Income Tax Appellate Tribunal - Ahmedabad
Saumya Construction Pvt.Ltd.,, ... vs Acit.,Circle-1(3),, Ahmedabad on 14 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI S.S. GODARA, JUDICIAL MEMBER)
ITA. No: 693 & 943/AHD/2013
(Assessment Year: 2010-11)
Saumya Construction Pvt. V/S ACIT, Central Circle-1(3),
Ltd. 1st Floor, "Aditya", Ahmedabad
Nr. Khadayata-Colony,
Ellisbridge, Ahmedabad-
380006
ACIT, Central Circle-1(3), V/S Saumya Construction Pvt.
Ahmedabad Ltd. 1st Floor, "Aditya", Nr.
Khadayata-Colony,
Ellisbridge, Ahmedabad-
380006
(Appellant) (Respondent)
PAN: AAFCS 3523G
Appellant by: Shri S.N. Soparkar & P.M. Mehta, A.R.
Respondent by: Ms. Vibha Bhalla, CIT/DR
(आदे श)/ORDER
Date of hearing : 08 -02-2017
Date of Pronouncement : 14 -02-2017
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:
2 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11
1. ITA Nos. 693 & 943/Ahd/2013 are cross appeals by the Assessee and the Revenue preferred against the order of the Ld. CIT(A)-I, Ahmedabad dated 21.01.2013 pertaining to A.Y. 2010-11.
2. Both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity.
ITA No. 693/Ahd/2013 Assessee's appeal for A.Y. 2010-113. Assessee has raised two substantive grounds of appeal. Ground no. 1 relates to the addition made u/s. 14A of the Act amounting to Rs. 12,80,892/-.
4. During the course of the scrutiny assessment proceedings, the assessee was asked to show cause why the provisions of Section 14A should not be invoked in respect of investments in shares, the income of which is exempt from tax. The assessee strongly contended that it is having sufficient interest free funds for making investment in equity shares. Though, this contention was primarily accepted by the A.O. but he was of the opinion that the assessee failed to provide nexus of investments made in equity shares out of interest free funds. The A.O. was of the firm belief that the mandate of Section 14A is to disallow and expenditure directly or indirectly incurred in relation to the exempt income which is claimed against the 3 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 income taxable. The A.O. accordingly computed the disallowance u/s. 14A read with Rule 8D and disallowed Rs. 12,80,892/-.
5. The assessee carried the matter before the ld. CIT(A) but without any success.
6. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. The ld. D.R. strongly supported the findings of the revenue authorities.
7. After giving a thoughtful consideration to the order of the authorities below. We find that there is no dispute that the assessee was having sufficient interest free funds available with it for making the investments in shares. It is equally true that the assessee could not demonstrate the nexus between the interest free funds and the purchases of shares. In our considered opinion and to meet the interest of justice, the disallowance u/s. 14A should be made to the extent of the exempt income claimed by the assessee. We, accordingly, direct the A.O. to restrict the disallowance to the extent of exempt income. Ground no. 1 is partly allowed.
8. Ground no. 2 relates to the addition to the extent of Rs. 25,15,655/- out of total addition of undisclosed income.
9. A search operation was conducted at the business and residential premises of the assessee and its directors. During the search proceedings, the 4 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 assessee had disclosed an amount of Rs. 9 crores earned as unaccounted on money on sale of 278 units out of which 223 were conveyed and 55 were booked. The A.O. worked out the average on money of Rs. 3,23,741/- per unit on 278 units. The A.O. further worked out that average of Rs. 373.65 per sq. yd. was the on money on the total size of the plot. The A.O. was of the firm belief that the assessee must have also taken on money on the units that were booked/conveyed after the date of search i.e. 07.10.2009. The A.O. found that the highest rate that has been charged in the Aantarkshitij scheme was at Rs. 2813 per sq. yd. The A.O. added to this. The average on money per sq. yd. calculated as referred to hereinabove and came to a minimum rate of Rs. 3186 per sq. yd. The A.O. found that the assessee has sold/booked plots whose total area is 19470 sq. yd. of 24 units after 07.10.2009. Multiplying the minimum sales price calculated hereinabove, the A.O. came to the conclusion that the assessee must have earned on money to the tune of Rs. 1,01,63,340/- and added the same to the total income of the assessee.
10.The assessee strongly agitated this matter before the First Appellate Authority.
11.After considering the facts and the submissions, the ld. CIT(A) held as under:-
10. I have gone through the assessment order and the submissions and arguments of the AR of the appellant carefully. It is seen that the Assessing Officer has calculated the average rate of "on money" charged on the bookings and sale made by the appellant by dividing the entire on money received in-
5 ITA No . 693 & 943/Ahd/2013
. A.Y. 2010-11
respect of bookings / sales made by the total area sold. He has then added this "on money" to the highest rate of sale in respect of the project Aantarkshitij scheme in October 2009 to arrive at the rate on which the balance of the lands sold during the year. The above contention of the Assessing Officer is not right.
There is no doubt that the appellant had charged on money on the land transactions prior to the search. However for determining the on money charged after the search the 'Assessing Officer was not justified in taking the highest rate of land' sold in October -2009 and over and above that rate adding a sum of Rs. 373.65 per square yard. For calculating the average on money rate the Assessing Officer has considered the average of entire sales hence he cannot take the highest rate for determining the rate of sales of the remaining plots. It is also seen that the average sale rate recorded for the entire plots is Rs.2,169/- per sq. yard. The highest rate is Rs.2,813/- per sq. yard in October, 2009 and the lowest rate is Rs.3,586/- per sq. yard in April, 2009. It is seen that the average rate of. the lands sold during September 2009 is Rs. 24137- per square yard and the average rate in August is Rs. 2420/- per square yard and the average rate in July 2009 is 1600/- per square yard. In view of the above the Assessing Officer is directed to adopt the rate of Rs. 24207- per square yard and. add to this rate a sum of Rs, 373.65 for calculating the on money charged on the lands sold i.e. 19470 sq. yards. The addition works out to Rs.25,15,654.50 as under:
(2793.65X 19470) = 54392365.50- 5,18,76,711=25,15,654.50 .
The addition made by the A.O. is hence reduced as indicated above.
12.Aggrieved by this, both the assessee and the revenue are before us. The revenues grievance is at ground no. 2 of its appeal in ITA No. 943/Ahd/2013 which is considered at the latter part of this appeal.
6 ITA No . 693 & 943/Ahd/2013
. A.Y. 2010-11
13.Rival submissions were heard at length. Having heard the rival contentions, we have carefully perused the order of the authorities below and with the assistance of the ld. Senior Cousnel, we have considered the relevant documentary evidences brought on record in the light of Rule 18(6) of the ITAT Rules.
14.The undisputed fact is that during the course of the search proceedings, the assessee admitted of having received on money on the flats sold by it or booked by it. A perusal of the assessment order shows that the A.O. has calculated the on money post search operations on the belief that after 07.10.2009 also, the assessee must have taken on money as he had taken prior to 07.10.2009. In our considered opinion, the entire additions made by the A.O. partly confirmed by the ld. CIT(A) are solely based upon mathematical calculations. But in the Income Tax assessment proceedings, the additions/disallowances have to be made on the basis o f documentary evidences and judicial decisions.
15.There is not even a single piece of evidence lest it be cogent material evidence which could justify the impugned additions made by the A.O.
16.The entire additions made by the A.O. are based upon the surmise and the presumption that the assessee must have earned on money post 07.10.2009 also. These observations have formed the basis of the addition. In Lalchand Bhagat Ambica Ram vs. CIT 37 ITR 288, The Hon'ble Supreme 7 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the "notorious practice"
prevailing in trade circles.
17.The assessee had given complete details of booking received after 06.10.2009 and the same is as under:-
SAUMYA CONSTRUCTION PVT. LTD.
AANTARKSHITIJ DETAILS OF BOOKING RECD AFTER 06/10/2009 PHASE UNIT NAME ADDRESS PAN NO.
PHASES 0169 PRAKASH J HARIBHAKTI 76, TAPOVAN SOCIETY, NR. AAEPH1911M MANEKBAUG HALL, AMBAVADI, AHMEDABAD 11 PHASES 0057 RAJESHWARI SANJAY PATEL NANDI HILL ", ACRPP3751C JASWANTLAL BIDIWALA PARK, JODHPUR TEKRA, AHMEDABAD PHASES 0058 SAN J AY J. PATE L " NANDI HILL ", AATPP8013D JASWANTLAL BIDIWALA PARK, JODHPUR TEKRA, AHMEDABAD 11 PHASES 0059 SANJAY J. PATEL NANDI HILL ", AATPP8013D JASWANTLAL BIDIWALA PARK, JODHPUR TEKRA, AHMEDABAD PHASES 0060 RAJESHWARI SANJAY PATEL " NANDI HILL ", ACRPP3751C JASWANTLAL BIDIWALA PARK, JODHPUR TEKRA, AHMEDABAD PHASES 057A RAJESHWARI SANJAY PATEL " NANDI HILL ", ACRPP3751C JASWANTLAL BIDIWALA PARK, JODHPUR TEKRA, AHMEDABAD PHASES 058A SANJAY J. PATEL " NANDI HILL ", AATPP8013D JASWANTLAL BIDIWALA PARK, JODHPUR TEKRA, AHMEDABAD 8 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 PHASES 0176 NILAMBARICSHETH B-40,ARYAMAN BUNGLOWS, AIJPS6137R OPP; ANAND NIKETAN SCHOOL NEAR THALTEJ RAILWAY CROSSING, AHMEDABAD PHASES 0118 MONAL DHANVIN. PUJ 201, AKASH SAGAR FLAT, AMYPP1788L PANCHVATI IIND LANE, BEHIND MONALISHA, AMBAWADI, AHMEDABAD PHASES 0147 SATISH VORA B/24, SHALIGRAM - 3, ABAPV4346F PRAHLADNAGAR, SATELLITE, AHMEDABAD PHASES 0116 ATULJASVANTLALSHAH B/204, VRAJ VIHAR - 4, OPP. ACIPS7564F CHANDAN PATY PLOT, JODHPUR, SATELLITE, AHMEDABAD PHASES 0117 JASHWANTLAL G. SHAH 301, KRISHNA TOWER, AACCN6152D PARTHSARTHI PLAITS, NR.
SHYAMAAL RAW HOUSE II, SATELLITE 132 FT RING ROAD, AHMEDABAD PHASES 0119 VINODCHANDRA S. THAKKAR 20, VRUNDAVAN AAHPT2912M BUNGALOWS III, THALTEJ SHILAJ ROAD, SHILAJ, AHMEDABAD PHASES 0157 JAYANTKUMAR M. PANDYA 25, SHIVALIK BUNGALOWS, ABEPP0742R ANANDNAGAR, SATELLITE 100 FT. ROAD, AHMEDABAD PHASE UNIT NAME ADDRESS PAN NO.
PHASES 0158 JAYANTKUMAR M. PANDYA 25, SHIVALIK ABEPP0742R BUNGALOWS, ANANDNAGAR, SATELLITE 100 FT. ROAD, AHMEDABAD PHASES 0120 KAMLABEN BABULAUAIN 94/1, GIRDHARNAGAR AAQPJ7763F SOCIETY, SHAHIBAUG, AHMEDABAD - 4 PHASES 0121 KAMLABEN BABULAUAIN 94/1, GIRDHARNAGAR AAQPJ7763F SOCIETY, SHAHIBAUG, AHMEDABAD - 4 PHASES 0189 JWALIT A. DAVE 4, KEDAR, ADHYAPARK ABXPD2004M MITRA MANDAL SOCIETY, NR. KETAV PETROL PUMP, POLYTECHNIC, AMBAWADI, AHMEDABAD 9 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 PHASES 0190 KAMLESH N. RAVAL B/22, MARUTI NANDAN ADAPR1999Q VILLA, OPP. LA HABITAT, NR. SUVARNA VILLA, 100FT RING ROAD, AHMEDABAD PHASES 0162 NARMADABEN GHEVARCHAND 301, SUDARSHAN FLAT, AABPJ5829K JAIN OPP. SHAH HOSPITAL, 13, SHANTINAGAR SOCIETY, ASHRAM ROAD, AHMEDABAD PHASES 0163 PRAVIN J. SHAH 24, TRIBHUVAN PARK, NR. AAIPS9115Q PARASMANI SOCIETY, JAWAHAR CHOWK, AHMEDABAD PHASES 0164 DINESH RAMANLALSHAH 102, SUDARSHAN AAIPS9087M APPARTMENT, NR. DR.
ANJNABEN DISPENSARY,
NR. SHANTINAGAR JAIN
TAMPLE, AHMEDABAD
PHASES 0056 JIGNESH DASHRATHBHAI 51, ANURAG BUNGLOWS, AAMPP6712C
PATEL NEAR SARASWATI
SCHOOL, SOLA SCIENCE
SITI ROAD,SOLA,
AHMEDABAD
PHASES 0088 RANKIT KISHORKUMAR C-34, RBI OFFICERS ADIPT0134H
THAKKAR QUARTERS, NORTH
AVENUE ROAD,
SANTACRUZ(WEST)
MUMBAI
24
18. A perusal of the aforementioned list shows that the A.O. was incomplete possession of all the details in respect of all the persons who had booked/purchased flat after 06.10.2009. There is not even a single piece of evidence to show that any enquiry was made by the A.O. from these purchasers. We find further that all the sales were made at Jantry rate .
19.In our understanding of the law, the assessing authority has no power to disturb the sale price shown except in three cases. The first is under Section 145 of the Act. Where the sale of properties is part of the business of the 10 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 assessee, the Assessing Officer, if he is of the opinion that the accounts are not correct and complete, may proceed to reject the books of accounts and thereafter make a best judgment assessment of the income in the manner prescribed by Section 144. The second is the case where Section 50C of the Act is invoked on the basis of the prices fixed by the Stamp Valuation Authorities of the State Government. The third is the case of Section 92BA inserted by the Finance Act, 2012 w. e. f. 01.04.2013. This section gives power to the assessing officer to recalculate the profits shown by the assessee in cases of "specified domestic transactions" where the aggregate of such transaction entered into in the relevant accounting year exceeds a sum of Rs. 5 crores.
20.The power of the assessing Officer to raise valid queries on the basis of the facts or unusual features noticed by him must be conceded. The features noticed by him in the assessees' business certainly constitute a starting point of inquiry. They are, however, not to be taken as evidence or material showing any suppression or understatement of the sale price. If on further probe, the assessing Officer was able to unearth any evidence or material on the basis of which actual suppression of the sale price could be found, then the additions made on that basis would be valid. But it is not open to him, merely on the basis of what he perceives to be the market conditions, to make additions to the sale price or the profits, without any evidence of understatement.
11 ITA No . 693 & 943/Ahd/2013
. A.Y. 2010-11
21.In our considered opinion, the Assessing Officer has drawn a presumption that all the units booked after 07.10.2009 must have also fetched on money to the assessee. The A.O. has not made any further enquiry to substantiate or justify his presumption. The A.O. has not pointed out a single transaction in the books of accounts as not properly accounted for in the books vis-à-vis the details furnished by the assessee.
22.No doubt, the assessee has made disclosure of additional income of Rs. 9 crores for the conveyance done and bookings done for the period between 01.04.2009 and 06.10.2009 but this by itself cannot prompt the A.O. to presume that the assessee must have done the same thing which he has done prior to 07.10.2009.
23.The Assessing Officer has proceeded to make impugned addition arbitrarily on assumption, surmises and conjectures brushed aside all written submissions made in the course of assessment proceedings. It is a settled proposition of law that no addition can sustain which is based on presumption/surmises/conjectures. Therefore, the assessment order is erroneous on this count and the First Appellate Authority further erred in partly confirming an erroneous assessment.
24.We, therefore, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the entire addition of Rs. 1,01,63,340/-. Ground no. 2 is accordingly allowed and ground no. 2 of Revenue's appeal is dismissed.
12 ITA No . 693 & 943/Ahd/2013
. A.Y. 2010-11
25.In the result, the appeal filed by the Assessee is partly allowed.ITA No. 943/Ahd/2013 Revenue's appeal for A.Y. 2010-11
26.Revenue has raised two substantive grounds of appeal. Ground no. 1 relates to the deletion of the disallowance of interest of Rs. 9,07,942/- made u/s. 36(1)(iii) of the Act and Ground no. 2 relates to the restriction of the addition made on account of undisclosed on money to Rs. 25,25,655/- out of total Rs. 1,01,63,640/-.
27.Ground no. 2 is dismissed qua our detailed discussion given in allowing ground no. 2 of assessee's appeal in ITA No. 693/Ahd/2013 (supra).
28.This leaves with only grievance of the revenue relating to the deletion of the disallowance of Rs.9,07,942/-.
29. During the course of the scrutiny assessment proceedings, the assessee was asked to explain the interest expenditure claimed u/s. 36(1)(iii) of the Act and to justify the reasonableness of the interest charged on the advances given during the course of its business. After perusing the detailed submissions of the assessee, the A.O. was of the opinion that the assessee has given advances at a rate lower than the average rate of the three assessment years which works out to 14.94% and since the assessee has given interest bearing advances at a rate lesser than 15%, the A.O. worked out the disallowance at Rs. 9,07,942/-.
13 ITA No . 693 & 943/Ahd/2013
. A.Y. 2010-11
30.Assessee carried the matter before the ld. CIT(A) and reiterated its contention.
31.After considering the facts and the submissions and the two decisions of the Hon'ble Supreme Court in the case of Munjal Sales Corporation 298 ITR 298 and S. A. Builers Ltd. 288 ITR 1, the ld. CIT(A) observed that similar additions were made in A.Y. 2008-09 & 2009-10 by the A.O. which have been deleted by his predecessor. Therefore, following the same, the ld. CIT(A) deleted the disallowance.
32.Before us, the ld. D.R. strongly supported the findings of the A.O. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
33.We have carefully perused the orders of the authorities below. The A.O. has not disputed the fact that the assessee has sufficient interest free funds, therefore, the ratio laid down by the Hon'ble Supreme Court in the case of Munjal Sales Corporation (supra) squarely apply. Further, we find that the A.O. has questioned the commercial prudence of the assessee which is against the ratio laid down by the Hon'ble Supreme Court in the case of S.A. Builders Ltd. (supra) wherein the Hon'ble Supreme Court has held that the businessman alone can decide the reasonableness or business expediency of the expenditure. We, further find identical additions were deleted in an earlier assessment years. We, therefore, do not find any error 14 ITA No . 693 & 943/Ahd/2013 . A.Y. 2010-11 or infirmity in the findings of the ld. CIT(A). Ground no. 1 is accordingly dismissed.
34.In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 14 - 02- 2017
Sd/- Sd/-
(S. S. GODARA) (N. K. BILLAIYA)
JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER
Ahmedabad: Dated 14/02/2017
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad