M/s. Vaidya Realities, Rajkot V. The Pr. CIT-1, Rajkot, Rajkot

ITA 113/RJT/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 9102 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-01-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 12-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRISHRAMDEEPSINHA
• Assessee Lawyers: SHRISAGARSHAH

Judgement Text

आयकरअपीलीयअधिकरण , राजकोटनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, RAJKOTBENCH,RAJKOT (ConductedthroughVirtualCourt) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRISIDDHARTHANAUTIYAL,JUDICIALMEMBER आयकरअपीलसं ./ITANo.113/Rjt/2022 धििाधरणणवध / Asstt.Year:2017-2018 M/sVaidyaRealities, 1-AVidyutNagarSociety, “Vandematram”, Opp.Rajkot-1AstronShopping Centre, Rajkot-360001. PAN:AAIFV8723D Vs.ThePrincipalCommissioner ofIncomeTax, Rajkot-1, (Applicant)(Respondent) Assesseeby:ShriSagarShah,AR Revenueby:ShriShramdeepSinha,CIT.DR सुिणाईकीतारीख /DateofHearing:02/01/2024 घोवणाकीतारीख/DateofPronouncement:19/01/2024 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: Thecaptionedappealhasbeenfiledattheinstanceoftheassesseeagainst theorderofthePrincipalCommissionerofIncomeTax,Rajkot-1,arisinginthe matteroforderpassedunderSection263oftheIncomeTaxAct,1961(here-in- afterreferredtoas"theAct")relevanttotheAssessmentYear2017-18. 2.TheonlygrievanceraisedbytheassesseeisthattheLd.PCITerredin holdingtheassessmentframedu/s143(3)oftheAct,aserroneousinsofar prejudicialtotheinterestofrevenue. ITANo.113/Rjt/2022 A.Y.2017-18 2 3.Thenecessaryfactsarethattheassesseeinthepresentcaseisa partnershipfirmandengagedintheRealestatebusiness/residentialhousing project.Therewasasurveyoperationatthebusinesspremisesoftheassessee u/s133AoftheActdated25/10/2016.Theassesseebasedontheseized documentsimpoundduringthesurveyoperationadmittedhavingreceivedon- moneyinitsrealestateproject.Accordingly,theassesseeagreedtosurrender unexplainedincomeamountingtoRs.1,77,66,000/-whichwasdulyofferedin theincometaxreturnundertheheadbusinessandprofessionandthesamewas acceptedbytheAOintheassessmentframedu/s143(3)oftheAct,videorder dated19/12/2019. 4.Subsequently,theLd.PCITonverificationoftheassessmentrecordsfound thattheincomeofferedbytheassesseeisrepresentingon-moneyreceivedwhich shouldhavebeentaxedundertheprovisionsofsection69oftheAct,and accordinglythesameshouldhavebeenbroughttotaxatthespecialratespecified u/s115BBEoftheActandthattoowithoutallowinganydeductionagainstsuch income.However,theassesseeagainstsuchincomehasclaimeddeductionon accountofremunerationandinterestpaidtothepartnersamountingtoRs. 1,16,58,398/-and16,27,064/-respectively.Thus,theLd.PCITheldthatthe assessmenthasbeenframedu/s143(3)oftheActwithoutverificationwith respecttoundisclosedincomeofferedbytheassesseeforRs.1,77,66,000/-in pursuancetotheprovisionsofsection69r.w.s.115BBEoftheActwhichis erroneousandcausingprejudicetotheinterestofrevenue. 5.BeingaggrievedbytheorderofthelearnedPCIT,theassesseeisinappeal beforeus. 5.1ThelearnedARbeforeusfiledapaperbookrunningfrompages1to156 andcontendedthattheassessmenthasbeenframedbytheAOafterraisingthe queryinthenoticeissuedu/s142(1)oftheActwithrespecttotheincomeoffered duringsurveyoperation.TheLd.ARfurthersubmittedthequeryraisedbytheAO ITANo.113/Rjt/2022 A.Y.2017-18 3 wasdulyansweredbytheassesseevideletterdated14/11/2019.TheLd.ARin supportofhiscontentiondrewourattentiononpages32to48ofthepaperbook wherethequestionraisedbytheAOandrepliesmadebytheassesseewere placed. 5.2Besidestheabove,theLd.ARfurthercontendedthatnoneofthe authoritiesbelowhasdoubtedthattheincomesurrenderedinthesurveywasnot representingtheon-moneyreceivedinrelationtotherealestateprojectcarried outbytheassesseeandthereforethesamewasacceptedasbusinessincomeof theassessee.Oncetheassesseehasestablishedthattheincomeindisputedoes notfallunderthedeemingprovisionu/s69oftheAct,thequestionofcharging thesameatthespecialratedoesnotarise. 5.3Ontheotherhand,theLd.DRvideletterdated16-01-2024submittedas under: 2.KindattentionofHon'bleITATwasinvitedtotheprovisionsofsection69oftheActand provisionsofsection115BBEoftheITAct.Itwasemphasizedthattheprovisionu/s69 speaksof'Investmentsnotrecordedinthebooksofaccountmaintainedbyassesseefrom anysourceofincome.Further,thesectionstatesthat'thevalueoftheInvestmentsmay bedeemedtobetheincomeoftheassesseeofsuchfinancialyear.Theseprovisionsare tobesimultaneouslyreadwithS.115BBE(2)whichbeginswithaNon-obstanteclauseand statesthat"noexpenseispermissiblefromdeemedincome."Thehighlightedportionsin theprovisionwereemphasizedtosuggestthefollowing: (i)Thatevenif,theinvestmentisoutofunrecordedbusinessIncome,theentirevalueof investmentistobetreatedasdeemedIncome.Whenthisisreadalongwithprovisionsof 115BBE(2),itcanbesaidthatnoexpenseispermissiblefromsuchvalueofinvestment deemedtobeundisclosedIncomeoftheassessee.Thus,assessmentorderwasbadinlaw inpermittingexpensefromdeemedincomeinthehandsoftheassessee. (ii)Thus,itwashumblysubmittedthatbasedonabovesubmission,thedecisioninITANo. 92/RJT/2020para5.2is"amistakeoflaw"becauseLd.ITAThasnotconsideredthe impactofsection115BBE(2)readalongwithsection69.Tosuchextentthemainreliance bytheappellantonITANo.92/RJT/2020duringthehearingofthecaseismisplaced.Itis simultaneouslysubmittedthatthedoctrinesof'per-incurium'and'sub-silentioare explanationstotheruleof'staredecisis',Ifadecisionhasbeengiveninignoranceoflaw oranystatuteoranybindingauthority,thedoctrineof'per-incurium'isattracted(Stateof UPVsSyntheticsandChemicalsLtd.(1991)4SCC139)ruleof'sub-silentio'isapplicable whereaparticularpointoflawisnotperceivedbytheCourtorwasnotpresenttoitsmind orisnotconsciouslydeterminedbytheCourt[ArnithDasVsStateofBihar,AIR2000SC 2264,para21] ITANo.113/Rjt/2022 A.Y.2017-18 4 (iii)Simultaneously,thedeemedincomeistaxedatspecialratesunder115BBE(1).Non- subjectingtheundisclosedbusiness-incomeofferedinlieuofunaccountedandunexplained investmentinproperty,isanothermistakeoflawintheassessmentorder. 3.AsperthefactsofthecaseduringthecourseofSurveyu/s133A,ascanbeseenfrom page4andpage5ofthestatementofMr.ShirishNVaidya(page41and42ofpaper booksubmitteddated12thAugust,2023),atotalamountofRs.3crores,includingRs. 1.7766crorespertainingtoM/sVaidyaRealitiesforAY2016-17wasadmittedas "UndisclosedIncome"ofthefirm.Initsstatementonpage4(page41ofpaperbook)Mr. ShirishN.Vaidyahasspecificallyadmittedasfollows: (a)Thatinthe"NavinNagarProject"ofVaidyaRealities,betweenApril,2016toJune, 2016,theassesseehasreceived"ownmoney"-whichistheamountoverandabovethe registeredvalueofresidentialhousessold. (b)DuringthistimefromNavinNagarProject,cashofRs.1,77,66,000/-hasbeenreceived asownmoney. (c)Iamdisclosingsuchcashreceipts/ownmoneyas"undisclosedbusinessIncome"ofM/s VaidyaRealitlesforthecurrentyear. (d)IhaveconsultedallpartnersofVaidyaRealitieswhiledeterminingsuchamount. (e)Thisamount(Rs.1,77,66,000/-)isoverandabovetheregularIncomeofmyfirm (VaidyaRealities). [OtherdisclosuresandstatementsdonotpertaintoVaidyaRealitiesandhencearenot reproduced.] 4.Thereafter,inhisbooksofaccountstheappellanthasincludedRs.1,77,66,000/-as IncomedisclosedduringSurveywhichcanbeseenonpage26ofthepaperbook. However,thetotaltaxableincomedeclaredbytheassesseeisonlyRs.76,22,270/-.Inthe assessmentorder,theAOhasacceptedthereturnedincomeatRs.76,22,270/-;andhas alsonottaxedthesameasperratesspecifiedunderS115BBE(1)oftheITAct. 5.Intheorderu/s263,Ld.PCIThasraisedthefollowingissues: (1)Despiteasubstantialfallinthegrossprofitandnetprofit,theassessmentorderis silentandrecordsdonotshowanyinquiryoranysatisfactoryexplanationgivenbythe assesseeontheissue. (ii)TheUnexplainedInvestmentofRs0.1,77,66,000/-beingunaccountediscovered underdeemedincome.Onsuchunaccountedincome,theassesseehaddebited remunerationpaidtopartnersandinterestpaidtopartners.Thus,provisionsof115BBE r.w.s.69oftheActstandviolated.Theassessmentorderdoesnotconsiderthese provisionsoflaw. (iii)AnamountofRs.1,30,15,424/-shouldalsohavebeenshownasnetprofitexcluding disclosuresmadeduringtheSurvey(pleaseseepara3to11oforderu/s263). (iv)Afterexaminingthesubmissionsoftheassesseeduring263proceedings,Ld.PCIThas concludedthattheAOhasnotmadeanyconsciousattempttoexaminetheissueonthe basisofthematerialonrecord.Also,thattheAOdidnotconductanysuchinquiriesor verificationasoutlinedabove(para3to10oforderu/s263)andsimplyacceptedthe assessee'ssubmission.Basedontheabove,Ld.PCIThasconsideredthattheassessment orderiserroneousaswellasprejudicialtotheinterestoftheRevenue.Hehasdirectedto ITANo.113/Rjt/2022 A.Y.2017-18 5 makefreshassessmentkeepinginviewtheobservationsofPCIT,afterconducting necessaryverificationsandInquiriesandafterprovidingproperopportunityofbeingheard. 6.Duringthecourseofhearing,theundersignedalsoexplainedthattheamountof UndisclosedInvestment,acceptedasincomeintheformofadditionalmoneyreceived fromsaleofresidentialhouses,whichtheassesseehastermed'ownmoney','amountover andabovetheregisteredvalueofproperty','amountsinadditiontotheregularincomeof thefirmduringthecurrentyear',arevalueofundisclosedInvestment/valueofresidential housesoverandabovetheregisteredvalue.Thus,thesourceofsuchinvestmentisnot recordedinthebooksoftheassessee,and,suchInvestmentwasonlyfoundwhenthe Surveyu/s133Awasconducted,andcash-receiptdocumentswerefoundandconfronted totheassessee.BasedonthedocumentsandfindingsoftheSearch,theassesseehas acceptedunrecordedinvestmentsinproperty,overandabovethevalueofpropertyshown inRegisteredsaledeedforwhichhehasreceivedownmoney/additionalmoneyfromhis customers. 7.Ld.ITATwasrequestedthattheAssessingOfficerhasfailedtoconjointlyreadthe provisionsofsection69withsection115BBE(2)andhaspermittedexpensesinthehands oftheassesseeagainsttheprovisionsofITAct.Further,hehasfailedtonoticeand inquirethereasonsforfallingrossprofit,andthus,thiscasesquarelyfallswithinthe definitionoferroneousinthecontextofdecisionofHon'bleAhmedabadITATinthecase ofBabulalS.SolankiVsITO,ITA-3493/AHD/2016whichisalsorelieduponby Revenue. 8.Itisrequestedtoupholdorderu/s263oftheITAct. 6.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe assessmentframedu/s143hasbeenheldaserroneousinsofarprejudicialtothe interestofrevenueforthereasonthattheincomesurrenderedduringsurvey operationforRs.1,77,66,000/-wasnotverifiedinpursuancetotheprovisionof section69r.w.s.115BBEoftheAct.Thecontroversyariseswhethertherewasany inquiryconductedbytheAOduringtheassessmentproceedingquatheincome offeredbytheassesseeduringthesurveyoperation.Inthisregard,wefindthat therelevantquerieswereraisedbytheAOinthenoticeissuedu/s142(1)ofthe Act,dated10/10/2019whicharereproducedasunder: ComparisonofGP/NPforlastthreeyears. Detailsofotherincomewithsupportingdocuments. Valuationofclosingstock. Detailsofincomeofferedfortaxationu/s.133A. Pleaseexplainthedetailsofnotingappearingonthepapersimpoundedduringthecourse ofsurveycarriedoutatyourbusinesspremisesu/s.133A25.10.2016. ITANo.113/Rjt/2022 A.Y.2017-18 6 6.1Theabovequeriesweredulyansweredbytheassesseevideletterdated 14/11/2019,whichisplacedonpages36to37ofthepaperbook.Therelevant extractofthesameisreproducedasunder: SpecificInformation: PointNo.6 Sir,weareengagedinthebusinessofconstructingaswellasexcecutingworkon constructionsiteofclientaswellasofourownandthus,wearenotdealingwiththe tradedgoodsandthereisnoconceptofGrossProfit.However,thenetbusinessprofit offeredascomparedtotunnoveristabulatedhereinbelow: ParticularsF.Y2016-17F.Y2015-16F.Y2014-15 Sales(inRs.)2,98,82,30066,00,7001,77,01,100 NetProfit(inRs.)76,22,2656,34,29217,78,159 Pointno.7 Sir,thedetailsofotherincomearedulyevidentfromthescheduleP5ofauditedaccounts alreadyplacedonrecords.Thesummaryofthesameistabulatedhereinbelow: Sr.No.ParticularsAmount(in Rs.) Remarks,if any 1.Incomedisclosed duringsurveyin October,2017 1,77,99,000Ledgeraccount enclosedatpg1 2.InterestIncome77,340Ledgeraccount enclosedatpage2 *Copyofstatementrecordedduringthecourseofsurveyproceedingsenclosedatpg3to 8 PointNo.8. Sir,Kindlynotethatthereisnochangeinthemethodofvaluationofclosigstockandthe methodofvaluationoftheclosingstockindulyreportedatclauseno.14(a)ofForm no.3CDalreadyplacedonrecords. Pointno.9 Theincomedisclosedduringthecourseofsurveyproceedingsisdulydisclosedasbusiness incomeintheReturnofIncomefiledfortheyearconsiderationandisincludedinother incomeinauditedbooksofaccounts. Pointno.10 Sir,thesedetailsaredulydisclosedinthestatementrecordedundersection131duringthe courseofsurveyproceedingsandthesameisenclosedherewithatpg3to8 6.2Onperusaloftheabovedetails,itistranspiredthattherewasapplication ofmindbytheAOduringtheassessmentproceedings.Accordingly,itcannotbe saidthattheassessmenthasbeenframedbytheAOwithoutconductinginquiries. Assuch,weholdthattheAOframedtheassessmentafternecessaryinquiries withrespecttotheincomesurrenderedbytheassesseeduringthesurvey operationconductedu/s133AoftheAct. ITANo.113/Rjt/2022 A.Y.2017-18 7 6.3Besidestheabove,wealsonotethattheassesseeinthestatement recordedduringthesurveyoperationhasalsoacceptedthatithasreceivedon- moneyforitsrealestateproject.Thesurveystatementisplaceonpage1to5of thepaperbook.Likewise,theAOintheassessmentframedu/s143(3)oftheAct, hasalsoobservedasunder: Duringthesurveyproceedingcertainloosepapersanddiaryetcwerefoundand impounded.Theimpoundedmaterialwereconfrontedduringthestatementrecordedon oathofoneofthepartnerShShirishBhaiVaidyaandhehasacceptedthattheyreceived onmoneyreceiptinhisresidentialprojectalmost25%ofthetotalvalueoftheresidential unit. 6.4AconjointreadingrevealsthattherewasdueapplicationofmindbytheAO duringtheassessmentproceedingsandthereforeassessmentcannotbeheldas erroneousinsofarprejudicialtotheinterestofrevenueonaccountofnon- verification. 6.5Withoutprejudicetotheabove,wenotethattheLd.PCITinhisorderhas referredtheexplanation2tosection263oftheAct,inholdingthatthenecessary inquirieswerenotcarriedoutbytheAOduringtheassessmentproceedings. However,wefindthattheLd.PCITinthenoticeissuedu/s263oftheActhas nowheremadeanyreferencetotheexplanation2tosection263oftheAct,and thereforeweholdthattheLd.PCITerredinholdingassessmentorderas erroneousandprejudicialtotheinterestofRevenueafterreferringtothe explanation2ofsection263oftheAct. 6.6WefurthernotethattheITATChandigarhinthecaseofShriParmodSingla v.ACITreportedin154taxmann.com347oftheActhasobservedasunder: 15.Intheinstantcase,forthedeemingprovisionsofsection69tobeattracted,therehas tobeafindingthattheassesseehasmadeinvestmentsduringthefinancialyearinthe stockandbywayofadvances,suchinvestmentsarenotrecordedinthebooksofaccount somaintainedbytheassessee,andtheassesseeoffersnoexplanationaboutthenature andsourceoftheinvestmentsortheexplanationsoofferedisnotfoundsatisfactoryinthe opinionoftheAO.Similarly,forthedeemingprovisionsofsection69Atobeattracted, therehastobeafindingthattheassesseewasfoundtobeownerofcashsofoundatthe timesurvey,suchcashhasnotbeenrecordedinthebooksofaccountsomaintainedby theassessee,andtheassesseeoffersnoexplanationaboutthenatureandsourceofthe cashortheexplanationsoofferedisnotfoundsatisfactoryintheopinionoftheAO. ITANo.113/Rjt/2022 A.Y.2017-18 8 6.7Fromtheabove,itistranspiredthattotaxanyitemofincome/expenditure, unaccountedinvestmentatthespecificrater.w.s.115BBEoftheAct,itis necessarytoclassifytheincomeundertheheaddeemingprovisionundersection 69,68,69Betc.Inthepresentcase,theincomesurrenderedwastobeclassified u/s69oftheAct.AsperthedirectionoftheLd.PCIT,however,wefindthatthe Ld.PCIThasnowherepointedoutanycontraventionthattheincomesurrendered bytheassesseefallswithintheprovisionofsection69oftheAct.Assuch,the assesseeinthepresentcasewasabletojustifythesourceofincomesurrendered duringsurveyoperationandthereforeweareoftheviewthatthesamecannotbe treatedasdeemedincomeu/s69oftheAct.Oncetheincomegoesoutofthe previewofthedeemingprovision,theprovisionofsection115BBEoftheAct, cannotbeapplied. 6.8Fromtheabove,wenotethattheAOhastakenoneoftheimpossibleview bytreatingtheincomeofferedduringsurveyoperationasincomeunderthehead businessandprofession.TheLd.PCITcannotsubstitutetheviewtakenbytheAO asperhisunderstandingoffactsofthecase.Inviewoftheabove,andafter consideringthefactsintotality,weholdthattheorderpassedu/s263oftheAct isnotsustainable.Accordingly,wequashthesame.Hence,thegroundofappeal oftheassesseeisherebyallowed. 7.Intheresult,theappealfiledbytheassesseeisherebyallowed. OrderpronouncedintheCourton19/01/2024atAhmedabad. Sd/-Sd/- (SIDDHARTHANAUTIYAL)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated19/01/2024 Manish,Sr.PSTRUECOPY