Shri Nilesh Himatlal Shah, Valsad V. The ACIT., Cent.Circle-4, Surat

ITA 312/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0516 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 17-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: K N BHATT
• Keywords: Unexplained expenditure; Capital asset
• Section: 69C; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGARWAL, A.M.) I.T.A. NOS. 312, 313, 314 & 315/AHD./2007 ASSESSMENT YEARS : 1998-1999, 1999-2000, 2000-2001 & 2001-2002 SHRI NILESH HIMATLAL SHAH, VALSAD -VS.- ASSISTANT COMMISSIONER OF INCOME TAX, (P.A. NO. ACQPS 9921 C) CENTRAL CIRCLE-4, SUR AT (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI K.N. BHATT RESPONDENT BY : SHRI SHELLEY JINDAL O R D E R PER BENCH :- THERE ARE FOUR APPEALS FILED BY THE ASSESSEE RAIS ING COMMON ISSUES INVOLVED. THESE ARE DISPOSED OF TOGETHER BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE ASSESSEE IS AGITATED AGAINST TAXING THE ON-MONEY RECEIPT BY IT ON SALE OF FLATS CONSTRUCTED BY IT. THE TAXING OF ON-MONEY HAS BEEN SPREAD OVER IN FOUR YEARS AND ADDITIONS HAVING BEEN CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE AS SESSEE HAS CHALLENGED THE ORDERS DATED 08.12.2006 OF LEARNED COMMISSIONER OF INCOME TAX(AP PEALS)-II, AHMEDABAD BEFORE US. 2. THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZ URE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS AND RESIDENTIAL PRE MISES OF THE ASSESSEE AND HIS GROUP CONCERNS ON 18.06.2003. THE ASSESSEE HAD STARTED CONSTRUCTION B USINESS IN THE NAME OF M/S. PARAMOUNT CONSTRUCTION AND UNDERTOOK THE CONSTRUCTION OF FLAT S IN AKSHARDHAM PROJECT. THE ASSESSEE PURCHASED LAND FROM SHRI RAJENDRA BRAHMBHATT FOR AN APPARENT CONSIDERATION OF RS.8,00,000/- BUT DOCUMENTS FOUND IN THE SEARCH REVEALED TOTAL CO ST OF THE LAND AT RS.24,00,000/-. THE STATEMENT OF SHRI RAJENDRA BRAHMBHATT WAS ALSO RECO RDED IN WHICH HE ALSO CONFIRMED TO HAVE RECEIVED TOTAL PAYMENT OF RS.24,00,000/-. IN ADDITI ON TO THE TRANSFER OF LAND, THE ASSESSEE SOLD, APPARENTLY AS A PART OF TOTAL DEAL, TWO FLATS TO S HRI RAJENDRA BRAHMBHATT FOR TOTAL SALE CONSIDERATION OF RS.15,60,000/-. THE TOTAL AREA OF EACH FLAT WAS 1,200 SQ.FT., WHICH RESULTED SALE RATE TO RS.650/- PER SQ.FT. 2 3. AFTER CONSTRUCTION OF THE FLATS, THE ASSESSEE SO LD THEM TO VARIOUS CUSTOMERS FROM WHOM HE ADMITTED TO HAVE RECEIVED ON-MONEY TOTALING TO RS.2 4,15,000/-. THIS ON-MONEY WAS RECEIVED BY THE ASSESSEE, AS REFLECTED FROM THE DOCUMENTS AS WE LL AS FROM THE STATEMENT OF THE ASSESSEE IN THE FOLLOWING YEARS :_ FINANCIAL YEAR AMOUNT OF ON-MONEY RECEIVED 1998-1999 RS.10,75,000/- 1998-1999 RS. 3,80,000/- 1999-2000 RS. 7,20,000/- 2000-2001 RS. 2,40,000/- TOTAL RS.24,15,000/- OUT OF ABOVE ON-MONEY RECEIVED, THE ASSESSEE TREATE D RS.14,55,000/- IN THE ASSESSMENT YEAR 1999-2000 AND DECLARED PART OF IT IN THE RETURN OF INCOME IN THAT YEAR. SIMILARLY, PART OF THE SUBSEQUENT RECEIPT WAS ALSO DECLARED BY IT IN SUCCE EDING ASSESSMENT YEARS AS UNDER :- ASSTT. YEAR RECEIPT IN LAKH AMOUNT OFFERED IN RETURN RS. LAC DIFFERENCE RS. IN LAC 1999-2000 14.55 11.14 3.41 2000-2001 7.20 5.22 1.98 2001-2002 2.40 1.74 0.66 24.15 18.10 6.05 4. THE A.O. ON THE BASIS OF SALE RATE WORKED OUT ON SALE OF FLATS TO SHRI RAJENDRA BRAHMBHATT HAS STATED THAT THE FLATS ARE SOLD AT A RATE OF RS.650/- PER SQ.FT. AND ACCORDINGLY THE DIFFERENCE IN DECLARED SALE CONSIDERATION AND SALE CONSIDERATION WORKED OUT AT THE RATE OF RS.650/- PER SQ.FT. WAS CALCULATED BY HIM AS UNDER :- ASSESSMENT YEAR DECLARED TOTAL SALE CONSIDERATION TOTAL SALE CONSIDERATION @ 650/- PER SQ.FT. DIFFERENCE 1999-2000 RS.36,89,000/- RS.40,30,000/- RS.3,41,000 /- 2000-2001 RS.21,42,000/- RS.23,40,000/- RS.1,98,000 /- 2001-2002 RS. 7,14,000/- RS. 7,80,000/- RS. 66, 000/- 3 5. THE A.O. ALSO FOUND THAT OUT OF TOTAL TRANSACTIO NS CARRIED OUT WITH SHRI RAJENDRA BRAHMBHATT, A SUM OF RS.10,00,000/- WAS PAID BY THE ASSESSEE IN CASH AND BALANCE WAS SHOWN AS DUE AGAINST SHRI BRAHMBHATT. THE A.O. SOUGHT TO TAX A SUM OF RS.10,00,000/- AS PAID BY THE ASSESSEE UNDER SECTION 69C IN THE FINANCIAL YEAR 19 97-98 RELEVANT TO THE ASSESSMENT YEAR 1998- 99. THE ASSESSEE SOUGHT TO EXPLAIN THAT IT HAD RECE IVED A SUM OF RS.10,75,000/- AS ON-MONEY AND SALE OF FLATS OUT OF WHICH IT HAS PAID RS.10,00,000 /- TO THE LANDLORD. BUT LATER RECEIPT OF ON-MONEY OF RS.14,55,000/- ON SALE OF FLATS WAS SHOWN IN THE ASSESSMENT YEAR 1999-2000 AND ACCORDINGLY THE PAYMENT OF RS.10,00,000/- TO SHRI RAJENDRA BRAH MBHATT REMAINED UNEXPLAINED. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE A DDITION OF RS.10,00,000/- IN THE ASSESSMENT YEAR 1998-99 WITHOUT GIVING HIM THE BENE FIT OF CLAIMING THIS EXPENDITURE AGAINST THE PROJECT COST. ACCORDING TO HIM, PROVISO TO SECTION 69C DID NOT ENABLE THE ASSESSEE TO ADJUST UNEXPLAINED EXPENDITURE AGAINST INCOME UNDER ANY OT HER HEAD. IN ASSESSMENT YEAR 1999-2000, THE A.O. TAXED A SUM OF RS.11,14,000/- WHICH WAS DE CLARED BY THE ASSESSEE, BUT REJECTED THE CLAIM OF THE ASSESSEE FOR THE BENEFIT OF RS.16,00,0 00/- BEING THE ON-MONEY PAID BY IT ON PURCHASE OF LAND FROM SHRI RAJENDRA BRAHMBHATT. FOLLOWING HI S ORDER FOR THE ASSESSMENT YEAR 1998-99, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DID NOT ALLOW THIS SET OFF OR ANY PART OF IT ON THE GROUND THAT THIS PLEA WAS NOT RAISED ORIGINALLY BEF ORE THE A.O. 6. IN THE ASSESSMENT YEAR 2000-01, THE A.O. SOUGHT TO TAX A SUM OF RS.1,98,000/- BEING THE ON-MONEY CALCULATED BY HIM AS HAVING BEEN RECEIVED BY THE ASSESSEE ON SALE OF FLATS BUT NOT OFFERED FOR TAXATION. AS STATED ABOVE, THE A.O. CAL CULATED THAT ASSESSEE HAS RECEIVED A SUM OF RS.7,20,000/- AS ON-MONEY, WHEREAS IT HAS DECLARED IN THE RETURN OF INCOME AT RS.5,22,000/- ONLY. THUS HE SOUGHT TO TAX THE BALANCE OF RS.1,98,000/- IN THE ASSESSMENT YEAR 2000-01. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE A DDITION. 7. IN THE ASSESSMENT YEAR 2001-02, THE ASSESSEE SOU GHT TO TAX A SUM OF RS.66,000/- BEING THE DIFFERENCE IN ON-MONEY RECEIVED BY THE ASSESSEE. IT WAS CALCULATED BY THE A.O. THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.2,40,000/- AS ON-MONEY WHE REAS IT HAS OFFERED ONLY RS.1,74,000/-. THE DIFFERENCE OF RS.66,000/- WAS TAXED BY HIM IN THE A SSESSMENT YEAR 2001-02 AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAD CONFIRMED T HE SAME. 4 8. BEFORE US, THE LD. A.R. FOR THE ASSESSEE ARGUING FOR ALL THE FOUR YEARS TOGETHER SUBMITTED THAT THE SUM OF RS.6,05,000/- CALCULATED BY THE A.O . AS ON-MONEY NOT OFFERED FOR TAXATION IN THE RESPECTIVE YEARS, WAS NOT OFFERED FOR THE REASON TH AT IT HAD PAID A SUM OF RS.16,00,000/- MORE TO SHRI RAJENDRA BRAHMBHATT FOR PURCHASE OF LAND. IN F ACT, A CASH AMOUNT OF RS.10,00,000/- ALONE WAS PAID TO HIM AGAINST SALE PROCEEDS OF THE FLATS. IT IS UNDOUBTED FACT THAT THE ASSESSEE HAS PAID MORE MONEY AS ON-MONEY FOR PURCHASE OF LAND, THEREF ORE, ITS PROJECT COST HAS SUBSTANTIALLY INCREASED AND ACCORDINGLY IT SHOULD BE GIVEN THE SE T OFF OF SUCH ON-MONEY PAID TO PURCHASE LAND. ITS PROJECT COST HAS INCREASED. ACCORDINGLY, THE AS SESSEE IS ENTITLED FOR SET OFF. 9. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE RELIED ON THE ORDER OF AUTHORITIES BELOW. 10. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IN OU R CONSIDERED VIEW, THE MAIN ISSUE INVOLVED IN ALL THE FOUR APPEALS IS WHETHER THE ASSESSEE SHOULD BE ALLOWED SET OFF OF RS.10,00,000/- PAID BY IT IN THE FIRST ASSESSMENT YEAR 1998-99 AGAINST SALE P ROCEEDS OF THE FLATS RECEIVED BY HIM IN SUBSEQUENT YEARS. THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) DID NOT ALLOW THIS BENEFIT ON THE GROUND THAT ISSUE WAS NOT RAISED BY THE ASSE SSEE BEFORE THE A.O. INITIALLY. WE, HOWEVER, DO NOT AGREE WITH THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) IF THE FACTS ARE ON RECORD, THE ADDITIONAL GROUND, EVEN ADDITIONAL PLEA, CAN BE RAI SED DURING APPELLATE PROCEEDINGS AS HELD BY THE HON'BLE SUPREME COURT IN NTPCS CASE REPORTED IN 22 9 ITR 383. ACCORDINGLY, THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF SET OFF OF RS.10,0 0,000/- PAID BY IT IN CASH FOR PURCHASE OF LAND. IF THAT IS SO, THEN QUESTION OF TAXING FURTHER SUM OF RS.3,41,000/-, RS.1,98,000/- AND RS.66,000/- IN THE ASSESSMENT YEARS 1999-2000, 2000-01 AND 2001 -02 RESPECTIVELY WOULD NOT ARISE. THE ASSESSEE HAS ALREADY OFFERED OTHER SUM OF ON-MONEY RECEIVED BY IT TOTALING TO RS.18.10 LAKHS IN THE THREE ASSESSMENT YEARS AS PER BIFURCATION GIVEN ABOVE. THE SUM OF RS.10,00,000/- HAS ALREADY BEEN TAXED UNDER SECTION 69C IN THE ASSESSMENT YEAR 1998-99. THUS ACCORDINGLY WE DECIDE THE FOUR APPEALS AS UNDER :- IN THE ASSESSMENT YEAR 1998-99, ADDITION OF RS.10,0 0,000/- UNDER SECTION 69C IS CONFIRMED. 5 IN THE ASSESSMENT YEARS 1999-2000, 2000-01 AND 200 1-02, THE ASSESSEE IS ALLOWED THE CREDIT OF RS.10,00,000/- IN THE PROJECT COST. T HIS WILL RESULT IN DELETION OF ADDITION IN THE ASSESSMENT YEAR 1999-2000 FOR A SUM OF RS.3,41,000/-, RS.1,98,000/- IN THE ASSESSMENT YEAR 2000-01 AND OF RS.66,000/- I N THE ASSESSMENT YEAR 2001-02. 11. AS A RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED AS INDICATED ABOVE. THE ORDER PRONOUNCED IN THE COURT ON 06 .11.2009 SD/- SD/- (T.K. SHARMA) (D.C. AGARWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 06 / 11 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT 3) CIT(A) CONCERNED; (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUT Y REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.