Income Tax Appellate Tribunal - Mumbai
Akruti City Ltd, Mumbai vs Department Of Income Tax on 23 June, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
"G" BENCH, MUMBAI
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND
SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
ITA no. 4875/Mum./2009
(Assessment Year : 2007-08)
M/s. Ackruti City Ltd. (Formerly known
as Akruti City Ltd.), Akruti Trade Centre
Road no.7, Marol, MIDC
Andheri (E), Mumbai 400 093
PAN - AAACA6101D ....................... Appellant
v/s
Dy. Commissioner of Income Tax
Circle-36, Aayakar Bhavan
101, M.K. Road, Mumbai 400 020 ................... Respondent
ITA no. 4913/Mum./2009
(Assessment Year : 2007-08)
Dy. Commissioner of Income Tax
Circle-36, Aayakar Bhavan
101, M.K. Road, Mumbai 400 020 ....................... Appellant
v/s
M/s. Ackruti City Ltd. (Formerly known
as Akruti City Ltd.), Akruti Trade Centre
Road no.7, Marol, MIDC ................... Respondent
Andheri (E), Mumbai 400 093
PAN - AAACA6101D
Assessee by : Mr. Vijay Mehta
Revenue by : Mr. Pawan Ved
Date of Hearing - 04.10.2011 Date of Order - 21.10.2011
2 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009
ITA no. 4913/Mum./2009
ORDER
PER J. SUDHAKAR REDDY, A.M.
These cross appeals are directed against the impugned order dated 23rd June 2009, passed by the Commissioner (Appeals)-VI, Mumbai, for assessment year 2007-08.
Facts in brief:-
2. The assessee is a company and is engaged in the business of real estate development and slum rehabilitation. The original return of income was filed on 15th November 2007, declaring total income of ` 3,32,22,900.
Later, the assessee filed revised return of income on 4th August 2008, declaring income of ` 5,13,97,000. On 10th August 2006, a search and seizer operation under section 132 of the Income Tax Act, 1961 (for short "the Act") was conducted on Ackruti Group of companies which included assessee also. This assessment year is relevant to the previous year in which the search and seizer action was conducted. In the return of income, the assessee claimed deduction under section 80IB(10) of the Act. The facts that are relevant for disposing off these cross appeals are that, the Assessing Officer restricted the claim of deduction under section 80IB(10), on the ground that the amount realised from sale of FSI, received as consideration for the rehabilitation project from MIDC, is in excess of the market rate prescribed in the Stamp Duty Ready Reckoner, issued by the State Government. In other words, the amount realised from sale of FSI in excess of the market rate prescribed in Stamp Duty Ready Reckoner was held as profits not eligible for deduction under section 80IB(10). This decision was taken on the projects - (i) Buldg. 7A Pkt.5, (ii) Bldg. 2 Pkt. 9 and (iii) Bldg.1 Pkt.9. The Assessing Officer has accepted the fact that the assessee has complied with all other requirements for availing deduction under section 80IB(10). In the words of Commissioner (Appeals), these facts are brought out as follows:-
3 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 "5.1 The A.O. has dealt with this issue in Para-4 running through pages-15 to 22 of the assessment order. The facts of the issue as brought out by the appellant are as follows:-
(i) The projects undertaken by the assessee at MIDC, Marol are covered under the SRA scheme of the Government of Maharashtra.
(ii) As a result of development of rehab project, the appellant is entitled to utilise the FSI generated for the development of sale project on the same plot of land or it can sell the FSI in the open market.
(iii) The rehabilitation part is a housing project as per the cretificate from MIDC.
(iv) During the year under appeal, the appellant completed rehab building at pocket 9 and sold the FSI generated from slum rehabilitation project awarded by MIDC respect of Pkt.5, Pkt. 5 and Pkt. 9.
(v) The company has sold FSI (development rights) of 1,00,000 sq.ft. generated by it from its MIDC project for ` 70 crores to Netzone Developers Pvt. Ltd. (Hereinafter referred as "Netzone").
(vi) Profit from sale of FSI is calculated as difference between the actual sale values of the FSI and actual cost of construction of Rehab housing.
5.1.1 The appellant has claimed deduction under section 80IB(10) in respect of profit earned from sale of FSI generated out of slum rehabilitation project awarded by MIDC as all the conditions of section 80IB(10) stood fulfilled. The details of claim made by the appellant are as under:-
Rehab Area Rate Per Amount Cost Profit Bldg. sq.ft Pocket-4 12,188.37 7,000 8,53,18,000 1,93,09,775 6,60,08,225 Pocket-5 2,120.00 7,000 1,48,40,000 21,13,137 1,27,26,863 Pocket-9 85,691.78 7,000 59,98,42,000 10,41,74,221 49,56,67,779 Total 1,00,000 70,00,00,000 12,55,97,133 57,44,02,867
• The A.O. noted that in respect of the portions of Pkt.4 and Pkt.8 at MIDC, completed in the same year, the profit was much lower at ` 6,60,08,815 and ` 57,59,678 respectively.
• On completion of Rehab Buildings, the value of FSI generated as per the stamp duty ready reckoner was taken by the assessee to determine the profit generated from the construction of such rehab buildings in the assessment year under consideration.
4 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 • The profits on the sale buildings was calculated by crediting the sales on account of the sale building projects, and by debiting the cost of construction and the cost of FSI utilized in constructing the same building.
5.1.2 In view of the above, the A.O. asked the assessee to explain the transaction regarding sale of FSI to Netzone. Explanation of the assessee was reproduced on the Page 16 and 18 of the assessment order.
5.1.3 As regard Pkt. 5 and 9, the A.O. allowed the claim of deduction under section 80IB(10) but the same was reduced by difference between sale values of FSI sold and stamp duty ready reckoner rate on the ground that abnormally high profit was claimed for projects at Pkt. 5 and Pkt. 9 in MIDC at the time of selling the FSI. In netshell, profit for Rehab Project in Pkt. 5 and 9 in MIDC was rewroked out taking stamp duty ready reckoner rate as sale consideration for FSI sold instead of actual sale value realised by the appellant for reasons stated in detail in the assessment order."
3. The other facts which are relevant for disposing off these appeals are that, the certain additions was made by the assessing officer on the basis of certain loose papers and documents seized during the course of search by coming to a conclusion that these are undisclosed sales. The Commissioner (Appeals) deleted certain additions and had also directed the Assessing Officer to grant deduction claimed under section 80IB(10) to the extent claimed on the ground that the actual sale proceeds have to be taken into consideration as it is not correct to restrict the sale consideration upto the market value specified in the Stamp Duty Ready Reckoner, for the purpose of grant deduction under section 80IB(10). He also confirmed certain additions as unrecorded sales based on certain loose papers seized during the course of search. Aggrieved, the Revenue is in appeal on the issues where Commissioner (Appeals) granted relief and whereas the assessee is in appeal before the Tribunal where the assessee's claim was rejected by the Commissioner (Appeals).
4. Before us, the learned Departmental Representative, Mr. Pawan Ved, on behalf of the Revenue, submitted that grounds no.1 to 4 of Revenue's appeal were on the issue of quantification of deduction under section 80IB(10). He submitted that the assessee was granted Floor Space Index 5 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 (FSI) as consideration for undertaking the rehabilitation project and it sold FSI at a much higher price than that which was specified as market value by the Sub-registrar Office giving raise to abnormal profits and those such excess profits have to be excluded for computing deduction u/s/80IB (10).
5. Learned Departmental Representative raised only three arguments for consideration before the Bench and those are (i) the FSI was sold at a rate, which was much higher than the market value guideline rate, prescribed by the Stamp Duty authorities. This resulted in inflation of profit resulting in excessive relief claimed under section 80IB(10) by the assessee and hence restriction of the relief is justified; (ii) the Commissioner (Appeals) has called for additional evidence in the form of - (a) list of directors and shareholders of Netzone Developers and Ackruti City Limited; (b) evidence of registration of agreement with Netzone and payment of stamp duty thereon; (c) details of payment received by the assessee from Netzone Developers on sale of FSI upto 31st March 2008; (d) copies of agreements regarding sale of FSI made to other parties, to support the market value rate of ` 7,000 per sq.ft. at which sale is made to Netzone Developers and at the same time that the C.I.T.(A) has not given the Assessing Officer an opportunity to examine these documents and offer his comments thereon. Thus he submits that not giving an opportunity to the Assessing Officer is bad-in-law and, hence, the issue should be restored to the file of Assessing Officer for adjudication afresh; and (iii) that the assessee was following a method of accounting wherein, the FSI in question was disclosed as stock-in-trade and this stock was valued at approved market rate for stamp duty purposes. He contends that there is a change in the method followed and sale is recorded at a much higher rate than the market value of stock. He relied on the order of the Assessing Officer.
6. On grounds no.5 and 6, learned Departmental Representative submitted that the Commissioner (Appeals) erred in deleting the addition of ` 20,00,000/- on account of undisclosed sales in respect of Flat no.503. He 6 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 took this bench to Para-8/Page-31 of the Commissioner (Appeals)'s order and thereafter relied on the findings in the assessment order.
7. Similarly, on ground no.7, the learned Departmental Representative relied on the order of the Assessing Officer and had not made any submissions.
8. Learned Counsel for the assessee, Mr. Vijay Mehta, on the other hand, submitted that the FSI has been granted to the assessee by MIDC as consideration for the cost incurred by the assessee for rehabilitation projects for Pkt. 4, Pkt. 5, Pkt.8 and Pkt. 9, and that the FSI was sold @ ` 7,000 per sq.ft. to Netzone Developers, and the proceeds were income of these projects and after meeting the costs of construction, the balance was profit of the project. He submitted that the Assessing Officer had not reduced the profits of Pkt. 4 though the sale of FSI was made at the same rate of ` 7,000 which is higher than the specified market value in Stamp Duty Ready Reckoner. Even in the case of Pkt. 5 and Pkt. 9, the learned Counsel pointed out that the Assessing Officer has not reduced the profits earned by these projects. In fact the profits were accepted. He submitted that only the profits earned by those particular projects were notionally divided, i) as profits earned upto the market rates specified in the Stamp Duty Ready Reckoner and ii) abnormal profits. He submitted that the act does not provide for such notional segregation. Thus, he argued that independent of the additional evidence called for by the Commissioner (Appeals) under section Rule 46A (4), no disallowance was warranted on the claim made under section 80IB(10), as exemption cannot be restricted in the manner done by the Assessing Officer. He argued that the entire profits of the project have to be exempted under section 80IB(10). On the additional evidence filed before the Commissioner (Appeals) the learned Counsel pointed out that the Commissioner (Appeals) has made it clear that it was under Rule-46A(4) that he called for filing of certain documents as evidence. He relied on the decision of the Tribunal in Dy. Director of Income-tax (International Taxation) v/s Thoresen Chartering Singapore (Pte.) Ltd, [2009] 118 ITD 7 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 0416 (Mum.) for the proposition that when the Commissioner (Appeals) invokes his powers under Rule 46A(4), there is no requirement for confronting the Assessing Officer with documents / evidence entertained by the Commissioner (Appeals) at the first appellate stage. He also relied on the judgment of Hon'ble Jurisdictional High Court in Smt. Prabhavati S. Shah v/s CIT [1998] 231 ITR 001 (Bom.). He pointed out that the difference between sub-rule (1), (2) and (4) of Rule 46A. He relied on the order passed by the Commissioner (Appeals) and submitted that nothing turns on this point of admission of additional evidence as otherwise the assessee was entitled to claim deduction.
9. On the issue that exemption under section 80IB(10), cannot be restricted by artificially dividing sale consideration and on the method of accounting, he pointed out that as per the method of accounting followed by the assessee, project completion method is followed and that closing stock is valued at cost or stamp duty market valuation rate, whichever is lower. He submitted that there is no error in such valuation of stock and that there is no change in method of accounting. He pointed out that there is no allegation whatsoever that money has flown back to the buyer from the assessee. He emphasized that there are no common share holders or directors in the Assessee Company and Netzone Developers and the allegation of the Assessing Officer that there may be indirect control, is without any basis or evidence and is only a surmise and conjecture. He filed a paper book running into 199 pages and pointed out Page-5 which is an agreement entered by the assessee with Netzone Developers and argued that none of these documents have been found fault with by the Assessing Officer. On the rate of ` 7,000, learned Counsel submitted that comparable cases have been furnished at the direction of the Commissioner (Appeals) and these comparable cases of sale of FSI prove that the sale rate is not excessive. Further in the case of assessee, the learned Counsel submitted that the FSI included the value of land for the reason that the construction is made on a separate plot of land provided by the MIDC and that sale of FSI in fact included sale of rights in land. He explained the accounting process 8 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 followed by the assessee and submitted that the order of the Commissioner (Appeals) on this issue be upheld.
10. On grounds no.5, 6 and 7, the learned Counsel relied on the order of the Commissioner (Appeals). He submitted that the factual finding is not contradicted by the ld.C.I.T(DR)
11. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record, as well as the case laws cited before us, we hold as follows:-
12. The undisputed facts in this case is that, the assessee is eligible for deduction under section 80IB(10) on the income from projects situated in Pkt. 5 and Pkg. 9, of slum rehabilitation projects awarded by MIDC. The issue before us is whether the Assessing Officer was correct in restricting the deduction claimed under section 80IB(10) on the ground that the FSI in question was sold to Netzone Developers at a rate, higher than the market value specified in the Stamp Duty Ready Reckoner of the State Government. The fact is that, the assessee has sold FSI @ ` 7,000 per sq.ft. and this was considered as income of the projects at Pkt.5 and Pkt. 9. The profits of these projects were computed by considering the sale consideration of FSI @ ` 7,000 per sq.ft.and deducting expenditure on construction, administration etc. there from. This was accepted by the Assessing Officer. In other words, profits of the project were not disturbed or disputed by the Assessing Officer. The Assessing Officer adopted market valuation rate as given in the stamp duty ready reckoner of the State Government as notional sale consideration of the FSI sold to Netzone Developers, for notionally arriving at the profits of these projects, for the sole purpose of computing deduction under section 80IB(10). Nowhere in the assessment order, a conclusion has been drawn that the sale proceeds @7000/- per sq.ft.for FSI, do not pertain to the projects in question or is there a finding that sale consideration was partly received in for something else than FSI. In fact in case of project at Pkt. 4, this rate was accepted by the Assessing Officer as arms length rate and the sale consideration was taken at the actuals and no notional division was 9 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 made and the profits were taxed without bifurcation. The agreement to sale FSI to Netzone Developers was registered with the stamp duty authorities on 22nd February 2008 and this document has not been disputed by the Revenue. The rate mentioned in this registered document is ` 7,000 per sq.ft. Certain amounts have been received by the assessee immediately on execution of deed of assignment. There is no material with the Assessing Officer to come to a conclusion that the sale consideration of the project was actually much lesser than what was depicted in the registered document as well as in the books of account. There is no allegation that money flowed back in cash from the assessee to the buyer. In the absence of any investigation or unearthing of any evidence that, the sale consideration was inflated or overstated, it is erroneous on the part of the Assessing Officer to notionally segregate the profits of the projects at Pkt. 5 and Pkt. 9 into two parts i.e., (i) profit to the extent where the sale realization is taken at the market rate given in the Stamp Duty Ready Reckoner and (ii) the balance of profits. There is no logic or legal basis for such segregation. Such artificial bifurcation is not permitted in law. Thus, for these reasons alone, we have to necessarily uphold the findings of the Commissioner (Appeals).
13. Coming to the Commissioner (Appeals) calling for further evidence under Rule 46A(4), the Mumbai of the Tribunal in Thoresen Chartering Singapore (Pte.) Ltd. (supra), held as follows:-
"Section 251 of the Income-tax Act, 1961, read with Rule 46A of the Income-tax Rules, 1962 - Commissioner (Appeals) - Powers of - Assessment year 2001-02 - Whether where assessee voluntarily files additional evidence before Commissioner (Appeals), latter is obliged to allow Assessing Officer a reasonable opportunity before admitting additional evidence - Held, yes - Whether where assessee under directions of Commissioner (Appeals) files additional evidence before him, there is no requirement for confronting Assessing Officer with documents/evidence entertained by Commissioner (Appeals) at first appellate stage - held, yes."
14. Respectfully following the same, we hold that there is no requirement in law, on the part of the C.I.T (A) of calling for a remand report from the Assessing Officer in this case. It is not the requirement of the section. Even 10 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 otherwise, the evidence regarding registration of agreement, details of payments received from Netzone Developers up to 31st March 2008, were factual matters available on record and in the books and were examined by the Commissioner (Appeals). We also observe that the Assessing Officer had no basis to express a dout that Netzone Developers and Ackruti City Ltd. might be connected parties. No details or information was called for or found. No investigation was done. The comment in the assessment order was without any basis and is just a doubt expressed by the Assessing Officer. In view of the above discussion we uphold the following findings of the Commissioner (Appeals) on this issue:-
"5.11 I have considered the facts of the issue as well as the submissions made by the AR and find merit in them.
5.12 A perusal of the method of accounting in respect of FSI followed by the appellant indicates that FSI is stated at the rate prescribed in the stamp duty ready reckoner issued by the State Govt. for the year in which FSI is generated. This value is taken by the appellant to determine the profit generated from the construction of Rehab Building. The same stamp duty rates were applied for ascertaining the approximate sale value of FSI consumed for development of sale project. Clearly, when the FSI generated was not sold during the same year but was carried forward as inventory to be consumed, the same was valued at stamp duty rates. However, when FSI generated as a result of development of Rehab Project is sold in open market in the very year of generation, the actual sale value of the FSI is considered for calculation of profit. This is also in consonance with the accounting standard AS-9, issued by the Institute of Chartered Accountants of India on revenue recognition. The appellant had to recognize in its books of account actual revenue generated through sale of FSI. Thus, the contention of the A.O. that the policy of recording revenue on FSI held in stock-in-trade will apply to a transaction where FSI is actually sold in the open market is unwarranted. Since the FSI is not utilized for the development of "sale component" of scheme, the profit on its sale cannot obviously form part of such "sale component". The FSI having been generated from an eligible slum housing project and all the conditions of sec. 80IB(10) having admittedly been fulfilled, the appellant's claim under section 80IB(10) seems justified. The A.O. also omitted to take note of the fact that FSI had been sold in the open market for the first time. The A.O. clearly misdirected himself in holding that any profit from the realized FSI over and above the stamp duty ready reckoner rate actually pertained to the "sale component" of the scheme. The A.O. failed to take into account the fact that cost of FSI formed part of the cost of construction of sale component of the scheme due to the fact that FSI was utilised for it. When FSI was not so utilized for development of "sale component", profits from sale of such FSI could not form part of "sale component" of the scheme. In
11 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 the present context, when the sale component was not constructed / developed by the appellant, how could profits be attributed to that component? All that the appellant under took was the "rehab component" of the scheme and therefore whatsoever profits were earned including those sale of FSI have to relate to the "rehab component" only."
5.13 The agreement with the Netzone Developers having been fully registered and stamp duty having been paid and there being no correlation between the shareholders and directors of the appellant and the assignee of PSI, Netzone Developers Pvt. Ltd. are fair indicators of the fact that it was an un-related party transaction. Also, the allegation of the AO that the sales proceeds had not been received by the appellant, has been found to be factually incorrect. The receipt of a sum of Rs.3.50 crores from the assignee company has been acknowledged by the appellant in the deed of assignment dated 27.03.2007 which was filed before he AO. Also, the entire payment of Rs.70 crores had been received by the appellant before 31.03.2005 i.e., much before the date of passing of the assessment order (30.12.208). There is also no basis for the contention of the A.O. that the assignee company "appeared" to be indirectly controlled by the appellant company. No basis for such premise has been given by the A.O. nor was an effort made by him to obtain the information regarding the shareholding pattern or directorship of these companies. The information called for during the appellate proceedings on these lines indicated the absence of any overlapping or commonality of ownership or directorship in these companies.
5.14 There is also no merit in the findings of the A.O. that the sale of FSI is equivalent to the assignment of vacant land. There is no merit in the submissions of the AR that the appellant only has the right of utilization of FSI on leasehold land belonging to MIDC which is a saleable commodity and that the appellant is not the owner of land and FSI is not embedded to the land. Hence, the non registration of the Deed of Assignment could not be a sufficient reason to deny the benefit of section 80IB(10) to the appellant.
5.15 Regarding the remark of the A.O. that FSI realised has been valued as per ready reckoner rates for other projects "completed" in the year consideration, there is merit in the submissions of the AR that completion of projects and valuation of FSI has no connection. The A.O. failed to appreciate that FSI realised and not assigned was valued at stamp duty rate since the beginning and by doing so in the current year, appellant continued to follow method of accounting consistently followed by it. Regarding the A.O's contention that why during the year under consideration the portion of FSI generated on pkt. 5 and 9 which was not sold to Netzone Developers was not valued at market rate, I find merit in the submissions of the AR that the portion of FSI which was not sold could not be assured to be sold at the same rate unless it was actually sold. Therefore, following the AS-9 on revenue recognition, the FSI which was sold in the open market had to be valued at the actual sale rate and as per AS-2 in Inventory Valuation, 12 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 FSI which was held in stock in trade ought to be valued as per stamp duty ready reckoner rate.
5.16 A comparison of the rate at which FSI has been sold by the appellant with the other sale instances in the same location at a much higher price further supports the claim of the appellant that the sale of FSI to the assignee company was a third party transaction at the prevailing market price. Hence, the A.O. has not been established that the impugned Deed of Assignment was a colourable device.
5.17 In view of the reasons discussed in the forgoing sub-paras, this ground of appeal is allowed."
In the result grounds no.1 to 4 are dismissed.
15. Coming to grounds no.5 and 6, the Commissioner (Appeals) has, at Para-8.4/Page-31, held as follows:-
"8.4 I have considered the facts of the issue as well as the submissions made by the AR and find merit in them. The AR has been able to establish that in respect of the impugned amount of ` 20.00 lakhs, another agreement had been entered into along with the sale agreement. It cannot be an afterthought since the amenities agreement carries franking stamp dated 29.12.2005, which rules out the allegation of after thought. This view is further strengthened by the fact that the AR has been able to prove that the payments towards the amenities aggregating to ` 20 lakhs had been received by the appellant before May 2006. This also clearly means that the said income of ` 20 lakhs has already been offered by the appellant for taxation as claimed and the same cannot be taxed twice. In all probability, the two agreements are made by the appellant and the buyer with a view to save on the stamp duty expenditure which is leviable on the sale / purchase of immovable property. However, this has no tax connotations and hence this ground of appeal is allowed."
16. Learned Departmental Representative was not able to dispute these factual findings. Hence we agree with the conclusion of the Commissioner (Appeals). Consequently, grounds no.5 and 6 are dismissed.
17. On ground no.7, the Commissioner (Appeals), at para-9.4, held as follows:-
"9.4 I have considered the facts of the issue and the submissions made by the A.R. It is true that the declared income is already inflated by ` 5,89,000 since the sale of flat figure has been shown in the books of account at ` 25,00,000 whereas the actual sale price as per the 13 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 seized documents was ` 19,11,000. Thus the addition of ` 5,89,000 (` 25,00,000 minus ` 19,11,000) made under section 69C, if confirmed, would tantamount to confirmation of double addition. Hence, the addition to the extent of ` 5,89,000 is deleted. However, regarding the balance amount of ` 1,86,000 claimed to have been paid by the Directors, the explanation is clearly an afterthought. The expenses of the company are normally not paid for the directors and it is the other way round. Also, the withdrawals shown by the individual directors are not sufficient to warrant such an assumption. Hence, the addition to the extent of ` 1,86,000 made by the A.O. is confirmed."
18. We find no infirmity in these findings, as the learned Departmental Representative was not able to dispute the same. Consequently, ground no.7 is dismissed.
19. In the result, Revenue's appeal is dismissed.
20. We now take up assessee's appeal. Following grounds have been raised by the assessee:-
"Being aggrieved by the order of the learned Commissioner of Income Tax (Appeals), Central VI, Mumbai, this appeal petition is submitted on the following grounds which it is prayed may be considered independently without prejudice to one another.
1(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.19OO,000/- , being the difference between the price of Rs.46,75,000/- at which flat no.403 of "Akruti Erica" was actually sold and offer price of Rs.65,75,000/- stated on the seized paper as alleged undisclosed sales of the assessee under the head "Income from Business.
1(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT (A) erred in confirming the addition of entire alleged undisclosed sales of Rs.19,00,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged undisclosed sales.
2(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.18,15,000/- , being the difference between the price of Rs.40,59,000/- at which office no.402 of "Akruti Orion" was actually sold without amenities and price of Rs.59,25,000/- stated on the seized paper as alleged undisclosed sales of the assessee under the head "Income from Business.
14 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 2(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of entire alleged undisclosed sales of Rs.18,15,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged undisclosed sales.
3(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.1,86,000/- being the expenses sourced from Director's personal withdrawals.
3(b) Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law learned Assessing Officer erred in not allowing telescoping of any addition in the nature of source against application of funds.
4(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.14,50,000/- , being the difference between the price of Rs.67,03,750/- at which flat at "Akruti Erica' was sold to Hemant Bhide without amenities and price of Rs.81 ,53,750/- stated on the seized paper no.44 of Ann exure I as alleged undisclosed sales of the assessee under the head "Income from Business".
4(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT (A) erred in confirming the addition of entire alleged undisclosed sales of Rs.14,50,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged undisclosed sales.
5(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.37,50,000/- as undisclosed sales made by the appellant on the basis of the seized page no.46 of Annexure I and holding that the assesee had sold some flat of "Akruti Erica/Akruti Orion" at Rs.1,07,50,000/- against the agreement value of Rs.70,00,000/- and had received Rs.17,50,000/- as down payment in cash.
5(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT (A) erred in confirming the addition of entire alleged undisclosed sales of Rs.37,50,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged undisclosed sales.
6(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.39,00,000/- as undisclosed sales of the assessee under the head "income from Business" that was made by the LAO relying on the seized page no.48 15 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 of Annexure I and holding that the assessee had sold some flat of "Akruti Erica" at Rs.1,02,51,000/- against the agreement value of Rs.63,51,000/- and had received Rs.20,11,000/- in cash.
6(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT (A) erred in confirming the addition of entire alleged undisclosed sales of Rs.39,00,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged undisclosed sales.
21. The assessee has also raised an addition ground which reads as follows:-
"The learned CIT(A) has erred in law and in fact in confirming the disallowance of deduction u/s 80IB(10) of the Act in respect of "Pocket-8 at MIDC, Andheri" which is a slum rehabilitation project approved by the CBDT."
22. Before us, the learned Counsel for the assessee did not press the additional ground, as well as grounds no.3(a) and 3(b). Consequently, these grounds No.3(a) and(b) as well as the additional ground are dismissed as "not pressed".
23. Insofar as the other grounds are concerned, the additions in question are based on certain seized documents found during the course of search. The assessee's submissions in brief are that, these documents are loose sheets of papers with certain hand written figures and scribbling on the same and that these documents are arithmetical workings and jottings and that these have no evidentiary value. It is argued that there is no name of any person, building or flat in most of the documents and they are unsigned and, hence, are dumb documents. It is argued that these are working papers/rough notings and without any corroborative evidence and examination of the purchases, it cannot be concluded that the figures mentioned therein is the unaccounted money of the assessee. Learned Counsel, in his note given in paper book Pages-4 and 5, relies on the following case laws:-
• Ashwani Kumar v/s ITO, (1991) 39 ITD 183 (Del.); 16 M/s. Ackruti City Ltd. ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 • N.K. Malhan v/s DCIT, (2004) 91 TTJ 938 (Del.); and • CIT v/s Girish Chaudhary (2008) 296 ITR 619 (Del.)
24. Learned Counsel requested that the issues may be restored to the file of Assessing Officer for fresh adjudication after examining the purchasers of the properties so that the correct position of fact is arrived at. He submitted that without such examination, no inference can be drawn on these documents.
25. Learned Departmental Representative, on the other hand, relied on the orders of the authorities below. On a query from the bench, he submitted that the purchaser was asked any questions on these loose papers,seized documents etc.and that the inferences drawn on these notings are not based on any corroborative evidence. He had no objection if the matter is restored to the file of Assessing Officer for fresh adjudication after examination of all the witnesses.
26. After hearing rival contentions, we find that the seized documents in question, on which these additions are made, are the papers containing mere arithmetical rough workings and jottings. For e.g., at Page-1 of the paper book-4, which is Page-46 of seized papers Annexure-A(1), only some figures appear and no name or date is written. It is not clear as to who had written the paper and which is the transaction that can be connected with this sheet of paper. This is nothing but a dumb paper. No inference can be drawn based on this material document. Unless the Assessing Officer gathers corroborative evidence by way of examining the purchaser, no addition can be made on this account. Similarly, Page-48 of Annexure-A (1) contains certain jottings without any narration. In our opinion, the Assessing Officer ought to have confronted the assessee as well as the purchaser with these seized documents. He should have examined the purchaser of the property and draw inferences only thereafter. It is well settled that no addition whatsoever can be made based mearly on arithmetic workings, jottings, notings, etc.on some papers without any corroborative material. In any event,as both parties have agreed that these grounds may be set aside to 17 M/s. Ackruti City Ltd.
ITA no. 4875/Mum./2009 ITA no. 4913/Mum./2009 the Assessing Officer for fresh adjudication, after examining the purchasers of the properties, and other enquires etc. we do not go into the merits of the additions.
27. In view of the submissions made by both the parties for setting aside of the grounds no.1, 2, 4, 5 and 6, we set aside ground no.1, 2, 4, 5 and 6 of the impugned order passed by the Commissioner (Appeals) and restore these issue back to the file of Assessing Officer for denovo adjudication, in accordance with law.
28. In the result, assessee's appeal is allowed for statistical purposes.
Order pronounced in the open Court on 21st October 2011.
Sd/- Sd/-
N.V. VASUDEVAN J. SUDHAKAR REDDY
JUDICIAL MEMBER ACCOUNTANT MEMBER
MUMBAI, DATED: 21st October 2011
Copy to:
(1) The Assessee;
(2) The Respondent;
(3) The CIT(A), Mumbai, concerned;
(4) The CIT, Mumbai City concerned;
(5) The DR, "G" Bench, ITAT, Mumbai.
TRUE COPY
BY ORDER
Pradeep J . Chowdhu ry ASSISTANT REGISTRAR
Sr. Private Secretary ITAT, MUMBAI BENCHES, MUMBAI