Swati Procon P. Ltd, Ahmedabad V. DCIT, Circle-4(1)(1), Ahmedabad

ITA 1927/AHD/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5574 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 11-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Keywords: Bogus purchase; Business income; Income from undisclosed sources; Loose papers
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 133A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH (Conducted Through Virtual Court) Before: Ms. Annapurna Gupta, Accountant Member And Shri Mahavir Prasad, Judicial Member Swati Procon P. Ltd., 11 th Floor, Signature-1, Sarkhej Gandhinagar Highway, Makarba, Ahmedabad-380051 PAN No: AANCS4561J (Appellant) Vs The DCIT, Circle-4(1)(1), Ahmedabad (Respondent) Appellant by : Shri Sakar Sharma, A.R. Respondent by : Shri Ajay Pratap Singh, CIT/DR Date of hearing : 22-03-2022 Date of pronouncement : 31-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad, (in short referred to as CIT(A)), dated 26-07-2018, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2014-15. 2. The grounds raised by the Assessee reads as under: 1. The Ld. CIT (A) erred on facts and in law in confirming addition of Rs. 6,85,00,000/-without appreciating that the very same amount had already been brought ITA No. 1927/Ahd/2018 Assessment Year 2014-15 I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 2 to tax by the Assessing Officer while making assessment for A.Y. 2013-14 leading to taxation of same income twice. 2. The Ld. CIT (A) erred on facts and in law in confirming action of Assessing Officer without bringing any material on record that the income of offered of Rs. 6,85,00,000/- in A.Y, 2013-14 was not against sales for which sale deeds had been executed in the year under consideration but on account of gathering of evidences of undisclosed income in the course of survey action relevant to A.Y. 2013-14. 3. Both the grounds raised before us, it was stated by the Ld. Counsel for the assessee ,related to the same addition of Rs. 6,85,00,000/-. The solitary contention of the ld. Counsel for the assessee before us was that the impugned addition tanamounted to double taxation of the said amount both in the preceding year when it was surrendered on account of survey and in the impugned year also. To clarify the same, the facts of the case were brought out before us from the assessment order. 4. At the outset itself, it was pointed out that the company is engaged in the business construction of residential houses. Our attention was drawn to the facts leading to the assessment order passed in the present case as being that the survey u/s. 133A of the Act was carried out on 31.01.2013 at the business premises of the assessee. During the course of survey statement of the director of the assessee company Shri Ashok Agarwal was recorded wherein he admitted to unaccounted/undisclosed income to the extent of Rs. 7 crores relevant to assessment year 2013-14, i.e. the preceding year of the assesee company. Thereafter, Ld.Counsel for the assessee pointed out that during assessment proceedings for the impugned year, the Assessing Officer (A.O.) noted from the notes to the accounts of the financial statement of the assessee of the impugned year that sales of Rs. 6,85,00,000/- already recorded in the preceding year had been deducted from the total sales of the impugned year as under: On perusal of the P&L accounts, it is seen from the note to account at para no. 13 as under: F.Y. 13-14 F.Y. 12-13 I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 3 Sales 188,457,160 164,972,971 Less: Sales already recorded in previous year 68,500,000 Adj: Estimated sales on partial completion method 68,500,000 119,957,160 233,472,971 6. The assessee was show caused as to why the said sales had been reduced, to which explanation was filed by the assesse reproduced at page 2 to 4 of the assessment order,the sum and substance of which was that the said sales of Rs. 6,85,00,000/- having already been taxed in financial year 2012-13 relating to assessment year 2013- 14, the same were excluded from the sales of the impugned year i.e. financial year 2013-14 relevant to assessment year 2014-15 to avoid double taxation. The A.O. however dismissed the contention of the assessee noting that the assessee himself had surrendered 7 crores as undisclosed income for preceding assessment year i.e A.Y 2013-14 and therefore could not reduce the said amount from the sales of the impugned year. Accordingly, addition of Rs. 6,85,00,000/- was added to the income of the assessee. 7. The assessee reiterated his arguments before the ld. CIT(A), who found no merit in the same and in turn upheld the order of the A.O. 7.1 Before us, the contention of the ld. Counsel for the assessee was that the Revenue had completely misappreciated the facts of the case in understanding that the amount of 6,85,00,000/- adjusted in the sales of the preceding year i.e. assessment year 2013- 14 and reduced from the sales of the impugned year related to the surrender made by the assessee of Rs. 7 crores. That the fact actually was that Rs. 7 crores surrendered by the assessee was not in relation to unaccounted sales but related to bogus purchases booked by it which had been surrendered and adjusted in the accounts of the preceding year i.e. A.Y. 2013-14 by way of reducing purchases booked by it. In this regard, ld. Counsel for the assessee drew our attention first to the statement of I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 4 the Director of the company noted by the Revenue authorities, English translation which was placed before us, at P.B 55 as under: Q.18 I am showing you lose paper file Annexure No B-2 tell me details of about Page no 1 to 77 of it. Ans. This are rough papers related to Swati procon Private limited and other business and I am unable to provide explanation about it at present. Therefore the documents obtained from my office and taking care of it I declare Unaccounted income of Rs 7.00 Crore for F.Y. 2012-13 and I am ready to pay The Tax Liablity and additional tax liability related to it and I also agree that I won't claim any deduction or set off on it, this is my additional income over and above my regular income. 8. Thereafter drew out attention to the letter addressed to the Income Tax Officer dated 29 th March, 2013 post survey disclosing the nature of surrendered made by the assessee placed before us at paper book page no. 346 to 348 : To The Income - tax Officer Ward - 9(1), Ahmedabad Sub; Survey proceedings u/s 133A initiated on 31/01/2013 and concluded on 01/02/2013; ___clarification on certain issues________ Respected Sir, Kindly refer to the statement recorded u/s 133A of Shri Ashok Agarwal, director of the company wherein he had admitted unaccounted/ undisclosed income to the extent of Rs. 7,00,00,000/-(Rupees Seven Crores only) for the financial year 2012-13 relevant to the assessment year 2013-14. In the course of survey, certain loose papers and bills, etc. were Impounded which pertain to the A.Y. 2012-13 also. By this communication, it is clarified that said bills were recorded in the books for the year ended 31/03/2012 without actual purchases having been made but with twin objects. Firstly, the purchases were inflated to the extent of Rs. 4,21 crores in order to inflate closing Work - in - progress. Thus, profit and loss account was debited and credited by the equal amount having no revenue impact. This was done with the sole object of availing higher banking facilities for which proposal was in the process of being mooted. Due to this reason, these bills remained unpaid as there was no intention to make payment against such I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 5 bills as there were no genuine purchases. Thus, accounting of these transactions was by way of book entry adjustment only. The other object was to reduce debit balance of Anchal Infrastructure P Ltd appearing in the books against these bills. These entries are now being reversed on 01/04/2012 as Assessee Company could not move proposal for further banking facilities. Due to this reason, opening work - In Progress as on 01/04/2012 corresponding to closing Work - In - Progress as on 31/03/2012 would get reduced and with corresponding reversal of entry in the party accounts representing such purchases as well as account of Anchal Infrastructure Private Limited by the respective amount. Due to these reasons, there will not be any change in the book profit vis. a vis. Income disclosed for the year ended 31/03/2012 in the books as well as in the income tax return except change in the corresponding accounts having no revenue impact. Therefore, by this communication, we reiterate and state that disclosure of Rs, 7 Crores made in the course of survey will be for the assessment year 2013-14 after taking into account the bills impounded during the course of survey which relate to A.Y. 2012- 13 but for which there Is no revenue impact as indicated earlier. If income for A.Y. 2012- 13 is attempted to be disturb due to aforesaid bills then corresponding income in A.Y, 2013-14 will get reduced without prejudice to our contention that existence or non existence of such bill in the books for A,Y. 2012-13 does not affect assessable income for A.Y. 2012-13, The said disclosure was made just to buy peace and without corroboration of any income suppressed and noticed in the course of survey. As a responsible assessee and citizen, the assessee intends to honour its commitment to pay tax on such income on or before the due date for filing of return of income after making complete reconciliation of papers impounded in the course of survey. Accordingly, tax is paid on the admitted income for A.Y. 2013-14 only. In addition to the advance tax already paid, we have made further payment of Rs.,50,00,000/- (Rupees fifty Lacs only). Copy of challan is enclosed for records. Any shortfall, if any, in payment of tax would be compensated on or before filing of return of income after compiling all the relevant information though we will try to make payment on or before 31st March, subject to availability of funds. 9. He thereafter drew our attention to details of additional income offered as a consequence of survey placed at paper book page no. 314 as under: Swati Procon P Ltd, Ahmedabad I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 6 Details of additional income offered as a consequence of Survey Account in which additional income disclosed has been credited Date on which accounting entry has been made Amount of income Remarks Swati-5 Purchase Account 01-08-2012 2766018 Income disclosed during survey Swati-5 Purchase Account 28-08-2012 2423657 Income disclosed during survey Swati-5 Purchase Account 09-10-2012 3124331 Income disclosed during survey Swati-5 Purchase Account 11-10-2012 3335241 Income disclosed during survey Swati-5 Purchase Account 01-02-2013 42100000 Inflation in purchase by revering entries in the account of Achnal Infrastructure P Ltd. Inflation in purchase was at Rs. 4,20,42,5487- Purchase return On various dates 15473455 Purchase invoices found recorded in the books on the date of survey which were not representing actual purchases and therefore, such purchases were removed by crediting purchase return account Total additional income offered in Return of Income based on incriminating material found during Survey 69222702 Addition made by AO 1500000 Addition made u/s 143(3) for A.Y. 2013-14 by the Assessing officer TOTAL ADDITIONAL income assessed in A.Y. 2013-14 as a consequence of survey 70722702 I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 7 10. Referring to the statement of the Director, the letter written by the assessee to the ITO post survey and to the details of additional income offered as a consequence of survey he pointed out that the disclosure/surrender primarily related to inflation in purchases made by the assessee and not to any unaccounted sales. He thereafter drew our attention to the profit and loss of the assessee for the period 1 st March 2012 to 31 st March 2013 relevant to A.Y. 2013-14 i.e. the preceding assessment year placed before us at paper book page 349 and pointed there from that the” purchase return” of 1.54 crores as reflected in the details of additional income offered as a consequence of survey stood adjusted in the purchases for the said year. He pointed out that the other items of purchase also accordingly stood adjusted in the relevant accounts. He also drew our attention to the fact that the “estimated sales on completion method” of 6,85,00,000/- stood separately reflected in the profit and loss account. He therefore contended that the surrender on account of incriminating documents found during survey related to bogus purchases made by the assessee and the revenue had erred in holding that the same related to sales of 6.85 crores reflected as estimated sales in the preceding year and reduced from the sales for the impugned year. For justification of the reduction of sales of the impugned year he further pointed out that the 6. 85 crores turnover was increased in the preceding year by including sale value of booked units of which more than 90% booking amount had been received but the sale deeds were executed in the subsequent year. That the said amount had been returned in the preceding year to avoid litigation since the assessee was subjected to survey during the year. In this regard, our attention was drawn to the notes to accounts forming part of the financial statements for the preceding year i.e. year ending 31 st March 2013 mentioning the said facts had in its significant accounting policies as under: Swati Procon Private Ltd. Schedules forming part of the Accounts for the year ended March 31, 2014 Schedule 21: Notes to Accounts 1. Significant Accounting Policies (a)......................... (b)........................... I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 8 (c) Revenue Recognition: Revenue has been generally recognized upon sale deed execution and on the work completion method. However since significant payments received from customers the company has changed method of recognizing sales, from current year. The company has also recognized sale in case of partial completion of construction by reducing inventory (W.I.P) to the same extent. Costs include all direct materials and labor costs and those indirect costs related to performance. 11. He thereafter pointed out that this amount also stood included in the turnover/sales for the impugned year also, following the accounting standard AS-9 recommending accounting on Project Completion Method, but since assessee had already accounted 6.85 crores in the preceding year on Partial Completion basis only, the same being again included in the turnover of the impugned year on Project Completion basis was therefore reduced. In this regard, he drew our attention to paper book page no. 13 containing notes to the accounts for the impugned year i.e. F.Y. 2013-14 relevant to A.Y. 2014-15 as under: Swati Procon Private Ltd. 13. Sales 188,457,160 164,972,971 Less: Sales already record in previous year (68,500,000) Adj: Estimated Sales on partial completion method 68,500,000 Refer note 1(c) and (f) of Schedule 21 119,957,160 233,472,971 Swati Procon Private Ltd. Schedules forming part of the Accounts for the year ended March 31, 2014 Schedule 20: Notes to Accounts 2. Significant Accounting Policies (a)......................... (b)........................... I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 9 (c) Revenue Recognition: Revenue has been generally recognized upon sale deed execution and on the work completion method. Costs include all direct materials and labor costs and those indirect costs related to performance. 11.1 Ld. Counsel for the assessee therefore contended that he had been correctly pleading before the lower authorities that the amount of 6.85 crores having already been included in its sales of the preceding year on Partial Completion Method and again being included in the sales in impugned year on Project Completion Method was therefore reduced from the same and the revenue subjecting it to tax tantamounted to double taxation. He contended that the revenue was misconstruing the said amount of Rs. 6.85 crores as representing the amount surrendered during survey which infact related to bogus purchases as demonstrated above and which stood accounted for in the books of the asessee for the preceding year. He therefore contended that the additions of Rs. 6,85 crores was incorrect on facts and needed to be deleted. 12. Ld. D.R. on the other hand relied on the order of the authorities below. Having heard the contentions of both the parties, we find merit in the contention of the ld. Cousnel for the asessee that the facts relating to the issue in the present case have not been appreciated in the proper perspective. The Revenue, we find, has noted from the Notes to Accounts of the assessee for the impugned year that Rs.6.85 crs were reduced from the sales of the impugned year and correlating it and treating it to be the amount surrendered by the assessee during survey of Rs.7 Crs held, that the surrender disclosed in the preceding year had so therefore being reversed in the impugned year, which could not be allowed and therefore added the same to the income of the assessee. But the assessee has made out case before us from the various documents as noted above that the amount of 6.85 crores had nothing to do I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 10 with the surrender made by the assessee which infact related to bogus purchases made by it and which stood surrendered by way of adjustment/reduction of purchases relating to assessment year 2013-14 i.e. preceding assessment year. That the amount of Rs./ 6.85 crores infact was included in the sales of the preceding year on partial completion method to avoid any litigation with the revenue and again in the impugned year on project completion method following the accounting standard prescribed for the business of real estate in which the assessee was and that therefore the said amount of 6.85 crores was double included in both in the sales of the preceding year and in the impugned year and therefore reduced from the sales of the impugned year. All these facts which have been demonstrated before us by way of various documents placed before us as noted above need verification and we find that the assessee has made out case for the addition of 6.85 crores being a double addition but since the facts as stated by the assessee need verification, having not been examined by the authorities below, We restore the issue back to the file of the A.O. to adjudicate the issue afresh in the light of the contentions made by the assessee before us and after considering the various documents and statements relied upon by the ld. Counsel for the assessee. Needless to add due opportunity of hearing be granted to the assessee. The grounds of appeal raised by the assessee are allowed for statistical purposes. 13. In effect, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 31-03-2022 Sd/- Sd/- (MAHAVIR PRASAD) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad : Dated 31/03/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- I.T.A No. 1927/Ahd/2018 A.Y. 2014-15 Page No Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 11 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद