Income Tax Appellate Tribunal - Jaipur
Future Buildestates P Ltd., Jaipur vs Department Of Income Tax on 30 January, 2014
IN THE INCOMETAX APPELLATE TRIBUNAL
JAIPUR BENCH: JAIPUR
(BEFORE SHRI H.M. MARATHA, JUDICIAL MEMBER AND
SHRI N.K. SAINI, ACCOUNTANT MEMBER)
I.T.A. No. 146/JP/2013
Asstt. Year- 2008-09
The Asstt. Commissioner of M/s Future Buildestates Pvt. Ltd.,
Income Tax, Central Circle-2 Vrs. B-304, Janta Colony,
Jaipur. Jaipur.
PAN No. AABCF0469N
(Appellant) (Respondent)
I.T.A. No. 149/JP/2013
Asstt. Year- 2008-09
The Asstt. Commissioner of M/s Integrated Build Estate
Income Tax, Central Circle-2 Vrs. Pvt. Ltd., 79, Talkatora,
Jaipur. Jaipur.
PAN No. AABCI6667D
(Appellant) (Respondent)
Department by :- Shri D.C. Sharma, D.R.
Assessee by :- Shri Mridul Goyal &
Vijay Goyal.
Date of hearing : 30/01/2014
Date of pronouncement : 31/01/2014
ORDER
PER: N.K. SAINI, A.M. These two appeals by the department are directed against the separate orders each dated 29/11/2012 of the CIT(A)(Central), Jaipur, Rajasthan.
Common issues having identical facts are involved in these appeals, which were ITA 146 & 149/JP/2013 2 heard together, so these are being disposed off by this consolidated order for the sake of convenience.
2. First we will deal with ITA No. 146/JP/2013, following grounds have been raised in this appeal.
"1. On the facts and in the circumstances of the case, the Ld. CIT(A), Central, Jaipur has erred in deleting the addition made by the A.O. on account of undisclosed investment on purchase of land at Rs. 1,31,02,000/-.
2. On the facts and in the circumstances of the case, the Ld. CIT(A), Central, Jaipur has erred in deleting the addition of Rs. 1,31,02,000/- which was based on a document, i.e. page No. 37 of Annex-A-57, seized during the course of search and the conclusion about its contents drawn by the A.O. was also corroborated by other seized documents (page No. 142 of Annex.A-24 & Page No. 77 of Annex.-A-40).
3. On the facts and in the circumstances of the case, the Ld. CIT(A), Central, Jaipur has erred in law as well as on facts in deleting the addition based on the conclusion of the A.O. derived from contents of a document despite the fact that the contents were wrongly explained by the Assessee under section 131(1) of the IT Act as subsequently admitted in an affidavit.
4. On the facts and in the circumstances of the case, the Ld. CIT(A), Central, Jaipur has erred in law as well as on facts of the case in deleting the addition of Rs. 1,31,02,000/- in spite of the fact that even the changed explanation of the assessee about the contents of the seized documents submitted in the affidavit also proved wrong from the contents of certain other seized documents.
5. The appellant craves the right to amend alter or add to any of the grounds of appeal given above."
3. The grievance of the department in this appeal relates to the deletion of addition of Rs. 1,31,02,000/- made by the Assessing Officer on the basis of a ITA 146 & 149/JP/2013 3 document i.e. page No. 37 of Annexure-A-57 seized during the course of search.
During the course of assessment proceedings, the Ld. Counsel for the assessee at the very outset stated that this issue is covered vide order dated 22/6/2012 in ITA No. 962/JP/2011 in the case of M/s Rising Buildestate Pvt. Ltd.. It was also stated that the Ld. CIT(A) deleted the impugned addition by following the said decision wherein on the basis of same document, the addition was made.
4. The aforesaid contention of the Ld. Counsel for the assessee was not controverted by the Ld. D.R.. However, he supported the impugned order passed by the Assessing Officer.
5. After considering the submissions of both the parties and the material on record, it is noticed that a similar issue was subject matter of the departmental appeal in ITA No. 962/JP/2011 for the A.Y. 2007-08 in the case of the DCIT, Central Circle-2, Jaipur Vs. M/s Rising Buildestate Pvt. Ltd., Jaipur wherein the similar addition on the basis of same document was deleted by the Ld. CIT(A) and the ITAT vide order dated 22/9/2012 confirmed the order of the Ld. CIT(A) and the relevant findings has been given in para 7 to 8.2, which read as under:-
"7. After going through the written submissions filed on behalf of the assessee, we noted that the written submissions filed here before the Tribunal are almost similar to the written submissions filed before Ld. CIT (A). The Ld. CIT (A) has reproduced the written submissions filed before him in his order which has been incorporated in this order also. We have also taken into ITA 146 & 149/JP/2013 4 consideration the order of Assessing Officer, order of Ld. CIT (A) and argument of Ld. CIT D/R and found that Ld. CIT (A) has given a detailed reasoning for deleting the addition. The finding of Ld. CIT (A) remained uncontroverted. The Ld. CIT (A) has taken into consideration most of the reasons taken by Assessing Officer for making the addition and thereafter explanation filed by assessee before Assessing Officer as well as before him. The Ld. CIT (A) has also taken into consideration the remand report and re-joinder and then only has come to conclusion that there was no material before the Assessing Officer to hold that Rs. 4,00,00,000/- was the cost of the land purchased by assessee. Accordingly, the impugned addition made by Assessing Officer was deleted. Findings of Ld. CIT (A) have been recorded in paras 5.1 to 5.10 at pages 42 to 51 which are as under :-
" 5.1 I have carefully considered the written submission and paper book filed by the AR of the assessee, assessment order, remand report, the material available on record and cases citied by both the parties. On perusal of assessment order, I find that the AO has finally made the addition of Rs. 2,61,66,611/- by applying the provisions of section 69B of Income Tax Act. From the assessment order, I find that the AO has made the addition on the basis of noting available on the seized page 37 of Exhibit A-57, seized from 73-74, Talkatora Jaipur. The AO has also referred another seized papers page 142 and 159 to 161 of Annexure A-24 (Pushp Garden)/page 73- 76 of Annexure A-40 (Bhavgarh) seized from 73-74 to support her view that the market value of the properties is not mentioned over the seized Page 37 of Exhibit A-57. The AO further ITA 146 & 149/JP/2013 5 mentioned that the Shri Pawan Lashkary has made incorrect statement in the post search inquiry, wherein he stated that area of the land is mentioned under column 4 of the Page 37 of Exhibit A-57. The AO mentioned that Sh. Pawan Lashkary has filed sworn affidavit during the course of the assessment proceedings explaining the contents of the above referred seized paper wherein he explained that the market value of the land for the joint venture purpose was mentioned over the said seized paper. The AO mentioned that this is wrong because the market value of the land was 22.79 crores not 4.00 crores. The AO mentioned that the wide variation in share of assessee group in the joint venture shows that the assessee's explanation as regard figure mentioned in column 1 of seized Paper 37 of Ann A-57 is also not correct.
5.2 I have carefully examined the above referred seized page 37 of A-57. No narration is mentioned over this seized page to ascertain whether cost is mentioned or market value is mentioned or some other value is mentioned. Any date or even the month or even the year is not at all mentioned so as to arrive at the definite conclusion whether it is cost or market value or some other value on particular date/month/time. The AO has tried to negate the argument of A.R. by observing that the market value is not mentioned in the column 4 of the impugned seized paper, therefore, as per the A.O., cost must have been mentioned, but A.O. failed to prove by positive evidence that the cost is mentioned in column 4 of the seized paper. Further, the AO failed to explain the nexus of the figures mentioned in column 1 and 3 with reference to figure of the alleged cost ITA 146 & 149/JP/2013 6 mentioned in column 4 of the impugned seized paper. In column 1, the figure 22.50 is mentioned and figure 169 is mentioned in column 3 against Pushp Garden. The AO herself has held that figure 22.50 does not indicate cost or market value per bigha of the land. However, the figure 22.50 cannot be a meaningless figure, particularly when it is written with reference to figure 400 mentioned in column 4 of the impugned seized paper.
5.3 I have also carefully examined another seized paper of Exhibit A-24/A-40 referred by the AO in assessment order. The seized page 142 of Annexure A-24 is an Email correspondence in between Shri G.K. Sharma and [email protected] wherein the land rate and interest in joint venture was asked to send and replies was given. Over this paper figure 13000- 17534 and 6000-62000 is hand written which indicates that first figure is land rate quotation and second figure is area of the land. It appears that the assessee group has quoted Rs. 13000/- per Sq yard for 17534 Sq. yard land in Pushp Garden. Therefore this paper does not indicate the cost of the land but quotation for the land rate for joint venture purpose. The seized paper 159 to 161 of Annexure A-24 and Page 73-76 of Annexure A-40 is the projection for the joint venture for Pushp Garden and Bhavgarh scheme respectively prepared by some developer and apparently given to Sh. Lashkary as proposal for discussion. On page 161 of Annexure A-24 working for land area, built up area, cost of land, cost of building, marketing expenses, administrative expenses etc are estimated/ projected for joint venture. At bottom of the page 20% is mentioned against cost % to be paid upfront to owner. The total land area is taken 17534 ITA 146 & 149/JP/2013 7 sq yards and land cost is taken Rs. 13000/- per Sq yards and total cost of the land is taken Rs. 22,79,42,000/-on this seized paper. On page 160 of the seized Annexure A-24 projection is made for inputs, costings and revenues. On page 159 of the seized Annexure A-24 projection was made for Fund Flow assuming all the flats are sold within 6 months. In this paper land expenses are taken Rs. 4,55,88,400/- as outflows of fund in 1st Month of 1st year. Rs. 4,55,88,400 is exactly 20% of Rs. 22,79,42,000/- . Therefore, the figure Rs. 22,79,42,000/- is full value of the land estimated for joint venture and the figure 4,55,88,400/- is the amount to be paid to the land owner against the joint venture as indicated by the above said seized papers. Obviously these papers are totally projections/ estimations of the joint venture, which have been prepared by some third party developers. Therefore, the cost of the land in the hands of the land owner cannot be visualized from these seized papers. Statements of Shri Pawan Lashkary recorded during the post search inquiry have been rightly rejected by the AO and are of no help for the assessing officer. During the course of the assessment, the assessee filed sworn affidavit of Shri Pawan Lashkary and relevant para of the affidavit is as under:-
"We purchased the agricultural land and made further exercise for 90B proceedings, conversion and approval of the projects. This and time-span resulted substantial increase in the market rate of the land. We estimated the market rate of each developed land (offered for negotiation for joint venture/ collaboration) at the time of negotiation and such estimated market value of the land was mentioned in column no 4 of the ITA 146 & 149/JP/2013 8 said seized paper. We offered the prospective party that our capital account should be credited by this amount against the capital contribution of land for the joint venture/collaboration, if the joint venture/collaboration is materialized. The figure is written in short at the time of negotiation by omitting five zero".
5.4 From the above affidavit, the assessee wanted to explain that market value of the land was estimated for the joint venture and such joint venture share being estimated upfront amount of market value of the land was mentioned in column 4 of the seized paper. The assessee further mentioned in the same para that its capital account should be credited by this amount against the capital contribution of the land for joint venture. If we read this para of the affidavit with reference to figure mentioned in seized page 159-161 of Annexure A-24, we find that full estimated market value of the land was 22.79 crores and Rs. 4.55 crores was to be paid in cheque/cash to the land owner against the land offered for joint venture (Of course, if the joint venture project is crystalised ).
If we read the above details carefully, we find that the assessee wants to say the market value of the land to be credited in its account for joint venture purpose, which cannot be full value of the land in joint venture cases. It is common practice of the trade that the land owner is paid part amount of the value of the land in cheque/cash and balance against the land value is payable by sharing the construction area in between the developer and land owner.
5.5 Without prejudice to above, it may be mentioned that in fact, out of various papers referred by the A.O. in the ITA 146 & 149/JP/2013 9 assessment order, earlier the A.O. has mainly relied on page no. 159 of Ann. A-24, wherein as per the A.O., the land expenses of Rs. 455,88,400/- is mentioned and the A.O. has given show cause letter dated 30.11.2010 to the appellant that the document Ann. A-24/159 is part of the Pushp Garden Group Housing Scheme and land expense are written as Rs. 4,55,88,400/- In the light of above, assessee was required to show cause why should not differential amount i.e Rs. 4,55,88,400/- - Rs. 1,50,91,463/- (i.e the recorded amount) be added back as undisclosed expenditure for the year. Even in the subsequent show cause notice dated 6.12.2010, the A.O. has again asked the appellant to explain as to why should not Rs. 4,55,88,400/- be considered as unexplained expenditure in land at village Murlipura Tehsil Sanganer.( i.e. now the full amount of Rs. 4.55 crore). Even in the third show cause /opportunity given to the appellant, the A.O. has reiterated her view of addition of Rs. 4.55 crore based on page no. 159 of A-24, which was now further supported with other documents referred in this opportunity so given to the appellant. However, after considering the reply of all these show cause notices, the A.O. was satisfied that amount of Rs. 4.55 crore ( more particularly Rs. 4,55,88,400/-) is not the cost of the land to the assessee but it is the 20% upfront charges of the estimated proposed value of land amounting to Rs. 22,79,42,000/- as estimated by some developer for the proposed project of joint venture on this land of the appellant. The A.O. has mentioned this fact of contention of the assessee on this issue being correct at para 8 of the assessment order. (However, simultaneously, the A.O. has stated that it shatters the explanation of the assessee regarding page 37 of Ann. A-57 ITA 146 & 149/JP/2013 10 given during the course of search that in column no.4 coding was done in two zeros and the figure represented the land area in sq. yd. This observation of A.O. is correct.).
5.6 It was only at the last i.e at the time of fourth opportunity/ show cause that the A.O., on 13.12.10 has now proposed different amount namely Rs 4.00 crore as investment in purchase of land on the basis of the entry at column no. 4 of page 37 of Ann A-57 namely '400' and after being not satisfied with the explanation, in the final assessment order, the A.O. has held Rs. 4.00 crore as total purchase cost. However, on perusal of the reply of the appellant and other relevant details as also discussed in earlier paras, it is seen that the explanation of figure '400' so given by the appellant is acceptable that the same represents the estimated upfront amount to be received by the land owner in respect of some proposed project of joint venture, which is also clear from another specific proposal for such project having details on page 159 to 161 of Ann. A-24, wherein upfront price is shown at Rs. 4.55 crore which has been effectively accepted by A.O, as mentioned supra. For some variation between the two figures namely '400'metnioned on page 37 of Ann. A-57 and Rs. 4.55 crore as per page 159 to 161 of Ann..A-57, the assessee has replied vide letter dated 11.12.2010, the relevant para of which is as under:-
"As regard page 37 of Exhibit A-57 (seized from 73-75 Tal Katora, Jaipur), we would like to mention here that this page was prepared at different point of time at the time of negotiation with some other party and some figures/notings were written on this paper during the discussion with some other party and ITA 146 & 149/JP/2013 11 figure mentioned in column no 4 represents to amount offered for credit in assessee's capital account against the land contribution by the assessee (or say upfront price); if the joint venture/collaboration is made on the sharing basis mentioned in column no. 1. The upfront price and sharing ratio depends on several factors such as reputation of developer, nature and quality of development work to be carried out by the developer, involvement of investment by developer, expected profit from the share received by the owner in the built up area, period of completion of project, size of project, expected FAR from JDA, expected availability of height etc. Thus, the upfront price and sharing ratio may vary person to person and project to project."
5.7 Therefore, the figure '400' mentioned in the column 4 of the seized paper 37 of Annexure A-57 should be read with reference to figure Rs. 4,55,88,400/- mentioned on seized paper 159 of Annexure A-24 and not with reference to figure 22,79,42,000 mentioned on seized paper 161 of Annexure A-24. The assessee explained the difference that noting on page 37 of Annexure A-57 was made with reference to the proposal of joint venture received from a different party, therefore, same figure or proposal can not be from two different parties.
5.8 The other point to be noted is that the appellant has also given explanation of entries in column no. 1 of page 37 of A-57 during the course of assessment proceedings that the same is the percentage sharing in the proposed joint venture. The A.O. has disbelieved the explanation of the appellant on the ground that the joint venture sharing is found to be highly varying. However, the A.R. has even given explanation of these varying % also ITA 146 & 149/JP/2013 12 particularly regarding joint sharing being only 18.75% in Sports City, which is on account of the fact that the said land was quite uneconomical having low value as the same was under river bed which is clear from the 'Jambandi', wherein the land was shown as 'Khatali' which means the land near river bed as is clear from the definition of the 'khatali' furnished by the A.R. in the written submission. Similarly, for high sharing ratio of 80% in R.R. Farm, the A.R. has explained that this was the joint venture of the farmhouse wherein not much of investment is required by the developer and it is mainly the value of the land and accordingly land owner would have the main and major share. These explanations so given by the A.R. cannot be just rejected and are rather plausible. Thus it is clear that explanation of the figure in column no. 1 given by A.R. is not un-acceptable. Even for the moment and for the sake of argument, the explanation of column no. 1, so given by the appellant is not accepted to be correct, as was observed by the A.O. in the assessment order, then on the other hand then it is noticed that the A.O. has not been able to give any sort of explanation for the figure in column no. 1, while trying to decipher/decode the entries on this page. Thus A.O. has not been able to explain entries in column no. 1 of the impugned page and also could not correlate them with other entries on this page. Similarly, the A.O. has treated the entry in column no. 4 as the cost price of the land without any correlation or justification or the basis for the same, after just merely rejecting the explanation of these entries given by appellant.
ITA 146 & 149/JP/2013 13 5.9 I agree with the argument of the ld. A.R that for making addition u/s 69 B, the onus is on the department to prove positively that the appellant has made unaccounted investment and this onus cannot be discharged merely by rejecting the explanation given by the appellant. Such addition to be made u/s 69 B is contradistinct from the claim of the deduction or allowance made by the assessee wherein the addition can be made if the evidence so furnished or explanation so given by the appellant is found to be lacking or incorrect/rejectable. In the case of addition u/s 69, the A.O. has to bring positive material to establish unaccounted investment/payment. In the instant case, no positive material could be brought out on record to establish that the impugned seized page in column no. 4 reflects the actual cost of the properties named in column no. 3.
5.10 The AO has relied on the decision of Delhi High Court in the case of Mahavir Woolen Mills Vs CIT (Del) 245 ITR 297 (2000). In this case part of the entries mentioned in the seized paper tallied with the entries in the ledger accounts maintained by the assessee. But in the case of this assessee the entries of the impugned seized document has no correlation with the books of account and other seized documents to show the actual cost of the properties is mentioned on page 37 of Annexure A-57. On the other hand, another decision of Delhi High Court namely Commissioner of Income Tax Vs. S.M. Aggarwal (2007) 293 ITR 43 (Del) and Commissioner Of Income Tax Vs. Girish Chuddar (2008) 296 ITR 619 (Del) and other decisions of the various ITAT cited by the assessee support the case of the assessee. In view of the above facts and circumstances, it is held that A.O. ITA 146 & 149/JP/2013 14 has not been successful in proving that column no. 4 of seized page 37 of Ann. A-57 reflects the cost/purchase price of the land and on the other hand explanation of appellant on this issue can not be considered to be incorrect and is rather same is found to be plausible and accordingly addition of Rs. 2,61,66,611/- so made by A.O., holding Rs. 4.00 crore to be purchase price of land, is hereby deleted. Thus, the ground No 1, 2 and 3 are decided in favour of the assessee."
8. As stated above, neither these findings could be controverted nor any other material were brought on record which can be said that findings of Ld. CIT (A) are not correct. The Ld. CIT (A) has taken into consideration the aspect that firstly the Assessing Officer's view was that the cost of land was Rs. 4.55 crore or odd. Three show cause notices were given to the assessee for explaining that why the cost of the land be not taken at Rs. 4.50 crore or odd. All the three times, the explanation was filed and the AO was satisfied with the explanation. Therefore, the A.O. has not taken the cost of investment at Rs. 4.50 crore or odd. However, as per column no. 4 of page 37 of Exhibit A-57 which was seized from 73-75, Talkotra, Jaipur where figure of 400 was mentioned, the AO took this value as cost of investment in the property. Contents of page 37 of Annexure A-57 has been tabulated in the order of ld. CIT (A) at page 4 which has also been reproduced somewhere above in this order while incorporating the facts of the case. Neither the AO could co-relate the figure of 22.5 mentioned in the column no. 1 nor the figure mentioned in column no. 3 as per books of account. Therefore, there cannot be a presumption that figure of 400 mentioned in column no. 4 is figure of cost of land purchased by ITA 146 & 149/JP/2013 15 assessee. There must be some corroborative evidence to hold that this figure is related to cost of the land purchased by the assessee. We are not repeating the explanation/findings of ld. CIT (A) as finding of ld. CIT (A) in its entirety have been reproduced in the above para of this order. However, as stated above, the findings of ld. CIT (A), in our considered view, are findings of fact which does not require any interference.
8.1. The ld. CIT (A) also found that the cases relied upon by AO were not relevant on the facts of the present case whereas cases relied upon by ld. Counsel of the assessee are in support of the case. The ratio of all these cases have also been reproduced somewhere in the order of ld. CIT (A) which is also part of this order. In view of the above facts and circumstances, we find no infirmity in the findings of ld. CIT (A) who has deleted the addition made by AO by holding that he has not brought any material to make any addition under section 69B.
8.2. In view of these facts and circumstances and in view of the detailed reasoning given by Ld. CIT (A) which is reproduced somewhere above in this order, we hold that Ld. CIT (A) was justified in deleting the addition made by Assessing Officer. Accordingly we confirm his order."
6. Since the facts of the present case are similar to the facts involved in the aforesaid referred to case of the DCIT, Central Circle-2, Jaipur Vs. M/s Rising Buildestate Pvt. Ltd., Jaipur (supra). So respectfully following the aforesaid order dated 22/6/2012 in ITA No. 962/JP/2012 for the A.Y. 2007-08 in the case of the DCIT, Central Circle-2, Jaipur Vs. M/s Rising Buildestate Pvt. Ltd., ITA 146 & 149/JP/2013 16 Jaipur, we do not see any infirmity in the impugned order passed by the Ld. CIT(A) and accordingly, do not see any merit in this appeal of the department.
7. In ITA No. 149/JP/2013, in the case of the ACIT, Central Circle-2, Jaipur Vs. M/s Integrated Build Estate Pvt. Ltd., the issue involved is similar as was involved in the case of the ACIT, Central Circle-2, Jaipur Vs. M/s Future Buildestates Pvt. Ltd. in ITA No. 146/JP/2013 (supra), the only different is that the deletion of addition in this case was of Rs. 48,83,013/- instead of Rs.
1,31,02,000/- involved in the case of M/s Future Buildestates Pvt. Ltd..
Therefore, our findings given in the former part of this order shall apply mutatis mutandis.
8. In the result, both these appeals of the department are dismissed.
(Order pronounced in the open court on 31/01/2014) Sd/- Sd/-
(HARI OM MARATHA) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, Dated : 31/01/2014 * Ranjan Copy forwarded to :-
1. Appellant - The ACIT, Central Circle-2, Jaipur.
2. Respondent- i. M/s Future Buildestates Pvt. Ltd., Jaipur.
ii. M/s Integrated Build Estate Pvt. Ltd., Jaipur.
3. The CIT (A)
4. The CIT
5. The D/R Guard file (I.T.A. No. 146 & 149/JP/2013) By Order, AR ITAT Jaipur.