M/s. Shiv Pujan Developers, Kalol V. The Income Tax Officer, Ward-3, Mehsana

ITA 399/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5624 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-08-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Income from undisclosed sources; Question of law; Corroborative evidences
• Section: 133A; 143(2)

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO.399/AHD/2017 / ASSTT.YEAR : 2012-13 M/S.SHIV PUJAN DEVELPERS C/O. JIGNESHKUAMR PURUSHOTTAMBHAI PATEL, ABF-12, FIRST FLOOR, SHIVAM PLAZA BORISANA THREE ROAD OPP: BORISANA PETROL PUMP KALOL (N.G.)-382 721. PAN : ABTFS 2833 H VS. ITO, WARD - 3 MEHSANA. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI TUSHAR HEMANI, AR REVENUE BY : SHRI ALOK SINGH, CIT-DR / DATE OF HEARING : 20/08/2019 ! / DATE OF PRONOUNCEMENT: 01/10/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A), GANDHINAGAR DATED 23.12.2016 PASSED FOR THE ASSESSM ENT YEAR 2012-13. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUNAL) R ULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN THE F IRST FOLD OF GRIEVANCE, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED I N CONFIRMING THE ADDITION OF RS.3,74,90,000/- WHICH WAS MADE BY THE AO WITH H ELP OF OUTCOME OF SURVEY CARRIED OUT AT THE PREMISES OF THE ASSESSEE. ITA NO.399/AHD/2017 2 3. BRIEF FACTS OF THE CASE ARE THAT SURVEY UNDER SE CTION 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 19.10.2011. IT HAS FILED ITS RETURN OF INCOME ON 30.9.2012 ELECTRONICALLY DECLAR ING TAXABLE INCOME AT RS.1,17,21,050/- WHICH WAS REVISED ON 30.10.2012 DE CLARING TOTAL INCOME AT RS.1,22,22,060/-. THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSU ED AND SERVED UPON THE ASSESSEE. THE LD.AO FOUND THAT DURING THE COURSE O F SURVEY STATEMENT OF SHRI NIKIL PRAHLADBHAI PATEL, PARTNER OF THE ASSESSEE-FI RM WAS RECORDED WHEREIN HE HAS ADMITTED AN UNDISCLOSED RECEIPT OF RS.3,74,79,0 00/-. THIS DISCLOSURE WAS MADE ON THE BASIS OF RECOVERY OF A DIARY VIZ. VIKR AM DIARY CONTAINING PAGES 1 TO 129 AND TAKEN INTO POSSESSION BY THE SURVEY TE AM AS ANNEXURE A. THE LD.AO HAS CONFRONTED THE ASSESSEE TO SHOW AS TO HOW IT HAS NOT INCLUDED THE ALLEGED UNDISCLOSED INCOME ADMITTED DURING THE COUR SE OF SURVEY. THE ASSESSEE SUBMITTED THAT NO SUCH DIARY WAS FOUND DUR ING THE COURSE OF SURVEY. IT HAS ACTUALLY BEEN CREATED BY THE SURVEY TEAM AT THE EARLY MORNING HOURS OF OCTOBER 20, 2011. AN AFFIDAVIT DATED 20.11.2011 HA S BEEN SUBMITTED TO THE AO TO THIS EFFECT AND THE AFFIDAVIT HAS BEEN REPROD UCED BY THE AO IN PARA 5.2 OF THE ASSESSMENT ORDER. THE LD.AO HAS MADE AN ANA LYSIS OF THIS AFFIDAVIT AS WELL AS ALLEGED DIARY AND RECORDED A FINDING THAT N AMES FROM WHOM MONEY HAS BEEN TAKEN BY THE ASSESSEE ARE BEING REFLECTED IN THE BOOKINGS ACCEPTED BY THE ASSESSEE FOR SALE OF SHOPS AND RESIDENTIAL FLAT S. THE ASSESSEE HAS NOT PRODUCED ANY INDEPENDENT EVIDENCE INDICATING AS TO HOW THIS DIARY WAS CREATED, AND WHAT WAS NATURE OF THREAT. THE LD.AO HAS ALSO MADE REFERENCE ABOUT CERTAIN PROCEDURAL DEFECTS IN THE AFFIDAVIT V IZ. PURCHASE OF STAMPS, ATTESTATION ETC. ON AN ANALYSIS OF THESE EVIDENC ES, THE AO HAS MADE AN ADDITION OF RS.3,74,79,000/-. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. ITA NO.399/AHD/2017 3 4. THE LD.COUNSEL FOR THE ASSESSEE WHILE IMPUGNING ORDERS OF THE REVENUE AUTHORITIES RAISED TWO FOLD SUBMISSIONS. IN HIS FI RST FOLD OF CONTENTIONS, HE SUBMITTED THAT THE STATEMENT MADE DURING THE COURSE OF SURVEY UNDER SECTION 133A, WAS WITHOUT ADMINISTERING ON OATH, AND THEREF ORE, IT DOES NOT CARRY ANY EVIDENTIARY VALUE EXCEPT AS A CORROBORATIVE PIECE O F INFORMATION FOR SETTING THE MACHINERY OF INVESTIGATION IN MOTION. FOR BUTT RESSING HIS CONTENTIONS, HE RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF CIT VS. S. KHADER KHAN SON, 25 TAXMANN.COM 413 (SC). HE RELIE D UPON THE JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MA THEWS & SONS VS. CIT REPORTED IN 263 ITR 101. HE PLACED ON RECORD COPY OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF S. KHADER KHAN (SUPRA) REPORTED IN 300 ITR 157. WITH REGARD TO THE RECOVERY OF DIARY, HE ALLEGED TH AT AN AFFIDAVIT WAS FILED BY THE ASSESSEE RETRACTING THE STATEMENT GIVEN AT THE TIME OF SURVEY AND ALSO ALLEGED THAT THIS DIARY WAS CREATED BY THE REVENUE AUTHORITIES. THE LD.COUNSEL FOR THE ASSESSEE TOOK AN ALTERNATIVE PLEA WHEREBY H E CONTENDED THAT THE AO HIMSELF HAS ALLEGED THAT AMOUNTS REFLECTED IN THE D IARY FROM 84 PERSONS WHO HAVE BOOKED SHOPS/RESIDENTIAL FLATS WHICH WERE REFL ECTED IN THE LIST OF UNIT HOLDERS, THEREFORE, AT THE MOST IT COULD BE CONSTRU ED AS ACCEPTANCE OF ON- MONEY IN CASH. IT IS TO BE TREATED AS PART OF TOTA L SALE CONSIDERATION AND ONLY THE ELEMENT OF PROFIT INVOLVED IN SUCH RECEIPTS OUG HT TO BE TREATED AS INCOME OF THE ASSESSEE. FOR BUTTRESSING THIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) DCIT VS. PANNA CORPORATION, TAX APPEAL NO.323 OF 20 00 (GUJ) II) CIT VS. PRESIDENT INDUSTRIES, 258 IR 654 (GUJ) III) CIT VS. BALCHAND AJIT KUMAR, 263 ITR 610 (MP) IV) MAN MOHAN SADANI VS. CIT, 304 ITR 52 (MP) ITA NO.399/AHD/2017 4 5. IN ORDER TO DEMONSTRATE THE AMOUNT REQUIRES TO B E ADDED BACK OR QUANTIFICATION OF THE PROFIT INVOLVED IN THE ALLEGE D ON-MONEY, HE SUBMITTED THAT THE ASSESSEE-FIRM HAS STARTED ITS BUSINESS FRO M THE ASSTT.YEAR 2011-12 TO 2016-17. THE TURNOVER AND PROFIT RATIO HAS BEEN CO MPILED IN TABULAR FORM, WHICH HAS BEEN FILED ALONG WITH SYNOPSIS DURING THE COURSE OF HEARING. HE MADE REFERENCE TO THIS MATERIAL. THEY READ AS UNDE R: ASST. YEAR TU RN OVER PROFIT RATIO 2011-12 RS. 1,62,25, 161/- RS.38,35,927/- 23.65% 2012-13 RS.5,44,29,724/- RS.L28.32.868/- 23.58% 2013-14 RS.2,20,87,315/- RS.NIL- 2014-15 RS.80,61,000/- RS.38,32,625/- 47.55% 2015-16 RS.58,62.000/- RS. 15,18,753/ - 25.91% 2016-17 RS.58,32,000/- RS.7,62,877/- 13.08% TOTAL RS. 11,24,97,200/- RS.7,62,877/- 20.25% 6. ON THE STRENGTH OF THE ABOVE, HE SUBMITTED THAT ADDITION, IF ANY, REQUIRES TO BE MADE THEN IT SHOULD BE RESTRICTED TO RS.75,89 ,498/- I.E. [20.25% OF RS.3,74,79,000]. THIS FIGURE HAS BEEN WORKED OUT B Y THE ASSESSEE ON THE BASIS OF WEIGHTED AVERAGE OF THE PROFIT STARTING FROM THE ASSTT.YEAR 2011-12 UPTO THE ASSTT.YEAR 2016-17. 7. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DERS OF THE REVENUE AUTHORITIES, AND CONTENDED THAT ADDITION IS NOT BAS ED SIMPLY ON THE BASIS OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY, RAT HER IT IS BASED ON EVIDENCES FOUND DURING THE COURSE OF SURVEY. THUS, JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF S. KHADERKAN(SUPRA) IS NOT APP LICABLE IN THE PRESENT CASE. AS FAR AS RESTRICTION OF ADDITION TO THE EXTENT OF ELEMENT OF PROFIT IS CONCERNED, ITA NO.399/AHD/2017 5 HE SUBMITTED THAT THIS IS THE RECEIPT WHICH HAS NOT BEEN INCLUDED IN THE OVERALL RECEIPTS REFLECTED IN THE BOOK, THOUGH EXPENDITURE MUST HAVE BEEN DEBITED IN THE BOOK. THEREFORE, TOTAL ARE REQUIRED TO BE ADDE D. 8. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS, AND G ONE THROUGH THE RECORD CAREFULLY. AS FAR AS THE ARGUMENT OF THE LD .COUNSEL FOR THE ASSESSEE IS CONCERNED THAT STATEMENT RECORDED DURING THE COURSE OF SURVEY DOES NOT CARRY EVIDENTIARY VALUE AND ON THE STRENGTH OF SUCH EVIDE NCE NO ADDITION CAN BE MADE IS CONCERNED, WE ARE OF THE VIEW THAT IN THE P RESENT CASE, ADDITION HAS NOT BEEN SOLELY ON THE BASIS OF THE STATEMENT. THE ADDITION HAS BEEN MADE ON THE CUMULATIVE SETTINGS OF THE DISCLOSURE MADE BY A PARTNER DURING THE COURSE OF SURVEY COUPLED WITH DISCOVERY OF A DIARY CONTAIN ING DETAILS OF ON-MONEY RECEIVED BY THE ASSESSEE FROM 84 PERSONS. THE PART NER, SHRI NIKIL PRAHLADBHAI PATEL THOUGH FILED AN AFFIDAVIT DEPOSING THEREIN TH AT THIS DIARY WAS PREPARED DURING THE COURSE OF SURVEY BY THE SURVEY-TEAM, BUT IT IS TO BE SEEN THAT THE NAMES OF 84 PERSONS ARE WRITTEN IN THIS DIARY, NEI THER THE ASSESSEE HAS PRODUCED ANY ONE NOR THE AO HAS CALLED FOR ANY ONE, WHETHER THEY HAVE GIVEN MONEY IN CASH TO THE ASSESSEE. IF THE NAMES REFLEC TED IN THE DIARY ARE COMMON WITH ULTIMATE PURCHASERS OF THE SHOPS/RESIDENTIAL F LATS, THEN IT IS DIFFICULT TO CONSTRUE THAT THE DIARY WAS CREATED WITH FICTITIOUS NAMES. THE STAND OF THE AO IS THAT HEAD OF SURVEY TEAM, SHRI MOHAN KUMAR IS A NON-GUJARATI AND IT WAS DIFFICULT FOR HIM TO ARRANGE A LIST OF 84 PERSO NS IN THE EARLY HOURS OF THE MORNING FOR INCORPORATING IN THE DIARY, IF ANY ONE OF THE BUYERS HAS NOT PAID ON-MONEY IN CASH. THUS, TO OUR MIND, EVIDENCE OF C ONCLUSIVE NATURE IS NOT AVAILABLE EITHER IN FAVOUR OF THE ALLEGATIONS MADE BY THE ASSESSEE OR AGAINST THAT ALLEGATION PRODUCED BY THE AO. NEVERTHELESS, FOR THE PURPOSE OF INCOME- TAX PROCEEDINGS, WE CONSTRUE THAT DIARY WAS FOUND W HEREIN DETAILS OF 84 PERSONS TO WHOM THE ASSESSEE HAS ULTIMATELY SOLD SH OPS/RESIDENTIAL FLATS ARE AVAILABLE, WHO HAVE ALLEGEDLY GIVEN CERTAIN MONEY T O THE ASSESSEE IN CASH. ITA NO.399/AHD/2017 6 THEREFORE, AS FAR AS EVIDENCE FOUND DURING THE COUR SE OF SURVEY AGAINST THE ASSESSEE IS CONCERNED, WE ARE SATISFIED THAT DEPART MENT IS ABLE TO LAY ITS HAND ON SUFFICIENT EVIDENCE WHICH CALL FOR MAKING ADDITI ON ON ACCOUNT OF ON- MONEY RECEIVED BY THE ASSESSEE FOR SALE OF FLATS/SH OPS. THE NEXT QUESTION IS, WHETHER GROSS RECEIPTS ARE TO BE ADDED OR TREATED A T PAR QUA RECEIPTS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE, IN OTHER WORDS, WHETH ER ADDITION OF TOTAL AMOUNT IS TO BE MADE OR, IT IS TO BE CONFINED TO TH E PROFIT ELEMENT INVOLVED IN THIS RECEIPT. BEFORE ADVERTING TO THIS ASPECT, WE WOULD LIKE TO NOTE THE FINDING OF THE AO THAT THIS ON-MONEY RECEIVED BY THE ASSESS EE ON SALE OF FLATS/SHOPS TO 84 PERSONS WHOSE ACCOUNTS ARE REFLECTED IN THE BOOK S, WHICH IS RECORDED IN PAGE NO.24-25 OF THE ORDER. IT READS AS UNDER: IT IS NOT POSSIBLE TO COLLECT A BLANK DIARY AT EAR LY MORNING AND TO PREPARE THE NAME AND ADDRESS OF THE PERSONS BY AN OUTSIDER OFFICER I.E. SHRI MOHAN KUMAR S., WHO BELONGS TO/NON GUJARATI AND H OW HE CAN IMAGING THE NAMES OF THE PERSONS WHICH REFLECTED IN THE DIA RY. FURTHER, THE NAMES OF 84 PERSONS WHO HAVE BOOKED SHOPS AND RESID ENTIAL FLATS, WHICH REFLECTED IN THE LIST OF UNIT HOLDERS PROVIDE D BY THE ASSESSEE I.E. THESE NAMES ARE MATCHED WITH THE RECORD, HENCE, HOW THE ASSESSEE SAID THESE 84 PERSONS AS FICTITIOUS ? THE DIARY IS CONTAINING 129 PAGES, WHICH IS NOT POSSIBLE TO MAKE IT IN ONE MORNING HOU RS. 9. AT THIS STAGE, WE WOULD LIKE TO TAKE NOTE OF THE FINDING OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. PANNA CO RPORATION WHERE SIMILAR CIRCUMSTANCE AROSE. THE QUESTION WHICH WAS FORMULA TED BY THE HONBLE HIGH COURT AND RELEVANT PART OF CONCLUSION MADE IN THIS CASE READ AS UNDER: WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED INCOME EARNED BY THE ASSESSEE OUT OF 'ON MONEY' RECEIPTS FROM THE SALE O F ROW HOUSES DONE DURING THE BLOCK PERIOD?' 5. LEARNED COUNSEL FOR THE REVENUE, SHRI SUDHIR MEH TA SUBMITTED THAT THE TRIBUNAL COMMITTED A SERIOUS ERROR IN REVERSING THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ON MONEY C OLLECTION BY THE RESPONDENT - ASSESSEE FIRM WAS ESTABLISHED. THE TRI BUNAL HAVING ITA NO.399/AHD/2017 7 CONFIRMED SUCH FINDINGS, OUGHT NOT TO HAVE RESCINDE D THE DIRECTIONS FOR COLLECTION OF TAX, INTEREST ETC. 6. ON THE OTHER HAND, LEARNED SENIOR COUNSEL SHRI S . N. SOPARKAR APPEARING FOR THE RESPONDENT - ASSESSEE OPPOSED THE APPEAL CONTENDING THAT NO QUESTION OF LAW ARISES. HE DREW OUT ATTENTI ON TO SECTION 260- A OF THE INCOME TAX ACT TO CONTEND THAT EVEN AFTER ADMISSION OF THE APPEAL, IT WOULD BE OPEN FOR THE ASSESSEE TO CONTEN D THAT NO QUESTION OF LAW ARISES. 7. HE SUBMITTED THAT EVEN IF THE ON MONEY COLLECTIO N OF RS.62 LAKHS IS BELIEVED, WHAT COULD BE TAXED IN THE HANDS OF THE A SSESSEE IS ONLY THE INCOME AND NOT THE ENTIRE RECEIPT. HE SUBMITTED THA T THE TRIBUNAL HAVING ACCEPTED THAT SUCH INCOME COULD NOT EXCEED R S.26 LAKHS OUT OF TOTAL RECEIPT OF RS.62 LAKHS, NO INTERFERENCE IS CA LLED FOR, SINCE ESTIMATION OF INCOME COULD NOT GIVE RISE TO ANY SUB STANTIAL QUESTION OF LAW. 8. IN SUPPORT OF HIS CONTENTIONS, THE COUNSEL RELIE D ON SEVERAL DECISIONS, REFERENCE TO WHICH WE MAY MAKE AT SLIGHTLY LATER ST AGE. 9. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTIES AND HAVING PERUSED THE ORDERS UNDER CONSIDERATION, WHAT EMERGES IS THA T THE FINDINGS ARRIVED AT BY THE ASSESSING OFFICER THAT THE RESPON DENT - PARTNERSHIP FIRM RECEIVED ON MONEY OF RS.62 LAKHS DURING THE BL OCK PERIOD FOR SALE OF THE FLATS, IS NOT SERIOUSLY IN DISPUTE. THE TRIB UNAL CONFIRMED SUCH FINDINGS ARRIVED AT BY THE ASSESSING OFFICER. HOWEV ER, THE TRIBUNAL DID NOT PERMIT THE REVENUE TO COLLECT THE TAX ON THE EN TIRE RECEIPT BELIEVING THE IT WAS ONLY THE INCOME EMBEDDED IN SUCH RECEIPT WHICH CAN BE SUBJECTED TO TAX. 10. AS POINTED OUT BY THE COUNSEL FOR THE RESPONDEN T, THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. PRESIDENT IND USTRIES, REPORTED IN (2002) 258 ITR 654 HAD TAKEN A SIMILAR VIEW. IN THE SAID CASE, DURING THE COURSE OF SURVEY CONDUCTED ON THE PREMIS ES OF THE ASSESSEE, FROM THE EXCISE RECORDS FOUND, AN INFERENCE WAS DRA WN BY THE ASSESSING OFFICER THAT SALES ACCOUNTING TO RS.29 LAKHS AND OD D HAD NOT BEEN DISCLOSED IN THE BOOKS OF ACCOUNT. THE ASSESSING OF FICER MADE ADDITION OF THE ENTIRE SUM OF THE SAID UNDISCLOSED SALES AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1994-95. SUCH ADDITION WAS CONFIRMED BY THE COMMISSIONER (APPEALS). THE TRIBUNAL, HOWEVER, HELD THAT THE ENTIRE SALES COULD NOT HAVE BEEN ADDED AS INCOME OF THE AS SESSEE, BUT ONLY TO THE EXTENT THE ESTIMATED PROFITS EMBEDDED IN THE SA LES FOR WHICH THE NET ITA NO.399/AHD/2017 8 PROFIT RATE WAS ADOPTED ENTAILING ADDITION OF INCOM E ON THE SUPPRESSED AMOUNT OF SALES. SUCH DECISION WAS CARRIED IN APPEA L BY THE REVENUE BEFORE THE HIGH COURT. THE HIGH COURT REJECTED THE APPEAL, OBSERVING THAT UNLESS THERE IS A FINDING TO THE EFFECT THAT I NVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH HAV E BEEN SOLD HAS BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEE N DISCLOSED, SUCH ADDITION COULD NOT BE SUSTAINED. IT WAS OBSERVED TH AT IN ABSENCE OF SUCH FINDINGS OF FACT, THE QUESTION WHETHER THE ENTIRE S UM OF UNDISCLOSED SALE PROCEEDS CAN BE TREATED AS INCOME OF THE RELEVANT A SSESSMENT YEAR ANSWERS BY ITSELF IN THE NEGATIVE. THE HIGH COURT R EJECTED THE APPEAL HOLDING THAT NO QUESTION OF LAW WHICH REQUIRES TO B E REFERRED ARISES. 11. IN THE CASE OF COMMISSIONER OF INCOME TAX V. GU RUBACHHAN SINGH J. JUNEJA, REPORTED IN (2008) 302 ITR 63 (GUJ.), ON CE AGAIN A SOMEWHAT SIMILAR ISSUE CAME UP BEFORE THIS COURT. I N THE SAID CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF TYRES. SEARCH PROCEEDINGS WERE CARRIED OUT AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE. ON THE BASIS OF LOOSE SHEETS WHICH WERE SEIZED DURING SUCH SEARCH OPERATION, THE ASSESSING OFFICER HELD T HAT SALES TO THE EXTENT OF RS.10.85 LAKHS WAS NOT FOUND IN THE BOOKS OF ACCOUNT. SUCH AMOUNT WAS INCLUDED IN THE TOTAL INCOME OF THE ASSE SSEE. THE COMMISSIONER (APPEALS) GAVE SUBSTANTIAL RELIEF TO T HE ASSESSEE AND REDUCED THE INCOME ON THE BASIS OF GROSS PROFIT RAT E. THE TRIBUNAL CONFIRMED THE ORDER OF THE COMMISSIONER (APPEALS). ON FURTHER APPEAL BEFORE THE HIGH COURT BY THE REVENUE, THE HIGH COUR T REFUSED TO REFER ANY QUESTION HOLDING THAT IN ABSENCE OF ANY MATERIA L ON RECORD TO SHOW THAT THERE WAS ANY UNEXPLAINED INVESTMENT MADE BY T HE ASSESSEE WHICH WAS REFLECTED BY THE ALLEGED UNDISCLOSED SALES, THE FINDING OF THE TRIBUNAL THAT ONLY THE GROSS PROFIT ON THE SAID AMO UNT CAN BE BROUGHT TO TAX DOES NOT CALL FOR ANY INTERFERENCE. 12. COUNSEL ALSO RELIED ON THE DECISION IN THE CASE OF COMMISSIONER OF INCOME TAX V. SAMIR SYNTHETICS MILL, REPORTED IN (2 010) 326 ITR 410, WHEREIN THE HIGH COURT CONFIRMED THE VIEW OF THE TR IBUNAL ACCEPTING ONLY THE PROFIT OF UNACCOUNTED SALE FOR THE PURPOSE OF COLLECTING TAX. 13. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE M. P. HIGH COURT IN THE CASE OF MAN MOHAN SADANI V. COMMISSION ER OF INCOME TAX, REPORTED IN (2008) 304 ITR 52, WHEREIN REFERRI NG TO AND RELYING UPON THE DECISION OF THIS COURT IN THE CASE OF COMM ISSIONER OF INCOME TAX V. PRESIDENT INDUSTRIES (SUPRA) AND OTHER DECIS IONS OF OTHER HIGH COURTS, THE M. P. HIGH COURT HAD ALSO TAKEN A SIMIL AR VIEW. IT WAS ITA NO.399/AHD/2017 9 OBSERVED THAT ENTIRE SALE PROCEEDS OF THE ASSESSEE SHOULD NOT BE ADDED IN HIS INCOME AND THAT THE TRIBUNAL HAS ERRED IN DO ING SO. 10. OTHER DECISIONS REFERRED BY THE LD.COUNSEL FOR THE ASSESSEE ARE ALSO TO SIMILAR FACTS. THEREFORE, WE ARE OF THE VIEW THAT ONLY ELEMENT OF PROFIT EMBEDDED IN THESE RECEIPTS ARE REQUIRED TO BE TREAT ED AS UNACCOUNTED INCOME. FOR QUANTIFYING THAT, AT THE COST OF REPETITION, WE WOULD LIKE TO NOTE OF PROFIT RATIO SHOWN BY THE ASSESSEE IN DIFFERENT YEARS, WHI CH READS AS UNDER: ASST. YEAR TU RN OVER PROFIT RATIO 2011-12 RS. 1,62,25, 161/- RS.38,35,927/- 23.65% 2012-13 RS.5,44,29,724/- RS.L28.32.868/- 23.58% 2013-14 RS.2,20,87,315/- RS.NIL- 2014-15 RS.80,61,000/- RS.38,32,625/- 47.55% 2015-16 RS.58,62.000/- RS. 15,18,753/ - 25.91% 2016-17 RS.58,32,000/- RS.7,62,877/- 13.08% TOTAL RS. 11,24,97,200/- RS.7,62,877/- 20.25% 11. A PERUSAL OF THE ABOVE WOULD INDICATE THAT WEIG HTED AVERAGE OF PROFIT IS 20.25%, WHICH IS REASONABLE ONE. THEREFORE, WE DIR ECT THE AO TO RESTRICT THE ASSESSMENT OF INCOME ON THIS ISSUE AT RS.75,89,498/ - AS AGAINST THE ADDITION OF RS.3,74,79,000/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 12. IN THE NEXT FOLD OF GRIEVANCE, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.23,80,391/- OUT OF TOTAL LABOUR EXPENSES. 13. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS DEBITED LABOUR EXPENDITURE AT RS.1,90,43,133/-. THE LD.AO HAS DIS ALLOWED 50% OF THE TOTAL ITA NO.399/AHD/2017 10 LABOUR EXPENSES AND MADE AN ADDITION OF RS.95,21,56 7/-. THE LD.CIT(A) HAS RESTRICTED THIS DISALLOWANCE TO 12.50% I.E. CONFIRM ED AN ADDITION OF RS.23,80,391/-. THIS ADDITION WAS CONFIRMED BY THE LD.CIT (A) ON THE BASIS OF FINDING RECORDED BY HIS PREDECESSOR IN EARLIER Y EARS, WHERE SIMILAR ADDITION WAS MADE. THE LD.COUNSEL FOR THE ASSESSEE AT THE V ERY OUTSET SUBMITTED IN THE ASSTT.YEAR 2011-12 THIS ISSUED TRAVELLED TO THE TRI BUNAL IN ITA NO.1767/AHD/2015 WHEREIN THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE TO 2% OF THE TOTAL EXPENDITURE. THUS, HE CONTENDED TH AT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL IN THE ASSTT.YEAR 2011-12. THE LD.CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR IN THE ASSTT.YEAR 2011-12 AND THAT DISA LLOWANCE HAS BEEN FURTHER SCALED DOWN BY THE TRIBUNAL. THE LD.DR WAS UNABLE TO CONTROVERT THIS CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE. 14. WE FIND THAT THERE IS NO DISPARITY ON FACTS. A LL THE DETAILS HAVE BEEN CONSIDERED BY THE TRIBUNAL IN ITS ORDER FOR THE ASS TT.YEAR 2011-12. THE RELEVANT FINDING OF THE TRIBUNAL READS AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE LABOR EXPENSES INCURRED BY THE ASSESSEE WAS DISALLOWED BY THE AO ON THE GROUND THAT THE LABOR EXPENSES WERE BOGUS. HOW THE LD CIT(A) REDUCED THE DISALLOWANCE MADE BY THE AO TO THE TUNE OF 5% OF THE TOTAL LABOR EXPENSES. NOW THE ISSUE BEFORE US ARISES WHETHER THE EXPENSES INCURRE D BY THE ASSESSEE REPRESENTS THE BOGUS EXPENSES IN THE GIVEN FACTS AN D CIRCUMSTANCES. IN THIS REGARD, WE NOTE THAT THE ASSESSEE HAS CONSTRUC TED A BUILDING, WHICH WAS NAMED AS SHIVAM PLAZA. IT IS A FACT ON RECORD THAT THE AO DULY ACCEPTED ALL THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE BUILDING CONSTRUCTION DURING THE ASSESSMENT PROCEED INGS. THE MAJOR REASON FOR THE DISALLOWANCE WAS THAT THE LABOR CONT RACTORS COULD NOT PROVE THE REGULAR PAYMENT TO THE LABORERS. IT WAS A LSO OBSERVED THAT THE ASSESSEE HAS NOT RELEASED ENTIRE PAYMENT TO THE LAB OR CONTRACTORS TILL THE END OF THE FINANCIAL YEAR UNDER CONSIDERATION. THEREFORE, IT WAS DOUBTED ON THE PAYMENT TO THE LABORERS MADE BY THE LABOR CONTRACTORS. HOWEVER, WE NOTE THAT ALL THE SUPPORTING EVIDENCE O F THE PARTIES SUCH ITA NO.399/AHD/2017 11 AS THEIR PAN NO., BANK ACCOUNT, BILLS, INCOME TAX R ETURN WERE DULY FURNISHED, WHICH IS AVAILABLE ON RECORD. THE AO HAS NOT DOUBTED IN ANY OF THE DOCUMENTS FILED BY THE ASSESSEE DURING THE A SSESSMENT PROCEEDINGS. WE ALSO NOTE THAT THERE WAS A CERTAIN DEFECTS IN TH E AMOUNT OF BILLS FURNISHED BY THE LABOR CONTRACTORS DURING THE ASSES SMENT PROCEEDINGS, BUT THAT DOES NOT LEAD TO THE CONCLUSIVE EVIDENCE T HAT THE PAYMENT TO THE LABORERS IS BOGUS. THEREFORE, WE ARE OF THE VIEW, T HAT THE JUSTICE WILL BE SERVED TO THE ASSESSEE IF THE DISALLOWANCE MADE BY THE CIT(A) IS REDUCED TO 2% OF THE TOTAL LABOR EXPENSES. ACCORDIN GLY, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE OF LABOUR EXPENSES TO THE TUNE OF 2% IN THE GIVEN FACTS AND CIRCUMSTANCES. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. SINCE THE LD.CIT(A) HAS RESTRICTED THE DISALLOW ANCE AT 12.5% ON THE BASIS OF FINDING RECORDED IN THE ASSTT.YEAR 2011-12 , BUT THAT FINDING OF THE LD.CIT(A) WAS NOT UPHELD BY THE ITAT, AND HAS SCALE D DOWN TO 2%. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH, WE ALLOW THIS GROUND OF APPEAL AND DIRECT THE AO TO CO MPUTE DISALLOWANCE OUT OF LABOUR EXPENSES AT 25% OF THE TOTAL LABOUR PAYMENT MADE BY THE ASSESSEE. IN OTHER WORDS, IT SHOULD 2% (TWO PERCENT) OF RS.1,90 ,43,133/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST OCTOBER, 2019 AT AHMEDABAD. S D / - (AMARJIT SINGH) ACCOUNTANT MEMBER S D - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/10/2019