The ACIT, Circle-6, Surat V. M/s. Happy Home Corporation, Surat

ITA 2720/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5769 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S T BICHARI
• Assessee Lawyers: DENNIS CHOKSHI
• Keywords: Capital asset; Income from undisclosed sources
• Section: 133A; 145; 144

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.2720/AHD/2014 / ASSTT. YEAR: 2011-2012 ACIT, CIR.6 SURAT. VS. HAPPY HOME CORPORATION 1 ST FLOOR, SHANTINIKETAN APARTMENT AIRPORT ROAD, VESU, SURAT PAN : AADFH 4185 N / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI S.T.BICHARI, CIT-DR ASSESSEE BY : SHRI DENNIS CHOKSHI, AR ! / DATE OF HEARING : 26/04/2017 '#$ ! / DATE OF PRONOUNCEMENT: 01/06/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E ORDER OF THE LD.CIT(A)-I, SURAT DATED 21.7.2014 PASSED FOR THE A SSTT.YEAR 2011-12. 2. REVENUE HAS TAKEN SIX GROUNDS OF APPEAL, WHICH A RE NOT IN CONSONANCE WITH RULE 8 OF THE INCOME TAX (APPELLAT E TRIBUNAL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NA TURE. IN BRIEF, GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.24,90,44,067/-. ITA NO.2720/AHD/2014 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT AND BUILDING HOUSING PROJECTS IN THE NAME AND STYLE OF HAPPY HOME CORPORATION. IT HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 30.9.2011 FOR TH E ASSTT.YEAR 2011-12 DECLARING TOTAL INCOME AT RS.2,76,81,160/-. THE CA SE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UND ER SECTION 143(2) WAS ISSUED ON 31.7.2012 AND SERVED UPON THE ASSESSE E. IT IS PERTINENT TO MENTION THAT A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 18.10.2 010. DURING THE COURSE OF SURVEY, TWO PAPERS WERE FOUND FROM THE PO CKET OF ONE OF THE PARTNERS WHICH WERE INVENTORISED AS ANNEXURE B/1 AN D THESE PAPERS WERE IMPOUNDED. STATEMENT OF SHRI MUKESH PATEL, ON E OF THE PARTNERS OF THE ASSESSEE-FIRM WAS RECORDED WHEREIN HE ADMITT ED THAT THE ASSESSEE FIRM HAS EARNED UNACCOUNTED INCOME OF RS.2 6.10 CRORES OVER AND ABOVE ITS REGULAR INCOME. THE ASSESSEE HAS GIV EN BIFURCATION OF THIS RS.26.05 CRORES IN THE PROJECTS. 4. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS ONLY OFFERED A SUM OF RS.1,14,55,933/- AS UNACCOUNTED INCOME INSTEAD OF RS.26.05 CRORES. HE OBSERVED THA T OUT OF RS.26.10 CRORES, DECLARED BY SHRI MUKESH PATEL, RS.5.00 LAKH S WAS ON ACCOUNT OF CASH DISCREPANCIES. THUS, THE AO HAD ISSUED A DETA ILED SHOW CAUSE NOTICE DATED 25.3.2014. COPY OF THE SHOW CAUSE NOT ICE HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER. 5. THE ASSESSEE HAS REPLIED SHOW CAUSE NOTICE. REP LY OF THE ASSESSEE HAS BEEN REPRODUCED BY THE AO IN THE ASSES SMENT ORDER FROM PAGE NOS.4 TO 12. THE ASSESSEE HAS POINTED OUT THA T IT HAS NOT RETRACTED FROM DECLARATION MADE DURING THE COURSE O F SURVEY. TWO PAGES OF ANNEXURE B/1 IMPOUNDED DURING THE COURSE O F SURVEY DID NOT EXHIBIT NATURE OF THE AMOUNT MENTIONED AGAINST EACH PROJECT. THEY ONLY DISCLOSED THE NAME OF THE PROJECT, ADDRESS OF THE PROJECT AND ITA NO.2720/AHD/2014 3 AMOUNT AGAINST WHICH PROJECTS. THE PAPERS DO NOT D ISCLOSE AS TO WHETHER THE AMOUNT MENTIONED HAS BEEN RECEIVED OR R ECEIVABLE. THUS, ENTIRE UNACCOUNTED INCOME IS BEING BROUGHT TO TAX O NLY ON THE BASIS OF THE STATEMENT OF PARTNER. THE STATEMENT OF THE PART NER OUGHT TO BE READ AS A WHOLE. THIS DISCLOSURE IS MADE IN REPLY TO QU ESTION NO.5 AND THE PARTNER HAS SPECIFICALLY DEPOSED THAT THESE AMOUNTS WOULD BE SUBJECT TO REGISTRATION OF THE SALE DEED. IN OTHER WORDS, THE INCOME IN THESE AMOUNTS WOULD BE RECOGNIZED WHEN THE SALE DEED WOUL D BE EXECUTED OR POSSESSION WILL BE DELIVERED TO THE PROSPECTIVE BUY ERS. THE PARTNER HAS SPECIFICALLY REPLIED TO THIS EFFECT. THE ASSESSEE HAS OFFERED INCOME OF RS.26.05 CRORES IN DIFFERENT ASSESSMENT YEARS IN DI FFERENT PROJECTS. IT HAS PAID TAXES. THE ASSESSEE HAS SUBMITTED BREAK-U P OF THE INCOME IN DIFFERENT ASSESSMENT YEARS FOR DIFFERENT PROJECTS. SOMEHOW, THE LD.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSES SEE, AND THEREFORE, REJECTED BOOK RESULTS OF THE ASSESSEE AND ADDED DIF FERENTIAL AMOUNTS. BRIEF DISCUSSION MADE BY THE AO IN CONCLUDING PARAG RAPHS READS AS UNDER: 11.1. ONCE THE SELLER HAS TRANSFERRED ALL THE SIGN IFICANT RISKS AND REWARDS OF OWNERSHIP TO THE BUYER AND OTHER CONDITIONS FOR REC OGNITION OF REVENUE SPECIFIED IN PARAGRAPHS 10 AND 11 OF AS 9 ARE SATIS FIED, ANY FURTHER ACTS ON THE REAL ESTATE PERFORMED BY THE SELLER ARE, IN SUB STANCE, PERFORMED ON BEHALF OF THE BUYER. ON PERUSAL OF THE PRINCIPLES LAID DOWN BY THE ACCOU NTING STANDARDS, THE FOLLOWING PARAMETERS EMERGE RELEVANT FOR ASCERTAINI NG THE POINT OF REVENUE RECOGNITION: (I) TRANSFER OF SIGNIFICANT RISKS AND REWARDS OF OW NERSHIP, PRICE BEING ON E OF THE MOST SIGNIFICANT RISK FACTORS (II) NO SIGNIFICANT UNCERTAINTY EXISTS REGARDING TH E AMOUNT OF THE CONSIDERATION EXPECTED TO BE DERIVED AND (III) IT IS NOT UNREASONABLE TO EXPECT ULTIMATE COL LECTION. 11.2 HERE, IT APPEARS NECESSARY TO UNDERSTAND THE S PECIFIC TRADE PRACTICE PREVALENT IN THE REAL ESTATE WORLD OF SURAT CITY. W HAT ACTUALLY HAPPENS IT THAT THE SELLER AND THE BUYER ENTER INTO A WRITTEN AGREEMENT CALLED SATAKHAT, MENTIONING THE DETAILS OF THE PROPERTY, RATE OF TRA NSACTION AND SCHEDULE OF PAYMENT ETC. DULY SINGED BY THE PARTIES I TO TRANSA CTION. AND THEN, A DIARY IS ITA NO.2720/AHD/2014 4 MAINTAINED TO KEEP THE RECORD OF INSTALLMENTS AS AN D WHEN PAID BY THE CUSTOMERS. IT MAY BE NOTED THAT ONE OF SUCH DIARIES WAS ALSO FOUND DURING THE COURSE OF SURVEY PROCEEDINGS IN CASE OF THE ASS ESSEE COMPANY. IT IS |AN OPEN SECRET THAT, SINCE THESE DOCUMENTS ARE THE EVIDENCES OF ACTUAL RATE OF TRANSACTION INCLUDING THE UNACCOUNTED PORTI ON, THE ASSESSES MAINTAIN THEM SECRETLY AT SOME LESS KNOWN SECRET PR EMISES. THUS, ON EVERY INSTALLMENT RECEIVED FROM THE CUSTOMER, THE SAID DI ARY GETS UPDATED. THE UNACCOUNTED PORTION IS MUCH HIGHER THAN THE ACCOUNT ED PORTION THEREFORE, PAID UP MUCH BEFORE THE ACCOUNTED PORTION OF CONSID ERATION AND HENCE SIGNIFICANT RISKS AND REWARDS GET TRANSFERRED TO TH E BUYER MUCH EARLIER THAN WHAT IS APPARENTLY IS SHOWN ON DATE OF ACTUAL TRANS FER. TAKING THE DATE OF SALE DEED WOULD, THEREFORE, FRUSTRATE THE LOGIC EMB EDDED IN THE ACCOUNTING STANDARDS. IN THE INSTANT CASE, A MATERIAL EVIDENCE WAS ALSO FOUND WHICH PROVES THAT THE SUBSTANCE OF THE TRANSACTION WARRAN TS THAT REVENUE BE RECOGNIZED IN THE YEAR OF SURVEY AS WELL. THE ASSES SEE HAS PLACED RELIANCE ON VARIOUS CASE LAWS. HOWEVER THE FACTS AND CIRCUMS TANCES OF THESE CASE LAWS ARE DISTINGUISHABLE FROM THE FACT CIRCUMSTANCE S OF THE INSTANT CASE. 12. IN LIGHT OF THE DISCUSSION MADE ABOVE, IT IS VE RY MUCH CLEAR THAT THE DISCLOSURE OF RS.26.05 CRORES AS UNACCOUNTED INCOME OVER AND ABOVE THE REGULAR INCOME IS THE UNACCOUNTED INCOME IN THE NAT URE OF ON MONEY PERTAINING TO THE CURRENT YEAR ONLY I.E. F.Y. 2010- 11 RELEVANT YEAR 2011-12. 13. THE ASSESSEE HAS ALSO PLACED RELIANCE ON PHOTOG RAPHS OF THE PROJECT AS! ON 31/3/2011 ALLEGED TO HAVE BEEN TAKEN BY AN I NDEPENDENT AUTHORITY. HOWEVER, THIS ARGUMENT DOES NOT CARRY TOO MUCH WEIG HT AS BOOKING OF A PARTICULAR PROJECT TAKES PLACE ON ITS LAUNCH ITSELF . IT IS BY VIRTUE OF THIS THAT THE ASSESSEE HAS BEEN IN A POSITION; TO QUANTIFY TH E AMOUNT OF 'ON MONEY' RECEIVED FROM EACH PROJECT ENUMERATED ABOVE OFFER U NDISCLOSED INCOME TO THE TUNE OF RS.26.05 CRORES FOR FY 2010-11 RELEVANT TO 2011-12. 14. THE ASSESSEE HAS ALSO MADE A CONTENTION THAT NO CAPITAL WAS CREATED AND THERE WAS NO INCOME APPLICATION IN THE CURRENT YEAR IN EXCESS OF INCOME DISCLOSED | OF RS.1,14,55,933/- PERTAINING T O THE CURRENT YEAR. IT IS WELL-SETTLED THAT INCOME ATTRACTS TAX AS SOON AS IT ACCRUES. THE APPLICATION OR DESTINATION OF THE INCOME HAS NOTHING TO (DO WIT H ITS ACCRUAL OR TAXABILITY. IN OTHER WORDS, INCOME-TAX IS ATTRACTED WHEN THE IN COME; IS EARNED. TAXABILITY OF INCOME IS NOT DEPENDENT UPON ITS DEST INATION OR THE MANNER OF ITS UTILIZATION. IT HAS TO BE SEEN WHETHER AT THE P OINT OF ACCRUAL, THE AMOUNT IS OF REVENUE NATURE. IF SO, THE AMOUNT WILL HAVE T O BE TAXED- TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V. CIT(1997) 227ITR 17 2, 186, 182 (SC). 15. REJECTION OF BOOKS OF ACCOUNT U/S.145(3): IN LIGHT OF THE ABOVE DISCUSSION, HAVING ESTABLISHE D THAT THE UNACCOUNTED INCOME WHICH NATURE OF ON MONEY AMOUNTING TO RS.26. 05 CRORES IS THE UNACCOUNTED INCOME OVER AND ABOVE THE REGULAR INCOM E OF THE ASSESSEE FOR THE F.Y. 2010-11 RELEVANT TO A.Y. -12, IT IS CL EAR THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE DO NOT PRESENT THE CORRECT AND COMPLETE PICTURE OF ITA NO.2720/AHD/2014 5 THE STATE OF BUSINESS OF THE ASSESSEE AND THEREFORE OUGHT TO BE REJECTED U/S. 145(3) OF THE INCOME TAX ACT. 15.1 THE GUIDING PRINCIPLES REGARDING MAINTENANCE O F PROPER AND ACCEPTABLE BOOKS OF ACCOUNTS ARE ENVISAGED BY SECTI ON 145 OF THE INCOME TAX ACT, 1961. SECTION 145 OF THE INCOME TAX ACT, 1 961 CASTS TRIPLE ONUS ON THE ASSESSEE TO MAINTAIN BOOKS OF ACCOUNT IN SUC H MANNER AS TO MEET THE FOLLOWING THE THREE CRITERIA. (1) SATISFACTION ABOUT THE CORRECTNESS OF THE ACCOU NTS (2) SATISFACTION ABOUT THE COMPLETENESS OF THE ACCO UNTS (3) REGULARITY IN FOLLOWING THE METHOD OF ACCOUNTIN G PROVIDED IN SUB-SECTION (1) OF SECTION 145 OR ACCOUNTING STANDARDS AS NOTIF IED UNDER SUB-SECTION (2) OF SECTION 145. 15.2 THUS SECTION 145 OF THE IT. ACT PUTS THE TRIPL E ONUS ON THE ASSESSEE TO PROVIDE FOR AN MAINTAIN THE CORRECTNESS, COMPLETENE SS AND REGULARITY OF THE METHOD OF ACCOUNTING STRICTLY TO THE SATISFACTION O F THE ASSESSING OFFICER. THE FAILURE TO MEET ONE OF THE REQUIREMENTS OF SECT ION 145 OF THE INCOME TAX ACT, 1961 RENDERS THE BOOKS MAINTAINED BY THE A SSESSEE LIABLE TO REJECTION ON ACCOUNT OF INCORRECTNESS OR INCOMPLETE NESS OR IRREGULARITY. 15.3 FROM THE PERUSAL OF PROFIT & LOSS ACCOUNT OF T HE ASSESSEE, IT IS SEEN THAT IT HAS OFFERED RS. 1,14,55,933/- AS INCOME DIS CLOSED DURING SURVEY FOR THE F.Y. 2010-11 AS AGAINST THE DISCLOSURE OF UNACC OUNTED INCOME OF RS.26.05 CRORES OVER AND ABOVE THE REGULAR INCOME F OR F.Y. 2010-11 AS DISCUSSED ABOVE. FURTHER, THE ASSESSEE HAS ALSO FAI LED TO PROVIDE THE LIST OF CUSTOMERS TO WHOM THE INCOME DISCLOSED DURING THE C OURSE OF SURVEY PROCEEDINGS IS RELATABLE. THUS, THERE IS THE UNDERS TATEMENT OF UNACCOUNTED INCOME DISCLOSED DURING THE SURVEY PROCEEDINGS IN T HE P&L ACCOUNT TO THE EXTENT OF RS.24,90,44,067/-. FURTHER, NO SEPARATE E NTRY WAS PASSED FOR THE CASH DISCREPANCY OF RS.478036/- WHICH WAS FOUND DUR ING THE SURVEY AND WHICH WAS MADE PART OF THE DISCLOSURE, HENCE, THE B OOKS OF ACCOUNT OF THE ASSESSEE ARE INCORRECT. 15.4 THE PROVISIONS OF SECTION 145(3) OF THE INCO ME TAX ACT ARE CLEARLY APPLICABLE IN CASE OF THE ASSESSEE AS THE ASSESSEE HAS FAILED TO SATISFACTORILY EXPLAIN AND ESTABLISH THE CORRECTNES S OF THE ACCOUNTS. 15.5 IN LIGHT OF THE ABOVE, THE BOOKS OF ACCOUNT S MAINTAINED BY THE ASSESSEE ARE BEING TREATED TO BE UNRELIABLE AND INC ORRECT. THE PROVISIONS OF SECTION 145(3) ARE APPLIED TO THE PRE SENT CASE. 15.6 HENCE, THE INCOME OF RS. 24,90,44,067/- HAS ES CAPED ASSESSMENT DURING THE YEAR UNDER CONSIDERATION. 15.7 THUS, FROM THE ABOVE DISCUSSION, IT IS EVIDENT THAT THE ASSESSEE HAS FURNISHED IN ACCURATE PARTICULARS BY SUPPRESSING AN D UNDER REPORTING THE ITA NO.2720/AHD/2014 6 INCOME. THE ENSUING INCOME HAS BEEN UNDER REPORTED BY THIS FURNISHING OF INACCURATE PARTICULARS AND ENHANCE THERE HAS BEE N RESULT IN CONCEALMENT OF INCOME, THEREFORE, SATISFIED ON ACCO UNT OF THESE REASONS AS ABOVE, PENALTY PROCEEDINGS U/S.271(1)(C) ARE BEI NG INITIATED FOR FURNISHING IN ACCURATE PARTICULAR INCOME AND THEREB Y LEADING TO CONCEALMENT OF INCOME. IN NUTSHELL: SURVEY WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE. ! IMPOUNDED DOCUMENTS SHOW UNACCOUNTED INCOME (' ON MONEY') ADMITTED IN THE STATEMENT RECORDED ON OATH. ; ADMITTED UNACCOUNTED INCOME IN STATEMENT ON OA TH. HOWEVER, SAME IS NOT REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESS EE. J SIGNIFICANTLY, SURRENDER OF INCOME IS NEITHER RETRACTED NOR WITHDRAWN. UNACCOUNTED INCOME PERTAINS TO 'CURRENT YEAR' I.E. F.Y. 2010-11 WHICH FACT IS EVIDENT FROM THE DATE ON THE IMPOUNDED MATE RIAL. THE ASSESSEE ADMITS THE IMPOUNDED PAPERS TO BE TRUE AND CORRECT REFLECTING ITS UNACCOUNTED INCOME. EITHER THE CONTE NT IS TOTALLY TRUE OR IS ENTIRELY FALSE. THEREFORE THERE CAN BE NO CHERRY PI CKING. (ADDITION ON ACCOUNT OF INCOME DISCLOSED DURING SUR VEY-RS. 24,90,44,067/-) 16. DURING THE COURSE OF SURVEY PROCEEDING, EX CESS CASH OF RS.478036/- WAS ALSO FOUND. IN REPLY OF QUESTION NO . 10 OF THE STATEMENT RECORDED DURING THE SURVEY, AN AMOUNT OF RS.5,00,000/- WAS VOLUNTARY OFFERED OVER AND ABOVE THE UNCOUNTED INCOME AGAINST THE SAID DISCREPANCY OF RS.4,78,036/-. IN RESPONSE TO SPECIFIC QUERY REG ARDING THE TREATMENT OF RS.5,00,000/-, THE ASSESSEE STATED THAT SEPARATE EN TRY FOR THE SAID DIFFERENCE IN THE AMOUNT OF CASH WAS NOT PASSED AND THAT RS.5,00,000/- IS VOLUNTARILY OFFERED AS ADDITIONAL INCOME OF THE CUR RENT YEAR IN ORDER TO PEACE OF MIND AND AVOID PROTRACTED LITIGATION. IN THIS RE GARD IT IS SUBMITTED THAT IT IS ONLY AFTER THIS DISCREPANCY WAS BROUGHT TO LIGHT BE FORE THE ASSESSEE, THAT HE OFFERED THE CASH DIFFERENCE OF RS.5,00,000/- AS INC OME. ACCORDINGLY RS.5,00,000/- IS HEREBY ADDED TO THE TOTAL INCOME O F THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE IT. ACT ARE INITI ATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY LEADIN G TO CONCEALMENT OF INCOME. (ADDITION ON ACCOUNT CASH DISCREPANCY DURING SURVEY -RS. 5,00,000/-) 17. WITH THE ABOVE DISCUSSION OF THE FACTS AND AFTE R CAREFULLY SCRUTINIZING THE DETAILS FILED, THE TOTAL INCOME AS RETURNED BY THE ASSESSEE IS ACCEPTED AND THEREUPON, COMPUTED AS UNDER: IN RS. TOTAL INCOME AS PER RETURN OF INCOME 2,76,81,160/- ADD: INCOME DISCLOSED DURING SURVEY 24,9Q,44,067/- : CASH DISCREPANCY 5,00,000/- ITA NO.2720/AHD/2014 7 ASSESSED INCOME 27,72,25,227/- ASSESSED UNDER SECTION 144 R.W.S.143(3) OF THE INCO ME TAX ACT, 1961. CHARGE INTEREST U/S. 234A, 234B, 234C & 234D IF APP LICABLE. GIVE CREDIT FOR PREPAID TAXES, IF ANY, AFTER DUE VERIFICATION. ISSU E DEMAND NOTICE AND CHALLAN / RO ACCORDINGLY. ISSUE SHOW CAUSE NOTICE U /S. 274 R.W.S. 271(1) (C) OF THE I.T.ACT. ITNS 150 ENCLOSED. 6. DISSATISFIED WITH THIS ADDITION, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE ASSESSEE HAS RAIS ED MULTIPLE FOLD OF CONTENTIONS, WHICH HAVE BEEN ANALYTICALLY EXAMINED BY THE LD.CIT(A). THE LD.FIRST APPELLATE AUTHORITY HAS ULTIMATELY ARR IVED AT A CONCLUSION THAT THIS AMOUNT OF RS.26.05 CRORES WHICH WAS ADMIT TED BY THE PARTNER RECEIVED AS ON-MONEY CANNOT BE TAXED IN THE ASSTT.Y EAR 2011-12 ALONE. THE DETAILED DISCUSSION MADE BY THE LD.CIT(A) IS WO RTH TO NOTE. IT READS AS UNDER: 4.1 NOW THE QUESTION ARISES THAT IN WHICH YEAR TH E DISCLOSURE OF INCOME AMOUNTING TO RS. 26.05 CRORE, WHICH HAS BEEN TERMED BY AO AS 'ON MONEY', SHOULD BE TAXED. WHETHER IT SHOUL D BE TAXED IN A.Y. 2011-12 ALONE ON THE BASIS OF STATEMENTS OF T HE PARTNER, SHRI MUKESH PATEL OR IN DIFFERENT YEARS CONSIDERING THE RELEVANT FACTS AND CIRCUMSTANCES OF THE CASE. IN MY OPINION, THE STATEMENT OF AO THAT 'ON MONEY' IS INCOME, IS A GENERIC FORM OF SAME RECEIPT TO TREAT IT AS INCOME, NOT IN THE SENSE OF TRUE INT ERPRETATION OF THE TERM 'INCOME'-AS PER IT ACT. 'ON MONEY' AS SUCH CAN NOT BE TAXED ALONE UNLESS IT IS PROVED THAT ALL THE RELATED EXPE NDITURE OF THE RELEVANT PROJECTS AGAINST WHICH DISCLOSURE HAS BEEN MADE HAS ACTUALLY INCURRED AND RECORDED IN THE BOOKS OF ACCO UNT. TO THE CONTRARY, IT IS UNDISPUTED POSITION THAT UNDISCLO SED INCOME AGAINST THE PROJECTS HAS BEEN DISCLOSED BUT THE PRO JECTS ARE STILL TO BE COMPLETED OR VARIOUS INVESTMENT/EXPENDITU RE ARE TO BE INCURRED. THUS, BOTH THE COMPONENTS I.E. RECEIPTS A ND EXPENDITURE SHOULD EXIST TO TREAT ANY AMOUNT AS INCOME. THEREFO RE, IN THE CASE OF APPELLANT, ONLY THE RECEIPT PART I.E. DISCL OSURE OF RS. 26.05 CRORES, CANNOT BE TREATED AS INCOME IN ISOLATION UN LESS THE EXPENDITURE/INVESTMENT PART ALSO CORRESPONDINGLY EX ISTS. THE METHOD OF ACCOUNTING DISCLOSED BY APPELLANT ALSO SU PPORTS THIS PRINCIPLE. IT IS UNDISPUTEDLY FOLLOWING THE AS- 9, WHEREIN INCOME IS RECOGNIZED AT THE TIME OF TRANSFER OF OWNERSHIP OF IMMOVABLE PROPERTY BY EXECUTING REGISTERED SALE DEED AND HAND ING OVER OF POSSESSION TO ITS CUSTOMERS. IN THE LIGHT OF THESE FACTS, IT HAS TO ITA NO.2720/AHD/2014 8 BE DECIDED THAT WHEN THE INCOME OUT OF SUCH RECEIPT S WOULD ACCRUE TO THE APPELLANT. IN MY OPINION, ON MONEY (U NDISCLOSED INCOME) IS PART AND PARCEL OF MONEY RECEIVED ON SAL E OF FLATS. THE AMOUNTS RECEIVED BY CHEQUE/CASH PRIOR TO ACTUAL TRA NSFER OF FLATS TO THE PURCHASERS WOULD BE IN THE NATURE OF ADVANCE AND CANNOT BE SAID TO HAVE ACCRUED TO THE APPELLANT. APPELLANT HAS INCURRED EXPENDITURE/INVESTMENT IN DIFFERENT PROJECTS IN DIF FERENT YEARS BUT INCOME TO IT WOULD ACCRUE ONLY WHEN THE FLATS ARE S OLD TO THE BUYERS. ANY ADVANCE MONEY RECEIVED BY APPELLANT CAN NEVER BE ITS INCOME. IT WOULD ONLY BE A LIABILITY SHOWN IN T HE BALANCE SHEET AS ADVANCES FROM THE CUSTOMERS AND WOULD BE ADJUSTE D AGAINST THE SALE PROCEEDS OF THE FLATS WHEN FLATS ARE TRANS FERRED TO THE PURCHASERS. THEREFORE, ACCRUAL OF INCOME TO THE ASS ESSEE WILL NOT ARISE ON THE DATE WHEN IT RECEIVES CHEQUE OR CASH A GAINST SALE ON FLATS BUT WILL ARISE WHEN FLATS ARE TRANSFERRED TO THE BUYERS. TILL THEN, IT WILL ONLY BE AN ADVANCE. IT CAN BE SEEN TH AT THE APPELLANT HAS BOOKED THE FLATS IN VARIOUS PROJECTS AND RECEIV ED ADVANCES BY WAY OF CHEQUE. SIMILARLY, IT HAS ALSO RECEIVED ADVA NCE IN CASH WHICH IS NOW DECLARED AND TERMED BY AO AS 'ON MONEY ' IN THE STATEMENTS GIVEN BY THE PARTNER OF THE FIRM. TO SUB STANTIATE THIS FACT, APPELLANT HAS FURNISHED THE DETAILS OF PROJEC TS AS WELL AS THE BASIS ON WHICH CASH ADVANCES HAVE BEEN RECEIVED BY IT FROM ITS CUSTOMERS. IN THIS WAY, REVENUE CAN BE RECOGNIZED I N THE CASE OF APPELLANT ONLY WHEN FLATS ARE SOLD AND, THUS, BOTH CHEQUE PORTION/CASH PORTION BEING THE ON MONEY' WOULD ACC RUE AS INCOME ONLY IN THE YEAR OF SALE OF FLATS. THEREFORE, IN AN Y WAY, DISCLOSURE OF RS. 26.05 CRORE CANNOT BE TAXED SOLELY IN THE YE AR UNDER CONSIDERATION. 4.2 THE CLAIM OF APPELLANT THAT INCOME IN ITS CASE GETS ACCRUED/ARISEN ONLY WHEN THE SALE DEEDS IN DIFFEREN T PROJECTS ARE EXECUTED, ALSO GETS SUPPORT FROM VARIOUS JUDGMENTS OF DIFFERENT COURTS. HON'BIE SUPREME COURT, DEFINING THE ACCRUAL OF INCOME, IN THE CASE OF CIT VS. M/S. EXCEL INDUSTRIES LTD. (201 3) 86 CCH 086 ISCC HAS OPINED AS UNDER:- 'IN OUR OPINION, MORE IMPORTANTLY, INCOME ACCRUES WHEN THERE ARISES A CORRESPONDING LIABILITY OF THE OTHER PARTY FROM W HOM THE INCOME BECOMES DUE TO PAY THAT AMOUNT. THE INCOME ACCRUES WHEN IT BECOMES DUE BUT IT MUST ALSO BE ACCOMPANIED BY A CORRESPONDING LIABILITY OF THE OTH ER PARTY TO PAY THE AMOUNT. ONLY THEN CAN IT BE SAID THAT FOR THE PURPO SE OF TAXABILITY THAT THE INCOME IS NOT HYPOTHETICAL AND IT HAS REALLY AC CRUED TO THE ASSESSEE.' ITA NO.2720/AHD/2014 9 IN THE LINE OF AFORESAID VIEW TAKEN BY HON'BLE SUPR EME COURT, THE JURISDICTIONAL HIGH COURT HAS ALREADY DECIDED THE I SSUE ON SIMILAR FACTS IN THE CASE OF CIT VS. ASHALAND CORPORATION ( 1982) 133 ITR 55. IN THIS CASE, HON'BLE GUJARAT HIGH COURT HAS HE LD THAT INCOME ACCRUES ON SALE OF LAND AND ARISES IN THE YEAR IN W HICH THE TITLE IN THE PROPERTY IS TRANSFERRED AND NOT IN THE YEAR IN WHICH ASSESSEE RECEIVED PART OF CONSIDERATION AND EARNEST MONEY. T HE TRANSACTION OF SALE OF IMMOVABLE PROPERTY BECOMES COMPLETE ONLY ON POSSESSION OF TITLE WHICH TAKES PLACE ONLY WHEN REG ISTERED DEED IS EXECUTED. SOME RECEIPT OF EARNEST MONEY AND ADVANCE RECEIPT OF MONEY TOWARDS TRANSACTION WOULD NOT BY ITSELF PARTA KE THE CHARACTER OF TAXABLE INCOME AS THE REGISTERED SALE DEED WAS EXECUTED ONLY IN THE SUBSEQUENT YEAR, IN THIS REGAR D, HEAD NOTES FROM THE JUDGMENT ARE REFERRED AS UNDER:- THE LAND PURCHASED BY THE ASSESSEE WHICH FORMS PART OF ITS STOCK- IN-TRADE, WOULD CONTINUE TO BE SO, UNTIL AND UNLESS IT SELLS IT. THE BUSINESS DEAL IN RESPECT OF THE LAND WOULD BE COMPL ETE ONLY WHEN THE ASSESSEE EXECUTED A SALE DEED. SINCE IT WAS ONL Y ON COMPLETION OF THE SALE TRANSACTION THAT THE ASSESSEE COULD BE SAID TO HAVE EARNED PROFIT OR SUFFERED LOSS, THE EARNEST MONEY A ND PART PAYMENT OF PRICE WOULD NOT CONSTITUTE TRADING RECEIPTS FOR THE ASSESSMENT YEAR IN WHICH THEY WERE RECEIVED UNLESS THE TITLE OF THE ASSESSEE IS EXTINGUISHED, THE TITLE TO THE PURCHASER CANNOT ARI SE. BOTH _ CANNOT BE THE EXCLUSIVE OWNERS OF THE SAME PROPERTY AT THE SAME TIME. IT WAS AXIOMATIC THAT AN AGREEMENT TO SELL DOES NOT CR EATE ANY INTEREST IN FAVOUR OF THE PURCHASER. IT IS ON COMPLETION OF THE TRANSACTION OF PURCHASE AND SALE CULMINATING IN THE EXTINGUISHMENT OF THE TITLE OF THE VENDOR AND SIMULTANEOUS CREATION OF THE TITLE I N THE VENDEE THAT THE ASSESSEE EARNS PROFIT OR SUFFERS LOSS. A TRANSA CTION WHICH MAY OR MAY NOT ULTIMATELY RESULT IN A COMPLETED SALE BY EX ECUTING A REGISTERED CONVEYANCE IS NO TRANSACTION AT ALL FOR THE PURPOSE OF WORKING OUT PROFIT. RECEIPT OF SUM AMOUNT WOULD ASS UME THE CHARACTER OF INCOME OR PROFIT ONLY WHEN THE SALE TR ANSACTION IS COMPLETED IN ACCORDANCE WITH LAW. THE LAND DOES NOT CEASE TO BE THE STOCK-IN-TRADE OF THE ASSESSEE UNLESS AND UNTIL THE SALE IS COMPLETED. THEREFORE, THE AMOUNT RECEIVED BY THE AS SESSEE BY WAY OF EARNEST MONEY AND PARRY-PAYMENT OF THE PURCHASE PRICE CANNOT BE TREATED AS ITS TRADING RECEIPT KUNJANTAL & SON S. IN RE (1941*) 9 ITR 358 (ALL), CHIDAMBARAIN CHETTIAR VS. CIT (1936) 4 ITR 309 (MAD); TC39R, 210 AND CIT VS. SHAH DOSHI & CO. (198 1) 23 CTR (GUJ) 307: (1982) 133 ITR 23 (GUJ): TC 39R, 936 FOL LOWED. AMOUNT RECEIVED BY WAY OF EARNEST MONEY AND ADVANCE AMOUNT TOWARDS TRANSACTION OF SALE OF LAND WOULD NOT BY IT SELF PARTAKE THE CHARACTER OF TAXABLE INCOME.' ITA NO.2720/AHD/2014 10 THE RATIO GIVEN BY HON'BLE HIGH COURT GETS SUPPORT FROM VARIOUS DECISIONS OF OTHER HIGH COURTS ALSO. ON THE ISSUE T HAT WHETHER THE SALE OF IMMOVABLE PROPERTY TO PURCHASER WOULD BE CO MPLETE ON ACTUAL CONVEYANCE OF THE TITLE OR OTHERWISE, IT HAS BEEN HELD BY HON'BLE CALCUTTA HIGH COURT IN THE CASE K. C. PAL C HAUDHARY VS. CIT 46 ITR 01 THAT CAPITAL GAIN WOULD ACCRUE ON PAY MENT OF FULL CONSIDERATION AND HANDING OVER OF THE POSSESSION. I N MECCANE INDUSTRIES LTD. VS. CIT 254 ITR 175, HON'BLE MADRAS HIGH COURT HAS HELD THAT CAPITAL GAIN WOULD ACCRUE IN THE YEAR IN WHICH SALE DEED WAS EXECUTED. SIMILARLY, HON'BLE ANDHRA PRADES H HIGH COURT IN CIT VS. NAWAB MEHMOOD JUNG BAHADUR 172 ITR 592 H AS HELD THAT CAPITAL GAIN WOULD ARISE ON TRANSFER OF ASSET LIABLE TO BE TAXED FOR THE YEAR IN WHICH TRANSFER TOOK PLACE. HON'BLE GUJARAT HIGH COURT ALSO HAS HELD IN THE CASE OF CIT VS. MORMASJI MANCHARJI VAID 250 ITR 542 THAT THE TRANSFER OF IMMOVABLE PROPERTY IS EFFECTED ON THE DATE OF EXECUTION OF TRANSFER DEED AND REGIS TRATION OF TRANSFER DEED IS EFFECTED FROM THE DATE OF EXECUTIO N. FROM THESE AUTHORITIES, IT FOLLOWS THAT THERE SHOULD BE IMMOVA BLE PROPERTY IN EXISTENCE AND TRANSFER DEED IS EXECUTED WHICH IS LA TER REGISTERED. THUS, CAPITAL GAIN WOULD ACCRUE OR ARISE ONLY WHEN TRANSFER DEED IS EXECUTED. THE APPELLANT ALSO IS DEALING IN SEVER AL IMMOVABLE PROPERTIES AND THE CAPITAL ASSETS, IN THE FORM OF F LATS, WHICH ARE STOCK IN TRADE FOR IT, BUT, THE BASIC PRINCIPLE OF ACCRUAL OF INCOME WILL REMAIN THE SAME I.E. PROFIT ON SALE OF FLAT WI LL ACCRUE TO IT WHEN FLAT IS IN EXISTENCE AND THE SAME IS TRANSFERR ED TO THE PURCHASER THROUGH THE TRANSFER DEED. POINT OF TAXAB ILITY IN THE CONTEXT OF TRANSFER OF AN IMMOVABLE PROPERTY WOULD BE THE MOMENT WHEN TRANSFER DEED IS EXECUTED AND AT THAT M OMENT PROFIT TO THE APPELLANT WOULD ACCRUE AND A RIGHT OF THE APPELLANT TO RECEIVE CONSIDERATION FOR SUCH TRANSFER WOULD ARISE . PRIOR TO THIS, WHATEVER THE APPELLANT HAS RECEIVED FROM THE PROSPE CTIVE BUYER WOULD ONLY BE A LIABILITY AND THE LIABILITY AS SUCH CANNOT BE TREATED AS INCOME. AS MENTIONED BY APPELLANT ALSO IN ITS SU BMISSIONS, MERELY RECEIVING A SUM FOR FUTURE PURCHASE OF AN IM MOVABLE PROPERTY CANNOT BE A SALE CONSIDERATION AS PROPERTY BEING NOT IN EXISTENCE. THE POSSESSION THEREOF CANNOT BE GIVEN T O THE PROSPECTIVE BUYERS, THEREFORE, THE SUM RECEIVED FOR BEING ADJUSTED AGAINST SALE CONSIDERATION WILL CONTINUE T O CARRY THE CHARACTER OF ADVANCE ONLY AND A LIABILITY IN THE BO OKS OF THE ASSESSEE. MERELY BECAUSE SUCH RECEIPT IS NOT DECLAR ED OR RECORDED IN THE BOOKS OF ACCOUNT WILL NOT CHANGE THE CHARACT ER WHICH HAS TO BE DECIDED IN THE LIGHT OF PURPOSE FOR WHICH IT IS GIVEN. FURTHER, SUCH RECEIPT (ON MONEY IN THE PRESENT CASE) CANNOT BE DISSECTED FROM OTHER PART OF RECEIPT THROUGH CHEQUES AS BOTH ARE INTEGRAL PART OF SALE CONSIDERATION. IF THE AMOUNT GIVEN BY CHEQUE CARRIES THE CHARACTER AS AN ADVANCE AGAINST SALE CONSIDERAT ION THEN 'ON MONEY' IN CASH WILL ALSO CARRY THE SAME CHARACTER. BOTH TYPES OF ITA NO.2720/AHD/2014 11 RECEIPTS I.E. RECEIPT THROUGH CHEQEUS AND RECEIPT T HROUGH CASH AS 'ON MONEY' WILL ARISE AS INCOME TO THE APPELLANT AS SOON AS TRANSFER OF IMMOVABLE PROPERTY IS EXECUTED AND NOT BEFORE, OR POSSESSION THEREOF IS HANDED OVER AND FOR THIS IT I S NECESSARY THAT SUCH IMMOVABLE PROPERTY SHOULD BE IN EXISTENCE. THE REFORE, IN THE CASE OF APPELLANT, ON MONEY' RECEIVED BY IT DO NOT HAVE THE CHARACTER OF INCOME BUT ONLY AN ADVANCE LIKE ONE RE CEIVED THROUGH CHEQUE. BOTH WILL BECOME PART OF THE SALE C ONSIDERATION TO THE APPELLANT SIMULTANEOUSLY ON EITHER HANDING O VER THE POSSESSION OF THE FLATS OR ON EXECUTION OF TRANSFER DEEDS WHICHEVER HAPPENS EARLIER. IN VIEW OF THIS DISCUSSI ON, IT IS HELD THAT THE DISCLOSURE AMOUNT OF RS. 24,90,44,067/- CR ORES AS XON MONEY' WILL PARTAKE THE CHARACTER OF TAXABLE INCOME WHEN REGISTERED SALE DEEDS OF THE FLATS ARE EXECUTED IN SUBSEQUENT YEARS, NOT IN THE YEAR UNDER CONSIDERATION. 4.3 THE OTHER ISSUES RAISED BY APPELLANT IN ITS SUBMISSIONS ALSO SUPPORT ITS CLAIM THAT THE ENTIRE DISCLOSED INCOME OF RS. 26.05 CRORE IS N OT TAXABLE SOLELY IN THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS NOT RETRACTED THE STATEMENTS MAKING DISCLOSURE AND ACCEPTED IT IN TOTO. IT HAS PAID TAXES ALSO ON THE INCOME DISCLOSED IN RELEVANT YEARS SUBSEQUENT TO CURRENT YEAR AS AN WHEN SALE DEEDS OF FLATS HAVE BEEN EXECUTED. THUS, THE APPELLANT HAS ADMITTED TO HAVE EARNED THE UNDISCLOSED INCOME AND ACCORDINGLY PAID TAXES. THE ONLY DISPUTE REMAINS IS THE YEAR OF TAXABILITY ONLY WHIC H IS ENTIRELY ACADEMIC IN THE EYES OF HON'BLE SUPREME COURT AS HE LD IN THE CASE CIT VS. M/S. EXCEL INDUSTRIES LTD. (SUPRA) AS UNDER:- THE REAL QUESTION CONCERNING US IS THE YEAR IN WHICH TH E ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN TH E SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENSE AND THE DUTY ENT ITLEMENT PASS BOOK AND PAID TAX THEREON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEP RIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY T HE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX E FFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CONTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITL ESS (ON MERIT) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING I MUCH TO THE PUBLIC COFFERS. FURTHER, THE APPELLANT HAS DISCLOSED INCOME OFFERED DURING SURVEY IN THE SUBSEQUENT YEARS AND PAID TAXES THEREON, THE REFORE, TAXING THE WHOLE AMOUNT OF RS. 26.05 CRORES IN THE CURRENT YEAR WOULD AMOUNT TO DOUBLE TAXATION WHICH IS NOT PERMITTED AS PER SETTLED POSITION OF LAW (ITO VS. BHAVESH BHARATBHAI MEHTA ( 2013) (37 CCH 285 AHD. TRIB.). THIS FACT WAS BROUGHT TO THE N OTICE OF AO ITA NO.2720/AHD/2014 12 DURING THE ASSESSMENT PROCEEDINGS BY THE APPELLANT BUT NO COMMENTS HAVE BEEN GIVEN BY HER IN THIS REGARD. THU S, IN THE CASE OF APPELLANT, SAME AMOUNT OF DISCLOSURE CANNOT BE TAXED TWICE. ; 4.4 IN THE LIGHT OF AFORESAID DISCUSSION, THE CONCL USION DRAWN BY AO FOR REJECTING THE BOOKS OF ACCOUNT OF APPELLANT AND MAKING ADDITION OF RS. 24,90,44,067/- IN THE YEAR UNDER CO NSIDERATION IS NOT SUSTAINABLE. THE AO HAS REJECTED THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY APPELLANT WITHOUT POINTING OUT ANY DEFECT IN THE SAME OR IN THE BOOKS OR WITHOUT OBSERVING TH AT FROM THE METHOD ADOPTED BY APPELLANT, TRUE INCOME CANNOT BE DEDUCED. SHE HAS FAILED TO OBSERVE THAT FOR ONE DISCLOSED IN COME, THERE CANNOT BE TWO SEPARATE METHODS OF ACCOUNTING. SHE H AS ALSO FAILED TO COMMENT UPON THE ISSUE OF REDUCTION OF IN COME IN SUBSEQUENT YEARS IN CASE WHOLE OF THE AMOUNT DISCLO SED TO BE ASSESSED IN ONE YEAR I.E. THE YEAR UNDER CONSIDERAT ION. THE PROVISIONS OF SECTION 292C OF THE ACT AND PRINCIPLE OF PREPONDERANCE OF PROBABILITY DISCUSSED BY AO HAVE N O RELEVANCE AS THE APPELLANT HAS NOT RETRACTED FROM THE STATEME NTS AND ADMITTED TO DISCLOSE THE INCOME AND PAID TAXES AS P ER STATEMENTS GIVEN BY HIM. IN VIEW OF THIS, AO HAS FAILED TO SUB STANTIATE THE ADDITION MADE BY HER IN THE YEAR UNDER CONSIDERATIO N. 4.5 IN VIEW OF ABOVE DISCUSSION, IT IS HELD THAT TH E ADDITION OF RS. 24,90,44,067/- MADE BY AO IS NOT JUSTIFIED AS THIS AMOUNT IS NOT TAXABLE SOLELY IN THE YEAR UNDER CONSIDERATION, RAT HER, IN THE RELEVANT SUBSEQUENT YEARS AS AN WHEN THE REGISTERED SALE DEEDS OF FLATS ARE EXECUTED IN VARIOUS PROJECTS AS PER TH E CHART. THEREFORE, THE ADDITION OF RS. 24,90,44,067/-MADE B Y AO IS DELETED AND GROUNDS TAKEN BY APPELLANT ARE ALLOWED. 7. WHILE IMPUGNING THE ORDER OF THE LD.CIT(A), THE LD.DR CONTENDED THAT PARTNER OF THE ASSESSEE, SHRI MUKESH PATEL HAD VOLUNTARILY ADMITTED THAT AMOUNT OF RS.26.05 CRORES IS AN UNACCOUNTED IN COME FOR THE CURRENT YEAR I.E. F.Y.2010-11 RELEVANT TO THIS ASSE SSMENT YEAR. THIS INCOME WAS NOT RECORDED IN THE REGULAR BOOKS OF ACC OUNTS. THIS AMOUNT HAD ALREADY BEEN RECEIVED AT THE TIME OF BOO KING EVEN WITHOUT REGISTERING A SINGLE REGISTRATION. THESE AMOUNTS W OULD NOT BE ADJUSTED AGAINST ANY FUTURE EXPENDITURE. IT WAS AN OUT-OF-B OOK PROFIT. THEREFORE, IT SHOULD HAVE BEEN OFFERED IN THIS ASSE SSMENT YEAR ONLY. HE FURTHER CONTENDED THAT THE LD.CIT(A) HAS RECORDED A FINDING THAT ON- ITA NO.2720/AHD/2014 13 MONEY CANNOT BE TAXED ALONE UNLESS IT IS PROVED TH AT ALL THE RELEVANT EXPENDITURE OF THE RELEVANT PROJECTS AGAINST WHICH DISCLOSURE HAS BEEN MADE HAS ACTUALLY BEEN INCURRED AND RECORDED IN THE BOOKS OF ACCOUNTS, IS WITHOUT ANY SOUND REASONING BECAUSE ACCEPTING OF ON-MONEY ENTAILS MONEY RECEIVED OUTSIDE THE BOOKS OF ACCOUNTS FOR WH ICH NO CORRESPONDING EXPENDITURE WOULD HAVE TO BE INCURRED . THE CORRESPONDING EXPENDITURE WOULD BE RECORDED IN THE BOOKS AGAINST THE DECLARED PROFIT. THUS, THE LD.DR CONTENDED THAT TH E ACTION AT THE END OF THE CIT(A) IS NOT JUSTIFIABLE. 8. AS FAR AS REFERENCE TO ACCOUNTING STANDARD AS-9 MADE BY THE ASSESSEE IS CONCERNED, THAT IS RELATED TO THINGS DU LY ACCOUNTED IN THE BOOKS. IT IS SOMETHING OVER AND ABOVE THOSE ITEMS. 9. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE HAS FILED WRITTEN SUBMISSIONS RUNNING INTO 21 PAGES. IN HIS F IRST FOLD OF CONTENTIONS, HE SUBMITTED THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS. HE POINTED O UT THAT BASICALLY TAXABILITY OF THE AMOUNTS IS NOT IN DISPUTE. AS FA R AS RATE OF TAX IS CONCERNED, THE ASSESSEE IS BEING TAXED AT THE SAME RATE IN DIFFERENT ASSESSMENT YEARS. AN AMOUNT OF RS.26.05 CORES HAS BEEN OFFERED FOR TAXATION AND TAXES HAVE ALSO BEEN PAID. ONLY DISPU TE IS YEAR OF TAXABILITY. ACCORDING TO THE AO, THIS AMOUNT OF RS .26.05 CORES SHOULD BE TAXED IN THE ASSTT.YEAR 2011-12 I.E. YEAR IN WHI CH DISCLOSURE WAS MADE BY THE ASSESSEE, WHEREAS ON THE OTHER HAND, TH E STAND OF THE ASSESSEE IS THAT IT IS IN THE BUSINESS OF DEVELOPME NT OF HOUSING PROJECT. IT WILL RECOGNIZE THE REVENUE ON TRANSFER OF FLATS TO THE PROSPECTIVE BUYERS. IN THIS YEAR, IT HAS OFFERED INCOME TO THE EXTENT OF SALES HAVE BEEN MATERIALIZED. HE TOOK US THROUGH THE STATEMEN T OF SHRI MUKESH PATEL RECORDED DURING THE COURSE OF SURVEY AND APPR ISED US ABOUT THE STATUS OF THE PROJECTS AGAINST WHICH INCOME IS BEIN G ASSESSED AT THE END OF THE AO IN THIS ASSESSMENT YEAR. HE MADE REFEREN CE TO THE QUESTION ITA NO.2720/AHD/2014 14 AND REPLY NO.5 AS WELL AS 8. STATEMENT OF SHRI MUK ESH WAS RECORDED IN GUJARATI, BUT A TRANSLATED COPY HAS BEEN PLACED ON PAPER BOOK AT PAGE NO.73. ENGLISH TRANSLATION OF THE RELEVANT QUESTIO N/REPLY READS AS UNDER: Q.5 PLEASE TELL US THE STAGE OF CONSTRUCTION W ORK COMPLETED OF ABOVE MENTIONED PROJECTS CARRIED ON BY M/S. HAPPY HOME CORPORATION AND ALSO FURNISH COMPLETE DETAIL OF BOOKING STATUS IN ALL PROJECTS. A.5 THE DETAIL OF COMPUTATION OF CONSTRUCTION AND B OOING POSITION OF ABOVE MENTIONED PROJECTS OF M/S. HAPPY HOME CORPORATION IS AS UNDER . PROJECT NAME CONSTRUCTION STATE % OF BOOKING 1 NANDINI II OUTER PLASTER & FLOORING 46% 2 NANDINI III PLINTH WORK 47% 3 NANDANVAN II SECOND SLAB 34% 4 NANDANVAN III FIRST SLAB 27% 5 VASTU LUXURIA FIRST SLAB 25% 6 LUXARIA BUSINESS HUB GROUND LEVEL 4% 7 NAKSHATRA HEIGHTS NINTH SLAB 68% 8 NAKSHATRA PLATINUM COMPOUND WALL 9% 9 NAKSHATRA VIEW GROUND LEVEL JUST STARTED 10 NEST VIEW COMPOUND WALL 4% 11 CAPITAL GREENS COMPOUND WALL JUST STARTED 12 SWEET HOME COMPLETED 32% 13 SWEET HOUSE COMPLETED 38% 14 HAPPY RESIDENCY MASONARY, PLASTURE & 59% FLOORING THE COMPLETE DETAIL OF FINANCIAL TRANSACTION OF THE BOOKING OF ALL THE ABOVE PROJECTS ARE RECORDED IN OUR REGULAR BOOKS OF ACCOUNTS AND THE B ACK-UP OF COMPUTER HAS BEEN TAKEN BY YOUR GOODSELF DURING THE COURSE OF SURVEY PROCEEDINGS AS ON TODAY. .. Q.8 TODAY AS ON DAY OF SURVEY, WE HAVE FOUND 2 PAPERS FROM POCKET OF YOUR SHIRT AND WHICH HAS BEEN INVENTORISED AS PAGE 1 & 2 OF AN NEXURE BI. ON THESE PAPERS, CERTAIN AMOUNT HAS BEEN MENTIONED AGAINST NAMES OF DIFFERENT PROJECTS. THE TOTAL OF PAGE 1 AMOUNTS TO RS. 10,55,00,000/- AND PAGE 2 AMO UNTS TO RS. 15,50,00,000/-. THUS, THE AGGREGATE TOTAL OF BOTH PAGES AMOUNTS TO RS. 26,05,00,000/-. KINDLY EXPLAIN BOTH THE PAPERS. A.8 THE AFORESAID AMOUNT OF RS. 26,05,00,000/- IS U NACCOUNTED INCOME OF M/S. HAPPY HOME CORPORATION FROM ITS ALL PROJECTS, WHICH I DEC LARE VOLUNTARILY AND WHICH IS NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. ON THIS AMOUNT OF RS. 26,05,00,000/-, WE WILL PAY THE DUE INCOME TAX IN TIME. THIS UNACCOUNT ED INCOME OF RS. 26,05,00,000/- (ONLY RUPEES TWENTY-SIX CRORES AND FIVE LACS) IS OU R INCOME FOR THE CURRENT YEAR BUT WHICH IS DEPENDENT UPON THE REGISTRATION OF THE SAL E DEED. THE AFORESAID UNACCOUNTED INCOME IS OVER AND ABOVE THE REGULAR INCOME REFLECT ED IN THE REGULAR BOOKS AND INCOME TAX RETURNS. ITA NO.2720/AHD/2014 15 10. ON THE STRENGTH OF THE ABOVE, HE POINTED OUT TH AT CERTAIN PROJECTS WERE JUST STARTED. IN OTHER WORDS, LEVELING OF GRO UND WAS DONE. AT CERTAIN PROJECTS, CONSTRUCTION WAS MADE ON PLINTH L EVEL ONLY. IN SUCH SITUATION, HOW IT CAN BE STATED THAT WHOLE RECEIPTS SHOULD BE RECOGNIZED AS REVENUE. THIS ON-MONEY PART-TAKES CHARACTER OF ADVANCES. IF THE ASSESSEE HAS NOT CONSTRUCTED FLATS, THEN IT HAS TO RETURN THE ON-MONEY ALSO. THUS, ON-MONEY IS DEPENDED UPON COMPLETION O F PROJECTS. THE ASSESSEE HAS BEEN RECOGNIZING ITS REVENUE ON PROJEC T COMPLETION BASIS. HE FURTHER DREW OUR ATTENTION TOWARDS PHOTOS WHICH WERE FILED BEFORE THE AO IN ORDER TO DEMONSTRATE ACTUAL STATE OF AFFA IRS AT A PARTICULAR PROJECT. HE PUT RELIANCE UPON THE FOLLOWING DECISI ONS AND FILED COPIES OF THEM: I) CIT VS. ASHALAND CORPORATION, 133 ITR 0055 II) CIT VS. MOTILAL C. PATEL & CO., 173 ITR 0666; III) ALAPATI VENKATARAMIAH VS.CIT, 57 ITR 0185; IV) ITO VS. SIDDHARTH S. PATEL, ITA NO.1852 AND 1853/AHD/2003, DATED 23/4/2010 V) DR CONSTRUCTION VS. ITO (AHD TRIB.), ITA NO.2735/AH D/2010 VI) CIT VS. SHIVALIK BUILDWELL P.LTD. 40 TAXMANNC.OM 21 9 (GUJ) 11. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT AN AMOUNT DISCLOSED AT RS.26.05 CORES BY THE ASSESSEE HAS BEEN OFFERED FOR TAXATION IN DIFFERENT ASSESSMENT YEARS, AS AND WHEN PROJECT WAS COMPLETE AND SALES HAVE BEEN MATERIALIZED. IT HAS ALSO NOT BEEN DISPUTED THAT REVENUE IS NOT TAXING THE ASSESSEE ON RECEIPT OF BOOKING AMOUNT I.E. THE AMOUNT WHICH HAS ALREADY BEEN RECOR DED IN THE BOOKS. A SIMPLE EXAMPLE CAN BE TAKEN FROM THE REPLY TO QUE STION NO.5 GIVEN BY THE ASSESSEES PARTNER AT THE TIME OF SURVEY. FOR EXAMPLE, IN THE PROJECT NANDINI-II, 46% BOOKING WAS THERE. THE ASS ESSEE MUST HAVE RECEIVED SUBSTANTIAL AMOUNT, BUT THIS 46% HAS NOT B EEN TAXED ON RECEIPT BASIS. THE AO DID NOT DISPUTE WITH REGARD TO THE STAND OF THE ITA NO.2720/AHD/2014 16 ASSESSEE THAT AMOUNTS WHICH HAVE BEEN ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNTS WOULD BE TAXED WHEN SALE DEED WOULD BE EXECUTED OR POSSESSION WILL BE DELIVERED TO THE PROSPECTIVE BUY ERS. A DIFFERENT YARDSTICK HAS BEEN ADOPTED FOR THE ON-MONEY RECEIVE D BY THE ASSESSEE OVER AND ABOVE AMOUNTS STATED IN THE REGULAR BOOKS OF ACCOUNTS. ANALYSIS OF THE AO WAS THAT AGAINST THIS AMOUNT, TH E ASSESSEE WOULD NOT BE REQUIRED TO INCUR EXPENDITURE. IT IS A NET REALIZATION WHICH HAS ONLY A PROFIT COMPONENT. THE ASSESSEE IS NOT DISP UTING THIS FACT, BUT IT WAS OF THE VIEW THAT RIGHT TO RETAIN THIS AMOUNT WO ULD ACCRUE TO IT WHEN SALE DEED WOULD BE EXECUTED OR POSSESSION OF THE FL ATS WOULD BE GIVEN TO THE PROSPECTIVE BUYERS ON COMPLETION OF THE PROJ ECT. FOR EXAMPLE, IF ON ACCOUNT OF ANY REASON PROJECT COULD NOT BE COMPL ETED, THEN THE ASSESSEE WOULD BE REQUIRED TO REFUND THE MONEY, AND IN THAT SITUATION, ON-MONEY WOULD ALSO BE REFUNDED. THUS, THE RIGHT T O RECEIVE OR RETAIN THIS COMPONENT WAS SUBJECT TO THE EXECUTION OF THE SALE DEED OR HANDING OVER OF THE POSSESSION. THIS ASPECT HAS BE EN CLARIFIED BY THE PARTNERS EVEN WHILE ADMITTING THE INCOME. THE LD.A O HAS BEEN UNNECESSARILY IGNORING THAT PART OF THE STATEMENT. IT IS ALSO PERTINENT TO OBSERVE THAT THE TITLE IN THE PROPERTY WOULD BE TRA NSFERRED NOT IN THE YEAR IN WHICH THE ASSESSEE RECEIVED PART CONSIDERAT ION AS EARNEST MONEY, BUT IT IS TO BE CONSTRUED IN THE YEAR, WHEN THE SALES WAS REGISTERED OR POSSESSION WAS HANDED OVER TO THE PRO SPECTIVE BUYERS. ON COMPLETION OF THIS TRANSACTION THEN ONLY RIGHT T O RECEIVE WOULD CRYSTALISE. THOUGH, THE LD.COUNSEL FOR THE ASSESSE E HAS MADE REFERENCE TO LARGE NUMBER OF DECISIONS, BUT MOST OF THEM ARE RELATED TO THOSE ASSESSEES WHO ARE TRADING IN THE LAND AND HONBLE C OURTS HAVE OBSERVED THAT TRANSACTION WOULD BE CONSTRUED AS COM PLETE WHEN SALE DEED WAS REGISTERED. BUT THERE IS ONE DECISION OF HONBLE GUJARAT HIGH COURT WHEREIN THE ASSESSEE WAS A DEVELOPER AND INCO ME HAS BEEN RECOGNIZED WHEN POSSESSION WAS DELIVERED OR SALE DE ED WAS EXECUTED. WE WOULD LIKE TO REFER TO THE DECISION OF THE HONB LE GUJARAT HIGH COURT ITA NO.2720/AHD/2014 17 IN THE CASE OF CIT VS. SHIVALIK BUILDWELL. THE ASS ESSEE WAS A DEVELOPER OF REAL ESTATE. IT HAD RECEIVED BOOKING AMOUNT OF RS.27.85 LAKHS. THE AO MADE ADDITION OF THIS AMOUNT. ON APPEAL, THE LD .CIT(A) HAS DELETED IT. THE TRIBUNAL CONCURRED WITH THE LD.CIT(A) BUT FOR DIFFERENT REASONS. THE REVENUE WENT IN APPEAL BEFORE THE HONBLE HIGH COURT AND THE HONBLE COURT HAS UPHELD THE DELETION BY OBSERVING AS UNDER: 2. INSOFAR AS THE QUESTION 'A' IS CONCERNED, WE NO TICE THAT THE ASSESSING OFFICER HAD MADE ADDITION OF RS. 27.85 LA KH (ROUNDED OFF). THE ASSESSEE CARRIED THE ISSUE IN APPEAL. THE CIT ( APPEALS) DELETED SUCH ADDITIONS ON THE GROUND THAT THE ASSESSING OFF ICER DID NOT EVEN ISSUE A NOTICE TO THE ASSESSEE BEFORE MAKING SUCH S UBSTANTIAL ADDITIONS AND FURTHER THAT THE ASSESSEE COULD NOT BE STATED T O HAVE EARNED INCOME ON BOOKING AMOUNT COLLECTED AS THE ASSESSEE IS AN O RGANIZER AND DEVELOPER AND IS ENTITLED TO RECEIVE ONLY SUPERVISI ON FEES FROM THE SOCIETY FOR WHICH IT UNDERTAKES SUCH DEVELOPMENT WO RK. 3. ON THE REVENUE'S APPEAL, THE TRIBUNAL CONFIRMED THE VIEW OF CIT (APPEALS), HOWEVER, ON SLIGHTLY DIFFERENT GROUND, N AMELY, THAT THE ASSESSEE BEING A DEVELOPER OF THE PROJECT, PROFIT I N HIS CASE, WILL ARISE ON TRANSFER OF TITLE OF THE PROPERTY AND RECEIPT OF AN Y ADVANCES OR BOOKING AMOUNT CANNOT BE TREATED AS TRADING RECEIPT OF THE YEAR UNDER CONSIDERATION. THE TRIBUNAL FURTHER NOTED THAT SUCH METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE HAD BEEN ACCEPTED BY THE R EVENUE IN EARLIER YEARS. THE TRIBUNAL WAS, THEREFORE, OF THE OPINION THAT THE ASSESSING OFFICER'S DECISION TO REJECT THE BOOK RESULTS DURIN G THE YEAR UNDER CONSIDERATION WAS NOT JUSTIFIED. 4. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR, IF AS PER THE ACCOUNTING STANDARD AVAILABLE, THE ASSESSEE WAS ENTITLED TO CLAIM THE ENTIRE INCOME ON COMPLETION OF THE PROJECT AND IF SUCH ACCOUNTING STANDARD WAS ACCEPTED BY THE REVENUE IN THE EARLIER YEARS, IN THE PRESENT YEAR, THE ASSESSING OFFICER COULD NOT HAVE TAKEN A DIFFERENT STAND AND THAT TOO, WITHOUT HEARING THE ASSESSEE. 12. APART FROM THE ABOVE, THE LD.CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT SAME AMOUNT CANNOT BE TAXED TWICE B ECAUSE THIS VERY AMOUNT HAS BEEN OFFERED FOR TAXATION IN DIFFERENT Y EARS AND THE SAME RATE OF TAX IS APPLICABLE UPON THE ASSESSEE. THUS, TAKING INTO CONSIDERATION WELL REASONED FINDING OF THE LD.CIT(A ) EXTRACTED (SUPRA), ITA NO.2720/AHD/2014 18 WE DO NOT SEE ANY REASONS TO INTERFERE IN IT. APPE AL OF THE REVENUE IS DEVOID OF ANY MERIT, HENCE DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 1 ST JUNE, 2017. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER