Income Tax Appellate Tribunal - Ahmedabad
Sanskruti Township, Surat vs Department Of Income Tax on 15 September, 2011
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "C"AHMEDABAD
Before S/Shri D. K. Tyagi, J.M. and A. K. Garodia, A.M.
ITA No. Asst. Year
1885/Ahd/2006 2003-04
C.O. 2003-04
No.239/Ahd/06
Income-tax Officer, V/s. M/s Sanskruti
Ward 6(4), Surat. Township, Block
No.428,, Village: Pal,
Hajira Road, Surat.
(Appellant) .. (Respondent)
Appellant by :- Shri S. K. Gupta,
CIT, DR
Respondent by:- Shri S. N. Soparkar,
Sr.Advocate
Date of hearing :15/9/2011.
Date of pronouncement :23/9/2011.
ORDER
Per D. K. Tyagi, Judicial Member.
The appeal has been filed by the Revenue and the Cross Objection by the assessee against the order of ld. CIT(A) 9/6/2006.
2. The Revenue has raised the following grounds in its appeal :-
(1) On the facts and in the circumstances in law, the ld. CIT(A) has erred in deleting the addition of Rs.3,46,61,718/- made by the Assessing Officer on account of receipt of on money and excess sale of 65 plots.ITA No.1885/Ahd/2006 along
with CO 239/Ahd/2006 Asst. Year 2003-04 (2) The ld. CIT(A) has not appreciated the efforts of the AO in respect of addition of Rs.3,46,61,718/- made on account of receipt of on money and excess sale of 65 flats.
(3) The ld. CIT(A) has erred in directing the AO to restrict the disallowance of Rs.6,51,470/- out of total addition of Rs.14,65,772/-
3. The first and second grounds of the appeal relates to deletion of addition of Rs.3,46,61,718/- made by AO on account of receipt of on money and excess sale of 65 plots. The facts of the case are that assessee filed its return of income on 19.03.2004 declaring NIL income. The same was processed u/s 143(1) of the Act. The return of income for the year under consideration was selected for scrutiny as per the guidelines of the CBDT. Accordingly, notice u/s 143(2) dated 08.10.2004 was issued and served upon the assessee on 16.10.2004. Subsequently, questionnaires dated 02.06.2005 and 15.07.2005 were issued and duly served upon the assessee along with notice u/s 142(1) of the Act. In this case, a survey u/s 133A of the Act was conducted on 11.09.2002 at the business premises of the assessee situated at Hazira Road, village -Pal, Tal. Choryasi, Dist. Surat. During the course of survey proceedings, some incriminating documents were found and impounded, as per Annexure-B dated 11.09.2002. On verification of these documents and diaries impounded during the course of survey proceedings, the AO observed that as per the copy of the site plan which was impounded (page nos.8 and 19 of Annexure-B-19), there were 90 plots in the project called Sanskruti Township. In the site plan certain plots were tick marked by black ball pen and these plots were actually the remaining unsold plots numbering
25. During the course of survey the statements of the partners of the firm Shri Nilesh J. Patel and others was also recorded. The AO reproduced the 2 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 question put to him and his answers in the assessment order and it was as under :
"Q.8: At the time of answering to question No.3, you had mentioned that there are 82 plots in Sanskruti township and you do not know how many plots are sold till date. I am showing you one pamphlet in which you had in your handwriting mentioned the details of unsold plots. You have tick marked by black ball pen the unsold plots when we talked about the purchasing of plots. According to this, you had stated the number of plots No.3, 15,16,17,18,35,34, 33,32,31,30,29,40,41,42,43,44,58,76,77,80,82 and 82. You had stated that unsold plots are 25. Please explain the same.
A.8 In this regard, it is to be submitted that I am not sitting at here. I do not know the true things and to attract the customers, I had shown excess booking of plots."
From this statement, the AO came to the conclusion that only 25 plots were unsold on the date of survey and therefore a total of 65 plots were sold by the assessee during the year upto the date of survey. In response, the assessee stated that Shri Nilesh Patel had never admitted that 65 plots were sold by the assessee and since no incriminating documents were found during the course of survey, it was not a fact that the assessee sold 65 plots during the year. Another partner Shri Dinesh Patel whose statement was also recorded during the course of survey, admitted that the assessee had sold only 6 plots upto the date of survey and only 16 plots were sold till the end of the accounting year. The AO rejected the explanation holding that during the course of survey, Shri Nilesh Patel had himself tick-marked the unsold plots on the site plan and had never denied the fact that only 25 plots remained unsold and since the plots were sold by the assessee in cash, the same has to be treated as income of the assessee, even if no documents/registration papers were prepared. The AO further observed that it was immaterial that no documents pertaining to sale of 65 plots were found during the course of survey since when transactions were carried out in cash and no books of accounts were 3 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 maintained, the clear marking of the unsold plots on the Site Plan by the partner of the firm had to be accepted as correct. The AO, therefore, held that the assessee had sold the 65 plots up to the date of survey as against 6 plots sold as stated by the assessee upto the date of survey and total of 16 plots sold during the accounting year.
4. In appeal before the first appellate authority, the ld. AR of the assessee submitted that the AO's conclusion was based only on one loose paper which was a pamphlet containing description about plots for sale and was only in the nature of advertisement. The present era was of advertisement, one would be out of market if one did not show to people that the product was selling like hot cake in the market. One had to apply different kinds of strategy to entice people to come and buy the product. They had to be given illusion that there was limited stock and if they don't decide well within time that they might lose it and it was a general practice of the business to expose before the prospective customers in a fashion that "you buy the plots immediately or you will never get a plot". Accordingly a printed pamphlet which has no utility as such or value was shown under the strategy that the plots which were unsold were shown in such a manner as if they had been sold. Hence, such kind of pamphlet or a paper on which no signature, date or amount was written had no evidentiary value and was just a business strategy to attract customers and nothing beyond that. There were 14 partners in the firm who were doing activity in different lines. Hence, every partner would not know everything. As per the partnership deed, Nileshbhai whose statement was recorded had never been authorized to deal with anyone. Hence, his statement was of no value. Even otherwise he did not state anything on which such a huge addition could be made. Shri Nilesh K Patel never admitted that 65 plots were sold nor any documents found during the 4 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 course of survey from which it could be established that appellant had sold 65 plots. Another partner Shri Dinesh K. Patel in his statement dated 11/9/2002 during the course of survey proceedings had already submitted that only 6 plots were sold till the date of survey. Hence, it could never be assumed that 65 plots were sold during the year under consideration.
4.1 The ld. AR also reiterated the fact that the assessee had sold only 16 plots during the year under consideration and the remaining plots were sold in subsequent years only. It was further submitted that the chart regarding sale of 65 plots as per page 10 of the assessment was factually incorrect since plots at Sl.No.4,9,19,37,49,55,56,57,61,62,64,65,71,72 and 87 only were sold during the year and all other plots were sold in FYs 2003-04, 2004-05 and 2005-06, in support of which the assessee furnished copies of registration papers of all the plots sold till date.
5. The ld. CIT(A) considering the observations of the AO and the submissions along with documents of the assessee observed as under :-
"I have considered the submissions and have gone through the documents found during the course of survey proceedings and the paper book filed by the appellant as also the copies of conveyance deeds in respect in respect of the said 65 plots and find that the appellant's contention is in order. A perusal of the assessment order shows that the appellant filed conveyance deeds in respect of 16 plots claimed to have been sold by it during the year. However, it is surprising that the AO either did not ask for or declined to entertain the conveyance deeds in respect of other plots which the assessee claimed to have sold during the subsequent years. It appears that these documents were not taken on record simply to strengthen the AO's view for making the said addition. The said documents were filed before me and although the same were not additional evidence, the AO was confronted with this and requested to explain as to why these documents were not examined by him which would substantiate the appellant's claim that only 16 plots were sold during the year under consideration. No comments were offered by the AO on this aspect. After going through the conveyance deeds in respect of 5 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 65 plots mentioned to have sold by the AO during the year, I find that the appellant's contention is correct. It is seen that plots at Sl. Nos.2,5,6,7,8,10,25,26,27,28,29,38,39,45,46,47,48,50,51,52,53,54,59,63, 66,67,68,69,70,73,74,75,78,79,84 were all sold during the financial year 2003-04 and rest of the plots were sold during financial years 2004-05 and 2005-06 only. Since there is documentary evidence in the form of conveyance deeds in respect of the contentions of the appellant, I am of the considered view that the appellant's claim of having sold only 16 plots during the year is in order and no adverse inference can be drawn on this ground and the claim of the appellant should have been accepted."
6. Other related ground of appeal is regarding the addition on account of alleged 'on money' received on sale of the plot. The AO made addition in respect of alleged 'on money' charged by the appellant on sale of the above mentioned 65 plots. It was observed by the AO that on page No.65 of Annexure-B-11 found and impounded during the course of survey, the rate of corner plot, inside plot, etc. was written. The narration of the relevant piece of paper is as under :-
Corner plot 3850 Inside plot single 3500 1 to 10 plot 3350 Booking amount 25% payment Time of payment of plot sales 6 to 7 months Development charges 20,000 15 days payment 3200
Amount of documents, as per Jantri 400 per sq. metres.
The AO further observed that on the site plan found and impounded as per page No.19 of Annexure B-19, the assessee firm's partner had also written the sale price of various plots as 1 to 13 -4150 and 14 to 82 -3950. On this point the relevant portion of statement Shri Nilesh Patel was also reproduced in the assessment order as under -
6 ITA No.1885/Ahd/2006 alongwith CO 239/Ahd/2006 Asst. Year 2003-04 "Q No.6 In your answer to question No.5 you had stated Rs.335 per sq.yd. as the sale price of plot. When we came to your office in the morning and talked about sale price of per sq.yard you had stated Rs.4150/- as rate per sq. yard. Further of plot No.14 to 82 you said has sale price of Rs.3950/- per sq. yard. Please explain the same in detail.
A No.6 I was not knowing the exact detail. I am not sitting in the site office of M/s Sanskruti Township. I am attending the office today only and I did not know. Therefore I had stated the rate mentioned by you by mistake."
From the above notings in the impounded documents and the reply of the assessee to question No.6 mentioned above, he concluded the assessee was not recording full sale consideration in its books since the documented price was less than the actual sale price. When required to explain as to why the sale price of said plots should not be taken at Rs.4150/- per sq. yd. on the basis of page No.69 of Annexure B-11 of the impounded material, the appellant stated as under :
"The upper portion of page No.69 contains the details of work to be done by the unknown contractor which is incorporated by him. The first three items of lower portion indicates the estimate of additional development charges of certain plots which are adjoining to more margin land. The 4th and 5th item was incorporated by the contractor. He was informed that he will obtain 25% of payment from the booker in respect of the development charges and he will be given full amount within 6 to 7 months. 6th and 7th item is the suggestion made by the contractor to collect Rs.20,000/- per plot and he will collect nearly 15% i.e. Rs.3,000/- per plot, irrespective of whether booking is made or not. The said contractor was interested in buying certain plots as against the payment to be obtained by him for the proposed contract and he inquired in respect of the consideration of the plot per sq.metre which he has incorporated at last."
The AO did not accept the explanation of the assessee on the ground that the partner of the firm Shri Nilesh Patel had not denied this rate which was mentioned on the impounded document and it was not believable that a partner of the firm who was paid salary was not knowing the rate of 7 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 plots at which these were actually sold. The AO further held that the assessee's explanation regarding the notings being made by the unknown contractor was also an after thought since he was not able to furnish the name or the address of the said contractor and since the impounded document was a diary where the expenses, details of work done were mentioned, no prudent businessman will write the details of discussions with the known contractor on such a paper and that it was clear that the appellant was selling plots not below the rates mentioned in the said paper. The AO therefore, worked out the sale price of 65 plots sold by the appellant at the rates mentioned in the impounded paper and made an addition of Rs.3,46,61,718/-.
7. Before the ld. CIT(A) the submission of the assessee was that the AO's contention that assessee received 'on money' amount for selling plot was without any basis and was a mere guesswork without any cogent proof. His contention that such plots were sold at a much more price than what was accounted for was on the basis of only one rough sheet containing only a area wise description (not including the sales price) of land for advertisement. It was further submitted that nowhere in the whole pamphlet word "Rupees" was used. Even the amount written by pen did not mention "rupees" anywhere. The figure written by pen, was in point i.e. 41.50 and 39.50 and did not indicate whether it is for sq.meters or yard or feet or for full plot and most important fact was that such a pamphlet could not be construed as any legal supportive proof in any circumstances. Further nowhere in any of statement given at the time of survey anyone accepted that on money was charged. It was further submitted that none of the partners statement differed anyway on this aspect. The sale deeds were produced before the AO in which the buyer was charged Rs.400/- per sq. yard for outer side plot and names, 8 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 addresses etc. available who could have called them and confirmed the amount whether appellant charged anything extra other than what was accounted for. But the AO could not find any discrepancy or fault in such document and he ultimately accepted the rate disclosed for such parties. The ld. AR further relied on various judgment in support of his contentions that no addition could be sustained merely on the basis of loose papers.
7.1 The ld. AR of the assessee further submitted that the AO also tried to strengthen his findings regarding 'on money' by observing in his order on page No.9 and 10 that the rate of plot was Rs.3,650/- per sq. yard as per document at page No.69 of Annexure B-11 and in addition to such sale consideration the assessee was also collecting development charges of Rs.20,000/- per plot. It was stated by the AO that the sale consideration received in respect of 664 sq. yards of land at the rate of Rs.3,650/- per sq.yard would work out to Rs.24,23,600/- and the development charges for six plots would be Rs.1,20,000/- which would add up to Rs.25,43,600/- out of which the amounts spent for development upto the date of survey as per cash book was Rs.8,321/- and as such unaccounted profit on sale of six plots available for settlement amongst 14 partners would be Rs.17,29,279/-. The AO further observed that as per the partnership deed one of the partner Shri Jhaverbhai was having 6.67% share and his son Shri Prakashbhai 6.66% share and the two together held 13.33% share. The proportionate share on this profit would work out to Rs.2,30,000/- and on verification of page No.26 of Annexure B-11 it was found that Shri Jhaverbhai had withdrawn a total of Rs.2,30,000/- on various dates i.e. Rs.1 lakh on 22/4/2002, Rs.50,000/- on 1/5/2002 and Rs.80,000/- on 8/5/2002 which proved that the assessee had sold these six plots by charging 'on money' of Rs.3,325/- per sq.yard.
9 ITA No.1885/Ahd/2006 alongwith CO 239/Ahd/2006 Asst. Year 2003-04 7.2 The ld. AR of the assessee also submitted that the observations of the AO were not based on the facts. The AO referred to page No.56 of annexure B-5 wherein there was an alleged withdrawal of Rs.2,30,000/- on 3 different dates, but on the same page against the name of Shri Jhaverbhai 43.25 was also mentioned which in fact was his collective share in the partnership since he was representing eleven other partners also and that the AO did not refer to a material nothing on page 58 of the same annexure, wherein against a total of Rs.5,25,660/- four names were mentioned i.e. that of Jhaverbhai -230000 -43.75; K.D -147830 -28.12, P.G -111241 -21.16 and G.C. -36589 -5.95. It was submitted that the AO's observation that this was the amount of profit available from charging of 'on money' was without any basis and in fact was the investment by these partners for development work in the land. It was also submitted that four plots were sold on 31/5/2002 and two plots were sold on 12/8/2002, whereas as per the AO the 'on money' was received and withdrawn by the partners on 22/4/2002. The so called unaccounted profits could not have been shared in advance or withdrawn in advance.
8. After considering the observations of the AO and the submissions of the assessee the ld. CIT(A) deleted the entire addition on this account i.e. receipt of 'on money' and excess sale of plots by observing as under:-
"I have gone through the copies of the impounded material and the statement of partners of the firm recorded during the course of Survey operation. It is seen that the AO has really put in a lot of efforts and hard work in working out the sale price of each and every plot on the basis of notings in the impounded material as also detailed examination of the impounded papers. However, the AO has based his conclusion on the notings of the impounded material and the unrecorded evidence of what transpired between the papers of the firm Shri Nilesh Patel and the survey party prior to start of the actual survey operations. I have also 10 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 examined the statements of the various partners recorded during the course of survey operations and find that nowhere in the statements as it has been admitted by any of the partners that 'on money' was being charged on sale of the plots. It is also seen that no cash or any other incriminating material to prove the charging of 'on money' was found during the course of survey operations. The AO's conclusion based on the notings on these papers is not sustainable since the appellant's explanation is also convincing and cannot be rejected out right specially in view of the fact that there was no disclosure made by the appellant nor was any cash found at the time of survey and as held by the various courts, no adverse inference can be drawn from notings on loose papers or diaries unless corroborative evidence is also available. In the instant case, the registration of sale deed has been done at the rate of Rs.400/- per sq.yard which was the rate fixed by the Government. It is also seen that the AO has not brought any other case on record where similar plots in any other or same locality were sold at the rates calculated by the AO in the instant case. Further, the AO did not record the statement of any of the buyers of the plots which could have established his case that 'on money' was paid for purchase of such plots I am also in agreement with the ld. AR that such statements could have gone in his favour since neither the buyers nor the sellers might have admitted to the payment or receipt of any such 'on money' and therefore there is no justification in making an addition on the basis of such unrelated and unconfirmed material. I have also considered the explanation filed by the appellant during the course of assessment proceedings and after examining the two documents i.e. page No.56 and 58 of the Annexure B-11 it is clear that the said entries could not possibly be in respect of withdrawal of money or allocation of alleged 'on money' received since no prudent buyer would pay such 'on money' three months in advance to unknown and unrelated property dealer. It is further seen that the AO has relied upon the noting on the pamphlet in support of his view that the plots were sold at the rate of Rs.3650/-. A perusal of the said document at page 19 of Annexure B-19 shows that 4150 and 3950 are the figures written on it which do not have any co relation with the rates of plots worked out by the AO. The AO has relied on notings of page 69 of Annexure B-11 which is again an unsigned paper and as per the version of the appellant is only an estimate of the charges quoted by the contractor. These unsigned documents have no evidentiary value specially in view of the fact that no corroborative evidence like cash found or any other paper acknowledging the receipt of any 'on money' or any incriminating evidence/document was found during the course of survey operations. It is also important to note that none of the partners even during the course of survey operations ever admitted to charging of 'on money' nor offered 11 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 the same for taxation which is unusual during the course of survey when most of the businessmen surrender their unaccounted income. In view of this, it is held that the AO's action in relying upon unrelated documents is not in order and entire addition on this account i.e. receipt of 'on money' and excess sale of plots is directed to be deleted."
Against this order of the ld. CIT(A) the Revenue has come in appeal before the Tribunal.
9. Before us the ld. DR supported the order of AO and submitted that during the course of survey proceedings, some incriminating documents were found and impounded, as per Annexure-B dated 11.09.2002. On verification of these documents and diaries impounded during the course of survey proceedings, the AO observed that as per the copy of the site plan which was impounded (page nos.8 and 19 of Annexure-B-19), there were 90 plots in the project called Sanskruti Township. In the site plan certain plots were tick marked by black ball pen and these plots were actually the remaining unsold plots numbering 25. During the course of survey the statements of the partners of the firm Shri Nilesh J. Patel and others was also recorded. The assessee was not recording full sale consideration in its books since the documented price was less than the actual sale price. The AO had held that the assessee's explanation regarding the notings being made by the unknown contractor was also an after thought since he was not able to furnish the name or the address of the said contractor and since the impounded document was a diary where the expenses, details of work done were mentioned, no prudent businessman will write the details of discussions with the known contractor on such a paper and that it was clear that the appellant was selling plots not below the rates mentioned in the said paper. The AO therefore, worked out the sale price of 65 plots sold by the appellant at the rates mentioned in the impounded paper. The ld. CIT(A) has wrongly 12 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 deleted the impugned addition made by the AO. Therefore, he prayed that the order of ld. CIT(A) be set aside and that of the AO be restored.
10. On the other hand, the ld. counsel of the assessee submitted that AO's contention that assessee received 'on money' amount for selling plot was without any basis and was a mere guesswork without any cogent proof. His contention that such plots were sold at a much more price than what was accounted for was on the basis of only one rough sheet containing only an area wise description (not including the sales price) of land for advertisement. It was further submitted that nowhere in the whole pamphlet word "Rupees" was used. Even the amount written by pen did not mention "rupees" anywhere. The figure written by pen, was in point i.e. 41.50 and 39.50 and did not indicate whether it is for sq.meters or yard or feet or for full plot and most important fact was that such a pamphlet could not be construed as any legal supportive proof in any circumstances. Nowhere in any of statement given at the time of survey anyone accepted that on money was charged. None of the partners statement differed anyway on this aspect. The sale deeds were produced before the AO in which the buyer was charged Rs.400/- per sq. yard for outer side plot and names, addresses etc. available who could have called them and confirmed the amount whether appellant charged anything extra other than what was accounted for. The AO could not find any discrepancy or fault in such document and he ultimately accepted the rate disclosed for such parties. The ld. AR further relied on various judgment in support of his contentions that no addition could be sustained merely on the basis of loose papers. The ld. AR of the assessee further submitted that the AO also tried to strengthen his findings regarding 'on money' by observing in his order on page No.9 and 10 that the rate of plot was Rs.3,650/- per sq. yard as per document at page No.69 of Annexure B-11 13 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 and in addition to such sale consideration the assessee was also collecting development charges of Rs.20,000/- per plot. It was stated by the AO that the sale consideration received in respect of 664 sq. yards of land at the rate of Rs.3,650/- per sq.yard would work out to Rs.24,23,600/- and the development charges for six plots would be Rs.1,20,000/- which would add up to Rs.25,43,600/- out of which the amounts spent for development upto the date of survey as per cash book was Rs.8,321/- and as such unaccounted profit on sale of six plots available for settlement amongst 14 partners would be Rs.17,29,279/-. The AO further observed that as per the partnership deed one of the partner Shri Jhaverbhai was having 6.67% share and his son Shri Prakashbhai 6.66% share and the two together held 13.33% share. The proportionate share on this profit would work out to Rs.2,30,000/- and on verification of page No.26 of Annexure B-11 it was found that Shri Jhaverbhai had withdrawn a total of Rs.2,30,000/- on various dates i.e. Rs.1 lakh on 22/4/2002, Rs.50,000/- on 1/5/2002 and Rs.80,000/- on 8/5/2002 which proved that the assessee had sold these six plots by charging 'on money' of Rs.3,325/- per sq.yard. The ld. AR of the assessee also submitted that the observations of the AO were not based on the facts. The AO referred to page No.56 of annexure B-5 wherein there was an alleged withdrawal of Rs.2,30,000/- on 3 different dates, but on the same page against the name of Shri Jhaverbhai 43.25 was also mentioned which in fact was his collective share in the partnership since he was representing eleven other partners also and that the AO did not refer to a material nothing on page 58 of the same annexure, wherein against a total of Rs.5,25,660/- four names were mentioned i.e. that of Jhaverbhai -230000 -43.75; K.D -147830 -28.12, P.G -111241 -21.16 and G.C. -36589 -5.95. It was submitted that the AO's observation that this was the amount of profit available from charging of 'on money' was without any basis and in fact was the investment by these partners for 14 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 development work in the land. It was also submitted that four plots were sold on 31/5/2002 and two plots were sold on 12/8/2002, whereas as per the AO the 'on money' was received and withdrawn by the partners on 22/4/2002. The so called unaccounted profits could not have been shared in advance or withdrawn in advance. Therefore, the AO was not correct in making the addition. The ld. CIT(A) has rightly appreciated the facts and deleted the impugned addition. His order may kindly be upheld.
11. After considering the rival submissions and perusing the material on record, we are of the view that there is no infirmity in the order of ld. CIT(A). The AO has based his conclusion on the notings of the impounded material and the unrecorded evidence of what transpired between the partner of the firm Shri Nilesh Patel and the survey party prior to start of the actual survey operations. As far as AO's contention that assessee has sold 65 plots during the year under consideration, we find that the ld. CIT(A) in his order has observed that perusal of the assessment order showed that the assessee filed conveyance deeds in respect of 16 plots claimed to have been sold by it during the year. He further observed that the AO either did not ask for or declined to entertain the conveyance deeds in respect of other plots which the assessee claimed to have sold during the subsequent years. It appeared that these documents were not taken on record simply to strengthen the AO's view for making the said addition. The said documents were filed before him and although the same were not additional evidence, the AO was confronted with this and requested to explain as to why these documents were not examined by him which would substantiate the assessee's claim that only 16 plots were sold during the year under appeal. No comments were offered by the AO on this aspect. After going through the 15 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 conveyance deeds in respect of 65 plots mentioned by the AO to have been sold by the assessee during the year, he found that the assessee's contention is correct. It was seen that plots at Sl. Nos.2, 5, 6, 7, 8, 10, 25, 26,27,28,29,38,39,45,46,47,48,50,51,52,53,54,59,63,66,67,68,69,70,73,7 4,75,78,79,84 were all sold during the financial year 2003-04 and rest of the plots were sold during financial years 2004-05 and 2005-06 only. Since there was documentary evidence in the form of conveyance deeds in respect of the contentions of the assessee, he was of the considered view that the assessee's claim of having sold only 16 plots during the year was in order and no adverse inference could be drawn on this ground and the claim of the assessee was accepted. Since this finding of the ld. CIT(A) remained uncontroverted at the time of hearing before us, we are of the view that no interference is called for in respect of this issue. Now coming to the contention of the AO that assessee received 'on money' on sales of plots we find that nowhere in the statements it has been admitted by any of the partners that 'on money' was being charged on sale of the plots. No cash or any other incriminating material to prove the charging of 'on money' was found during the course of survey operation. The ld. CIT(A) has rightly observed that AO's conclusion based on the notings on these papers is not sustainable since the assessee's explanation is also convincing and cannot be rejected out right specially in the light of the fact that there was no disclosure made by the assessee nor was any cash found at the time of survey and no adverse inference can be drawn from notings on loose papers or diaries unless corroborative evidence is also available. In the present case the registration of sale deed has been done at the rate of Rs.400 per sq. yd. which was the rate fixed by the Govt. AO has not brought any other case on record where similar plots in any other or same locality were sold at the rates calculated by the AO in the instant case. The AO did not record the statement of any of the buyers of the 16 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 plots which could have established his case that 'on money was paid for purchase of such plots. Entries on page No.56 and 58 of the Annexure B- 11, could not possibly be in respect of withdrawal of money or allocation of alleged 'on money' received since no prudent buyer would pay such 'on money' three months in advance to unknown and unrelated property dealer. The AO has relied upon the noting on the pamphlet in support of his view that the plots were sold at the rate of Rs.3,650/-. The AO has relied on notings of page 69 of Annexure B-11 which is an unsigned paper. The unsigned documents have no evidentiary value specially in view of the fact that no corroborative evidence like cash found or any other paper acknowledging the receipt of any on money or any incriminating evidence/document was found during the course of survey operations. AO's action in relying upon unrelated documents is not in order. Therefore, in our considered view the ld. CIT(A) has rightly deleted the entire addition i.e. receipt of 'on money' and excess sale of plots. No interference is called for. We uphold the same. The first and second grounds raised by the Revenue are dismissed.
12. The next ground relates to restriction of disallowance of Rs.6,51,470/- out of total addition of Rs.14,65,772/-. During the assessment proceedings the AO observed that as per page No.1 to 61 of the documents impounded as per Annexure B-11, the assessee had incurred various expenditures of Rs.14,65,772/-. When required to explain the assessee submitted that these were only estimation of plot development expenses and were not actually spent. The AO did not accept the said explanation on the ground that one of the partners of the firm Shri Dinesh Patel had in his statement accepted that he had spent an amount of Rs. 5 lakhs and Rs. 2 lakhs for developmental expenses and construction of office compound wall etc. On the basis of such 17 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 information received and admission of the assessee the AO concluded that the expenditure recorded in the impounded material was out of unexplained sources and made an addition of Rs.14,65,772/-. On this account.
13. Before ld. CIT(A) it was submitted that the said notings were only estimated figures written in the diary and were in respect of plot development charges being a part of the planning of the business. The actual expenditure till the date of survey was shown under the head 'work in progress' where a sum of Rs.8,14,302/- for various development expenses were shown and the same was funded by the partners. Therefore, there was no justification in making addition on the basis of figures noted in diary and the AO had not brought any evidence on record to show that the amount written in the diary was actually incurred. The ld. CIT(A) after considering the contentions of the AO and the submissions of the assessee restricted the addition to Rs.6,51,470/- out of Rs.14,65,772/- made by AO with the following observations :-
"I have considered the submissions and have gone through the copies of the impounded material. I am in agreement with the AO that this expenditure recorded on various pages of the diary from page No.1 to 61 of Annexure B-9 has actually been incurred by the appellant. I do not agree with the appellant that these are mere notings which has no relevance to the actual expenditure incurred. However, it is also seen that the appellant has shown a sum of Rs.8,14,302/- as 'work in progress' in his account as on the date of survey, in view of which expenditure to this extent cannot be treated as unexplained. However, the balance amount of Rs.6,51,470/- has not been recorded in the books of account and, therefore, I am of the considered view that this expenditure has been incurred by the appellant from out of undisclosed sources. Addition on this account is, therefore, directed to be restricted to Rs.6,51,470/- only. It is also an important fact that the appellant has contradicted his own stand that these notings were not actual expenditure but only estimates by subsequently admitting that a sum of Rs.8,14,302/- out of the total noting 18 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 of expenditure in the impounded material was actually incurred by him and recorded as 'work in progress'."
Against this observation of the ld. CIT(A) the Revenue is in appeal before the Tribunal.
14. The ld. DR vehemently supported the order of AO and submitted that during the assessment proceedings the AO observed that as per page No.1 to 61 of the documents impounded as per Annexure B-11, the assessee had incurred various expenditures of Rs.14,65,772/-. When required to explain the assessee submitted that these were only estimation of plot development expenses and were not actually spent. The AO did not accept the said explanation on the ground that one of the partners of the firm Shri Dinesh Patel had in his statement accepted that he had spent an amount of Rs. 5 lakhs and Rs. 2 lakhs for developmental expenses and construction of office compound wall etc. On the basis of such information received and admission of the assessee the AO concluded that the expenditure recorded in the impounded material was out of unexplained sources and made an addition of Rs.14,65,772/-. On this account. The AO has rightly made the addition and the ld. CIT(A) was not justified in restricting the addition to Rs. 6,51,470/-. His order may kindly be set aside and that of the AO be restored.
15. On the other hand the ld. counsel of the assessee relying on the order of ld. CIT(A) submitted that the appellant has shown a sum of Rs.8,14,302/- as 'work in progress' in his account as on the date of survey, in view of which expenditure to this extent cannot be treated as unexplained. However, the balance amount of Rs.6,51,470/- has not been recorded in the books of account and, therefore, the ld. CIT(A) 19 ITA No.1885/Ahd/2006 along with CO 239/Ahd/2006 Asst. Year 2003-04 considering that this expenditure has been incurred by the appellant from out of undisclosed sources restricted the addition on this account is, Rs.6,51,470/- only. There is no infirmity in the order of ld. CIT(A). This may kindly be upheld.
16. We have considered the rival submissions and perused the material on record. We find that expenditure of Rs.8,14,302/- has been incurred by the assessee as recorded on various pages of the diary from page No.1 to 61 of Annexure-B-9. This sum of Rs.8,14,302/- has also been shown as 'work in progress' on the date of survey. This cannot be treated as unexplained. However, the balance amount of Rs.6,51,470/- has not been recorded in the books of account of assessee. Accordingly, the ld. CIT(A) has treated this expenditure as incurred by assessee from out of undisclosed sources and he directed to restrict the addition to Rs.6,51,470/- out of Rs.14,65,772/-. He was justified in restricting this addition to Rs.6,51,470/-. We confirm the order of ld. CIT(A) on this issue and dismiss the ground raised by the Revenue.
17. The Cross Objection of the assessee is in support of the order of ld.
CIT(A). Since we have upheld the order of ld. CIT(A) on the related grounds raised by the Revenue, the C.O. has become infructuous and the same is dismissed.
20 ITA No.1885/Ahd/2006 alongwith CO 239/Ahd/2006 Asst. Year 2003-04
18. In the result, the appeal filed by the Revenue and the Cross Objection filed by the assessee are dismissed.
Order pronounced in Open Court on 23/9 /2011
Sd/- Sd/-
(A. K. Garodia) (D. K. Tyagi)
Accountant Member Judicial Member
Ahmedabad,
Dated :23/9/2011
Mahata/-
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)-
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
1.Date of dictation 15/09/2011.
2.Date on which the typed draft is placed before the Dictating Member 20/9/11.
/Other Member................
3.Date on which the approved draft comes to the Sr.P.S./P.S.............
4.Date on which the fair order is placed before the Dictating Member for pronouncement..............
5.Date on which the fair order comes back to the Sr.P.S./P.S...............
6.Date on which the file goes to the Bench Clerk...........
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................
21