The ACIT, Circle-3, Surat V. Shri Manojbhai Kanjibhai Patel, Surat

ITA 1082/AHD/2008

• Counselvise Citation: 108220514 RSA 2008
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 26-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH SRAR
• Keywords: Unexplained cash credit; Income from undisclosed sources; Proportionate interest
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.1082 & 3658/AHD/2008 ASSESSMENT YEARS:2004-05 & 2005-06 ACIT, CIRCLE-3, SURAT / V/S . SHRI MANOJBHAI KANJIBHAI PATEL, PROP OF M/S MARUTI DEVELOPERS, 34/4/20, JIVANDEEP, SUMAN DESAI WADI, KHATODRA, SURAT PAN NO.AJSPP9070G / APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI J.P.SHAH, SR-AR / BY REVENUE SHRI VINOD TANWANI, SR-DR / DATE OF HEARING 28-03-2012 !'# /DATE OF PRONOUNCEMENT -04-2012 $ $ $ $ / // / O R D E R PER T.R.MEENA, ACCOUNTANT MEMBER:- THESE TWO APPEALS BY THE REVENUE ARE ARISING OUT O F THE TWO DIFFERENT ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)- II, SURAT IN APPEALS NO. CAS/II/501/06-07 & CAS/II/488/07-08 DATED 26-12-200 7 AND 25-08-2008. THE ASSESSMENTS WERE FRAMED BY THE ITO WARD-3(1)/ACIT, CIRCLE-3 SURAT VIDE THEIR ORDERS DATED 29-12-2006 AND 28-12-2007 U/S 14 3(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FO R THE ASSESSMENT YEARS 2004- 05 AND 2005-06. FIRST WE TAKE UP REVENUES APPEAL IN ITA NO.1082/AH D/2008. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND:- ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,89,67 ,630/- MADE BY A.O ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN THE FORM OF ADVANCES IN 47 FICTITIOUS NAMES FOUND NON GENUINE. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND SELLING OF PLOTS IN THE NAME & STYLE OF MARUTI DEVE LOPERS, A PROPRIETARY CONCERN OF THE ASSESSEE, WHO FILED ITS RETURN OF INCOME ON 01-11-2004 DECLARING TOTAL INCOME OF RS.4,60,400/-. SUBSEQUENTLY THE RETURN WA S SELECTED FOR SCRUTINY AND A NOTICE U/S. 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE ON 31-08-2005. IN RESPONSE THERETO ASSESSEE PRODUCE D BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THE ASSESSEE HAD SHOWN WORK-IN-PROGRESS OF RS.64 LAKH FOR WHICH HE HAS PRODUCED THE DETAILS WHICH HAVE BEEN VERIFIED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN FROM THE BALANCE-SHEET ANN EXED TO THE AUDIT REPORT THAT THE ASSESSEE HAS TAKEN UNSECURED LOAN FROM 12 PERSONS. THE AO ASKED TO FILE THE CONFORMATIONS FROM THE LOANEE/CREDITORS . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ACCEPTED ADVANCE FO R PURCHASE PLOT FROM 103 PERSONS AMOUNTING TO RS.6.05 CRORES AND THE ASSESSE E HAD PURCHASED LAND THROUGH DEBT RECOVERY TRIBUNAL (DRT FOR SHORT) AHME DABAD FOR A CONSIDERATION OF RS.10.05 CRORES ON 29-03-2004. THE PROPERTY IN QUESTION OF 1,70,683 SQ.MTRS. WHICH SITUATED AT VILLAGES PANDES ARA AND BHUDWAD. THE LAND WAS BELONGED TO BARODA RAYON CORPN. LTD. SURAT AND ICICI MUMBAI BRANCH WAS THE PARTY WHO HAD SOLD THE SAID PROPERTY TO THE ASSESSEE THROUGH THE DRT, AHMEDABAD. THE AO ASKED TO FILE A CONFIRMA TION NOT ONLY FOR SECURED LOAN BUT UNSECURED LOAN ALSO, WHICH WAS AT RS.1,39,95,397/- FROM CITY CO-OPERATIVE BANK LTD., SURAT AND RS. 3,55,88, 397/- FROM 12 PERSONS. THE ASSESSEE, HOWEVER, COULD NOT PRODUCE THE CONFIR MATION FROM 47 PERSONS OUT OF 103 PERSONS WHOM HAD MADE THE BOOKINGS FOR P URCHASE OF PLOT FROM THE ASSESSEE AMOUNTING TO RS.1.85 CRORES. THE ASSESSEE FINALLY ABLE TO FILE CONFIRMATION IN CASE OF 69 PERSONS OF WHOM HAD BOOK ED THE PLOT AND WITH UNSECURED DEPOSITORS AND ASSESSEE COULD NOT FURNISH THE CONFIRMATION IN CASE OF 47 PERSONS AND TOTAL UNSECURED/DEPOSITORS/BOOKIN G OF PLOTS. ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 3 4. THERE WAS A SURVEY CONDUCTED U/S. 133A AT THE BU SINESS PREMISES OF THE ASSESSEE ON 12-01-2006 AND ASSESSEE DISCLOSED O F RS.2.61 CRORES ON ACCOUNT OF ALLEGED ON-MONEY RECEIPT OF BOOKING OF T HE PLOTS WHICH WERE RE- INVESTED IN HIS PROPRIETARY BUSINESS BY WAY OF THE BOOKINGS DEPOSITS IN THE NAME OF THE DIFFERENT PARTIES BUT THIS CONTENTION O F THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY GIVING THE DETAILS REASONING AT PAGES 7 TO 11 AND THE AO ADDED RS.1,85,07,234/- ON ACCOUNT OF UNEXPLAINED CASH CRE DITS IN THE FORM OF ADVANCES IN 47 FICTITIOUS NAMES U/S. 68 R.W.S. 69 O F THE ACT. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE FIRST APPELLATE AUTHORITY. THE LD. CIT(A) VIDE ITS ORDER DATED 26-1 2-2007 DELETED THE ADDITION BY OBSERVING THAT THE ENTRY IN FICTITIOUS NAMES OF RS.1,85,07,234/- IS TO BE SOME SOURCE OF INCOME WHICH HAS NOT BEEN SHOWED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. THE LD. CIT(A) FURTHER CON CLUDED THAT THIS WAS UNEXPLAINED CASH CREDIT ON AN ADMISSION OF THE ASSE SSEE ON QUERY RAISED BY THE AO AFTER THE ASSESSEE HAD DECLARED ADDITIONAL I NCOME IN DUE COURSE OF SURVEY CONDUCTED AT ASSESSEES PREMISES ON 12-01-20 06. IN OTHER WORDS, HE HELD THAT THIS INVESTIGATION WAS MADE BY THE AO AFT ER CONDUCTING THE SURVEY AND ADMISSION MADE BY THE ASSESSEE. THE ASSESSMENT DURING THE YEAR UNDER CONSIDERATION WAS TAKEN UP BY THE AO SEVERAL MONTHS AFTER SURVEY CONDUCTED. THE ASSESSEE NEVER ADMITTED ADDITIONAL INCOME OF RS .2.61 CRORES ON SUCH INCOME EARNED DURING THE FINANCIAL YEAR 2005-06. HE ALSO REFERRED ASSESSMENT ORDER, WHERE REPLY TO QUESTION NO.23 OF THE STATEMENT REPRODUCED BY THE ASSESSING OFFICER. THE ON-MONEY C HARGED BY THE ASSESSEE AT THE TIME OF ACCEPTING ADVANCES AGAINST THE BOOKI NGS OF PLOTS WHICH HAS BEEN OBSERVED BY THE LD. CIT(A) THAT IT IS COMMON K NOWLEDGE IN THE DEPARTMENT THAT ANY DISCREPANCY FOUND DURING THE CO URSE SURVEY WOULD BE DISCLOSED IN YEAR OF SURVEY TO AVOID PAY INTEREST A ND PENALTY ON CONCEALMENT OF INCOME OF PREVIOUS YEARS ON THE BASIS OF EVIDENC E FOUND. HE HELD THAT DISCLOSURE OF RS.2.61 CRORES MADE IN A.Y. 2006-07 W AS REALLY UNDISCLOSED INCOME OF THE EARLIER YEARS. THE ASSESSEE GOT RIGHT ON THE SAID PIECE OF LAND ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 4 ON 10-06-2003 AS PER THE ORDER OF THE DRT AHMEDABAD AFTER FIRST INSTALLMENT OF RS. 2.21 CRORES WAS PAID ON 26-06-2003. EVEN THO UGH, THE FINAL PAYMENT WAS MADE ON 19-05-2004. AFTER 10-06-2003 THE ASSESS EE WAS ENTITLED TO ADVERTISE THE SALE OF PLOT CARVED OUT OF SUCH LAND AND ALSO TO DEPLOY HIS OWN SECURITY. IT IS WELL KNOWN IN THAT LINE OF BUSINESS THAT PURCHASE CONSIDERATION FOR LAND PURCHASE IS PAID OUT OF ADVANCE RECEIVED. HE CONCLUDED THAT THE ASSESSEE HAD STARTED BOOKING PLOTS IN THE FINANCIAL YEAR 2003-04 AND RECEIVED ON-MONEY FROM THEM AND INTRODUCED IN HIS BOOKS OF A CCOUNT IN FICTITIOUS NAMES. DURING THE YEAR THERE WAS NO SALE OF ANY PL OT AND IN THE NAME OF PLOT BOOKED WHATEVER ONLY RECEIVED FROM FICTITIOUS PERSO N WAS LIABILITY OF THE ASSESSEE. THIS DISCLOSURE WAS ON ACCOUNT OF SURVEY CONDUCTED U/S 133A OF THE I.T. ACT. THEREFORE, THE AO WOULD HAVE FULLY JU STIFIED IN TREATING THE SUM OF RS.1,85,07,234/- AS UNEXPLAINED CASH CREDIT EVEN WI THOUT THE ACCEPTANCE OF ASSESSEE THAT SUCH ADVANCES WERE BOGUS. BUT ONCE TH E ASSESSEE HAD MADE A DISCLOSURE OF RS.2.61 CRORES IN COURSE OF THE SUR VEY, AND CONSIDERING THE FACT THAT THERE WAS NO OTHER TRANSACTION IDENTIFIED BY THE AO OR BROUGHT ON RECORD TO SHOW THAT THE BOGUS ADVANCES WHICH REPRES ENTED THE ASSESSEES OWN UNACCOUNTED MONEY HAD BEEN EARNED FROM TRANSACT IONS OTHER THAN THOSE INVOLVING THE SALE OF PLOTS OF LAND PURCHASED FROM THE ICICI BANK THROUGH THE DRT, AND THE FACT THAT THE UNACCOUNTED INCOME OF RS .2.61 CRORES HAD NOT BEEN ADMITTED AS HAVING BEEN EARNED DURING THE YEAR OF THE SURVEY, THERE WAS EVERY JUSTIFIABLE AND REASONABLE GROUND TO LINK THE ADVANCES ADMITTED AS BOGUS DURING THE YEAR TO THE DECLARATION MADE DURIN G THE SURVEY. WHAT CANNOT ALSO BE IGNORED IS THE PRACTICE OF MAKING DISCLOSUR ES DURING THE CURRENT YEAR OF UNACCOUNTED INCOME OF EARLIER YEAS AND A PRACTICE W HICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN ALMOST ALL CASES. IN SUCH VIEW OF THE MATTER, LD. CIT(A) CAME TO THE CONCLUSION THAT THE AO WAS NOT JUSTIFIE D IN TREATING THE SUM OF RS.1,85,07,2324/- AS UNEXPLAINED CASH CREDITS IN TE RMS OF SECTION 68 OF THE ACT DURING THE YEAR UNDER CONSIDERATION LD. CIT(A) DIRECTED TO DELETE THE SAID ADDITION. ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 5 6. NOW, AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVEN UE CAME IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING BEFORE US LD. SR-DR CONTE NDED THAT THE DISCLOSURE MADE DURING THE SURVEY WAS ON ACCOUNT OF DEPOSITION MADE BY THE PURCHASER OF THE PLOT, WHEREAS THE ASSESSING OFFICE R HAD MADE ADDITION ON THE BASIS OF CASH CREDITS SHOWN IN THE BALANCE-SHEE T. THERE IS NO CO-RELATION BETWEEN THE DISCLOSURE MADE IN THE A.Y. 2006-07 AND CASH CREDITORS ENTRY REFLECTED IN THE BALANCE-SHEET AS BOTH THE PARTIES ARE NOT SAME AS WELL AS YEAR IS DIFFERENT. THE LD. DR ALSO ARGUED THAT ASSESSMEN T PROCEEDINGS FOR YEAR UNDER CONSIDERATION STARTED ON 08-08-2005 AND NOTIC ES U/S. 143(2) WAS SERVED ON 31-08-2005. AGAIN NOTICES U/S. 143(2) WAS SERVED ON ASSESSEE UPON 12- 09-2005, WHEREAS SURVEY WAS CONDUCTED ON 12-01-2006 . HE FURTHER CONTENDED THAT WHATEVER ENTRIES MADE IN THE BOOKS O F ACCOUNT ARE THE BEST EVIDENCE FOR JUDGING THE CLAIM OF THE ASSESSEE AS P ER SEC. 68 AND PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE UNDER INCOME TAX PROC EEDING. THERE IS NO PROMISE MADE BY THE SURVEY PARTY THAT DISCLOSURE OF RS.2.61 CRORE WOULD COVERED UNDISCLOSED INCOME BOOKED IN FICTITIOUS NAM E IN ASSESSMENT YEAR 2004-05 OTHERWISE ALSO PROMISSORY ESTOPPEL IS NOT A PPLICABLE IN INCOME TAX CASE AS EACH YEAR IS DIFFERENT FOR ASSESSING THE IN COME OF THE ASSESSEE. THE ONUS LIES ON THE ASSESSEE TO PROVE THE CREDITWORTHI NESS, GENUINENESS AND IDENTITY OF THE PERSONS. HE FURTHER RELIED UPON THE JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMAD HANIF V. CIT (1963) 50 ITR 1 (SC) AND ROSHAN DI HATTI V. CIT (1977) 107 ITR 938 (SC). ADVERTISEMENT MADE BY THE ASSESSEE TO COMPLETE THE LEGAL FORMALITIES OF PURCHASING THE LAND FROM DRT AHMEDABAD. HE PRAYED B EFORE THE BENCH THAT ORDER OF LD CIT(A) IS NOT JUSTIFIED BY DELETING THE ADDITION MADE BY ASSESSING OFFICER. 8. ON THE CONTRARY, LD AR CONTENDED THAT HE HAD SUB MITTED CONFIRMATIONS IN 56 PERSONS BUT NOT IN 47 PERSONS AND THE TOTAL D EPOSITS IN THE NAME OF 47 PERSONS OF RS.1,85,07,234/-. HE HAS DRAWN OUR ATTEN TION OF THE PROCEEDINGS OF ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 6 DRT AHMEDABAD DATED 20-06-2003 AT PAGES 10 TO 20 OF ASSESSEES PAPER BOOK AND REPRODUCED THE SAME FOR THE SAKE OF CLARIT Y AS UNDER:- ORDERS THE OFFER GIVEN BY M/S. MARUTI DEVELOPERS TO PURC HASE THE ABOVE DESCRIBED IMMOVABLE PROPERTY BELONGING TO THE JUDGM ENT DEBTOR COMPANY FOR AN AMOUNT OF RS.10.51 CRORES IS HEREBY ACCEPTED. AS PER CLAUSES OF THE AGREEMENT ARRIVED BETWEEN BOTH THE PARTIES, THEY AR E ALLOWED TO CARRY OUT THE JOINT SURVEY OF THE PROPERTY IN QUESTION WITHIN A P ERIOD OF 45 DAYS HEREAFTER THROUGH A MUTUALLY APPOINTED GOVT. APPROVED VALUER. THE OFFER IS ALLOWED TO PUBLISH THE ADVERTISEMENT AS REQUESTED ABOVE AND DE PLOY THEIR OWN SECURITY FOR SAFETY OF THE PROPERTY AFTER PAYMENT OF THE FIR ST INSTALLMENT. THE OFFICER IS DIRECTED TO DEPOSIT THE AMOUNT OF RS.7.80 CRORES IN FOUR INSTALLMENTS AS PER AGREEMENT AND AFTER TAKING CARE OF THE ENTIRE DUES PAYABLE TO THE SURAT MUNICIPAL CORPORATION AS WELL AS TO THE SPECIAL REC OVERY OFFICER. HOWEVER, IF THE SURAT MUNICIPAL CORPORATION ISSUES A LETTER/NO DUES CERTIFICATE TO THE C.H BANK CONFIRMING THE RECEIPT/ADJUSTMENT OF DUES AMOU NTING TO RS.1,03,33,712/- OR ANY SIMILAR AMOUNT FROM THE C.H. BANK, THE OFFIC ER SHALL PAY THE SAID AMOUNT, AT PAR, TO THE C.H. BANK, IN FOUR INSTALLME NTS ALONG WITH THE OTHER INSTALLMENTS AS DESCRIBED ABOVE. IT IS FURTHER CLAR IFIED THAT THE CONCERNED PROPERTY SHALL BE SOLD TO THE PURCHASER ON AS IS WH ERE IS BASIS. THE C.H BANK IS AUTHORIZED TO RECEIVE THE AMOUNT IN INSTALLMENTS MENTIONED ABOVE DIRECTLY AND KEEP THE SAME IN A SUNDRY A/C. TILL THE SALE IS CONFIRMED IN DUE COURSE, AFTER RECEIPT OF THE FINAL INSTALLMENT. THE INITIAL AMOUNT OF RS. 5 LACS DEPOSITED WITH THIS TRIBUNAL SHALL ALSO BE RELEASED TO THE C. H BANK IN DUE COURSE, WHICH SHALL BE ADJUSTED TOWARDS THE FINAL PAYMENT OF RS.7 .80 CRORES. IT IS FURTHER CLARIFIED THAT IN THE CASE OF ANY DEFAULT IN PAYME NT, ON PART OF THE OFFICER, THE AMOUNTS ALREADY DEPOSITED BY THEM TILL DATE OF SUCH DEFAULT, SHALL BE FORFEITED. HOWEVER, IF, UNDER ANY CIRCUMSTANCES, THE SALE IS D ECLARED VOID, THEN THE ENTIRE DEPOSITED AMOUNT SHALL BE RETURNED WITHOUT I NTEREST BY THE C.H. BANK. THE MATTER IS ADJOURNED TO 27.06.2003 FOR SUBMISSIO NS OF AFFIDAVIT BY THE C.H. BANK CONFIRMING THE RECEIPT OF THE FIRST INSTALLMEN T. SD/- (JAGDISH SWAROOP0 RECOVEY OFFICER THE LD. COUNSEL FOR THE ASSESSEE FURTHER ARGUED THA T THE DISCLOSURE MADE IN A.Y 2006-07 WAS ON ACCOUNT OF ON-MONEY RECEIVED IN A.Y. 2004-05 AND THE ASSESSEE HAD ADVERTISED THE LAND FOR INTENDED BUYER S OF THE PLOTS AFTER THE ASSESSEE PAID FIRST INSTALLMENT ON 26-06-2003. THIS IS THE FIRST LAND DEVELOPED BY THE ASSESSEE. EARLIER HE WAS EMPLOYED WITH M/S MAHAVIR TIMBER, SUMAN DESAI WADI, KHATODRA, SURAT. THE ASSESSEE HAD ADMIT TED IN HIS STATEMENT ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 7 DATED 12-01-2006 DURING THE COURSE OF SURVEY THAT D URING THE PAST ONE AND HALF YEAR HE STARTED BOOKING AND SELLING OF PLOT AN D RECEIVED ON-MONEY AGAINST THEM. THE ASSESSEE HAD TAKEN LOANS FROM FAMILY MEMB ERS AND FRIENDS AND OUTSIDER ALSO AND MADE FULL PAYMENT FOR PURCHASE OF LAND TO DRT AHMEDABAD. DURING THE SAME PERIOD HE COMPLETED THE SALE OF PLO TS AGAINST WHICH HE HAD RECEIVED SALE CONSIDERATION/BOOKING DEPOSIT. IN REP LY TO QUESTION NO.16 OF STATEMENT DATED 12-01-06 HE HAD ADMITTED THAT THERE IS NO IMMOVABLE PROPERTY IN HIS NAME. THE LD. COUNSEL FOR THE ASSE SSEE HAS DRAWN OUR ATTENTION OF STATEMENT DATED 12-01-06. RELEVANT PA RT OF STATEMENT IS REPRODUCED AS UNDER:- ANSWER NO.23: AFTER LOOKING AT THE STATEMENTS SH OWN BY YOU AND AFTER DUE CONSIDERATION, I STATE THAT WE HAVE CHARG ED ON-MONEY WITHIN THE RANGE OF RS.30,000/- TO RS.50,000/- PER PLOT ON SAL E OF PLOTS. PLEASE NOTE THAT SUCH ON-MONEYS HAVE NOT BEEN COLLECTED ON ALL THE P ILOTS BUT THEY HAVE BEEN COLLECTED FROM SOME OF THE PARTIES. WE HAVE NOT CO LLECTED ON-MONEY FROM SOME OF THE PARTIES. THE ON-MONEYS HAVE NOT BEEN S HOWN IN MY ACCOUNTING STATEMENTS. THESE ON-MONEYS HAVE NOT BEEN SHOWN IN MY BOOKS OF ACCOUNTS. THIS ON-MONEY WE HAVE SHOWN BY WAY OF BO OKING ADVANCE ON DIFFERENT APPROXIMATELY AROUND 200 PLOTS IN THE NAM ES OF DIFFERENT PARTIES. THE TOTAL OF SUCH INVESTMENT IS RS.2,61,00,000/- (SAY R UPEES TWO CRORES AND SIXTY ONE LACS ONLY). THIS I HAVE ADMITTED AS ADDI TIONAL INCOME OF M/S MARUTI DEVELOPERS OF CURRENT FINANCIAL YEAR. THIS IS MY C URRENT FINANCIAL YEARS ADDITIONAL INCOME. I HAVE CONSIDERED ALL THE ACCOU NTING PAPERS FOUND DURING SURVEY TO-DAY AND ON THE BASIS OF THOSE PAPERS, I C ONSIDER THE ABOVE SUM AS MY INCOME. THIS ADDITIONAL INCOME I HAVE INVESTED IN MY PROPRIETARY BUSINESS IN THE NAMES OF DIFFERENT PARTIES BY WAY OF BOOKING OF APPROXIMATELY AROUND 200 PLOTS WHICH ARE KEPT AS STOCK-IN-TRADE OF MY BU SINESS. I DISCLOSE THIS INCOME AS ADDITIONAL INCOME OF CURRENT FINANCIAL YE AR 2005-06K AND I WILL PAY THE DUE TAX THEREON BEFORE MARCH. ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 8 THUS, YOUR GOODSELF WILL FIND THAT WHILE ADMITTIN G THE SAID SUM OF RS.2,61,00,000/- I HAD SUBMITTED BEFORE YOUR GOODSE LF THAT THE ON-MONEYS RECEIVED ON BOOKING OF PLOTS HAVE BEEN REINVESTED I N MY PROPRIETARY BUSINESS BY WAY OF BOOKING DEPOSITS IN THE NAMES OF DIFFEREN T PARTIES. KINDLY NOTE THAT THE ABOVE ARE THE PARTIES IN WHO SE NAMES I HAVE REINVESTED THE ON-MONEYS RECEIVED BY ME AS STATED A BOVE WHICH TOTALED TO RS.1,85,07,234/- DURING THE FINANCIAL YEAR 2003-04. PLEASE NOTE THAT UNDER THE CIRCUMSTANCES I HAVE N OT BEEN ABLE TO SUBMIT THE CONFIRMATIONS FROM THE ABOVE PARTIES. 9. WE HAVE PERUSED THE ASSESSMENT ORDER, APPEAL OR DER AND SUBMISSION AND ARGUMENT OF BOTH THE PARTIES. IT AP PEARS THAT THE ASSESSEE HAD DISCLOSED RS.2.61 CRORE ON ACCOUNT OF ON-MONEY RECEIVED ON BOOKING OF THE PLOT. THERE WAS NO INDISCRIMINATING EVIDENCE W ERE FOUND DURING THE COURSE OF SURVEY AND ALSO THE A.O. HAD NOT BROUGHT ON RECORD ANY MATERIAL FOR ADMISSION OF ADDITIONAL INCOME OF RS.2.61 CRORE. O N VERIFICATION OF THE BALANCE-SHEET SUBMITTED BEFORE THE A.O. IT IS FOUND THAT THE ASSESSEE HAS SHOWN CURRENT LIABILITY AT RS.6.5 CRORE WHICH INCLU DES CREDITORS FOR BOOKING IN BALANCE-SHEET OF ASSESSMENT YEAR 2004-05 AND THE WO RK IN PROGRESS AT RS.64 LAKHS. THE ASSESSEE HAS SHOWN CURRENT LIABILITY IN ASSESSMENT YEAR 2005-06 AT RS.6.36 CRORE WHICH INCLUDES CREDITOR FOR BOOKIN G AND THE WORK IN PROGRESS HAS INCREASED FROM RS.64 LAKHS TO RS.121 LAKHS. IN ASSESSMENT YEAR 2006-07 NO CURRENT LIABILITY HAS BEEN SHOWN BY THE ASSESSEE BUT THE ASSESSEE HAS SHOWN OPERATING INCOME OF RS.36.81 LAKHS AND INCOME DISCLOSED U/S 133A AT RS.2.61 CRORE. THE LIABILITY SHOWN IN ASSESSMENT Y EAR 2005-06 TO THE TUNE OF RS.6.36 CRORE HAS BEEN REDUCED FULLY IN ASSESSMENT YEAR 2006-07. IT IS REVEALED FROM THE BALANCE-SHEET THAT ASSESSEE HAD R ECEIVED ON-MONEY IN ASSESSMENT YEAR 2004-05 AS WELL AS IN ASSESSMENT YE AR 2005-06 WHEREAS THE DISCLOSURE MADE BY THE ASSESSEE IN ASSESSMENT Y EAR 2006-07. THERE IS A DIRECT NEXUS BETWEEN DISCLOSURE AND CASH CREDITORS SHOWN IN ASSESSMENT YEAR 2004-05. THE A.O. IS DIRECTED TO VERIFY THE F ACT WITH REFERENCE TO DISCLOSURE MADE IN ASSESSMENT YEAR 2006-07 AT RS.2. 61 CRORE AND CASH ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 9 CREDITORS OF RS.1,89,67,630/- IN ASSESSMENT YEAR 20 04-05 AND RS.28,97,420/- IN ASSESSMENT YEAR 2005-06. ACCORDINGLY, THE MATTER IS SET-ASIDE TO THE A.O. TO GIVE REASONABLE OPPORTUNITY TO THE ASSESSEE TO R E-CONSIDER THE MATTER. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE WITH THE A. O. AND GIVE FULL SUPPORT AND SUBMIT REQUIRED EVIDENCE AT THE TIME OF HEARING. T HE GROUND IS SET ASIDE. I.T.A. NO.3658/A/08, ASSESSMENT YEAR 2005-06 10 THE GROUNDS OF APPEAL ARE AS UNDER:- (1) ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A)-1, SURAT HAS ERRED IN HOLDING THAT THE BOOKING AMOUNT OF RS.28,97,420/- RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION I.E. DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR 200 5-06 WHICH IS CREDITED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS IN THE NAMES OF FIVE FICTITIOUS PERSONS AS BOOKING ADVANCE FOR THE PURCHASE OF PLOT IS INCL UDED IN THE AMOUNT OF UNDISCLOSED INCOME ADMITTED BY THE ASSESSEE OF RS.2 .61 CRORES DURING THE COURSE OF SURVEY PROCEEDING U/S 133A OF THE ACT AS HIS INCOME OVER AND ABOVE THE REGULAR INCOME FOR THE ACCOUNTING YEAR RE LEVANT TO THE ASSESSMENT YEAR 2006-07. (2) ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-1, SURAT HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS.28,97,420/- ON ACCOUNT OF CREDITS IN HIS BOOKS O F ACCOUNTS AS BOOKING ADVANCE IN THE NAMES OF FIVE FICTITIOUS PERSONS. (3) ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-1, SURAT HAS ERRED IN DELETING THE DISALLOWA NCE OF RS.2,73,000/- MADE BY THE A.O. ON ACCOUNT OF UTILIZATION OF INTEREST BEARING FUNDS IN ADVANCING INTEREST FREE LOANS. 11. GROUND NO.1 AND 2 ARE FOR ADDITION OF RS.28,97 ,420/- U/S 68 OF THE I.T. ACT. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN PRECEDING PARAS FOR ASSESSMENT YEAR 2004-05. THE FACTS ARE SAME DURING THE ASSESSMENT YEAR 2005-06 TOTAL ADDITION U/S 68 OF THE I.T. ACT WAS M ADE AT RS.28,97,420/-. OUR OBSERVATION ON THIS ISSUE IS ALSO SAME AND ACCORDIN GLY, THIS YEAR ALSO THE MATTER IS SET ASIDE TO THE A.O. ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 10 12. GROUND NO.3 IS AGAINST ADDITION OF RS.2,73,000 /- ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST. THE A.O. OBSERVED THAT ASSESSEE HAD ADVANCED RS.25 LAKHS TO M/S UMA CORPORATION AND NAVYUG VIDYA BHAWAN TRUST WHEREAS ASSESSEE HAD PAID INTEREST OF RS.23,20,641/- TO CITY CO-OPERATIVE BANK LTD. AND R S.16,93,568/- TO UNSECURED LOAN HOLDERS. THE ASSESSEE CLAIMED BEFOR E THE A.O. THAT HE HAD INTEREST FREE BEARING FUND RECEIVED ON BOOKING BUT THE A.O. WAS NOT CONVINCED WITH THE SUBMISSION OF ASSESSEE. THUS HE DISALLOWED INTEREST OF RS.2,73,000/- BEING INTEREST PAID ON IN TEREST BEARING FUNDS DIVERTED AS INTEREST FREE ADVANCES. BEING AGGRIEVED BY THE ORDER OF THE A.O. HE FILED SECOND APPEAL BEFORE THE CIT (A). TH E CIT (A) ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD INTEREST FREE FUND OF RS.4.82 CRORE AND INCOME DISCLOSED DURING THE YEAR AT RS.28.97 LAKHS. 13. BEFORE US THE LD. D.R. CONTENDED THAT THE CIT (A) WAS NOT JUSTIFIED TO ALLOW THE APPEAL IN FAVOUR OF THE ASSESSEE AS THE ASSESSEE WAS NOT HAVING ANY INTEREST FREE FUND WITH HIM. HE RELIED UPON THE FINDINGS OF THE A.O. THE LD. A.R. FOR THE ASSESSEE CONTENDED THAT HE HAD INTEREST FREE LOANS GIVEN OUT OF IT. T HE A.O. HAS NOT ESTABLISHED THE NEXUS BETWEEN BEARING OF INTEREST B EARING FUND TO ADVANCING INTEREST FREE LOANS. HE RELIED UPON THE ORDER OF THE CIT (A) AND REQUESTED TO CONFIRM THE ORDER OF CIT (A) 14. WE HAVE PERUSED THE ASSESSMENT ORDER, ORDER OF THE CIT (A) AND HEARD THE ARGUMENT OF THE BOTH SIDES. THE ASSESSEE HAD DEPOSITS OF RS.4.82 CRORE DURING THE YEAR FROM WHIC H THE ASSESSEE HAD ADVANCED INTEREST FREE LOAN. THERE IS NO DIVERSION OF INTEREST BEARING FUND TO INTEREST FREE LOANS. ACCORDINGLY, THE CIT (A) ORDER IS CONFIRMED. THE REVENUE APPEAL IS DISMISSED ON THIS ISSUE. 15. IN THE RESULT, THE REVENUE APPEAL IS SET ASIDE FOR GROUND NO.1 OF I.T.A. NO.1082/A/08 FOR ASSESSMENT Y EAR 2004-05 ITA NO.1082 & 3658/AHD/2008 A.YS. 04-05 & 05-06 ACIT CIR-3 SRT V. SH MANOJBHAI K PATEL PAGE 11 AND ON GROUND NO.1 AND 2 OF I.T.A. NO.3658/AHD/2008 IS SET ASIDE AND ON GROUND NO.3 REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 -04 -2012 SD/- SD/- (MUKUL KUMAR SHAWART) (T. R. MEENA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) %&'- 13 /04/2012 ) * DKP/NKC $ $ $ $ ++, ++, ++, ++, -,' -,' -,' -,' / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. &&+2 3 / CONCERNED CIT 4. 3- / CIT (A) 5. ,67 +++2, +2#, ) / DR, ITAT, AHMEDABAD 6. 7:; <= / GUARD FILE. BY ORDER/ $ , >/) & +2#, ) *