on those dates under the project Swastik Residency which was mentioned in short as "SR".
26. On the basis of similar notings on the other pages of the same diary, the disclosures were made in the case of other projects i.e. sister concerns of the appellant group, similar inference has been drawn during the course of search which formed the basis of total disclosure of Rs. 23.69 crores by Shri Karsanbhai Prajapati, the main person of the group and the said disclosure was accepted by the department.
27. The assessing officer on the identical facts has held in 3 other concerns of the group i.e. M/s. Wood Enterprise (Swastik Woods), M/s. Vihar Enterprise (Swastik Vihar) and M/s. Vibhuti Organisers Pvt. Ltd. (Swastik Universal), the disclosure as 'Business Income' and assessed accordingly, whereas in the case of the appellant firm and another sister concern i.e. M/s. Milestone Enterprise (Project Swastik Milestone), the
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said disclosure has been treated as "Income from other sources" which is unjustified.
28. Learned AR has also cited a judgment of Nilkanth Developers vs. ITO - ITA No. 2610/A/2014 where identical facts are involved. In this case also the assessee has undertaken not to claim the deduction u/s. 80IB(10) at the time of survey but it was claimed in the return of income afterwards. This case was followed in the case of ACIT vs. Ambica Enterprise - ITA No. 679/A/2014. It is to be noted that the search was conducted on the same day in the case of M/s. Ambica Enterprise when the search was conducted in the case of assessee where identical facts are involved.
29. In view of the foregoing observation, we dismissed the appeal of the revenue.
30. Now we take up the Revenue's appeal in ITA No. 2880/Ahd/2013. Revenue has been taken following Ground of appeal:
The learned CIT(A) has erred in law and on facts in deleting addition of Rs.3,90,00,000/- made on account of disallowance of deduction u/s. 80IB(10) of the Act, ignoring the fact that the assessee did not produce any supporting evidences which can prove that the unaccounted income was actually received from the project of the assessee.
31. In this case, search was also conducted along with M/s. Saraswat Enterprise and facts are identical in this case, for the sake of brevity we don't want to repeat here.
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32. In this case, learned CIT(A) allow the appeal.
33. We do not find any infirmity to interfere in the order passed by the learned CIT(A) and similarly we dismissed the appeal of the assessee.
34. As we have already dismissed the Revenue's appeal in ITA No.2879/Ahd/2013.
35. In the result, both the appeals in ITA No.2879/Ahd/2013 and ITA No. 2880/Ahd/2013 are dismissed.
This Order pronounced in Open Court on 27/04/2017
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(PRAMOD KUMAR) ( MAHAVIR PRASAD )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad;
Priti Yadav, Sr. Ps
Dated 27/04/2017
आदे श क त ल प अ!े षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &यथ% / The Respondent.
3. संबं3धत आयकर आयु5त / Concerned CIT
4. आयकर आय5
ु त(अपील) / The CIT(A)-II, Ahmedabad.
5. 6वभागीय त न3ध, आयकर अपील,य अ3धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स&या6पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy