Raviraj Kothari Associates, Pune V. DCIT, Circle-2, Pune

ITA 1755/PUN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1053 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Depreciation; Document seized; Difference of opinion; Block assessment; Reason to believe; Documents seized
• Section: 69C; 133A; 133(6); 147; 131; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! # $% , & ' BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ( / ITA NO. 1755/PN/2013 ) * +* / ASSESSMENT YEAR : 2007-08 RAVIRAJ KOTHARI ASSOCIATES, 614, NANA PETH, PUNE-411002 PAN : AAFFR5259M ....... / APPELLANT ) / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE / RESPONDENT ASSESSEE BY : SHRI NEELESH KHANDELWAL REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 27-07-2016 / DATE OF PRONOUNCEMENT : 26-08-2016 , / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 19-02 -2013 FOR THE ASSESSMENT YEAR 2007-08. 2 ITA NO. 1755/PN/2013, A.Y. 2007-08 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE IS A BUILDER AND LAND DEVELOPER. A SURVEY U/S. 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF RAVIRAJ GROUP ON 27-09-2006. THE ASSESSEE IN JOINT VENTURE WITH SANAND PROPERTIES P VT. LTD. HAD DEVELOPED A COMMERCIAL PROJECT FORTALEZA AT KALYANI NA GAR, PUNE. THE PROFITS ARISING FROM THE SAID PROJECT WERE TO BE DIVIDED BE TWEEN THE ASSESSEE AND SANAND PROPERTIES PVT. LTD. IN THE RATIO OF 65% AND 35%. DURING THE COURSE OF SURVEY A DOCUMENT (LETTER OF INTE NT) GIVING DETAILS OF SALE OF SHOP NO. 129 IN VITORIA-II BUILDING WAS FOUND AND SEIZED. THE SHOP UNDER REFERENCE HAVING TOTAL SALEABLE AREA OF 360 SQ . FT. WAS SOLD TO MRS. USHA MAJUMMDAR AND MS. PUNAM MAJUMMDAR AT THE COST OF ` 6500/- PER SQ. FT. THE TOTAL CONSIDERATION AS PER THE LET TER OF INTENT SEIZED WAS ` 23,40,0000/-. WHEREAS, IN THE SALE AGREEMENT THE PRICE OF THE SAME SHOP WAS SHOWN AS ` 2500/- PER SQ. FT. I.E. AT THE TOTAL CONSIDERATION OF ` 9,00,000/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE EXPLANATION FURNISHED BY THE ASSESSEE FOR DIFFERENCE IN PRICE AS SHOWN IN LETTER OF INTENT SEIZED DURING THE SURVEY ACTION AND SALE AGREEMENT WAS REJECTED BY THE ASSESSIN G OFFICER. THE ASSESSING OFFICER TREATED THE DIFFERENCE BETWEEN THE TWO R ATES AS ON- MONEY. THE ASSESSING OFFICER EXTRAPOLATED THE COST MENT IONED IN THE LETTER OF INTENT SEIZED DURING THE SURVEY TO THE OTHER S HOPS BOOKED/SOLD DURING FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 200 7-08. THE ASSESSING OFFICER IDENTIFIED 13 SHOPS THAT WERE BOOKED/SOLD DURING FINANCIAL YEAR 2006-07. OUT OF 13 SHOPS, 2 SHOPS WERE SO LD TO THE RELATIVES OF THE PROMOTERS. THE ASSESSING OFFICER AFTER EXC LUDING THE 2 SHOPS SOLD TO RELATIVES OF PROMOTERS COMPUTED THE ON-M ONEY RECEIVED 3 ITA NO. 1755/PN/2013, A.Y. 2007-08 IN THE RESPECT OF THE REMAINING 11 SHOPS BY EXTRAPOLATING THE RATE AS MENTIONED IN THE LETTER OF INTENT SEIZED DURING THE SURVEY . THE ASSESSING OFFICER THUS, MADE ADDITION OF ` 1,35,16,000/- IN THE INCOME RETURNED BY THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 31-12-2009, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TH E ASSESSEE MADE THREE ALTERNATE SUBMISSIONS : I. TO RESTRICT THE ADDITION TO 65% OF THE TOTAL ADDITION IN T HE HANDS OF ASSESSEE AS THE REMAINING 35% SHARE IN JOINT VENTURE IS HELD BY M/S. SANAND PROPERTIES (P.) LTD. II. TO RESTRICT THE ADDITION TO THE EXTENT OF EVIDENCE FOUND DURING SURVEY WITHOUT EXTRAPOLATING THE DIFFERENCE IN COST TO OTH ER SHOPS SOLD/BOOKED DURING THE YEAR. III. THAT EVEN IF EXTRAPOLATION HAS TO BE MADE THE SAME SHO ULD BE RESTRICTED TO THE NET PROFIT FROM SALE OF SHOPS. THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE FIRS T PRAYER OF THE ASSESSEE AND REJECTED THE OTHER SUBMISS IONS. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI NEELESH KHANDELWAL APPEARING ON BEHALF OF THE ASSE SSEE SUBMITTED THAT THE ENTIRE ADDITION HAS BEEN MADE ON THE BASIS OF LETTER OF INTENT ALLEGEDLY ISSUED IN FAVOUR OF MRS. USHA MAJUMMDAR AND MS. PUNAM MAJUMMDAR SEIZED DURING SURVEY ACTION. THE LD. AR OF THE 4 ITA NO. 1755/PN/2013, A.Y. 2007-08 ASSESSEE REFERRED TO THE IMPOUNDED DOCUMENT AT PAGE 1 7 OF THE PAPER BOOK. THE LD. AR ASSERTED THAT A PERUSAL OF DOCUMENT (LE TTER OF INTENT) WOULD SHOW THAT IT DOES NOT BEAR ANY DATE. THERE ARE NO SIGNATURES / INITIALS OF THE ASSESSEE. THE DOCUMENTS HAVE SIGNATURES OF ONE OF THE PURCHASERS ONLY. THE ADDITION CANNOT BE MADE ON THE B ASIS OF A SINGLE UNDATED DOCUMENT BY EXTRAPOLATING THE RATE MENTIONED T HEREIN. THE LD. AR CONTENDED THAT THE ASSESSING OFFICER REJECTED THE BO OKS OF ACCOUNT OF THE ASSESSEE MERELY ON THE BASIS OF THE SINGLE DOCUME NT SEIZED DURING SURVEY. THE SAID DOCUMENTS PERTAIN TO ONLY ONE SHOP. THE ASSESSING OFFICER HAS TREATED THE DIFFERENCE IN THE RATE ME NTIONED IN THE LETTER OF INTENT AND THE SALE AGREEMENT AS ON-MONEY. THE ASSESSING OFFICER HAS EXTRAPOLATED THE ALLEGED ON-MONEY ON THE OTHE R SHOPS BOOKED/SOLD BY THE ASSESSEE DURING FINANCIAL YEAR 2006-07 . EXCEPT FOR THE SINGLE PAPER SEIZED DURING SURVEY THERE WAS NO OTH ER DOCUMENT FOUND DURING SURVEY ACTION WHICH WOULD INDICATE THAT THE A SSESSEE HAS RECEIVED ON-MONEY. THERE IS NO IOTA OF EVIDENCE TO SHOW THAT THE ASSESSEE HAD RECEIVED ON-MONEY ON THE OTHER SHOPS AS WELL. THE LD. AR REFERRED TO CHART AT PAGE 5 OF THE IMPUGNED ORDER TO S HOW THAT THE GROSS PROFIT RATIO AND THE NET PROFIT RATIO WERE CONSISTENT IN PR ECEDING TWO FINANCIAL YEARS. THE LD. AR SUBMITTED THAT IF AT ALL THE ADDI TION HAS TO BE MADE IT SHOULD BE IN RESPECT OF SHOP, IN RESPECT OF WHI CH LETTER OF INTENT WAS IMPOUNDED DURING SURVEY AND THE ADDITION SHOU LD BE RESTRICTED TO PROFIT ELEMENT OF THE ON-MONEY RECEIVED BY THE ASSESSEE. THE LD. AR MADE AN ALTERNATE PRAYER THAT IF THE FINDINGS OF ASSESSING OFFICER WITH RESPECT TO EXTRAPOLATION OF ON-MONEY ARE TO B E UPHELD, THEN THE EXTRAPOLATION SHOULD BE RESTRICTED TO NET PROFIT ONLY . THE LD. AR 5 ITA NO. 1755/PN/2013, A.Y. 2007-08 CONTENDED THAT THE DECISIONS ON WHICH THE COMMISSIONER OF INCOME TAX (APPEALS) HAS PLACED RELIANCE TO CONFIRM THE ADDITION ARE NO T APPLICABLE IN THE FACTS AND CIRCUMSTANCES IN THE CASE OF ASSESSEE. THE LD. AR CONTENDED THAT IN THE CASE OF KHOPADE KISANRAO MANIKRAO VS. ACIT REPORTED AS 74 ITR 25 (PUNE-TRIB.) (TM). THE ASSESSEE HAD ADMITTED THE RECEIPT OF ON-MONEY AMOUNT AND THE ADMISSION OF ASSESSEE WAS SUPPORTED BY COGENT EVIDENCE FOUND DURING THE COURSE O F SURVEY. SIMILARLY, IN THE CASE OF RAJNIK & CO. VS. ACIT REPORTED AS 251 ITR 561 (AP) THERE WAS AN ADMISSION BY THE PARTNER WITH RESPECT TO SUPPRESSION OF TURNOVER. HOWEVER, IN THE PRESENT CASE THERE IS NEITH ER ADMISSION BY THE ASSESSEE IN RESPECT OF RECEIPT OF ON-MONEY NOR THE RE IS EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED ON-MONEY ON THE SHOPS BOOKED/SOLD DURING THE YEAR. THEREFORE, THE RELIANCE PLACE D BY THE COMMISSIONER OF INCOME TAX (APPEALS) ON THE AFORESAID DECIS IONS IS MISPLACED. 4. ON THE CONTRARY THE LD. AR OF THE ASSESSEE CONTENDE D THAT THE CASE OF THE ASSESSEE IS COVERED BY THE FOLLOWING DECISIONS : I. D N KAMANI HUF VS. DCIT, 70 ITD 77 (PAT.) (TM); II. ELITE DEVELOPERS VS. DCIT, 73 ITD 379 (NAG.); III. ABHISHEK CORPORATION VS. DCIT, 63 TTJ 651 (AHD. TRIB.); IV. KISHOR MOHANLAL TELWALA VS. ACIT, 107 TAXMAN 86 (AHD. TRIB.); V. SHRI V. SUBRAMANI VS. ACIT IN ITA NOS. 1047 & 1046/MDS/20 11 (ITAT CHENNAI) DECIDED ON 27-07-2012. 6 ITA NO. 1755/PN/2013, A.Y. 2007-08 5. PER CONTRA SHRI HITENDRA NINAWE REPRESENTING THE DEP ARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCO ME TAX (APPEALS) IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD. DR CONTENDED THAT THE ASSESSEE MUST HAVE PLACED DO CUMENTS AT DIFFERENT PLACES, THEREFORE, ONLY SINGLE DOCUMENT WAS RECOVE RED DURING SURVEY. THE POWERS OF THE DEPARTMENT EXERCISED DURING SURVEY ARE NOT AS WIDE AS THE POWERS EXERCISED DURING SEARCH PROCEEDIN GS, THEREFORE, NO OTHER DOCUMENT COULD BE FOUND. THE LD. DR SUBMITTED THAT THE CONSIDERATION MENTIONED IN THE SALE AGREEMENT IS FAR LESS T HAN THE COLLECTOR RATE, WHEREAS, IN THE DOCUMENT SEIZED DURING TH E COURSE OF SEARCH THE RATE MENTIONED IS ABOVE THE COLLECTOR RATE. THIS CLEARLY SHOWS THAT THE ASSESSEE HAS SUPPRESSED THE INCOME FRO M SALE OF SHOPS. THE LD. DR REFERRED TO THE DECISION RENDERED BY THE TRIBU NAL IN THE CASE OF SANAND PROPERTIES (P) LTD. VS. ACIT IN ITA NO. 1657/PN/2 011 FOR ASSESSMENT YEAR 2007-08 DECIDED ON 28-02-2013. THE LD . DR CONTENDED THAT THE TRIBUNAL IN THE CASE OF SANAND PROPE RTIES (P) LTD. VS. ACIT (SUPRA), THE OTHER PARTNER OF THE ASSESSEE IN JOINT VENTURE HAS AFFIRMED THE FINDINGS OF AUTHORITIES BELOW WITH REGARD TO ON-M ONEY RECEIVED BY THE ASSESSEE. THE LD. DR FURTHER CONTENDED THAT THE CONTENTIONS OF THE ASSESSEE THAT THE ADDITION SHOULD BE RESTRICTED TO NET PROFIT ONLY IS NOT TENABLE AS ALL THE EXPENSES ARE REFLECTE D IN THE BOOKS OF ACCOUNT AND THE ON-MONEY RECEIVED BY THE ASSESSE E IS PURE PROFIT OF THE ASSESSEE. THE LD. DR VEHEMENTLY SUPPORTED THE FIND INGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSIN G THE APPEAL OF THE ASSESSEE. 7 ITA NO. 1755/PN/2013, A.Y. 2007-08 6. CONTROVERTING THE SUBMISSIONS OF LD. DR, THE LD. AR REFERR ED TO PAGE 5 OF THE IMPUGNED ORDER WHEREIN THE GP RATIO AND T HE NET PROFIT RATIO FOR THE FINANCIAL YEARS 2004-05, 2005-06 AND 2006-0 7 WERE COMPUTED. THE LD. AR CONTENDED THAT IF THE ENTIRE ON-MO NEY AS ALLEGED BY THE REVENUE IS ADDED, IT WOULD GIVE ILLOGICAL CALCULATIONS O F NET PROFIT AND GROSS PROFIT IN THE ASSESSMENT YEAR UNDER APPEAL. T HE NET PROFIT AND THE GROSS PROFIT OF THE ASSESSEE OVER THE PERIOD OF TIME IS CONSISTENT. THE LD. AR PRAYED FOR SETTING ASIDE THE FINDIN GS OF COMMISSIONER OF INCOME TAX (APPEALS). 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF T HE ASSESSEE HAS PLACED RELIANCE. THE ADDITIONS HAS BEEN MADE IN THE C ASE OF ASSESSEE ON THE BASIS OF A DOCUMENT (LETTER OF INTENT) SEI ZED DURING SURVEY ACTION IN THE CASE OF RAVIRAJ GROUP. THE ASSESS EE IN JOINT VENTURE WITH SANAND PROPERTIES PVT. LTD. HAS DEVELOPED A COMMERCIAL COMPLEX FORTALEZA AT KALYANINAGAR, PUNE. THE DOCUMENT T HAT WAS IMPOUNDED DURING COURSE OF SURVEY IS A LETTER OF INTENT ISS UED IN FAVOUR OF MRS. USHA MANUMMDAR AND MS. PUNAM MAJUMMDAR IN RESPE CT OF SHOP NO. 129, VITORIA-II BUILDING IN THE AFORESAID FORTALEZA C OMMERCIAL COMPLEX. THE TOTAL SALEABLE AREA OF SHOP IS 360 SQ. FT. AS PER THE LETTER OF INTENT THE SALE PRICE OF SHOP IS AT THE RATE OF ` 6500/- PER SQ. FT. WHEREAS, AS PER SALE AGREEMENT THE CONSIDERATION WAS FIX ED AT ` 2500/- PER SQ. FT. THE ASSESSING OFFICER TREATED THE DIFFERENCE BET WEEN THE CONSIDERATION MENTIONED IN THE SALE AGREEMENT AND THE C OST MENTIONED 8 ITA NO. 1755/PN/2013, A.Y. 2007-08 IN THE LETTER OF INTENT AS ON-MONEY. THE ASSESSING OFFICE R EXTRAPOLATED THE ALLEGED ON-MONEY RECEIVED BY ASSESSEE IN RESPECT OF SHOP NO. 129 TO THE OTHER SHOPS WHICH WERE BOOKED/SOLD DURING THE FINANC IAL YEAR 2006-07 AND THUS, MADE ADDITION OF ` 1,35,16,000/-. THE DETAILS OF VARIOUS SHOPS IN RESPECT OF WHICH ADDITIONS HAVE BEEN MA DE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 ARE AS UNDER : SHOP NO. S. AREA AGREEMENT BOOKING DATE BASIC COST DIFFEREN CE IN RATE PSF RATE RS. @ 6500 DIFFERENCE IN TOTAL PRICE 102 360 25-SEP-06 900,000 2500 23,40,000/- 1440000 105 360 27-DEC-06 31/08/2006 900,000 2500 23,40,000/- 1440000 113 250 29-AUG-06 26/08/2006 625,000 2500 16,25,000/- 1000000 117 380 27-DEC-06 04/04/2006 950,000 2500 24,70,000/- 1520000 118 380 06-MAR-07 19/02/2009 2,090,000 5500 24,70,000/- 380000 119 380 19-FEB-07 19/02/2007 2,090,000 5500 24,70,000/- 380000 121 360 15-APR-06 03/04/2006 900,000 2500 23,40,000/- 1440000 122 360 15-APR-06 03/04/2006 900,000 2500 23,40,000/- 1440000 128 360 25-MAY-06 900,000 2500 23,40,000/- 1440000 129 360 25-MAY-06 900,000 2500 23,40,000/- 1440000 117A 380 11-MAY-06 950,000 2500 24,70,000/- 1596000 8. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT FU RNISHED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NO T FULLY AND TRULY RECORDED THE SALE CONSIDERATION OF THE SHOPS IN THE BOOK S, THEREFORE, THE RESULTS SHOWN IN THE BOOKS OF THE ASSESSEE ARE NOT RELIA BLE. THE ASSESSEE HAD FILED AFFIDAVIT OF MRS. USHA MANUMMDAR IN SUPPOR T OF HIS CONTENTIONS. THE ASSESSING OFFICER ISSUED SUMMONS U/S. 133 A TO MRS. USHA MAJUMMDAR BUT SHE DID NOT APPEAR BEFORE THE ASSE SSING OFFICER. THE ASSESSING OFFICER, THEREAFTER, DISCARDED THE AFFIDAVIT OF M RS. USHA MAJUMMDAR. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) 9 ITA NO. 1755/PN/2013, A.Y. 2007-08 UPHELD THE FINDINGS OF ASSESSING OFFICER IN MAKING THE ADDITION BY EXTRAPOLATING ON-MONEY COMPONENT ON THE SHOPS BOOKED/ SOLD DURING THE FINANCIAL YEAR 2006-07. HOWEVER, THE COMMISSIONER OF I NCOME TAX (APPEALS) RESTRICTED THE ADDITION TO THE EXTENT OF 65% OF T HE TOTAL ON- MONEY ALLEGEDLY RECEIVED, AS THE PROFITS OF THE PROJECT WE RE SHARED BETWEEN THE ASSESSEE AND SANAND PROPERTIES PVT. LTD. IN THE RATIO OF 65% AND 35%. THE LD. AR OF THE ASSESSEE HAS MADE THREE ALTERNATE SUBMISSIONS BEFORE US. I. TO DELETE THE ENTIRE ADDITION. II. TO RESTRICT THE ADDITION TO THE EXTENT OF DOCUMENTARY EVIDENCE SEIZED DURING SURVEY. FURTHER, TO RESTRICT THE ADDITION TO THE EXTENT OF NET PROFIT ON THE UNDISCLOSED INCOME. III. TO ACCEPT THE EXTRAPOLATION MADE BY THE AUTHORITIES BELO W IN RESPECT OF ELEVEN SHOPS, SUBJECT TO THE ADDITION OF NET P ROFIT ELEMENT ONLY. 9. IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF SU RVEY, ONLY SINGLE DOCUMENT I.E. LETTER OF INTENT IN THE NAME OF MRS. USHA MAJUMMDAR AND MS. PUNAM MAJUMMDAR WAS FOUND AND SEIZED BY THE DEPARTMENT. APART FROM THE SAID LETTER OF INTENT NO OTHE R DOCUMENT WAS FOUND OR SEIZED TO SHOW THAT THE ASSESSEE HAD REC EIVED ON-MONEY FROM ANY OTHER VENDEE. THE ASSESSING OFFICER EXTRAPOLATED THE ON- MONEY ELEMENT ON THE OTHER SALE TRANSACTIONS ENTERED I NTO BY THE ASSESSEE IN RESPECT OF SHOPS BOOKED/SOLD IN THE FINANCIAL YEAR 2006-07. THE EXTRAPOLATION HAS BEEN DONE ON THE PRESUMPTION THA T SINCE THE ASSESSEE HAS ACCEPTED ON-MONEY IN RESPECT OF SHOP NO. 129, THE 10 ITA NO. 1755/PN/2013, A.Y. 2007-08 ASSESSEE MUST HAVE RECEIVED ON-MONEY ON THE SALE OF OT HER SHOPS AS WELL. THE ADDITION HAS BEEN MERELY MADE ON THE PREPONDE RANCE OF PROBABILITIES. THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER HAS PLACED RELIANCE ON THE DECISION OF HON' BLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF SALES TAX VS. H.M. ESUFALI H.M. ABDULALI REPORTED AS 90 ITR 271 (SC) TO SUPPORT THE PRINCIPLE OF ESTIMATING THE UNDISCLOSED INCOME IN RESPECT OF T RANSACTION WHICH ARE NOT RECORDED IN THE DIARIES. THE COMMISSIONER OF INCOME TA X (APPEALS) HAS FURTHER PLACED RELIANCE ON THE DECISION RENDER ED BY THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF RAJNIK & CO. VS. ACIT (SUPRA) AND THE DECISION OF PUNE BENCH OF THE TRIBUNA L IN THE CASE OF KHOPADE KISANRAO MANIKRAO VS. ACIT (SUPRA). IN THE CAS E OF RAJNIK & CO. VS. ACIT (SUPRA), THE HON'BLE HIGH COURT HELD THAT THERE WAS ABUNDANT MATERIAL ON RECORD SHOWING THAT THE ASSESSEE HAS SUPPRESSED TURNOVER AND THERE WAS ADMISSION IN THE SWORN STATEMEN T OF A PARTNER OF THE ASSESSEE FIRM ADMITTING THAT THERE WAS DAY-TO-DAY SUPPRESSIONS THROUGHOUT THE ASSESSMENT YEARS FOR THE ENTIRE BLOCK P ERIOD. SIMILARLY, IN THE CASE OF KHOPADE KISANRAO MANIKRAO VS. ACIT (SUPRA) , WHERE ON- MONEY IN RESPECT OF LAND DEAL WAS ESTABLISHED, THE ASSESSE E ALSO ADMITTED TO HAVE RECEIVED ON-MONEY. IN THE AFORESAID CA SES, THE ASSESSEE HAD ADMITTED THE RECEIPT OF AMOUNT, IN SUCH CIRC UMSTANCES THE COURTS UPHELD THE PRINCIPLE OF EXTRAPOLATING UNDISCLOSED INCOME ON THE OTHER TRANSACTIONS AS WELL. IN THE PRESENT CASE, DU RING THE COURSE OF SURVEY ONLY SINGLE DOCUMENT IN RESPECT TO SHOP NO. 1 29 WAS FOUND BY THE DEPARTMENT. THE ASSESSEE IN HIS STATEMENT RECO RDED U/S. 133A DURING THE COURSE OF SURVEY ACTION NEVER ADMITTED TO H AVE ACCEPTED ON- 11 ITA NO. 1755/PN/2013, A.Y. 2007-08 MONEY. THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF OT HER 10 TRANSACTIONS ENTERED INTO BY THE ASSESSEE DURING THE FIN ANCIAL YEAR WITHOUT THERE BEING ANY MATERIAL ON RECORD. THUS, IT IS CLE ARLY EVIDENT THAT THE FACTS IN THE PRESENT CASE ARE AT VARIANCE FROM THE FACTS OF THE DECISIONS ON WHICH RELIANCE HAS BEEN PLACED BY THE COMMISS IONER OF INCOME TAX (APPEALS) FOR CONFIRMING THE ADDITION. THUS, THE RATIO LAID DOWN IN THOSE CASES WOULD NOT APPLY IN THE FACTS OF PRES ENT CASE, BEING DISTINGUISHABLE. 10. THE CONTENTION OF THE LD. AR OF THE ASSESSEE IS THAT APART FROM UNDATED SEIZED DOCUMENT WHICH BEARS THE SIGNATURE OF VE NDEE ALONE, NO OTHER DOCUMENT WAS FOUND DURING SURVEY. IT WAS FURT HER CONTENDED THAT NO ASSET OR ANY EVIDENCE INDICATING INVESTMENT OUT OF CASH GENERATED FROM THE ALLEGED ON-MONEY RECEIVED BY THE ASS ESSEE WAS FOUND DURING SURVEY. 11. WE DO NOT FIND FAVOUR WITH THE FIRST SUBMISSION OF THE LD . AR OF THE ASSESSEE TO DELETE THE ENTIRE ADDITION. A DOCUMENT WAS SEIZED DURING THE COURSE OF SURVEY FROM THE PREMISES OF THE AS SESSEE, THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE REASON FOR EX ECUTING SUCH DOCUMENTS. THE DOCUMENT SEIZED (LETTER OF INTENT) IS ON TH E JOINT LETTER HEAD OF THE ASSESSEE AND SANAND PROPERTIES PVT. LTD. T HE LETTER OF INTENT SPECIFICALLY MENTIONS THE DESCRIPTION OF SHOP, AREA AN D THE PER SQ. FT. RATE. ADMITTEDLY, THE ASSESSEE HAS ENTERED INTO S ALE AGREEMENT WITH MRS. USHA MAJUMMDAR AND MS. PUNAM MAJUMMDAR IN RE SPECT OF SAME SHOP NO. 129 WHICH HAS BEEN MENTIONED IN THE LETTER OF INTENT. 12 ITA NO. 1755/PN/2013, A.Y. 2007-08 HOWEVER, IN THE SALE AGREEMENT THE RATE OF SHOP HAS BEE N STATED TO BE MUCH LOWER THAN WHAT HAS BEEN STATED IN THE LETTER OF INTENT. THUS, THE DOCUMENT SEIZED CANNOT BE TERMED AS DUMB DOCUMENT. A N INEVITABLE CONCLUSION THAT CAN BE DRAWN FROM THE SEIZED DOCUMENT A ND THE SALE AGREEMENT IS THAT THE DIFFERENCE BETWEEN THE RATE MENTIO NED IN THOSE TWO DOCUMENTS IS THE ON-MONEY THAT HAS BEEN RECEIVE D BY THE ASSESSEE. THEREFORE, THE DIFFERENCE BETWEEN THE RATE ST ATED IN THE LETTER OF INTENT AND THE SALE AGREEMENT IS THE UNDISCLOSED INCOME WHICH HAS TO BE ADDED IN THE INCOME RETURNED BY THE ASSESSEE. IN SO FAR AS CONTENTION OF THE ASSESSEE THAT ADDITION T O THE EXTENT OF NET PROFIT SHOULD BE MADE, AS THE ENTIRE ON-MONEY RECE IVED CANNOT BE THE PROFIT OF THE ASSESSEE, WE DO NOT INTENT TO AGREE W ITH THIS CONTENTION. THE ASSESSEE HAS DISCLOSED THE ENTIRE EXPEN DITURE IN ITS BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT BEEN ABLE TO S HOW THE ADDITIONAL EXPENDITURE WHICH HAS BEEN INCURRED BUT NOT DIS CLOSED IN THE BOOKS. THE ON-MONEY RECEIVED BY THE ASSESSEE IN R ESPECT OF SHOP NO. 129 IS THE PURE PROFIT OF THE ASSESSEE WITH NO CORRES PONDING EXPENDITURE. THEREFORE, WE REJECT THE CONTENTION OF THE ASSESSEE TO CONSIDER ONLY THE PROFIT ELEMENT AS THE UNDISCLOSED INCOME OF THE ASSESSEE. 12. THE TRIBUNAL IN THE CASE OF D.N. KAMANI (HUF) VS. DCIT (SU PRA) UNDER SIMILAR CIRCUMSTANCES WHERE THE ASSESSEE HAD SOLD DIFFERENT TYPE OF FLATS AT DIFFERENT COST. DURING THE SEARCH ON THE PREMIS ES OF ONE G CERTAIN DOCUMENTS WERE SEIZED WHICH SHOWED THAT G HAD PURCHASED A FLAT AND MADE PAYMENTS IN CHEQUES AS WELL IN CASH. HOWEVE R, IN THE 13 ITA NO. 1755/PN/2013, A.Y. 2007-08 BOOKS OF ACCOUNT OF THE ASSESSEE ALL THE CHEQUE AMOUNTS AND CHEQUE NUMBERS TALLIED BUT THE CASH PAYMENTS WERE NOT SHOWN. THE ASSESSEE DENIED ANY NEXUS OF THE SEIZED DOCUMENTS WITH THE SALE O F FLAT TO G. THE ASSESSING OFFICER EXAMINED CERTAIN BUYERS BUT DID NOT FIND ANY EXCESS SALE PROCEEDS RECEIVED. DURING THE COURSE OF SEAR CH ALSO NEITHER ANY DOCUMENTARY EVIDENCE WAS RECOVERED REFLECTING THE A CCEPTANCE OF ON-MONEY NOR ANY INVESTMENT WAS FOUND. THE ASSESSING O FFICER IN BLOCK ASSESSMENT HELD THAT 40% OF TOTAL PAYMENTS RECEIVED IN RESP ECT OF ALL FLATS WAS ON-MONEY PAYMENT AND COMPUTED THE UNDISCLOS ED INCOME ON ACCOUNT OF ON-MONEY RECEIVED IN RESPECT OF SALE OF 16 FLATS, SPREAD IT OVER TO DIFFERENT YEARS AND MADE ADDITION ACCORDINGLY. IN APPEAL BEFORE THE TRIBUNAL THOUGH BOTH THE MEMBERS AFFIRMED THE ADDITION IN CASE OF SALE OF FLAT TO G. HOWEVER, THERE WAS DIFFERENCE OF OPINION IN MAKING ADDITION ON THE REMAINING 15 OTHER FLATS. WHILE THE JUDICIAL MEMBER DELETED THE ADDITION FOR REMAINING 15 OTHER FLATS ON THE GR OUND THAT THERE IS NO DIRECT EVIDENCE OF ON-MONEY PAYMENTS. ON T HE OTHER HAND, THE ACCOUNTANT MEMBER UPHELD ADDITION OF UNDISCLOSED INCOM E, TO BE CALCULATED ON THE BASIS OF AVERAGE RATE OF FLOOR AREA OF ALL THE FLATS. THE THIRD MEMBER CONCURRING WITH THE VIEW OF THE JUDICIAL MEMBE R HELD THAT THE UNDISCLOSED INCOME COMPUTED IN RESPECT OF REMAIN ING 15 FLATS SOLD WAS NOT JUSTIFIED AND HAS BEEN RIGHTLY DELETED. THE RELEVANT EXTRACT OF THE FINDINGS OF THE THIRD MEMBER ARE AS UNDER : 7.10 THE ASSESSING OFFICER HAS COMPUTED THE UNDISC LOSED INCOME RELATING TO THE SAID FIFTEEN FLATS AT RS. 42,18,134 ONLY ON PRESUMPTION THAT THE ASSESSEE HUF MIGHT HAVE RECEIVED 'ON MONEY ' FROM FIFTEEN FLAT BUYERS ALSO WHEN HE HAS TAKEN RS. 3.35 LACS AS 'ON MONEY' FROM SHRI H. S. GREWAL LOOKING TO THE LOCATION AND THERE BEING P REVALENT PRACTICE OF 14 ITA NO. 1755/PN/2013, A.Y. 2007-08 RECEIVING 'ON MONEY' IN PROPERTY TRANSACTIONS. THUS , THE UNDISCLOSED INCOME COMPUTED IS SOLELY BASED ON PRESUMPTION AND NOT ON ANY CONCRETE MATERIAL. THE TRIBUNAL IN THE AFORECITED C ASE OF SUNDER AGENCIES HAS ALSO FIELD THE VIEW THAT SCHEME OF CHAPTER XIV- B GIVES NO POWER TO THE REVENUE TO DRAW PRESUMPTION IN REGARD TO UNDISC LOSED INCOME. FURTHER, IN THE CASE OF W.D. ESTATE (P) LTD. (SUPRA ) THE ADDITION SUSTAINED BY THE COMMISSIONER (APPEALS) PARTLY INFLUENCED BY A REPORT OF THE FINANCE MINISTRY WHEREIN A NOTORIOUS PRACTICE OF PA YMENT OF BLACK MONEY IN REAL ESTATE TRANSACTION IN METROPOLITAN CITY OF BOMBAY WAS DISCUSSED, WAS DELETED BY THE TRIBUNAL TREATING THE ADDITION B EING ON HEAR SAY EVIDENCE. 7.11 ANOTHER QUESTION THAT NEEDS CONSIDERATION IS W HETHER THE UNDISCLOSED INCOME COULD BE ESTIMATED ON ACCOUNT OF 'ON MONEY' FROM FIFTEEN FLATS BUYERS BASED ON THE SAID DOCUMENT REC OVERED FROM SHRI H.S. GREWAL INVOKING THE PROVISIONS OF SECTION 145 OF TH E INCOME TAX ACT.SECTION 145 PROVIDES THE METHOD OF ACCOUNTING. ACCORDING TO THIS SECTION INCOME CHARGEABLE UNDER THE HEAD 'PROFITS A ND GAINS OF BUSINESS OR PROFESSION 'OR 1NCOME FROM OTHER SOURCES' IS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. WHEN ACCOUNTS ARE CORRECT AND COMPLETE BU T METHOD EMPLOYED IS SUCH THAT INCOME CANNOT PROPERLY BE DEDUCTED THE REFROM, COMPUTATION IS TO BE MADE ON SUCH BASIS, AND IN SUCH MANNER AS THE ASSESSING OFFICER MAY DETERMINE. WHERE THE ASSESSING OFFICER IS NOT S ATISFIED ABOUT CORRECTNESS OR COMPLETENESS OF ACCOUNTS, OR WHERE N O METHOD OF ACCOUNTING HAS BEEN REGULARLY EMPLOYED, THE ASSESSI NG OFFICER IS EMPOWERED TO MAKE ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. AS MENTIONED ABOVE, THE ASSESSING OFFICER WHILE COM PLETING THE REGULAR ASSESSMENT FOR THE ASSESSMENT YEAR 1992-93 HAS ACCE PTED THE BOOKS OF ACCOUNT MAINTAINED AS CORRECT. HOWEVER, THE DOCUMEN T SEIZED FROM SHRI H.S. GREWAL DID INDICATE THAT THE ASSESSEE RECEIVED RS. 3.35 LAKHS IN CASH AS 'ON MONEY' ON SALE OF FLAT TO HIM AND THIS A MOUNT WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. IT COULD, TH EREFORE, BE SAID THAT SO FAR AS THE SAID AMOUNT OF RS. 3.35 LAKHS IS CONCERN ED THE BOOKS OF ACCOUNT MAINTAINED WERE NOT CORRECT AND COMPLETE AN D THE ASSESSING OFFICER COULD RESORT TO ASSESSMENT OF INCOME ESTIMA TE INVOKING THE PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT HUT I SUCH AN ACTION COULD ONLY BE TAKEN AT THE MOST WHILE COMPLETING TH E REGULAR ASSESSMENT. 15 ITA NO. 1755/PN/2013, A.Y. 2007-08 ADMITTEDLY THE PRESENT PROCEEDINGS INVOLVED ATE BLO CK ASSESSMENT PROCEEDINGS UNDEI CHAPTEI-XIV-B OF THE INCOME TAX A CT AND NOT THE REGULAR ASSESSMENT PROCEEDINGS. IT IS ALSO MENTIONE D HERE THAT CHAPTER XIV-B IS A CODE IN ITSELF PROVIDING FOR SPECIAL PRO CEDURE FOR ASSESSMENT OF SEARCH CASES AND AS PER SUB-SECTION (2) OF SECTION 158BB, IN COMPUTING UNDISCLOSED INCOME FOR THE BLOCK PERIOD PROVISIONS OF SECTIONS 68,69,69A, 69B AND 69C MAY BE APPLIED BUT NOWHERE I T IS PROVIDED IN THIS CHAPTER THAT PROVISIONS OF SECTION 145 WOULD B E APPLICABLE IN COMPUTING THE UNDISCLOSED INCOME IN THE BLOCK ASSES SMENT AND THERE BEING NO SUCH PROVISION MADE NO UNDISCLOSED INCOME COULD BE COMPUTED ON ESTIMATE BASIS INVOKING THE PROVISIONS OF SECTIO N 145BASED ON THE SAID DOCUMENT RELATING TO THE FLAT SOLDS TO SHRI H. S. GREWAL IN RESPECT OF REMAINING FIFTEEN FLATS SOLD TO OTHERS. FURTHER, WH EN SPECIFIC ADDITION IS MADE BASED ON THE SAID DOCUMENT, THERE COULD BE NO ADDITION MADE ON ESTIMATE BASIS BASED ON THE SAME DOCUMENTS. 7.12 AS REGARDS THE QUESTION WHETHER SUCH ADDITION COULD BE MADE IN THE NORMAL COURSE AS PER PROVISIONS OF SECTION 147, REA D WITH SECTION 148, OF THE INCOME TAX ACT, IT IS MENTIONED THATSECTION 147 PROVIDES THAT IF THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT AN Y INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR HE MAY, SUBJECT TO THE PROVISIONS OFSECTIONS 148 TO 153 ASSESS OR RE-A SSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS KNOWLEDGE SUBSEQU ENTLY IN THE COURSE OF PROCEEDINGS UNDER THIS SECTION OR RECOMPU TE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE FOR THE ASSESSMENT YEAR CONCERNED. THUS, FOR ASSESSING AN ESCAPED INCOME UNDER SECTION 147 THE ASSESSING OFFICER MUST HAVE R EASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT. SO FAR AS THE FLAT SOLD TO SHRI H.S. GREWAL IT IS ESTABLISHED FROM THE SEIZED DOCUMENT THAT CASH OF RS. 3.35 LACS WAS PAID TO THE ASSESSEE HUF OVER AND ABOVE THE APPARENT CONSIDERATION AND BASED ON S UCH EVIDENCE ACTION UNDER SECTION 147COULD VALIDLY BE TAKEN. HOW EVER, THERE IS NO SUCH MATERIAL EVIDENCE FOUND DURING THE COURSE OF S EARCH ABOUT THE 'ON MONEY' PAID BY THE REMAINING FIFTEEN FLAT BUYERS TO THE ASSESSEE HUF OR THE ASSESSEE HUF RECEIVING ANY 'ON MONEY' FROM THER EIN. THE ASSESSING OFFICER DURING THE COURSE OF REGULAR ASSESSMENT PRO CEEDINGS FOR THE ASSESSMENT YEAR 1992-93 EXAMINED THE FLAT BUYERS UN DER THE PROVISIONS 16 ITA NO. 1755/PN/2013, A.Y. 2007-08 OF SECTION 131 OF THE INCOME TAX ACT BUT NO INCRIMI NATING MATERIAL CAME ON RECORD FROM THEIR CROSS-EXAMINATION. FURTHER, DU RING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS ALSO THE ASSESSING OFF ICER AGAIN MADE AN EFFORT TO ASCERTAIN FROM THE REMAINING FIFTEEN FLAT BUYERS THE 'ON MONEY' PAID, IF ANY, TO THE ASSESSEE HUF BY WAY OF SUMMONS UNDER SECTION 131 OR, ENQUIRY LETTERS UNDER SECTION 133(6) OF THE INCOME TAX ACT BUT TO NO RESTILT. THE SEARCH CONDUCTED AT THE PREMISES OF THE KARTA OF THE HUF ALSO DID NOT REVEAL THE FACT OF 'ON MONEY,' REC EIVED IF ANY FROM THE SAID FIFTEEN FLAT BUYERS. FURTHER, THE DOCUMENT SEI ZED FROM SHRI GREWAL NO DOUBT RAISED THE PRESUMPTION THAT THE ASSESSEE H UF MIGHT HAVE SIMILARLY RECEIVED 'ON MONEY' FROM THE OTHER FLAT B UYERS BUT THE PRESUMPTION HOWSOEVER STRONG MAY BE, CANNOT TAKE TH E PLACE OF EVIDENCE OR IS NO SUBSTITUTE OF EVIDENCE. THIS SHOULD HAVE H OWEVER PROMPTED THE ASSESSING OFFICER TO MAKE DEEP AND PROPER ENQUIRY/I NVESTIGATION BUT AS IS EVIDENT FROM ABOVE, THE INVESTIGATION/ENQUIRY MA DE BY THE ASSESSING OFFICER FROM THE OTHER FIFTEEN FLAT BUYERS HAS NOT PRODUCED ANY RESULT IN THE DIRECTION OF PROVING THAT THE ASSESSEE HUF RECE IVED ANY 'ON MONEY' FROM OTHER FLAT BUYERS ALSO. IN THIS VIEW OF THE MA TTER, NO ACTION COULD BE TAKEN UNDER SECTION 147 TO MAKE ANY ADDITION TO THE INCOME DECLARED ON ACCOUNT OF THE FIFTEEN FLATS SOLD. 13. FURTHER, THE ASSESSEE IN SUPPORT OF HIS SUBMISSIONS TH AT ONLY NET PROFIT SHOULD BE BROUGHT TO TAX HAS PLACED RELIANCE ON TH E DECISIONS IN THE CASE OF ABHISHEK CORPORATION VS. DCIT (SUPRA) AND IN T HE CASE OF KISHOR MOHANLAL TELWALA VS. ACIT (SUPRA). HOWEVER, WE FIND TH AT THE FACTS OF BOTH THESE CASES ARE AT VARIANCE FROM THE FACTS OF THE CASE IN HAND. THUS, THE ASSESSEE WOULD NOT BE ABLE TO DRAW AN Y HELP FROM THE AFORESAID DECISIONS. 14. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND DOCU MENTS ON RECORD WE HOLD THAT THE ADDITION IN RESPECT OF ON-MONEY RECEIVED IN RESPECT OF SHOP NO. 129 I.E. THE SHOP IN RESPECT OF WHICH T HE DOCUMENT 17 ITA NO. 1755/PN/2013, A.Y. 2007-08 WAS SEIZE DURING SURVEY IS UPHELD. WHEREAS, IN THE ABSENC E OF ANY MATERIAL TO SHOW THAT ON-MONEY WAS RECEIVED IN RESPECT OF OTHER SHOPS SOLD OR BOOKED DURING THE FINANCIAL YEAR 2006-07, THE ADDIT ION ON ACCOUNT OF ON-MONEY IS NOT SUSTAINABLE. THE PRINCIPLE OF EXTRAPOLATION OF ON-MONEY ON THE OTHER SHOPS SOLD/BOOKED DURING TH E PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL IS REJECTED IN THE ABSENCE OF ANY MATERIAL ON RECORD. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 26 TH DAY OF AUGUST, 2016. SD/- SD/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 26 TH AUGUST, 2016 RK ,-#./0+. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. # # $ () / THE CIT(A)-II, PUNE 4. # # $ / THE CIT-II, PUNE 5. '() *+ , # *+ , , ,-. , / DR, ITAT, B BENCH, PUNE. 6. )/0 12 / GUARD FILE. // ' // TRUE COPY// #3 / BY ORDER, 4 *. / PRIVATE SECRETARY, # *+ , / ITAT, PUNE