SHREE GOPAL HOUSING & PLANTATION CORPORATION, MUMBAI V. ACIT (OSD-II) CEN RG -7, MUMBAI

ITA 4692/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84091 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 30-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIMATI ABHA KALA CHANDRA
• Assessee Lawyers: NAGIN PAREKH
• Keywords: Unexplained cash credit; Search and seizure; Initiation of penalty proceedings; Competent authority; Capital receipt; Onus to prove
• Section: 234B; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./I.T.A. NO.2320 AND 4692/MUM/2010 ( / ASSESSMENT YEARS : 2006-07 AND 2007-08) M/S GHP CORPORATION, MILLENIUM TOWER, 3 RD FLOOR, BEHIND IOC PETROL PUMP, POWAI, MUMBAI-400076 / VS. ASSISTANT COMMISSIONER OF INCOME TAX, (OSD-II), CENTRAL RANGE-7, OLD CGO BUILDING, M K ROAD, MUMBAI-400020 ( !' / APPELLANT) .. ( #$!' / RESPONDENT) ! ./ % ./PAN/GIR NO. :AACFS1525J !' & / APPELLANT BY S/SHRI RAJIV KHANDELWAL, NEELKANTH KHANDELWAL AND NAGIN PAREKH #$!' ' & /RESPONDENT BY SHRIMATI ABHA KALA CHANDRA ( ' ) / DATE OF HEARING : 14.10.2014 *+ ' ) /DATE OF PRONOUNCEMENT : 7.11.2014 / O R D E R PER BENCH:- BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A)-40, MUMBAI AND THEY RELATE TO T HE ASSESSMENT YEARS 2006- 07 AND 2007-08. WE NOTICE THAT THE ASSESSMENT ORDE R FOR AY 2006-07 HAS BEEN PASSED IN THE NAME OF GHP CORPORATION AND THE ASS ESSMENT ORDER FOR AY 2007-08 HAS BEEN PASSED IN THE NAME OF M/S GOPAL H OUSING AND PLANTATION CORPORATION. AT THE TIME OF HEARING, THE LD A.R C LARIFIED THAT THE NAMES REFER TO THE ASSESSEE HEREIN ONLY. SINCE IDENTICAL ISSUES A RE URGED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. I.T.A. NO.2320 & 4692/MUM/2010 2 2. THE GROUNDS URGED BY THE ASSESSEE IN AY 2006-07 RELATE TO THE FOLLOWING ISSUES:- (A) ASSESSMENT OF RS.3.00 CRORES RECEIVED FROM M/ S ALOKIK TOWNSHIP CORPORATION. (B) ASSESSMENT OF RS.1,40,27,025/- ASSESSED AS UNA CCOUNTED CASH RECEIPTS ON SALE OF PLOTS. (C) VALIDITY OF INTEREST CHARGED U/S 234B AND 23 4C OF THE ACT. (D) VALIDITY OF INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE HEREIN IS A PARTNERSHIP FIRM AND IS CARRYING ON THE BUSINESS AS BUILDER AND DEVELOPER. IT CARRIES ON ITS BUSINESS ACTIVITIES IN MUMBAI AND JA IPUR. THE PARTNERS ARE SHRI DIXANT SHARMA AND SHRI PRASHANT SHARMA. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF GHP GROUP OF CAS ES ON 18-01-2007. A SURVEY OPERATION WAS ALSO CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE HEREIN LOCATED AT JAIPUR. THE IMPUGNED ASSESSMENT HAS BEEN COMPLETED ON THE BASIS OF DOCUMENTS IMPOUNDED AND THE STATEMENT TAKE N DURING THE COURSE OF SEARCH/SURVEY OPERATIONS. 4. THE FIRST ISSUE RELATES TO THE ADDITION OF R S.3.00 CRORES RECEIVED FROM ALOKIK TOWN CORPORATION. FROM THE DOCUMENTS IMPOUNDED, ON E MEMORANDUM OF UNDERSTANDING (MOU) DATED 10-09-2005 ENTERED BETWEE N THE ASSESSEE AND M/S ALOKIK TOWNSHIP CORPORATION (ATC) WAS FOUND. AS PER THE MOU, M/S ATC WOULD DEVELOP THE AGRICULTURAL LAND OWNED BY THE AS SESSEE AT VILLAGE RAJAWAS IN THE DISTRICT OF JAIPUR. THE SAID PROJECT WAS NAMED EDEN GARDEN PROJECT, WHICH CONSISTED OF DEVELOPMENT A MINI TOWNSHIP WITH HOUSI NG PLOTS AND CONSTRUCTION OF VILLAS. IN PURSUANCE OF THE MOU, M/S ATC PAID RS. 3.00 CRORES TO THE ASSESSEE IN INSTALMENTS DURING THE FINANCIAL YEAR 2005-06. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.2.00 CRORES BY WA Y OF CHEQUE AND THE BALANCE AMOUNT OF RS.1.00 CRORE WAS RECCEIVED BY WA Y OF CASH. THE AMOUNT RECEIVED BY WAY OF CHEQUE WAS ACCOUNTED FOR IN THE BOOKS AND THE AMOUNT RECEIVED BY WAY OF CASH WAS NOT ACCOUNTED FOR. BOT H THE PARTNERS OF THE ASSESSEE FIRM AGREED TO OFFER A SUM OF RS.50.00 LAK HS EACH IN THEIR RESPECTIVE HANDS. SUCH OFFER WAS ALSO MADE IN THE REVISED COM PUTATION OF STATEMENT FILED IN THEIR PERSONAL ASSESSMENTS. HOWEVER, THE AO TOOK T HE VIEW THAT THE ASSESSEE HEREIN IS ENTITLED TO THE AMOUNT OF RS.1.00 CRORE, SINCE IT WAS RECEIVED BY IT AS PER THE TERMS OF MOU. ACCORDINGLY, THE AO ASSESSED THE SUM OF RS.1.00 CRORES I.T.A. NO.2320 & 4692/MUM/2010 3 AS UNACCOUNTED RECEIPT IN THE HANDS OF THE ASSESSEE HEREIN. IN THE HANDS OF BOTH THE PARTNERS, THE AMOUNT OF RS.50.00 LAKHS OFF ERED BY EACH OF THEM WAS ASSESSED ON PROTECTIVE BASIS. 5. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED TH AT THE ASSESSEE HAS RECEIVED RS.3.00 CRORES AS ADVANCE AS PER THE TERMS OF MOU A ND THE SAME IS IN THE NATURE OF REFUNDABLE ADVANCE. THE ASSESSEE PLACED RELIANCE ON VARIOUS CLAUSES OF MOU TO SUPPORT ITS CONTENTIONS. ACCORDINGLY IT WAS SUBMITTED THAT THE ADVANCE RECEIPT COULD NOT BE SUBJECTED TO TAX AS IT WAS A C APITAL RECEIPT. IT WAS FURTHER SUBMITTED THAT THE ATC HAD COMPLETED ONLY 2% OF THE WORK AND HENCE THERE IS NO QUESTION OF RECOGNIZING ANY INCOME FROM THE ABOVE S AID PROJECT. THE LD CIT(A), HOWEVER, TOOK THE VIEW THAT THERE IS NO REAL COMMER CIAL JUSTIFICATION IN RECEIVING ADVANCE OF RS.1.00 CRORES BY WAY OF CASH AND IN NOT ACCOUNTING THE SAME IN THE BOOKS OF ACCOUNT. THE LD CIT(A) FURTHER TOOK THE V IEW THAT THE ASSESSEE NEVER INTENDED TO REPAY THE ADVANCE AND ONLY A FACADE WAS BEING CREATED THROUGH THE MOU TO GIVE THE IMPUGNED RECEIPTS A COLOUR OF BEING AN ADVANCE. THE LD CIT(A) ALSO TOOK THE VIEW THE ADVANCE PAID BY WAY O F CASH COULD NOT BE ENFORCED IN LAW IN THE EVENT OF BREACH OF TERMS. FURTHER, T HE FACT THAT THE PARTNERS OF THE FIRM AGREED TO OFFER RS.1.00 CRORE AS INCOME IN THE IR HANDS WOULD SHOW THAT THE IMPUGNED ADVANCE IS NOT REFUNDABLE. HOWEVER, SINCE THE ADVANCE OF RS.1.00 CRORE WAS PAID IN PURSUANCE OF MOU ENTERED WITH THE ASSESSEE, THE LD CIT(A) HELD THAT THE SAME IS ASSESSABLE IN THE HANDS OF TH E ASSESSEE HEREIN ON SUBSTANTIVE BASIS. FURTHER, SINCE THE LD CIT(A) HA D TAKEN THE VIEW THAT THE ADVANCE AMOUNT OF RS.3.00 CRORES WAS NEVER INTENDED TO BE REPAID, HE TOOK THE VIEW THAT THE ENTIRE ADVANCE AMOUNT IS ASSESSABLE I N THE HANDS OF THE ASSESSEE AND ACCORDINGLY ENHANCED THE ADDITION TO RS.3.00 CR ORES. THE LD CIT(A) DREW SUPPORT FOR HIS DECISION FROM THE FACT THAT M/S ATC HAD CARRIED OUT ONLY 2% OF THE WORK. THE LD CIT(A) ALSO TOOK THE SUPPORT OF THE D ECISION RENDERED BY HONBLE SUPREME COURT IN THE CASES OF DURGA PRASAD MORE (82 ITR 540) AND SUMATI DAYAL VS. CIT (214 ITR 801) AND HELD THAT THE SUBMI SSIONS MADE BY THE ASSESSEE ARE AGAINST HUMAN PROBABILITIES. 6. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT TH AT THE ASSESSEE HAD RECEIVED THE SUM OF RS.3.00 CRORES FROM M/S ATC. THE QUESTION T HAT ARISES IS ABOUT THE I.T.A. NO.2320 & 4692/MUM/2010 4 NATURE OF THE RECEIPT OF THE ABOVE SAID AMOUNT. TH E AO HAS TAKEN THE VIEW THAT THE UNACCOUNTED ADVANCE AMOUNT OF RS.1.00 CRORE IS ASSESSABLE AS INCOME. HOWEVER, THE LD CIT(A) HAS TAKEN THE VIEW THAT THE MOU IS ONLY A FACADE AND THE ADVANCE AMOUNT OF RS.3.00 CRORES WAS NEVER INTE NDED TO BE REPAID AND HENCE THE ENTIRE AMOUNT IS ASSESSABLE AS INCOME OF THE ASSESSEE. 7. THERE SHOULD NOT BE ANY DISPUTE THAT THE TAX AUTHORITIES CAN ASSESS ANY AMOUNT, ONLY IF IT FALLS WITHIN THE FOUR CORNERS OF THE INCOME TAX ACT. HENCE ALL RECEIPTS CANNOT AUTOMATICALLY BE ASSESSED TO TAX. I T IS WELL SETTLED PROPOSITION THAT THE CAPITAL RECEIPTS ARE NOT TAXABLE UNLESS IT IS S PECIFICALLY AUTHORIZED UNDER THE ACT. FOR EXAMPLE, THE PROVISIONS RELATING TO CAPIT AL GAINS AUTHORIZES ASSESSMENT OF CAPITAL RECEIPTS ARISING ON SALE OF SPECIFIED CA PITAL ASSETS. SIMILARLY CASH CREDITS ARE ASSESSABLE AS INCOME U/S 68 OF THE ACT, IF THE ASSESSEE FAILS TO DISCHARGE THE PRIMARY BURDEN OF PROOF PLACED UPON H IM. WITH THE UNDERSTANDING OF THESE LEGAL PRINCIPLES, WE SHALL NOW EXAMINE THE FACTS PREVAILING IN THE INSTANT CASE. 8. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HEREIN HAS RECEIVED THE ADVANCE AMOUNT OF RS.3.00 CRORES AS PE R THE MOU DATED 10-09- 2005. ON PERUSAL OF THE MOU, WHICH IS PLACED AT PA GES 78 TO 86, WE NOTICE THAT THE ASSESSEE HEREIN OWNED NEARLY 150 BIGHAS (4,57,0 00 SQ. YARDS) OF LAND AT VILLAGES NAMED RAJAWAS AND MOTHU FALLING IN THE DIS TRICT OF JAIPUR. THE ASSESSEES SISTER CONCERN NAMED M/S BUILDERS ALLIAN CE (P) LTD HAD OBTAINED NOC FROM JAIPUR DEVELOPMENT AUTHORITY TO DEVELOP A MINI TOWNSHIP. THE ABOVE SAID MOU WAS ENTERED BETWEEN THE ASSESSEE AND M/S ATC IN ORDER TO JOINTLY DEVELOP THE ABOVE SAID LAND. THE MARKET VA LUE OF THE ABOVE SAID LAND WAS DETERMINED APPROX AT RS.40.00 CRORES. IT WAS AGRE ED THAT THE PROJECT COST WOULD BE RS.20.00 CRORES AND M/S ATC WOULD CONTRIBUTE TH E SAME. IT WAS ALSO AGREED THAT M/S ATC WOULD PAY RS.3.00 CRORES AS ADVANCE TO THE ASSESSEE HEREIN. IF THE PROJECT COST EXCEEDS RS.20.00 CRORES, THE ADDIT IONAL INVESTMENT SHALL BE MADE JOINTLY BY THE ASSESSEE AND ATC IN THEIR PROFI T SHARING RATIO. IT WAS FURTHER AGREEED THAT THE AGREEMENTS, SALE DEEDS, RECEIPTS O F ADVANCE AGAINST BOOKING, LETTER OF BOOKING CONFIRMATION WILL BE SIGNED JOINT LY BY BOTH THE PARTIES. THE CLAUSE 10 OF THE MOU, WHICH IS PERTINENT HERE, READ S AS UNDER:- I.T.A. NO.2320 & 4692/MUM/2010 5 10. THAT THE DEVELOPER HAS PAID A SUM OF RS. 3 CR ORES (RUPEES THREE CRORES ONLY) TO THE OWNER BY WAY OF REFUNDABLE ADVANCE AGAINST THE DEAL, HOWEVER DEVELOPER HAS ALREADY PAID A SUM OF R S.3.00 CRORES AT THE TIME OF SIGNING THIS DEED, DETAILS AS PER ANNEXURE B. THE ADVANCE AMOUNT THUS RECEIVED WILL BE RETURNED BY THE OWNER TO THE DEVELOPER WITHIN 30 DAYS FROM THE DATE OF COMPLETION OF INFRA STRUCTURE DEVELOPMENT WORK AT SITE. IN THE MOU, THE TERM DEVELOPER REFERS TO M/S ATC AND THE TERM OWNER REFERS TO THE ASSESSEE HEREIN. FURTHER, IT IS PROVIDED IN CLAUSE 18 THAT THE MOU SHALL STAND CANCELLED IF THE APPROVAL FROM THE COMPETENT AUTHORITY IS NOT RECEIVED WITHIN ONE YEAR AND IN THAT EVENT, THE ASSESSEE HER EIN IS LIABLE TO REFUND THE ADVANCE AMOUNT OF RS.3.00 CRORES TO M/S ATC ALONGWI TH ALL OTHER EXPENSES INCURRED BY M/S ATC. THE SAME CONDITION IS REITERA TED IN CLAUSE 21(A) ALSO. CLAUSE 22 SPECIFIES THE PROFIT SHARING RATIO. ANNE XURE B OF THE AGREEMENT GIVES THE DETAILS OF PAYMENTS OF ADVANCE AMOUNT OF RS.3.0 0 CRORES. 9. FROM THE PERUSAL OF VARIOUS CLAUSES OF MOU, WE DO NOT FIND ANYTHING TO SUSPECT THE GENUINENESS OF THE AGREEMENT. THE FACT THAT THE ASSESSEE OWNED LANDS IN THE VILLAGES NEAR JAIPUR IS NOT DISPUTED. THE FACT THAT THE ASSESSEE HAS RECEIVED RS.3.00 CRORES FROM ATC IS ALSO NOT DISPUT ED. VARIOUS CLAUSES REFERRED BY IS IN THE PRECEDING PARAGRAPH WOULD SHOW THAT TH E PARTIES HAVE TAKEN PRECAUTION TO PRESERVE THEIR RESPECTIVE RIGHTS AND THE SAID CLAUSES ESTABLISH THE GENUINESS OF THE MOU. HENCE, WE ARE UNABLE TO AGRE E WITH THE VIEW TAKEN BY LD CIT(A) THAT THE MOU WAS ONLY A FACADE PREPARED TO G IVE THE COLOUR OF REFUNDABLE ADVANCE TO THE IMPUGNED RECEIPT OF RS. 3.00 CRORES. IF WE ASSUME FOR A MOMENT THAT THE VIEW TAKEN BY LD CIT(A) IS CO RRECT, THEN THE QUESTION THAT ARISES IS WHY THE ASSESSEE WAS PAID A SUM OF RS.3 .00 CRORES BY M/S ATC?. WE DO NOT FIND ANY ANSWER FOR THIS QUESTION IN THE ORDER PASSED BY LD CIT(A). 10. ANOTHER IMPORTANT POINT WE NOTICE IS THAT TH E FACT OF RECEIPT OF ADVANCE AMOUNT OF RS.1.00 CRORE BY WAY OF CASH CAME TO BE N OTICED BY THE TAX AUTHORITIES FROM MOU ONLY. SINCE THE ASSESSEE DID NOT ACCOUNT FOR THE ABOVE SAID AMOUNT OF RS.1.00 CRORE IN ITS BOOKS OF ACCOUNT, THEY HAVE TAKEN THE VIEW THAT THE SAME CONSTITUES UNACCOUNTED RECEIPT, MEANING THEREBY, TH E TAX AUTHORITIES ARE PLACING RELIANCE ON THE MOU FOR ASSESSING THE ABOVE SAID AM OUNT OF RS.1.00 CRORE. FURTHER, THE FACT THAT THE ASSESSEE HAS RECEIVED AD VANCE AMOUNT OF RS.3.00 CRORES WAS ALSO ACCEPTED ON THE BASIS OF MOU. HOWE VER, IN ORDER TO ASSESS THE I.T.A. NO.2320 & 4692/MUM/2010 6 BALANCE AMOUNT OF RS.2.00 CRORES ALSO, IT APPEARS T HAT THE LD CIT(A) HAS EXPRESSED DOUBT ABOUT THE GENUINENESS OF THE MOU, S INCE THE ASSESSEE HAD CONTENDED ON THE BASIS OF MOU THAT IT HAS ONLY RECE IVED REFUNDABLE ADVANCE. IT IS WELL SETTLED PROPOSITION THAT THE BOOKS OF ACCOU NTS OR DOCUMENTS HAVE TO BE RELIED UPON IN TOTO AND PLACING PARTIAL RELIANCE IS NOT PERMITTED UNDER THE EYES OF LAW. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE MOU WAS ONLY A FACADE AND NON-GENU INE. 11. WE HAVE ALREADY NOTICED THAT ALL RECEIPTS A RE NOT ASSESSABLE TO TAX. IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVED THE IMPUGNE D AMOUNT OF RS.3.00 CRORES AS ADVANCE FROM M/S ATC IN PURSUANCE OF MOU ENTERED BETWEEN THE ASSESSEE AND M/S ATC. THE FACT THAT THE ASSESSEE HAS RECEIV ED THE ABOVE SAID AMOUNT OF RS.3.00 CRORES IS NOT DOUBTED WITH. WE HAVE ALSO S EEN THAT THE ABOVE SAID ADVANCE IS DESCRIBED AS REFUNDABLE ADVANCE IN THE MOU AND THE TERMS OF REPAYMENT OF ADVANCE ARE ALSO PROVIDED THEREIN. TH E TAX AUTHORITIES HAVE NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE ABOVE S AID AMOUNT IS NOT REFUNDABLE AT ALL. AS STATED EARLIER, THEY HAVE NOT GIVING AN Y FINDING WITH REGARD TO THE PURPOSE FOR WHICH THE ABOVE SAID AMOUNT WAS PAID BY M/S ATC. HENCE, IN OUR VIEW, IT MAY NOT BE PROPER TO TAKE A VIEW THAT THE IMPUGNED ADVANCE IS NOT REFUNDABLE AT ALL. ONCE IT IS ACCEPTED THAT THE AS SESSEE IS LIABLE TO REFUND RS.3.00 CRORES, THE NEXT QUESTION THAT ARISES IS WH ETHER THE SAME IS EXIGIBLE TO TAX OR NOT. WE NOTICE THAT IT WAS NOT THE CASE OF THE TAX AUTHORITIES THAT THE SAME IS ASSESSABLE TO TAX AS UNEXPLAINED CASH CREDIT IN TERMS OF SEC. 68 OF THE ACT, SINCE THERE IS NO WHISPER ABOUT THE SAME AND FURTHE R THEY HAVE ACCEPTED THAT GENUINENESS OF RECEIPT OF RS.3.00 CRORES FROM M/S A TC. HENCE THE REFUNDABLE ADVANCE OF RS.3.00 CRORES RECEIVED BY THE ASSESSEE CONSTITUTES CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE, WHICH IS NOT LIABLE T O TAX UNDER ANY OF THE PROVISIONS OF THE ACT. FURTHER, A PERUSAL OF THE MOU WOULD SHOW THAT IT WAS A CASE OF JOINT DEVELOPMENT OF LAND BELONGING TO THE ASSESSEE AND THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS PARTED WITH THE LAND IN FAVOUR OF M/S ATC. HENCE, THE QUESTION OF CAPITAL GAINS ALSO, IN OUR VIEW, WOULD NOT ARISE. 12. THE ONLY GROUND ON WHICH THE AO HAS ASSESSED THE AMOUNT OF RS.1.00 CRORE AS INCOME OF THE ASSESSEE IS THAT THE SAME WA S NOT ACCOUNTED IN THE BOOKS OF THE ASSESSEE. EVEN THOUGH THE AO HAS ASSE SSED THE AMOUNT OF I.T.A. NO.2320 & 4692/MUM/2010 7 RS.1.00 CRORE HAS UNACCOUNTED RECEIPT, HE HAS FAILE D TO REFER TO ANY OF THE PROVISIONS OF THE ACT UNDER WHICH THE SAME IS ASSES SABLE OR TO SHOW ANY AUTHORITY FOR HIS DECISION. IN OUR VIEW NON ACCOUN TING OF CAPITAL RECEIPT, WHICH IS OTHERWISE NOT TAXABLE IN PURSUANCE OF THE PROVISION S OF THE ACT, MAY NOT HAVE ANY IMMEDIATE IMPLICATION SO FAR TAXATION IS CONCERNED. EVEN OTHERWISE, WE HAVE HELD THAT THE ASSESSEE IS LIABLE TO REFUND THE ADVA NCE AMOUNT IN TERMS OF MOU. ACCORDINGLY, WE ARE UNABLE TO SUSTAIN THE VIEW TAKE N BY THE TAX AUTHORITIES IN RESPECT OF THE ADDITION PERTAINING TO RS.1.00 CRORE . THE ADDITION OF BALANCE AMOUNT OF RS.2.00 CRORES IS ALSO LIABLE TO BE DELET ED, SINCE WE HAVE HELD THAT THE MOU WAS GENUINE ONE AND FURTHER THE SAME IS ALSO A REFUNDABLE ADVANCE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS.3.00 CRORES PERTAINING TO THE ADVANCE AMOUNT RECEIVED FROM M/S ATC. 13. THE NEXT ISSUE RELATES TO THE ASSESSMENT O F UNACCOUNTED CASH RECEIVED ON SALE OF PLOTS. THE FACTS RELATING TO THE SAME A RE DISCUSSED IN BRIEF. FROM THE IMPOUNDED DOCUMENTS RELATING TO EDEN GARDEN PROJECT , JAIPUR, THE AO NOTICED THAT THE ASSESSEE HAS PREPARED A CHART SHOWING THE DETAILS LIKE NAME OF PURCHASERS, PLOT NO., PLOT SIZE, 50% AMOUNT, THE AM OUNT RECEIVED AND THE AMOUNT DUE. THE COLUMN WITH THE HEADING 50% WAS PRESUMED BY THE ASSESSING OFFICER TO BE REPRESENTING 50% OF THE SAL E VALUE OF PLOT. FOR EXAMPLE, THE AMOUNT SHOWN FOR PLOT NO.G-9 UNDER THE HEADING 50% WAS RS.4,35,552/- FOR AN EXTENT OF 272.22. THE AO PRESUMED THAT FULL VAL UE OF SALE CONSIDERATION WAS DOUBLE THE AMOUNT, I.E., RS.8,71,104/-. THE SAID A MOUNT DIVIDED BY THE PLOT AREA OF 272.22 GAVE THE RATE PER SQ. YARD AT RS.3,200/-. SIMILAR WAS THE POSITION IN RESPECT OF ONE MORE PARTY. THE AO ALSO NOTICED FRO M THE NOTING MADE IN PAGE 114 OF ANNEXURE 22 THAT THE AMOUNT OF 3200 WAS MENT IONED THEREIN WITH FURTHER SPLIT UP OF 70% - 2240 AND 30% 960. FURTHER PAGE 1 07 CONTAINED A LETTER WRITTEN BY ONE OF THE BUYER NAMED SHRI NAVNEET JHAVAR, WHIC H MENTIONED THAT HE HAD BOOKED TWO PLOTS AT THE RATE OF RS.3200/- PER SQ. Y ARD. ACCORDINGLY, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS SOLD THE PL OTS @ RS.3,200/- PER SQ. YARD AND FURTHER IT HAS RECEIVED 30% OF THE SALE CONSIDE RATION BY WAY OF CASH AND THE SAME HAS NOT BEEN ACCOUNTED. I.T.A. NO.2320 & 4692/MUM/2010 8 14. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT HAD RECEIVED ONLY ADVANCES FROM THE PROSPECTIVE BUYERS AND THE SALE OF PLOTS W ERE AGREED TO BE EXECUTED ONLY AFTER THE RECEIPT OF APPROVAL FROM THE LOCAL A UTHORITY. IT FURTHER SUBMITTED THAT THE 50% MENTIONED IN THE CHART WAS A TYPOGRA PHICAL MISTAKE. WITH REGARD TO THE SPLIT UP OF 70% AND 30%, THE ASSESSEE SUBMIT TED THAT THE SAME WAS NOTED IN A LOOSE SHEET, WHICH HAD ALSO CONTAINED MANY OTH ER SCRIBBLING AND HENCE NO IMPORTANCE SHOULD BE GIVEN TO THE SAME. IT SUBMITT ED THAT THE SAID LOOSE PAPER MIGHT HAVE BEEN LEFT IN THE OFFICE BY ONE OF THE CU STOMERS. WITH REGARD TO THE LETTER WRITTEN BY SHRI NAVNEET JHAVAR, THE ASSESSEE SUBMITTED THAT THE SAID BUYER HAD BOOKED THE PLOTS THROUGH AN AGENT AND THE IMPUG NED LETTER WAS WRITTEN IN CONNECTION WITH THE DISPUTE BETWEEN HIM AND THE AGE NT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE ULTIMATELY DID NOT SELL THE PLOTS TO HIM AND IT HAD REFUNDED THE ADVANCE TO HIM. ACCORDINGLY, THE ASSESSEE CONTENDE D BEFORE THE AO THAT IT HAD DULY ACCOUNTED THE ADVANCE RECEIPTS IN ITS BOOKS OF ACCOUNT AND NOTHING WAS CONCEALED. THE ASSESSEE GAVE THE DETAILS OF ADVANC ES RECEIVED ON BOOKING OF PLOTS AS UNDER:- ASSESSMENT YEAR 2006-07 - RS.3,27,29,726/- ASSESSMENT YEAR 2007-08 - RS.4,93,82,247/- THE ASSESSEE FURTHER SUBMITTED THAT THE AO WAS NOT CORRECT IN PRESUMING THAT ALL THE AGREEMENTS HAVE NOT BEEN EXECUTED AT THE RATE O F RS.2,240/- PER SQ. YARD. THE ASSESSEE SUBMITTED THAT THERE WERE CASES WHERE THE SALE AGREEMENTS WERE ENTERED FOR HIGHER OR LOWER AMOUNTS ALSO. ACCORDIN GLY, THE ASSESSEE CONTENDED THAT THERE IS NO QUESTION OF ESTIMATING ANY ON MON EY IN RESPECT OF BOOKING OF PLOTS. 15. HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXP LANATIONS FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER NOTICED THAT T HE ASSESSEE HAS BEEN INDULGING IN CASH TRANSACTIONS IN OTHER DEALS ALSO. THE SEARCH OPERATIONS REVEALED ABOUT THE AVAILABILITY OF UNACCOUNTED CASH . IN VIEW OF THE ABOVE, THE AO CONCLUDED THAT THE ATTENDING CIRCUMSTANCES SHOW THAT THE ASSESSEE HAS NOT ACCOUNTED FOR 30% OF THE SALE CONSIDERATION. TAKIN G THE ADVANCE AMOUNT OF RS.3,27,29,726/- REPRESENTING 70% OF SALE CONSIDERA TION, THE AO COMPUTED THE PORTION OF 30% AT RS.1,40,27,025/- AND ASSESSED THE SAME AS UNACCOUNTED CASH RECEIPTS. I.T.A. NO.2320 & 4692/MUM/2010 9 16. THE LD CIT(A) UPHELD THE VIEW TAKEN BY THE AS SESSING OFFICER AND ACCORDINGLY CONFIRMED THE ADDITION OF RS.1,40,27,02 5/-. 17. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE A ND PERUSED THE RECORD. THE MAIN CONTENTION OF LD A.R WAS THAT THE TAX AUTH ORITIES HAVE REACHED THE CONCLUSIONS ON THE BASIS OF SURMISES AND CONJECTURE S. HE SUBMITTED THAT THE AO HAS ONLY PRESUMED THAT THE HEADING 50% REPRESENTS 50% OF THE SALE CONSIDERATION. REFERRING TO THE TABLE ATTACHED AT PAGE 122 OF THE PAPER BOOK, THE LD A.R SUBMITTED THAT THE SALE CONSIDERATION TAKEN AT DOUBLE THE FIGURE WORKS OUT TO RS.3,950/- PER SQ. YARD IN THE SECOND TABLE AND THE SAME WORKS OUT TO RS.4,000/- PER SQ. YARD IN THE III TABLE. REFERRIN G TO THE ALLOCATION OF 70% AND 30% NOTED IN ONE OF THE PAPERS, THE LD A.R SUBMITTE D THAT THE SAID PAPER CONTAINS MANY SCRIBBLING, BUT THE AO HAS CHOSEN TO REFER TO 70% AND 30% NOTED THEREIN. HE SUBMITTED THAT THE ASSESSEES EXPLANAT ION WAS THAT THE SAID PAPER MIGHT HAVE BEEN LEFT BY ANY ONE OF THE CUSTOMERS. HE SUBMITTED THAT THE OTHER NOTING MADE IN THAT PAPER DOES NOT FIT IN THE RATIO OF 70:30. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONDUCT ANY ENQU IRY IN THIS REGARD WITH ANY OF THE PROSPECTIVE BUYERS OF THE PLOT TO SUBSTANTIATE HIS CONCLUSIONS. THE LD A.R FURTHER SUBMITTED THAT THE SAID DOCUMENT WAS NOT IN THE HAND WRITING OF THE PARTNERS/EMPLOYEES OF THE ASSESSEE AND FURTHER IT D OES NOT CONTAIN SIGNATURE OF ANYBODY. ACCORDINGLY HE SUBMITTED THAT IT WAS A DU MB DOCUMENT AND THE AO WAS NOT JUSTIFIED IN PLACING RELIANCE ON A DUMB DOC UMENT. HE FURTHER SUBMITTED THAT MOST OF THE BOOKINGS HAVE BEEN CANCELLED BY TH E CUSTOMERS AND THE ASSESSEE HAS REFUNDED THE ADVANCE AMOUNT TO THEM BY WAY OF CHEQUE IN THE SUBSEQUENT YEARS. HE SUBMITTED THAT THE MERE RECEI PT OF ADVANCE WOULD NOT GIVE RISE TO ANY INCOME ELEMENT. HE SUBMITTED THAT THE PROFIT ELEMENT WOULD ARISE ONLY ON SALE OF PLOTS. ON THE CONTRARY, THE LD D.R PLACED RELIANCE ON THE ORDER PASSED BY LD CIT(A) AND THE FACTS NARRATED IN THE W RITTEN SUBMISSION FURNISHED BY HER. 18. WE FIND MERIT IN THE CONTENTIONS OF THE LD A. R. FIRST OF ALL, WE NOTICE THAT THE ASSESSING OFFICER HAS DRAWN CERTAIN INFERENCES ON THE CHART FOUND DURING THE COURSE OF SURVEY. THE AO DID NOT MAKE ANY ATTEMPT TO CONDUCT ENQUIRIES WITH ANY OF THE PROSPECTIVE BUYERS TO ASCERTAIN THE TRUE POSITION. ON THE BASIS OF SAID INFERENCES AND BY TAKING TWO INSTANCES, THE AO HAS CONCLUDED THAT THE ASSESSEE I.T.A. NO.2320 & 4692/MUM/2010 10 WAS SELLING PLOTS @ RS.3,200/- PER SQ. YARD. BEFOR E US, THE ASSESSEE HAS SHOWN THAT THE COMPUTATION MADE BY THE AO, IF FOLLOWED IN SOME OTHER CASES, WOULD GIVE THE SELLING RATE OF RS.3,950/- AND RS.4000/- P ER SQ. YARD. WITH REGARD TO THE RATIO OF 70% AND 30%, WE EXAMINED THE RELEVANT SHEE T ATTACHED AS ANNEXURE C TO THE ASSESSMENT ORDER. THOUGH THERE IS A REFEREN CE TO THE RATIO OF 70:30 WITH THE CORRESPONDING AMOUNT OF RS.2,240/- AND RS.960/- , YET OTHER NOTING MADE THEREIN DOES NOT FIT IN THAT RATIO. WITH REGARD TO THE LETTER WRITTEN BY ONE OF THE PROSPECTIVE BUYERS, THE ASSESSEE HAS EXPLAINED THAT THE SAID PERSON HAD BOOKED THE PLOT THROUGH AN AGENT. IT IS QUIET COMMON THAT THE AGENT WOULD BOOK THE PLOTS AT A HIGHER RATE TO MAKE HIS OWN PROFIT. WE NOTICE THAT THE AO DID NOT TAKE ANY STEP TO DISPROVE THE SAID EXPLANATION. HOWEVER, TH E SUBMISSION OF THE LD A.R WAS THAT THEY WERE ADVANCES RECEIVED ON BOOKING OF PLOTS AND 80% OF THE BOOKINGS GOT CANCELLED AND THE ASSESSEE WAS CONSTRA INED TO REFUND THE ADVANCE AMOUNT. WE FURTHER NOTICE THAT THE AO DID NOT COND UCT ENQUIRIES WITH ANY OF THE PROSPECTIVE BUYERS TO SUBSTANTIATE HIS VIEWS. IN VI EW OF THE FOREGOING, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS REACHED CON CLUSIONS ABOUT THE SELLING RATE OF PLOTS ONLY ON SURMISES AND CONJECTURES WITHOUT B RINGING ANY CREDIBLE EVIDENCE ON RECORD. HENCE, IN OUR VIEW, THERE IS NO CASE TO PRESUME THAT THE ASSESSEE HAD RECEIVED A PORTION OF ADVANCE IN CASH WITHOUT A CCOUNTING THE SAME IN ITS BOOKS OF ACCOUNT. 19. EVEN OTHERWISE, WE FIND FORCE IN THE CONTENTI ONS OF LD A.R THAT MERE RECEIPT OF ADVANCE WOULD NOT GIVE RISE TO ANY INCOM E ELEMENT. FROM THE EXPLANATIONS FURNISHED BEFORE THE AO, WE NOTICE THA T THE ASSESSEE HAD PROPOSED TO EXECUTE SALE AGREEMENTS ONLY IN THE SUBSEQUENT Y EARS AFTER THE RECEIPT OF NECESSARY APPROVALS, MEANING THEREBY THE ASSESSEE H AS RECEIVED ONLY ADVANCES DURING THE YEAR UNDER CONSIDERATION, WHICH ARE LIAB LE TO REFUNDED. ACCORDING TO LD A.R, THE ASSESSEE HAS REFUNDED ABOUT 80% OF BOOK INGS IN THE SUBSEQUENT YEAR. 20. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW T HAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PRESUMING THAT THE ASSESSEE HAD RE CEIVED 30% OF SALE CONSIDERATION AS ADVANCE IN THE FORM OF CASH WITHOU T ACCOUNTING FOR THE SAME. FURTHER, THE AO WAS NOT JUSTIFIED IN PRESUMING THAT THE SAID ADVANCE WOULD CONSTITUE INCOME IN THE HANDS OF THE ASSESSEE, IN V IEW OF THE FACT THAT THE I.T.A. NO.2320 & 4692/MUM/2010 11 ASSESSEE DID NOT SELL ANY PLOT DURING THE YEAR UNDE R CONSIDERATION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTI FIED IN CONFIRMING THIS ADDITION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE ALSO AND DIRECT THE AO TO DELETE THE SAID ADDITION. 21. THE NEXT ISSUE RELATES TO THE VALIDITY OF CHA RGING INTEREST U/S 234B AND 234C OF THE ACT. SINCE CHARGING OF INTEREST IS CON SEQUENTIAL IN NATURE, WE DO NOT FIND IT NECESSARY TO ADJUDICATE THIS ISSUE. 22. THE NEXT ISSUE RELATES TO THE VALIDITY OF INIT IATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THIS GROUND ALSO REQUIRES NO ADJUDICATION, SINCE THE PENALTY PROCEEDINGS WOULD TAKE ITS OWN LEGAL COURSE. 23. WE SHALL NOW TAKE UP THE APPEAL FILED FOR ASSE SSMENT YEAR 2007-08. THE ONLY EFFECTIVE GROUND TAKEN IN THIS YEAR IS THE ADD ITION OF UNACCOUNTED RECEIPTS REPRESENTING ALLEGED RECEIPT OF 30% OF SALE CONSIDE RATION IN CASH. WE HAVE DEALT WITH AN IDENTICAL ISSUE IN THE PRECEDING PARAGRAPHS IN AY 2006-07 AND HAVE DELETED THE IDENTICAL ADDITION MADE IN THAT YEAR FO R THE DETAILED REASONS GIVEN ABOVE. CONSISTENT WITH THE VIEW TAKEN IN AY 2006-0 7, WE HOLD THAT THE ADDITION OF RS.2,11,63,821/- MADE BY THE AO IN THIS YEAR IS NOT JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 24. THE OTHER GROUNDS RELATE TO THE VALIDITY OF CH ARGING INTEREST U/S 234B AND 234C OF THE ACT AND THE VALIDITY OF INITIATION OF P ENALTY PROCEEDINGS. WE DO NOT FIND IT NECESSARY TO ADDRESS THESE TWO GROUNDS. 25. IN THE RESULT, BOTH THE APPEALS FILED BY THE A SSESSEE ARE ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7TH NOV, 2014. *+ , -. 7TH NOV ,2014 + ' /( 0 SD SD ( / AMIT SHUKLA) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( MUMBAI: 7TH NOV,2014. I.T.A. NO.2320 & 4692/MUM/2010 12 . . ./ SRL , SR. PS !'# $#%! / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 12/ #3 , ) 3 , ( / DR, ITAT, MUMBAI CONCERNED 6. /4 5( / GUARD FILE. / BY ORDER, TRUE COPY 6 (ASSTT. REGISTRAR) ) 3 , ( /ITAT, MUMBAI