M/s. Janani Developers Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-1(4), Baroda

ITA 2348/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1964 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: A P SANDESARA
• Section: 44AD; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2348/AHD/2010 [ASSTT. YEAR : 2006-2007] M/S.JANANI DEVELOPER P. LTD. C/O. HONEST ALOO COMPANY SHOP NO.43 CHIMANBHAI PATEL MARKET YARD NR. VISHALA CIRCLE VASNA, AHMEDABAD-380 055. VS. ITO, WARD-1(4) AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.P. SANDESARA REVENUE BY : SHRI R.K. DHANESTA O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, BARODA DATED 03.05.2010 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. IN THIS APPEAL OF THE ASSESSEE FOLLOWING GROUNDS ARE RAISED: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.6, 20,0000/- ON THE GROUND OF INCOME PERTAINING TO EARLIER YEAR NOT DIS CLOSED IN THE RETURN O INCOME FOR THE YEAR. ADDITION, BEING AGAI NST THE LAW, IS NOT SUSTAINABLE AND LIABLE TO BE DELETED. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD.CIT(A) WAS OUGHT TO HAVE CONSIDER THE FACT THAT ADDITION REPRESENTS INCOME PERTAINING TO FINANCIAL YEAR 1998 -99 RELEVANT TO ASSESSMENT YEAR 1999-2000, AND AS PER LAW SAME CANN OT BE ADDED TO THE INCOME OF THE YEAR UNDER CONSIDERATION. 1.2 THE LD.CIT(A) ON THE BASIS OF SUBMISSION AND EV IDENCES PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING S, WAS OUGHT TO HAVE ACCEPTED THE CONTENTION OF THE APPELLANT TH AT IT HAD OFFERED ITA NO.2348/AHD/2010 -2- THE INCOME RECEIVED FROM THE TENANTS DURING THE FIN ANCIAL YEAR 1998-99, IN THE ASSESSMENT YEAR 1999-2000. HENCE T HE ADDITION RESULTED IN DOUBLE TAXATION ON THE SAME INCOME. AC CORDINGLY, LEARNED CIT(A) WAS OUGHT TO HAVE DEL4TED THE ADDITI ON OF RS.6,20,000/-. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY HAD TAKEN POSSESSION OF AN OLD CHAWL TO CONSTRUCT COMMERCIAL COMPLEX IN THE FINANCIAL YEAR 1997-98. THE SAID CHAWL WAS BELONGING TO A TRUST AND WAS OCCUPIED BY VARIOUS TENANTS. AGREEMENT WAS REACHED WITH THE TRUSTEES, WHEREBY IT WAS AGREED THAT THE ASSESSEE WOULD ALLOT EACH TENANT A UNIT IN THE PROPOSED BUILDING AGAINST THE UNITS OCCUPIED BY THEM AS TENANT IN THE OLD CHAWL . THERE WERE IN FACT 26 TENANT OUT OF WHICH 5 TENA NTS WERE OCCUPYING TWO UNITS, HENCE, THE ASSESSEE WAS UNDER OBLIGATION TO ALLOT 31 UNITS IN THE PROPOSED COMPLEX WITHOUT ANY CONSIDERA TION. HOWEVER, SUBSEQUENTLY TENANTS AGREED FOR PAYMENT OF RS.20,00 0/- FOR RESPECTIVE UNITS ALLOTTED TO THEM. DURING THE YEAR UNDER CONS IDERATION, THE ASSESSEE OFFERED INCOME FROM CONSTRUCTION AND SALE OF SAID C OMMERCIAL COMPLEX. HOWEVER, THE RECEIPT OF RS.6,20,000/- WAS NOT DISCL OSED. THEREFORE, THE AO MADE THE ADDITION OF RS.6,20,000/- WHICH IS SUST AINED BY THE CIT(A), HENCE THIS APPEAL BY THE ASSESSEE. 4. AT THE TIME OF HEARING BEFORE US, THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS TWO FOLDS; (I) THAT TH E AGREEMENT BETWEEN THE ASSESSEE AND THE TENANT WAS REACHED DURING THE FINA NCIAL YEAR 1997-98, THEREFORE THE AMOUNT OF RS.20,000/- EACH RECEIVED F ROM VARIOUS TENANTS WAS OFFERED AS INCOME IN THE YEAR IN WHICH THE SAID AMOUNT WAS RECEIVED. HE SUBMITTED THAT IN FACT THE ASSESSEE RECEIVED THE AMOUNT ONLY FROM SOME TENANTS AND NOT ALL THE TENANTS AND THE SAID A MOUNT HAS ALREADY BEEN DISCLOSED AS INCOME OF ASSESSMENT YEAR 1999-2000. THEREFORE, THE SAME INCOME CANNOT BE ASSESSED TWICE, AND (II) FOR THE Y EAR UNDER ITA NO.2348/AHD/2010 -3- CONSIDERATION, THE ASSESSEE OFFERED THE INCOME UNDE R SECTION 44AD; THAT AS PER THE BOOKS OF ACCOUNTS, THE INCOME OF THE ASS ESSEE WAS ONLY AT RS.58,623/-, BUT THE ASSESSEE OFFERED THE INCOME AT 8% OF THE RECEIPT WHICH WAS AMOUNTING TO RS.1,86,276/-; THAT THE AO H AD ENHANCED THE RECEIPT AND APPLIED THE NET PROFIT AT 15%; THAT ON APPEAL THE CIT(A) ACCEPTED THE ASSESSEES CONTENTION THAT THE INCOME WAS OFFERED UNDER SECTION 44AD AND THEREFORE NO FURTHER ADDITION CAN BE MADE. THIS FINDING OF THE CIT(A) WAS ACCEPTED BY THE REVENUE A S NO APPEAL IS FILED BY THE REVENUE AGAINST THE DELETION OF ADDITION OF RS.4,59,375/-. HE THEREFORE SUBMITTED THAT IF AT ALL RS.6,20,000/- IS CONSIDERED, AS THE RECEIPT OF THE YEAR UNDER CONSIDERATION, THE NET PROFIT RAT E OF 8% CAN BE APPLIED THEREON. 5. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW ON THIS POINT AND HE HAS STATED T HAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF HIS CONTENTION THAT THE SUM OF RS.6,20,000/- WAS DISCLOSED AS INCOME OF THE EARLIE R YEAR. THEREFORE, THIS CONTENTION OF THE ASSESSEE REQUIRES TO BE REJECTED. WITH REGARD TO THE APPLICATION OF NET PROFIT RATE OF 8%, HE HAS STATED THAT THE ASSESSEE HAS ALREADY RECORDED THE ENTIRE EXPENDITURE IN HIS BOOK S OF ACCOUNTS AND THEREFORE THE ADDITION IS TO BE MADE FOR THE ENTIRE RECEIPT AND NOT FOR THE NET PROFIT RATE OF SUCH RECEIPT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. SO FAR AS THE FIRST CONTENTION OF THE L EARNED COUNSEL THAT A SUM OF RS.6,20,000/- WAS DISCLOSED AS INCOME IN THE EAR LIER YEAR IS CONCERNED, WE FIND THAT NO EVIDENCE IN SUPPORT OF THIS CONTENT ION WAS PRODUCED EITHER BEFORE THE LOWER AUTHORITIES OR BEFORE US. EVEN AT THE TIME OF HEARING ITA NO.2348/AHD/2010 -4- BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE EXP RESSED HIS INABILITY TO PRODUCE ANY EVIDENCE SO AS TO ESTABLISH THAT THE RE CEIPT OF RS.6,20,000/- IS ASSESSED IN THE EARLIER YEARS. THEREFORE, THIS CON TENTION OF THE LEARNED COUNSEL CANNOT BE ACCEPTED. NOW WE COME TO HIS ALT ERNATE CONTENTION THAT 8% ON THE RECEIPT OF RS.6,20,000/- SHOULD BE C HARGED TO TAX. WE FIND THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN DISCLOSING THE INCOME AT RS.1,86,276/-. THE ASSESSEE HAS SHOW N THE RECEIPT OF RS.23,28,450/- AS UNDER: I) FROM SALE OF 2450 SQ.FEET OF CONSTRUCTED AREA R S.20,78,000/- II) FROM EXTRA CONSTRUCTION WORK RS. 2,50,450/- TOTAL RS.23,28,450/- ========== HE APPLIED NET PROFIT RATE OF 8% ON THE ABOVE RECEI PT WHICH WORKED OUT TO RS.1,86,276/-. IT WAS POINTED OUT BY THE LEARNED C OUNSEL THAT AS PER THE BOOKS OF ACCOUNTS, NET PROFIT OF THE ASSESSEE-COMPA NY WAS RS.58,623/-. HOWEVER, THE ASSESSEE OPTED FOR SHOWING THE INCOME UNDER SECTION 44AD AND DISCLOSED THE INCOME AT THE RATE OF 8% OF THE G ROSS RECEIPTS. THE AO ESTIMATED THE RECEIPT AT RS.30,62,500/- AS AGAINST THE RECEIPT OF RS.23,28,450/- DISCLOSED BY THE ASSESSEE. HE ALSO APPLIED NET PROFIT RATE OF 15% ON SUCH RECEIPT THEREBY HE DETERMINED THE NE T PROFIT OF RS.4,59,375/- AS AGAINST RS.1,86,270/- DISCLOSED BY THE ASSESSEE. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AGAINST THE ADDITION MADE BY THE AO AND THE CIT(A) ACCEPTED THE ASSESSEES CONTENTIO N THAT THE INCOME OF THE ASSESSEE IS TO BE TAKEN AT RS.1,86,276/- AS AGA INST THE INCOME DETERMINED BY THE AO AT RS.4,59,375/-. THE REVENUE HAS ACCEPTED SUCH PART OF THE CIT(A)S ORDER. NOW THE FACTS REMAIN T HAT THE ASSESSEE FILED THE RETURN BY OFFERING THE INCOME AT 8% OF THE GROS S-RECEIPT AS PER THE SECTION 44AD OF THE IT ACT. THEREFORE, IF THERE IS A VARIATION IN THE FIGURE OF GROSS RECEIPT, ONLY 8% OF SUCH INCREASE IN THE G ROSS RECEIPT CAN BE ITA NO.2348/AHD/2010 -5- CHARGED TO TAX. WE THEREFORE ACCEPT THE ALTERNATIV E CONTENTION OF THE ASSESSEE AND DIRECT DEPARTMENT TO ENHANCE GROSS-REC EIPT OF THE ASSESSEE BY RS.6,20,000/- AND THEREAFTER WORK OUT THE NET PROFI T BY APPLYING THE NET PROFIT RATE OF 8%. 7. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 TH MARCH, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 10-02-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD