DCIT 17(2), MUMBAI V. RUPJI CONSTRUCITONS, MUMBAI

ITA 1202/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101031 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH B GUPTE
• Assessee Lawyers: KAILASH GAIKWAD
• Keywords: Document seized; Opportunity of being heard; Documents seized
• Section: 133A; 37(1); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 1202 / MUM/20 1 1 ( / ASSESSMENT YEA R : 20 0 7 - 08 ) ASSTT. COMMISSI ONER OF INCOME TAX 17( 2 ) , ROOM NO. 217 , PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. / VS. M/S RUPJI T CONSTRUCTIONS, 548 A , DEVENDRA SHETH B N BUILDG, MATUNGA, MUMBAI - 400019 ( / APPELLANT ) .. ( / RESPONDENT ) . / ./PAN. : AAAFR5733M / APPELLANT S BY SHRI KAILASH GAIKWAD / R EVENUE BY SHRI RAJESH B GUPTE / DATE OF HEARING : 0 3 .9 . 201 5 / DATE OF PRONOUNC EMENT: 11 . 9. 201 5 / O R D E R P ER B R BASKARAN, AM : THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 25.11.2010 PASSED BY LD CIT(A) - 29, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. FOLLOWING ISSUES ARE URGED IN THIS APPEAL: - ( A ) RELIEF GRANTED IN RESPECT OF ADDITION OF RS.48.00 LAKHS RELATING TO EXPENDITURE NOT ALLOWABLE U/S 37(1) OF THE ACT. ( B ) RELIEF GRANTED IN RESPECT OF ADDITION OF RS.27.00 LACS RELATING TO RECEIPT OF ON - MONEY. 2. WE HEARD THE PARTIES AND PERUSED T HE RECORD. THE ASSESSEE IS A BUILDER AND DEVELOPERS. A SURVEY ACTION U/S 133A OF THE ACT WAS CONDUCTED IN THE HANDS OF THE ASSESSEE ON 23.3.2007. AT THE TIME OF ITA NO. 1202 / MUM/20 1 1 2 SURVEY OPERATIONS, IT WAS NOTICED THAT THE ASSESSEE WAS HAVING PHYSICAL CASH BALANCE OF RS.2 ,27,400/ - ONLY AS AGAINST THE BOOK BALANCE OF RS.50,23,958/ - . WHEN QUESTIONED, THE ASSESSEE SUBMITTED THAT THE DIFFERENCE OF ABOUT RS.48.00 LAKHS REPRESENTS AMOUNT SPENT BY IT TOWARDS EXPENDITURE WHICH MAY NOT BE ALLOWABLE U/S 37 OF THE ACT. ACCORDINGLY THE ASSESSEE AGREED TO OFFER THE SAID AMOUNT TO TAX. THE ASSESSEE ALSO AGREED TO OFFER ADDITIONAL INCOME OF RS.77.00 LAKHS TOWARDS CASH PAYMENTS RECEIVED OVER AND ABOVE THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNTS. 3. IN THE BOOKS OF ACCOUNT, THE ASS ESSEE DECLARED THE AMOUNT OF RS.77.00 LAKHS AS ITS INCOME. IT ALSO ACCOUNTED FOR THE CLAIM OF EXPENDITURE OF RS.48.00 LAKHS BY REDUCING THE CASH BALANCE WITH CORRESPONDING AMOUNT. ACCORDINGLY, IN THE PROFIT AND LOSS ACCOUNT PREPARED FOR THE YEAR UNDER CO NSIDERATION, THE ASSESSEE CLAIMED EXPENDITURE OF RS.48.00 LAKHS IN THE DEBIT SIDE AND OFFERED THE INCOME OF RS.77.00 LAKHS IN THE CREDIT SIDE. WHILE PREPARING THE STATEMENT OF TOTAL INCOME, THE ASSESSEE DISALLOWED THE ABOVE SAID AMOUNT OF RS.48.00 LAKHS, THUS INCREASING THE NET PROFIT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. 4. THE AO TOOK THE VIEW THAT THE ASSESSEE IS REQUIRED TO DISCLOSE RS.1.25 CRORES (RS.77 LAKHS + RS.48 LAKHS) AS ITS INCOME. HOWEVER, THE ASSESSEE HAS ONLY DISCLOSED ONLY RS.29.00 LAKHS (RS.77.00 LAKHS CREDITED ( - ) RS.48.00 LAKHS DEBITED TO P & L A/C). ACCORDINGLY, THE AO TOOK THE VIEW THAT THE ASSESSEE SHOULD HAVE OFFERED RS.48.00 LAKHS SEPARATELY AS ITS INCOME. ACCORDINGLY, HE ASSESSED THE AMOUNT OF RS.48.00 LAKHS AS INCOME OF THE ASSESSEE. IN THE SEIZED DOCUMENTS, AT PAGE NO.13, A DOCUMENT TITLED AS FIRST CONTRACT REPORT WAS EXAMINED BY THE AO. IN THE SAID DOCUMENT, THE DETAILS OF CONTRACT PERTAINING TO A BUYER NAMED ASHOK ITA NO. 1202 / MUM/20 1 1 3 B MANCHEKAR WERE NOTED. IN THE COLUMN MENTIONED AS TERMS OF PAYMENT STATED, IT IS WRITTEN AS 15% BOOKING 40% CASH. SINCE THE ASSESSEE HAD OFFERED RS.77.00 LAKHS AS ON - MONEY RECEIPTS, THE AO EXAMINED THE SAID OFFER BY TAKING THE VIEW THAT THE ASSESSEE IS UNIFORMLY RECEIVING 40% OF SALE CONSIDERATION AS CASH PAYMENTS OUTSIDE THE BOOKS OF ACCOUNT. ACCORDINGLY, THE AO WORKED OUT THE PROBABLE CASH COMPONENT (ON - MONEY RECEIPTS) BY TAKING THE SALE VALUE DECLARED BY THE ASSESSEE, I.E., THE SALES VALUE DECLARED WAS TAKEN AS 60% OF THE AGREED SALE CONSIDERAT ION. ACCORDINGLY HE ARRIVED AT A FIGURE OF RS.1.31 CRORES. SINCE THE ASSESSEE HAD ALREADY DECLARED RS.77.00 LAKHS, THE AO TOOK THE VIEW THAT THE DIFFERENCE AMOUNT OF RS.54 LAKHS REPRESENTS THE ON - MONEY RECEIPTS NOT DISCLOSED BY THE ASSESSEE. THE AO FURT HER TOOK THE VIEW THAT THE ASSESSEE MIGHT HAVE SPENT 50% OF THE ABOVE AMOUNT AND ACCORDINGLY ASSESSED THE BALANCE AMOUNT OF RS.27.00 LAKHS AS INCOME OF THE ASSESSEE. 5. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELETED BOTH THE ADDITIONS AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 6. WITH REGARD TO THE FIRST ITEM, VIZ., THE ADDITION OF RS.48.00 LAKHS, WE NOTICE THAT THE SAME REPRESENTS DEFICIT CASH BALANCE. ACCORDING TO THE ASSESSEE, THE DEFICIT CASH BALANCE REPRESENTS THE EXPENDITURE INCURRED BY IT ON ITEMS, WHICH MAY NOT BE ALLOWED U/S 37(1) OF THE ACT. ACCORDINGLY, THE ASSESSEE ACCOUNTED FOR THE EXPENDITURE, BUT DISALLOWED THE SAME WHILE COMPUTING THE TOTAL INCOME. LET US ASSUME FOR A MOMENT, HAD THE DEFICIT CASH BALANCE REPRESENTE D LEGITIMATE EXPENDITURE ALLOWABLE U/S 37 OF THE ACT, THEN ALSO THE ASSESSEE WOULD HAVE ACCOUNTED THE SAME IN THE BOOKS OF ACCOUNT, BUT WOULD NOT HAVE DISALLOWED IT. THE AO WOULD ALSO HAVE ALLOWED IT. SINCE THE ASSESSEE ITSELF HAS AGREED THAT THE EXPENDI TURE OF RS.48.00 LAKHS IS NOT ALLOWABLE, IT HAS VOLUNTARILY DISALLOWED THE SAME ITA NO. 1202 / MUM/20 1 1 4 WHILE COMPUTING THE INCOME. ACCORDING TO THE ASSESSING OFFICER, THE ABOVE SAID SUM OF RS.48.00 LAKHS SHOULD HAVE BEEN OFFERED TO TAX. SINCE THE SOURCE FOR SPENDING THE AMOUNT OF RS.48.00 LAKHS IS AVAILABLE IN THE BOOKS OF ACCOUNT, THE DISALLOWANCE OF THE CLAIM ITSELF WOULD AMOUNT TO OFFERING THE SAME AS INCOME OF THE ASSESSEE. THE QUESTION OF OFFERING THE SAME SEPARATELY WOULD ARISE ONLY, IF SOURCE IS NOT AVAILABLE. IT IS NO BODYS CASE THAT THE SOURCE FOR INCURRING THE EXPENDITURE OF RS.48.00 LAKHS WAS NOT AVAILABLE. ACCORDINGLY, IN OUR VIEW, THE ADDITION OF THE VERY SAME AMOUNT, WHICH HAS ALREADY BEEN DISALLOWED BY THE ASSESSEE WOULD RESULT IN DOUBLE TAXATION OF THE SAME AM OUNT. HENCE, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.48.00 LAKHS. 7. THE NEXT ADDITION RELATES TO THE ALLEGED ON - MONEY RECEIPT OF RS.54 LAKHS AGAINST WHICH A DEDUCTION OF 50% WAS GIVEN TOWARDS EXPENSES AND THE BALANCE AMOUNT OF RS.27.00 LAKHS WAS ASSESSED. THE AO HAS MADE THIS ADDITION BY PLACING RELIANCE ON THE IMPOUNDED DOCUMENT PAGE NO.13, WHEREIN CASH COMPONENT IS STATED AS 40%. THE AO HAS PRESUMED THAT THE ASSESSEE WOULD BE RECEIVING CASH COMPONENT AT TH E SAME LEVEL IN ALL THE CASES AND FURTHER THE CASH COMPONENT REPRESENTS ON - MONEY RECEIPTS. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER DID NOT CORROBORATE HIS PRESUMPTION BY CONDUCTING THE NECESSARY ENQUIRIES WITH THE CONCERNED BUYER. AT LEAST THE AO C OULD HAVE VERIFIED THE BOOKS OF ACCOUNT IN ORDER TO FIND OUT AS TO WHETHER THE SAID TRANSACTION DID MATERIALIZE OR NOT, WHETHER THE SALES HAS BEEN SHOWN AT THE RATES AGREED BY THE BUYER, WHETHER THE CASH COMPONENT HAS BEEN ACCOUNTED FOR OR NOT. IN OUR VIE W, WITHOUT CONDUCTING SUCH TYPE OF ENQUIRIES, IT MAY NOT BE PROPER ON THE PART OF THE AO TO DRAW ADVERSE INFERENCES. WE NOTICE THAT THE LD CIT(A) DELETED THIS ADDITION BY OBSERVING THAT THE FOLLOW UP STATUS IS MENTIONED AS WILL CALL BACK IN PAGE NO.13 O F THE IMPOUNDED DOCUMENTS, I.E., THE LD CIT(A) ITA NO. 1202 / MUM/20 1 1 5 PRESUMED THAT THE SAID SALE TRANSACTION DID NOT MATERIALIZE. HE ALSO DID NOT VERIFY THE BOOKS OF ACCOUNT TO FIND OUT FACTUAL ASPECTS. THE LD CIT(A) HAS ALSO NOTICED THAT, IN SOME OTHER DOCUMENTS, THE CASH CO MPONENT IS STATED AS 10%, MEANING THEREBY, THE LD CIT(A) HAS ALSO GRANTED RELIEF ON PRESUMPTIONS. 8. WE HAVE EARLIER NOTICED THAT THE ASSESSEE ITSELF HAS OFFERED ON - MONEY RECEIPT OF RS.77.00 LAKHS. IN THE PAPER BOOK, THE WORKING OF ON - MONEY RECEIPT IS FURNISHED BY THE ASSESSEE. HENCE, IN OUR VIEW, THE AO SHOULD HAVE EXAMINED THE SAID WORKINGS WITH THE DOCUMENTS IMPOUNDED DURING THE COURSE OF SEARCH IN ORDER TO FIND OUT THE VERACITY OF THE SAID WORKINGS. THE NECESSITY OF ESTIMATION WOULD ARISE ONLY IF THE AO DID NOT AGREE WITH THE WORKINGS FURNISHED BY THE ASSESSEE. SINCE, THIS EXERCISE WAS NOT DONE, IN OUR VIEW, THIS ISSUE REQUIRES FRESH EXAMINATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF TH E AO WITH THE DIRECTION TO EXAMINE THE OFFER OF RS.77.00 LAKHS WITH THE IMPOUNDED DOCUMENTS AND TAKE APPROPRIATE DECISION THEREON IN ACCORDANCE WITH THE LAW. THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 11TH SEPT, 2015. 11TH SEPT , 2015 S D SD ( AMARJIT SINGH ) ( B.R. BASKARA N) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 11TH SEPT , 2015 . ITA NO. 1202 / MUM/20 1 1 6 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITA T, MUMBAI