THE DCIT, Central Circle-1(1), Ahmedabad V. M/S. Neelkanth Enterprise, Ahmedabad

ITA 1027/AHD/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73026 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHHAJED
• Assessee Lawyers: T P KRISHNA KUMAR
• Keywords: Capital asset; Document seized; Proportionate interest; Notional interest; Documents seized
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NOS. 808 & 2262/AHD/2009, 309/AHD/2011, 100 &101 /AHD/2013 (ASSESSMENT YEAR: 2005-06,0 6-07 & 07-08) M/S. NEELKANTH ENTERPRISE C/O. KETAN H. SHAH, ADVOCATE, 903, SAPPHIRE COMPLES, NR. CARGO MOTORS, C.G. ROAD, AHMEDABAD V/S THE DCIT, CENTRAL CIRCLE 1(1), AHMEDABAD (APPELLANT) (RESPONDENT) I.T.A. NO. 1027 & 2645/AHD/2009 (ASSESSMENT YEAR: 2005-06-06-07) THE DCIT, CENTRAL CIRCLE 1(1), AHMEDABAD V/S M/S. NEELKANTH ENTERPRISE C/O. KETAN H. SHAH, ADVOCATE, 903, SAPPHIRE COMPLES, NR. CARGO MOTORS, C.G. ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAEFN 0177H APPELLANT BY : SHRI M.S. CHHAJED RESPONDENT BY : SHRI T.P. KRISHNAKUMAR CIT D. R. ( )/ ORDER DATE OF HEARING : 07-01-201 4 DATE OF PRONOUNCEMENT : 21 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 2 1. THERE ARE 7 APPEALS OF WHICH 2 ARE FILED BY REVE NUE AND 5 ARE FILED BY ASSESSEE FOR A.YS. 05-06, 06-07 & 07-08. THE 2 APP EALS OF REVENUE (ITA NO. 1027/AHD/2009 AND ITA NO. 2645/AHD/2009) FOR A. YS. 05-06 & 06-07 RESPECTIVELY ARE AGAINST THE RELIEF GIVEN BY CIT(A) IN QUANTUM PROCEEDINGS. OUT OF 5 APPEALS FILED BY ASSESSEE, 3 APPEALS (ITA NO. 808/AHD/2009, ITA NO. 2262/AHD/2009 AND ITA NO. 309/AHD/2011) ARE FOR A.YS. 05-06, 06-07 & 07-08 RESPECTIVELY WHICH ARE AGAINST THE PARTIAL RE LIEF GIVEN BY CIT(A) IN QUANTUM PROCEEDINGS AND 2 APPEALS (ITA NO. 100/AHD/ 2013 & ITA NO. 101/AHD/2013 FOR A.YS. 05-06 & 06-07 ARE AGAINST PE NALTY ORDER OF CIT(A). 2. BEFORE US, AT THE OUTSET LD. A.R. SUBMITTED WITH RESPECT TO QUANTUM ADDITIONS THAT THOUGH THE APPEALS OF THE ASSESSEE PERTAIN TO DIFFERENT ASSESSMENT YEARS BUT THE ISSUE AND FACTS INVOLVED IN THE APPEALS ARE IDENTICAL EXCEPT FOR THE AMOUNT AND THE SUBMISSIONS MADE BY THEM IN CASE OF ONE YEAR WOULD BE APPLICABLE TO THE OTHER YEARS AND THEREFORE ALL THE APPEALS CAN BE HEARD TOGETHER. THE LD A.R. FURTHER SUBMITTED THAT A.Y. 05-06 CAN BE CONSIDERED TO BE THE LEAD MATTER. WE THEREFORE PROCEED TO DISPOSE OF THE APPEALS AGAINST QUANTUM ADDITION TOGETHER FOR THE SAKE OF CONVENIEN CE BY MEANS OF A CONSOLIDATED ORDER AND THUS PROCEED WITH THE FACTS FOR AY 2005-06. 3. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF BU ILDING CONSTRUCTION. IT FILED ITS RETURN OF INCOME FOR AY 2005-06 ON 31.10.2005 DECLA RING TOTAL INCOME OF RS 88,150/-. THE CASE WAS SELECTED FOR SCRUTINY AND TH EREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 29.12.2006 A ND THE TOTAL INCOME WAS DETERMINED AT RS 1,40,33,890/-. AGGRIEVED BY THE OR DER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). C1T(A) V IDE ORDER DATED 22.1.2009 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL B EFORE US. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER:- 1. THE LD. A.O. ERRED IN ASSESSING THE INCOME AT RS. 1 ,40,33,890/-. 2. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE NOTIONAL INTEREST DISALLOWANCE AT RS. 12,000/- AS PER HIS ORDER PAGE 3 AND 4 PARA. 6 THEREOF. IT IS RESPE CTFULLY SUBMITTED THAT THE ADDITION MADE BY THE ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 3 A.O. OF RS. 4,71,392/- AS PER HIS ORDER PARA. 3.2 O UGHT TO HAVE BEEN DELETED IN TOTO IN VIEW OF THE WRITTEN SUBMISSION MADE BEFORE THE A.O. DATED 15.12 .2006. 3. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE AT RS. 14,00,000/- AS PER HIS ORDER PAGE 12, PARA. 13.1 AND 13.2 OUT OF ADDITION MADE BY THE A.O. AT RS. 1,34,40,147/- AS PER A.OS ORDER PAGE 5 TO 11 PARA. 6 TO 6.3. IN NUTSHELL IT IS PRA YED THAT THE WHOLE ADDITION IN RESPECT OF SO CALLED UNDISCLOSED INCOME OUGHT TO HAVE BEEN DELETED BY TH E HONBLE CIT(A). 4. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,91,223/- AS PER A.O.S ORDER PAGE 11 TO 12, PARA. 7, CIT(A)S FINDING AS PER PAGE 13, PA RA. 14. IT IS PRAYED THAT THE WHOLE ADDITION MADE OF RS. 1,91,223/- ON ACCOUNT OF SO CALLED UNDISCLOS ED INCOME FROM EXTRA WORK RECEIPT IS REQUIRED TO BE DELETED. 4. THE GROUNDS RAISED BY THE REVENUE READS AS UNDER :- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST FOR USE OF BORROWED FUNDS FOR NON BUSINESS PURPOSE OF RS.4,85,408/-. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN REST RICTING THE ADDITION OF RS.1,36,45,513/- TO RS.11,49,000/- MADE ON ACCOUNT OF UNRECORDED RECEIP TS FROM THE SALE OF PLOTS AND CONSTRUCTION OF BUNGALOWS, WITHOUT CONSIDERING THE FACT THAT CO-OPE RATIVE HOUSING SOCIETY WAS MERELY A FACADE CREATED BY THE ASSESSEE FOR CARRYING OUT ITS ACTIVI TY OF PURCHASE AND SALE OF PLOTS AND CONSTRUCTION OF BUNGALOWS. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT THE ADDITION MADE ON ACCOUNT OF ON MONEY RECEIVED FROM SALE OF PLOTS CANNOT BE MADE IN THE HANDS OF THE ASSESSEE AS LAND BELONGS TO COOPERATIVE HOUSING SOCIETY, WITHOUT CONSIDERING TH E CLEAR CUT FINDING AND MATERIAL ON RECORDS THAT CO-OPERATIVE HOUSING SOCIETY WAS A NON TRADING ORGANIZATION AND ENTIRE PROFIT BELONGS TO THE ASSESSEE FIRM ONLY. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED T O THE ABOVE EXTENT. WE FIRST TAKE UP ASSESSEES APPEAL (ITA NO. 808/A HD/2009 FOR A.Y. 05- 06). GROUND NO 1 IS GENERAL AND REQUIRES NO ADJUDICATION . GROUND NO 2 AND 4 ARE NOT PRESSED AND THEREFORE DIS MISSED AS NOT PRESSED. GROUND NO 3 IS WITH RESPECT TO RESTRICTING THE ADDI TION TO RS. 14,00,000/- BY CIT(A) AS AGAINST THE ADDITION OF RS . 1,34,40,147/- MADE BY THE A.O. 5. SINCE GROUND NO. 3 OF ASSESSEE AND GROUND NO. 2 & 3 OF REVENUE ARE INTERCONNECTED BOTH ARE CONSIDERED TOGETHER. ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 4 6. A SEARCH U/S 132 OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 9.2.2005 ALONG WITH SEARCH IN DHARAMDEV BUILDER GROUP OF CASES. ON THE BASIS OF DOCUMENTS IMPOUNDED, IT WAS NOTICED THAT ASSESSEE HAD CHARGED COST OF LAND @ RS 8000 SQ YD AND COST O F CONSTRUCTION @ RS 6200 PER SQ YD, IN ADDITION TO WHICH ADDITIONAL CHA RGE OF RS 1,50,000/- ON ACCOUNT OF AEC CHARGES, MAINTENANCE CHARGES ETC WAS ALSO RECOVERED. IT WAS ALSO NOTICED THAT DURING THE YEAR THE ASSESSEE HAD RECEIVED CONSTRUCTION RECEIPTS OF RS 1,18,39,149/- IN RESPECT OF 8 BUNGLO WS (DETAILS OF BUNGLOW NOS ETC. STATED AT PAGE 10 OF THE ORDER) AND ON PERUSIN G THE P&L ACCOUNT IT WAS NOTICED BY HIM THAT ASSESSEE HAD SUPPRESSED CONTRAC T RECEIPTS TO THE EXTENT OF RS 1,48,49,251/- ASSESSEE WAS ASKED TO EXPLAIN A S TO HOW THE TRANSACTIONS OF SALE OF BUNGLOW AND CONSTRUCTION RE CEIPTS WERE RECORDED IN ITS BOOKS OF ACCOUNTS. ASSESSEE INTERALIA SUBMITTED THA T LAND IN QUESTION WAS OWNED BY M.AAJARA COOP HOUSING SOCIETY, SALE DEED W AS EXECUTED BY M.AAJARA COOP HOUSING SOCIETY WITH THE MEMBERS AND THE ASSESSEE WAS ONLY A CONTRACTOR AND NOT OWNING ANY LAND. IT WAS F URTHER SUBMITTED THAT THE CONSIDERATION OF LAND IS ACCOUNTED FOR IN THE BOOKS OF SOCIETY. IT WAS FURTHER SUBMITTED THAT THE IMPOUNDED REGISTER WAS PREPARED BY THE SITE SUPERVISOR AND WAS NOT AUTHENTICATED BY ANY PARTNER AND THE NA MES OF THE PERSONS WERE NOT MENTIONED IN THE IMPOUNDED REGISTER. IT WAS FUR THER SUBMITTED THAT ASSESSEE WAS WORKING AS BUILDING CONTRACTOR AND HAD ENTERED INTO CONSTRUCTION AGREEMENT WITH 8 MEMBERS FOR RS 14 LAC EACH. IN CASE OF SOME OF THE MEMBERS, EXTRA WORK WAS DONE BY THE ASSESSEE . THE TOTAL AMOUNT OF CONTRACTED AMOUNT AND THE EXTRA WORK AMOUNTING TO R S 1,18,29,149/- (DETAILS GIVEN ON PAGE 7 OF AO'S ORDER) WAS ACCOUNTED AS CON TRACT RECEIPTS IN THE BOOKS OF ACCOUNTS. IT WAS FURTHER SUBMITTED THAT TH E CONSTRUCTION AMOUNT CHARGED TO THE 8 MEMBERS WAS AS PER THE PREVAILING MARKET RATES. WITH RESPECT TO RS 1,50,000/- ADDITIONAL CHARGE RECOVERE D BY ASSESSEE, IT WAS SUBMITTED THAT THE IT WAS RECEIVED FROM MEMBERS FOR MAINTENANCE CHARGES, AEC AND LEGAL CHARGES AND IT WAS RECEIVABLE ONLY ON HANDING OVER THE POSSESSION AND SINCE THE POSSESSION WAS NOT HANDED OVER TO THE PURCHASERS, ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 5 THERE WAS NO QUESTION OF ITS RECEIPT AND THEREFORE BOOKING IT AS INCOME. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO FOR THE REASON THAT ACCORDING TO AO, BUILDERS THROUGH THEIR CONFIDENTS FORM A HOUSING SOCIETY, LAND IS PURCHASED / ACQUIRED IN THE NAME O F HOUSING SOCIETY, THE SHARE OF MEMBERS IS ALSO ARRANGED BY THE BUILDER AN D THEREFORE THE ULTIMATE SOURCE FOR PURCHASE OF LAND IS THROUGH THE FUNDS OF THE BUILDER. ON SALE OF LAND BY THE SOCIETY, ONLY THE SHARES OF THE SOCIETY ARE TRANSFERRED TO THE INCOMING MEMBER BUT THE TRANSFER OF LAND REMAINS WI TH THE SOCIETY AND THEREFORE THE TRANSFER OF LAND DOES NOT TAKES PLACE . THE AO WAS ALSO OF THE VIEW THAT THE AFORESAID PRACTICE HAS ALSO BEEN FOLL OWED IN THE PRESENT CASE. ASSESSING OFFICER. WAS THEREFORE OF THE VIEW THAT A SSESSEE HAS CHARGED RS 8000 PER SQ YARD ON ALLOTMENT OF LAND TO DIFFERENT MEMBERS, OUT OF WHICH THE PART AMOUNT WAS CREDITED IN THE BOOKS OF M AJARA CO -OP HOUSING SOCIETY AND THE BALANCE AMOUNT WAS CHARGED BY THE ASSESSEE AS P REMIUM/ON MONEY. HE WAS FURTHER OF THE VIEW THAT ASSESSEE HAD CHARGED R ATE OF CONSTRUCTION AT RS 6000 PER SQ YARD OUT OF WHICH ONLY PART OF THE AMOU NT HAS BEEN DISCLOSED IN THE BOOKS OF ACCOUNTS. HE FURTHER NOTICED THAT AJAR A SOCIETY HAD ALLOTTED LAND TO 10 MEMBERS OUT OF WHICH 8 MEMBERS HAD STARTED CO NSTRUCTION WORK THROUGH ASSESSEE AND BALANCE 2 MEMBERS HAD NOT STAR TED CONSTRUCTION ACTIVITIES AND THUS THE ASSESSEE HAD CHARGED PREMIU M FOR ALLOTMENT OF LAND IN RESPECT OF 10 MEMBERS BUT HAD RECEIVED CONSTRUCTION RECEIPTS FROM ONLY 8 MEMBERS. THUS ON THE BASIS OF RATES NOTED IN THE SE IZED DOCUMENTS, AO WORKED OUT THE SALE PROCEEDS IN RESPECT OF 10 BUNGL OWS AND CONSTRUCTION RECEIPTS IN RESPECT OF 8 BUNGLOWS AND BASED ON THE WORKING AS SHOWN ON PAGE 10 OF THE ASSESSMENT ORDER, WORKED OUT THE TOT AL UNDISCLOSED INCOME AT RS 1,34,40,147/-. AGGRIEVED BY THE ORDER OF AO, ASS ESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING A S UNDER:- 13 THE CONTENTIONS/DETAILS ON RECORD WERE CAREFULLY CO NSIDERED. IT IS SEEN THAT IT WAS THE M. AJARA CO-OP. HOUSING SOCIETY (REGISTRATION NO. GH-21020) WHICH HAD PURCHASED LAND FROM LAND OWNERS VIDE REGISTERED SALE DEEDS. THE APPELLANT FIRM WAS APPARENTLY ENGAGED AS DEVELOPER AND CONSULTANT AND CARRIED OUT DEVELOPMENT WORK, IN TER MS OF THE AGREEMENT DATED 14/12/2004 WITH THE SOCIETY, IN RESPECT OF THE LAND OF THE SOCIETY, BEING FT NO.37/TPS NO.L, THALTEJ, AHMEDABAD, ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 6 ADMEASURING 7864 SQ.MTRS. IT ALSO INVOLVED SEEKING/ OBTAINING APPROVALS OF LEGAL AUTHORITIES, PROVIDING AMENITIES, FACILITIES, SERVICES, ARRANGIN G FINANCES, ETC.. THE EXPENSES ON SUCH DEVELOPMENT, BORNE BY THE APPELLANT FIRM ARE STATED TO HAVE BEEN REIMBURSED SUBSEQUENTLY. IT IS STATED THAT THE COST OF THE LAND PER SQ. MTR. WAS D ETERMINED AFTER KEEPING IN ACCOUNT THE FACT THAT APPROXIMATELY 40% OF THE LAND WAS TO BE KEPT FOR RE ADS/FACILITIES. THE SOCIETY HAS ALLOTTED PLOTS TO THE MEMBERS AS PER INDIVIDUAL SALE DEED EXECUTED WI TH THE ALLOTTEE MEMBERS. THE MEMBERS HAD, IN TURN, ENTERED INTO AGREEMENT FOR CONSTRUCTION OF TH EIR RESIDENCE, WITH THE APPELLANT FIRM. THE A.O. FELT THAT THE ASSESSEE WAS UNDER NO OBLIGATION TO D EVELOP COMMON AMENITIES/CONSTRUCT COMPOUND WALL AND THAT THE SOCIETY WAS JUST A FACADE WHILE T HE ACTUAL BENEFICIARY WAS THE ASSESSEE. THE A.O. ALSO REFERRED TO THE ENTRIES IN THE DOCUMENTS SEIZE D FROM POSSESSION OF ONE SHRI HARDIK JANI, A SUPERVISOR, AT THE CONSTRUCTION SITE. THE A.O. NOTE D THAT THE DOCUMENTS REVEALED THAT ON MONEY/PREMIUM HAD BEEN EARNED ON THE SALE OF PLOTS/ OBTAINED FROM CONSTRUCTION, WHICH IN HIS OPINION, HAD FLOWN TO THE ASSESSEE FIRM AND CONSTIT UTED ITS UNDISCLOSED INCOME. HOWEVER, THE A.O. WAS NOT BROUGHT FORWARD ANY EVIDENCE TO JUSTIFY HIS SUSPICION. THE SAID M. AJARA CO-OP. HOUSING SOCIETY, HAS NOT BEEN PROVED TO BE NOT A REGULAR SO CIETY OR A BENAMI OF THE ASSESSEE. THE ESTABLISHED AND INDEPENDENT EXISTENCE OF THE SOCIET Y HAS NOT BEEN NEGATED AND THE DULY EXECUTED AND LEGALLY REGISTERED LAND DOCUMENTS HAVE NOT BEEN PROVED TO BE SHAM AND FABRICATED. IN SUCH FACTS, THE RATIO OF THE DECISION OF THE HON'BLE SUP REME COURT IN CASE OF K.P. VARGHESE, 131 ITR 597 AND OF THE IT AT, AHNMEDABAD IN CASE OF PRARTHA NA CONSTRUCTION, 70 TTJ 122, AND OTHER DECISIONS REPORTED IN 63 TTJ 790, 94 TTJ 885, QUOTE D BY THE APPELLANT, APPLIES. IT IS ALSO SEEN THAT THE TWO PLOT OWNERS, NAMELY HARJIT SINGH AND KETANB HAI, EXAMINED BY THE DEPARTMENT, ON 21/2/2005 AND 2/3/2005 RESPECTIVELY HAVE ALSO CONFI RMED THEIR PLOT AREA AND THE COST OF LAND (AT RS.2,500/- PER SQ. MTR.) WHICH IS IN LINE WITH THEI R RESPECTIVE AGREEMENTS WITH THE SOCIETY. AS SUCH, THE INVESTMENT IN THE LAND OF THE SOCIETY AND ON MO NEY RECEIVED THEREFROM, CANNOT BE CONSIDERED AS PART OF THE ASSESSEE'S UNDISCLOSED INCOME. THE A DDITION MADE BY THE A.O. FOR THE PREMIUM/ON MONEY EARNED ON SALE OF PLOTS TO THE MEMBERS, IS THEREFORE NOT TENABLE/JUSTIFIED, IN THE HANDS OF THE APPELLANT FIRM. 13.1 IN RESPECT OF THE ADDITION MADE FOR ON MONEY/P REMIUM RECEIVED FROM CONSTRUCTION ACTIVITIES OF THE RESIDENCES IN THE PREVIOUS YEAR IT IS SEEN H OWEVER THAT THE AFOREMENTIONED OWNERS HAVE CONFIRMED THAT THE RATE CHARGED PER SQ. YARD FOR CO NSTRUCTION WAS RS.6,200/-. THEIR STATEMENT CORROBORATES THE RATE OF CONSTRUCTION AS SEEN IN TH E SEIZED DOCUMENTS I.E. (APPROXIMATELY RS.6,000/- PER SQ. YARD). IT IS ALSO SEEN THAT WHIL E SHRI HARDIK JANI MAY BE A THIRD PARTY, NOT PRIVY TO THE DETAILS IN RESPECT OF THE TRANSACTIONS OF LA ND/PLOT, YET HE WAS INTIMATELY INVOLVED, WITH THE CONSTRUCTION ACTIVITY AND SO THE RATE NOTED BY HIM. IN THE SEIZED DOCUMENTS AND ALSO CONFIRMED BY THE TWO PLOT OWNERS I.E. RS.6,200/- PER SQ. YARD, W AS CORRECT. IT THEREFORE, STANDS TO REASON THAT THE CONSTRUCTION RECEIPTS HAVE BEEN UNDERSTATED BY THE APPELLANT FIRM TO THE EXTENT, CALCULATED BY THE A.O. IN HIS CHART, ON PAGE 10 OF THE ASSESSMENT ORD ER. THE DIFFERENTIAL AMOUNT OF RECEIPTS FROM CONSTRUCTION OF RESIDENCE I.E. RS.L,75,000/- FROM E ACH OF THE 8 BUNGALOWS CONSTRUCTED DURING THE PREVIOUS YEAR, A TOTAL OF RS. 14,00,000/- THEREFOR E CONSTITUTES UNDISCLOSED INCOME OF THE APPELLANT. 13.2 IT HAS BEEN PLEADED BEFORE ME DURING THE COURS E OF HEARING THAT IF IT WAS HELD SO, THEN ONLY THE PROFIT ELEMENT I.E. ABOUT 8% OF THE RECEIPTS, S HOULD BE CONSIDERED FOR ADDITION. THIS PLEA HOWEVER IS NOT SUBSTANTIATED BY THE APPELLANT WITH REQUISITE EVIDENCE OF THERE BEING UNDEBITED EXPENSES/COST ETC. IT IS THEREFORE NOT ACCEPTABLE. AS SUCH, OVER ALL ADDITION OF RS. 1,34,40,147/- MADE BY THE A.O. IS RESTRICTED TO RS. 14,00,000/- A ND THE BALANCE IS DELETED. THE RELATED GROUND OF APPEAL IS DECIDED ACCORDINGLY. 7. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND R EVENUE ARE NOW IN APPEAL BEFORE US. 8. BEFORE US, LD A.R. REITERATED THE SUBMISSIONS MA DE BEFORE AO AND CIT(A). IT WAS FURTHER SUBMITTED THAT ASSESSEE IS NOT THE OWNE R OF THE LAND AND THE LAND ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 7 IS OWNED BY THE SOCIETY AND THEREFORE NO ADDITION O N ACCOUNT OF LAND CAN BE MADE IN THE HANDS OF THE ASSESSEE. HE FURTHER SUBMI TTED THAT THE ASSESSEE IS ONLY A CONTRACTOR FOR WHICH IT HAD ENTERED INTO CON TRACT FOR CONSTRUCTION WITH THE PURCHASERS OF LAND. IT WAS FURTHER SUBMITTED TH AT THE ENTIRE CONTRACT RECEIPTS CANNOT BE CONSIDERED AS INCOME AND AT THE MOST ONLY THE PROFIT ELEMENT CAN BE CONSIDERED AS INCOME. THE LD. D.R. O N THE OTHER HAND SUBMITTED THAT THE MATERIAL WAS SEIZED FROM THE SIT E AND WAS WRITTEN BY ASSESSEES SUPERVISOR AND THEREFORE THE CONTENTS OF THE SEIZED MATERIAL CANNOT BE IGNORED. HE FURTHER TOOK US THROUGH THE V ARIOUS FINDINGS OF AO AND SUBMITTED THAT THE AO WAS FULLY JUSTIFIED IN MAKING THE ADDITION. HE THUS SUPPORTED THE ORDER OF AO. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE BEFORE US IS AS TO WHETHER THE ADDITION MADE BY THE A.O. WAS JUSTIFIED. WE FIND THAT CIT(A) WHILE GRANTING THE RELIEF HAS G IVEN A FINDING OF FACT THAT M.AJARA CO-OP HOUSING SOCIETY HAD PURCHASED LAND FR OM LANDOWNERS VIDE REGISTERED SALE DEEDS, THE SOCIETY HAS NOT BEEN PRO VED TO BE NOT A REGULAR SOCIETY OR A BENAMI OF THE ASSESSEE, THE ESTABLISHE D AND INDEPENDENT EXISTENCE OF THE SOCIETY HAS NOT BEEN NEGATED, THE EXECUTED AND LEGALLY REGISTERED LAND DOCUMENTS HAVE NOT BEEN PROVED TO B E SHAM OR FABRICATED. HE HAS ALSO NOTED THAT 2 PLOT OWNERS, WHEN EXAMINED , HAVE CONFIRMED THEIR PLOT AREA AND COST OF LAND WHICH IS IN LINE WITH TH E AGREEMENT WITH THE SOCIETIES. HE HAS FURTHER GIVEN A FINDING THAT THE VIEW OF THE AO THAT SOCIETY WAS JUST A FACADE WHILE THE ACTUAL BENEFICIARY WAS THE ASSESSEE AND THE ON MONEY /PREMIUM EARNED ON SALE OF PLOT/OBTAINED FROM CONSTRUCTION HAD FLOWN TO ASSESSEE WAS NOT SUPPORTED BY ANY EVIDENCE. BEFO RE US ALSO NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE AFORESAID FINDINGS OF CIT(A). THEREFORE WE DO NOT FIND ANY REASON TO INTE RFERE IN THIS FINDING OF LD. CIT(A). NOW THE ISSUE TO BE EXAMINED IS AS TO WHET HER LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE ENTIRE CONSTRUCTION RECEIPT? WIT H RESPECT TO CONSTRUCTION COST, CIT(A) HAS NOTED THAT OWNERS HAVE CONFIRMED T HE RATE CHARGED FOR ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 8 CONSTRUCTION TO BE RS 6200 PER SQ YARD WHICH ALSO C ORROBORATES WITH THE APPROXIMATE RATE OF RS 6000 PER SQ YARD STATED IN T HE SEIZED DOCUMENTS AND HAS ALSO BEEN CONFIRMED BY MR. JANI IN HIS STATEMEN T AND HAD ACCORDINGLY CONFIRMED THE ADDITION OF RS 14,00,000 (RS 1,75,000 X 8 BUNGLOWS). THE SUBMISSION OF THE ASSESSEE THAT SOCIETY HAD ENTERED INTO A PROJECT DEVELOPMENT AND CONSULTANT AGREEMENT WITH ASSESSEE AND THE MEMBERS OF THE SOCIETY HAD ENTERED INTO CONSTRUCTION AGREEMENT FOR BUNGLOWS ON THEIR PLOTS WITH THE ASSESSEE HAS NOT BEEN CONTROVERTED B Y REVENUE BY BRINGING ANY TANGIBLE EVIDENCE IN ITS SUPPORT AND THUS THE F ACT THAT ASSESSEE IS CONTRACTOR IS NOT CONTROVERTED. WE FIND THAT ASSESS EE HAD RECEIVED RS. 1,75,000/- FROM 8 BUNGLOWS AGGREGATING TO RS. 14 LA CS WHICH IS STATED TO HAVE BEEN RECOVERED TOWARDS MAINTENANCE, REGISTRATI ON ELECTRICITY ETC. BEFORE US NO MATERIAL HAS BEEN BROUGHT ON RECORD BY ASSESS EE TO SHOW THE EXTENT OF EXPENSES INCURRED BY ASSESSEE ON THOSE COUNT. IT I S ALSO A FACT THAT THE ENTIRE RECEIPTS OF RS. 14 LACS CANNOT BE CONSIDERED TO BE INCOME. THE SUBMISSION OF THE ASSESSEE THAT IT IS A CONTRACTOR FOR CARRYING OUT CIVIL WORK COULD NOT BE DISPROVED BY REVENUE WITH ANY TANGIBLE EVIDENCE. WE ALSO FIND THAT AS PER THE PROVISIONS OF SECTION 44 AD AS WAS APPLICABLE AT THE RELEVANT TIME TO AN ASSESSEE WHO WAS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, A SUM EQUAL TO 8% OF GROSS RECEIPTS WAS DEEMED TO BE PROFITS OF BUSINESS. WE FIND THAT EVEN IN THE CASE OF VIJAY PROTEINS LTD VS . ACIT (1996) 55 TTJ (AHD) 76 WHERE THE PURCHASE WAS HELD TO BE BOGUS, ADDITIO N WAS MADE TO THE EXTENT OF 25% OF PURCHASE PRICE. CONSIDERING THE P ECULIAR OF FACTS, MORE SO, WHEN THE ASSESSEE IS A CONTRACTOR, WE ARE OF THE VI EW THAT ENDS OF JUSTICE SHALL BE MET IF ADDITION IS RESTRICTED TO 30% OF TH E RECEIPTS. WE THEREFORE RESTRICT THE ADDITION TO RS. 4,20,000/- (30% OF RS. 14,00,000/-) AS AGAINST RS. 14 LACS THAT WAS CONFIRMED BY CIT(A). WE THUS DIRE CT ACCORDINGLY. 10. IN THE RESULT, THIS GROUND OF ASSESSEE AND REVE NUE ARE PARTLY ALLOWED. 11. WE NOW TAKE UP REVENUES APPEAL FOR A.Y. 05-06. ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 9 GROUND NO. 1 OF REVENUES APPEAL IS WITH RESPECT TO RESTRICTING DISALLOWANCE OF INTEREST TO RS. 12,000/- AS AGAINST RS. 4.71 LACS M ADE BY A.O. 12. ON PERUSING THE PROFIT AND LOSS ACCOUNT, A.O. NOTI CED THAT ASSESSEE HAD CLAIMED INTEREST OF RS. 10,12,600/- AND ASSESSEE HA D ADVANCED INTEREST FREE LOAN OF RS. 38,97,550/- TO M/S AJARA CO-OP. SOCIETY AND RS. 1,40,290/- TO OTHERS. ON THE QUERY OF A.O., ASSESSEE INTERALIA S UBMITTED THAT IT HAS NOT GIVEN ANY ADVANCE TO THE SOCIETY BUT HAD INCURRED E XPENSES ON BEHALF OF SOCIETY AS PART OF LEGAL OBLIGATION AS A CONTRACTOR AND THEREFORE THE EXPENSES WERE OUT OF BUSINESS CONSIDERATION. THE SUBMISSION OF ASSESSEE WAS NOT FOUND ACCEPTABLE TO A.O. HE THEREAFTER WORKED OUT I NTEREST @ 12% ON THE AMOUNT ADVANCED AND WORKED OUT THE INTEREST OF RS. 4,71,392/- TO BE NOT FOR THE PURPOSE OF BUSINESS AND ADDED TO THE INCOME. A GGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CI T(A) DISPOSED THE MATTER IN ASSESSEES FAVOUR BY HOLDING AS UNDER:- IN RESPECT OF THE INTEREST DISALLOWED, IT IS SEEN THAT THERE WAS A BUSINESS NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE INTEREST BEARING FUNDS . MOREOVER, THE EXPENDITURE INCURRED BY THE APPELLANT ON BEHALF OF THE SOCIETY, IN THE PREVIOUS YEAR WAS MUCH LESS AS INDICATED BY THE FACT THAT T HE OPENING BALANCE ITSELF WAS OF RS. 37.35 LAKHS. IT I S ALSO SEEN THAT THE APPELLANT HAD CHARGED INTEREST ON THE ADVANCES GIVEN TO N.M. KOTHARI HUF AND TEJAS . C. JOSHI HUF. HOWEVER THE NATURE AND BUSINESS PURPOSE OF THE ADVANCE OF RS. 1 LAKH TO SHRI N.H. A MIN REMAINS UNEXPLAINED. IT WOULD BE APPROPRIATE TO DISALLOW PROPORTIONATE INTEREST @ 12% IN RESPECT OF THE INTEREST FREE ADVANCE OF RS. 1 LAKH I.E. RS . 12,000/- AND TO DELETE THE BALANCE DISALLOWANCE OF INTEREST. THE RELATED GROUNDS OF APPEAL ARE DECIDED ACCORDINGLY. 13. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. AND ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS BEFORE CIT(A) AND SUPPOR TED HIS ORDER. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE GRANTING PARTIAL RELIEF TO ASSESSEE HA S GIVEN A FINDING THAT THERE WAS NEXUS BETWEEN EXPENDITURE INCURRED AND INTEREST BEARING FUNDS, THE EXPENSES INCURRED BY ASSESSEE ON BEHALF OF SOCIETY IN THE PREVIOUS YEAR WAS MUCH LESS AND ASSESSEE HAD ALSO CHARGED INTEREST AN ADVANCE GRANTED TO 2 PARTIES. BEFORE US, REVENUE COULD NOT CONTROVERT T HE FINDING OF CIT(A) AND ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 10 THEREFORE WE FIND NO REASON TO INTERFERE WITH THE O RDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF ASSESSEE AND REVEN UE ARE PARTLY ALLOWED. ITA NO.2262/AHD/2009 (ASSESSEES APPEAL) AND ITA NO . 2645/AHD/2009 (REVENUES APPEAL) FOR A.Y. 06-07. 16. THE GROUND RAISED BY ASSESSEE READS AS UNDER;- 1. IN ASSESSING/CONFIRMING THE ASSESSED INCOME AT R S. 1,41,55,621/- AS AGAINST THE RETURNED INCOME OF RS. 14,05,910/-. 2. IT IS SUBMITTED THAT THE WHOLE PROCEEDINGS IS IT SELF BAD IN LAW, VOID AUTHORITIES BELOW-INITIO, ILLEGAL AND REQUIRED TO BE QUASHED WITH CONSEQUENTI AL RELIEF. 3. BOTH THE LOWER AUTHORITIES HAVE ERRED IN MAKING ADDITION/CONFIRMING THE ADDITION TO THE EXTENT OF RS. 11,49,000/- OUT OF RS. 52,72,00/-. IT IS SUBMITTED THAT IN VIEW OF THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS IN VIEW OF GROUND NO. 4 .1 TO 4.8 BEFORE CIT(A) OUGHT TO HAVE DELETED THE WHOLE ADDITION MADE BY TH E ASSESSING OFFICER INSTEAD OF GIVING PARTIAL RELIEF. THUS THE CIT(A) HAS ERRED IN NOT GI VING ANY FINDING THEREBY DELETING THE ADDITION AS DISCUSSED BY HIM IN HIS APPEAL ORDER PA GE 14 TO 17 INTER ALIA PARA 6.6 TO 6.7. 4. THE ASSESSEE ALSO DENIES TOTAL LIABILITY OF PAY ANY SUCH INTEREST UNDER SECTION. 234 AS MENTIONED BY THE ASSESSING OFFICER IN HIS ASSESSMEN T ORDER. 17. THE GROUND RAISED BY THE REVENUE READS AS UNDER :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST FOR USE OF BORROWED FUNDS FOR NON BUSINESS PURPOSE OF RS. 4,85,408/-. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITION OF RS. 1,36,45,513/- TO RS. 11,49,000/- MADE ON ACCOUNT OF UNRECORDED RECEIPTS FROM THE SAME OF PLOTS AND CONSTRUCTION OF BUNGALOWS, WITHOUT CONSIDERING THE FACT THAT CO-OPE RATIVE HOUSING SOCIETY WAS MERELY A FAADE CREATED BY THE ASSESSEE FOR CARRYING OUT ITS ACTIVI TY OF PURCHASE AND SALE OF PLOTS AND CONSTRUCTION OF BUNGALOWS . 3. THE LD . CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THA T THE ADDITION MADE ON ACCOUNT OF ON MONEY RECEIVED FROM SALE OF PLOTS CANNOT BE MADE IN THE HANDS OF THE ASSESSEE AS LAND BELONGS TO CO-OPERATIVE HOUSING SOCIETY, WITHOUT CONSIDERING T HE CLEAR CUT FINDING AND MATERIAL ON RECORDS THAT CO-OPERATIVE HOUSING SOCIETY WAS A NON TRADING ORGANIZATION AND ENTIRE PROFIT BELONG TO THE ASSESSEE FIRM ONLY. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) BE SET ASIDE AND THAT OF THE A . O. BE RESTORED TO THE ABOVE EXTENT. ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 11 18. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE GROUNDS RAISED IN BOTH THE APPEALS OF ASSESSEE AND REVENUE ARE IDENTICAL TO TH AT OF THE GROUNDS RAISED BY THEM FOR A.Y. 05-06 AND FURTHER THE FACTS AND CI RCUMSTANCES OF THE CASE ARE ALSO SIMILAR TO THAT OF A.Y. 05-06. WE THEREFO RE FOR THE SIMILAR REASONS GIVEN WHILE DISPOSING THE APPEALS FOR A.Y. 05-06, A LSO DISPOSE OF THE PRESENT APPEALS. 19. THUS THE APPEALS OF ASSESSEE AND REVENUE ARE PA RTLY ALLOWED. ITA NO. 309/AHD/2011 (A.Y. 07-08) 20. THE GROUND RAISED BY THE ASSESSEE READS AS UND ER:- 1. THE LD. ASSESSING OFFICER HAS ERRED IN MAKING AD DITION OF RS. 1,54,44,720/- IN RESPECT OF SO-CALLED UNDISCLOSED INCOME IN RESPECT OF CONSTRUCTION OF BU NGALOWS AND ALLOTMENT OF PLOT (ASSESSING OFFICERS ORDER PAGE 5). IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, LEARNED CIT(A) HAS ALSO ERRED IN NO T APPRECIATING THE FACTS AND SUBMISSIONS MADE BEFORE HIM, AS REPRODUCED BY HIM IN HIS APPEAL ORDER PAGE 3 TO 11 PARA 6.2 INTER ALIA ERRED IN NOT APPRE CIATING THE FACTS MENTIONED IN THE SAID SUBMISSION AND CAME TO THE WRONG CONCLUSION IN HIS APPEAL ORDE R PAGE 11 TO 13 PARA 7 TO 8 THEREOF. IT IS PRAYED THAT THE WHOLE ADDITION MADE IS DIRECTED TO BE DELE TED WITH CONSEQUENTIAL RELIEF. 21. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE GROUND RAISED IN THE PRESENT APPEAL OF ASSESSEE IS IDENTICAL TO THAT OF A.Y. 05- 06 AND FURTHER THE FACTS AND CIRCUMSTANCES OF THE CASE ARE ALSO SIMILAR TO THAT OF A.Y. 05-06/ . WE THEREFORE FOR THE SIMILAR REASONS GIVEN WHILE DISPO SING THE APPEAL FOR A.Y. 05- 06, ALSO DISPOSE OF THE PRESENT APPEAL. 22. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ITA NO. 100/AHD/2013 (A.Y.05-06) AND ITA NO. 101/AH D/2013 (A.Y. 06- 07). 23. THE GROUND RAISED BY ASSESSEE READS AS UNDER:- ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 12 1. THE ORDER PASSED BY THE LD. CIT(A) IS AGAINST LAW, EQUITY AND JUSTICE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPH OLDING THE ORDER OF LD. A.O. FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR AMEND ANY OR ALL GROUND OF APPEAL BEFORE FINAL HEARING. 24. BEFORE US, THE LD. A.R. SUBMITTED THAT THE AFOR ESAID 2 APPEALS ARE AGAINST THE PENALTY LEVIED U/S. 271(1)(C) FOR A.Y. 05-06 & 06-0 7. HE FURTHER SUBMITTED THAT SINCE THE FACTS AND THE ISSUE INVOLVED IN BOTH THE APPEALS ARE IDENTICAL EXCEPT FOR THE AMOUNT AND DATES, BOTH THE APPEALS CAN BE D ISPOSED TOGETHER. WE THEREFORE PROCEED TO DISPOSE BOTH THE APPEALS BY WA Y OF CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND THUS PROCEED WITH T HE FACTS OF A.Y. 05-06. 25. IN THIS CASE AGAINST THE INCOME OF RS. 88,150/- RETURNED BY THE ASSESSEE THE TOTAL INCOME WAS DETERMINED AT RS. 1,40,33,890/- BY ORDER DATED 29.12.2006 PASSED U/S. 143(3) OF THE ACT. AGGRIEVED BY THE OR DER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO CONFIRMED THE ADDITION ONLY TO THE EXTENT OF RS. 16,10,254/-. ON THE AFORESAID ADDITION CONFI RMED BY CIT(A). A.O. VIDE ORDER DATED 25.03.2010 LEVIED PENALTY OF RS. 5,89,2 34/- U/S. 271(1)(C). AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) PARTLY CONFIRMED THE PENALTY BY HOLDING AS U NDER:- 3.1 . AS FAR AS THE LEVY OF PENALTY ON ACCOUNT OF D ISALLOWANCE OUT OF MOTOR CAR EXPENSES AND TELEPHONE EXPENSES AND DISALLOWANCE OF INTEREST IS CONCERNED, MERE FACT IS THAT THE DISALLOWANCE HAS BEEN MADE ON ESTIMATE AND THE SAME HAS BEEN PARTLY CONFIRMED IN APPEAL, DOES NOT CALL FOR LEVY OF PENALTY U/S.271(L)(C) OF THE I.T. ACT. RELIANCE IN THIS REG ARD IS PLACED ON THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LT D. REPORTED IN 322 ITR 158(SC). THE PENALTY LEVIED IN RESPECT OF DISALLOWANCE ON AC COUNT OF TELEPHONE AND VEHICLE AND DISALLOWANCE OF INTEREST IS HEREBY DELETED. 3.2 AS FAR AS THE LEVY OF PENALTY ON ACCOUNT OF UNA CCOUNTED RECEIPTS FROM THE CONSTRUCTION OF BUNGALOWS, IT IS SEEN THAT THE ADDITION HAS BEEN MA DE ON THE BASIS OF DOCUMENTS SEIZED WHICH CLEARLY INDICATE THE RECEIPT OF ON MONEY BY THE APPELLANT. THE CIT(A) HAS EXAMINED THESE DOCUMENTS AND THE EXPLANATION OF THE APPELLANT IN RESPECT OF THESE DO CUMENTS IN DETAIL IN THE APPELLATE ORDER. IT IS ALS O SEEN THAT THE APPELLANT HAS ALSO INDIRECTLY ACCEPTE D THE RECEIPT OF ON MONEY BEFORE CIT(A) WHICH IS EVIDENT FROM THE FACT THAT IN PARA 13.2 OF THE APPE LLATE ORDER THE CIT(A) MENTIONS AS UNDER: ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 13 'IT HAS BEEN PLEADED BEFORE ME DURING THE COURSE OF HEARING THAT IF IT WAS HELD SO, THEN ONLY THE PROF IT ELEMENT I.E. ABOUT 8 OF THE RECEIPTS, SHOULD BE CON SIDERED FOR ADDITION. THIS PLEA HOWEVER IS NOT SUBSTANTIATED BY THE APPELLANT WITH REQUISITE EVIDE NCE OF THERE BEING UNDEBITED EXPENSES/ COST ETC. ' 3.3 IT IS CLEAR THAT THE ABOVE ON MONEY RECEIPTS WE RE NOT ACCOUNTED WHICH HAS LED THE CIT(A) TO HOLD THAT THE AVERAGE RATE OF RECEIPT OF ON MONEY WAS RS . 6000/- PER SQ. YARD. THIS FACT WAS ALSO CONFIRMED BY TWO PLOT OWNERS. IN VIEW OF THE ABOVE IT IS CLEA R THAT THE APPELLANT HAD ON MONEY RECEIPTS WHICH HE HAD NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS. THE AO WAS HENCE JUSTIFIED IN LEVYING PENALTY U/S 271(L)(C ) OF THE ACT ON THIS ACCOUNT. 3.4 IT IS SEEN THAT THE AO HAS ALSO LEVIED PENALTY ON THE ADDITION OF RS. 1,91,223/-. THIS ADDITION HA S BEEN MADE ON THE BASIS OF DOCUMENTS SEIZED AT THE C ONSTRUCTION SITE WHEREIN THE EXTRA WORK BEING DONE HAS BEEN MENTIONED. AT THE CONSTRUCTION SITE STATEM ENT OF THE RELATED PERSON MR. HARDIK JANI WAS RECORDED. EVEN SHRI HARDIK JANI CONFIRMED THE EXTRA WORK BEING DONE. SHRI HARDIK JANI WAS ACTUALLY LOOKING AFTER THE CONSTRUCTION AND HENCE THERE WAS FULLY AWARE ABOUT WHAT EXTRA WORK WAS DONE IN RESPECT OF CONSTRUCTION OF EACH BUNGALOW. THE ASSES SING OFFICER HAS AFTER EXAMINATION OF THE DOCUMENTS SEIZED AND ON THE BASIS OF THE STATEMENTS RECORDED HAS COME TO THE CONCLUSION REGARDING THE UNDISCLOSED RECEIPTS ON ACCOUNT OF EXTRA WORK DONE IN THE BUNGALOWS. THE APPELLANT HAD NOT FURNISHED ANY EXPLANATION IN THIS REGARD BEFORE THE CIT(A). T HE ONLY CONTENTION WAS THAT THE DOCUMENTS REPRESENTED ESTIMATES, HOWEVER NO EVIDENCE TO SUPPO RT THE SAME WAS FILED. 3.5 IT IS ALSO SEEN THAT THE APPELLANT HAS ALSO IND IRECTLY ACCEPTED THE RECEIPT OF ON MONEY BEFORE CIT (A) WHICH IS EVIDENT FROM THE FACT THAT IN PARA 14 OF T HE APPELLATE ORDER THE CIT(A) MENTIONS AS UNDER: 'IT HAS BEEN PLEADED BEFORE ME DURING THE COURSE OF HEARING THAT IF IT WAS HELD SO, THEN ONLY THE PROF IT ELEMENT I.E. ABOUT 8 OF THE RECEIPTS, SHOULD BE CON SIDERED FOR ADDITION. THIS PLEA HOWEVER IS NOT SUBSTANTIATED BY THE APPELLANT WITH REQUISITE EVIDE NCE OF THERE BEING UNDEBITED EXPENSES/COST ETC,' 3.6 IN VIEW OF THE ABOVE FACTS, IT BECOMES APPARENT THAT THE APPELLANT WAS FULLY AWARE OF THE AMOUNT CHARGED FOR THE EXTRA WORK DONE IN THE BUNGALOWS BE CAUSE NO EXTRA WORK WOULD HAVE BEEN DONE IN ANY OF THE BUNGLOWS WITHOUT THE KNOWLEDGE OF THE APPELL ANT. THE FACT THAT THE SEIZED PAPERS GIVE THE DETAI LS OF SUCH UNACCOUNTED EXTRA CHARGES HAS TO BE APPRECI ATED. THE CIT(A) CLEARLY HELD THAT THE APPELLANT HAD RECEIVED CONSIDERATION OVER AND ABOVE THE DECLA RED SALES AMOUNT ON ACCOUNT OF EXTRA WORKS DONE. THE AO WAS HENCE JUSTIFIED IN LEVYING PENALTY U/S 2 71(L)(C) OF THE ACT ON THIS ACCOUNT. 3.7 IN VIEW OF THE ABOVE, THE ASSESSING OFFICER WAS JUS TIFIED IN RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA & OTHER S VS. DHARMENDRA TEXTILE PROCESSORS & OTHERS REPORTED IN 306 ITR 277 (SC) TO HOLD THAT PENALTY W AS LEVIABLE ON THIS GROUND. 3.8 IN VIEW OF THE ABOVE, PENALTY U/S.271(L)(C) OF THE I.T. ACT LEVIED BY THE ASSESSING OFFICER TO THE EXTENT OF THAT ON THE UNACCOUNTED RECEIPTS AND THAT CHARGED FOR EXTRA WORK IN THE CONSTRUCTION OF THE BUNGALOWS IS CONFIRMED. 26. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 14 27. BEFORE US, LD. A.R. SUBMITTED THAT THE PENALTY WERE LEVIED MAINLY ON THE ADDITION AND DISALLOWANCE MADE BY A.O. WHICH WERE P ARTLY CONFIRMED BY CIT(A). HE SUBMITTED THAT ASSESSEE HAD DISCLOSED A LL THE NECESSARY FACTS WHILE FILING THE RETURN OF INCOME AND DURING THE AS SESSMENT PROCEEDINGS. HE FURTHER SUBMITTED THAT ASSESSEE HAS NOT CONCEALED P ARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. HE THE REFORE SUBMITTED THAT IT IS A SETTLED LAW THAT MERE DISALLOWANCE COULD NOT BE A G ROUND FOR LEVY OF PENALTY. HE THUS SUBMITTED THAT PENALTY BE DELETED. LD. D.R . ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A). 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL POSITION IS THAT AGAINST THE RETURNED INCOM E OF RS. 88,150/- THE INCOME WAS DETERMINED AT RS. 1,40,33,890/- AND THEREAFTER THE ADDITION WAS SUSTAINED ONLY TO THE EXTENT OF RS. 16,10,254/-. WE WHILE DECIDING THE QUANTUM APPEAL HEREINABOVE HAVE RESTRICTED THE ADDI TION TO RS. 4,20,000/- ON THE BASIS OF 30% OF THE RECEIPTS. IT IS A SETTL ED LAW THAT QUANTUM PROCEEDINGS AND PENALTY PROCEEDS ARE DISTINCT AND S EPARATE AND THEREFORE THE FACT THAT ADDITION HAS BEEN MADE IN QUANTUM PROCEED INGS WILL NOT AUTOMATICALLY JUSTIFY THE IMPOSITION OF PENALTY. I N OTHER WORDS A PENALTY CANNOT BE IMPOSED AUTOMATICALLY OR MECHANICALLY AFT ER AN ADDITION HAS BEEN MADE. EVEN THE MATERIAL ON WHICH THE ADDITIONS WER E MADE HAVE TO BE AGAIN GIVEN A FRESH LOOK FROM THE POINT OF VIEW OF LEVYIN G PENALTY. IN THE PRESENT CASE, SINCE ALL THE NECESSARY FACTS WERE FURNISHED BY ASSESSEE AND THE FACT THAT THE ADDITION HAS BEEN SUBSTANTIALLY REDUCED AN D THE ADDITION HAS BEEN SUSTAINED ONLY ON ESTIMATE BASIS, WE ARE OF THE VIE W THAT THE ADDITION DOES NOT CALL FOR LEVY OF PENALTY U/S. 271(1)(C). WE THU S CANCEL THE PENALTY LEVIED TO A.O. 29. FURTHER, SINCE THE GROUNDS RAISED IN PENALTY A PPEAL FOR A.Y. 06-07 ARE IDENTICAL TO THAT OF THE GROUNDS RAISED FOR A.Y. 05 -06 AND FURTHER SINCE THE ITA NOS. 808 & 2626/A/ 09, 309/A/2011 & 100 & 101/A/2013, 1027 & 2645/A/09 . A.Y. 2005-06,2006-07 & 2007- 08 15 FACTS AND CIRCUMSTANCES OF THE CASE ARE ALSO SIMILA R TO THAT OF A.Y. 05-06, WE THEREFORE FOR THE SIMILAR REASONS GIVEN WHILE DISPO SING THE APPEALS FOR A.Y. 05-06 HEREINABOVE ALSO DISPOSE OF THE PRESENT APPEA L AND DELETE THE PENALTY LEVIED U/S. 271(1)(C). 30. THUS BOTH THE APPEALS OF ASSESSEE ARE ALLOWED . 31. IN THE RESULT ASSESSEES APPEAL IN ITA NO. 100 & 10 1/AHD/2013 IS ALLOWED AND THE OTHER 5 APPEALS OF ASSESSEE AND REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 -02 -2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT 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