Laxmi Infra Developers Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 1167/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94839 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGRAWAL
• Assessee Lawyers: J P SHAH
• Keywords: Income from undisclosed sources; Deemed to accrue or arise in india; Corroborative evidences
• Section: 143(3); 133A; 263

Judgement Text

I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. 1167 /AHD/201 3 A SSESSMENT YEAR : 20 0 8 - 09 LAXMI INFRA DEVELOPERS LIMITED , .APPELLANT A - HOUSE, GROUND FLOOR, MILLEN NIUM MARKET, RING ROAD, SURAT. [P AN: AA B C A 9744 K ] VS. DY. COMMISSIONER OF INCOME TAX , . RESPONDENT CIRCLE - I, SURAT. APPEARANCES BY: J .P. SHAH , FOR THE APPELLANT R AJEEV AGRAWAL , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARIN G: SEPTEMBER 10 , 201 5 DATE OF PRONOUNCING THE ORDER : DECEMBER 7 TH , 2015 O R D E R PER PRAMOD KUMAR , AM : 1. THIS APPEAL CHALLENGES CORRECTNESS OF LE ARNED C OMMISSIONER S ORDER DATED 28 TH MARCH, 2013 PASSED UNDER SECTION 263 R.W.S. 14 3(3) OF THE I NCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 200 8 - 09. 2. BRIEFLY STATED, RELEVANT MATERIAL FACTS, TO THE EXTENT NECESSARY FOR THE PRESENT ADJUDICATION , ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN CONSTRUCTION AND DEVELO PMENT BUSINESS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE WAS SUBJECTED TO A SURVEY I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 2 OF 7 OPERATION UNDER SECTION 133A OF THE ACT. T HE ASSESSEE HAD FILED A RETURN OF INCOME DISCLOSING A TAXA B LE INCOME OF RS.2,80,89,791/ - . WHILE THE ASSESSEE HAD OFFERED A UM OF RS.3.50 CRORES TO TAX DURING THE SURVEY PROCEEDINGS, THE NET INCOME DISCLOSED IN THE RETURN WAS ONLY RS.2.87 CRORES AS THE AMOU NT OF RS.63,00,000/ - WAS CLAIME D TO HAVE BEEN SPENT ON EXPENSES TO EARN THE SAID UNACCOUNTED INCOME OF RS.3,50,00,000/ - . THE ASSESSING OFFICER, HOWEVER , PROCEEDED TO ADOPT RS.3.50 CRORES AS INCOME OF THE ASSESSEE RELA T ABLE TO THE SURRENDER MADE DURING THE SURVEY PROCEEDINGS . DURING THE SCRUTINY ASSESSMENT PROCEEDINGS , IT WAS ALSO NOTICED THAT THE ASSESSEE HAS SHOWN BOOKIN G DEPOSITS OF RS.22,42,83,099/ - IN THE BALANCE SHEET BUT NO INCOME WAS SHOWN ON ACCOUNT OF INCOME DERIVED FROM THE BUSINESS ACTIVITY OF D EVELOPING HOUSING PROJECT . THE STAND OF THE ASSESSEE WAS THAT THE R EVENUE BY THE C OMPANY IS RECOGNISED EITHER ON P OSSESSION OR ON EXECUTION OF SALE AGREEMENT WHICHEVER IS EARLIER AND THAT THE ASSESSEE C OMPANY HAS ADOPTED THIS METHOD OF RECOGNITION OF INCOME SINCE THE BEGINNING OF THE PROJECT . IT WAS ALSO POINTED OUT THAT NEITHER ANY POSSESSION WAS GIVEN NOR ANY SALE AGREEMENTS WERE ENTERED INTO WITH ANY BUYER DURING THE YEAR UNDER CONSIDERATION, HENCE NO INCOME WAS RECOGNISED DURING THE YEAR . THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THIS EXPLANATION. AFTER AN ELABORATE DISCUSSION ON WHY THESE EXPLANATIO NS ARE NOT ACCEPTABLE, THE ASSESSING OFFICER CONCLUDED THAT IT WOULD BE MOST REASONABLE AND JUSTIFIED TO ESTIMATE THE INCOME OF THE ASSESSEE C OMPANY FROM THE ACTIVITY OF DEVELOPING HOUSING PROJECTS @ 8% ON THE BOOKING DEPOSITS OF RS.22,42,83,099/ - SHOWN B Y THE ASSESSEE . AN ADDITION OF RS. 1,79,42,647/ - WAS THUS MADE IN RESPECT OF THIS PROFIT AS WELL . THE INCOME, WHICH WAS RETURNED AT RS.2,80,89,790/ - , WAS THUS ASSESSED A T RS.5,23,32,440/ - ON 31.12.2010. I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 3 OF 7 3. ON 19 TH MARCH, 2013, LEARNED COMMISSIONER ISSUE D A NOTICE TO THE ASSESSEE REQUIRING HIM TO SHOW CAUSE AS TO WHY A SSESSMENT ORDER DATED 31 ST DECEMBER, 2010 NOT BE SUBJECTED TO REVISION ON THE FOLLOWING GROUNDS : - ON EXAMINATION OF RECORDS, IT IS NOTICED THAT DURING THE COURSE OF SCRUTINY ASSESSMENT A. O. DID NOT APPEAR TO HAVE OB TAINED OR VERIFIED ANY DETAILS WITH REGARD TO THE BASIS OF ADMISSIONS OF THE UNACCOUNTED INCOME OF RS.3.50 CRORES ADMITTED DURING THE COURSE OF SURVEY ACTION U/S 133A OF THE ACT. THE DETAILS LIKE AREA OF WORK COMPLETED UPTO THE PERIOD OF DATE OF SURVEY AND VERIFICATION OF T HE BASIS OF ADMISSION OF T HE UNACCOUNTED INCOME AND REASONABLENESS O N THE UNACCOUNTED INCOME DECLARED BY THE ASSESSEE VIS - A - VIS WORK CARRIED OUT BY THE ASSESSEE IN THE PROJECT. IN VIEW OF THAT NOTHING FROM TH E RECORD CAN BE SEEN WHICH INDICATED THE REASONABLENESS ON UNACCOUNTED INCOME DECLARED BY T HE ASSESSEE. IN VIEW OF RATIOS LAID DOWN BY THE HON BLE COURTS DEEMED INCOME AT 8% OF THE GROSS RECEIPTS NEED TO BE FOLLOWED IN THE CASE OF BOOKING RECEIPTS OF RS.1 21,18,15,177/ - WHICH WERE SHOWN IN THE AUDIT REPORT OF THE ASSESSEE. IN VIEW OF THESE FACTS BY NOT FOLLOWING T HE RATIOS A S LAID DOWN BY DIFFERENT COURTS AND BY NOT ASSESSING THE DEEMED INCOME AT 8% ON GROSS RECEIPTS FOUND ON ASSESSEE BALANCE S HEET, UNDER ASSESSMENT OF INCOME OF T HE ASSESSEE WAS MADE FOR A.Y. 2008 - 09. THEREFORE THE ORDER UNDER REFERENCE APPEARS TO BE ERRONEOUS AND THEREFORE, PREJUDICIAL TO T HE INTEREST OF REVENUE WITHIN T HE MEANING OF SECTION 263 OF THE I.T. AC T, 1961. 4. IT WAS EXPLAI NED BY THE ASSESSEE T HAT THE AMOUNT OFFERED TO TAX BY THE ASSE SS EE, AS A RESULT OF SURVEY PROCEEDINGS, WAS DULY EXAMINED BY T HE ASSE S SING OFFICER, T HAT THE SEIZED DIARY SHOWED ONLY ENTRIES AGGREGATING TO RS.2,40,000/ - AND THAT THE ASSESSING OFFICER HAD DU LY CONSIDERED AND VERIFIED ALL THE DETAILS WITH REGARD TO THE BASIS OF ADMISSIONS OF UNACCOUNTED INCOME OF RS.3.50 CRORES ADMITTED DURING THE COURSE OF SURVEY . AS FOR THE SECOND POINT RAISED IN THE SHOW CAUSE NOTICE, IT WAS POINTED OUT THAT CORRECT BOOKI NG MOUNT IS RS.22,42,83,099/ - , WHEREAS RS.121,18,15,177/ - REFERRED TO IN SHOW CAUSE NOTICE REPRESENTS STOCK IN TRADE, AND THAT THE 8% OF BOOKING RECEIPTS OF RS.22,42,83,099/ - I.E. I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 4 OF 7 RS.1,79,42,647/ - HAS ALREADY BEEN BROUGHT TO TAX IN THE ASSESSMENT ORDER SOU GHT TO BE REVISED. ON THE BASIS OF, INTER ALIA, THESE ARGUMENTS, THE LEARNED COMMISSIONER WAS URGED TO DROP REVISION PROCEEDINGS. HOWEVER , LEARNED COMMISSIONER DID NOT YIELD TO THESE SUBMISSIONS . HE PROCEEDED TO EXERCISE HIS POWERS UNDER SECTION 263 OF THE ACT AND JUSTIFIED THE SAME AS FOLLOWS : - 7. I HAVE CAREFULLY CONSIDERED T HE DETAILED SUBMISSIONS OF THE AR. I HAVE ALSO GONE THROUGH THE VARIOUS CASE - LAWS RELIED UPON BY H IM. IT IS OBSERVED TH A T THE ASSESSING OFFICER DID NO T APPEAR TO HAVE OBTAINED AND VERIFIED ANY DE T AILS WITH REGARD TO THE BASIS OF ADMISSION O F UNACCOUNTED INCOME OF RS.3.50 CRORES ADMITTED DURING THE SURVEY ACTION U/S. 133A OF THE ACT. THE AO ALSO DID NOT OBTAIN THE DETAILS OF AREA OF WORK COMPLE T ED UPTO THE PERIOD OF DATE OF S URV E Y, AND ASCERTAIN THERE FROM TH E UNCOUNTED INCOME EARNED BY THE ASSESSEE EITHER ON THE B A SIS OF MODUS OPERANDI FOR CHARGE OF ON - MONEY ADMITTED, IF ANY, DURING SURVEY PROCEEDINGS OR ON THE BASIS OF NORMAL RATE OF RECEIPT OF UNACCOUNTED SALE PART. 7. 1 ON VERIFICATION OF THE AUDITED REPORT U/S. 44AB OF THE ACT ATTACHED WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER REVIEW , IT IS NOTICED THAT THE ASSESSEE HAD SHOWN BOOKING RECEIPTS OF RS. 121,18,15,177/ - IN ITS B A LANCE - SHEET BUT HAS NOT SHOWN A NY INCOME DERIVED FROM THE ACTIVITIES OF DEVELOPMENT OF HOUSING PROJECTS IN THE PROFIT & LOSS A CCOUNT, ON THE BA SI S IF METHOD IF WORK COMPLETION BASIS . THE A . O . ALSO DO E S NOT APPEAR TO HAVE VERIFIED THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDING S . THE COMPLETED CONTRACT METHOD WHICH CAME IN VOGUE WITH AS - 7 IS ACCEPTED AS CORRECT METHOD FOR COMPUTATION OF TOTAL INCOME UNDER THE INCOME - TAX IN SEVERAL DECISIONS OF VARIOUS HON BLE ITATS. PAGE 971 OF BOTLIBOY ADVANCE ACCOUNTANCY HAD LAID DOWN ES TABLISHED METHOD FOR CALCULATION OF PROFIT FROM ON GOING PROJECT WHICH IS REFERRED TO IN T HE DECISION OF HON BLE PATNA HIGH COURT IN THE CASE OF SUKHDEV JALAN VS. CIT 26 ITR 617 (PATN A ) A ND IN THE DECISION OF HON BLE HIGH COURT IN THE CAS E OF TUTICORIN A LKALI CHEMICALS AND FERTILISERS LTD . VS. CIT 227 ITR 172 (SC) . 7.2 AS PER THE RATIOS LAID DOWN BY THE AFO RESAID HON BLE COURTS , IT IS CLEAR T HAT IRRESPECTIVE OF Y E AR OF COMPLETION OF PROJECT, INCOME H A S TO BE WORKED OUT IN EACH YEAR DEPENDING UPON THE R ECEIPTS. IN THE CASE OF THE ASSESSEE , THE ASSESSEE HA S THOUGH SHOWN BOOKING RECEIPTS OF RS.121,18,15,177/ - BUT HAS NOT S HOWN ANY INCOME DERIVED FROM THE BUSINESS ACTIVITIES OF DEVELOPMENT OF HOUSING PROJECTS IN THE PROFIT & LOSS ACCOUNT. 7.3 ON THE BASIS OF THE FACTS OF THE CASE AND STATUTORY PROVISIONS, I HAVE COME TO THE PRIMA FACIE CONCLUSION THAT THE ASSESSMENT ORDER WAS ERRONEOUS A ND HENCE, PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSMENT ORDER DATED 30.12.2010, PASSED U/S. 143(3) I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 5 OF 7 OF THE I.T. ACT , IS HEREBY SET ASIDE ON THIS ISSUE. THE ASSESSING OFFICER IS DIRECTED TO FRAME A FRESH ASSESSMENT AFTER EXAMINING ALL HE RELEVANT FACTS OF THE CASE, AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. THE A SSESSEE IS AGGRIEVED AND IN APPAL BEFORE US. 6. WE HAVE HE A RD TH E RIVAL CONTENTIONS, PERUSED THE MATERIAL ON R E CORD AND DULY CONSIDERED FACTS OF THE CA S E IN TH E LIGHT OF APPLICABLE LEG A L POSITION. 7. AS FAR AS THE FIRST ISSUE , I.E. AMOUNT OF RS.3.50 CRORES OFFERED TO TAX DURING THE SURVEY PROCEEDINGS IS CONCERNED, WE HAVE NOTED THAT EVEN AS A RESULT OF IMPUGNED REVISION ORDER, NO INDEPENDENT ADDITION IS EVENTUALLY MADE IN THE COURSE OF THE REMANDED PROCEEDINGS. THE ISSUE IS T HUS WHOLLY ACADEMIC. IN ANY EVENT, AS RIGHTLY CONTEND ED BY THE LEARNED COUNSEL, THIS AMOUNT WAS BROUGHT TO TAX ON THE BASIS OF A VOLUNTARY OFFER MADE DURING THE SURVEY PROCEEDING AND AFTER DULY EXAMINING THE MATTE R ON MERITS IN THE ORIGINAL ASSESSMENT PROC EE DINGS. THE ADDITION REPRESENTED THE AMOUNT OFFERED TO TAX, AND THE DEDUCTIONS CLAIMED, WITHOUT SUPPORTING EVIDENCES, WERE DECLINED. WE SEE NO INFIRMITY, FROM R EVENUE S PERSPECTIVE, IN TH E STAND SO TAKEN BY THE ASSESSING OFFICER. LEARNED CIT, THEREFORE , WAS WHOLLY UNJUSTIFIED IN RESORTING TO REVISION PRO CEEDINGS ON THIS COUNT. 8. COMING TO THE SECOND LIMB OF THE IMPUGNED REVISION ORDER , WE FIND IT PROCEEDS ON THE MISCONCEPTION THAT THE BOOKING RECEIPTS WERE RS.121,18,15,177/ - . THE ACTUAL BOOKING RECEIPTS, DULY REFLECTED IN THE BALANCE S HEET, WERE ONLY R .22,42,83,099/ - AND 8% OF THE S E RECEIPTS WAS ANYWAY BRO UGHT TO T AX. AS A MATTER OF FACT , THIS ERROR IS E VIDENT FROM THE I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 6 OF 7 FOLLOWING OBSERVATION IN THE ASSESSMENT ORDER, PASSED AS RESULT OF IMPUGNED REVISION ORDER, AT PAGE 28 PARAGRAPH 8.1 .............. .. ................. .. THE ASSESSEE HAD SHOWN WORK - IN - PROGRESS (INADVERTENTLY MENTIONED A S BOOKING RECEIPTS IN THE ORDER U/S 263 OF CIT , SURAT) OF RS. 121,18,15, 177/ - IN THE AUDITED BALANCE SHEET BUT HAS NOT SHOWN ANY INCOME DERIVED FROM THE ACTIVITIES OF D EVELOPMENT OF HOUSING PROJECTS IN THE PROFIT AND LOSS ACCOUNT , ON THE BASIS OF METHOD OF WORK COMPLETION BASIS . ........................... ......... . 9. THE VERY BASIS OF THE IMPUGNED REVISION ORDER IS THUS FACTUALLY INCORRECT . THE INCOME IS TO BE CO MPUTED, AS LEARNED CIT HIMSELF STATES IN PARAGRAPH 7.2, DEPENDING UPON THE RECEIPTS WHICH IS PRECISELY WHAT ASSESSING OFFICER HAS DONE. IT WAS NOT EVEN COMMISSIONER S CASE THAT THE COMPUTATION OF INCOME MUST DEPEND UPON THE VALUE OF WORK IN PROGRESS. H IS APPROACH IN THE IMPUGNED ORDER THU S PROCEEDED ON AN INCORRECT APPRECIATION OF FACTS . ON THIS COUNT ALSO, LD. COMMISSIONER S ACTION CANNOT BE SUSTAINED IN LAW. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOL D THE GRIEVANCE OF THE ASSESSEE AND QUASH THE IMPUGNED REVISION ORDER. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 11. IN THE RESULT, THE APP E AL IS ALLOWED. P RONOUNCED IN THE OPEN COURT TODAY ON 7 TH DECEMBER , 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 7 TH DAY OF DECEMBER , 201 5 . PBN/ * I.T.A. NO. 1167 /AHD/ 201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 7 OF 7 COPIES TO : (1) THE APPE LLANT ( 2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD