Income Tax Appellate Tribunal - Ahmedabad
Shree Nidhi Corporation, Surat vs Department Of Income Tax on 26 August, 2016
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'डी
डी'
डी अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, AHMEDABAD
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND
SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 1635/Ahd/2011
िनधा रण वष / Assessment Year : 2008-09
ACIT, M/s. Shree Nidhi Corporation,
Circle-9, Vs Block No.204, Satellite Road,
Surat Varachha Road, Surat
PAN : ABJFS 3086 N
अपीलाथ /
अपीलाथ (Appellant) यथ
यथ /
थ (Respondent)
Revenue by : Shri Sanjay Kumar, Sr DR
Assessee by : Shri R.N. Vepari, AR
सुनवाई क तारीख/ Date of Hearing : 22/06/2016
घोषणा क तारीख / Date of Pronouncement: 26/08/2016
आदेश/O R D E R
PER R.P. TOLANI, JUDICIAL MEMBER:-
This appeal by the Revenue is directed against the order of the Commissioner of Income-Tax (Appeals)-I, Surat dated 28.02.2011 for AY 2008-09.
2. The Revenue has raised following grounds in its appeal:-
1) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO at Rs.74,00,000/- despite the fact that the AO has rightly held that no claim of deduction u/s 80IB(10) can be allowed as the unaccounted income offered by the appellant is not its regular income disclosed in its books of accounts up to the date of survey and therefore in the nature of deemed income against which no deduction or set off is available.
2) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in facts and in deleting the addition made by the AO at Rs.1,32,99,175/- on account of current liability despite the fact that the assessee could not prove the genuineness of the transactions.
3) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not calling for a remand report on further submissions filed by the assessee before the appellate authority which is in clear violation of Rule 46A of I.T. Rules.ITA No. 1635/Ahd/2011
ACIT vs. Shree Nidhi Corporation AY : 2008-09 2
3. The brief facts are - The assessee, partnership firm was created by a partnership deed executed on 07.02.2007, with following constitution:-
i) Shri Hitesh Bhikhabhai Sutaria - 95%
ii) Shri Iswarbhai Gulabbhai Desai - 5%
The firm claims to be engaged in development and construction of residential housing project.
3.1 A survey u/s 133A was conducted on 12.09.2007, where some incriminating materials were found; on confrontation thereof, the assessee made a voluntary declaration of income of Rs.74,00,000/- while answering question No.28 of the statement recorded during the course of search. The income was declared as the unaccounted income of Shrinidhi Corporation for the current year. It may be mentioned that the income was not declared as attributable to any particular project.
3.2 Return of income for AY 2008-09 though was filed at Nil income, claiming income tax refund of Rs.11,00,000/-. In schedule F, appended with the Audit Report filed with the return, in item No.4, following was mentioned:-
"The project development site of the firm was surveyed by Income Tax officials during the year under consideration. The firm had made disclosure in survey of unaccounted receipts of Rs.74 lacs earned from the said project. In view of the fact that the firm has adopted project completion method of accounting, the unaccounted receipts of Rs.74 lacs is shown under the account head 'unaccounted booking receipts' on liability side of the balance sheet and will be offered to income in the year in which the entire project is completed. This is done in conformity of the provisions of the Act and in accordance with the generally accepted accounting principles, practices and procedures."
Queries were raised in this behalf by ld. AO and the assessee has made further submissions as under:-
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 3 Submission dated 17.02.2010 "Our firm has shown NIL income during the year under consideration. Our firm has accounted for disclosure of 'unaccounted booking receipts' of Rs.74,00,000/- made during the course of survey u/s 133A of the Act. However, since our firm is following project completion method of accounting and project has just commenced during the subject year, the aforesaid disclosure of Rs. 74 lacs is disclosed under the head 'Current Liabilities' in the Balance Sheet under the head booking receipts."
Submission dated 22.11.2010 "In this regard, we have to submit that in the statement recorded in survey on 12.09.2007 of Shri Hitesh Bhikhabhai Sutaria, the partner of the firm he had specifically stated as follows.
(English translation of the extracts of statement recorded in survey) 'Q.28 In addition to what has been stated herein about, do you want to submit anything else?
Ans. I disclose the sum of Rs 74 lacs (Rupees Seventy Four Lacs) including unaccounted cash of Rs.10,000/- found during the survey. The said disclosure of income is in respect of unaccounted and undisclosed income of our firm M/s Shrinidhi Corporation, which is earned out of and through the conduct of business in the said firm.
From the above statement your honour may kindly appreciate that -
- The disclosure made by the partners of the firm in survey is the only base of offering unaccounted business receipts.
- The disclosure has been made specifically of 'unaccounted business receipts' out of and through the development of residential housing project carried on by our firm.
- Since the firm is engaged only in undertaking business of development of housing projects, the unaccounted receipts disclosed in survey has resulted in generation of business receipts of Rs.74 lacs of the firm.
- The firm was carrying out only one business activity of developing residential housing projects during the year and the period when survey was conducted.
- The survey was conducted by the department at the business premises i.e. the development site of our firm. Further except the business related books, vouchers and ancillary records, no other details were found by the survey team.
However since our firm have followed completed contract method (Project Completion method of accounting) for the project development activity, the said disclosure was shown under the head 'Unaccounted booking receipts disclosed in Survey' in the Balance Sheet under the Schedule 'Current ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 4 Liabilities' along with other liabilities in form of Booking Deposits received from the customers.
The same shall be offered to tax as income on the substantial completion of the project, along with the profit from the activity of building and development of residential housing project, it being in the same nature as that of the regular profit from sale of residential units in the project.
25.2 Without prejudice to what has been submitted herein above and without admitting to contentions of your honour, we have to submit that in case if the amount of Rs. 74 lacs is taxed by your honour as income of the subject year, then in view of the fact that the same pertains to the business of development carried on by our firm, it would be treated as 'Business Income' and accordingly would also be subject to the claim of deduction u/s 80-IB(10) of the Act."
3.3 The Assessing Officer further found that assessee had shown current liabilities and provisions totaling to Rs.3,92,44,365/- out of which Rs.3,04,33,175/- was claimed to be for booking deposits which are listed at page Nos.6-7 of the assessment order. Assessing Officer probed the matter further and vide letter dated 16.12.2010 asked the following queries:-
"(i) In the submission filed by you dated 22.11.2010, you have stated that the development of the project was commenced during F.Y. 2007-08 and thus this is the first year of development of the project. In the submission filed by you in December 2010, you have enclosed copy of Partnership Deed as Annexure-20. It is found that the Partnership Deed has been executed on 07.02.2007. However, in schedule-F on notes forming part of accounts filed with your audit report for F.Y. 2007-08, it is mentioned that the firm has commenced its project in F.Y. 2006-07. Further, the audited accounts for F.Y. 2006-07 also shows work-in-progress of Rs.1,54,03,688/. Please explain the above discrepancy in your submission and also submit necessary supporting evidences viz. approvals obtained from the relevant authorities for commencement of the project. Also explain the status of the concern at the time of commencement of business activity before execution of Partnership Deed. Please also furnish necessary evidences for source of funds deployed for incurring expenses for the work-in-progress of Rs. 1,54,03,688/- along with detailed copy of capital account of the partners for F.Y. 2006-07 along with their Bank statements for F.Ys. 2006-07 and 2007-08.
(ii) On perusal of the Bank statements filed by you, it is found that the Bank account in Cosmos Co-Op. Bank had been opened on 28.09.2007 and SBI, Station Road Branch on 23.09.2008. You are requested to explain as to how the firm carried on its activities since F.Y. 2006-07 in the absence of any ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 5 Bank A/c. and how transactions viz. receipts and payments have been carried on related to the construction activities.
(iii) You are requested to please furnish copy of Partners' capital account in respect of all payments incurred by them on behalf of the firm in F.Ys.
2006-07 & 2007-08.
(iv) You are requested to submit the BUC certificate received in respect of work already completed and details of present status of the remaining work in the project and its likely date of completion.
(v) In the statement recorded from Shri Hiteshbhai Bikhabhai Sutharia during the course of survey proceedings on 12.09.2007, in reply to question No.28, he had stated as under (English text of Gujarati translation):-
"On behalf of project the amount of Rs.74 lacs inclusive of Rs.10,000/- cash received in my firm, Shirinidhi Corporation, which is not accounted for in the books of the firm, is declared as the unaccounted income of Shrinidhi Corporation of the current year. The details thereof will be given in two days."
However, it is found that no such details regarding source of declaration of unaccounted income has been given till date. In this connection, it is pertinent to point out that the onus lies on you to substantiate the declaration made by you to prove that the same pertains to the 'business receipts' as stated by you in your submissions filed during the course of assessment proceedings. Hence, you are requested to furnish the full name. address and confirmations of payment of unaccounted money along with PAN and I.T. filing details of all such persons from whom you have claimed to have received unaccounted business receipts in the form of booking deposits in order to accept your claim that the same pertains to the business activity carried on by you since it is also found in the Partnership Deed dated 07.02.2007 that the firm can in addition to construction activity, carry on any other activity with the mutual consent of the partners. You are also informed that your submission dated December 2010 mentioning that minute details of receipt of unaccounted business receipts in the form of booking deposits received from particular persons to whom flats have been sold and the date of receipt is not retained by you will not suffice to prove the genuineness of such grounds of declaration made by you. In the event of your failure to do so, you are required to show-cause as to why the declaration of Rs.74 lacs should not be taxed u/s.69A of the I.T. Act in the year under assessment.
(vi) In your submission dated 12.11.2010 in Annexure-11, you have furnished details of advance booking from 78 persons. However, during the course of inquiry it is found that majority of the persons are not available at the given address. Hence, you are requested to produce the parties whose names are mentioned by you in the details of advance booking furnished by ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 6 you along with supporting evidences, viz. proof of identity, copy of the their Bank statements evidencing such payments made, IT. acknowledgment, computation of income and balance sheet, before the undersigned for verification in order to prove the genuineness of such current liabilities of Rs.3,04,34,175/- shown in your Balance Sheet and failing which to show- cause as to why the same should not be considered as unexplained cash credits u/s.68 of the IT. Act pertaining to the year under assessment."
Assessee vide letter dated 24.12.2010 filed a reply in this behalf, which, according to Assessing Officer did not explain the specific queries raised by the Assessing Officer and following observations were made in this behalf:-
"3.11 The reply of the assessee to the show-cause letter is duly perused. On the issue of declaration of unaccounted income of Rs.74 lacs, the assessee was specifically requested to furnish the full name, address and confirmations of payments of unaccounted money along with bank and IT filing details of all such persons from whom assessee had claimed to have received unaccounted business receipts in the form of booking receipts, in order to accept the assessee's claim that the same pertained to the business activity carried on by the assessee. However, it is found that the assessee has only merely repeated his earlier submission dated 07-12-2010 wherein it was stated that the minute details of receipts of the same with regard to exact amount received from a particular person to whom flats have been sold and the date of its receipts is not retained.
The above contentions of the assessee cannot be accepted. Moreover, even in the statement recorded from Shri Hitesh B. Sutaria, Partner on 12-09-2007 during the course of survey proceedings in reply to question No. 28 he has stated that details of disclosure of Rs.74 lacs will be submitted in two days which he had failed to do so.
3.4 Relying on the decision of Hon'ble Gujarat High Court in the case of Fakir Mohamed Haji Hasan vs. CIT (2001) 247 ITR 290 (Guj.), ld. Assessing Officer held as under:-
"The scheme of ss. 69, 69A, 69B and 69C would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion etc. owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money, or value of articles not recorded in the books of accounts or the unexplained ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 7 expenditure may be deemed to be the income of such assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under s. 14, it would not be possible to classify such deemed income under any of these heads including income from "other sources" which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under s. 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of ss. 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions, etc. applicable to the relevant head of income under which such income falls will automatically be attracted. The opening words of s. 14 "Save as otherwise provided by this Act" clearly leave scope for "deemed income" of the nature covered under the scheme of ss. 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from "other sources" because the provisions of ss. 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion etc. and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head "income from other sources". Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of ss. 69, 69A, 69B and 69C in view of the scheme of those provisions."
From the aforesaid, it follows that such amounts assessed by virtue of the deeming provisions of section 68, 69, 69A, 69B and 69C also do not form part of 'book profit' as defined in Explanation -3 below section 40(b), which has to be computed under the head "profits and gains of business or profession." That being the case, such income will also not enter into the computation of the amount of salary of partners allowable u/s 40(b)(v) in the assessment of partnership firms. Similarly, any brought forward loss also cannot be set off against the amount assessed u/s 68, 69.69A, 69B and 69C as income."
3.5. Thereafter, ld. Assessing Officer made following observations:-
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 8
(i) It may be added that by an amendment made by the Finance (No.2) Act, 1998 with effect from 01.4.1999, inserting a proviso to section 69C, it has been specifically enjoined that any explained expenditure which is deemed to be income of the assessee u/s 69C shall not be allowed as a deduction under any head of income. The effect of the Gujarat High Court decision is that it applies the same principles imbibed in the proviso to section 69C to all sections in Chapter VI dealing with deemed income. The fact is that no specific provision akin to the proviso to section 69C was necessary in respect of other sections in this chapter because the income added therein as unexplained investment, unexplained valuables etc. is even otherwise not allowable as deduction, unlike unexplained expenditure which is otherwise allowable as deduction.
(ii) Since the assessee's transactions and business activities were not reliable, the income of each year was to be computed and taxed without waiting for the completion of projects.
3.6 Ld. Assessing Officer further relied on the decision of ld. CIT(A) in the case of M/s. D.R. Construction, by following observations:-
"3.12. The facts in the case of the assessee is exactly similar to the issue discussed in the appellate order of the CIT(A) in the case of M/s.D.R. Construction. As held by the Ld.CIT(A) in the case of M/s.D.R. Construction, the income offered by the assessee as unaccounted income during the course of survey is also in the nature of 'deemed income'. The issue of head of deemed income u/s.69, 69A, 69B & 69C has also been considered in the Gujarat High Court decision in the case of Fakir Mohmad Haji Hasan Vs. CIT (2001) 247 ITR 290 (Guj.). Hence, declaration of unaccounted income shown by the assessee is taxed u/s.69A of the IT. Act. Further, as held by the Ld.CIT(A) no expenses can be claimed in any manner whatsoever, viz. by debiting corresponding expenses account and transferring it to WIP a/c. as done by the assessee.
3.13. The assessee's claim in its submission dated 22-11-2010 that in case the amount of Rs.74 lacs is taxed as income of the year then, it would be ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 9 subject to the claim of deduction u/s.80-IB (10) is also not sustainable as the unaccounted income offered by the appellant is not the income from the regular books of account upto the date of the survey and, therefore, in the nature of deemed income against which, no deduction or set-off is available.
4. On perusal of the balance sheet, it is found that the assessee has shown booking deposits totaling Rs.3,04,34,175/- under current liabilities. In the Annexure attached to notice u/s. 142(1) dated 29-10-2010, the assessee was asked to furnish details of all current liabilities pertaining to booking advances shown of Rs.3,04,34,175/-. The assessee in his submission dated 22-11-2010 had furnished details of advance booking viz. cost of flat, amount received, balance outstanding with name & address of the parties. Thereafter, notice u/s. 133(6) was issued in the basis of the parties. However, it was found that in several cases the parties were unavailable/flat were found to be locked. Inspector was also deputed for verification and the report furnish also showed that in several cases parties were unavailable at the given addresses. Notices u/s. 133(6) issued and served also elicited very poor response as no replies were filed in most of the cases."
Besides, the ld. Assessing Officer was of the view that the on-money transactions as claimed will amount to undisclosed receipts in the hands of the assessee and will constitute unaccounted money or black-money in the hands of the alleged flat purchasers. According to Assessing Officer, the assessee did not furnish complete information and sustained the addition by following observations:-
"4.3. However, it is to be noted that the assessee was expressly conveyed by this office show-cause letter dated 16-12-2010 to furnish proof of identity, copy of bank statement and also to produce the parties in order to ascertain genuineness the liabilities shown by the assessee. Mere furnishing of confirmation without any supporting evidence viz. bank statement, I.T. filing details and copy of accounts, does not prove either the creditworthiness of the parties or the genuineness of the transactions. The assessee failed to produce even a single party for examination as called for vide this office letter dated 16-12-2010 and thus failed to comply with the terms of the show-cause letter. Out of total booking liability shown of Rs.3,04,34,175/-, the assessee has discharged the onus of proving the genuineness of such current liability to the extent of Rs.154.10 lacs by furnishing sales deeds. In respect of the remaining balance of Rs.1,50,24,175/- no supporting evidences as called for are furnished to prove the same. However, in response to letters u/s. 133(6) issued, the following parties have confirmed the transactions by producing supporting evidences :-
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 10 [1] F-301 Vithalbhai Jeram Chhodavadiya Rs. 20,000/- [2] F-304 Vithalbhai Jeram Chhodavadiya Rs. 20,000/ [3] F-803 Vijyaben Ashokbhai Jagani Rs. 4,70,000/- [4] H-604 Parixit Natthubhai Mendpara Rs. 5,95,000/- [5] G-603 Pujaben Parixitbhai Mendpara Rs. 6.20,000/-
TOTAL Rs.17,25,000/-
In the light of the confirmations filed by the above parties, liabilities shown to the extent of Rs.17,25,000/- is also accepted. Hence, remaining liabilities to the extent of Rs. 1,32,99,175/- is not proved.
4.4 The onus to prove the genuineness of cash credit lies on the assessee.
Such proof includes proof of identity of the creditor, capacity of such creditors to advance the money and the genuineness of the transaction. In the case of cash credits, the conclusive findings have been given by the Supreme Court in the case of Sumati Dayal Vs. CIT 214 ITR 801 (1995) that the onus to prove the genuineness of credit lies on the assessee. The findings are as given below:
"In view of Section 68, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of any income nature.""
4.5 In the instant case, the assessee has failed to establish the genuineness of the credit as discussed above even though he was given sufficient time and opportunity to prove the same. However, he has failed to do so. Hence, current liability to the extent of Rs.1,32,99,175/- as discussed above the genuineness of which is not proved by the assessee is stated as unexplained cash credits u/s.68 pertaining to the year under assessment and added to the total income of the assessee. Penalty proceedings u/s.271(l)(c) are initiated for concealment of income."
4. Aggrieved, assessee preferred first appeal, where ld. CIT(A) deleted all the additions.
5. Aggrieved by the order of ld. CIT(A), the Revenue is now in appeal before us.
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 11
6. Ld. DR vehemently contends that ld. CIT(A) while giving complete relief to the assessee has neither considered the relevant facts of the case nor adhered to the principles of natural justice and on summary considerations, the appeal has been allowed.
6.1 Adverting to revenue Ground No.3 regarding violation of Rule 46A and not calling the remand report from Assessing Officer, it is contended that assessee has nowhere raised a grievance that proper opportunity of hearing was not given by ld. AO. A perusal of the AO's order will reveal that the assessee was repeatedly asked to produce the name of the persons who paid the alleged on-money and the verifiable details of the creditors appearing in the schedule of current liabilities. The assessee conducts a well organized full-fledged business, maintains accounts which are audited. It is unthinkable the details about the persons who booked the flats did it without necessary paper work and transactions with creditors who owed huge interest bearing money from assessee will be without correspondence or paper work. Assessee went on feigning ignorance and non availability of documents and filed only selective evidence. The documents and details of assessee's business affairs are in the absolute knowledge and possession of the assessee. Law creates an onus on the assessee to come forward, cooperate in assessment proceedings by complying with what is asked by AO in discharge of his statutory duties. Since assessee was not furnishing relevant information, in these circumstances AO was constrained to legitimately draw adverse inference consequently the additions were made based on the material available on record, surrounding circumstances and human conduct as ordained by Hon'ble Supreme Court in the case Sumati Dayal.
6.2 The assessment in question was framed by preceding survey operations which resulted in discovery of incriminating material. It is contended that the according to Income Tax Act ld. AO is an Investigation ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 12 Officer with an obligation to conduct proper inquiries. When the relevant inquiries are undertaken by AO about assessee's own business whose affairs are in the knowledge of assessee only, it is the obligation of the assessee to co-operate in the proceedings in order to ensure that the enquiries initiated by AO are brought to a logical conclusion. Assessee failed to discharge its onus in this behalf by not furnishing the details about its own business, which were in its exclusive knowledge. Assessee on one hand cannot remain silent about the important transactions of its business before AO and on other hand raise grievance before CIT(A) that additions were wrongly made .
6.3 Adverting to the admission of disclosure of Rs.74 lacs during the course of survey, assessee has nowhere claimed that the additional income pertains to any particular project, or construction activity which was eligible for deduction u/s 80IB. The declaration of income was qua the business of the firm. Assessee has not denied the statement anywhere however its true purport is being twisted by putting forth a convenient interpretation of the statement that it amounts to being from specific housing project, eligible for sec. 80(IB) and further the income is not credited to P & L A/c but to work in progress account and the final result i.e. profit or loss from the project will be determined on the basis of project completion method. The assessee cannot be awarded premium on his defaults, cannot blow hot and cold on a statement which is accepted by it albeit twisted to suit its agenda of carrying out unaccounted activities which help in generation of Black Money. Therefore there is no merit in assessee's self serving interpretations and evasive contention relied on by ld. CIT(A) while awarding substantial relief without giving proper opportunity to ld. AO.
6.4 It is further contended that the income was declared not from any particular project but from the undisclosed income of the firm M/s. Shree ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 13 Nidhi Corporation. The AO asked pertinent queries and assessee chose to remain silent. Therefore, AO was perfectly justified in taking proper adverse inference of non compliance, record, survey material and thereby making the additions in this behalf by relying o proper judicial precedents which have not been controverted by ld. CIT(A). The assessee has acted in a very clever manner by crediting this amount to work-in-progress account and thereby not offering even a rupee for tax in this year and on the other hand claiming refund of Rs.11 lacs from Income-tax. The assessee, which is neck deep into dubious deal and not maintaining its books of accounts by recording proper entries, cannot be awarded benefit of project completion method as has been rightly held by AO. The accounting standard A-7 as prescribed by ICAI applies to a business which is carried out by recording of the transactions in a legitimate manner and cannot be accorded to a business which is carried on to generate black money. Therefore, the AO was right in holding that the project completion method as envisaged in the accounting standard "AS-7" cannot be used to postpone the computation of income and charge of tax. When assessee in survey statement did not even name the project, there is no justification in assuming that it was for a building project, eligible for benefits of sec. 80IB and taxation to be deferred to uncertainty on completion of unnamed project. All these clever maneuvers are afterthought to somehow dodge the due tax and get rid of open and shut case of indulging in dubious deals generating black money. Ld. AO has rightly relied on Hon'ble Gujarat High Court judgment in the case of Fakir Mohamed Haji Hasan vs. CIT (supra) and other judgments.
6.5 Similarly, in respect of current liabilities also the amount of cash credits in the books of the assessee, they are not proved by the assessee by proper evidence thus failing to discharge its burden in terms of section 68 have been rightly added. Order of AO is relied on.
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 14 6.6 Adverting to ld. CIT(A)'s order, it is contended that in the entire order of the ld. CIT(A) there is no mention of any application for additional evidence or assessee's claim about being prevented by sufficient cause in admitting any additional evidence. Rule 46A mandates that before admission of any additional evidence, ld. CIT(A) is under obligation to comply with the mandatory conditions mentioned therein. In this case, ld. CIT(A) has failed to exercise his quasi-judicial power in a judicious manner on following counts:-
i) In failing to refer to any application for additional evidence before admitting the same;
ii) In failing to give any finding that the assessee was prevented by a sufficient cause in producing the same before the AO;
iii) Without calling a remand report from the ld. AO, thus grossly violating the principles of natural justice.
Reliance is placed on Hon'ble Delhi High Court judgment in the case of CIT vs. Manish Build Well (P) Ltd, (2011) 245 CTR 0397, which lays down that conditionality's of Rule 46A are mandatorily and to be satisfied before admitting the additional evidence.
Thus, ld. CIT(A) has endeavored to improve the case of the assessee based on evidence which was produced by a clever design by assessee to canvass its theory which was believe in nature which is accepted and relied on by ld. CIT(A) without legal justification. Therefore, the ld. CIT(A)'s order suffers from fundamental infirmities and relief awarded thereon is untenable. On merits, ld. AO has categorically held that :-
a) The assessee when confronted with incriminating evidences found during the course of survey, assessee requested not to proceed with further inquiries and offered Rs. 74 lacs as income towards the business of the firm.ITA No. 1635/Ahd/2011
ACIT vs. Shree Nidhi Corporation AY : 2008-09 15
b) The statement does not refer to any project, project completion method or sec. 80IB claim. It merely refers to assessee-firm business. It may include any other business which may not have been disclosed by the firm, partners dubious capital or any other source which was for the assessee to explain as the facts were in its exclusive knowledge. If assessee fails to discharge its onus and fully explain its own business details an adverse inference becomes inevitable. Therefore, the satisfaction expressed by ld. CIT(A) on the specious pleas of the assessee that income belongs to particular project which follows project completion method as per AS7 and assessee specifically declared the additional income towards the specific building project has no legs to stand. Therefore, the assessee's camouflage tactics to introduce the surrendered amount in work-in-progress a/c is an act of deliberately and cunningly evading the tax with irony of claiming refund where it ought to have paid tax. Thus is a case where survey operations have come to help the assessee instead of paying tax, claim a refund. Ld. CIT(A) glossed over the entire set of facts, circumstances and designs of the assessee and misdirected himself by relying on inadmissible evidence and awarding massive relief.
6.7 Apropos the addition of current liabilities u/s 68, it emerges very clearly from record that the assessee failed to discharge its onus in terms of Section 68 in proving the identity, genuineness and creditworthiness of the creditors in the books of accounts, then the amounts are liable to be added u/s 68. Since before the ld. AO the assessee failed to discharge its burden, there was no alternative left but to add the same u/s 68/69 as ordained by law. Further reliance is placed on Hon'ble Gujarat High Court judgment in the case of Fakir Mohamed Haji Hasan (supra). Assessee's inability to discharge its burden cannot be cured by ld. CIT(A) by improving its case based on unreliable evidence.
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7. In reply, ld. Counsel for the assessee relied on following judgments:-
i). My Home Developers vs. ITO, [2015] 155 ITD 335 (Ahd Trib.) "It is evident that, as per revenue, the noting in the diary which was found during course of survey is the details of on-money received for booking of the flat in Ornate House project and the total of such receipt is Rs. 76.25 lakhs.
The assessee was asked to state how it is reflected in the assessee's books of account. In response to which the assessee admitted the receipt was on- money relating to booking in the project Ornate House, which the assessee declared as undisclosed income of the assessee-firm for the current year. The sum of Rs. 76.25 lakhs is credited in the assessee's profit and loss account as business income. The above facts have not been disputed by the revenue. Thus, from the above statement, it is evident that the sum of Rs. 76.25 lakhs found recorded in the diary was accepted to be the noting relating to receipt of on-money for the booking of flat in Ornate House by the Revenue authorities as well as the assessee. Now, the revenue is taxing the sum of Rs. 76.25 lakhs but instead of business income, treating the same as income from other sources. There is no justification for the different stand of the revenue authorities - one at the time of survey and another at the time of regular assessment. During the course of survey, the revenue authorities themselves have considered the receipt noted in the diary to be on-money received for booking of the flats in Ornate House. The assessee admitted the same and surrendered the sum of Rs. 76.25 lakhs as its income from OrnateHouse.- project. Admittedly, the assessee did not have any other business activity during the year under consideration. Considering the totality of these facts and the arguments of both the sides, there was no justification for the Assessing Officer to hold that the sum of Rs. 76.25 lakhs was the income from other sources and not the income from Ornate House project. [Para 12]"
ii). Madhav Corporation vs. ACIT, [2015] 44 ITR (Trib) 193 (Ahd) "The assessee claimed exemption under section 80-IB of the Act on additional income shown in the block return. The authorities made addition on additional claim of deduction on the basis of seized records. On appeal:
Held, allowing the appeal, that the assessee had earned additional income which was disclosed consequent upon the search. Hence it partook of the character of business income and the assessee had admitted that the amount a part of income earned from the housing project undertaken by it. Since the amount had direct and proximate connection with the normal business activities, it was business income and eligible for deduction under section 80- IB of the Act.ITA No. 1635/Ahd/2011
ACIT vs. Shree Nidhi Corporation AY : 2008-09 17 The assessee claimed deduction on additional income under section 80-IB(10) of the Act. The Commissioner (Appeals) rejected the claim of the assessee on the ground that the on money not shown in regular books of account could not be considered for the purpose of deduction under section 80-IB(10) of the Act. On appeal :
Held, allowing the appeal, that on money was relatable to business income. Admittedly, there was no business activity undertaken by the assessee other than the housing development project. Hence the assessee was entitled to deduction in respect of additional income detected consequent to search under section 80-IB(10) of the Act."
iiI). CIT vs. Sheth Developers (P) Ltd, (2012) 77 DTR (Bom) 249 "Held : Explanation to sub-s. (1) of s. 158BB was amended by the Finance Act, 2002 with retrospective effect from 1st July, 1995. Prior to the amendment, according to the Explanation, the total income or loss was to be computed in accordance with Chapter IV. Consequent to the amendment by Finance Act, 2002 with retrospective effect from 1st July, 1995, the total income or loss has to be computed in accordance with the provisions of this Act. Consequently, w.e.f. 1st July, 1995 the total income/loss for the block period has to be computed in Accordance with the provisions of the Act and- the same would include Chapter VI-A. Sec. 80-IB is a part of Chapter VI-A. In view of the above, while computing the undisclosed income for the block period the respondent-assessee is entitled to claim deduction from its income under s. 80-IB. It is not the case of the Revenue that the money found in possession of the assessee could not be explained and/or its source could not be explained to the satisfaction of the AO. In the present case undisclosed income found in the form of cash was explained as having been acquired while carrying on business as a builder and this explanation was accepted by the AO by having assessed the undisclosed income for the block period as income from profits and gains of business or profession. In the present case, no question of application of ss. 68, 69 and 69A, 69B and 69C arises as the same has not been invoked by the Department. It is an admitted position between the parties as reflected even in the order of the AO that undisclosed income was in fact received by the assessee in the course of carrying out its business activities as a builder. --Anbu Textiles vs. Asstt. CIT (2004) 187 CTR (Mad) 646 : (2003) 262 ITR 684 (Mad) concurred with; Fakir Mohmed Haji Hasan vs. CIT (2001) 165 CTR (Guj) 111: (2001) 247 ITR 290 (Guj) distinguished."
7.1 Ld. Counsel for the assessee contends that the assessee had made voluminous submissions and filed all necessary papers and had discharged its burden. It has not been disputed that the assessee is into building construction, the disclosure was only qua the bookings of flats, and as ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 18 assessee was following project completion method in accordance with AS7, the amount was rightly credit to WIP a/c. No question was asked during survey about the project. Since assessee honoured its disclosure by way of additional income of Rs.74 lacs in WIP a/c, it becomes part of the sales proceeds of ongoing building project. The assessee was following project completion method. Since the amount of Rs.74 lacs stands included in the WIP, it impliedly means that the assessee has honoured the disclosure and offered it as income.
7.2 Apropos current liabilities, the ld. AO has failed to appreciate that these are the advances received by the assessee for purchase of flats; therefore, they cannot be added as cash credits. Order of ld. CIT(A) was relied on.
7.3 At the end of arguments ld. Counsel fairly conceded that all the details were not filed before the AO and the remaining documents were filed before the ld. CIT(A) which were duly perused and considered by him. Ld. CIT(A) has coterminous powers as of AO and has powers to call for any information and conduct enquiries, the additional papers have been relied on in accordance with law and the relief has been granted based on just and proper considerations. His order is relied on.
8. Ld. DR, in reply, vehemently contends that all the case-laws relied on by the assessee are rendered on the peculiar facts which are distinguishable from assessee's case.
i) In the case of My Home Developers (supra), the diary itself revealed that the on-money received from booking of flats. In this case, the assessee, when confronted with the incriminating material, neither pointed out any on-money or made any statement that they represent any on-money; rather assessee has specifically ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 19 stated that it is the additional income earned by the assessee-firm business. In case it was not the income and only part of WIP, nobody stop the assessee in making clear statement to this effect. The statement has not been denied by the assessee., ld. Counsel has not been able to answer to the query of the Bench as to how many projects were undertaken by the firm and the on-money and the additional income was declared from which business or which building project.
ii) In the case of Madhav Corporation (supra), it pertains to a case where there is a definite project to which 80IB was held as clearly applicable. Since assessee neither attributed the income towards any projects nor put up a claim u/s 80IB during the course of statement, the facts of Madhav Corporation are clearly distinguishable.
iii) In the case of Sheth Developers (P) Ltd, Hon'ble Bombay High Court was dealing of a case u/s 158BB, i.e., search assessment; whereas assessee's case is of survey. Besides, in that case Revenue could not demonstrate that assessee failed to explain the sources of the monies found in its possession. Whereas, in assessee's case not only during the course of survey but during the course of assessment, assessee failed to discharge its burden. Since all these cases are not applicable to the assessee's case, the order of the ld. CIT(A) deserves to be reversed as the relief has been granted without getting into the facts of the case or crucial points necessary for giving decision on the specific facts of the case.
9. We have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities. In our considered view, Revenue has laid out a clear case that:-
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 20
(a) The additional evidence was relied on by ld. CIT(A) has been admitted in gross contravention of mandatory provisions of Rule 46A. Relying on the judgment of Hon'ble Delhi High Court in the case of Manish Build Well (P) Ltd (supra) we hold that the CIT(A) was not justified in entertaining the additional evidence without mentioning the application in this behalf, the contents thereof and without giving a clear finding that the assessee was prevented by sufficient cause in filing the evidence before the ld. AO. It has not been disputed by the assessee that sufficient opportunities were given to him by ld. AO. Besides, no ground has been raised in the grounds of appeal before the ld. CIT(A) that proper opportunity of hearing was not given, therefore, the justification of admitting additional evidence is conspicuously missing. Furthermore, non-
calling of a remand report from AO endorses the contention of the ld. DR that ld. CIT(A) failed in this behalf. In our considered view, the additional evidence filed by the assessee could not have been admitted and relied on by ld. CIT(A).
(b) In the statement given by the assessee, there is neither any mention of specific housing project. The declared income not being towards a particular housing project, the specious plea that it should be assumed that declared business income was for particular housing project. Since assessee was following the project completion method and therefore assessee had nothing more to do than credit the amount in WIP account cannot be accepted. The accounting standard A7 cannot be applied to unscrupulous assessee who indulges in fudging of accounts and wantonly promoting black money transactions. It clearly emerges from the record that assessee indulged in dubious activities leading to generation of black money;
ITA No. 1635/Ahd/2011ACIT vs. Shree Nidhi Corporation AY : 2008-09 21 it will be unjustified to hold that the accounting standards A7 will apply to such business and books which are thoroughly unreliable. Consequently, we are unable to hold that the assessee discharged its obligations and made a proper case to go beyond its statement of offering additional income. More so in claiming refund of Rs.11 lacs of prepaid taxes. In the given facts and circumstances, the additional income cannot be held to be pertaining to any specific building project and the alternate claim of the assessee for exemption u/s 80IB is unjustified and deserves no credence.
(c) Apropos current liabilities also we find merit in the contention of the ld. DR that the assessee, despite opportunities, failed to disclose the identity coupled with demonstration of other relevant details about flat allotments, allotment letter or any other correspondence to establish that the amount legitimately claimed as flat booking advance was in fact so. Since the assessee has failed to discharge its burden in this behalf, the addition has been rightly made by ld. AO and there is no justification in CIT(A)'s holding that assessee has discharged its burden based un admission of untenable additional evidence. In our considered view, neither the assessee has discharged its burden nor the additional evidence relied by the ld. CIT(A) is tenable in the eyes of law. Therefore, the order of ld. CIT(A) on this issue is reversed.
(d) Apropos the case-laws relied on by the ld. Counsel for the Assessee, ld. DR has succinctly countered that cited cases have been decided on distinguishable facts which cannot be applied to assessee's case. In the entirety of facts and circumstances, foregoing rival contentions and paper-book filed by the assessee, we are of the view that the additions were rightly made by the AO. Ld. CIT(A) was not ITA No. 1635/Ahd/2011 ACIT vs. Shree Nidhi Corporation AY : 2008-09 22 justified in relying on additional evidence which is in gross contravention of Rule 46A. On merits also, the additions made by ld. AO are upheld. We reverse the order of ld. CIT(A) and restore the order of ld. AO.
10. In the result, Revenue's appeal is allowed.
Order pronounced in the Court on 26th August, 2016 at Ahmedabad.
Sd/- Sd/-
ANIL CHATURVEDI R.P. TOLANI
(ACCOUNTANT MEMBER) (JUDICIAL MEMBER)
Ahmedabad; Dated 26/08/2016
*Biju T., PS
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent.
3. संबंिधत आयकर आयु / Concerned CIT
4. आयकर आयु (अपील) / The CIT(A)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad