Income Tax Appellate Tribunal - Jaipur
Dcit, Jaipur vs Renu Agarwal, Jaipur on 20 December, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES , JAIPUR
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BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 763/JP/2015
fu/kZkj.k o"kZ@Assessment Year : 2011-12
The DCIT cuke Smt. Renu Agarwal
Central Circle- 3 Vs. 25, Dayal Nagar
Jaipur Gopalpura Byepass, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAOPA 6576 B
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by :Shri Nasir Ali, CIT -DR
fu/kZkfjrh dh vksj ls@Assessee by: Shri Vijay Goyal
lquokbZ dh rkjh[k@ Date of Hearing : 15/12/2016
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20/12/2016
vkns'k@ ORDER
PER BHAGCHAND, AM
The assessee has filed the appeal against the order of ld. CIT(A) -4, Jaipur dated 31.08.2015 for the assessment year 2011-12 raising therein following ground of appeal:-
''Whether on the facts and in the circumstances of the case the ld. CIT(A) was right in deleting the penalty of Rs. 1,06,80,000/- levied by the AO u/s 271AAA of the I.T. Act, 1961 without appreciating the fact that the assessee willfully concealed the particulars of income and documents found during the course of search demonstrate the undisclosed income used for making undisclosed investment and expenditure.2 ITA No. 763/JP/2015
The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur .
2.1 The facts of the issue as emerges from the order of the ld. CIT(A) is as under:-
3.1.3 I have duly considered assessee's submission and carefully gone through penalty order passed by the AO. I have also perused the facts of the case. On perusal of submission made and assessment order passed by the AO, following things have been noticed.
(i) No incriminating document whatsoever indicating cash received from "Guru Pragya"on account of Land transaction. Whatever amount received from "Guru Pragya" was found recorded in the books found during the course of search. Accordingly, there is no allegation of receipt of on money by the assessee found during the search operation. Cost of land was duly disclosed in the regular books of accounts found by search party.
(ii) Cheques as consideration received from Guru Pragya shown in the regular books of accounts.
(iii) Seized document identified as AS-1 pg 4 is placed at page 7 of the paper book. Notings/Transactions recorded are therein which is mentioned at page 22 of ld. CIT(A)'s order.
This seized document shows total receipt of Rs.6.01 Cr. upto 15th Sep 2010. Assessee has submitted a ledger account (PB Pg 48-50) which shows receipt of Rs.6.01 Cr. upto 12/04/2010. Accordingly, there cannot be undisclosed receipts. On plain reading of the aforementioned document, it is also seen that transaction pertains to JV with Guru Pragya. Total considerations estimated was Rs.9.86 Cr. (approximate) against which the assessee has shown sales on percentage completion method of Rs.4,72,96,492/= in AY 2011-12 and Rs.3,83,95,882/= in AY 2012-13, totalling to Rs.8,56,92,374/=. Since, the sale of the project was not completed upto 31/03/2012, therefore, the assessee has also not booked entire cost of the land against the project and closing stock of the land amounting to Rs.7,40,180/= shown in Balance Sheet as on 31/03/2012. This fact was also disclosed before the AO vide letter(para D internal page 4 of the letter) dt. 09/9/2013 (Reference: PB Pg 184-191). This indicate that there is no documentary evidence of undisclosed income found during the search operation and transactions recorded in the said seized document identified as AS-1 pg 4 are duly matching with the regular books of account for the year. 3 ITA No. 763/JP/2015
The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . The only dispute in this case is of accounting treatment of the transaction of the JV Vs sale of land. The AO treated the transaction as sale of land whereas the assessee treated the same as development agreement/JV. Assessee treated this transaction as a JV/Development agreement on the basis of registered development agreement which was duly accepted by the Stamp Duty Authorities / JDA and other Govt. Dept. AO's observation is purely based on certain terms and conditions mentioned in the development agreement such as advance money received, rate @ Rs.1000/- per Sq Ft, fixed time limit for completion of the project, profit shareable in the ratio of 21:79 with Guru Pragya etc. In this regard, AO has merely raised his doubt without any basis or documentary evidences found ruing the search operation. It is pertinent to mention here that AR has explained all the objections raised by the AO on the terms and conditions mentioned in the development agreement vide letter dt. 9th Sep 2013 [Para (e) internal pg 5 to 7] (Ref PB Pg 184 to
191). On perusal of the penalty order, it is also seen that AO has not controverted all these facts. It is also seen that advance money received was towards refundable security against the development agreement. It is a normal practice adopted by any prudent business man to protect his/her interest. It is also a fact that assessee has given possession to Guru Pragya for construction only, not for sale of land as it is. AR has also submitted before the AO and appellate proceeding that even the sale deed with allotee/flat owner will be jointly executed by the developer and the land owner i.e., the assessee. All these prove the contention of the assessee with regard to JV / Development agreement with Guru Pragya are bonafide.
(iv) It is also a fact that issue of 80 IB claim in case of Guru Pragya in AY 2010-11 has been allowed by CIT(Appeals)-1 Jaipur vide order dated 24/02/2015 (ITA No.25/13-14).
(v) AO has referred the statement of Sh. Ashok Agrawal at pg 23 to 24 in the impugned penalty order. On plain reading of the sworn statement recorded on oath of Sh. Ashok Agrawal, it is seen that Sh. Ashok Agrawal has admitted undisclosed sale on the ground that the amount received from developer has shown advance in books of accounts and sale has not been recorded in the books found at the time of search. In this regard, AR explained that the assessee is following percentage completion method, therefore, sale could be recroded only at closure of accounting year after receipt of certificate from the developer. Assessee has submitted copies of certificates of share in sale made in housing project issued by Guru Pragya which is placed at PB Pg 95-96. The certificate for FY 2010-11 is dated 24/9/2011, therefore, the assessee could not know what will be sale figure as on the date of search. Whether a particular transaction is disclosed or undisclosed this should be 4 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . analyzed with reference to date of search. As on the date of search, the fact is that amount received against sale as well as cost was duly recorded in the books found by the search team. The accounting treatment of the land as JV was given after the search i.e. at the time of filing of the return and on the basis of expert's advice (Auditors), the said transactions have not been treated as sale of land and auditors have not qualified the tax audit report. Therefore, assessee acted on expert's advice and given the accounting treatment of the land accordingly.
(vi) AO has mentioned that assessee has not preferred any appeal against the impugned assessment order which clearly shows that assessee has accepted the contention of the AO in respect of the additions made. In this regard, AR has mentioned that not filing of the appeal cannot be a ground for levy of penalty, by relying on the decision of Hon'ble Jurisdictional High Court in case of Jawahar Kala (Supra).
(vii) Even otherwise also, the assessee is covered by sub clause 2 of sec 271AAA of the Act. In the statement recorded u/s 132(4) of the Act, assessee has admitted the income and stated the manner in which income derived and declared the same in her ROI filed after search and paid taxes thereof.
In view of facts and circumstances of the case as mentioned above, levy of penalty of Rs.1,06,08,000/= u/s 271AAA of the Act cannot be sustained, hence deleted.'' 2.2 During the course of hearing, the ld. DR relied on the order of the AO.
2.3 During the course of hearing, the ld. AR of the assessee supported the order of the ld. CIT(A) and filed the written submission which has been taken into consideration while adjudicating upon the issue in question.
2.4 We have heard the rival contentions and perused the materials available on record. A search was conducted on 22-09-2010 in the case of 5 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . Shree Ram Group, Jaipur to which the assessee belongs . The assessee is an individual and she derives income from real estate business, and capital gain. The assessee purchased agricultural land and got it converted into residential and commercial plot after getting the same approved from JDA (i.e. Jaipur Development Authority). The assessee filed return of income declaring total income at Rs. 7,11,74,000/-/- on 27- 09-2011 u/s 139(1) (Copy at PB Page 8-12). In original return filed u/s 139(1), she claimed deduction of Rs. 4,58,25,167/- u/s 80IB(10) against the joint venture housing project with Guru Pragya Infrastructure Pvt Ltd. In support of this claim, the assessee filed Certificate of CA in Form No 10CCB (Copy at PB Page 36-42). However, when it came to the knowledge of the assessee that the claim of deduction u/s 80IB(10) would attract the prolonged litigation with department, she choose the path of peace and in order to avoid the litigation, she withdrew the claim of deduction u/s 80IB by filing revised return u/s 139(5) of Income Tax Act within the time allowed by the law. The Revised return of income was filed on 26-03-2013 declaring total income at Rs. 11,69,99,170/- (Copy at PB Page 43-47) and due taxes were paid thereon along with the revised return. The basic dispute is over a housing project in joint venture with M/s Guru Pragya Infrastructure Pvt Ltd. The issue is whether the 6 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . transaction is a joint venture housing project or pure sale of the land in the hands of assessee. During the course of search a document Page 4 Exhibit 1 of Annexure AS-01 (Copy at PB Page 7) was found which is aide memoire - a rough noting of joint venture transaction with M/s Gurupragya Real Mart Pvt Ltd (Now M/s Guru Pragya Infrastructure Pvt Ltd) (in short M/s Gurupragya) showing estimated amount of consideration of Rs. 9.86 crores out of which an amount of Rs. 6.01 crore was received till 15.09.2010 and the remaining amount of Rs. 3.85 crores was outstanding. In the regular books of account seized by the department, the amount received from M/s Gurupragya was shown as "Advance Received" (Copy of ledger a/c at PB Page 48-50). It is undisputed fact that the assessee has not received any "unaccounted money" or "Cash" from M/s Gurupragya whatever the amount was paid by M/s Gurupragya was found recorded in the books of account of the assessee which were found as the result of search. During the course of search the statement of Shri Ashok Agarwal dated 12.10.2010, (husband of assessee) and assessee were recorded u/s 132(4) (Copy at PB Page 51-
61). The statement of Shri Ashok Agarwal, husband of the assessee admitted the income from Joint Venture Transaction with Gurupragya. In his statement he said that the land was sold through JV to M/s. Guru Real 7 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . Pragya Mart Pvt. Ltd. for total sale consideration of Rs.9.86 crore and out of which Rs.6.01 crore was received and the remaining amount of Rs.3.85 crore was outstanding. Smt Renu Agarwal also signed this statement. The manner in which the undisclosed income derived was also explained. The assessee had spelled out in detail the nature of the transaction. The assessee had stated that the amount is shown as advance in the books of account. The said income was fully recorded in the books of account found at the time of search. The assessee was acting on the basis of terms of development agreement (Copy at PB Page 62-94) and following the "Percentage Completion Method" for this project. The sale was recorded on the basis of the figures of sales intimated by the developer. The developer M/s Gurupragya Real Mart Pvt Ltd (Gurupragya Infra Ltd) intimated the assessee's share in sales i.e. 3,35,762 Sq ft area amounting to Rs. 4,72,96,492/- on 31.03.2011(Certificate of Guru Pragya at PB Page 95-96), therefore, corresponding journal entry was passed at the end of the year debiting the a/c of Developer and crediting the account of "Sales Guru Shikhar A-G Project". In the return of income, the assessee showed profit of Rs.4,58,25,167/- of AY 2011-12 and profit of Rs. 3,72,01,442/- of AY 2012-13 from this transaction and also claimed deduction u/s 80IB. The assessee vide letter dated 23.01.2013 (Copy at 8 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . PB Page 119-125A) clarified that the transaction has been treated in books as under:-
(i) A.Y. 2011-12: On the basis of percentage completion method of accounting followed for the purpose of joint venture, a sum of Rs.4,72,96,492/- on a/c of sale and interest of Rs.67,55,287/- was credited. Cost of land was taken at Rs.14,71,325/- and thus a profit of Rs.4,58,25,167/- was declared from joint venture.
(ii) In A.Y. 2012-13, the sale booked as per percentage completion method was Rs.3,83,95,882/- and after considering the cost of land of Rs.11,94,440/-, a profit of Rs.3,72,01,442/- was shown.
In original return filed u/s 139(1) the deduction u/s 80IB(10) was claimed (Copy at PB Page 8-12), which was withdrawn by filing revised return u/s 139 (5) of Income Tax Act (Copy at PB Page 43-47) within the stipulated time. The due tax together with interest in respect of such income has been paid. In the assessment proceedings the AO held that the transaction of assessee with M/s Gurupragya is not of joint venture housing project transaction but pure sale of land and assessed the profit from land at Rs. 10,06,80,000/- of AY 2011-12 (Copy of order at PB Page 156-182) as against the profit of Rs. 4,72,96,492/- and Rs. 3,83,95,882/- declared by the assessee in the returns for the year ended on 31.03.2011 and 31.03.2012 respectively. The AO in the assessment order relied on the statement on oath of Sh. Ashok Agarwal (Copy at PB Page 51-61) and 9 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . also referring to various clauses in joint agreement dated 19.03.2008 (Copy at PB Page 62-94) concluded that joint venture agreement is nothing but sale of land for a fixed consideration. Total salable area is 5,21,361 sq.feet and considering the sale consideration of Rs.@210 per sq.feet relatable to assessee, the total consideration is Rs.10,94,85,810/- cost of land is Rs.26,65,765 and thus profit on sale of land came to Rs.10,60,80,000. The assessee has shown profit of Rs.4,58,25,167 of AY 2011-12 and profit of Rs. 3,72,01,442/- of AY 2012-13 and unsold portion shown as stock . The AO rejected the submission of the assessee because of mainly following reasons: -
(a) Consideration for sale of land was stated at Rs.9.86 Crores while undisclosed income is determined at is Rs.10,60,80,000/-.
(b) In statement, it is stated that land was sold while in return, the profit shown from sale of project through joint Venture.
(c) Undisclosed income was not recorded in the books of account found during search.
(d) The assessee has not paid tax together with interest in respect of undisclosed income of Rs.10,60,80,000.
(e) Since the assessee has not filed appeal and hence the issue is not debatable.
The AO treated the amount of Rs. 10,06,80,000/- as undisclosed income of the assessee and initiated penalty proceedings u/s 271AAA of Income Tax Act. The assessee filed detailed explanation objecting the levy of penalty (Copy at PB Page 184-191) which was rejected by the AO in 10 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . summary manner. The AO levied the penalty of Rs.1,06.08,000/- on Rs. 10,60,80,000/- u/s 271AAA treating the amount of Rs.10,06,80,000/- as undisclosed by passing an order on 30/09/2013. The AO also levied penalty u/s 271(1)(c) of Income Tax Act on Rs. 4,58,25,167/- by passing an separate order on account of deduction claimed under 80IB for the JV project. Thus the penalty on amount of Rs.4,58,25,167/- was imposed u/s 271AAA of Income Tax Act, 1961 as well as u/s 271(1)(c) of Income Tax Act, 1961. The assessee carried the matter before the ld. CIT(A) who had deleted the penalty of Rs.1,06,80,000/- levied by the AO u/s 271AAA of the I.T. Act, 1961. It is noted that the ld. CIT(A) that there was no incriminating documents as to cash received from ''Guru Pragya'' on account of land transaction and the amount so received during search was found recorded in the books of account of the assessee. The only dispute in this case is accounting treatment of the transaction of the JV vs sale of land whereas the assessee treated the same as development agreement / JV. The assessee treated this transaction as a JV/ Development agreement on the basis of registered development agreement which was duly accepted by the Stamp Duty Authorities/ JDA and other Govt. Deptt. The AO treated it sales of the land by interpreting the certain clauses of Development Agreement. During the assessment stage, no show cause notice was given 11 ITA No. 763/JP/2015 The DCIT, Central Circle- 3, Jaipur vs. Smt. Renu Agarwal, Jaipur . to the assessee. However, at the penalty proceeding stage, the assessee submitted point to point explanation over the clauses of the Development Agreement which had not been controverted by the AO in penalty order. Therefore, the assessee's treatment as to land transaction as joint venture / development agreement was bona fide. The Development Agreement is dated 19-03-2008. Therefore, it is not understandable on what basis it can be treated as sales for A.Y.2011-12. Looking into all the facts and circumstances of the case, we concur with the findings of the ld. CIT(A) on the issue in question. Thus the appeal filed by the Revenue is dismissed. 3.0 In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 20 -12-2016. Sd/- Sd/- ¼dqy Hkkjr½ ¼HkkxpUn½ (KUL BHARAT) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 20/12/ 2016 *Mishra
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The DCIT,Central Circle- 3 Jaipur
2. izR;FkhZ@ The Respondent- Smt. Renu Agarwal, Jaipur
3. vk;dj vk;qDr¼vihy½@ CIT(A).
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 763/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar