DCIT, Central Circle-1(2), Ahmedabad V. Shri Pushkar Construction Co., Ahmedabad

ITA 1452/AHD/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6952 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 31-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 28; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL AT AHMEDABAD] BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER I .T .A . N o . 14 52 /A h d /2 01 8 ( A s s e s s me nt Y ea r : 20 1 5- 16 ) DC I T C e ntr a l C ir c le - 1 ( 2 ), Ah me da bad Vs . Sh ri P u s h ka r C o ns t r uc ti o n C o. 40 3, A a s t ha n C o m p le x , O p p . Po l yt ec hn ic , A mb a w a d i, A h m e da ba d [ P AN N o. A B M F S4 28 3 N ] (Appellant) .. (Respondent) Assessee by : Shri Vartik Chokshi, AR Revenue by : Shri Vijaykumar Jaiswal, CIT DR & Mukesh Jain, Sr. DR D a t e of H ea r i ng 24.02.2022 D a t e of P r o no u n ce me nt 14.03.2022 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 28.03.2018 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the order dated 29.12.2016 passed by the ACIT, Central Circle-1(2), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for A.Y. 2015-16. 2. The brief facts leading to the case is this that the assessee, a builder and developer constructing residential flats has filed its return of income for the year under consideration on 30.09.2015 declaring total income at Rs. 18,30,020/-. ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 2 - A search action was conducted in the case of one Ashit Haribhai Vora on 04.12.2014 during which documents marked as Annexure-A/8 containing 37 pages pertain/pertains to the assessee company were found in respect to Pushkar-III and Pushkar-IV developed by the appellant. The verification and examination of those documents revealed that the assessee had not reflected certain business transaction both (Cash Receipts & Payments) in its regular books of accounts as the primary finding made by the Ld. AO whereupon show-cause was issued on 13.12.2016 as to why the cash receipts on sale of flats over and above the documents price, which were not found recorded in the books of accounts of the assessee would not be added to assessee’s income. As per the tabulate sheet made by the Revenue the total gross receipt as per return of income of the assessee for the year under consideration is of Rs. 4,54,41,000/- and the amount of cash considering 41% of sale consideration was of Rs. 3,15,77,644/-. In reply to the show-cause the assessee submitted the following: “5. In response the show cause notice the assessee filed written submission on 22.12.2016 and objected the proposed additions on the following grounds: A. The assessee firm has not received any unaccounted money/cash and all the receipts of relevant projects are received through cheque and the same are properly recorded in the books of accounts. B. The material found from premises of another person (Shri Asit Vora), does not belong to the assessee firm. It merely refers to the name of the projects undertaken by the firm and represents rough noting only and noting more. C. The assessee firm has gone through the seized material and verified the same with its books of account and ultimately stated that this material has no relation the income of the assessee firm. ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 3 - D. The word "cash" is not written anywhere in the pages seized from the residence of Shri Asit Vora. It is only presumption of the department. E. The assessee has taken unsecured of Rs. 6,58,00,000/- during F.Y. 2008-09 and 2009-10 and it was agreed upon with the REPL that the loan will be repaid within specified period. In case of nonpayment within time limit, REPL will be entitled to recover the Joan amount from selling of certain residential units of the assessee firm (Total 30 Flats) directly to the buyers and the sell proceeds received by this assessee in this regard will be paid immediately to REPL. The assessee is not aware of any cash portion/transactions out of book on sell of said flats. Necessary evidence regarding payment through cheque made to REPL is also attached with the reply. F. The proposed additions as per Para 3, 3.3, 3.4, and 4 of the show cause notice dtd.13,12.2016 are based on mere estimation based on rough work done on certain pages and the same has no relevance with the assessee firm and therefore, the same cannot be relied upon for reaching any conclusion. G. Clarifying the observation made in para 3.2 of show cause notice the assessee submitted that the information relates to values as per deed registered with stamp duty authority and the actual sell value units are higher than the amount reflected in the said paragraph because extra finishing work was done at the request of buyer and the cost of the same also received and reflected in books of account. The alleged cash receipts mentioned against certain persons to whom REPL has sold flats might have been received by it without the assessee's knowledge H. The proposed addition on the basis on assumed ration of 41% of total sales consideration being received in cash is based on presumptions and the same does not survive. The sales consideration were received by cheque only and it is properly recorded in books of account. The observations of para 4 of show cause notice do not relates/belongs to the assessee firm and therefore, the same should not be treated as relevant material for the case of the assessee. 3. However, the plea taken by the assessee was not found acceptable and ultimately the Ld. AO came to a final finding that the actual price of flats sold/book for sale was much higher than that of the price mentioned in the registered documents. The difference between document price and the actual price received by the firm was not accounted for in the regular books of accounts. The said unaccounted amount represents 41% of the total value of the flats booked/sales. Applying the ratio on gross receipt ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 4 - of 4,54,41,000/- as disclosed by the assessee in the return of income, the unaccounted on-money cash received by the assessee was worked out at Rs. 3,15,77,644/- which was added to the total income of the assessee. The same was deleted by the Ld. CIT(A). Hence, the instant appeal before us. 4. The contention of the assessee before the appellate authority and before us as well is this that the addition should be restricted to the net profit on alleged on money receipts reflected in seized material found from the premises of the third party. 5. During the course of appellate proceeding the appellant contended that it had taken unsecured loan of Rs. 6,58,00,000/- from Rajshah Enterprises Pvt. Ltd. (REPL) in the F.Y. 2008-09 and 2009-10 which were recorded in the books of account and it was agreed upon between the parties that in the event the loan was not paid within the specified period, REPL would be entitled to recover its loan from the sale of certain residential units of the Appellant Firm. As the appellant could not repay such loan within the agreed period those flats were sold by REPL directly to the buyers and cheques received towards such sale were received by the Appellant Firm which were immediately transferred to REPL. The corroborating documents being the ledger account of REPL from its books of account and the bank book were duly submitted by the appellant. The assessee further submitted that the assessee was not aware regarding any on-money/cash received by REPL on sale of such flats hence the noting mentioned in the loose paper found from the premises ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 5 - of Ashit Vora does not belong to the appellant. Such alleged receipt represents the income of REPL and not the appellant. Further that the seized paper referred by the AO were not written by the employees or partners of the Appellant Firm, neither signed by them, nor found from the residential premises of any partner of the Appellant Firm. It was mentioned that Shri Ashit Vora was not a partner of the appellant company. 6. The case made out by the appellant is this that if addition on on- money is required to be made it should be restricted to net profit on alleged on-money mentioned in the loose paper pertaining to few units sold by the Appellant Firm and any extrapolation of such on-money on entire scheme in all the Assessment Years cannot be made in the absence of any evidence brought by the Ld. AO to prove that the appellant has received on-money in each and every unit/flat sold by it particularly when no statement of any buyer was recorded by the AO to prove his contention of receipt of on-money on the entire scheme. It appears that the AO has taken into consideration Rs. 1,81,72,500/- for Pushkar – III and Rs. 1,69,49,500/- for Pushkar – IV as on-money received by the assessee. The AO has computed ratio of on-money at 41% based upon on-money receipts in comparison with total receipt for few units reflected in seized material and such ratio has been applied on total turnover shown in regular books of account for all the Assessment Years which includes scheme of Pushkar – III and Pushkar – IV and all the other schemes. Therefore, the AO has extrapolated on-money receipts of 41% of entire turnover which according to us is not sustainable on assumption ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 6 - and presumption basis particularly when the cheque receipts for two schemes is Rs. 3.24. crores as reflects from the loose papers as against gross receipts shown in the books of account from A.Y. 2010-11 to 2015- 16 for Rs. 53.32 croes. According to the Ld. AO similar material related to Pushkar Infrastructure was also found during the course of search at third party which proves that the appellant is taking on-money on all the units but such contention cannot be accepted as Pushkar Infrastructure is altogether a different entity and have no relevance on the appellant’s case. 7. Further taking into consideration this particular fact that the search was carried out in the case of one Ashit Vora on 04.12.2014 and the notices are issued in the case of the appellant on 18.06.2016 followed by the assessment order passed on 29.12.2016 we do not find any recording of statement of buyers whose sales have been recognized all the years by the Ld. AO. No clinching evidence of receipt of on-money on the entire sales made by the appellant is found in the absence of which extrapolation of income simply based on few flimsy instances is not sustainable. On this aspect we have considered several judgments passed by the different Benches including the Coordinate Benches in the case of M/s. Amar Corporation in ITA No. 2041/Ahd/2007 dated 31.03.2011 on an identical fact there was no material found in the possession of the Ld. AO which could conclusively demonstrate that in respect of the other flats the assessee had in fact charged “on-money” from the customers. Once the ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 7 - Revenue department has taken the extreme step of conducting a raid on assessee, then it is expected to unearth other company of unrecorded money, but at the same time the fact was that neither any unaccounted money was recorded nor any such document was found in the possession of the assessee through which it could have been held that the assessee was in practice of charging on-money on other flats as well as the observation made by the Coordinate Bench. Under this premise extrapolation made in that particular case was found to be incorrect. Such decision passed by the Coordinate Bench also been affirmed by the Hon’ble Jurisdictional High Court in Tax Appeal No. 26 of 2012 dated 18.07.2012. We have further considered the judgment passed by the Coordinate Bench in the case of ACIT vs. Dhara Associates in ITA No. 1945/Ahd/2007 dated 26.08.2007 the judgment in the case of Shri Kiran J. Trivedi vs. DCIT in IT(SS)A No. 63 to 65 & 100 to 102/Ahd/2014 dated 18.04.2017. All the judgments laid down the ratio on the same line as we have already discussed hereinabove. 8. The AO is only empowered to confine himself on the incriminating material found during the course of search and material is to be treated as true and correct. In our considered opinion, when the Revenue is in possession of the incriminating material wherein certain sales instances were found recorded in respect of specific amount of on- money alleged to have been charged by the assessee on the sale of flats the AO should have made addition only in respect of those sales instances and not extrapolate the said amount of on-money merely on presumption on the entire sale. Thus, we find extrapolation of the entire ITA No.1452/Ahd/2018 DCIT vs. Shri Pushkar Construction Co. Asst.Year –2015-16 - 8 - income of appellant in all the assessment years based upon on-money receipts reflected in the loose paper pertaining to few units sold by the appellant is found to be unjustified and on that basis addition is required to be restricted only to the undisclosed income of the assessee to the tune of Rs. 1,81,72,500/- for Pushkar-III and 1,69,49,500/- for Pushkar-IV. Remaining addition deserves to be deleted as has been rightly held by the Ld. CIT(A) without any ambiguity so as to warrant interference. Thus, Revenue’s appeal is found to be devoid of any merit and hence dismissed. 9. In the result, the appeal preferred by the Revenue is dismissed. This Order pronounced in Open Court on 14/03/2022 Sd/- Sd/- (WASEEM AHMED) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 14/03/2022 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 08.03.2022 2. Date on which the typed draft is placed before the Dictating Member 08.03.2022 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 14 .03.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement 14.03.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S 15 .03.2022 7. Date on which the file goes to the Bench Clerk 15 .03.2022 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................