M/s. Radhesrishna Developers, Surat V. The Dy.CIT.,Circle-6, Surat

CO 88/AHD/2012

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1833 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-12-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ALBINUS TIRKEY
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Audit objection; Difference of opinion; Change of opinion
• Section: 143(3); 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA NO: 439/AHD/2012 & C.O. NO. 88/AHD/12 (ASSESSMENT YEAR: 2003-04) THE D.C.I.T., CIRCLE-6, SURAT V/S M/S. RADHEKRISHNA DEVELOPERS C/O. DIPAK NAGINBHAI CHAUHAN, NO. 1, AGAM SOCIETY, TADWADI, RANDER ROAD, SURAT-395009 (APPELLANT) (RESPONDENT) M/S. RADHEKRISHNA DEVELOPERS C/O. DIPAK NAGINBHAI CHAUHAN, NO. 1, AGAM SOCIETY, TADWADI, RANDER ROAD, SURAT- 395009 V/S THE D.C.I.T., CIRCLE-6, SURAT (APPELLANT) (RESPONDENT) PAN: AADFR 8705N APPELLANT BY : SHRI ALBINUS TIRKEY, SR. D .R. RESPONDENT BY : SHRI TUSHAR HEMANI, A.R. ( )/ ORDER DATE OF HEARING : 11-12-2015 DATE OF PRONOUNCEMENT : 01-01-2016 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO 439/A HD/2012 . A.Y. 2003-04 2 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-IV, SURAT DATED 25.10.2011 FOR A.Y. 2003-04. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE IN THE BUSINESS OF BUILDING CONSTRUCTION. ASSESSEE FILED ITS ORIGINAL RETURN O F INCOME FOR A.Y. 2003-04 ON 30.11.2003 DECLARING TOTAL INCOME OF RS. 22,12,4 89/-.THEREAFTER THE CASE WAS RE-OPENED AND NOTICE U/S. 148 OF THE ACT WAS IS SUED ON 25.02.2010 AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) R.W.S. 147 VIDE ORDER DATED 29.10.2010 AND THE TOTAL INCOME WAS DETERMINED AT R S. 36,07,010/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 25.10.2011 GRANTED SUBS TANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. C IT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EF FECTIVE GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF REMUNERATION TO THE PARTNERS OF RS. 13,94,516/- MADE BY THE ASSESSING O FFICER. 4. ASSESSEE HAD ALSO FILED C.O AND THE GROUNDS RAISED IN ITS C.O. READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. A.O IN REOPENING THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH IS BAD IN LAW AND WITHOUT JURISDICTION ON FOLLOWING AMONGST OTHER GROUNDS: (I) IT IS BASED ON AUDIT OBJECTION; (II) THERE IS NO PROOF OF VALID SERVICE OF NOTICE U /S. 148 OF THE ACT ON RECORD; ITA NO 439/A HD/2012 . A.Y. 2003-04 3 (III) THERE IS NO FAILURE ON THE PART OF THE ASSESS EE IN DISCLOSING FULLY AND TRULY ALL THE MATERIAL FACTS AND THEREFORE THIS REASSESSM ENT BEING BEYOND A PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YE AR, IS BAD IN LAW; (IV) IN ANY CASE, THIS REASSESSMENT AMOUNTS TO CHANGE OF OPINION AND THEREFORE ALSO BAD IN LAW. 5. A SURVEY U/S. 133A OF THE ACT WAS CARRIED ON 18/19/ 02/2003 AT THE BUSINESS PREMISES OF THE ASSESSEE AND DURING THE COURSE OF S URVEY ASSESSEE HAD DECLARED RS. 35 LACS AS UNDISCLOSED INCOME. IN THE RETURN OF INCOME, ASSESSEE HAD CLAIMED PARTNERS REMUNERATION IN THE F ORM OF SALARY OF RS. 15,52,074/-. A.O WAS OF THE VIEW THAT AS PER PROVIS IONS OF SECTION 40(B)(V)(2) OF THE ACT, THE REMUNERATION WHICH IS T O BE PAID IS ON THE BOOK PROFITS OF THE BUSINESS OF THE PREVIOUS YEAR AND T HE BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR COMPUTED IN THE MANNER LAID DOWN IN CHAPTER IV -D. HE WAS OF THE VIEW THAT THE UNDISCLOSED INCOME WHICH HAS BEEN DEC LARED BY THE ASSESSEE IS NOT INCOME FROM BUSINESS AS ENVISAGED IN CHAPTER IV-D OF THE ACT AND THEREFORE THE REMUNERATION TO THE PARTNERS WHICH IS CLAIMED BY THE ASSESSEE ON THE UNDISCLOSED INCOME WAS NOT CORRECT. HE ACC ORDINGLY WORKED OUT THE EXCESS REMUNERATION OF RS. 13,94,516/- WHICH ACCORD ING TO HIM WAS NOT ALLOWABLE AND ACCORDINGLY MADE ITS ADDITION. AGGRIE VED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER:- 3. GROUND NO.3 IS AGAINST THE A.O. RE-COMPUTING THE DEDUCTION U/S. 40 (B). THERE WAS A SURVEY IN THE CASE OF THE ASSESSEE WHEN A VOL UNTARY DISCLOSURE OF RS. 35,00,000/- WAS MADE. THIS INCOME WAS STATED TO BE THE UNDISCLOSED INCOME FROM THE PROJECT DURING THE YEAR. IT WAS SHOWN IN T HE P&L ACCOUNT PREPARED FOR THE YEAR. IT WAS ARGUED THAT THE INCOME SO OFFERED WAS FROM THE CONSTRUCTION ITA NO 439/A HD/2012 . A.Y. 2003-04 4 BUSINESS OF THE FIRM, WHICH WAS THE ONLY BUSINESS O F THE ASSESSEE AND THAT IT HAS BEEN NOTED IN THE ORIGINAL ORDER U/S. 143(3) THAT T HE ASSESSEE HAD DISCLOSED INCOME OF RS. 35,00,000/- IN RESPECT OF UNACCOUNTE D INCOME FROM CONSTRUCTION ACTIVITY AND THEREFORE THIS INCOME WAS FROM BUSINES S AND ALSO FORMED PART OF THE BOOK PROFITS, HENCE ELIGIBLE FOR COMPUTATION U/S. 4 0(B). THE A.O. DID NOT ACCEPT THE EXPLANATION. HE HELD THAT THE CLAIM THAT UNACCO UNTED INCOME WAS FROM CONSTRUCTION ACTIVITY IS AN UNESTABLISHED CLAIM BEC AUSE THE EXACT SOURCE OF UNACCOUNTED INCOME WAS NEVER FURNISHED BY THE ASSES SEE. HE MENTIONS THAT THE ASSESSEE COULD HAVE FURNISHED THE INFORMATION REGAR DING PARTIES FROM WHOM SUCH UNACCOUNTED OUT OF BOOK INCOME HAD BEEN COLLEC TED WHICH WOULD ESTABLISH THE SOURCE. THE A.O. ALSO DID NOT ACCEPT THE ARGUME NT OF THE ASSESSEE THAT REMUNERATION HAD BEEN SHOWN BY THE PARTNERS AS THEI R TAXABLE INCOME AS ACCORDING TO HIM THE MATTER PERTAINED TO THE ASSESS MENT OF THE FIRM AND ALLOWABILITY U/S. 40(B). 3.1 DURING THE COURSE OF APPEAL PROCEEDING, THE APPELLANT SUBMITTED THE STATEMENT RECORDED DURING SURVEY AND COPY OF ORIGIN AL ASSESSMENT ORDER U/S. 143(3). IT WAS SUBMITTED THAT THE ONLY SOURCE OF IN COME OF THE APPELLANT WAS FROM CONSTRUCTION PROJECT SURVEYED BY THE DEPARTMENT. IT WAS SUBMITTED THAT IN THE STATEMENT RECORDED BY THE OFFICERS OF THE DEPARTMEN T THAT THE 'FIRM' WAS DISCLOSING INCOME FROM THE 'SAID PROJECT' AND IT HA D BEEN INCLUDED IN THE P&L ACCOUNT AND FORMED PART OF BOOK PROFITS OF THE ASSE SSEE. THE APPELLANT ALSO RELIED ON A NUMBER OF DECISIONS INCLUDING THE JURIS DICTIONAL ITAT IN THE CASE OF VIRAT GEMS IN ITA NO.3541 AND 3756/AHD/2008 DATED 1 9.11.2010. 3.2 I HAVE GONE THROUGH THE FACTS OF THE CASE. THE A.O. DID NOT CON SIDER THE INCOME DISCLOSED DURING SURVEY FOR COMPUTAT ION OF DEDUCTION IN RESPECT OF PARTNER'S REMUNERATION U/S. 40(B) AS ACCORDING TO HIM THE SOURCE OF THIS INCOME WAS NOT ESTABLISHED TO BE BUSINESS. THIS CON CLUSION OF THE A.O., I AM AFRAID, CANNOT BE UPHELD. THE ASSESSEE HAD ONLY ONE SOURCE OF INCOME, I.E. CONSTRUCTION ACTIVITY FROM THE PROJECT. IN THE STA TEMENT RECORDED, IT WAS CATEGORICALLY MENTIONED THAT THE INCOME WAS FROM CO NSTRUCTION PROJECT. THIS WAS SHOWN IN THE P&L ACCOUNT OF THE FIRM AND OFFERED FO R TAX. IT WOULD BE UNFAIR TO ITA NO 439/A HD/2012 . A.Y. 2003-04 5 ACCEPT THAT PART OF THE STATEMENT WHICH RELATES TO INCOME AND REJECT THAT PART WHICH MENTIONS THE SOURCE OF THIS INCOME. THE STATE MENT HAS TO BE READ IN TOTALITY AND NOT SELECTIVELY. FURTHER, IT HAS NOT B EEN SHOWN BY THE A.O. THAT ANY OTHER SOURCE OF INCOME EXISTED FOR THE APPELLANT. T HEREFORE HAVING ACCEPTED THE QUANTUM OF INCOME DISCLOSED IT WAS NOT OPEN TO THE A.O. TO REJECT THE CLAIM OF BUSINESS INCOME. IN ANY CASE, THIS INCOME HAS BEEN SHOWN BY THE PARTNERS AS THEIR TAXABLE INCOME AND HENCE THERE SHOULD NOT BE ANY GRIEVANCE TO THE DEPARTMENT. THE DISALLOWANCE MADE IS THEREFORE DELE TED. THIS GROUND IS ALLOWED. 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), RE VENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI LABDHI PRINTS ITA NO. 3258/A/2011 ORDER DATED 18.05.2012 A ND THE DECISION IN THE CASE OF MD. SERAJUDDIN & BROTHERS VS. CIT REPORTED IN (2012) 24 TAXMAN.COM 46 (CALCUTTA). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISIONS. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE ADDITION MADE IN RESPECT OF PARTNERS REMUNERATION U/S. 40B OF THE ACT. IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF SURVEY, ASSESSEE HAD DISCLOSED RS. 35 LACS AS UNACCOUNTED INCOME. WE FIND THAT LD. CIT(A) WHILE D ELETING THE ADDITION HAS NOTED THAT ASSESSEE HAD ONLY ONE SOURCE OF INCO ME BEING CONSTRUCTION ACTIVITY AND IN THE STATEMENT RECORDED DURING THE C OURSE OF SURVEY, IT WAS ITA NO 439/A HD/2012 . A.Y. 2003-04 6 CATEGORICAL MENTIONED THAT THE INCOME WAS FROM CONS TRUCTION PROJECT, IT WAS DISCLOSED IN THE PROFIT AND LOSS ACCOUNT OF THE FIRM AND WAS OFFERED TO TAX AND THE QUANTUM OF INCOME DISCLOSED HAS BEEN ACCEPTED BY REVENUE. WE FIND THAT THE CO-ORDINATE BENCH OF TRIB UNAL IN THE CASE OF SHRI LABDHI PRINTS (SUPRA) AFTER CONSIDERING THE VA RIOUS DECISIONS CITED BEFORE IT AND REFERRED TO IN THE ORDER HAD AGREED W ITH THE DECISION OF LD. CIT(A) THAT ONCE THE ADDITIONAL INCOME OFFERED FOR TAXATION DURING THE SURVEY IS ACCEPTED AND IT HAS BEEN EXPLAINED TO BE AS BUSINESS INCOME AS THE SOURCE THEN THERE IS NO BAR IN THE ACT FOR CLAI MING PARTNERS REMUNERATION FROM SUCH ADDITIONAL BUSINESS INCOME. BEFORE US, REVENUE HAS NOT CONTROVERTED THE FINDINGS OF LD. CIT(A) NOR HAS BROUGHT ON RECORD ANY CONTRARY BINDING DECISION. WE FURTHER FIND THAT HONBLE CALCUTTA HIGH COURT IN THE CASE OF MD. SERAJUDDIN & BROTHERS VS. CIT REPORTED IN (2012) 24 TAXMANN.COM 46 (CAL.) HAS HELD THAT EVEN IF THE INCOME FROM OTHER SOURCES IS INCLUDED IN THE PROFIT AND LOSS AC COUNTS, TO ASCERTAIN THE NET PROFITS QUA BOOK PROFIT FOR COMPUTATION OF THE REMUNERATION OF THE PARTNERS, THE SAME CANNOT BE DISCARDED. IN VIEW OF THE AFORESAID FACTS AND THE DECISION OF HONBLE CALCUTTA HIGH COURT CITED H EREIN, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THE GROUND OF REVENUE IS DISMISSED. 9. BEFORE US, LD. A.R. DID NOT SERIOUSLY PRESS THE GRO UNDS RAISED BY THE ASSESSEE IN THE C.O AND THEREFORE THE GROUNDS ARE D ISMISSED. ITA NO 439/A HD/2012 . A.Y. 2003-04 7 10. IN THE RESULT, THE APPEAL OF REVENUE AND C.O OF ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01 - 01 - 2016. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY 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,AHM EDABAD