SUPREME REAL ESTATE DEVELOPERS P/ LTD, MUMBAI V. ACIT CEN CIR 23, MUMBAI

ITA 3097/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7840 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure
• Section: 131

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./3097/MUM/2014, / ASSESSMENT YEAR: 2011-12 M/S. SUPREME REAL ESTATE DEVELOPERS PRIVATE LIMITED 215, ATRIUM, 10TH FLOOR, NEAR MARRIOT, COURTYARD HOTEL,ANDHERI-KURLA RD. ANDHERI-(E),MUMBAI-400 093. PAN:AAACS 5871 N VS. ACIT-CENTRAL CIRCLE-23 AAYAKAR BHAVAN, 4TH FLOOR, MK ROAD NEW MARINE LINES MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) ./I.T.A./3185/MUM/2014, /ASSESSMENT YEAR: 2011-12 ACIT-CENTRAL CIRCLE-23 MUMBAI-400 020. VS. M/S. SUPREME REAL ESTATE DEVELOPERS PRIVATE LIMITED MUMBAI-400 093. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI ANAND MOHAN-CIT--DR /ASSESSEE BY: SHRI VIJAY MEHTA / DATE OF HEARING: 23/03/2017 / DATE OF PRONOUNCEMENT: 31.03.2017 / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 28/02/2014, OF THE CIT( A)-40,MUMBAI THE ASSESSING OFFICER (AO) AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR THE A BOVE ASSESSMENT YEAR.ASSESSEE-COMPANY,IS A REAL ESTATE DEVELOPER.THE AO COMPLETED THE ASSESSME NT,ON 28/03/2013,U/S.143 (3) OF THE ACT, DETERMINING ITS INCOME AT RS. 43.30 LAKHS. EFFECTIVE GROUND OF APPEAL, FILED BY THE AO,IS ABOU T CREATING A SUM OF RS.45 LAKHS, FOUND AND SEIZED DURING THE SEARCH AND SEIZURE PROCEEDINGS, O UT OF SALE OF SCRAP. ITA/3185/MUM/2014 : BRIEF FACTS: 2. A SEARCH AND SEIZURE ACTION U/S.132 OF THE WAS CARR IED OUT,ON 29/03/2011,AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE DIRECTORS OF THE ASSESS EE AND THE GROUP CONCERNS, INCLUDING THE ASSESSEE.DURING THE COURSE OF THE SEARCH THE AUTHOR ISED OFFICERS FOUND AND SEIZED CERTAIN DOCUMENTS AND CASH FROM THE BUSINESS AS WELL AS RES IDENTIAL PREMISES.DIRECTORS OF THE ASSESSEE 3097/M/14(11-12) SUPREMEREALESTATE 2 DISCLOSED A SUM OF RS. 45 LAKHS ON ACCOUNT OF UNDIS CLOSED SALES OF SCRAP,DURING THE COURSE OF STATEMENT RECORDED ON OATH. DURING THE ASSESSMENT PROCEEDINGS,THE ASSESSEE ARGU ED THAT THE AMOUNT OF RS. 45 LAKHS REPRESENTED INCOME FROM SALE OF IRON AND STEEL SCRA P GENERATED AT LUCKNOW SITE WHERE IT WAS CONSTRUCTING ALL, THAT THE PROJECT WAS SHELVED DUE TO RECESSION IN THE MARKET, THAT THE SCRAP WAS SOLD FOR RS. 45 LAKHS THAT WAS REDUCED OUT OF THE W ORK IN PROGRESS AS ON 31/03/2011,THAT CASH IN HAND WAS INCREASED BY THE SAID AMOUNT,THAT THE RETU RN WAS FILED ACCORDINGLY. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND R EJECTED THE CLAIM WITH REGARD TO SALE OF IRON AND STEEL SCRAP. HE TREATED THE AMOUNT IN QUESTION UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT MADE DETAILED SUBMISSI ONS AND REFERRED TO CERTAIN CASE LAWS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT THE ASSESSEE WAS CONSTRUCTING A MALL AT LUCKNOW, THAT THE RUNNIN G BILLS IN RESPECT OF THE CONSTRUCTION WORK WERE SUBMITTED BY THE CONTRACTOR TO THE ASSESSEE FR OM TIME TO TIME, THAT IT HAD MADE PAYMENT TO THE TUNE OF RS. 3.69 CRORE TO THE CONTRACTOR, THAT THE BILLS WERE CERTIFIED BY THE SITE ENGINEER, THAT STATE OF 319.543MT, VALUED AT RS. 79.88 LAKHS, WAS PURCHASED AND USED IN THE CONSTRUCTION, THAT THE ASSESSEE HAD CLAIMED THAT ENTIRE FOUNDATION WAS DEMOLISHED AND STEEL SCRAP OF 252 METRIC TONS WAS GENERATED, THAT IT WAS SOLD AT THE RATE OF 18,000/-PER TONNE TO A SCRAP DEALER, THAT CONFIRMATION LETTER OF THE SCRAP DEALER WAS FILED D URING THE ASSESSMENT PROCEEDINGS, THAT THE DEALER HAD CONFIRMED PURCHASE OF SCRAP FROM THE ASS ESSEE FOR A SUM OF RS. 45.08 LAKHS, THAT THE AO HAD ASKED THE ASSESSEE TO PRODUCE THE SCRAP DEAL ER FOR EXAMINATION, THAT HE WAS NOT PRODUCED, THAT LATER ON THE AO ISSUED A SUMMONS UND ER SECTION 131 OF THE ACT, THAT THE SUMMONS COULD NOT BE SERVED, THAT THE AO REJECTED THE CLAIM MADE BY THE ASSESSEE TOWARD SALE OF SCRAP AND TREATED THE DISPUTED AMOUNT IS INCOME UNDER THE HEAD OTHER SOURCES, THAT THE ASSESSEE HAD RECEIVED RS. 45 LAKHS FROM THE SCRAP DEALER SHORTLY BEFORE THE DATE OF SEARCH, THAT THE DETAILS OF SALE OF SCRAP WAS AVAILABLE IN THE DIARY SEIZED FRO M THE BUSINESS PREMISES OF THE ASSESSEE, THAT THE DIARY WAS MAINTAINED BY DGM(PURCHASE) FROM WHOSE PO SSESSION IT WAS SEIZED, THAT IN HIS STATEMENT ON OATH HE HAD ADMITTED THAT THE CASH WAS OUT OF THE SALE OF STEEL SCRAP OF LUCKNOW SITE,THAT A PORTION OF THE MONEY HAD ALREADY BEEN G IVEN TO ONE OF THE DIRECTORS OF THE COMPANY,THAT DIRECTORS OF THE COMPANY HAD CONFIRMED THE STATEMENT MADE BY THE DGM,THAT 3097/M/14(11-12) SUPREMEREALESTATE 3 CONSIDERING THESE EVIDENCES THE AO SHOULD NOT HAVE DOUBTED THE CLAIM OF THE ASSESSEE.HE REFERRED TO THE CASE OF BIREN V SAVLA (100 TTJ 1006 ) AND HELD THAT ENTIRE DOCUMENT SHOULD BE READ AS A WHOLE AND THAT CONTENTS OF THE DOCUMENT S HOULD BE TREATED AS CORRECT/REJECTED A WHOLE, THAT THE SUM OF RS. 45 LAKHS WAS GENERATED ON ACCOU NT OF SALE OF SCRAP, THAT SAME HAD TO BE TREATED AS BUSINESS INCOME IN THE HANDS OF THE ASSE SSEE, THAT IT WAS NOT REQUIRED TO BE REDUCED OUT OF THE WORK IN PROGRESS, THAT THE AO SHOULD HAVE CO NSIDERED SEPARATELY IN THE PROFIT AND LOSS ACCOUNT. ACCORDINGLY, HE ALLOWED THE APPEAL OF THE ASSESSEE,IN PART. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) CONTENDED THAT THE SCRAP DEALER WAS NOT PRODUCED BEFORE THE AO, TH AT THE ASSESSEE WAS NOT ABLE TO PROVE THE NEXUS BEYOND OUT THAT THE CASH FOUND AT THE PREMISE S OF THE ASSESSEE AND THE NOTING THE DIARY ABOUT THE SALE OF SCRAP AT LUCKNOW WERE THE SAME, T HAT THE THERE WAS NO CONCLUSIVE EVIDENCE TO PROVE THE GENUINENESS OF THE CLAIM MADE BY THE ASSE SSEE. THE AUTHORISED REPRESENTATIVE (AR) REFERRED TO THE PAGES 1-8 OF THE PAPER BOOK AND STA TED THAT CASH WAS GENERATED FROM SALE OF SCRAP, THAT THE ENTRIES IN THE DIARY CONTAINED THE NAME OF THE SCRAP DEALER, THAT AT PAGE 8 OF THE PAPER BOOK ENTRIES PERTAINING TO LUCKNOW PROJECT WERE MEN TIONED, THAT THE DGM AND THE DIRECTORS OF THE COMPANY HAD ADMITTED THE GENERATION OF CASH OUT OF SALE OF SCRAP.HE REFERRED TO THEIR STATEMENTS AND STATED THAT CASH FOUND DURING THE CO URSE OF SEARCH WAS ON ACCOUNT OF SALE OF SCRAP AND NOT ON ACCOUNT OF ANY OTHER SOURCE, THAT IT WAS NOT A SEPARATE SOURCE/STREAM OF REVENUE, THAT THE GROUP HAD OFFERED RS. 98.17 LAKHS AS INCOME FRO M SALE OF SCRAP IN THE HANDS OF 7 ENTITIES INCLUDING THE ASSESSEE,THAT THE EXPLANATION GIVEN B Y IT THAT THE CASH SEIZED PERTAINED TO INCOME ON SALE OF SCRAP WAS ACCEPTED BY THE VERY SAME AOS IN ALL OTHER ENTITIES,THAT IN ALL OTHER CASES HE HAD ACCEPTED THE TREATMENT GIVEN BY THE ASSESSEE OF REDUCING THE INCOME, GENERATED ON ACCOUNT OF SALE OF SCRAP, FROM WORK IN PROGRESS.HE REFERRED TO THE ORDER,DATED 28/03/2013, OF RUPAL R KANAKIYA PASSED BY THE AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AN ACTION U/S.132 OF THE ACT WAS CARRIED OUT IN THE GROUP ENT ITIES, THAT CERTAIN DOCUMENTS WERE SEIZED BY THE AUTHORISED OFFICERS,INCLUDING A DIARY CONTAINING TH E DETAILS OF CASH RECEIVED ON SALE OF SCRAP, THAT THE DGM AS WELL AS THE DIRECTORS OF THE ASSESSEE AD MITTED THAT CASH WAS GENERATED OUT OF THE SALE PROCEEDS OF SCRAP SOLD,THAT THE ASSESSEE ALONG WITH THE OTHER ENTITIES OF THE GROUP HAD ADMITTED SALE OF SCRAP OF LUCKNOW SITE,THAT THE AO HAD ACCEP TED THE CLAIM MADE BY THE ASSESSEE WITH 3097/M/14(11-12) SUPREMEREALESTATE 4 REGARD TO SALE OF SCRAP AND RECEIPT OF CASH IN OTHE R ENTITIES, THAT HE HAS NOT GIVEN ANY REASON FOR REJECTING THE CLAIM OF THE ASSESSEE THOUGH THE FACT S WERE SIMILAR.WE HAVE GONE THROUGH THE PAPER BOOK AND WE FIND THAT IN THE SEIZED PAPER NAME OF T HE LUCKNOW SITE,DATES OF RECEIPT OF CASH AND THE AMOUNTS INVOLVED ARE APPEARING. IN OUR OPINION, SALE PROCEEDS RECEIVED BY THE ASSESSEE ON ACCOUNT OF SCRAP SALE CANNOT BE TAXED UNDER THE HEA D INCOME FROM OTHER SOURCES, AS THE TRANSAC- TION WAS DIRECTLY RELATED WITH THE BUSINESS OF THE ASSESSEE. THE ASSESSEE WAS CONSTRUCTING A MALL AT LUCKNOW AND LATER ON IT HAD SHELVED THE PROJECT. THE AO HAS NOT DOUBTED THE GENUINENESS OF THE STATEMENTS OF THE DIRECTORS OF THE COMPANY, REC ORDED ON DIFFERENT DATES.IN THEIR STATEMENTS THEY HAVE ADMITTED THAT CASH FOUND DURING THE SEARC H PROCEEDINGS WAS OUT OF THE SALE OF SCRAP. WE HAVE GONE THROUGH THE STATEMENTS OF DGM,DATED 29 /03/2011 (PAGE 19-20 OF THE PB),ONE OF THE DIRECTORS NAMELY RAKESH KANAKIYA, DATED 30/03/2 011 AND 24/05/2011 (PAGE 9-18 OF THE PB). IN HIS ANSWER TO QUESTION NUMBER 7,HE ADMITTED THAT THE NOTICE IN THE DIARY SEIZED DURING THE SEARCH PROCEEDINGS RELATED TO CASH RECEIVED ON SALE OF SCRAP THAT WERE GENERATED AT THE LUCKNOW SITE AND THAT SAME REMAINED TO BE ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNTS.HE FURTHER STATED THAT CASH FOUND IN THE POSSESSION OF THE EMPLOYEES IS THE SAME AS NOTED IN THE SEIZED THE PAPER. THE AO HAS NOT BROUGHT ANY EVIDENCE THAT COULD SHOW THAT ASSESSEE HAD RECEIVED THE CASH FROM ANY OTHER SOURCE.HE WAS RELYING UPON THE SEIZED DOC UMENTS FOR MAKING THE ADDITION. BUT AT THE SAME TIME,HE WAS REJECTING THE CLAIM MADE BY THE AS SESSEE WITHOUT ANY BASIS. IN OUR OPINION,THE AO IS BARRED FROM PARTLY RELYING ON A DOCUMENT SEIZ ED DURING THE SEARCH PROCEEDINGS.FROM THE DAY ONE THE EMPLOYEES/DIRECTORS OF THE ASSESSEE HAD STATED THAT CASH FOUND AT THE BUSINESS PREMISES WERE GENERATED FROM THE SCRAP SALE.THEREFO RE,IN OUR OPINION, THE FAA WAS JUSTIFIED IN HOLDING THAT THE AO HAD NOT BROUGHT ANY EVIDENCE ON RECORD TO TAX THE DISPUTED AMOUNT UNDER THE HEAD INCOME FROM OTHER SOURCES.SO,CONFIRMING HIS OR DER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. ITA/3097/MUM/2014: 6. THE EFFECTIVE GROUND OF APPEAL,FILED BY THE ASSESSE E, IS ABOUT DIRECTION GIVEN BY THE FAA TO THE AO TO CONSIDER THE SALE OF SCRAP SEPARATELY IN THE PROFIT AND LOSS ACCOUNT.IN THE EARLIER PARAGRAPHS OF OUR ORDER, WE HAVE DELIBERATED UPON THE FACTS OF THE CASE.WE FIND THAT THE FAA REJECTED THE CLAIM OF THE ASSESSEE ABOUT REDUCING THE SALE OF SC RAP FROM THE WORK IN PROGRESS.AFTER CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT INCOME 3097/M/14(11-12) SUPREMEREALESTATE 5 GENERATED FROM SALE OF SCRAP CANNOT BE TREATED A SE PARATE SOURCE OF INCOME AND IT HAS TO BE TAKEN AS PART OF WORK IN PROGRESS. REVERSING THE ORDER OF THE FAA,WE ALLOW THE EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE. A RESULT, APPEAL FILED BY THE AO IS DISMISSED AND T HE APPEAL OF THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH , 2017. 31 , 2017 SD/- SD/- /- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 31.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ . //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.