M/s. Lotus Enterprise, Vadodara V. DCIT, Central Circle-1, Vadodara

ITA 1161/AHD/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0818 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 06-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 148; 132; 143(3); 139(1); 48; 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Ms. Madhumita Roy, Judicial Member M/s. Lotus Enterprise Groun ds Floo r, 1 & 2, Blue Bell Co mple x, Atma Jyo ti Ashram Roa d, Vadodara PAN No: AAEFL 21 45H (Appellant) Vs The DCIT, Central Circle-1, Vadodara (Resp ondent) Ap p ell an t b y : S h ri S . N. S o p ar kar , S r . Ad vo c ate. R e sp ond e nt b y : S hr i V i dh yu t Tr i ved i, S r. D.R. & S h ri Al o k K u mar , CI T/ DR Date of hearing : 29-06 -2 022 Date of pronouncement : 31-08 -2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeals relate to the same Assessee , pertaining to Assessment Years (A.Y) 2012-13 to 2014-15 and are against the consolidated order passed by the Commissioner of Income Tax (Appeals)- 12, Ahmedabad, (in short referred to as CIT(A)), dated 28-02-2018, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) for the said years . ITA Nos: 1160 to 1162/Ahd/2018 Assessment Years: 2012-13 to 2014-15 I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 2 2. It was common ground that the issue involved in all the appeals was identical arising from common set of facts. All the appeals were therefore taken up together for hearing and are being disposed of by way of this common consolidated order for the sake of convenience. 2. 1. The solitary issue involved in all the appeals, it was stated, related to addition made to the income of the assessee on account of alleged on- money received by it in the business of real estate development carried out. It was contended by the ld. Counsel for the assessee that in all the three years involved the addition was based on a common premise and his arguments therefore were to be considered with respect to all the three years involved. 3. Briefly referring to the facts of the case ld. Counsel for the assessee pointed out that a search operation was carried out in the Bafna Panchal Group of cases on the 7/01/2014 and survey was carried out in the case of the assessee on the very same date. On the basis of documents/loose papers found during the course of search/survey, notice u/s. 148 of the Act was issued for two assessment years i.e. A.Y. 2012-13 & 2013-14. In response to the same, return of income was filed by the assessee for the said years and for A.Y. 2014-15 regular return of income u/s 139(1) of the Act was filed. That thereafter assessment was framed making addition on account of on- money received by the assessee treating it as its undisclosed sales. Ld.Counsel for the assessee stated that the addition was based primarily on the statement recorded during survey u/s. 131(1A) of Mr. Devji Sorathia ,who it was alleged by the department had purchased four shops I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 3 from the assessee (207 to 211) and had stated to have purchased the shops @ 2400 sq. Ft., whereas the average rate as per the books of accounts was noted to be Rs.1600 per sq. ft by the Assessing Officer( AO). Ld. Counsel for the assessee pointed out that the A.O accordingly held that the difference in rate was the on-money received by the assessee and accordingly applying the differential rate of Rs.800 per sq. ft. to all the properties agreed to be sold by the assessee during all the impugned three years, he worked out the undisclosed sales for each year as Rs. 79,52,935/- , 87,88,960/- and Rs. 1,65,01,590/- for A.Y. 12-13 , 13-14 and 2014-15, respectively. The working/calculation of the undisclosed sales for each year was pointed out to us from page 10 of the assessment order as under: Office/shop no. Area sq. ft SALE DEED VALUE Avg selling rate FYof booking Difference <§> Rs.800/- per sq. ft Difference from the maximum rate charged in a year I Working of on-money receipts A B c D=C/B E F H 1 = H * B 212 295 320000 1085 2011-12 236000 773 228035 212 295 320000 1085 2011-12 236000 773 228035 308 395 490000 1241 2011-12 316000 617 243715 1 635 955500 1505 2011-12 508000 353 224155 6 635 825000 1299 2011-12 508000 559 354965 105 600 630000 1050 2011-12 480000 808 484800 214 295 320000 1085 2011-12 236000 773 228035 303 LIME 640000 1620 2011-12 316000 238 94010 8 635 1180000 1858 2011-12 508000 0 0 305 395 500000 1266 2011-12 316000 592 233840 306 395 500000 1266 2011-12 316000 592 233840 301-302 915 1000000 1093 2011-12 732000 765 699975 309-310 570 620000 1088 2011-12 456000 770 438900 108 600 630000 1050 2011-12 480000 808 484800 I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 4 7 635 825000 1299 2011-12 508000 559 354965 103-104 1200 1260000 1050 2011-12 960000 808 969600 109-110 1200 1260000 1050 2011-12 960000 808 969600 112-A 2050 2100000 1024 2011-12 1640000 834 1709700 12140 14375500 1184 9712000 7952935 10 635 1175000 1850 2012-13 508000 0 405 395 600000 1519 2012-13 316000 331 130745 414-415 590 875000 1483 2012-13 472000 367 1216530 211-A 295 320000 1085 2012-13 236000 765 225675 2 12- A 295 320000 1085 2012-13 236000 765 1225675 416 295 320000 1085 2012-13 236000 765 225675 318 295 445000 1508 2012-13 236000 342 100890 407 285 310000 1088 2012-13 228000 762 217170 215 295 320000 1085 2012-13 236000 765 | 225675 216 295 320000 1085 2012-13 236000 765 225675 307, 395 490000 1241 2012-13 316000 609 240555 417 295 320000 1085 2012-13 236000 765 225675 304 395 640000 1620 2012-13 316000 230 90850 204 595 885000 1487 2012-13 476000 363 215985 9 635 825000 1299 2012-13 508000 551 349885 5 635 825000 1299 2012-13 508000 551 349885 2 635 825000 1299 2012-13 508000 551 349885 3 635 825000 1299 2012-13 508000 551 349885 4 635 825000 1299 2012-13 508000 551 349885 111-112 1200 1260000 1050 2012-13 960000 800 960000 311-317 4380 4592000 1048 2012-13 3504000 802 3512760 14110 17317000 1227 11288000 8788960 406 395 450000 1139 2013-14 316000 1244 491380 409 285 450000 1579 2013-14 228000 804 229140 408 285 521000 1828 2013-14 228000 555 158175 404 395 600000 1519 2013-14 316000 864 341280 I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 5 403 395 650000 1646 2013-14 316000 737 291115 14 635 750000 1181 2013-14 508000 1202 763270 11 635 775000 1220 2013-14 508000 1163 738505 12 635 775000 1220 2013-14 508000 1163 738505 106 600 1430000 2383 2013-14 480000 0 0 107 600 900000 1500 2013-14 480000 883 529800 211 2050 1850000 902 2013-14 1640000 1481 3036050 401-402 1015 1850000 1823 2013-14 812000 560 568400 15 1865 2100000 1126 2013-14 1492000 1257 2344305 201,201- A,202,203,205,2 06 4395 4200000 956 2013-14 3516000 1427 6271665 14185 17301000 11348000 16501590 Total of all years 40435 31692500 32348000 33243485 207,208,209,210 ,210A 1425 1401000 983 2011-12 2019000 2019000 Grand Total 41860 33093500 34367000 35262485 4. Ld. Counsel for the assessee contended that the ld. CIT(A) however restricted the undisclosed sales to 12,79,000/-, 14,09,600/- and 51,41,600/- for all the three impugned assessment years by calculating the same on the carpet area sold and not the super built up area as done by the A.O. and restricted the addition, his reasoning being that the sale deed executed by the assessee was on carpet area and not on super built up area and therefore the excess differential received by the assessee as per the statement of Mr. Sorathia of Rs. 800 per sq. Ft was to be applied on the carpet area and not as done by the AO applying it on the super built area for calculating the undisclosed income. He pointed out that the Ld CIT(A) I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 6 thereafter went on to apply a net profit rate of 17.5% to the total turnover of the assessee including both the disclosed and undisclosed sales and worked out the net profit accordingly earned by the assessee for the impugned years. Reducing the income originally returned by the assessee for the impugned years form the net profit so computed the ld. CIT(A) made addition of difference to the income of the assessee, thus restricting the addition to Rs. 10,71,290/-, 18,45,389/- and 12,65,787/- for all the three impugned years respectively. In this regard he drew our attention to the table at page 24 of the CIT(A) reflecting the above figures as udder: (Copy) A.Y Business Income (BI) before Interest and Remunerati on(Rs) Turnover as per books (Rs) On-money as computed (Rs) N.P at 17.5% (Rs) (Book TO + On-money) Difference^ enhanced NP and BI to be added to T.L (Rs) (1) (2) (3) (4) (5) (6)=(5)-{2) 2012-13 9,91,909 1,05,10,710 12,79,000 (6,00,0000 + 6,79,000) 20,63,199 10,71,290 2013-14 22,76,301 2,21,42,914 14,09,600 41,21,689 18,45,389 2014-15 19,72,469 1,33,62,719 51,41,600 32,38,256 12,65,787 5. Thus, ld. Counsel for the assessee contended, while the A.O. had made addition on account of entire undisclosed income worked out by him, the Ld. CIT(A) had in the first place reduced the quantum of undisclosed sales and further made addition only on account of net profit earned on the same, applying an estimated net profit rate to the total turnover of the assessee. Ld. Counsel for the assessee contended that both the Revenue and the assessee had come up in appeal against the said order of the ld. I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 7 CIT(A),but the Revenue’s appeal had been dismissed on account of low tax effect involved. 6. Having pointed out the facts relating to the case as above, ld. Counsel for the assessee proceeded to make his arguments against the order of the ld. CIT(A). His arguments in brief against the same were as under: i) that the addition was based entirely on the statement of an alleged allottee of the property sold by the assessee, Mr. Devji Sorathiya, which statement was unreliable and could not be taken cognizance of for the following reasons: • he had nothing to do with the property whose actual allottees were his wife and son and both had denied payment of any on- money, by way of an affidavit filed. Our attention was drawn to the copy of the affidavit placed before us at PB 121 & 122. • Mr. Sorathia himself was not directly aware of the rate at which the property was allotted having admitted in his statement that it was his son from whom he had confirmed on phone the rate of Rs. 2400 per sq. ft. In this regard he drew our attention to the copy of the statement recorded of Mr.Devji Sorathia u/s 131(1A) of the Act on 07-01-2014 placed before us at paper book page no 119- 120. He pointed out therefrom that on being put the question as to with whom Mr.Sorathia had entered into dealing with for four shops purchased from the assessee, he had replied that it was his son who had entered into the dealings and he therefore had no idea with whom the dealings were done . That thereafter he was asked whether he had any knowledge /information of the rate at which the properties I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 8 were bought, to which he had replied that since it was his son who had done the dealings ,he had confirmed the rates from him on phone that it was done at Rs.2400/- per sq. ft. Ld.Counsel contended that this admission of rate of Rs2400 per sq. ft paid for purchase of property by Mr. Sorathia was therefore only here say and not on the basis of his own knowledge and information. ii) That as per the order of the Ld. CIT(A) no other incriminating material relating to undisclosed receipt was found during survey or search operation carried out in the group cases. And in the absence of any material to support the statement of Mr. Sorathia which in any case was based on here say his statement recorded during survey had no meaning. Reliance was placed on the following decision in this regard: (i) Paul Mathews & Sons vs. CIT [2003] 129 taxmann.com 416 (ii) CIT vs. S. Khader Khan Son [2012] 254 CTR 228 (SC) (iii) CIT vs. S. Khader Khan Son [2008] 300 ITR 157 (iv) CIT-III, vs. Golden Finance [2014] 220 taxmann.com 162 (Guj.) iii) Without prejudice to the above, ld. Counsel for the assesses contended that if the statement was held believable it could not in any case be applied across board to all the transactions undertaken by the assessee during the impugned three years. In this regard, Ld. Counsel for the assessee contended that in the absence of any incriminating material found, based on the statement of one person only who was not even the original allotee of any property, the extrapolation of rate could not have been done across board to all I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 9 transactions undertaken. He further drew our attention to a table at page 21 & 22 of the CIT(A) which was the working of on money receipt as per the directions of the ld. CIT(A) on the carpet area, pointing therefrom that in most of the cases it was found that no extra money had been charged by the assessee. The table is reproduced as under: Office/ Shop No (i) Carpet Area (Sq. ft.) (2) Total Sale value (Rs) (3) Average Selling Price (Rs) (4)=(3)/(2) Undisclosed on-money receipt (5)={Rs.2400- __ (4) x (2)_ A.Y. 2012-13 212 178.75 320000 1 790 1 09 000 212 0.00 0 0 0 308 240.00 5 50 000 2 292 26 000 1 389.00 9 55 500 2456 0 6 389.00 9 51 000 2 445 0 105 367.00 10 00 000 2 725 0 214 178.75 4 40 000 2,462 0 303 240.00 6 40 000 2 667 0 8 389.00 1 1 80 000 3033 0 305 240.00 5 00 000 2 083 76 000 306 240.00 5 00 000 2 083 76 000 301-302 555.00 10 00 000 1 802 3 32 000 309 175.00 3 90 000 2229 310 175.00 3 90 000 2 229 30 000 108 367.00 9 00 000 2 452 0 7 389.00 17 00 000 4370 0 103-104 734.00 21 00000 2 861 0 109-110 734.00 28 00 000 3815 0 112-A 1 260.00 48 00 000 3 810 0 I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 10 A.Y. 2013-14 10 389.00 11 75000 3021 0 405 240.00 6 00 000 2 500 0 414-415 175.00 8 75 000 5 000 0 211-A 178.75 4 00 000 2238 29 000 212-A 178.75 4 00 000 2238 29 000 416 175.00 4 00 000 2286 20000 318 178.75 4 45 000 2 490 0 407 175.00 4 00 000 2 286 20000 215 178.75 4 00 000 2238 29000 216 178.75 4 00 000 2 238 29000 307 240.00 8 50 000 3 542 0 417 175.00 4 00 000 2286 20000 304 240.00 6 40 000 2 667 0 204 363.00 8 85 000 2 438 0 9 389.00 9 00 000 2314 33 600 5 389.00 10 00 000 2571 0 2 389.00 20 25 000 5206 0 3 389.00 20 25 000 5206 0 4 389.00 20 25 000 5206 0 111-112 734.00 28 00 000 3 815 0 311-317 3 000.00 60 00 000 2 000 12 00 000 A.Y. 2014-15 406 240.00 4 50 000 1 875 1 26 000 409 175.00 4 50 000 2571 0 408 175.00 5 21 000 2977 0 404 240.00 6 00 000 2 500 0 403 240.00 6 50 000 2 708 0 14 389.00 7 50 000 1 928 1 83 600 I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 11 11 389.00 7 75 000 1 992 1 58 600 12 389.00 7 75 000 1 992 1 58 600 106 367.00 14 30 000 3 896 0 107 367.00 1475000 4 019 0 211 1 260.00 18 50 000 1 468 1 1 74 000 401,402 555.00 18 50 000 3 333 0 15 1 145.00 21 00000 1 834 6 48 000, 201 to 206 2 872.00 42 00 000 1 462 26 92 800 TOTAL of 3 AYs 72,30,200 iv) That in any case the 17 .5 % net profit rate could not have been adopted since it was based on the profits disclosed by the other group concerns to the Hon’ble Settlement Commission. It was contended that the orders passed by the Settlement Commission had no binding force and further were based on the facts of each particular case and the ld. CIT(A), without being aware of the facts of those cases, applied the net profit rate surrendered in the other group concern. Ld counsel for the assessee contended that the assessee having returned net profit of 10%, 10%, 15% in all the three years involved, the said net profit should be accordingly applied. 7. Per contra ld. D.R. contended that the statement of Mr. Devji Sorathia could not be dismissed as unreliable since document found during survey at the assesses premises revealed him to be the co-owner of 4 shops with his son ,though subsequently the allotment was made in the name of I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 12 his wife and son. He contended that Mr.Sorathiyas connection with the property cannot therefore be ruled out completely. Ld.DR further contended that the fact of on-money received was arrived at also on the basis that within a period of time properties were allotted at different rates which was not justifiable since there couldn’t possibly be much fluctuation in price of property in a short period of time. Further he pointed out that the admission of on money receipt by other group companies to the Settlement Commission was also the basis of making the addition of undisclosed sales by the contended that besides Mr .In this regard he drew our attention para 6.8 of the Assessment order as under: 6.8 Without prejudice to what is stated so far, the determination of on-money receipts considering Rs.800 per sq, ft. is further evaluated by comparing another method of determination of on-money receipts. The rate of any property or commodity is at a particular level at the time of certain time period. In the case of the assessee, it is observed that in F Y 2011-12, the assessee has charged Rs,1858 per sq. ft. for office no. 8 which is the maximum price charged from the customer in the year. Similarly, in F Y 2012-13 and 2013-14, the assessee has charged maximum rate of Rs.1850 per sq. ft. for office no. 10 and Rs.2383 per sq. ft. for office no. 106 respectively. If it is considered that the assessee has not charged on-money from these purchasers in whose case actual sale price documents are prepared, it is also proved that the assessee has accommodated other customers to whom the sales of the offices/shops are made in the concerned year. Therefore, if the yearwise maximum price is taken as actual rate of that year and the same rate is applied to other buyers in the concerned year, the amount of on-money could be worked out as mentioned in Column No. T of the tabular calculation at Para No. 6.7 above. The total undisclosed income in this method from FY 2011-12 to 2013-14 comes to Rs. 3,52.62,485/-. The total undisclosed income calculated through both the above mentioned methods is very close to each other as the difference is Rs.8,95,485/- only (Rs. 3,52,62,485/ less Rs. 3,43,67,000/-). This difference is mainly due to static calculation without considering location of the property, direction etc in the case of on-money valuation of Rs. 3,52,62,485/-. Therefore, the undisclosed income calculated in the first method i.e. at the rate of Rs.800/- per sq. ft. based on the statement of one of the buyers is considered in the case of the assessee. The undisclosed income in respect of unit No. 207, 208, 209, 210, 210A for which statement of Sh. Devjibhai Sorathia was recorded during the course of survey proceedings is calculated separately, which comes to Rs. 20,19,000/- for F Y 2011-12 as mentioned towards bottom of the table at Para No. 6.7 above. I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 13 8. Ld. D.R. contended that the AO’s finding that even as per the maximum rate charged by the assessee being applied to the other parties, for determination of on money received, the quantum of undisclosed income came to the same as based on the statement of Mr. Sorathiya and therefore the AO had adopted the basis of statement of Mr. Devji Sorathia for determining the undisclosed income. He further contended that all the case laws referred to by the Ld.counsel for the assessee were distinguishable. Ld.D.R. further contended that the extrapolation was also based on the admission of the group concern before Settlement commission as also the net profit rate applied. 9. We have heard both the parties and have gone through the orders of the authorities below as also the documents and case laws referred before us. The grievance of the assessee before us against the order of the Ld.CIT(A) is twofold: • on account of holding that the assessee had earned on money on booking/allotment of its properties during the impugned years before us. and • against estimating profits for the said years by application of 17.5% rate on the accounted and unaccounted sales of the assessee. 10. The on-money, held by the Ld.CIT(A) to be earned by the assessee and the profits estimated for the impugned years before us is as under: A.Y On-money as computed (Rs) N.P at 17.5% (Rs) (Book TO + On- Difference^ enhanced NP and BI to be I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 14 money) added to T.L (Rs) 2012-13 12,79,000 (6,00,0000 + 6,79,000) 20,63,199 10,71,290 2013-14 14,09,600 41,21,689 18,45,389 2014-15 51,41,600 32,38,256 12,65,787 11. The on money has been worked out by treating the rate at which properties were actually sold at Rs.2400 per sq.ft. Reducing therefrom the rate at which the transaction was recorded, the difference rate, which came to Rs.800/- per sq.ft., applied to the area of each property sold ,was treated as on-money received by the assessee .This rate of Rs.2400/- per sq. ft adopted by the department as the actual rate of sale of properties, was based on the statement of one Mr.Devji Sorathiya who was summoned for recording his statement u/s 131(1A) of the Act during survey proceedings conducted on the assessee on 07-01-2014.The Revenue authorities have justified the on-money alleged to be received by the assessee in each year on another basis also by taking the maximum rate at which property was sold in a particular year to be the actual rate and treating the properties sold at lower rates accordingly to having been accommodated by taking on-money. The reasoning being that the rate of property is at a particular level at the time of certain time period. It is also an undisputed fact that six group concerns of the assessee firm (Bafna group) had filed settlement petition before the Hon’ble Settlement Commission ,in consequence to search action undertaken on them, and had admitted to on money received on sale of units by them. The application of I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 15 net profit rate of 17.5% to the total disclosed as well as undisclosed turnover is also based on the disclosure made by the group entities to the Settlement commission and accepted by it. 12. Having outlined the basic and relevant facts pertinent for adjudication of the issues before us, we shall now proceed to deal with both the contentions of the Ld.Counsel for the assessee before us. 13. We shall first deal with the challenge of the assessee to the basis with the Revenue for holding that on money had been received on properties sold by the assessee, since the sustainability of the net profit addition rests on this finding, for the reason that in the absence of any on money received by the assessee, there is no other reason brought to our notice for rejecting the book results of the assessee as unreliable. 14. The argument of the Ld.Counsel for the assessee , in this regard that the statement of Mr.Devji Sorathia revealing higher rate having been agreed to be paid, as compared to the contracted rate, ,which was the primary basis for finding that on money had been received , was unreliable, we find merit in the same. Mr.Sorathia, it is not denied, is neither the owner of the stated shops, which were in fact owned by his son and wife, nor was his basis of stating the rate of purchase of shops at Rs.2400/- based on his own knowledge. It was admittedly based on what he was told by his son on phone. Mr.Sorathiya himself has admitted to the same in his statement recorded during survey which is evident from the copy of the statement filed before us at P.B 119-120. This fact is not denied I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 16 by the Revenue. His statement is in fact found to be incorrect since his son, who is the allottee of the property had denied paying any on- money , stating so on oath by way of filing an affidavit in this regard. The Revenue has made no effort to prove the fact stated on oath by Mr.Sorathiya’s son to be false. Nor is this the plea of the Revenue before us. Therefore the fact stated on oath by Mr. Sorathiyas son , who is the allottee of properties by the assessee, and clearly therefore fully aware of the rate at which transaction was entered, and which fact has not been found to be falsely stated by the Revenue, undoubtedly carries more weight and is more reliable than that stated by Mr.Sorathiya who himself admitted to having no knowledge of the rate and had stated to have confirmed the same from his son on phone. The contention of the Revenue that documents found during survey revealed Mr.Sorathiya as being the original allotee and therefore his statement was believable, we find, is of no consequence in view of the fact that Mr. Sorathiya ,as per his own admission, himself had no knowledge of the rate of allotment which he had got to know from his son and as we have noted above his son denied any extra amount agreed to be paid for the properties allotted to him. Therefore, we hold, no credence can be given to the statement of Mr.Sorathiya relating to the rate of Rs.2400/- per sq. ft being the actual rate at which the properties were sold by the assessee. 15. The contention of the Revenue that the admission of on money received by other entities of the group to the settlement commission lends credence to the statement of Mr.Sorathiya, we find is also not acceptable. I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 17 Nothing has been brought to our notice by the Revenue to demonstrate the parity of the facts and circumstances of those cases with that of the assessee. The Revenue has not even pointed out the facts and circumstances in which surrender/admission had been made by each such concern to the Settlement Commission. It appears to be a sweeping generalized exercise of the Revenue in treating the facts and circumstances of the assesses case being similar to the other group cases. Assessment of incomes cannot be done on this basis. There is no basis, therefore, we hold, for drawing an analogy from the group concerns admission before the settlement commission, with the assessee’s case so as to derive that the assessee also had received on money. 16. As for the contention of the Revenue that even applying the alternate basis of determining the on money received by the assessee by taking the maximum rate charged during the year as the actual rate , we find that the same also cannot be the basis. The logic applied that rates are constant during a particular period does not impress us, until demonstrated statistically. It is not to be forgotten that the exercise being indulged into by the Revenue authorities is determination and assessment of income of assesses. The said exercise may not require finding of income earned to be established with certainty to make any addition of the same, and can be made on the basis of surrounding facts and circumstances demonstrating to a large degree the fact of earning income, but still there has to be a substantial basis for the same. Pure assumptions , estimations and guess works cannot be the basis for determining incomes. The endeavour of the I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 18 Revenue in treating the maximum rate for property sold during the year as being the actual rate for all properties sold, appears to be an exercise to this end only. This basis is also held to be unacceptable and thus rejected. 17. Even otherwise the assessee has demonstrated that even as per the this exercise, in maximum cases no on- money was noted to be received by the assessee. The basis for holding that the assesseesse received on - money clearly did not apply to maximum properties sold. The said facts and circumstances lead to the inescabable conclusion that the basis therefore was ill conceived. 18. In view of the above we hold that there was no basis warranting a finding of on money received by the assessee. 19. Having held so the addition made by applying net profit rate to the total turnover of the assessee also does not survive since as stated above no other basis has been brought to our notice for rejecting the books of the assessee as not capable of presenting the true picture of profits earned. The addition made therefore by estimating profits for all the three years of Rs.10,71,290/-,Rs.18,45,389/- & Rs.12,65,787/- respectively is deleted. 20. Having adjudicated the common issue arising in all the three appeals before us , we now proceed to adjudicate the appeals before us. We have noted that identical grounds were raised in all the appeals .we shall I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 19 therefore reproduce the grounds raised in the assesses appeal for A.Y 2012- 13 and dispose off all the appeals accordingly. ITA No.1160/Ahd/2018 (Asstt.Year 2012-13): 21. The effective grounds of appeal are as under: “1. In the facts and in the circumstances of the case, the learned CIT(A) has erred in rejecting the relevant ground of appeal raised by the appellant before him challenging the validity of the proceedings initiated u/s.147 of the l.T. Act. 2. In law and in facts and circumstances of the case of appellant, the Assessing Officer has erred in initiating reassessment proceedings within four years without any tangible material on record which shows that income has escaped assessment and consequently reassessment carried out u/s 143(3) r.w.s 147 of the Act is bad in law and required to be quashed. 3. In law and in facts and circumstances of the case of appellant, the Ld. CIT(A) has failed to appreciate the fact that the present reopening carried out u/s 147 is consequent to search action carried out at Bafna Panchal Group cases u/s 132 of the Act and accordingly present assessment is required to be carried out u/s 153C of the Act and accordingly notice issued u/s 148 of the Act is bad in law and consequential order passed u/s 143(3) r.w.s 147 of the Act is required to be quashed. 4. In law and in facts and circumstances of appellant's case, the Ld. CIT (A) has erred in estimating net profit on the Turnover shown in the books of accounts as well as on money of Rs.12,79,000/- calculated on the basis of statement of Shri Devji Sorathia without appreciating the fact that there were no evidences found during the course of survey/ search proceedings which indicates that the Appellant has earned on money on sale of shops/ offices as stated in the statement of Shri Devji Sorathia. 5. In law and in facts and circumstances of appellant's case, the Ld. CIT(A) has erred in calculating on money on sale of shops/ offices in respect sale of all shops / offices and in all assessment years merely on the basis of I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 20 statement of single buyer Shri Devji Sorathia without appreciating the fact that statement of one buyer cannot be taken as base for making addition in respect of sale of other shops/ offices particularly when there are no evidences on record found during the course of search proceedings which indicates that the Appellant has earned on money as stated in such statement. 6. In law and facts and circumstances of appellant's case, the Ld. CIT (A) has directed A.O. to make addition on account of low gross profit for Rs.10,71,290/- on turnover shown in books of account and on money calculated as per the rate mentioned by Shri Devji Sorathia in his statement recorded during the course of survey proceedings u/s 131(1 A) of the Act without appreciating fact that both AO and CIT(A) has not found any discrepancies in books of account maintained by the appellant and same was not subject matter of addition made by A.O. 6.1 In law and facts and circumstances of appellant's case, Ld. CIT (A) has grossly erred in estimating profit @ 17.5% in case of appellant relying upon order of Settlement Commission passed in case of group cases of appellant, without appreciating the fact that, there is no on-money taken by the appellant in present project whereas in case before Hon'ble Settlement Commission, during the course of search evidences were found that said concern have taken on-money on various projects executed by them. Addition made by the AO deserves to be deleted. 22. Ground No.1 , 2 & 3 were stated to be not pressed by the Ld.Counsel for the assessee before us. The same are therefore dismissed as not pressed. 23. Remaining grounds,i.e Ground No.4-6 & 6.1, it was stated by both the parties, related to the issue of addition made to the income of the assessee by holding that it earned on-money on sale of property and by applying estimated net profit rate of 17.5% to the total turnover of the assessee including both disclosed as well as undisclosed sales. The said I.T.A Nos. 1160 to 1162/Ahd/2018 A.Y. 2012-13 to 2014-15 Page No M/s. Lotus Enterprise vs. DCIT 21 issue having being adjudicated by us above, in favour of the assessee from para 9 to 19, these grounds of appeal are accordingly allowed. 24. In the result, the appeal for the Asst.Year 2012-13 is partly allowed. 25. Since the grounds of appeals are noted to be identical in the rest of the appeals also the appeal of the assessee in ITA No.1161/Ahd/2018 (Asstt.Year 2013-14) and ITA No.1162/Ahd/2018 (Asstt.Year 2014-15) is also partly allowed. 26. All the appeals of the assessee are partly allowed. Order pronounced in the open court on 31 -08-2022 Sd/- Sd/- (MADHUMITA ROY) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER