The DCIT, Central Circle-1(3), Ahmedabad V. Shri Natvarlal Kacharalal Vyas, Dist. Mehsana

ITA 1760/AHD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57124 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 19-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIVASTAVA
• Assessee Lawyers: R B RATHI
• Keywords: Rejection of books of accounts

Judgement Text

ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, A HMEDABAD (BEFORE SHRI G.C. GUPTA,VICE PRESIDENT AND SHRI B. R. BASKARAN,AM) ITA.NO.1760/AHD/ 2008 (ASSESSMENT YEARS: 2001-02) DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE 1(3), INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. SHRI NATVARLAL KACHARALAL VYAS, PROP. M/S. KESHAV ESTATE DEVELOPERS, DOCTOR HOUSE, VARDHAMANNAGAR, NEAR SARDAR BAUG, KALOL, DIST. MEHSANA. (RESPONDENT) ITA.NO.3078, 3079 & 3080/AHD/2009 (ASSESSMENT YEARS: 2002-03, 2003-04 AND 2004-05) SHRI NATVARLAL KACHARALAL VYAS, PROP. M/S. KESHAV ESTATE DEVELOPERS, DOCTOR HOUSE, VARDHAMANNAGAR, NEAR SARDAR BAUG, KALOL, DIST. MEHSANA. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(3), INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: ACGPV 7887A BY DEPARTMENT : SHRI P.K.SRIVASTAVA, SR.D.R. BY ASSESSEE. : SHRI R. B. RATHI. DATE OF HEARING : 18-1-2012 DATE OF PRONOUNCEMENT : 25-1-2012 PER: SHRI B.R.BASKARAN, ACCOUNTANT MEMBER:- THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD CIT (A) FOR THE ASSESSMENT YEAR 2001-02 IN QUANTUM PROCEEDINGS AND THE APPEALS FILED BY THE ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 2 ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT (A) IN THE PENALTY PROCEEDINGS RELATING TO THE ASST. YEAR 2002-03 TO 2 004-05. SINCE ALL THESE APPEALS WERE HEARD TOGETHER, THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. WE SHALL FIRST TAKE UP THE APPEAL OF THE REVENUE RELATING TO THE A.Y. 2001- 02. THE REVENUE IS ASSAILING THE DECISION OF LD. CI T (A) IN DELETING THE INCOME OF RS.17.68 LACS ASSESSED BY THE AO FROM HOUSING PLOT SALES SCHEME PROMOTED BY THE ASSESSEE.. 3. THE FACTS RELATING TO THE SAID ISSUE IS STATED I N BRIEF. THE ASSESSEE WAS ENGAGED IN REAL ESTATE BUSINESS, I.E. DEVELOPMENT A ND SALE OF HOUSING PLOTS UNDER INSTALMENT SCHEME. THE DEPARTMENT CARRIED OUT SEARC H OPERATION IN BATA GROUP OF CASES ON 4-9-2003, DURING THE COURSE OF WHICH A FIL E CONTAINING THE DETAILS OF HOUSING PLOT SCHEME PROMOTED BY THE ASSESSEE, IN TH E NAME OF KESHAV ESTATE DEVELOPERS WAS FOUND. WHILE CONDUCTING SURVEY OPER ATION IN THE PREMISES OF SHRI BHARAT J. RAO ON 29-9-2003, THE BOOKS OF ACCOUNTS P ERTAINING TO ABOVE SAID CONCERN WERE FOUND. THE HOUSING PLOT ALLOTEES WERE REQUIRED TO PAY 36 MONTHLY INSTALMENTS. THUS THE SCHEME SPREAD OVER FOUR ACCO UNTING YEARS, THE FIRST YEAR IS THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONS IDERATION. THE AO RECORDED SWORN STATEMENTS FROM THE ASSESSEE ON 29-9-2003 AND 18-3-2004. IN THE SAID STATEMENTS THE PROFIT EARNED FROM THE REAL ESTATE V ENTURE CITED ABOVE WAS WORKED OUT AS UNDER:- TOTAL RECEIPTS ON ACCOUNT OF MEMBERSHIP FEES FOR THE PERIOD OF 30 MONTHS STARTING FROM JANUARY,2001 TILL DATE FROM 370 MEMBERS. 1,38,75,000 ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 3 LESS EXPENSES INCURRED I) CASH OF 15 LACES 30,00,000 II) COST OF ITEMS I.E. PRIZES. 1,80,000 III) COST OF OTHER MISC. EXPENSES LIKE HALL RENT ETC. 20,000 IV)COST OF LAND PURCHASED 36,00,000 68,00,000 NET RECEIPTS 70,75,000 THE AO WAS UNDER THE IMPRESSION THAT THE ASSESSEE H AS AGREED TO OFFER THE NET PROFIT OF RS.70.75 LACS AS HIS INCOME FOR THE PERIO D OF FOUR YEARS CITED ABOVE. HOWEVER, IN RETURN OF INCOME FILED FOR A.Y. 2001-02 THE ASSESSEE DECLARED A LOSS OF RS. 7,70,248/-. IN SUBSEQUENT THREE YEARS THE INCOM E DECLARED BY THE ASSESSEE AGGREGATED TO RS.20.47 LACS ONLY. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE RETRACTED HIS STATEMENT MADE WITH REGARD T O PROFITS STATED ABOVE BY FILING LETTER ON 30-1-2006, WHICH WAS REJECTED BY THE AO B Y PLACING RELIANCE ON CERTAIN CASE-LAW DISCUSSED IN THE ASSESSMENT ORDER. DURING THE COURSE OF SURVEY, THE ASSESSEE HAD ACCEPTED THAT HE DID NOT MAINTAIN BOOK S OF ACCOUNT EXCEPT FOR A PERIOD OF 4 MONTHS FROM 1-12-2000 TO 31-3-2001. HOWEVER IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE PRODUCED BOOKS OF ACCOUNT , BUT FAILED TO PRODUCE THE BILLS OR VOUCHERS. HENCE, THE AO REJECTED THE BOOK RESULTS AND ADOPTED THE PROFIT OF THE IMPUGNED REAL ESTATE VENTURE AT RS.70.75 LAK HS. THE AO DISTRIBUTED THE SAID AMOUNT EQUALLY BETWEEN THE FOUR YEARS AND ACCORDING LY COMPUTED THE TOTAL INCOME OF THE YEAR UNDER CONSIDERATION AT RS.17,68,750/-, BY REJECTING THE LOSS DECLARED BY THE ASSESSEE. ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 4 4. BEFORE THE LD. CIT (A), THE ASSESSEE PRODUCED A CHART SHOWING INCOME EARNED BY HIM FROM THE IMPUGNED VENTURE (INCOME CHA RT) AND CLAIMED THAT THE SAID CHART WAS PREPARED OUT OF THE BOOKS OF ACCOUNT MAIN TAINED BY HIM. THE ASSESSEE ALSO CONTENDED THAT HE DID NOT ACCEPT THE INCOME FI GURE OF RS.70.75 LAKHS IN HIS SWORN STATEMENT. THE LD CIT(A) SOUGHT THE COMMENTS OF THE AO ON THE INCOME CHART SUBMITTED BY THE ASSESSEE AND ALSO ON HIS CON TENTIONS. AFTER CONSIDERING THE REPORT OF THE AO, SUBMISSIONS MADE BY THE ASSESSEE AND ALSO ON A PERUSAL OF THE STATEMENTS RECORDED FROM THE ASSESSEE, THE LD. CIT (A) CONCLUDED THAT THE ASSESSEE DID NOT OFFER THE INCOME OF RS.70.75 LACS AS PRESUM ED BY THE AO. THE OBSERVATIONS OF THE LD. CIT (A) IN THIS REGARD IS AVAILABLE IN P ARA 7.2 OF HIS ORDER. WITH REGARD TO THE INCOME CHART, THE AO POINTED OUT CERTAIN DEF ECTS. THE LD CIT(A) NOTICED THAT THE NUMBER OF PLOTS THAT WAS ACTUALLY SOLD WAS NOT TAKEN UP CORRECTLY AT THE TIME OF SURVEY. SIMILARLY, EXPENSES ON SALARY PAYM ENTS ETC., WERE ALSO NOT CONSIDERED AT THAT POINT OF TIME. HENCE, ON OVERAL L CONSIDERATION OF ALL FACTS, THE LD. CIT (A) CONSIDERED IT FIT TO DELETE THE ADDITIO N MADE IN THE A.Y. 2001-02. THE RELEVANT OBSERVATIONS OF THE LD. CIT ( A) ARE EXTRA CTED BELOW:- 7.5. ON CAREFUL CONSIDERATION OF THE CONTENTIONS AND DET AILS ON THE RECORD, IT IS SEEN THAT THE APPELLANT HAD DERIVED INCOME, M AINLY BY FORMING THE SOCIETY IN NAME OF KESHAV ESTATE DEVELOPERS. APPARE NTLY OUT OF OVER 490 PLOTS DEMARCATED ONLY 351 PLOTS HAD BEEN BOOKED TILL THE DATE OF SURVEY, AS PER THE SCHEME FLOATED BY THE ASSESSEE. AS PER THIS SCHEME, EACH MEMBER WAS TO PAY THE TOTAL AMOUNT OF RS.45,00 0/-, IN INSTALLMENTS. HOWEVER, NOT ALL THE MEMBERS DID SO A ND SOME 7 MEMBERS HAD TO BE RETURNED THEIR INSTALLMENTS ALSO. THE DETAILS OF THE INSTALLMENTS RECEIVED WAS SUBMITTED BEFORE THE A.O. WITH THE INFORMATION THAT THE SOCIETY HAS NOT BEEN FULLY BOO KED. THE AO HOWEVER PLACED RELIANCE ON THE STATEMENT OF THE APP ELLANT DATED 29-9- 2003 FOR MAKING THE ADDITION. HOWEVER, THE PERUSAL OF THE STATEMENT REVEALS THAT THE APPELLANT HAD NEVER ADMITTED TO TH E INCOME OF RS.70.75 LACS, AS WAS ASSUMED BY THE AO. THE AO DID NOT VERIFY THE CONTENTIONS/DETAILS OF THE EXPENSES/INCOME FROM INS TALMENTS WHICH WAS IN THE CHART STATED TO BE PREPARED AS PER THE B OOKS OF ACCOUNTS . ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 5 DURING THE HEARING BEFORE ME, THE PRESENT AO HAS PO INTED OUT THAT THE EXPENDITURE ON SALARY, AS PER THIS CHART I.E. TOTAL OF RS.7.08 LACS WAS NOT VERIFIABLE IN THE LIGHT OF THE STATEMENT OF THE APPELLANT, WHERE IN ANSWER TO Q. NO.34 HE HAD STATED THAT THERE WERE NO EMPLOYEES IN THE FIRM. THUS THE EXPENSES CLAIMED WERE NOT SUPPORTED BY EVIDENCE. HOWEVER, THE SUBSEQUENT EXPLANATION OFFERED BY THE APPELLANT IS THAT THIS STATEMENT OF NO EMPLOYEES WAS NOT IN THE PROPE R CONTEXT AND IN VIEW OF THE FACT THAT EMPLOYEE (S) WERE ESSENTIALLY REQUIRED FOR MAINTAINING THE AFFAIRS RELATING TO ALMOST 300 MEMB ERS OF THE SOCIETY. 7.6. IT IS ARGUED THAT THE APPELLANT, HIS STATEMENT, HAD REFERRED TO THE SITUATION EXISTING THEN, I.E. AT THE TIME OF SURVEY AND RECORDING OF HIS STATEMENT, AND NOT FOR EARLIER PERIOD. THIS APPEARS TO BE A PLAUSIBLE EXPLANATION FOR EARLIER YEARS BUT NOT IN RESPECT OF A.Y. 2004-05. HENCE THE AUTHENTICITY OF THE EXPENSES OF RS.1.80 L AKHS OF SALARY IN RESPECT OF A.Y. 2004-05 IS NOT ESTABLISHED, IN LIGH T OF THE STATEMENT OF THE APPELLANT RECORDED ON 29-9-2003. SIMILARLY THE CLAIM OF DONATION OF RS. 41,000/- IN F.Y. 2001-02, RS.37,076/- IN F.Y . 2002-03 AND RS.12,000/- IN F.Y. 21003-04 (I.E. TOTAL OF RS.90,0 76/-) WAS NOT ALLOWABLE EXPENDITURE. THUS ON A HOLISTIC CONSIDERA TION OF THE SUBMISSIONS/DETAILS ON RECORD, IT IS CONSIDERED REA SONABLE TO RESTRICT THE ADDITIONS MADE BY THE AO IN THE AFOREMENTIONED ASSESSMENT YEARS TO RS.41,000/- IN A.Y. 2002-03, RS.37,076/- IN A.Y. 2003-04 AND RS.1.92 LAKHS IN A.Y. 2004-05. THE ADDITION MADE IN A.Y. 2001-02 IS DELETED. THE RELATED GROUNDS OF APPEAL ARE ADJUDGED ACCORDINGLY. AGGRIEVED BY THE ORDER OF LD. CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 5. WE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PER USED THE RECORDS. THE IMPORTANT COMMENT MADE BY THE CIT (A) IS THAT THE A O DID NOT VERIFY THE CONTENTIONS/DETAILS OF EXPENSES/ INCOME FROM INSTAL MENTS WHICH WAS AVAILABLE IN THE CHART. HOWEVER, IT IS PERTINENT TO NOTE THAT TH E LD. CIT (A) HAS HIMSELF QUALIFIED HIS COMMENT BY STATING THAT THE CHART WAS STATED T O BE PREPARED AS PER THE BOOKS OF ACCOUNT, MEANING THEREBY THE LD CIT(A) ALSO DID NO T VERIFY WHETHER THE SAID STATEMENT IS AS PER THE BOOKS OF ACCOUNT. BE THAT A S IT MAY, WE NOTICE FROM THE ASSESSMENT ORDER THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNTS, SINCE THE ASSESSEE ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 6 HAS FAILED TO PRODUCE BILLS OR VOUCHERS ETC., IN SU PPORT OF THE EXPENSES CLAIMED BY HIM. WHEN THE AO HAS REJECTED THE BOOK RESULTS, T HERE IS NO NECESSITY FOR HIM TO VERIFY THE INCOME CHART, WHICH WAS CLAIMED TO HAV E BEEN PREPARED FROM THE VERY SAME BOOK. WE ALSO NOTICE THAT THE LD. CIT (A) DID NOT GIVE ANY REASON AS TO WHY THE DECISION OF THE AO IN REJECTING THE BOOK RESULT IS NOT CORRECT. BEFORE THE LD. CIT (A), THE AO HAS POINTED OUT CERTAIN ERRORS IN T HE INCOME CHART PREPARED BY THE ASSESSEE AND ACCORDINGLY SUBMITTED THAT THE SAID CH ART IS NOT AUTHENTICATED AND DOES NOT HAVE ANY EVIDENTIARY VALUE. THE LD CIT(A) DID NOT CONTROVERT THE SAID OBSERVATIONS OF THE AO. IT IS ALSO PERTINENT TO N OTE THAT THE LD. CIT (A) HIMSELF HAS OBSERVED THAT THE AUTHENTICITY OF EXPENSES OF R S.1.80 LACS OF SALARY IN RESPECT OF A.Y. 2004-05 IS NOT ESTABLISHED. THUS THE DECIS ION RENDERED BY LD. CIT (A) APPEARS TO CONTRADICT WITH THE FACTS AVAILABLE ON R ECORD. THUS, IN OUR VIEW, THE LD. CIT (A) IS NOT JUSTIFIED IN PLACING RELIANCE FULLY ON THE INCOME CHART PREPARED BY THE ASSESSEE WITHOUT CAUSING INQUIRES WITH REGARD T O VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. 6. THOUGH THE AO HAS ESTIMATED THE UNDISCLOSED INCO ME RELATED TO THE YEAR UNDER CONSIDERATION AT RS.17.68 LAKHS ON THE BASIS OF SWORN STATEMENT OF THE ASSESSEE, I.E., 25% OF RS.70.75 LAKHS, YET FOR THE REASONS STATED BY THE LD. CIT (A) IN PARA 7.2 OF HIS ORDER, WE ARE ALSO OF THE VIEW T HAT THE AO WAS WRONG ON ENTERTAINING SUCH A PRESUMPTION. ACCORDINGLY WE AG REE WITH THE VIEW OF THE LD CIT (A) THAT THE ASSESSEE HAS NOT ACCEPTED THAT HIS INCOME FROM THE IMPUGNED VENTURE WAS RS.70.75 LAKHS. HOWEVER, IN REPLY TO QU ESTION NO.31 OF THE SWORN STATEMENT, THE ASSESSEE HIMSELF HAS REPLIED THAT TH ERE WAS A NET PROFIT OF RS.30 LAKHS UPTO MARCH,2003. WE NOTICE THAT LD CIT (A) H AS NOT FURNISHED ANY REASON AS TO WHY HE IS NOT TAKING COGNIZANCE OF THE SAID S TATEMENT. SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE VOUCHERS, BILLS ETC. ALONG WI TH THE BOOKS OF ACCOUNT, WE ARE OF ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 7 THE VIEW THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESULTS. IN VIEW OF THE SAME, WE ARE OF THE VIEW THAT THE INCOME FROM THE I MPUGNED VENTURE IS REQUIRED TO BE ESTIMATED AND ON THE BASIS OF THE SWORN STATEMEN T OF THE ASSESSEE, IT MAY BE TAKEN AT RS.30.00 LAKHS SUBJECT TO MODIFICATION IN EACH YEAR ON THE BASIS OF SPECIAL CIRCUMSTANCES PREVAILING IN THAT YEAR. ACCORDINGLY, THE INCOME ALLOCABLE TO THE YEAR UNDER CONSIDERATION WOULD WORK OUT TO RS.7.50 LAKHS. SINCE THE ASSESSEE MUST HAVE SPENT MORE AMOUNT DURING THE INITIAL YEAR OF P ROJECT AND THE YEAR UNDER CONSIDERATION, BEING INITIAL YEAR, WE ARE OF THE VI EW THAT THE INCOME FOR THE YEAR UNDER CONSIDERATION MAY BE ESTIMATED AT RS.5.00 LAK HS (RUPEES FIVE LAKHS). IN OUR VIEW, THE SAME WOULD MEET THE ENDS OF JUSTICE AND W E ORDER ACCORDINGLY. 7. NOW, WE SHALL TAKE UP THE APPEALS FILED BY T HE ASSESSEE. IN ASSESSMENT YEARS 2002-03 TO 2004-05, THE AO LEVIED PENALTY ON THE AD DITION CONFIRMED BY LD CIT(A) IN THE QUANTUM PROCEEDINGS. THE ASSESSEE CO ULD NOT SUCCEED IN THE APPEAL FILED BEFORE LD CIT(A) AND HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 8. WE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. WE NOTICE THAT THE LD CIT (A) HAS ONLY CONFIRMED THE ADDITION OF FOLLOWING ITEMS: ASST. YEAR DONATION SALARIES ESTIMATION OF LIASION INCOME 2002-03 - RS.41,000/- 2003-04 - RS.37,076/- --- RS.70,000/- 2004-05 - RS.12,000/- RS.1,80,000/- RS.70,000/- THE DONATION EXPENSE IS LIABLE TO BE DISALLOWED IN THE NORMAL COURSE AND THE SALARY EXPENSES HAVE BEEN CONFIRMED ONLY FOR WANT OF EVIDE NCE. THE LIAISON INCOME HAS ONLY BEEN ESTIMATED. HENCE, IN OUR VIEW, THESE ADD ITIONS ARE NOT EXIGIBLE FOR PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE REVERSE THE ORDERS OF LD CIT(A) ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 8 ON THIS ISSUE AND DIRECT THE AO TO DELETE THE PENAL TY IMPOSED U/S 271(1)(C) OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED AND THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25-1-2012 SD/- SD/- ( G.C. GUPTA) (B.R.BASKARAN) VICE PRESIDENT ACCOUNTAN T MEMBER AHMEDABAD. S.A.PATKI. 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,AHMEDABAD. ITA NO.176 0/AHD/2008 A.Y.2001-02 ITA NO.307 8,3079,3080/AHD/2009 9 1.DATE OF DICTATION 20 - 1 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 20 / 1 / 20121 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 25 - 1 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 01 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 - 01 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25 -01 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..