Appeal Details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 66662 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-09-2012
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
Not Allotted
Assessment Year
2008-2009
Appeal Filed On
10-04-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAICS1865J I.T(SS).A.NOS. 111 , 112 & 189 /IND/201 2 . A.Y S . : 2006 - 07, 2007 - 08 & 2008 - 09 M/S.SHARDA REAL ESTATE PVT.LTD., ACIT, UJJAIN CHHOTA MALSAPURA, VILLAGE-SIYA, DEWAS VS APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR DATE OF HEARING : 21 .0 8 .2012 DATE OF PRONOUNCEMENT : 04 . 0 9 .201 2 O R D E R PER R. C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEARS 2006-07, 2 007-08 & -: 2: - 2 2008-09, IN THE MATTER OF ORDER PASSED U/S 153C REA D WITH SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF DEVELOPING HOUSING PROJECT A ND COLONIES FOR RESIDENTIAL HOUSES AND SALE THEREOF. A SEARCH U/S 132 WAS CARRIED OUT ON 29.01.2008 IN THE CASE OF SH RI RAMESH KUMAR AGRAWAL, WHO IS ONE OF THE MAIN DIRECTORS OF THE ASSESSEE COMPANY AND CERTAIN DOCUMENTS PERTAINING T O THE ASSESSEE COMPANY WERE FOUND FROM HIS RESIDENCE. THE ASSESSEE COMPANY WAS ALSO COVERED THROUGH SURVEY U/ S 133A. IN VIEW OF THE FACT THAT CERTAIN DOCUMENTS BELONGIN G TO ASSESSEE COMPANY WAS SEIZED DURING THE SEARCH FROM THE RESIDENCE OF SHRI RAMESH KUMAR AGRAWAL, PROCEEDING U/S 153C R.W.S. 153A WAS INITIATED IN THE CASE OF ASSES SEE COMPANY. CONSEQUENTLY, NOTICES U/S 153A WAS ISSUE D TO THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 TO 2007-08. SI NCE THE COMPANY WAS INCORPORATED ON 16.06.2003, THE PROCEED INGS FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 WERE DROPPE D. FOR ASSESSMENT YEAR 2004-05 AND 2005-06, RETURNED INCOM E WERE -: 3: - 3 ACCEPTED. HOWEVER, FOR ASSESSMENT YEAR 2006-07, 20 07-08 AND 2008-09 ADDITIONS HAVE BEEN MADE BASED ON A DOC UMENTS (IN THE FORM OF EXCEL SHEET) IMPOUNDED FROM THE PRE MISES OF ASSESSEE COMPANY. THE SAID DOCUMENT CONTAINED THE PARTICULARS OF SALE OF PLOT SUCH AS PLOT NUMBERS, M ONEY RECEIVED THROUGH CHEQUE AND ON MONEY RECEIVED IN CA SH. THE ASSESSEE COMPANY WAS INCORPORATED ON 16.06.2003 AND IS ENGAGED IN THE BUSINESS OF DEVELOPING OF HOUSING PR OJECT AND COLONIES FOR RESIDENTIAL HOUSES AND SALE THEREOF. I N MAKING THE AFORESAID ADDITION, THE ASSESSING OFFICER OBSERVED THAT ON PAPERS SO IMPOUNDED CERTAIN AMOUNTS RECEIVED BY WAY OF CHEQUE ON VARIOUS DATES ALONGWITH THE AMOUNT RECEIV ED IN CASH IS NOTED. THE AMOUNTS RECEIVED BY WAY OF CHEQU ES ONLY WERE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESS EE AS SALE CONSIDERATION ON THE DATES MENTIONED ON THE SAID PA GE. ACCORDINGLY, ADDITION WAS MADE IN RESPECT OF CASH E NTRIES FOUND NOTED ON THE LOOSE SHEETS. 3. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE PROCEEDINGS INITIATED U/S 153-C AS WELL AS ON MERIT OF THE ADDITIONS. -: 4: - 4 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) DISMISSED THE LEGAL GROUND RAISED BY THE ASSESSEE AFTER HAVING TH E FOLLOWING OBSERVATIONS :- 4.1 LEGAL ISSUE - FRAMING OF ASSESSMENT U/S. 153C: THE ASSESSEE HAS CHALLENGED FRAMING OF ASSESSMENT U/S. 153C SAYING THAT NOTHING INCRIMINATING BELONGING TO THE ASSESSEE COMPANY WAS FOUND AND SEIZED DURING THE SEARCH FROM THE RESIDENTIAL PREMISES OF ITS DIRECTOR SHRI RAMESH KUMAR AGRAWAL; THAT THE ADDITIONS MADE WERE BASED ON ONLY THOSE DOCUMENTS WHICH WERE IMPOUNDED DURING THE SURVEY U/S. 133A MADE IN THE PREMISES OF ASSESSEE COMPANY ITSELF. IN THIS CONTEXT, I FIND THAT AO HAS DEARLY MENTIONED IN THE ASSESSMENT ORDER THAT CERTAIN DOCUMENTS PERTAINING TO ASSESSEE COMPANY WERE FOUND FROM THE RESIDENCE OF SHRI RAMESH KUMAR AGRAWAL; AND THAT FROM THE DOCUMENTS IMPOUNDED FROM THE OFFICE OF ASSESSEE -: 5: - 5 COMPANY DURING SURVEY AND THOSE (BELONGING TO ASSESSEE) WHICH WERE SEIZED DURING THE SEARCH (FROM THE RESIDENCE OF SHRI RAMESH KUMAR AGRAWAL), IT WAS NOTED THAT ASSESSEE HAD NOT FULLY RECORDED THE SALE CONSIDERATION IN ITS BOCKS OF ACCOUNTS. IN VIEW THEREOF, NOTICES U/S. 153A R.W.S 153C WERE ISSUED TO THE ASSESSEE COMPANY ALSO AND ASSESSMENT WERE FRAMED ACCORDINGLY. IN ITS WRITTEN SUBMISSIONS, THE ASSESSEE HAS TAKEN A PLEA THAT THE SAID SEIZED DOCUMENT (FROM THE RESIDENCE OF SHRI RAMESH KUMAR AGRAWAL] WERE NOT THE DOCUMENT OF THE ASSESSEE. SUCH A PLEA IS MADE SAYING THAT THOSE SEIZED DOCUMENTS WERE BASICALLY ALLOTMENT PAPERS OF THE PLOTS ISSUED BY ASSESSEE COMPANY TO THE PLOT OWNER', AND ALSO THEIR REGISTRIES. IN THIS WAY, ASSESSEE PERHAPS INTENDS TO SAY THAT OWNERSHIP OVER THOSE DOCUMENTS WAS OF THE PLOT OWNERS AND NOT OF THE ASSESSEE COMPANY. -: 6: - 6 IN MY CONSIDERED VIEW, SUCH A PLEA IS MISPLACED. ADMITTEDLY, ALLOTMENT LETTERS ARE ISSUED BY THE ASSESSEE COMPANY AND IN PURSUANCE OF THE SALES TRANSACTIONS, A COPY OF SUCH LETTERS AND ALSO THAT OF REGISTERED DEED IS RETAINED BY THE ASSESSEE FOR ITS OWN RECORD. THE DOCUMENTS PROVIDES FOR THE DETAILS OF TRANSACTIONS ENTERED BETWEEN THE ASSESSEE COMPANY (BEING SELLER) AND THE PLOT OWNERS (BEING PURCHASER). THUS, IT CANNOT BE SAID THAT THE DOCUMENT' DID NOT BELONG TO THE ASSESSEE COMPANY. THE DOCUMENTS WERE VERY WELL OF THE ASSESSEE COMPANY AND IT IS IMMATERIAL WHETHER THOSE WERE INCRIMINATING IN NATURE OR NOT, PROCEEDINGS U/S. 153C CAN BE INITIATED. IT IS NOTED THAT IN THE SAID PROVISION OF SECTION 153C, NOWHERE THE WORD 'INCRIMINATING' HAS BEEN MENTIONED. THE ONLY REQUIREMENT IS OF THE SEIZED DOCUMENTS WHICH BELONGED TO SUCH OTHER PERSON. THIS IS -: 7: - 7 FULFILLED. THUS, NOTICES WERE VALIDLY ISSUED TO THE ASSESSEE COMPANY. IT IS NOTEWORTHY THAT THE DOCUMENTS WHICH WAS IMPOUNDED FROM THE ASSESSEES PREMISES DURING THE SURVEY TOGETHER WITH THOSE WHICH WERE SEIZED FROM THE PREMISES OF ITS DIRECTOR DID INDICATE THAT ASSESSEE COMPANY HAD BEEN SUPPRESSING THIS SALES BY RECORDING IN ITS BOOKS ONLY THAT AMOUNT WHICH WAS RECEIVED THROUGH CHEQUE ONLY; AND THAT THE ON MONEY RECEIVED IN CASH WAS NOT DISCLOSED. THIS MEANS THAT THE DOCUMENTS SUCH AS ALLOTMENT PAPERS AND REGISTRIES WERE INDEED OF INCRIMINATING NATURE AS THE ENTIRE SALE CONSIDERATION WAS NOT MENTIONED THEREIN. 5. THE LD. CIT(A) ALSO CONFIRMED THE ADDITION IN RESPE CT OF THE CASH AMOUNT RECEIVED AS FOUND MENTIONED IN THE DOCUMENTS SO IMPOUNDED. AGAINST THIS ORDER OF CIT(A ), THE ASSESSEE IS IN APPEAL BEFORE US. -: 8: - 8 6. SHRI S. S. DESHPANDE, C. A. APPEARED ON BEHALF OF T HE ASSESSEE AND CONTENDED THAT A SEARCH WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE DIRECTOR SHRI RAMESH KUMAR AGRAWAL. ALLOTMENT PAPERS OF THE PLOT AND CERTAIN REGISTERED DOCUMENTS WERE FOUND AT THE RESIDENCE OF THE DIRECTOR. ON THE BASIS OF BOOKS OF ACCOUNTS THE RETURNS WERE FILED DECLARING THE INCOME/LOSS FOR THE VARIOUS YEARS. THE DOCUMENTS WHICH WERE FOUND AT THE RESIDENT WERE ALL ENTERED IN THE BOOKS. NO INCRIMINATING PAPERS WERE FOUND AT THE RESIDENCE OF THE DIRECTOR WHERE THE SEARCH WAS CONDUCTED. FROM THE ASSESSMENT ORDER IT WOULD BE SEEN THAT NO ADDITIONS HAVE BEEN MADE ON ACCOUNT OF THE PAPERS FOUND AT THE RESIDENCE OF THE DIRECTOR. SIMULTANEOUSLY, WITH THE SEARCH, A SURVEY WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE AND A BUNCH OF LOOSE PAPERS WERE FOUND IN THE COMPUTERIZED SHEETS. ON THESE -: 9: - 9 SHEETS THE DETAILS OF THE SALE OF PLOTS AND AMOUNT RECEIVED BY CHEQUE/CASH WERE MENTIONED. ON THE BASIS OF THESE PAPERS FOUND DURING THE COURSE OF SURVEY, THE LD. AO ISSUED THE NOTICES U/S. 153C IN THE CASE OF THE ASSESSEE. IT MAY BE SEEN FROM THE ORDERS THAT THE ADDITIONS HAVE BEEN MADE ONLY ON THE BASIS OF THESE PAPERS ON THE GROUND THAT THE ASSESSEE HAS NOT ACCOUNTED FOR THE CASH AMOUNT SHOWN IN THESE PAPERS IN THE REGULAR BOOKS OF ACCOUNTS. THE LD. AO AT P-L AND 2 OF THE ASSESSMENT ORDER HAS STATED THAT THE ENTRIES ON THESES PAPERS HAVE NOT BEEN SHOWN IN THE BOOKS AND AS SUCH IT IS AN UNDISCLOSED INCOME FROM SALE OF PLOTS NOT RECORDED IN THE BOOKS. ACCORDINGLY, HE MADE ADDITIONS FOR THREE YEARS FOR ALL THE AMOUNTS SHOWN AS CASH RECEIPTS . BEFORE CIT(A), IT WAS ARGUED THAT ORDER PASSED U/S 153C IS ILLEGAL & BAD IN LAW AS NEITHER ANY -: 10: - 10 DOCUMENT PERTAINING TO THE ASSESSEE SUGGESTING ANY UNDISCLOSED INCOME WAS FOUND FROM THE PREMISES OF ITS DIRECTOR SHRI RAMESH KUMAR AGARWAL NOR ANY ADDITION IS MADE ON THE BASIS OF THE PAPERS REFERRED IN NOTICE U/S 153C. IT WAS FURTHER ARGUED THAT NO SATISFACTION AS REQUIRED U/S 153C IS DISCERNABLE FROM THE ASSESSMENT ORDER OF THE ASSESSEE. THE LD. CIT(A) AFTER DISCUSSING THE SUBMISSIONS OF THE ASSESSEE (P-3 TO 16) UPHELD THE ACTION OF THE LD. AO THAT THE NOTICE U/S 153C WAS VALIDLY ISSUED AND SUCH AN ADDITION COULD BE MADE IN THE ASSESSMENT (P-17 TO 31). THE LD. CIT(A) DID NOT FOLLOW THE DECISION OF THE IT AT INDORE BENCH IN THE CASE OF S.K JAIN, 14 ITJ 434 AND IN THE CASE OF CI AUTO MOTORS 8 ITJ 146. THE LD. CIT(A) ON MERITS DISCUSSED THE MATTERS IN DETAILS AND HELD THAT THE CASH SHOWN ON THE PAPERS ARE THE ACTUAL RECEIPTS, BEING THE UNACCOUNTED SALE PROCEEDS FROM THE -: 11: - 11 LAND. AND AS SUCH THEY ARE ALL TAXABLE IN THE HANDS OF THE ASSESSEE. HE HOWEVER ALLOWED THE DEDUCTION OF THE EXPENDITURE SHOWN ON THESE PAPERS. ACCORDINGLY HE ALLOWED THE APPEALS IN PART. HE BIFURCATED THESE EXPENDITURES ON THE BASIS OF PROPORTIONATE CASH RECEIPTS FOR TWO YEARS. THE LD. CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS. 43,77,609/- IN AY 2006-07, RS.77,43,946/- IN AY 2007-08 & RS. 2,10,39,000/- IN A Y 2008-09. WHILE CONFIRMING THE ADDITIONS HE DID NOT CONSIDER THE FACT THAT ASSESSEE HAS FILED AFFIDAVIT OF EACH PLOT HOLDER THAT NO ON MONEY WAS PAID BY THEM. HE FURTHER DID NOT CONSIDERED THE FACT THAT AO RECORDED STATEMENT OF FEW PARTIES WHEREIN THEY HAVE EXPLAINED THAT NO ON MONEY WAS PAID TO THE ASSESSEE COMPANY. WHILE CONSIDERING THE LOOSE PAPERS AND PREPARING THE VARIOUS CHARTS HE MENTIONED ' PAYMENTS RECEIVED IN CASH ' WHILE IN THE ORIGINAL PAPERS -: 12: - 12 THERE ARE NO SUCH WORDS. THUS HE ERRED IN HOLDING THAT THIS AMOUNT REPRESENTS THE ON MONEY RECEIVED BY THE ASSESSEE ON SALE OF THE PLOTS. IT IS HUMBLY SUBMITTED THAT NO INCRIMINATING PAPERS WERE FOUND DURING THE COURSE OF THE SEARCH AT THE RESIDENTIAL PREMISES OF ONE OF THE DIRECTORS. UNDER THESE CIRCUMSTANCES THE ADDITIONS CANNOT BE MADE IN THE ASSESSMENTS U/S. 153C. IN THIS CONNECTION WE WOULD LIKE TO DRAW THE KIND ATTENTION TO THE SPECIAL BENCH JUDGMENT OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS VS. DCIT (PARA-53). THE DETAILED ARGUMENTS AND SUBMISSIONS ARE ENCLOSED SEPARATELY DISCUSSING ALL THE CASE LAWS AND THE CONCLUSIONS DRAWN ON THIS CASE. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, IT IS HUMBLY SUBMITTED THAT LOOSE PAPERS WERE FOUND IN THE PREMISES OF THE ASSESSEE SHOWING CERTAIN ENTRIES ABOUT INSTALLMENTS. THESE PAPERS -: 13: - 13 DID NOT CONTAIN THE SIGNATURE OF ANYONE NOR IT WERE FOUND ENTERED IN ANY BOOKS OF ACCOUNTS. EVEN OTHERWISE THE LD. CIT (A) WHILE CONSIDERING THE EXPENSES HAS CONSIDERED THE SAME ONLY TO THE EXTENT OF 37,43,355/-. THE BALANCE AMOUNT MENTIONED AT P.39 HAS BEEN CONSIDERED BY HIM AS PAYMENTS TO THE DIRECTORS WHICH IS TOTALLY A WRONG ASSUMPTION. THESE CASH WITHDRAWALS ARE FOR EXPENSES AND SHOULD HAVE BEEN CONSIDERED WHILE ALLOWING THE RELIEF. IN THE VARIOUS JUDICIAL PRONOUNCEMENT IT HAS BEEN HELD THAT THE 'ON MONEY' RECEIPT AS SUCH CAN'T BE BROUGHT TO TAX. WHAT CAN BE TAXED IS ONLY A REASONABLE PROFIT RATE ON SUCH RECEIPT. FOR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES:- DY. CIT VS. PANNA CORPORATION [2012] 74 DTR 89 (GUJ-HC) -: 14: - 14 BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF CONSTRUCTION OF FLATS. A SEARCH WAS CONDUCTED IN CASE. OF THE ASSESSEE. DURING THE SEARCH OF THE RESIDENTIAL PREMISES OF ONE OF THE PARTNER OF THE FIRM, LOOSE PAPERS WERE FOUND. ON THE BASIS OF THESE LOOSE PAPERS, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE PARTNERSHIP FIRM WAS COLLECTING UNACCOUNTED CASH FROM THE PURCHASERS OF THE FLATS. ACCORDINGLY HE ESTIMATED THE 'ON MONEY' RECEIPT AT 62 LACS (RS.1 LACS PER FLAT FOR 62 FLAT SOLD IN THIS PERIOD) AND MADE ADDITION THEREOF. IN APPEAL TRIBUNAL RELYING ON ITS EARLIER DECISION IN THE CASE OF KISHORE MOHANLAL TELWALA, HELD THAT NOT THE ENTIRE RECEIPT, BUT ONLY THE PROFIT EMBEDDED IN SUCH RECEIPT WHICH CAN BE TAXED. ON DEPARTMENTAL APPEAL, HON'BLE HC HELD AS UNDER : - -: 15: - 15 'IT CAN, THUS, BE SEEN THAT CONSTANTLY, THIS COURT AND SOME OTHER COURTS HAVE BEEN FOLLOWING THE PRINCIPLE THAT EVEN UPON DETECTION OF ON MONEY RECEIPT OR UNACCOUNTED CASH RECEIPT, WHAT CAN BE BROUGHT TO TAX IS THE PROFIT EMBEDDED IN SUCH RECEIPTS, THEMSELVES. IF THAT BE THE LEGAL POSITION, WHAT SHOULD BE ESTIMATED AS A REASONABLE PROFIT OUT OF SUCH RECEIPT, MUST BEAR AN ELEMENT OF ESTIMATION. IN VIEW OF THE LEGAL POSITION THAT NOT THE ENTIRE RECEIPTS, BUT THE PROFIT ELEMENT EMBEDDED IN SUCH RECEIPTS CAN BE BROUGHT TO TAX, IN OUR VIEW, NO INTERFERENCE IS CALLED FOR IN THE DECISION OF THE TRIBUNAL ACCEPTING SUCH ELEMENT OF PROFIT AT RS. 26 LAKHS OUT OF TOTAL UNDISCLOSED RECEIPT OF RS. 62 LAKHS. IN OTHER WORDS, WE ACCEPT THE LEGAL PROPOSITION, THE TRIBUNAL ACCEPTING RS. 26 LAKHS DISCLOSED BY THE ASSESSEE AS PROFIT -: 16: - 16 OUT OF TOTAL UNDISCLOSED RECEIPT OF RS. 62 LAKH, WOULD NOT GIVE RISE TO ANY QUESTION OF LAW.' CIT VS. BALCHAND AJIT KUMAR [MP HC] 263 ITR 610. THE FACTS OF THIS CASE WERE THAT IN A SEARCH CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE, IT WAS FOUND THAT THERE WERE CREDIT SALES, WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT. ON SCRUTINY OF THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER ADDED A SUM OF RS. 8,19,255 TOWARDS THE SALES PROFIT OF THE ASSESSEE. THE COMMISSIONER (APPEALS) CAME TO THE CONCLUSION THAT THE ENTIRE CREDIT SALES COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AND ACCORDINGLY FOLLOWED THE METHOD OF ADDING NET PROFIT -: 17: - 17 RATE OF FIVE PER CENT. ON THESE SALES AND ACCORDINGLY RS. 40,960 WAS INCLUDED ON THAT SCORE. THE TRIBUNAL HELD THAT THE COMMISSIONER (APPEALS) HAD RECOURSE TO A REASONABLE METHOD BY ADOPTING THE NET PROFIT RATE OF FIVE PER CENT. IN AS MUCH AS THE ENTIRE SALE COULD NOT HAVE BEEN REGARDED AS THE PROFIT OF THE ASSESSEE. HOWEVER, THE TRIBUNAL DID NOT REDUCE THE RATE, WHICH WAS ADDED BY THE COMMISSIONER (APPEALS). ON APPEAL. IT IS HELD THAT THE TOTAL SALE COULD NOT BE REGARDED AS THE PROFIT OF THE ASSESSEE. THE NET PROFIT RATE HAD TO BE ADOPTED AND ONCE IT WAS ADOPTED IT COULD NOT BE SAID THAT THERE WAS PERVERSITY OF APPROACH. CIT VS. SAMIR SYNTHETICS MILL [2010] 326 ITR 410 (GUJ) -: 18: - 18 BRIEF FACTS OF THE CASE ARE THAT A SEARCH WAS CONDUCTED BY THE EXCISE DEPARTMENT IN THE PREMISES OF THE ASSESSEE WHEREIN IT WAS FOUND THAT THE PRODUCTION OF MAN MADE FABRICS WAS SUPPRESSED AND ONLY A SMALL PART THEREOF WAS SHOWN IN THE EXCISE REGISTER. THE ASSESSEE COULD NOT RECONCILE THE PRODUCTION, SALES AND CLOSING STOCK. ADDITION IN RESPECT OF UNACCOUNTED SALES WAS MADE BY THE AO. IN APPEAL CIT(A) AS WELL AS TRIBUNAL HELD THAT ANY ADDITION WAS TO BE MADE NOT IN RESPECT OF THE SALE CONSIDERATION BUT ONLY IN RESPECT OF THE PROFITS. FURTHER THERE WAS NO EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE HAD CLAIMED ALL THE EXPENSES IN THE PROFIT AND LOSS ACCOUNT. ON DEPARTMENTAL APPEAL, HON'BLE HC HELD -: 19: - 19 THAT IN VIEW OF THE CONCURRENT FINDINGS OF FACT BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL THAT THE REDUCED ADDITION WAS JUST AND EQUITABLE ON ACCOUNT OF PAPERS FOUND DURING THE SEARCH, THERE WAS NO MERIT IN THE APPEAL. CIT VS. PRESIDENT INDUSTRIES (GUJ HC), 258 ITR 654. IN THE COURSE OF SURVEY CONDUCTED IN THE PREMISES OF THE ASSESSEE, EXCISE RECORDS WERE FOUND WHICH INDICATES GODOWN SALES ARE NOT DISCLOSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. AO MADE ADDITION OF ENTIRE SALE PROCEEDS THEREOF. CIT(A) AFFIRMED THE ADDITION BUT TRIBUNAL HELD THAT THE ENTIRE SALE PROCEEDS COULD NOT HAVE BEEN ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE BUT THE ADDITION COULD BE ONLY OF THE PROFITS EMBEDDED IN THE SALES. HON'BLE HC HELD THAT THE AMOUNT OF SALES COULD -: 20: - 20 NOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAD NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY THE SELLER OF THE GOODS; ONLY THE REALIZATION OF THE EXCESS OVER THE COST INCURRED COULD FORM PART OF THE PROFIT INCLUDED IN THE CONSIDERATION FOR THE SALES. SINCE THERE WAS NO FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH WERE SOLD HAD BEEN MADE BY THE ASSESSEE AND THAT INVESTMENT WAS ALSO NOT DISCLOSED; ONLY THE EXCESS OVER THE COST INCURRED COULD BE TREATED AS PROFIT. IN VIEW OF THE ABOVE, THE AO BE DIRECTED TO APPLY A REASONABLE PROFIT RATE ON THE 'ON MONEY' RECEIPT DETERMINED BY THE CIT(A). MOHAN SADHANI VS. CIT 304 ITR 52 (MP) HELD THAT ENTIRE SALE PROCEEDS CANNOT BE ADDED TO INCOME, ONLY NP RATE TO BE ADOPTED. JANTA TILES VS. ACIT 66 TTJ (PUNE) 695: 9 -: 21: - 21 WHILE MAKING ADDITION ON ACCOUNT OF SHORTAGE OF ST OCK IT WOULD BE JUST AND FAIR TO APPLY GROSS PROFIT RAT E ON REPORTED SHORTAGE OF STOCK. AGRAWAL MOTORS VS ACIT 68 ITD 407 (JAB), ABHISHEK CORPORATION VS. DCIT: 63 TTJ (AHD) 651: ADDITION CAN BE MADE ONLY OF G.P/N.P. ON SUPPRESSED SALES AND NOT ENTIRE SALE PRICE ITSELF. ITO V. GURUBACHAN SINGH J. JUNEJA 216 ITR 99 (AT) (AHD-TRIB) (T M). IT WAS HELD THAT VALUE OF THE CASH SALES CAN'T BE ADDED TO THE TOTAL INCOME AS THERE WAS NO MATERIAL ON REC ORD THAT ASSESSEE MADE INVESTMENT TO MAKE UNACCOUNTED SALES. GROSS PROFIT RATE SHOULD BE APPLIED TO THE UNACCOUNTED SALES. IN VIEW OF THE ABOVE, THE AO BE DIRECTED TO APPLY A REASONABLE NET PROFIT RATE ON THE ALLEGED 'ON MONEY ' RECEIVED BY THE ASSESSEE. -: 22: - 22 7. ON THE OTHER HAND, SHRI KESHAVE SAXENA, LD CIT DR APPEARED ON BEHALF OF THE REVENUE AND CONTENDED THA T DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE DIRECTOR, CERTAIN LOOSE DOCUMENTS WERE FOUND, WHICH WERE COMP ARED BY THE ASSESSING OFFICER WITH THE LOOSE DOCUMENTS FOUN D AT THE OFFICE PREMISES OF THE ASSESSEE COMPANY, WHICH INDI CATED SALE OF PLOT TO DIFFERENT PERSONS AND THE AMOUNT RECEIVE D BY CHEQUE AS WELL AS BY CASH. SINCE THE AMOUNT OF CHEQUE WAS ONLY ENTERED IN THE REGULAR BOOKS OF ACCOUNT, THE ASSESS ING OFFICER WAS JUSTIFIED IN ADDING THE AMOUNT OF CASH ALLEGED TO BE MENTIONED IN THE LOOSE DOCUMENTS. ON THE LEGAL ISSU E, HE INVITED OUR ATTENTION TO THE VARIOUS OBSERVATIONS OF THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LIM ITED AND SUBMITTED THAT SINCE ORIGINAL ASSESSMENTS WERE NOT FRAMED U/S 143(3) AND ONLY INTIMATIONS WERE ISSUED U/S 143 (1)(A), THE ASSESSING OFFICER GOT THE COMPLETE JURISDICTION TO FRAME ASSESSMENT IN RESPECT OF SIX YEARS FALLING PRIOR TO THE YEAR OF SEARCH AND HE HAS GOT JURISDICTION BOTH U/S 143(3) AS WELL AS ALSO U/S 153A READ WITH SECTION 153C OF THE INCOME- TAX ACT, 1961. -: 23: - 23 8. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORDS PERUSED. WE HAVE ALSO DELIBERATED ON THE CASE LAWS CITED BY THE LD. AUTHORIZED REPRESENTATIVE AND LD. CIT DR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE REC ORD, WE FOUND THAT A SEARCH U/S 132 WAS CARRIED ON AT THE R ESIDENCE OF DIRECTORS OF THE COMPANY AND SIMULTANEOUS SURVEY WA S ALSO CARRIED U/S 133A AT THE BUSINESS PREMISES OF THE AS SESSEE COMPANY. THE ASSESSING OFFICER ANALYZED THE DOCUME NTS IMPOUNDED AT THE BUSINESS PREMISES AS WELL AS LOOSE PAPERS SEIZED FROM RESIDENCE OF THE DIRECTORS AND FOUND T HAT AGAINST THE SALE OF PLOTS THE ASSESSEE WAS IN RECEIPT OF CH EQUE AND CASH AND SINCE ONLY CHEQUE AMOUNTS WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNT, HE MADE AN ADDITION IN RE SPECT OF THE CASH AMOUNT MENTIONED IN THESE DOCUMENTS WHILE FRAMING ASSESSMENT U/S 153C OF THE INCOME-TAX ACT, 1961. 9. BY THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE IS SUE OF LEGALITY OF NOTICE U/S 153C AND FRAMING OF ASSES SMENT, HE ALSO CONFIRMED THE ADDITIONS MADE IN RESPECT OF SAL E PROCEEDS ALLEGED TO BE RECEIVED IN CASH. CONTENTION OF LD. A UTHORIZED REPRESENTATIVE WAS THAT AT THE PLACE OF SEARCH, WH ICH WAS -: 24: - 24 CONDUCTED AT THE RESIDENCE OF THE DIRECTORS ONLY AL LOTMENT PAPER OF THE PLOT AND CERTAIN REGISTERED DOCUMENTS WERE FOUND, WHICH WERE DULY ENTERED INTO THE REGULAR BOOKS OF T HE ASSESSEE COMPANY AND NO INCRIMINATING PAPERS WERE FOUND AT T HE RESIDENCE OF DIRECTORS, HE, THEREFORE, SUBMITTED TH AT INITIATION OF PROCEEDINGS U/S 153C AGAINST THE ASSESSEE COMPAN Y WAS NOT JUSTIFIED. FROM THE RECORD, WE FOUND THAT IN A DDITION TO THE SEARCH AT RESIDENCE OF DIRECTOR, THERE WAS SIMULTAN EOUS SURVEY AT BUSINESS PREMISES OF THE ASSESSEE COMPANY. WHEN THE DOCUMENTS IMPOUNDED FROM BUSINESS PREMISES WERE COMPARED WITH THE DOCUMENTS SEIZED AT THE RESIDENCE OF THE DIRECTOR, IT WAS FOUND THAT THERE WAS RECEIPT OF CA SH AGAINST THE SALE OF PLOTS IN ADDITION TO THE AMOUNT RECEIVE D THROUGH CHEQUES. THESE CONSTITUTED INCRIMINATING DOCUMENTS ON THE BASIS OF WHICH ASSESSING OFFICER HAS VALIDLY ISSUED NOTICE U/S 153C. ACCORDINGLY, WE UPHOLD THE ACTION OF ASSESSIN G OFFICER FOR FRAMING ASSESSMENT U/S 153C IN VIEW OF INCRIMIN ATING DOCUMENTS SO FOUND AND IMPOUNDED FROM THE RESIDENCE OF THE DIRECTOR. -: 25: - 25 10. SO FAR AS MERIT OF ADDITION IS CONCERNED, WE FOUND THAT THE ASSESSING OFFICER HAS ADDED THE ENTIRE AMOUNT O F SALE PROCEEDS OF PLOTS RECEIVED IN CASH IN THE INCOME OF THE ASSESSEE. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BALCHAND AJIT KUMAR, 263 ITR 610, HELD THAT ENTIRE AMOUNT OF SALE PROCEEDS CANNOT BE REGARDED AS PROFIT OF THE A SSESSEE, THE NET PROFIT RATE HAD TO BE ADOPTED FOR THE PURPOSE O F ADDITION. ACCORDINGLY, HON'BLE M.P. HIGH COURT CONFIRMED THE ACTION OF THE TRIBUNAL FOR CONCLUSION THAT ENTIRE SALE PROCEE DS COULD NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AND ONLY THE AMOUNT OF NET PROFIT SHOULD BE ADDED. SIMILARLY, HO N'BLE GUJARAT HIGH COURT IN THE CASE OF SAMIR SYNTHETICS MILLS, 326 ITR 410, HELD THAT ADDITION WAS TO BE MADE NOT IN R ESPECT OF SALE CONSIDERATION BUT ONLY IN RESPECT OF THE PROFI TS. IN CASE OF PRESIDENT INDUSTRIES, 258 ITR 6754, HON'BLE GUJARAT HIGH COURT HELD THAT WHERE UNACCOUNTED SALES WERE REVEAL ED DURING COURSE OF SURVEY, ENTIRE SALE PROCEEDS CANNOT BE AD DED AS UNDISCLOSED INCOME OF THE ASSESSEE, BUT ADDITION CO ULD ONLY BE TO THE EXTENT OF PROFIT EMBEDDED IN SALES. IT WAS F URTHER OBSERVED BY HON'BLE HIGH COURT THAT ENTIRE AMOUNT O F SALES -: 26: - 26 COULD NOT REPRESENT THE INCOME OF THE ASSESSEE, WHO HAD NOT DISCLOSED THE SALES. 11. HON'BLE GUJARAT HIGH COURT IN THE CASE OF DY. CIT V S. PANNA CORPORATION, 74 DTR 89, WHERE ASSESSEE WAS E NGAGED IN BUSINESS OF CONSTRUCTION OF FLATS AND DURING COU RSE OF SEARCH, IT WAS OBSERVED THAT THE LOOSE PAPERS FOUND AT THE PREMISES OF PARTNERS INDICATED THAT ASSESSEE WAS C OLLECTING UNACCOUNTED CASH FROM THE PURCHASERS OF THE FLATS. ACCORDINGLY, THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF ON MONEY OF RS. 62 LAKHS RECEIVED. IN AN APPEAL FIL ED BEFORE THE HIGH COURT, THE HON'BLE HIGH COURT OBSERVED THA T IT CAN, THUS, BE SEEN THAT CONSTANTLY, THIS COURT AND SOME OTHER COURTS HAVE BEEN FOLLOWING THE PRINCIPLE THAT EVEN UPON DETECTION OF ON MONEY RECEIPTS OR UNACCOUNTED CASH RECEIPTS, WHAT CAN BE BROUGHT TO TAX IF THE PROFITS EMBEDDED IN SUCH RECEIPTS, THEMSELVES. IF THAT BE THE LEGAL POSITION , WHAT SHOULD BE ESTIMATED AS REASONABLE PROFIT OUT O F SUCH RECEIPT MUST BEAR THE ELEMENT OF ESTIMATION. -: 27: - 27 IN VIEW OF THE LEGAL POSITION THAT NOT THE ENTIRE RECEIPTS, BUT THE PROFIT ELEMENT EMBEDDED IN SUCH RECEIPTS CAN BE BROUGHT TO TAX, IN OUR VIEW, NO INTERFERENCE IS CALLED FOR IN THE DECISION OF THE TRIBUNAL ACCEPTING SUCH ELEMENT OF PROFIT AT RS. 26 LAKHS OUT OF TOTAL UNDISCLOSED RECEIPT OF RS. 62 LAKHS. IN THE INSTANT CASE BEFORE US, THE ASSESSEE WAS ENG AGED IN THE BUSINESS OF REAL ESTATE, WHEREIN PART OF THE AMOUNT OF SALE CONSIDERATION WAS RECEIVED THROUGH CHEQUE AND BALAN CE IN CASH ONLY CHEQUE AMOUNT WAS ENTERED IN THE REGULAR BOOKS. THE ASSESSING OFFICER ADDED ENTIRE AMOUNT OF SALES RECEIVED IN CASH IN ASSESSEES INCOME. IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE THAT INCRIMINATING DOCUM ENTS ALLEGED TO BE FOUND AT THE RESIDENCE OF THE DIRECTO R INDICATING SALES RECEIVED IN CASH, DID NOT BEAR ANY SIGNATURE OF THE AUTHORIZED PERSON OR THE DIRECTORS OF THE COMPANY. HE FURTHER SUBMITTED THAT IN THE BUSINESS OF REAL ESTATE, THE ASSESSEE IS NOT ONLY RECEIVING CASH PAYMENT AGAINST SALE OF PLO T, LAND OR -: 28: - 28 FLAT BUT ALSO MAKING CASH PAYMENT IN RESPECT OF PUR CHASE OF PLOT AND ALSO INCURRING EXPENDITURE ON ITS DEVELOPM ENT, WHICH HAS TO BE TAKEN INTO ACCOUNT WHILE ASCERTAINING THE PROFIT ELEMENT EMBEDDED IN THE SALE PROCEEDS RECEIVED IN C ASH, WHICH IS ALLEGED TO BE UNACCOUNTED. OUR ATTENTION W AS ALSO INVITED TO THE DOCUMENTS INDICATING INCURRING OF EX PENSES BY DIRECTORS BUT TREATED BY CIT(A) AS WITHDRAWAL BY DI RECTORS AND SET OFF OF SUCH EXPENSES WERE NOT ALLOWED. THE CRU X OF THE ARGUMENT OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT ONLY PROFIT ELEMENT EMBEDDED IN THE SALE PROCEEDS RECEIV ED IN CASH, SHOULD BE ADDED IN THE ASSESSEES INCOME AND NOT TH E ENTIRE SALE PROCEEDS. AS PER OUR CONSIDERED OPINION ADDING ENTIRE AMOUNT OF SALE CONSIDERATION RECEIVED IN CASH WILL NOT SERVE THE END OF JUSTICE. SALE PROCEEDS COMPRISES OF COST , EXPENSES AND PROFITS. OUT OF ENTIRE SALE PROCEEDS, ONLY PROF IT ELEMENT IS LIABLE TO TAX. WHEN THE ASSESSEE IS FOUND TO HAVE N OT INCORPORATED ENTIRE SALE PROCEEDS IN THE REGULAR BO OKS OF ACCOUNTS AND THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF ASSE SSEE, THE SAME ARE LIABLE TO BE REJECTED. UNDER THESE CIRCUMS TANCES, -: 29: - 29 ESTIMATION OF PROFIT IS TO BE MADE IN RESPECT OF SA LE PROCEEDS NOT ACCOUNTED FOR. ACCORDINGLY, PROFIT ELEMENT IN T HE UNACCOUNTED SALE PROCEEDS RECEIVED IN CASH IS TO BE BROUGHT TO TAX NET. KEEPING IN VIEW THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HIGH COURT AS WELL AS OTHER HIGH COU RTS AS DISCUSSED HEREINABOVE AND TOTALITY OF FACTS AND CIR CUMSTANCES OF THE CASE, MORE PARTICULARLY, KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS OF PURCHASE AND SALE OF REAL ES TATE AND FLATS, WE DIRECT THE ASSESSING OFFICER TO TAKE 25 % OF SALE PROCEEDS RECEIVED IN CASH AS ASSESSEES INCOME RATH ER THAN MAKING ADDITION OF ENTIRE AMOUNT OF SALE PROCEEDS R ECEIVED IN CASH. WE DIRECT ACCORDINGLY. 12. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLO WED IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 4 TH SEPTEMBER, 2012. CPU* 2731849
Other Referred Cases
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Laws Referred To
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Guide to Charitable Trusts: Formation, Benefits, and Compliance
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1:1 Consultation on Business Valuations
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1:1 Consultation on FEMA Compliance
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Initial LLP Agreement
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CRM Implementation Plan
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