Nishant Construction Pvt. Ltd., Ahmedabad V. The ACIT, Circle-5, Ahmedabad

ITA 1502/AHD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9284 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 27-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Sale consideration of property below Jantri Value; Loose papers; Sham transactions; Set aside; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 50C; 133A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 1502/AHD/2015 (ASSESSMENT YEAR: 2011-12) NISHANT CONSTRUCTION PVT. LTD. 801-802, REGENCY PLAZA, ANANDNAGAR ROAD, SATELITE, AHMEDABAD V/S ACIT, CIRCLE-5, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACN 3752B APPELLANT BY : SHRI S. N. SOPARKAR & PARIN SHAH, AR RESPONDENT BY : MS. VIBHA BHALLA, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 07 -02-201 7 DATE OF PRONOUNCEMENT : 14 -02-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)- 9, AHMEDABAD DATED 09.03.2015 PERTAINING TO A.Y. 20 11-12. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE RELATES TO THE A DDITIONS MADE ON ACCOUNT OF ALLEGED ON MONEY RECEIPT OF RS. 25.66 CR ORES IN RESPECT OF RATNAKAR III SCHEME AND RS. 6.90 CRORES IN RESPECT OF RATNAKAR IV SCHEME TOTALING TO RS. 32.56 CRORES . 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F DEVELOPMENT OF REAL ESTATE. THE ASSESSING OFFICER FOR THE ASSESSME NT YEAR 2011-12 HAD MADE ADDITIONS OF RS. 32.56 CRORES (ROUNDED OFF) BY WAY OF ON MONEY RECEIPTS OF THE ASSESSEE RELYING ON THE DOCUMENTS I MPOUNDED DURING THE SURVEY. HE HAD ALSO RELIED ON THE PRICES OF PROPERT Y IN THE LOCALITY. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CO MMISSIONER. COMMISSIONER, WHILE REJECTING THE APPEAL OF THE ASS ESSEE, PLACED RELIANCE ON HER ORDER IN APPEAL IN CASE OF ONE M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. FOR THE ASSESSMENT YEAR 20 12-13 TO CONCLUDE THAT THE PRACTICE OF RECEIVING ON MONEY IN SUCH BUSINESS IS RAMPANT. SHE REFERRED TO STATEMENTS OF VARIOUS PERSONS RECORDED IN SUCH ASSESSMENT PROCEEDINGS THAT THE FLATS IN THE SCHEME WERE SOLD AT THE PRICE RANGING BETWEEN 1.4 CRORE AND 1.5 CRORE WHEREAS THE VALUE S HOWED IN THE BOOKS OF ACCOUNTS WAS RANGING FROM RS. 32 LACS TO 44.50 L ACS. SHE, THEREFORE, CONCLUDED THAT FACTS EMERGING FROM THE ASSESSMENT O F M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. WOULD PROVE THAT THE PRACT ICE OF ACCEPTING ON MONEY IS RAMPANT IN THE REAL ESTATE BUSINESS, IN CO NTRAST TO THE CONTENTION OF THE ASSESSEE THAT THERE IS NO SUCH PRACTICE PREVAILING IN TRADE. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 3 4. ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL AND THE TRIBUNAL AFTER CONSIDERING MATERIALS ON RECORD AND IN PARTICULAR, THE FINDINGS OF THE LD. CIT(A) REMANDED THE PROCEEDINGS FOR FRESH CONSIDERA TION OF LD. CIT(A) BY DIRECTING THE LD. CIT(A) TO CONFRONT THE ASSESSEE W ITH THE FACTS OF SAMBHAV INFRASTRUCTURE PVT. LTD. AND TO ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY TO SHOW AS TO HOW THE OBSERVATIONS MADE IN SAMBHAV INFRASTRUCTURE PVT. LTD WOULD APPLY TO THE FACTS OF THE ASSESSEE. 5. THE ASSESSEE ASSAILED THE ORDER OF THE TRIBUNAL BEF ORE THE HONBLE HIGH COURT OF GUJARAT. IT WAS STRONGLY CONTENDED THAT TH E CASE BEFORE THE TRIBUNAL WAS THAT THE LD. CIT(A) COULD NOT HAVE CON FIRMED THE ORDER OF THE ASSESSMENT WITH THE AID OF ANY MATERIAL ON RECORD I N CASE OF ANOTHER ASSESSMENT PROCEEDINGS. THE HONBLE HIGH COURT OBSE RVED AS UNDER:- TO MAKE IT CLEAR, THE ASSESSEE CONCEDES BEFORE US THAT THERE IS NO REQUIREMENT OF PLACING ADDITIONAL MATERIALS OR SEEKING CROSS-EX AMINATION IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS AND THE MATERIALS OF SUC H ASSESSMENT IN CASE OF M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. AND THAT THE ASSES SEE WOULD BE SATISFIED, IF THE TRIBUNAL WERE TO DECIDE ALL LEGAL CONTENTIONS OF TH E ASSESSEE INCLUDING THAT THE ASSESSMENT IN CASE OF M/S. SAMBHAV INFRASTRUCTURE P VT. LTD. AND COLLECTED MATERIALS WOULD NOT ESTABLISH THE FACT OF ON MONEY RECEIPT IN CASE OF THE ASSESSEE. 8. WE NOTICE THAT THE TRIBUNAL HAD NOT CONSIDERED O THER ASPECTS OF THE MATTER. UNDER THE CIRCUMSTANCES, IN VIEW OF THE CONCESSION MADE BY THE COUNSEL FOR THE ASSESSEE, WE SET ASIDE THE ORDER OF THE TRIBUNAL AN D REQUEST THE TRIBUNAL TO HEAR THE ASSESSEE'S APPEAL ON THE BASIS OF MATERIALS ON RECORD PERMITTING ALL LEGAL CONTENTIONS TO BOTH SIDES. TAX APPEAL ALONGWITH CIV IL APPLICATION IS DISPOSED OF ACCORDINGLY. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 4 6. PURSUANT TO THE AFOREMENTIONED ORDER OF THE HONBLE HIGH COURT, RIVAL SUBMISSIONS WERE HEARD AT LENGTH. CASE RECORDS WERE CAREFULLY PERUSED AND WITH THE ASSISTANCE OF THE LD. SENIOR COUNSEL, RELE VANT DOCUMENTARY EVIDENCES AND THE JUDICIAL DECISIONS RELIED UPON HA VE BEEN CONSIDERED IN THE LIGHT OF RULE 18(6) OF THE INCOME TAX APPELLATE TRIBUNAL RULES. 7. A SURVEY U/S. 133A WAS CARRIED OUT BY INVESTIGATION WING, AHMEDABAD AT THE VARIOUS PREMISES OF M/S. NISHANT CONSTRUCTION P VT. LTD. AND ITS RELATED CONCERNS ON 19.05.2011. ON THE BASIS OF THE FINDING S GIVEN IN THE SURVEY REPORT, THE A.O. ISSUED SHOW CAUSE NOTICE TO THE AS SESSEE WHICH READS AS UNDER:- '2. A SURVEY WAS CONDUCTED BY THE INVESTIGATION W ING, AHMEDABAD ON 19/05/2011 WHEREIN YOUR FOLLOWING BUSINESS PREMISES WERE COVERED: NAME ADDRESS NISHANT CONSTRUCTION PVT.LTD, 801-802, REGENCY PLAZA, OPP RAHUL TOWER, ANANDNAGAR CROSS ROAD, SATELLITE, AHMEDABAD SITE OFFICE OFRATNAKARLLL PRERNATITH DERASAR ROAD, ANANDNAGAR CROSS ROAD, SATELLITE, AHMEDABAD SITE OFFICE OFRATNAKAR IV ANANDNAGAR CROSS ROAD, SATELLITE, AHMEDABAD SITE OFFICE OF RICHMOND GRAND BEHIND DNA, NR. TORRENT POWER, MAKARBA ROAD, ODD S,G. HIGHWAY, PRAHLADNAGAR, AHMEDABAD ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 5 3. THE SURVEY REPORT PREPARED BY DDIT (LNVESTIGATIO N), UNIT - 1(3) AHMEDABAD, WAS FORWARDED TO THIS OFFICE. DOCUMENTS IMPOUNDED D URING THE COURSE OF SURVEY WERE ALSO FORWARDED TO THIS OFFICE. THE SURVEY REPO RT AND THE IMPOUNDED DOCUMENTS HAVE BEEN EXAMINED BY THIS OFFICE. IT IS SEEN FROM PAGE 130 OF ANNEXURE BF-17 (COPY ENCLOSED FOR YOUR READY REFERE NCE) WHICH WAS RECOVERED FROM YOUR SITE OFFICE OF RATNAKAR-IV AT ANANDNAGAR CROSS ROAD, SATELLITE, AHMEDABAD DURING THE COURSE OF SURVEY, THAT THIS PA PER CONTAINS CERTAIN NOTINGS. THESE NOTINGS CLEARLY DESCRIBE THE AREA AND THE RAT E. THE AREA OF 3 BEDROOM AND 4 BEDROOM FLATS GIVEN ON THIS PAGE CLEARLY INDICATE THAT THE NOTINGS PERTAIN TO RATNAKAR II! PROJECT AS THE AREA OF THE 3 BEDROOM F LATS AND 4 BEDROOM FLATS MENTIONED ON THE PAGE ARE AS PER THE ACTUAL AREA OF THE SAID FLATS IN RATNAKAR-LLL. IN THE FIFTH LINE OF THIS PAGE, RATE IS MENTIONED A T RS. 43007- PER SQUARE FT. THE NOTINGS ON THE FOLLOWING LINES ARE '35% ON BOOKING' AND '65% (21 INSTALLMENTS)'. IT IS SEEN THAT WHEN THESE NOTINGS ARE READ IN CONJ UNCTION WITH ANOTHER SHEET OF PAPER IMPOUNDED FROM THE SAME PREMISES AND INVENTOR ISED AS PAGE 129 OF ANNEXURE - BF17 (COPY ENCLOSED), THE NOTINGS CAN BE CLEARLY UNDERSTOOD. PAGE 129 OF BF-17 (AS ENCLOSED) REFERS TO THE DETAILS OF TRANSACTIONS IN RESPECT OF FLAT NO. C/1 104 OF RATNAKAR -III PROJECT. THE SHEET CAR RIES THE NAMES, PAN AND ADDRESSES OF BUYERS, AREA OF THE FLAT, TOTAL CONSID ERATION AND CHEQUE PAYMENTS. AREA OF THE FLAT IS 2610 SQ. FT. THE RATE MENTIONED ON PAGE NO. 130 IS RS. 4300 PER SQ.FT. THE PRICE OF THE SAID FLAT OBTAINED BY MULTI PLYING ITS AREA WITH THE RATE COMES TO RS. 1,12,23,0007-. FIAT C/1104 OF RATNAKAR -L/F PROJECT HAS BEEN SOLD TO ONE MRS. INDRANI ROY. THIS FACT IS ALSO SEEN FROM T HE DETAILS OF FLAT-WISE SATES SUBMITTED BY YOUR AR VIDE SUBMISSION DATED 21/02/20 14 RECEIVED IN THIS OFFICE ON 24/02/2014. AS PER THE SUBMISSION MADE BY YOUR AR, THE SALE DEED FOR THE FLAT IS DATED 30/12/2011 AND YOU HAVE APPORTIONED PART OF T HE REVENUE TO FY 2010-11 I.E. AY 201 F-12. AS PER THE SUBMISSION OF YOUR AR, THE RATE PER SQ. FT. IS RS. 1777 FOR THIS FLAT. HOWEVER, AS OBSERVED ABOVE, THE ACTU AL RATE FOR THE SAME IS RS, 4300/- AS SEEN FROM PAGE 130 OF ANNEXURE BF-17 (AS ENCLOSED). THUS, CLEARLY YOU HAVE RECEIVED THE REMAINING SUM OF RS. 65,85,030/- ((4300-1777)*2610 SQ. FT.) BY WAY OF CASH I.E. ON-MONEY. THIS MEANS THAT AS A PER CENTAGE OF TOTAL CONSIDERATION YOU HAVE RECEIVED CLOSE TO 60% AS ON- MONEY IN THE INSTANT CASE. A COMPLETE CHART OF ALL YOUR SALES OF FIATS OF RATNAK AR-LFF HAS BEEN WORKED OUT BY TAKING THE RATE OF RS. 4300 PER SQ. FT. AS MENTIONE D ON THE SHEET OF PAPER FOUND FROM YOUR PREMISES, MULTIPLYING IT WITH THE AREA OF EACH FLAT AND COMPARING IT WITH THE VALUE YOU HAVE BOOKED IN YOUR BOOKS. THE D IFFERENCE BETWEEN CALCULATED VALUE AND THE VALUE DECLARED BY YOU IS THEN APPORTI ONED ACROSS DIFFERENT YEARS IN THE SAME RATIO AS YOU HAVE APPORTIONED IT IN YOUR S UBMISSION DATED 21/02/2014. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 6 IT IS SEEN THAT AS PER THE CALCULATION ABOVE, AN AM OUNT OF RS. 25,66,17,425/- IS CALCULATED AS ON-MONEY RECEIPTS IN THE FINANCIAL YE AR RELEVANT TO AY 2011-12 BY TAKING THE ACTUAL RATE OF RS. 4300 PER SQ. FT, AND APPORTIONING THE RESULTANT CONSIDERATION AS PER THE RATIO IN WHICH YOU HAVE YO URSELF ALLOCATED THE RECEIPTS TO AY 2011-12. 4. FURTHERMORE, IT IS SEEN THAT SOME OF THE SALE PR OCEEDS OF YOUR RATNAKAR-IV PROJECT HAVE ALSO BEEN APPORTIONED TO AY 2011-12. F OLLOWING THE SAME METHODOLOGY AS ABOVE, A SUM OF RS. 6,90,80,980/- IS ASCERTAINED TO BE THE ON- MONEY RECEIPTS IN YOUR CASE FOR THE SAID YEAR. CHAR T OF THE WORKING OF THE SAME IS ENCLOSED. 5. YOU ARE HEREBY, DIRECTED TO SHOW-CAUSE WHY THE A BOVE MENTIONED SUM OF RS, 25,66,17,425/- IN RELATION TO RATNAKAR- III AND A S UM OF RS. 6,9Q,80,980/- IN RELATION TO RATNAKAR - IV SHOULD NOT BE TREATED AS UNDISCLOSED INCOME RECEIVED BY WAY OF CASH BY YOU FOR AY 2011-12.' 8. IN RESPONSE TO THE ABOVE SHOW CAUSE, THE ASSESSEE F URNISHED A DETAILED REPLY STRONGLY CONTENDING THAT THE SHEET OF PAPER B EING RELIED UPON FOR CALCULATING THE QUANTUM OF ON MONEY IS NOT CORRECT. THE ASSESSEE EXPLAINED THAT IT HAS NOT RECEIVED ANY ON MONEY. IT WAS BROUG HT TO THE NOTICE OF THE A.O. THAT NO NAME HAS BEEN STATED ON TOP OF THE ALL EGED LOOSE SHEET FOUND AT THE TIME OF SURVEY. THEREFORE, IT CANNOT BE SAID TO BE PERTAINING TO RATNAKAR III SCHEME. THE ASSESSEE ALSO DENIED THAT THE LOOSE SHEET BELONGS TO IT. 9. THE DETAILED SUBMISSIONS OF THE ASSESSEE ALONG WITH DOCUMENTARY EVIDENCES DID NOT FIND ANY FAVOUR WITH THE A.O. THE A.O. WAS OF THE FIRM BELIEF THAT THE HOUSING PROJECTS OF THE ASSESSEE AR E LOCATED IN SOME OF THE MOST PROMISING AND ESTABLISHED SATELLITE AND ANANDN AGAR AREAS OF AHMEDABAD. THE A.O. OBSERVED THAT THE ASSESSEE HAS SOLD ALL ITS FLATS IN RATNAKAR III AT RATES RANGING FROM RS. 958 SQ. FT. TO RS. 2000 PER SQ. FT. AND ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 7 IN RATNAKAR IV, THE RATES RANGE BETWEEN 1400 TO RS. 2600 PER SQ. FT. SINCE THE RATE MENTIONED ON THE IMPOUNDED LOOSE SHEET WAS AT RS. 4300 PER SQ. FT., THE A.O. CAME TO THE CONCLUSION THAT THE ASSES SEE HAS RECEIVED ON MONEY OVER AND ABOVE THE SALE CONSIDERATION SHOWN I N THE SALE DEEDS. 10. IN SUPPORT OF HIS STRONG BELIEF, THE A.O. TOOK A SN AP SHOT OF THE ADVERTISEMENT OF A FLAT IN RATNAKAR III FROM THE WE BSITE 99ACRES.COM WHEREIN THE ADVERTISEMENT CLEARLY SHOWS THE PRICE O F A 3-BEDROOM FLATS AT RS. 2.14 CRORES AT RS. 6300 PER SQ. FT. THE A.O. WA S OF THE OPINION THAT THE WEBSITE LIKE 99ACRES.COM AND MAGICBRICKS.COM REPORT THE PREVAILING MARKET PRICES OF VARIOUS PROPERTIES. 11. THE A.O. FURTHER EXAMINED THE MARKET RATES BY THE T REND IN PROPERTY PRICES SHOWN IN THE WEBSITES OF 99ACRES.COM AND MAGICBRICK S.COM. AFTER COMPARING THE TREND RATES FROM THE WEBSITES, THE A. O. FOUND THAT THE AVERAGE MARKET RATE WAS RS. 4304 PER SQ. FT. WHICH IS ALMOST EXACTLY THE AMOUNT MENTIONED ON THE SAID LOOSE SHEET FOUND AT T HE TIME OF SURVEY. 12. AFTER VISITING THE AFORE-STATED WEBSITES AND COMPAR ING THE PREVAILING MARKET RATES, THE A.O. FINALLY CAME TO THE CONCLUSI ON THAT THERE IS CERTAINLY NO DOUBT THAT THE ASSESSEE RECEIVED ON MONEY BY WAY OF CASH IN RELATION TO SALE OF ITS ENTIRE FLAT IN RATNAKAR III AND RATNAKA R IV SCHEMES. TAKING THE RATE OF RS. 4300 PER SQ. FT., AS THE BASE RATE, THE A.O. MADE THE ADDITION OF RS. 32,56,98,405/- WHICH COMPRISES OF RS. 25.66 CRO RES IN RELATION TO RATNAKAR III AND RS. 6.90 CRORES IN RELATION TO RAT NAKAR IV SCHEMES. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 8 13. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 14. AS MENTIONED ELSEWHERE, THE LD. CIT(A) CONFIRMED TH E ASSESSMENT ORDER ON THE BASIS OF THE FINDINGS GIVEN IN THE CASE OF M/S. SAMBHAV INFRASTRUCTURE PVT. LTD. 15. THE BONE OF CONTENTION IS THE LOOSE SHEET FOUND DUR ING THE COURSE OF SURVEY IN WHICH THE ENTRIES ARE AS UNDER:- * 3 BED ROOM = 2620 SQ. FT. PENT HOUSE = 4100 SQ. FT. * 4 BED ROOM = 3400 SQ. FT. PENT HOUSE = 5450 SQ. FT. * RATE (REGULAR) 4300 RS. PER SQ. FT. = 35% ON BOOKING = 65% (21 INSTALLMENTS) * (D.P.) = 10 LACS POSSESSION BY 2 YEARS * EXTRA PAYMENT = RS. 12,00,000/- MAINTEANCE 2 CAR PARKING ACC (AUDA CHARGES) STAMP DUTY 16. IT CAN BE SEEN FROM THE ABOVE THAT THERE IS NO MENT ION OF ANY SCHEME OF THE ASSESSEE, BE IT RATNAKAR III OR RATNAKAR IV. IN THE LOOSE SHEET, THERE IS A REFERENCE TO PENT HOUSE BUT THERE IS NO PENT HOUSE IN RATNAKAR III SCHEME. FURTHER IN THE LOOSE SHEET, THERE IS A REFERENCE TO 4-BEDROOM FLATS BUT THERE ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 9 IS NO 4-BEDROOM FLAT IN RATNAKAR IV SCHEME. FURTH ER, THE AREA OF PENT HOUSE MENTIONED IN THE LOOSE SHEET IS 5450 SQ. FT. WHEREAS THE AREA OF PENT HOUSE IN RATNAKAR IV SCHEMES IS ONLY ON 2520 SQ. FT . THE ASSESSEE MAY CONCEAL THE CONSIDERATION BUT BY ANY STRETCH OF IMA GINATION, THE ASSESSEE CANNOT CONCEAL THE CARPET AREA OF THE FLATS. 17. A COMPARISON OF THE LOOSE SHEET WITH THE ACTUAL SIZ E OF FLATS IN RATNAKAR III AND RATNAKAR IV SCHEMES WOULD SHOW THAT THIS LOOSE SHEET HAS NO RELEVANCE WITH THE ACTUAL PROJECT OF THE ASSESSEE. 18. WE FIND THAT THE ASSESSEE HAS GIVEN COMPLETE DETAIL S OF THE PURCHASERS ALONG WITH THEIR ADDRESSES AND PAN NUMBERS. THE SAM E ARE EXHIBITED FROM PAGES 2 TO 8 OF THE PAPER BOOK. NONE OF THESE PURCH ASERS WERE EXAMINED BY THE A.O. NOR BY THE FIRST APPELLATE AUTHORITY. E XCEPT FOR THE LOOSE SHEET OF PAPER, THERE IS NOTHING ON RECORD TO PROVE THAT THE ASSESSEE HAS ACTUALLY RECEIVED SUM ON MONEY. 19. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE OBSERV ATIONS OF THE LOWER AUTHORITIES TO THE EFFECT THAT NO ONE MAKES A LOSS IN REAL ESTATE BUSINESS AND THAT THE MARKET PERCEPTIONS INDICATE THAT THE P RICES OF THE IMMOVABLE PROPERTIES ARE ALWAYS ON THE UPWARD TREND. IT APPEA RS THAT BOTH THE LOWER AUTHORITIES HAVE BEEN CARRIED AWAY WITH THE NOTORI OUS PRACTICE PREVAILING IN REAL ESTATE CIRCLES THAT IN ALL PROPERTY TRANSAC TIONS, THERE IS NON-DISCLOSURE OF THE FULL CONSIDERATION. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 10 20. I N LALCHAND BHASAT AMBICA RAM VS. CIT: (1959) 37 ITR 288, THE SUPREME COURT DISAPPROVED THE PRACTICE OF MAKING ADDITIONS IN THE ASSESSMENT ON MERE SUSPICION AND SURMISES OR BY TAKING NOTE OF TH E 'NOTORIOUS PRACTICE' PREVAILING IN TRADE CIRCLES. IT WAS OBSERVED AS UND ER: 'ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FO R SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIR ED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPEL LANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MER CHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF.' 21. SEVERAL DECADES BACK THE MADRAS HIGH COURT IN THE C ASE OF SHRI RAMALINGA CHOODAMBIKAI MILLS LTD. VS. CIT: (1955) 28 ITR 952 HELD THAT IN THE ABSENCE OF ANY EVIDENCE TO SHOW EITHER THAT THE SALES WERE SHAM TRANSACTIONS OR THAT THE MARKET PRICE WERE IN FACT PAID BY THE PURC HASERS, THE MERE FACT THAT GOODS WERE SOLD AT A CONCESSIONAL RATE WOULD N OT ENTITLE THE INCOME TAX DEPARTMENT TO ASSESS THE DIFFERENCE BETWEEN THE MARKET PRICE AND THE PRICE PAID BY THE PURCHASER AS PROFIT OF THE ASSESS EE. IN CIT VS. A. RAMAN & CO.: (1968) 67 ITR 11 THE SUPREME COURT HELD THAT T HE LAW DOES NOT OBLIGE A TRADER TO MAKE THE MAXIMUM PROFIT THAT HE CAN OUT O F HIS TRADING TRANSACTIONS. INCOME WHICH ACTUALLY ACCRUES IS TAXA BLE, BUT INCOME WHICH THE ASSESSEE COULD HAVE, BUT HAS NOT IN FACT EARNED , IS NOT MADE TAXABLE. THESE TWO JUDGMENTS WERE APPROVINGLY NOTICED AND AP PLIED BY THE SUPREME COURT IN CIT VS. CALCUTTA DISCOUNT CO. LTD. : (1973) 91 ITR 8. THESE JUDGMENTS APPLY TO THE PRESENT CASE IN FAVOUR OF TH E ASSESSEE. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 11 22. IN OUR CONSIDERED OPINION, THE ASSESSING AUTHORITY HAS NO POWER TO DISTURB THE SALE PRICE SHOWN EXCEPT IN THREE CASES. THE FIR ST IS UNDER SECTION 145 OF THE ACT. WHERE THE SALE OF PROPERTIES IS PART OF TH E BUSINESS OF THE ASSESSEE, THE ASSESSING OFFICER, IF HE IS OF THE OPINION THAT THE ACCOUNTS ARE NOT CORRECT AND COMPLETE, MAY PROCEED TO REJECT THE BOO KS OF ACCOUNTS AND THEREAFTER MAKE A BEST JUDGMENT ASSESSMENT OF THE I NCOME IN THE MANNER PRESCRIBED BY SECTION 144. THE SECOND IS THE CASE W HERE SECTION 50C OF THE ACT IS INVOKED ON THE BASIS OF THE PRICES FIXED BY THE STAMP VALUATION AUTHORITIES OF THE STATE GOVERNMENT. THAT SECTION, IT IS POINTED OUT, HOWEVER, APPLIES ONLY IN THE COMPUTATION OF CAPITAL GAINS AND CANNOT BE AVAILED BY THE REVENUE WHERE THE PROFITS OF THE BUS INESS ARE TO BE COMPUTED. 23. THE THIRD IS THE CASE OF SECTION 92BA INSERTED BY T HE FINANCE ACT, 2012 W. E. F. 01.04.2013. THIS SECTION GIVES POWER TO THE ASSE SSING OFFICER TO RECALCULATE THE PROFITS SHOWN BY THE ASSESSEE IN CA SES OF SPECIFIED DOMESTIC TRANSACTIONS, WHERE THE AGGREGATE OF SUCH TRANSACTIONS ENTERED INTO IN THE RELEVANT ACCOUNTING YEAR EXCEEDS A SUM OF RS. 5 CRORES. 24. EXCEPT IN THESE THREE SITUATIONS, THE ACT DOES NOT PERMIT THE ENHANCEMENT OF THE PROFITS OF THE BUSINESS SHOWN BY THE ASSESSE E. 25. COMING TO THE EVIDENTIARY VALUE OF THE IMPOUNDED LO OSE SHEET MENTIONED ELSEWHERE, THE HONBLE SUPREME COURT IN THE CASE OF COMMON CAUSE (A ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 12 REGISTERED SOCIETY) AND OTHERS VS. UNION OF INDIA A ND OTHERS IN WRIT PETITION CIVIL APPEAL NO. 505 OF 2015 HAS OBSERVED AS UNDER:- 16. WITH RESPECT TO THE KIND OF MATERIALS WHICH HAV E BEEN PLACED ON RECORD, THIS COURT IN V.C. SHUKLA'S CASE (SUPRA) HAS DEALT WITH THE MATTER THOUGH AT THE STAGE OF DISCHARGE WHEN INVESTIGATION HAD BEEN COMPLETED BUT SAME IS RELEVANT FOR THE PURPOSE OF DECISION OF THIS CASE ALSO. THIS COURT H AS CONSIDERED THE ENTRIES IN JAIN HAWALA DIARIES, NOTE BOOKS AND FILE CONTAINING LOOS E SHEETS OF PAPERS NOT IN THE FORM OF 'BOOKS OF ACCOUNTS' AND HAS HELD THAT SUCH EN TRIES IN LOOSE PAPERS/SHEETS ARE IRRELEVANT AND NOT ADMISSIBLE UND ER SECTION 34 OF THE EVIDENCE ACT, AND THAT ONLY WHERE THE ENTRIES ARE IN THE BOO KS OF ACCOUNTS REGULARLY KEPT, DEPENDING ON THE NATURE OF OCCUPATION, THAT THOSE A RE ADMISSIBLE 17. IT HAS FURTHER BEEN LAID DOWN IN V.C. SHUKLA (S UPRA) AS TO THE VALUE OF ENTRIES IN THE BOOKS OF ACCOUNT, THAT SUCH STATEMENT SHALL NOT ALONE BE SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY, EVEN IF THEY ARE RELEVANT AND ADMISSIBLE, AND THAT THEY ARE ONLY CORROBORATIVE EV IDENCE. IT HAS BEEN HELD EVEN THEN INDEPENDENT EVIDENCE IS NECESSARY AS TO TRUSTW ORTHINESS OF THOSE ENTRIES WHICH IS A REQUIREMENT TO FASTEN THE LIABILITY. 26. THE HONBLE SUPREME COURT FURTHER OBSERVED:- 17. FROM A PLAIN READING OF THE SECTION IT IS MANIF EST THAT TO MAKE AN ENTRY RELEVANT THEREUNDER IT MUST BE SHOWN THAT IT HAS BE EN MADE IN A BOOK, THAT BOOK IS A BOOK OF ACCOUNT AND THAT BOOK OF ACCOUNT HAS B EEN REGULARLY KEPT IN THE COURSE OF BUSINESS. FROM THE ABOVE SECTION IT IS AL SO MANIFEST THAT EVEN IF THE ABOVE REQUIREMENTS ARE FULFILLED AND THE ENTRY BECO MES ADMISSIBLE AS/ RELEVANT EVIDENCE, STILL, THE STATEMENT MADE THEREIN SHALL N OT ALONE BE SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY. IT IS THUS SEE N THAT WHILE THE FIRST PART OF THE SECTION SPEAKS OF THE RELEVANCY OF THE ENTRY AS EVI DENCE, THE SECOND PART SPEAKS, IN A NEGATIVE WAY, OF ITS EVIDENTIARY VALUE FOR CHA RGING A PERSON WITH A LIABILITY. IT WILL, THEREFORE, BE NECESSARY FOR US TO FIRST ASCER TAIN WHETHER THE ENTRIES IN THE ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 13 DOCUMENTS, WITH WHICH WE ARE CONCERNED, FULFILL THE REQUIREMENTS OF THE ABOVE SECTION SO AS TO BE ADMISSIBLE IN EVIDENCE AND IF T HIS QUESTION IS ANSWERED IN THE AFFIRMATIVE THEN ONLY ITS PROBATIVE VALUE NEED BE A SSESSED. 27. WITH RESPECT TO EVIDENTIARY VALUE OF REGULAR ACCOUN T BOOK, THE HONBLE SUPREME COURT IN THE CASE OF V.C. SHUKLA 1998 (3) S CC 410 HAS LAID DOWN :- 37. IN BENI V. BISAN DAYAL IT WAS OBSERVED THAT E NTRIES IN BOOKS OF ACCOUNT ARE NOT BY THEMSELVES SUFFICIENT TO CHARGE ANY PERSON W ITH LIABILITY, THE REASON BEING THAT A MAN CANNOT BE ALLOWED TO MAKE EVIDENCE FOR H IMSELF BY WHAT HE CHOOSES TO WRITE IN HIS OWN BOOKS BEHIND THE BACK OF THE PA RTIES. THERE MUST BE INDEPENDENT EVIDENCE OF THE TRANSACTION TO WHICH TH E ENTRIES RELATE AND IN ABSENCE OF SUCH EVIDENCE NO RELIEF CAN BE GIVEN TO THE PARTY WHO RELIES UPON SUCH ENTRIES TO SUPPORT HIS CLAIM AGAINST ANOTHER. IN HI RA LAL V. RAM RAKHA THE HIGH COURT, WHILE NEGATIVING A CONTENTION THAT IT HAVING BEEN PROVED THAT THE BOOKS OF ACCOUNT WERE REGULARLY KEPT IN THE ORDINARY COURSE OF BUSINESS AND THAT, THEREFORE, ALL ENTRIES THEREIN SHOULD BE CONSIDERED TO BE RELEVANT AND TO HAVE BEEN PROVED, SAID, THAT THE RULE AS LAID DOWN IN SE CTION 34 OF TIE ACT THAT ENTRIES IN THE BOOKS OF ACCOUNT REGULARLY KEPT IN THE COURS E OF BUSINESS ARE RELEVANT WHENEVER THEY REFER TO A MATTER IN WHICH THE COURT HAS TO ENQUIRE WAS SUBJECT TO THE SALIENT PROVISO THAT SUCH ENTRIES SHALL NOT ALO NE BE SUFFICIENT EVIDENCE TO CHARGE ANY PERSON WITH LIABILITY. IT IS NOT, THEREF ORE, ENOUGH MERELY TO PROVE THAT THE BOOKS HAVE BEEN REGULARLY KEPT IN THE COURSE OF BUSINESS AND THE ENTRIES THEREIN ARE CORRECT. IT IS FURTHER INCUMBENT UPON THE PERSON RELYING UPO N THOSE ENTRIES TO PROVE THAT THEY WERE IN ACCORDANCE WITH FACTS.' 28. IT IS APPARENT FROM THE AFORESAID DISCUSSION THAT T HE LOOSE SHEET OF PAPERS ARE WHOLLY IRRELEVANT AS EVIDENCE BEING NOT ADMISSI BLE U/S. 34 SO AS TO ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 14 CONSTITUTE EVIDENCE WITH RESPECT TO THE TRANSACTION S MENTIONED THEREIN BEING OF NO EVIDENTIARY VALUE. 29. MOREOVER, THE ASSESSING OFFICE DID NOT MAKE ANY INQ UIRY FROM BUYERS OF FLAT IN RESPECT OF ACTUAL PRICES PAID BY THEM. HE ALSO D ID NOT MAKE ANY OTHER INQUIRY IN ORDER TO CORROBORATE HIS CONCLUSION. THE RE IS NO INCRIMINATING EVIDENCE TO SHOW THAT THE ASSESSEE HAS SOLD THE FLA TS AT A HIGHER RATE. 30. IN OUR UNDERSTANDING OF THE FACTS, THE IMPOUNDED LO OSE SHEET CAN AT THE MOST BE TERMED AS DUMB DOCUMENT WHICH DID NOT CON TAIN FULL DETAILS ABOUT THE DATES, AND ITS CONTENTS WERE NOT CORROBOR ATED BY ANY MATERIAL AND COULD NOT RELIED UPON AND MADE THE BASIS OF ADD ITION. 31. IN THE CASE OF CIT VS. KULWANT RAI 291 ITR 36 THE R ULING GIVEN IN THE CASE OF DHAKESWARI COTTON MILLS LTD. 26 ITR 775 BY THE HON BLE SUPREME COURT HAS BEEN RELIED UPON WHEREIN THE HONBLE SUPREME COURT HAS HELD EVEN THOUGH INCOME TAX AUTHORITIES INCLUDING THE ASSESSI NG OFFICER HAS UNFETTERED DISCRETION AND NOT STRICTLY BOUND BY THE RULES AND PLEADINGS AS WELL AS MATERIALS ON RECORD AND IS LEGITIMATELY ENT ITLED TO ACT ON THE MATERIAL WHICH MAY NOT BE ACCEPTED AS EVIDENCE, NEV ERTHELESS SUCH DISCRETION DOES NOT ENTITLE THEM TO MAKE A PURE GUE SS AND BASE AN ASSESSMENT ENTIRELY UPON IT WITHOUT REFERENCE TO AN Y MATERIAL OR EVIDENCE AT ALL. ITA NO. 1502 /AHD/2015 . A.Y. 2011- 12 15 32. CONSIDERING THE FACTS OF THE CASE IN HAND IN TOTALI TY AND IN THE LIGHT OF THE JUDICIAL DECISIONS REFERRED TO HEREINABOVE, WE DO N OT FIND ANY MERIT IN THE IMPUGNED ADDITIONS. WE, THEREFORE, SET ASIDE THE FI NDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 3 2.56 CRORES. 33. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 02- 20 17 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER AHMEDABAD: DATED 14 /02/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD