Income Tax Appellate Tribunal - Chandigarh
Dev Bhoomi Apartments (Aop), Solan vs Acit, Chandigarh on 11 November, 2016
I N T H E I N C O M E T A X AP P EL L AT E T R I BU N A L
D I VI S I O N B EN C H , C H AN D I G A R H
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA Nos. 179 & 180/CHD/2014
& ITA No. 584/CHD/2013
A.Ys : 2006-07, 2007-08 & 2009-10
M/s Dev Bhoomi Apartments(AOP), Vs The DCIT,
Kalka Shimla Road, Circle 6(1),
Deonghat, Mohali.
Distt. - Solan (HP).
PAN: AAAAD5685P
(Appellant) (Respondent)
Appellant by : S / S hr i R a j Ku m a r & S um i t Go y a l , C A s
R e s p o nd e n t by : S h r i S u s h i l K u m a r , CI T- D R
Date of Hearing : 08.11.2016
Date of Pronouncement : 11.11.2016
O R D E R
PER BHAVNESH SAINI,JM All the appeals by the same assessee are directed against different orders of ld. CIT(Appeals), Central Gurgaon 26.12.2013 for assessment years 2006-07 and 2007-08 and dated 30.03.2013 for assessment year 2009-10.
2. We have heard ld. Representatives of both the parties, perused the findings of authorities below and considered the material available on record. The appeals are decided as under.
2Assessment Year : 2006-07
3. On ground No. 1, assessee challenged the addition of Rs. 8,11,490/- under section 69C of the Act as unexplained expenditure and challenged the order of ld. CIT(Appeals) in not admitting the additional evidence under Rule 46A of the IT Rules.
4. Brief facts are that search operation under section 132(1) of the Income Tax Act was carried out at the residential/business premises of Sahni Group of cases including the assessee by the Investigation Wing, Chandigarh on 11.09.2009. The copies of the seized documents were provided to the assessee and same was confirmed by the assessee during the assessment proceedings. The Assessing Officer referred to the document A-3 (page 21) (Party-B-4 impounded from the business premises of the assessee) and noted that these documents are hand written pages and contain the details of payment received on various dates. Scanned copy of these documents are reproduced in the assessment order in para 4. The expenses recorded on these documents are as follows :
i) Rs. 7,65,695/- on the front side of page 21 financial year 2006-07 relevant to assessment year 2007-08)
ii) Rs. 8,11,490/- on back side of page 21 financial year 2005-06 relevant to assessment year 2006-07) 3
5. In the course of assessment proceedings, the assessee was asked to furnish following information :
a) Please f urnish the names and address of the persons f rom whom the payment as mentioned in the d o c u me n t scanned above, has been received.
b) P l e a s e me n t i o n t h e n a t u r e o f r e c e i p t a s we l l a s mode of receipts.
c) Please produce regular books of account to reconcile these entries.
5(i) The assessee in his reply before Assessing Officer submitted that though the seized paper have not been written by the members or the employees, however, from the contents of the papers, it appears that the same relate to some fruit/vegetable commission agent as in few cases, trade mark such as G.S.M., B.C.S., R.H.S., J.P.B., B.L.S. etc. have been mentioned by the writer of the document. The assessee has no concern with the document in question. The Assessing Officer considered the reply of the assessee and noted that the assessee has merely stated that said document did not belong to him. The assessee has not brought any material on record in support of the contention. The assessee was asked to explain why the expenses recorded on the said page should not be treated as its unexplained expenditure under section 69C of the Act. No explanation was filed by the assessee. The Assessing 4 Officer, therefore, treated the same to be unexplained expenditure under section 69C of the Act and made the addition of Rs. 8,11,490/-.
6. The addition was challenged before ld. CIT(Appeals). The submissions of the assessee are reproduced in the impugned order in which assessee reiterated the same submissions and also submitted that the seized document did not belong to the assessee. The assessee relied upon decision of ITAT Chandigarh Bench in the case of Jagdamba Rice Mills Vs ACIT 67 T T J 8 3 8 i n w h i c h i t w a s h e l d t h a t , " D o c u me n t s s e i z e d d u r i n g s e a r c h n o t b e a r i n g c l e a r a s t o wh e t h e r i t e m s we r e payments or receipts or s o me other calculations, no addition could be made on the basis of such d u mb d o c u me n t s " . The assessee also explained that the papers may relate to some fruit/vegetable commission agent. The assessee filed additional evidence under Rule 46A which is certificate from Secretary of Agriculture Market Produce Committee, Solan in which it has been certified that the above trade marks are used for identification of firms in the Sabji Mandi market.
7. The ld. CIT(Appeals), however, did not accept contention of the assessee. The ld. CIT(Appeals) noted that assessee has failed to satisfy the conditions of Rule 46A of Income Tax Rules and no evidence have been 5 produced despite giving opportunity at assessment stage, therefore, additional evidence was rejected. The ld. CIT(Appeals) on merit also confirmed the addition.
8. We have heard ld. Representatives of both the parties. The ld. counsel for the assessee reiterated the submissions made before authorities below and submitted that Assessing Officer has considered the details contained in the seized paper as 'payments received' on various dates and also given notice to the assessee considering the same to be the payments received by the assessee. However, he has made addition on account of unexplained expenditure under section 69C of the Act, therefore, addition may be deleted. He has submitted that ld. CIT(Appeals) should have admitted the additional evidence which is in the form of certificate from Agriculture Produce Market Committee, Solan and relied upon decision of Hon'ble Supreme Court in the case of Tek Ram Vs CIT 262 CTR 118 in which the assessee having filed certain documents before Supreme Court for the first time which are of some relevance and required to be looked into by the High Court. Therefore, matter was remanded to the High Court for fresh disposal after accepting the documents filed by the assessee.
8(i) On the other hand, ld. DR submitted that seized documents were supplied to the assessee which have 6 been scrutinized by the assessee but no explanation was filed before the authorities below. Section 292C will apply against the assessee.
9. After considering rival submissions, we are of the view addition is wholly unjustified. The Assessing Officer by referring to above seized document has mentioned that these documents are hand written pages and contain the details of payments received on various dates. The Assessing Officer issued Show Cause notice to the assessee to explain the name and address of the persons from whom the payments mentioned in the seized document have been received and also to explain nature of receipt as well as mode of receipts. The Assessing Officer, therefore, was of the view that it is unaccounted money received by the assessee from third party, as such it is unaccounted income of the assessee. However, the Assessing Officer while concluding the issue has considered it to be a case of unexplained expenditure incurred by assessee under section 69C of the Act. The whole finding of the Assessing Officer thus, clearly shows that Assessing Officer has passed a contradictory order without analyzing the issue in proper perspective. There cannot be unaccounted expenditure incurred by the assessee as per finding of the Assessing Officer because Assessing Officer has given show cause notice considering the contents of seized documents that assessee received unaccounted 7 income from third party. It would show that Assessing Officer was not aware of the contents of the document itself whether it is a receipt or payment by assessee. On this reason itself, the addition is wholly unjustified and no addition can be made on the basis of such a dumb document. However, we are of the view that additional evidence submitted before ld. CIT(Appeals) was rightly rejected by the ld. CIT(Appeals). The assessee has failed to explain as to how its case would fall within the parameters of Rule 46A of the IT Rules because assessee has failed to prove that Assessing Officer has refused to admit evidence which should have been admitted by him or that assessee was prevented by sufficient cause from producing documents before Assessing Officer. The Assessing Officer has given ample opportunity to the assessee to explain this issue but no evidence was filed before Assessing Officer at assessment stage. The assessee also failed to explain the relevance of the additional evidence because in the certificate of Secretary, Agriculture Market Produce Committee, Solan, it is nowhere clarified as to how the contents of the same were relevant to the matter in issue. It merely explains the identification of firms' names instead of writing full name. Since assessee failed to explain as to how the additional evidence was relevant to the matter in issue, we are of the view ld. CIT(Appeals) correctly refused to admit the same at appellate stage. However, considering the totality of the 8 above findings, it is clear that addition is wholly unjustified in the matter. We, therefore, set aside the orders of authorities below and delete the addition of Rs. 8,11,490/-. This ground of appeal of the assessee to that extent is allowed.
10. On ground No. 2, assessee challenged the addition of Rs. 78,577/- under section 69C of the Act and also challenged the order of ld. CIT(Appeals) in not admitting additional evidence under Rule 46A of IT Rules. The Assessing Officer has referred to document A-2 ( Page 9 and 12) (Party-B-4 impounded from the business premises of the assessee). The Assessing Officer noted that the seized documents are hand written pages and contained details of construction material purchased on 30.02.2006 and 30.04.2006 and payments made by the assessee. The scanned copy reproduced in para 5 of the assessment order. The Assessing Officer asked the assessee to file the information as to who has written these pages, to which concern/projects these documents are related, to reconcile the entries recorded in these documents with regular books of account and furnish the details of cash payment made by him as mentioned in the seized papers alongwith source. The assessee in its reply before Assessing Officer submitted that the scrutiny of the seized paper shows that same relate to purchase of material in respect of furnishing of some house. The projects of the assessee are still in initial 9 stage and no additional construction is made. The papers have been made in the name of Micky, Solan and assessee has no concern in respect of that paper. 10(i) The Assessing Officer noted that assessee has disowned the document though the documents have been found from the possession of the assessee. The Assessing Officer referred to provisions of Section 292C and noted that since seized documents have been found from the possession of the assessee and the said documents relate to purchase of construction material which are used by the assessee in its business of construction, therefore, mere disowning the document would not absolve the assessee from responsibility and gave notice to the assessee as to why the same be not considered as unexplained expenditure under section 69C of the Act. The assessee, however, did not file any reply. The Assessing Officer treated the same to be unexplained expenditure and made the addition of Rs. 78,577/-.
11. The addition was challenged before ld. CIT(Appeals). The assessee reiterated same submissions before ld. CIT(Appeals) and submitted that same document did not belong to the assessee. It was also submitted that now the assessee could trace one Shri Javed Akhtar to whom these purchases belong and has 10 filed his detailed affidavit, copy of which is filed at page 5-6 of the Paper Book in which he has owned up the seized papers and submitted that these documents were inadvertently left in premises of the assessee. The assessee requested that affidavit of Shri Javed Akhtar may be admitted as additional evidence.
12. The ld. CIT(Appeals) noted that the seized papers are hand written and contained the details of construction material purchased but no reply have been filed before Assessing Officer. Affidavit of Shri Javed Akhtar is filed who claims to be contractor, however, no information of 'Micky' of Solan have been given. There is a change in address given in the affidavit therefore, same could not be admitted for lack of authenticity. The ld. CIT(Appeals), on merit also confirmed the addition.
13. The ld. counsel for the assessee reiterated the submissions made before authorities below. On the other hand, ld. DR submitted that affidavit is self serving and cannot be considered as additional evidence.
14. On consideration of the rival submissions, we do not find any justification to interfere with the orders of authorities below. It is not in dispute that seized paper was recovered from possession of the assessee. The Assessing Officer noted that the seized paper contains 11 the details of construction material purchased which is connected with the business activity of the assessee. The assessee did not file any reply before Assessing Officer in response to show cause notice as to why the same be not treated as unexplained expenditure under section 69C of the Act. Section 292C of the Act is applicable in the case of the assessee. It provides that, here any books of account, other documents, money bullion, jewellery or wother valuable articles or things are or is found in possession or control of any person in the course of search under section 132 of Income Tax Act, it may, in any proceeding under this Act, be presumed that such books of account, other documents, money, bullion, jewellery or other valuable articles or things belong or belongs to such person, the contents of such books of account and other documents are true and that the signature on every document to be in hand writing of such particular person". The presumption under section 292C is, however, rebuttable. It is, therefore, proved on record that when seized document was found during the course of search from possession of the assessee, that seized document belong to the assessee and that the contents of the documents are true and are in the hand writing of the assessee. The assessee did not file any evidence or material or specific explanation before Assessing Officer at assessment stage, therefore, the assessee failed to rebut the presumption under section 292C, as such the seized 12 documents are admissible in evidence against the assessee. The assessee, for the first time has come up with another plea that the seized paper belong to Shri Javed Akhtar and filed his affidavit dated 13.02.2013 before ld. CIT(Appeals). However, assessee failed to explain as to how he remained silent in explaining the issue from the date of search i.e. 11.09.2009 till 13.02.2013. No reasons have been given as to why the affidavit was not obtained earlier and how suddenly Shri Javed Akhtar has come into the picture. His name was never explained before the authorities below. The assessee has not satisfied the conditions of Rule 46A of the IT Rules before ld. CIT(Appeals). The affidavit of Shri Javed Akhtar is therefore, self serving and clearly after thought. The assessee has failed to explain as to why the name of Shri Javed Akhtar was never mentioned before authorities below. The assessee has also failed to produce 'panchnama' before the Tribunal to explain the portion of place of recovery of the seized document from the possession of the assessee. The affidavit of Shri Javed Akhtar is merely an after thought explanation which was never explained by the assessee before authorities below. Therefore, the same would not be relevant to the matter in issue and is clearly filed to avoid the payments of legitimate taxes. The ld. CIT(Appeals), therefore, rightly rejected the admission of the affidavit at the appellate stage.
13
15. Considering the above discussion in the light of provisions of Section 292C, it is clear that assessee has made purchases of construction material which belong to the business of the assessee and in the absence of any plausible explanation, the authorities below were justified in making the addition under section 69C of the Act. No infirmity have been pointed out in the orders of authorities below. We, therefore, do not find any merit in this ground of appeal of the assessee. Same is accordingly, dismissed.
16. In the result, appeal of the assessee is partly allowed.
Assessment Year : 2007-08
17. On ground No. 1, assessee challenged the addition of Rs. 7,65,695/- under section 69C of the Act and challenged the order of ld. CIT(Appeals) in not admitting additional evidence under Rule 46A of IT Rules which is certificate of the Secretary of Agriculture Produce Market Committee, Solan. The ld. CIT(Appeals) noted that issue is same as has been considered in assessment year 2006-07 and accordingly, dismissed this ground of appeal of the assessee.
18. Ld. Representatives of both the parties submitted that this ground is same as has been considered in assessment year 2006-07 on ground No. 1 on the basis 14 of same seized document (A-3). Following reasons for decision in assessment year 2006-07, we set aside the orders of authorities below and delete the addition of Rs. 7,65,695/-. However, rejection of additional evidence by ld. CIT(Appeals) is confirmed. This ground is partly allowed.
19. On ground No. 2, assessee challenged the addition of Rs. 16,240/- under section 69C of the Act and in not admitting additional evidence under Rule 46A of IT Rule. The ld. CIT(Appeals) found that this issue is same as has been considered in assessment year 2006-07 and additional evidence is affidavit of Shri Javed Akhtar. The ld. CIT(Appeals), accordingly, dismissed this ground of appeal of the assessee.
19(i) Ld. Representatives of both the parties submitted that this ground is same as has been considered in assessment year 2006-07 on ground No. 2 in which we have dismissed the appeal of the assessee. Following reasons for decision for assessment year 2006-07, we dismiss this ground of appeal of the assessee.
20. In the result, appeal of the assessee is partly allowed.
Assessment Year : 2009-10
21. The ld. counsel for the assessee did not press ground No. 1, same is dismissed as not pressed. 15
22. On ground No. 2, assessee challenged the addition of Rs. 3,26,390/- under section 69C of the Act and in refusing to admit additional evidence under Rule 46A of the IT Rules. The Assessing Officer referred to document A-3 (page 29) ( Party B-4 impounded from business premises of the assessee). The Assessing Officer noted that this document is hand written page and contained details of purchases of Rs. 3,26,390/- made by the assessee and for which Rs. 50,000/- was paid in cash on 05.11.2008 and subsequently Rs. 2,76,390/- was also paid in cash. The same is reproduced in para 6 of the assessment order. The Assessing Officer asked for the information from the assessee as to who has written this page, nature of expenses and purpose of expenses and name and address of person to whom payment in cash has been made and explain the source. The assessee submitted before Assessing Officer that this document did not belong to the assessee and from the contents of the document, it appears that same relate to purchase of dry fruits and other items such as press, induction cooker etc. The same did not belong to the assessee. The Assessing Officer, however, noted that assessee has merely denied that document did not belong to him but the same cannot discharge his responsibility. The assessee has not brought any material on record to explain the seized document in response to the show cause notice issued for making addition under section 16 69 of the Act. The assessee did not file any explanation before Assessing Officer. Therefore, addition was made under section 69C of the Act.
23. The assessee reiterated same submissions before ld. CIT(Appeals) and also filed affidavit under Rule 46A of the Act of Shri Joginder Behal, copy of which is filed at page 7 of Paper Book in which he owned the contents of the seized document and explained that inadvertently he has left the seized paper at the premises of the assessee. The ld. CIT(Appeals), however, did not accept admission of the additional evidence and even on merit, confirmed the addition.
24. Ld. Representatives of both the parties submitted that this issue is same as have been considered on ground No. 2 in assessment year 2006-07 and 2007-08. Following reasons for decision on ground No. 2 in assessment year 2006-07 and 2007-08 (supra), we dismiss this ground of appeal of the assessee.
25. On ground No.3, assessee challenged the addition of Rs. 18,77,319/- on account of estimation of net profit. Briefly the facts of the case are that Assessing Officer noted NP chart of the assessee for the assessment years 2007-08 to 2010-11 in assessment order and found that the net profit rate of the assessee for assessment year 2010-11 and 2009-10 (after excluding the surrender income of Rs. 25 lacs) comes to 17 1.80% and 1.60% respectively which is on lower side as compared to NP rates of the earlier years. The NP rate for assessment year 2007-08 and 2008-09 are 8.65% and 3.14% respectively. Therefore, claim of the assessee that he has not claimed any expenses against the surrendered income is not correct. The Assessing Officer asked the assessee as to why its net profit result should not be re-casted by rejecting Profit & Loss Account to the extent of net profit ratio. The submission of the assessee is reproduced in the assessment order in which the assessee explained that it has commenced its commercial activities during the financial year 2006-07 and the comparison of sales and net profit for financial year 2006-07 to 2009-10 was explained. It was explained that the net profit rate for the financial year 2006-07 is 8.65%, for financial year 2007-08 is 3.15%, financial year 2008-09 is 1.67% and for the financial year 2009-10, it is 1.80%. The reasons for high net profit ratio in the financial year 2006-07 was due to the fact that this was the initial year of the commercial operation and the fixed expenses such as staff salary of the assessee quite low and no depreciation has been claimed by the assessee on fixed assets. It was also explained that the main reason for low net profit percentage in financial year 2008-09 and 2009-10 as compared to earlier years was due to the fact that assessee has not claimed any depreciation on fixed assets in financial year 2006-07 and 2007-08. The 18 assessee has claimed depreciation to the tune of Rs. 4,92,375/- during financial year 2008-09 and Rs. 3,35,188/- during financial year 2009-10. This has resulted in less net profit rate in financial year 2008-09 and 2009-10. In the absence of depreciation in financial year 2008-09 and 2009-10, the net profit ratio would have been 2.78% and 4.85% respectively which is almost same as in earlier years.
25(i) It was further submitted that later on projects of the assessee were at partial completion stage and sales have been booked and the fixed expenses such as staff salary, electricity expenses etc. cannot be avoided as they occur through out the year. Therefore, net profit shown by the assessee is correct. The Assessing Officer, however, did not accept explanation of the assessee and noted that NP rate remained high in earlier year is not acceptable and by rejecting the Profit & Loss Account, recasted the profit and by applying average net profit rate of two years, made above addition of Rs. 18,77,319/-.
26. The ld. CIT(Appeals) also confirmed the addition and dismissed this ground of appeal of the assessee.
27. After considering rival submissions, we are of the view addition is wholly unjustified. The ld. counsel for the assessee contended that Assessing Officer has not rejected the books of account and no specific defects in 19 maintenance of the books of account have been found. He has, however, admitted that during the course of search, assessee surrendered Rs. 25 lacs in assessment year under appeal. It would show that the book results declared by the assessee were not correct, otherwise, there was no reason for the assessee to have declare/surrender the additional income of Rs. 25 lacs. However, Assessing Officer merely on comparison of the NP rate of assessee from earlier years, made addition by rejecting the Profit & Loss Account to that extent. The Assessing Officer has not investigated and enquired into the explanation of the assessee given at assessment stage that there was higher expenses claimed in assessment year under appeal as compared to earlier years. No other reasons have been given by the Assessing Officer for re-casting the profit declared by the assessee.
28. Hon'ble Punjab & Haryana High Court in the case of CIT Vs K.S.Bhatia 269 ITR 577 held that, " M e r e f ac t t h a t t h e p r o f i t s we r e l o w c o m p a r e d t o t h e e a r l i e r y e a r s w a s n o t a c i r c u m s t a n c e o r m a t e r i a l wh i c h c o u l d j u s t i f y a n e s t i m a t e i n t h e c i r c u ms t a n c e s o f t h e c a s e " . As noted above, since the assessee has already surrendered additional income of Rs. 25 lacs in assessment year under appeal and no other reasons have been given by the Assessing Officer for estimating higher profit rate. Therefore, mere low NP rate shown in assessment year 20 under appeal by itself is no ground to make addition of this nature against the assessee. We, therefore, do not justify the orders of authorities below in making and upholding this addition. We, accordingly, set aside the orders of authorities below and delete the addition of Rs. 18,77,319/-. This ground of appeal of the assessee is allowed.
29. In the result, appeal of the assessee is partly allowed.
30. In the result, all appeals of the assessee are partly allowed.
Order pronounced in the Open Court.
Sd/- Sd/-
( ANNAPURNA GUPTA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 11th November,2016.
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR
Assistant Registrar,
ITAT/CHD