CIT V. JITENDRA KUMAR AGARWAL

ITA/297/2011

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax against Sh. Jitendra Kumar Agarwal concerning undisclosed investments in land. The primary legal question was whether the Tribunal was justified in its decision to compute only 10% profit on these investments as the assessee's income, instead of adding the full amount of the investments to the income. The Tribunal's decision was based on the interpretation that these transactions were part of the assessee's turnover in land dealing, not investments made for others. The High Court upheld the Tribunal's decision, agreeing that the 10% profit computation was appropriate.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 744748 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 30-08-2017
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S L PODDAR
• Assessee Lawyers: ADITYA VIJAY
• Keywords: Income tax appeal; Land dealing; Profit computation; Turnover; Undisclosed investment
• Section: 147; 148; 133A

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 297 / 2011 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Sh. Jitendra Kumar Agarwal, P/o M/s. Garg Jewellers, 222, Johari Bazar, Jaipur. ----Respondent Connected With D.B. Income Tax Appeal No. 334 / 2011 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Sh. Jitendra Kumar Agarwal, P/o M/s. Garg Jewellers, 222, Johari Bazar, Jaipur. ----Respondent D.B. Income Tax Appeal No. 653 / 2011 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Sh. Jitendra Kumar Agarwal, P/o M/s. Garg Jewellers, 222, Johari Bazar, Jaipur. ----Respondent D.B. Income Tax Appeal No. 676 / 2011 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant (2 of 7) [ITA-297/2011] Versus Sh. Jitendra Kumar Agarwal, P/o M/s. Garg Jewellers, 222, Johari Bazar, Jaipur. ----Respondent D.B. Income Tax Appeal No. 5 / 2012 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Sh. Jitendra Kumar Agarwal, P/o M/s. Garg Jewellers, 222, Johari Bazar, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Aditya Vijay for Mr. Anuroop Singhi For Respondent(s) : Mr. S.L. Poddar _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 30/08/2017 1. In all these appeals, common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the Tribunal whereby Tribunal has dismissed the appeals of the department and partly allowed the appeal preferred by the assessee. 3. This court while admitting the appeals framed following substantial questions of law:- (3 of 7) [ITA-297/2011] 3.1 Appeal No.297/2011 admitted on 3.7.2013 “Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs.1,21,85,400/- which was made by the Assessing Officer and confirmed by CIT(A) on account of undisclosed investment of assessee in land and simply directing to compute 10% profit on the said investment as income of the assessee, even after holding that the investment is assessee’s own turnover in land dealing and not the investment made for others?” 3.2 Appeal No.334/2011 admitted on 3.7.2013 “Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs.53,50,000/- which was made by the Assessing Officer and confirmed by CIT(A) on account of undisclosed investment of assessee in land and simply directing to compute 10% profit on the said investment as income of the assessee, even after holding that the investment is assessee’s own turnover in land dealing and not the investment made for others?” 3.3 Appeal No.653/2011 admitted on 14.11.2011 “Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs.4,32,78,595/- which was made by the Assessing Officer and confirmed by CIT(A) on account of undisclosed investment of assessee in land and simply directing to compute 10% profit on the said investment as income of the assessee, even after holding that the investment is assessee’s own turnover in land dealing and not the investment made for others?” 3.4 Appeal No.676/2011 admitted on 31.7.2012 “Whether on the facts and in the circumstances of the case, the Tribunal was (4 of 7) [ITA-297/2011] justified in deleting the addition of Rs.4,32,78,595/- which was made by the Assessing Officer and confirmed by CIT(A) on account of undisclosed investment of assessee in land and simply directing to compute 10% profit on the said investment as income of the assessee, even after holding that the investment is assessee’s own turnover in land dealing and not the investment made for others?” 3.5 Appeal No.5/2012 admitted on 19.2.2016 “Whether the Tribunal was justified in deleting the addition of Rs.1,99,50,574/- made by the Assessing Officer, despite the same being surrendered by the assessee during survey and no document being filed to prove the same to be accounted income of the assessee? 4. The facts of the case are that the assessee deals in jewellery, bullion, precious/semi precious stones in the name of his proprietorship concern M/s. Garg Jewellers. A survey u/s 133A was conducted on 21 & 22.1.2008 and some incriminating documents were impounded. In the incriminating documents it was noted certain unaccounted transaction relating assessment years 2004-05 to 2008-09. Therefore, the assessements were reopened by invoking provisions of Section 147/148. 4.1 During the survey proceedings, statement of Ch. Chandra Prakash Garg, father of the assessee was recorded wherein he admitted that the transaction appearing in impounded documents A-3 and A-5 were transactions out of regular books. A show cause notice was issued as no details of sales and purchase parties were made available. (5 of 7) [ITA-297/2011] 5. All the questions which arise for consideration are whether whole amount which is taken into consideration for the property is to be added in the income. The view taken by the tribunal is 12% on the basis of income. The transaction which has been shown by the assessee during the year it has come on record is only on the basis of statement of one of the relative (father of the assessee) and who was assessed for the whole amount of transaction and relevant finding in this regard recorded by the AO reads as under:- “It would now be extremely relevant to look at the statement given during the course of survey by the father of the assessee, Sh. Chandra Prakash Garg, who admitted in the statement that the land transactions shown in the A-5 were actually his investments in property and that these investments were out of his regular books of accounts which he would offer for income in the year to which these entries were related.” 5.1 For the same transaction, no contrary or other material was found on record, therefore the whole income was considered as income of the assessee. 5.2 The observations made by the Tribunal reads as under:- “After considering the submissions and perusing the material on record, we find that the entries of Annexure-A-5/71 to A-5/76 relating to pages 370 to 373 and 375 to 379 (as page 374 is blank) of the seized material relates to incoming and out going on account of land dealing. If the total of both sides separately is taken of these papers, the it is seen that the total tallies. The total incoming amount is of Rs.8,88,94,273/- and total out going amount is also of the same figure. The AO has made addition of the amount peaking (6 of 7) [ITA-297/2011] certain figure of amount out of Rs.8.88 crores or odd for a particular assessment year as in his view to this extent this is investment in the property from undisclosed sources. The ld. CIT(A) has sustained the additions on the basis of peak theory. Neither ld. AO nor ld. CIT(A) have taken into consideration the incoming figures for the purchase of land as they have taken only out going figure by treating the same as investment in the property from undisclosed sources. The view taken by the AO and ld. CIT(A), in our considered view is not correct. In the statement recorded during the course of survey, the father of the assessee has categorically stated that his son deals in purchase and sale of land on behalf of others and only brokerage has been challenged. However, no authenticate evidence in support of this contention was found from any of the parties for whom or from who the land was purchased or sold. Therefore, in our considered view these transactions should be treated as turnover in land dealing. The assessee has declared accumulated profit on amount of closing stock found during the course of survey at Rs.1.25 crores by filing return of income for A.Y. 2008-09 and Rs.1.75 crores on account of undisclosed debtors. Total surrender has been made at Rs.3 crores while filing the return of income for A.Y. 2008- 09. During the course of survey it was clearly mentioned that whatever the income found related to A.Y. 2005-06 onwards that will be declared in the A.Y. 2008-09 and according as stated above, the assessee has surrendered the amount of Rs.3,00,00,000/- or so.” In view of these facts, we are of the view that these incoming entries and out going entries relate to sale and purchase of land, and, therefore, this should be treated as turnover of the assessee and a profit rate should be applied on these transactions. It is not possible that accumulated profit of Rs.1.25 crores or undisclosed debtors of Rs.1.75 crores or so were related to A.Y.2008-09 only as in our considered view they relate to the accumulated profit of earlier year also i.e. 2004-05 to A.Y. 2008-09. Keeping in mind the quantum of accumulated closing stock and quantum of debtors, we are of the view that if (7 of 7) [ITA-297/2011] a 10% profit ratio is applied on the total turnover on account of transaction in land then it will meet the ends of justice to both the sides. The AO has made the addition of the total amount of a particular year whereas the ld. CIT(A) has made addition on the basis of peak theory. However, as we said that a net profit rate should be applied on the transactions related to a particular year, therefore, the AO is directed to compute the income of the respective year by taking 10% profit of the total transaction relate to that respective year and then add the same to the income of the assessee.” 5.3 In our considered opinion, the tribunal has assessed 10% of the amount as profit and in doing so, no error has been committed by the tribunal. 6. In that view of the matter, the issues are answered in favour of the assesee and against the department. The appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 10-14. "