Shri Kantilal Poonamchand Shah, Surat V. The ACIT.,Circle-9, Surat

ITA 1732/AHD/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6949 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-09-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 24-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Opportunity of being heard; Deemed to accrue or arise in india; Question of law
• Section: 69C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1. ./ I.T.A. NO.4207/AHD/2007 A.Y. 2004-05 2. ./ I.T.A. NO.1732/AHD/2010 A.Y. 2004-05 SHRI KANTIAL P.SHAH PROP.MAHAVIR INDUSTRIES GROUND FLOOR VASUPUJA APPTTS ARIHANT PARK SUMUL DAIRY ROAD SURAT / VS. THE ACIT CIRCLE-9 SURAT ' ./ ./ PAN/GIR NO. : ABNPS 7090 L ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '%( / APPELLANT BY : SHRI S.N.SOPARKAR, AR &''%)( / RESPONDENT BY : SHRI VIMALENDU VERMA, CIT-DR *) / DATE OF HEARING 12/11/2014 +,-.) / DATE OF PRONOUNCEMENT 12/12/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE TWO APPEALS (QUANTUM AND PENALTY) BY THE AS SESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMM ISSIONER OF INCOME TAX(APPEALS)-V, SURAT (CIT(A) IN SHORT) DATED 13/09/2007 AND 13/02/2010 PERTAINING TO ASSESSMENT YEAR (AY) 2004- 05 RESPECTIVELY. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 2 - 2. FIRST WE TAKE UP THE QUANTUM APPEAL, I.E. ITA NO .4207/AHD/2007. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING ADDITION OF RS.10,02,508/- MADE BY AO U/S.143(3) R.W.S.147 & 14 4 OF THE ACT BY REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT AN D ESTIMATING BOOK RESULTS AT 8% ON SALE OF PLOTS OF LAND WITHOUT PROP ERLY APPRECIATING THE FACT AND GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. 2. THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION O F RS.5,49,00,000/- MADE BY AO U/S.69C OF THE ACT ON THE BASIS OF FAILU RE TO EXPLAIN SOURCE OF THE EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THERE WAS NO EVIDENCE ON RECORD TO PROVE THAT THE APPELLANT R ECEIVED THE ON MONEY ON SALE OF PLOTS AND INCURRED UNACCOUNTED EX PENDITURE. 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE LD.CIT(A) FURTHER ERRED IN NOT APPRECIATING THE SUBMISSIONS OF THE AP PELLANT THAT IF STATEMENT REGARDING RECEIPT OF ON MONEY WAS ACCEP TED WITHOUT ANY EVIDENCE FOUND AT THE TIME OF SURVEY THAN STATEMENT OF EXPENDITURE INCURRED IN RESPECT OF EARNING THE SAID INCOME SHOU LD ALSO BE ACCEPTED IN ABSENCE OF ANY CONTRARY EVIDENCE. 4. THE LD.CIT(A) HAS GROSSLY ERRED IN LAW IN ISSUIN G NOTICE OF ENHANCEMENT WITHOUT APPRECIATING THE FACTUAL DATA A VAILABLE WITH HIM AND FURTHER ERRED IN ENHANCING THE INCOME OF THE AP PELLANT BY RS.9,68,00,000/- IGNORING THE SUBMISSIONS OF THE AP PELLANT AND MISINTERPRETING THE CONTENTS OF THE STATEMENTS OF T HE APPELLANT RECORDED AT THE TIME OF SURVEY PROCEEDINGS. THE EN HANCEMENT BEING WITHOUT ANY MERITS AND JUSTIFICATION REQUIRES TO BE QUASHED. 5. INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT IS NOT JUSTIFIED. 6. INITIATION OF PENALTY U/S.271(1)(C)(B) OF THE AC T IS NOT JUSTIFIED. 7. INITIATION OF PENALTY U/S.271F OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE T IME OF OR BEFORE THE HEARING OF THE APPEAL. ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 3 - 3. BRIEFLY STATED FACTS ARE THAT A SURVEY ACTION U/S.133A OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE. SUBSEQUENTLY, THE CASE W AS REOPENED AND ASSESSMENT U/S.143(3) R.W.S. OF THE ACT WAS FRAMED VIDE ORDER DATED 13/12/2006, THEREBY THE ASSESSING OFFICER (AO IN SH ORT) MADE ADDITION OF RS.10,02,508/- IN RESPECT OF THE PROFIT AND RS. 5,49,00,000/- IN RESPECT OF THE UNEXPLAINED INVESTMENT U/S.69-C OF THE ACT. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE REJECTED THE APPEAL AND ALSO WHILE DISPOSING OF THE APPEAL, THE LD.CIT(A) MADE ENHANCEMENT IN TH E ADDITION MADE U/S.69C OF THE ACT. 3. FIRST GROUND IS AGAINST THE ADDITION OF RS.10,02 ,508/- IN ESTIMATING BOOK RESULTS AT 8% ON SALE OF PLOTS AND LAND WITHOU T PROPERLY APPRECIATING THE FACT. THE LD.COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADDITION. 3.1. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDER OF THE LD.CIT(A). THE ASSESSEE HIMSELF DISCLOSED AND ADMI TTED THAT CERTAIN TRANSACTIONS WERE OUT OF BOOKS WHICH WAS DETECTED D URING THE COURSE OF SURVEY. THEREFORE, THE BOOK RESULTS AS SHOWN BY TH E ASSESSEE WAS NOT RELIABLE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 4 - THE UNDISPUTED FACT EMERGES FROM THE RECORD IS THAT DURING THE COURSE OF SURVEY, THE ASSESSEE HIMSELF HAS DISCLOSED IN A STA TEMENT THAT HE HAS RECEIVED ON-MONEY ON THE SALE OF PLOTS WHICH WAS NOT RECORDED IN THE BOOKS. IT IS ALSO STATED BY THE ASSESSEE THAT THE EXPENDITURE INCURRED OUT OF BOOKS. THEREFORE, IN VIEW OF THE FACT THAT THE ASSESSEE HIMSELF HAS DISCLOSED DURING THE COURSE OF SURVEY AND RECORDED IN THE AUDIT REPORT, THEREFORE THE AO WAS JUSTIFIED IN NOT ACCEPTING THE BOOK RESULT AND ESTIMATING THE INCOME. IT IS SETTLED POSITION OF L AW WHERE THE ACCOUNTS OF ASSESSEE ARE REJECTED, THE AO IS DUTY BOUND TO MAKE A FAIR ESTIMATION OF THE PROFIT. WHILE DOING SO, HE IS REQUIRED TO GIVE REASONING FOR ADOPTING A PARTICULAR RATE OF PROFIT. IN THE ABSENCE OF SUCH REASONING, THE ORDER COMPUTING PROFIT ON THE BASIS OF ESTIMATE BECOMES U NJUSTIFIED. THE LAW DOES NOT PERMIT AO TO ADOPT ANY RATE OF PROFIT ON T HE BASIS OF CONJECTURES AND SURMISES . IN THE PRESENT CASE, THE AO WHILE E STIMATING THE PROFIT HAS NOT GIVEN ANY BASIS FOR ARRIVING AT THE NET PROFIT @ 8%. ON THIS COUNT, THE ORDER OF THE AO IS DEFECTIVE AND, THEREFORE, THIS I SSUE IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION. THE AO IS D IRECTED TO PASS A SPEAKING ORDER AS TO HOW IT HAS ADOPTED AT 8% OF TH E NET PROFIT. THUS, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NOS.2 TO 4 ARE AGAINST THE CONFIRMATION OF ADDITION OF RS.5,49,00,000/- MADE BY THE AO U/S.69C OF THE ACT AND ENHANCEMENT BY THE LD.CIT(A). THESE GROUNDS WERE TAKEN UP TOGE THER AND ARE BEING DISPOSED OF TOGETHER. THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF THE STATEMEN T RECORDED DURING THE COURSE OF SURVEY. HE SUBMITTED THAT WHILE DOING SO , THE AO HAS ACTED ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 5 - ILLEGALLY AS IT IS A SETTLED POSITION OF LAW THAT T HE ASSESSMENT CANNOT BE MADE SOLELY ON THE BASIS OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY. IN SUPPORT OF THIS CONTENTION, HE RELIED O N THE FOLLOWING CASE- LAWS:- (I) 263 ITR 101 (KER.) IN THE CASE OF PAUL MATHEWS & S ONS VS.CIT (II) 300 ITR 157 (MAD.) IN THE CASE OF CIT VS. S.KHADARK HAN & SONS (III) 328 ITR 384 (DEL) IN THE CASE OF CIT VS. DHINGRA ME TAL WORKS (IV) 97 ITD 361 (AHD) IN THE CASE OF ASHOK MANILAL THAKK AR VS. ACIT. 5.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY THE ASSESSEE IS CARRYING OUT THE BUSINESS OF DEVELOPMEN T OF THE LAND AND HE HAS IN ITS BALANCE-SHEET SHOWN THE PLOTS AS STOCK-I N-TRADE, SUCH STOCK-IN- TRADE CANNOT BE SUBJECTED TO TAX TILL THE SALE-DEED S HAVE BEEN EXECUTED IN FAVOUR OF THE PURCHASER. IN SUPPORT OF THIS CONTEN TION, HE RELIED ON THE FOLLOWING TWO JUDGEMENTS OF HONBLE JURISDICTIONAL HIGH COURT: (I) 133 ITR 55 (GUJ.) IN THE CASE OF CIT VS. ASHALAND C ORPN. (II) 173 ITR 666 (GUJ.) IN THE CASE OF CIT VS. MOTILAL C .PATEL & CO. 5.2. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS PASSED HIS FINDING ON THE BASIS PICK AND CHOOSE ME THOD OF THE STATEMENT WHICH IS NOT PERMISSIBLE UNDER LAW. HE SUBMITTED TH AT A STATEMENT CANNOT BE READ BY PICK AND CHOOSE METHOD. THE DOCUMENTS RELIED UPON HAS TO BE READ AS A WHOLE AND NOT IN PART WHERE FAVOURABLE TO REVENUE ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 6 - AUTHORITIES. IN SUPPORT OF THIS CONTENTION, THE LD .COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING TWO DECISIONS OF THE TRIB UNAL:- (I) 56 TTJ 460 (AHD.) IN THE CASE OF ITO VS. GHANSHYAMBHAI R.THAKKAR (III) 71 ITD 245 (PUNE) IN THE CASE OF CHANDER MOHAN MEH TA VS. ACIT (INV.) 5.3. THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT TH AT DURING THE COURSE OF SURVEY, TWO STATEMENTS ARE RECORDED; ONE STATEME NT IS HAVING 18 QUESTIONS AND ANOTHER ONE IS HAVING 22 QUESTIONS. SUBSTANTIALLY, BOTH THESE STATEMENTS HAVE SIMILAR QUESTIONS, BUT IN ONE OF THE STATEMENTS, ANNEXURE-A IS MENTIONED, HOWEVER NO SUCH ANNEXURE-A WAS SEIZED DURING THE COURSE OF SURVEY. HE SUBMITTED THAT BAS ING ON SUCH STATEMENT WAS NOT PROPER. HE VEHEMENTLY ARGUED THAT THE LD.C IT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO ON THIS COUNT. 5.4. ON THE CONTRARY, LD.CIT-DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AUTHORITIES HAVE RIGHT LY MADE THE ADDITION AND CONFIRMED THE SAME. HE SUBMITTED THAT THE ASSES SEE HIMSELF HAS ADMITTED THE FACT AND DISCLOSED THE SAME IN HIS AUD IT REPORT THAT CERTAIN RECEIPTS WERE NOT RECORDED IN THE BOOKS. THE ASSES SEE CANNOT BE PERMITTED TO TAKE A CONTRADICTORY STRENGTH. HE SUB MITTED THAT IT WAS THE ASSESSEE WHO HAS STATED DURING THE COURSE OF SURVEY THAT CERTAIN ON- MONEY WAS RECEIVED WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN PURSUANCE OF SUCH STATEMENT, THE ASSESSEE HAS OF FERED AMOUNT OF RS.1,11,00,000/- AS HIS UNACCOUNTED INCOME. THEREF ORE, IT CANNOT BE INFERRED THAT THE ADDITIONS WERE MADE MERELY ON THE BASIS OF THE ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 7 - STATEMENT. HE SUBMITTED THAT EVEN THE ASSESSEE HAS NOT RETRACTED FROM THE STATEMENT. UNDER THESE FACTS, HE SUBMITTED THAT TH E AO WAS JUSTIFIED IN MAKING SUCH ADDITION. 5.5. IN REJOINDER, LD.COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE AUTHORITIES BELOW HAVE NOT PLACED ANY MATERIAL ON R ECORD SUGGESTING WHAT IS STATED DURING THE COURSE OF SURVEY IS CORROBORAT ED BY ANY OTHER MATERIAL. THEREFORE, HE SUBMITTED THAT THE LD.CIT- DR IS NOT JUSTIFIED IN MAKING THE SUBMISSION THAT THE ADDITIONS HAVE BEEN MADE APART FROM THE OTHER MATERIAL ON RECORD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENTS RELIED UPON BY THE LD.COU NSEL FOR THE ASSESSEE. THE UNDISPUTED FACT REMAINS THAT THE AO HAS MADE AD DITION OF RS.5,49,00,000/- INVOKING THE PROVISIONS OF SECTIO N 69C OF THE ACT, BY OBSERVING AS UNDER:- 8. IN THIS CASE THE RETURN OF INCOME FOR AY 2004- 05 HAS NOT BEEN FILED TILL THE DATE OF FINALIZATION OF ASSESSMENT. IN FACT ON THE DAY OF SURVEY THE ASSESSEE HAS ADMITTED THAT HE HAS RECEIV ED ON MONEY OF RS.6.60 CRORES AND UNACCOUNTED EXPENSES @ 85% WERE MADE FROM THE SAME THUS HE ULTIMATELY COULD EA RN AROUND 15% OF THE ON MONEY RECEIPT AS NET PROFIT, THEREB Y ADMITTED A DISCLOSURE OF RS.111 LACS AS ADDITIONAL INCOME. IT WAS CLAIMED DURING THE COURSE OF SURVEY THAT THE LAND PURCHASED WAS ORIGINALLY DIVIDED INTO 800 PLOTS OUT OF WHICH 600 PLOTS WERE SOLD BY THE ASSESSEE. THE ASSESSEE HAD NOT FURNISHED ANY EVIDE NCE REGARDING ANY EXPENSES INCURRED FOR EARNING SUCH ON MONEY. IN ANSWER TO QUESTION NO.10 THE ASSESSEE HAS ADMITTED THAT PE R PLOT HE RECEIVED RS.1,10,000/- AS ON MONEY. IN THIS CASE, NO RECEIPT OF THE ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 8 - AMOUNT WAS SATISFACTORILY EXPLAINED OR SHOWN IN THE AUDITED ACCOUNTS. SIMULTANEOUSLY THE EXPENDITURE HAS NOT B EEN DEBITED IN THE BOOKS OF ACCOUNT. 9. FAILURE TO EXPLAIN THE SOURCE OF TH4E EXPENDITUR E WOULD RESULT IN A LEGAL FICTION UNDER WHICH THE EXPENDITU RE WOULD BE DEEMED TO BE AN INCOME AND LIABLE TO BE ADDED. SEC TION 69C, IN NO UNCERTAIN TERMS, PROVIDES THAT IF THE EXPLANATIO N FOR THE SOURCE OF THE EXPENDITURE INCURRED OFFERED BY THE ASSESSEE IS NOT SATISFACTORY, THEN IT IS TO BE DEEMED TO BE AN INCO ME OF THE ASSESSEE. ADMITTEDLY, THE ASSESSEE HAD NOT FURNISH ED ANY EXPLANATION DURING THE SURVEY FURTHER THE ASSESSEE HAD FAILED TO UTILIZE THE SEVERAL OPPORTUNITY PROVIDED BY THIS OF FICE TO PRESENT ITS CASE. THEREFORE, THE EXPENDITURE CLAIMED TO HAVE B EEN MADE BY THE ASSESSEE AS STATED IN THE STATEMENT RECORDED ON OATH DURING THE COURSE OF SURVEY PROCEEDINGS I.E. (RS.6,60,00,000 RS.1,11,00,000) RS.5,49,00,000/- IS COVERED UNDER P ROVISO TO SECTION 69C OF THE I.T.ACT. HENCE THE UNEXPLAINED EXPENDITURE FOR WHICH THERE IS NO EVIDENCE ON THE BOOKS IS DISALLOW ED. THEREFORE THE SAME IS ADDED AS DEEMED INCOME OF THE A U/S.69C OF THE INCOME-TAX ACT. PENALTY PROCEEDINGS U/S.274 R.W.S. 271(1)(C) OF THE INCOME-TAX ACT IS INITIATED FOR FURNISHING INACCURA TE PARTICULARS OF INCOME AND THEREBY CONCEALMENT OF INCOME. (ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE RS.5,40,00,000) 6.1. WE FIND THAT THE AO HAS MADE ADDITION ON THE B ASIS OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY. DU RING THE COURSE OF SURVEY, IN ANSWER TO QUESTION NO.11, THE ASSESSEE H AS STATED THAT HE HAD RECEIVED ON-MONEY OF RS.6,60,00,000/- AS SALE CO NSIDERATION OF 600 PLOTS. IN THE SAME ANSWER, IT IS STATED BY THE ASS ESSEE THAT HE HAD INCURRED DIFFERENT KIND OF UNACCOUNTED EXPENSES WHICH IS TO BE PAID IN CASH, E.G. AMOUNT TO BE PAID TO FARMERS OVER AND ABOVE THE AMO UNT AS PER AGREEMENT, EXPENSES OF DEVELOPING, LEVELING, PLAN P ASSING WHICH ARE TO ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 9 - BE INCURRED IN CASH OUT OF ON MONEY RECEIPT. PROFI T OF 15% AFTER DEDUCTING UNACCOUNTED EXPENSES FROM UNACCOUNTED INC OME. IT IS STATED THAT THERE IS ONLY 15% OF THE PROFIT IN THE ON-MON EY. HOWEVER, THE AO HAS CONSIDERED THE PART OF THE STATEMENT AND NOT TH E ENTIRE STATEMENT. THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF HON BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. PRESIDENT IND USTRIES REPORTED AT (2002) 258 ITR 654 (GUJ.), WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER:- IT CANNOT BE A MATTER OF AN ARGUMENT THAT THE AMOU NT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVE D BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY I NCURRED THE COST. IT IS THE REALISATION OF EXCESS OVER THE COST INCURRED TH AT ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALES. THEREFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT INVESTMENT BY WAY O F INCURRING COST IN ACQUIRING GOODS WHICH HAVE BEEN SOLD HAVE BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED. IN THE ABSENC E OF SUCH FINDING OF FACT THE QUESTION WHETHER ENTIRE SUM OF UNDISCLOSED SALE PROCEEDS CAN BE TREATED INCOME OF THE RELEVANT ASSESSMENT YEAR A NSWERS BY ITSELF IN NEGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR ANY MATERIAL HAS BEEN REFERRED ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH HAVE BEEN FOUND SUBJECT O F UNDISCLOSED SALES. THEREFORE, NO QUESTION OF LAW WHICH REQUIRES TO BE REFERRED TO THIS COURT ARISES OUT OF TRIBUNALS ORDER. THE ORDER OF TRIBUNAL UNDER S. 256(1) IS NOT ERRONEOUS IN REACHING SUCH CONCLUSION . 6.2. THE RELIANCE IS ALSO PLACED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF DY.CIT (ASSTT.) VS. PANNA CORPORATION IN TAX APPEAL NO.323 OF 2000 WITH TAX A PPEAL NO.325 OF 2000, DATED 16/06/2012, WHEREIN THE HONBLE HIGH CO URT HAS HELD AS UNDER:- ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 10 - 14. WE MAY RECALL THAT THE TRIBUNAL, IN THE IMPUG NED JUDGEMENT, RELIED ON ITS PREVIOUS JUDGEMENT IN CASE OF KISHOR MOHANLAL TELWALA. THE SAID JUDGEMENT OF THE TRIBUNAL WAS AP PARENTLY CARRIED IN APPEAL BY THE REVENUE. THE HIGH COURT B Y A SPEAKING ORDER DATED 24.4.2000, DISMISSED THE APPEAL HOLDING THAT NO QUESTION OF LAW WAS INVOLVED. SIGNIFICANTLY, IN CA SE OR KISHOR MOHANLAL TELWA, THE ASSESSEE WAS ENGAGED IN THE BUS INESS OF CONSTRUCTION. IN HIS CASE, UNACCOUNTED RECEIPT OF R S.1.47 CRORES WAS DETECTED. IN THIS BACKGROUND, THE DIVISION BEN CH CONFIRMED THE VIEW OF THE TRIBUNAL AND DID NOT ACCEPT THE CON TENTION OF THE REVENUE THAT AS NO ACCOUNTS HAD BEEN MAINTAINED TO SUBSTANTIATE THE EXPENDITURE INCURRED BY THE ASSESSEE, THE ENTIR E AMOUNT RECEIVED BY THE RESPONDENT SHOULD BE TREATED AS INC OME. THE COURT CONCLUDED THAT THE TRIBUNAL WAS JUSTIFIED IN CONSIDERING THAT THE RESPONDENT ASSESSEE OUGHT TO HAVE SPENT REASO NABLE AMOUNT FOR THE PURPOSE OF RECEIVING SUCH GROSS RECEIPT. 15. IT CAN, THUS, BE SEEN THAT CONSISTENTLY, THIS C OURT AND SOME OTHER COURTS HAVE BEEN FOLLOWING THE PRINCIPLE THAT EVEN UPON DETECTION OF ON MONEY RECEIPT OR UNACCOUNTED CASH R ECEIPT, WHAT CAN BE BROUGHT TO TAX IS THE PROFIT EMBEDDED IN SUC H RECEIPTS AND NOT THE ENTIRE RECEIPTS THEMSELVES. IF THAT BE THE LEGAL POSITION, WHAT SHOULD BE ESTIMATED AS A REASONABLE PROFIT OUT OF SUCH RECEIPTS, MUST BEAR AN ELEMENT OF ESTIMATION. 6.3. THE UNCONTROVERTED FACTS EMERGE FROM THE RECOR DS ARE THAT DURING THE COURSE OF SURVEY, TWO STATEMENTS HAVE BEEN RECO RDED. THE ASSESSMENT AND ENHANCEMENT OF ASSESSMENT HAS BEEN F RAMED ON THE BASIS OF SUCH STATEMENTS COUPLED WITH MATERIAL IN THE FOR M OF LOOSE-PAPERS COLLECTED DURING THE COURSE OF SURVEY. NOTICES U/S .148/142(1) OF THE ACT DATED 31/10/2006 WERE ISSUED AND SERVED UPON THE AS SESSEE ON 10.11.2006. IN RESPONSE THERETO, THE ASSESSEE NEIT HER FILED RETURN NOR ATTENDED. HOWEVER, IT IS TRANSPIRED FROM THE RECOR DS THAT AFTER SURVEY ACTION ON 28.01.2004, THE ASSESSEE FILED THE AUDITE D ACCOUNTS U/S.44AB ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 11 - OF THE ACT ON 1.11.2004. HENCE, THERE WAS NO EFFEC TIVE REPRESENTATION ON BEHALF OF THE ASSESSEE AS THE REGULAR ASSESSMENT WA S MADE U/S.144 OF THE ACT. IN REOPENING PROCEEDINGS AS WELL, THE ASSESSE E REMAINED NON- COOPERATIVE. THE AO IN PARA-8 OF THE ORDER HAS OBS ERVED AS UNDER:- 8. IN THIS CASE THE RETURN OF INCOME FOR A.Y. 200 4-05 HAS NOT BEEN FILED TILL THE DATE OF FINALIZATION OF ASSESSM ENT. IN FACT ON THE DAY OF SURVEY THE ASSESSEE HAS ADMITTED THAT HE HAS RECEIVED ON MONEY OF RS.6.60 CRORES AND UNACCOUNTED EXPENSES @ 85% WERE MADE FROM THE SAME THUS HE ULTIMATELY COULD EA RN AROUND 15% OF THE ON MONEY RECEIPT AS NET PROFIT, THEREB Y ADMITTED A DISCLOSURE OF RS.111 LACS AS ADDITIONAL INCOME. IT WAS CLAIMED DURING THE COURSE OF SURVEY THAT THE LAND PURCHASED WAS ORIGINALLY DIVIDED INTO 800 PLOTS OUT OF WHICH 600 PLOTS WERE SOLD BY THE ASSESSEE. THE ASSESSEE HAD NOT FURNISHED ANY EVIDE NCE REGARDING ANY EXPENSES INCURRED FOR EARNING SUCH ON MONEY. IN ANSWER TO QUESTION NO.10, THE ASSESSEE HAS ADMITTED THAT P ER PLOT HE RECEIVED RS.1,10,000/- AS ON MONEY. IN THIS CASE, NO RECEIPT OF THE AMOUNT WAS SATISFACTORILY EXPLAINED OR SHOWN IN THE AUDITED ACCOUNTS. SIMULTANEOUSLY THE EXPENDITURE HAS NOT B EEN DEBITED IN THE BOOKS OF ACCOUNT. 6.4. FROM THE ABOVE OBSERVATION, IT IS EVIDENT THAT ADDITION IS MADE PARTLY ON THE BASIS OF THE STATEMENT RECORDED DURIN G THE COURSE OF SURVEY PROCEEDINGS. THE AO HAS NOT MADE ANY INDEPENDENT I NQUIRY ON THE MATERIAL GATHERED DURING SURVEY PROCEEDINGS. FURTH ER, IT IS NOTICED THAT TWO STATEMENTS OF SAME PERSON HAS BEEN RECORDED, CO NSISTING OF 18 QUESTIONS AND 22 QUESTIONS RESPECTIVELY. WE FIND T HAT THERE ARE GLARING INCONSISTENCIES IN TWO STATEMENTS. IN THE STATEME NT CONSISTING OF 18 PLOTS, THE ASSESSEE STATED THAT HE RECEIVED PER PLO T RS.1,10,000/- AS ON MONEY AND TOTAL PLOTS SOLD ARE 600, WHEREAS IN OTH ER STATEMENT CONSISTING 22 QUESITONS, THE ASSESSEE STATED TO HAV E RECEIVED ON MONEY ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 12 - RANGING FROM RUPEES SEVEN THOUSAND TO EIGHT THOUSAN D PER PLOT AND NUMBER OF PLOTS ARE SOLD IS 1480. UNDER THESE FACT S, THE AO MADE ADDITION ON THE BASIS OF SALE OF 600 PLOTS, TAKING ON MONEY AS RS.1,10,000/- PER PLOT. HOWEVER, THE LD.CIT(A) WHI LE ENHANCING THE ADDITION ADOPTED ON MONEY AT RS.1,10,000/- PER PL OT BUT FIGURE OF PLOT SOLD WAS TAKEN AT 1480. IT APPEARS EX-FACIE THAT B OTH THE ASSESSING OFFICER AS WELL AS THE LD.CIT(A) HAVE BASED THEIR F INDINGS ON TWO DIFFERENT STATEMENTS RECORDED DURING THE COURSE OF SURVEY. NO INDEPENDENT INQUIRY IS MADE BY THE AUTHORITIES BELO W. THE CONTENTION OF THE ASSESSEE IS THAT IT HAD SOLD ONLY 600 PLOTS, DE TAILS OF ON MONEY RECEIVED OUT OF SALE OF SUCH PLOT IS ENCLOSED AT PA PER-BOOK PAGE NOS.43 TO 83. FROM THE NOTING, IT IS EVIDENT THAT THE AMOUN T OF ON MONEY IS RANGING FROM PLOT TO PLOT. HOWEVER, IN THE STATEM ENT THE ASSESSEE HAS STATED TO HAVE RECEIVED RS.1,10,000/- PER PLOT AS ON MONEY. NEITHER THE REVENUE NOR THE ASSESSEE COULD EXPLAIN AS TO HO W TWO DIFFERENT STATEMENTS WERE RECORDED ON THE SAME DATE OF THE SA ME PERSON. IT IS NOTICED THAT TWO STATEMENT HAVE TWO DIFFERENT VERSI ON OF THE FACTS. BOTH THE AUTHORITIES HAVE BASED THEIR FINDINGS ON THE AS SUMPTION THAT EACH PLOT HAS SAME SIZE, WITHOUT CONSIDERING THE FACT THAT IN THE BUSINESS OF REAL ESTATE, SALE CONSIDERATION OF PROPERTY IS DEPENDENT ON SIZE AND LOCATION OF SUCH PROPERTY. THE AUTHORITIES BELOW HAVE ALSO NOT GIVEN ANY FINDING AS TO WHAT HAPPENED TO THE BUYERS OF THE PLOTS WHO HAV E PAID THE ON MONEY WHAT TREATMENT THEY HAVE GIVEN TO SUCH PAYM ENT. FURTHER, IT IS NOT COMING OUT FROM THE RECORDS THAT ANY ON MONEY WAS PAID BY THE ASSESSEE TO THE OWNERS OF LAND, AS IT HAS BEEN SPEC IFICALLY CLAIMED IN THE STATEMENT. IT IS SETTLED PROPOSITION OF LAW THAT O NLY PROFIT ELEMENT ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 13 - EMBEDDED INTO THE BUSINESS RECEIPT IS TO BE TAXED. IT IS ALSO SETTLED PROPOSITION OF LAW THAT ADDITIONS CANNOT BE MADE SO LELY ON THE BASIS OF SURVEY STATEMENT. IN THIS CASE, ONE OF THE SUBMISS IONS IS THAT HE IS INTO THE BUSINESS OF DEVELOPMENT OF PROPERTIES, THE RESI DENTIAL PLOTS, THEREFORE PLOTS ARE STOCK-IN-TRADE. IT IS POINTED OUT THAT SALE-DEEDS WERE EXECUTED IN OTHER YEARS, THEREFORE THE AUTHORITIES BELOW WER E NOT JUSTIFIED IN TAXING THE SALE CONSIDERATION IN THE YEARS UNDER CONSIDERA TION. HOWEVER, WE FIND THERE IS NO FINDING BY THE AUTHORITIES BELOW A ND NO INQUIRY HAS BEEN MADE AS TO WHEN SUCH PROPERTIES WERE TRANSFERRED TO THE RESPECTIVE BUYERS IN TERMS OF THE PROVISIONS OF INCOME TAX ACT. MOREO VER, FACTUM OF NUMBER OF PLOTS SOLD DURING THE YEAR UNDER CONSIDER ATION REQUIRES VERIFICATION AT THE END OF THE ASSESSING OFFICER AS THE AO AND THE CIT(A) HAVE TAKEN TWO DIFFERENT FIGURES. THEREFORE, AFTER CONSIDERING THE TOTALITIES OF THE FACTS AND JUDICIAL PRONOUNCEMENTS AS RELIED BY THE LD.COUNSEL FOR THE ASSESSEE, WE ARE OF THE CONSIDER ED VIEW THAT ACTIONS OF BOTH THE AUTHORITIES BELOW CANNOT BE JUSTIFIED, HOW EVER, THERE WAS NO EFFECTIVE REPRESENTATION BY THE ASSESSEE AND RELEVA NT INFORMATION WAS NOT PLACED BUT THE AO DID NOT MAKE FURTHER ENQUIRY ON T HE BASIS OF MATERIAL COLLECTED DURING THE COURSE OF SURVEY PROCEEDINGS. UNDER THESE FACTS, WE HEREBY SET ASIDE THE ORDERS OF THE AUTHORITIES BELO W AND RESTORE THESE ISSUES BACK TO THE FILE OF AO. THE AO IS DIRECTED TO MAKE DE NOVO ASSESSMENT IN ACCORDANCE WITH LAW, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 14 - 7. GROUND NO.5 IS IN RESPECT OF INITIATION OF PENAL TY U/S.271(1)(C) OF THE ACT. NO EFFECTIVE ARGUMENT WAS MADE, HENCE TH IS GROUND IS REJECTED. 8. GROUND NOS.6 & 7 ARE AGAINST INITIATION OF PENAL TY U/S.271(1)(B) AND 271F OF THE ACT RESPECTIVELY. NO EFFECTIVE ARG UMENT HAS BEEN MADE IN RESPECT OF THESE ISSUES, SAME ARE REJECTED AS SU CH. 9. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.420 7/AHD/2007 FOR AY 2004-05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. NOW, COMING TO ASSESSEES APPEAL IN ITA NO.173 2/AHD/2010 FOR AY 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL:- (1) THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AN D ON FACTS IN CONFIRMING THE PENALTY OF RS.1,84,47,827/- ON ACCOU NT OF ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE AMOUNTING TO RS. 5,49,00,000/- WHICH WERE NEVER THERE BY INVOKING PROVISION OF SEC TION 69C; (2) THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY OF RS.1,84,47,827/- ON ACCOU NT OF ADDITION MADE BY ESTIMATING BOOK PROFIT BY REJECTING BOOK RESULTS AND NOT TAKING INTO ACCOUNT NATURE OF BUSINESS CARRIED OUT BY ASSESSEE; (3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELE TE OR MODIFY ANY GROUND OF APPEAL. 10.1. THIS APPEAL HAS BEEN PREFERRED AGAINST CONFIR MATION OF PENALTY BY THE LD.CIT(A) IN ASSESSEES QUANTUM APPEAL IN ITA NO.4207/AHD/2007, WHERE WE HAVE SET ASIDE THE ASSESSMENT ORDER FOR DE NOVO ASSESSMENT. THEREFORE, THE PENALTY LEVIED BY THE REVENUE DOES N OT SURVIVE. THE AO IS HEREBY DIRECTED TO DELETE THE PENALTY. THUS, G ROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. ITA NOS.4207/AH D/2007 & 1732 /AHD/2010 SHRI KANTILAL P.SHAH VS. ACIT ASST.YEAR 2004-05 - 15 - 11. IN THE COMBINED RESULT, ASSESSEES APPEAL IN IT A NO.4207/AHD/07 (QUANTUM APPEAL) IS PARTLY ALLOWED F OR STATISTICAL PURPOSES AND ASSESSEES APPEAL IN ITA NO.1732/AHD/2 010 (PENALTY) IS ALLOWED. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 12/ 12 /2014 2..,.../ T.C. NAIR, SR. PS !'#$%$&' / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-V, SURAT 5. 78& 45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<* / GUARD FILE. / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 10.12.14(DICTATION-PAD 15+3 PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.12.14 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BA CK TO THE SR.P.S./P.S.12.12.14 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 12.12.14 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER