Tharif Builders P. Ltd, Kozhikkode V. TheACIT, Kozhikkode

ITA 489/COCH/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1336 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-03-2020
• Assessment Year: 2016-2017
• Appeal Filed On: 29-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Assessee Lawyers: SHJRI C.B.M. WARRIER
• Keywords: Capital asset; Depreciation; Income from undisclosed sources; Search and seizure; Document seized; Opportunity of being heard; Reasonable cause; Validity of assessment; Right to appeal; Documents seized; Set aside
• Section: 131; 69; 37; 132; 143(3); 142(1); 133A; 153A; 69A; 192; 43; 48; 72; 13; 22; 153C; 101; 20

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M ITA NO S . 487 TO 489 /COCH/ 2019 ASSESSMENT YEAR S : 2014 - 15, 2015 - 16 AND 2016 - 17 M/S. THARIF BUILDERS, THARIFF ARCADE, PUTHIYARA, KOZHIKODE - 673 004. [ PAN: AADCT 5386J] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 2, KOZHIKODE. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY SHJRI C.B.M. WARRIER, CA REVENUE BY SHRI MRITUNJAYA SHARMA, SR. DR DATE OF HEARING 09/03/2020 DATE OF PRONOUNCEMENT 19/05/ 2020 O R D E R PER CHANDRA POOJARI, AM: TH ESE THREE APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A) - III, KOCHI DATED 06/06/2019 ARISING OUT OF THE ORDER PASSED U/S. 143(3) R.W.S. 153A OF THE I.T. ACT AND PERTAIN TO THE ASSESSMENT YEAR S 2014 - 15 TO 2016 - 17. 2. SINCE THE ISSUES IN VOLVED IN THESE APPEALS ARE COMMON, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. I.T.A. NOS. 487 - 489/COCH/2019 2 3. THE ASSESSEE HAS RAISED COMMON GROUNDS OF APPEALS: 1. THE ASSESSMENT IS COMPLETED U/S. 153A OF THE ACT ON THE BASIS OF SURVEY CONDUCTED U/S. 133A ON 29/02/2016 ON THE APPELLANT AND HENCE THE ASSESSMENT U/S. 153A IS ILLEGAL AND THE CIT(APPEAL) HAS GONE WRONG IN REJECTING THE GROUNDS OF APPEAL BY THE APPELLANT. 2. THE CIT(A) HAS GONE WRONG IN ESTIMATING THE COLLECTION OF CASH OUTSIDE THE BOOKS OF ACCOUNTS AT RS.32,87,986/ - WITHOUT THE SUPPORT OF ANY SEIZED DOCUMENTS. 3. THE APPEALS FOR THE ASSESSMENT YEARS 2014 - 15, 2015 - 16 AND 2016 - 17 ARE COMPUTED BY THE CIT(A) AND FOUND THE TOTAL SURPLUS AT RS.8,72,43,520/ - . THE CIT(A) HAS GO NE WRONG IN ARRIVING AT THE NET SURPLUS WITHOUT CONSIDERING THE CONSTRUCTION EXPENSES OF RS.16,11,88,680/ - SPENT BY THE APPELLANT UP TO 31 - 03 - 2016 (RELATING TO ASSESSMENT YEAR 2016 - 17). 4. THE ASSESSEE HAS ALSO RAISED COMMON ADDITIONAL GROUND OF APPEALS AS FOLLOWS: WHETHER THE AO IS JUSTIFIED IN MAKING ASSESSMENT UNDER THE PROVISIONS OF SECTION 153A OF THE ACT, WHICH REQUIRES THE CARRYING OUT OF THE SEARCH U/S. 132 OF THE ACT IN COMPLIA NCE OF THE INCOME TAX RULES 112. IN THE ABSENCE OF ANY SEARCH CONDUCTED ON THE APPELLANT, THE ASSESSMENT U/S. 153A IS ILLEGAL AND VOID. THE REPRESENTATION OF THE REVENUE HAS GIVEN A COPY OF SEARCH WARRANT IN FORM NO.45 DATED 26/02/2016 BUT NO SEARCH W AS CONDUCTED BY THE AUTHORIZED OFFICER IN THE APPELLANTS PREMISES BUT AT THE SAME TIME AUTHORIZATION FOR SURVEY IS GIVEN ON 26/02/12016 WHICH WAS CARRIED OUT ON 29/02/2016. SINCE THE SURVEY WAS AUTHORIZED ON THE DATE OF SEARCH ON 26/02/2016 AND THE SU RVEY WAS CONDUCTED ON 29/02/2016 AFTER OMITTING THE SEARCH THE ASSESSMENT PROCEEDINGS SHOULD BE UNDER SURVEY AND NOT UNDER SEARCH. IN VIEW OF THE SURVEY U/S. 133A AND IN THE ABSENCE OF CONDUCTING SEARCH INSPITE OF MENTIONING THE OF THE APPELLANT COMPANY IN THE SEARCH WARRANT U/S. 132, THE ASSESSMENT U/S. 153A IS ILLEGAL AND VOID. THE COPY OF THE SEARCH WARRANT IN FORM NO. 45 PRODUCED BY THE REPRESENTATIVE OF THE REVENUE IS INCOMPLETE AND IN THE ABSENC E OF SEARCH I.T.A. NOS. 487 - 489/COCH/2019 3 WARRANT IN FORM N O. 45 WITH COMPLETE DETAILS, THE DOCUMENTS PROVIDED BY REVENUE IS INCOMPLETE. 4 . 1 THE ASSESSEE HAS FILED PETITION ACCOMPANIED BY AN AFFIDAVIT FOR ADMISSION OF THE ADDITIONAL GROUNDS. THE LD. AR SUBMITTED THAT ADDITIONAL GRO UND WHICH GOES TO THE ROOT OF THE MATTER IN DISPUTE MAY BE ADMITTED BY THE TRIBUNAL. IT WAS SUBMITTED THAT THE ASSESSEE CAME TO KNOW ABOUT THE POSSESSI O N OF THE SEARCH WARRANT ONLY ON THE DATE OF HEARING OF THIS APPEAL I.E. 09/03/2020. AS SUCH, AFTER GOIN G THROUGH THE SEARCH WARRANT, THE ASSESSEE CAME TO KNOW THAT THE SEARCH WAS NOT IN ACCORDANCE WITH SECTION 132 OF THE I.T. ACT R.W.S. 153A OF THE ACT. HENCE, THE LD. AR SUBMITTED THAT THERE WAS REASONABLE CAUSE FOR NOT RAISING THE ADD I TIONAL GROUND ON EARLIER OCCASION. 4 .2 THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THERE IS A VALID SEARCH WARRANT EXECUTED ON 29/02/2016 AS PER WHICH SEARCH WAS CARRIED OUT U/S. 132 OF THE I.T. ACT AND ALSO THE ASSESSEE IS AWARE OF THE SEARCH WARRANT AT THE TIME OF C ARRYING OUT THE SEARCH. THEREFORE, IT IS NOT CORRECT TO SAY THAT THE ASSESSEE WAS NOT AWARE OF THE SEARCH WARRANT AS IT WAS GIVEN BY THE SEARCH PARTIES AT THE TIME OF CARRYING OUT SEARCH. HENCE, THERE IS NO MERIT IN THE PLEA OF THE ASSESSEE AND IT IS TO BE REJECTED. 4 .3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE PETITION FILED BY THE ASSESSEE. THE TRIBUNAL WHILE DEALING WITH THE SUBJECT - MATTER OF THE APPEAL IN EXERCISE OF ITS POWER, IT MAY ALLOW THE PARTY TO TAKE UP A NEW GROUND OF APPEAL . IN OTHER WORDS, THE TRIBUNAL HAS POWER TO PERMIT THE ASSESSEE TO RAISE A NEW GROUND I.T.A. NOS. 487 - 489/COCH/2019 4 OF APPEAL, NOT SET FORTH IN THE MEMORANDUM OF APPEAL, EVEN WITHOUT FORMAL AMENDMENT OF THE GROUNDS SET FORTH IN THE MEMORANDUM OF APPEAL PROVIDED THAT A NEW GROUND DOES N OT INVOLVE A FURTHER INVESTIGATION INTO THE FACTS. THIS POWER OF TRIBUNAL IS SPELT OUT IN R. 11 OF ITAT RULES, 1963. HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD IN THE CASE OF VIJAY KUMAR JAIN VS. CIT (1975) ( 99 ITR 349 ) (P&H) THAT THE TRIBUNAL MAY ALLOW A PARTY TO PRESS A GROUND WHICH HE DOES NOT PRESS BEFORE THE FIRST APPELLATE AUTHORITY ALTHOUGH HE HAS TAKEN AND INCLUDED IN THE GROUNDS OF THE FIRST APPEAL. THE PROPOSITION OF LAW ON THE ISSUE OF ADMISSION OF ADDITIONAL OR NEW GROUNDS BY FIRST APPELLATE A UTHORITY WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. VS. CIT (1990) 88 CTR (SC) 66 : (1991) ( 187 ITR 688 ) (SC) AND HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (229 ITR 383) H ELD THAT THE SAME WILL APPLY TO APPEAL BEFORE TRIBUNAL HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. MOHD. AYYUB & SONS AGENCY (1992) 197 ITR 637 (ALL) HAS HELD THAT THE POWER OF THE TRIBUNAL TO PERMIT ANY PARTY TO THE APPEAL TO RAISE THE QUESTION OF JURISDICTION, WHICH GOES TO THE ROOT OF THE MATTER AND DOES NOT INVOLVE FURTHER INVESTIGATION INTO FACTS, CANNOT BE DISPUTED ON THE PLAIN READING OF R. 11 OF THE ITAT RULES, 1963. INDEED, ON SUCH A PLEA BEING TAKEN, THE TRIBUNAL IS UNDER A STATUTORY OBLIG ATION NOT ONLY TO ENTERTAIN THE PLEA BUT ALSO TO DECIDE THE SAME AFTER PROVIDING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE OTHER SIDE. SIMILAR VIEWS HAVE BEEN TAKEN BY HON'BLE DELHI HIGH COURT (I) IN THE CASE OF CIT VS. MAHALAX MI SUGAR MILLS CO. LTD. (1 993) ( 200 ITR 275 ) (DEL), (II) HON'BLE BOMBAY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD. VS. CIT (1992) 106 CTR (BOM) 78 ; (1993) ( 199 ITR I.T.A. NOS. 487 - 489/COCH/2019 5 351, 367 ) (BOM) AND (III) HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF MEWAR SUGAR MILLS LTD. VS. CIT (1 993) ( 203 ITR 415 ) (RAJ). THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BABY SAMUEL VS. ASSTT, CIT (2003) 184 CTR (BOM) 140 : (2003) ( 262 ITR 385 ) (BOM) HAS HELD THAT WHEN AN ISSUE WAS NOT SPECIFICALLY TAKEN IN THE MEMORANDUM AND GROUNDS OF APPEAL BUT MENT IONED IN THE WRITTEN SUBMISSIONS FILED BEFORE THE TRIBUNAL AND SPECIFICALLY ARGUED AT THE TIME OF THE FINAL HEARING OF THE APPEAL, THE TRIBUNAL CANNOT REFUSE TO ADJUDICATE UPON THAT ISSUE ON THE MERITS OF THE GROUND THAT NO SUCH GROUND HAS BEEN TAKEN SPECI FICALLY IN THE GROUNDS OF APPEAL. HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. (SUPRA) HAS HELD : '...THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF ASSESSMENT PROCEE DINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE IT EM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THE ITEM. THERE IS NO REA SON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER S. 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE CIT (A). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS - OBJECTIONS BEFORE THE TRIBUNAL. THE TRIBUNAL SHOUL D NOT BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS, ALTHOUGH NOT RAISED EARLIER. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO ISSUES ARISING OUT OF THE APPEAL BEFORE THE CIT(A) IS TOO NARROW A VIEW TO TAKE OFF THE POWE RS OF THE TRIBUNAL.' 4 .4 THUS, THE SETTLED LEGAL POSITION, WHICH EMERGES FROM THE AFORESAID JUDICIAL PRONOUNCEMENTS, IS THAT THE PURPOSE OF ASSESSMENT PROCEEDING IS TO TAX/ASSESS THE TAXABLE LIABILITY/INCOME OF THE ASSESSEE CORRECTLY IN ACCORDANCE WITH LAW AND IF THE ASSESSEE IS E NTITLED TO CERTAIN RELIEF, DEDUCTION OR BENEFIT, THE ASSESSEE SHOULD NOT I.T.A. NOS. 487 - 489/COCH/2019 6 BE DENIED OR DEPRIVED OF IT, EVEN IF THE CLAIM PERTAINING TO THE SAME IS MADE FOR THE FIRST TIME BEFORE THE TRIBUNAL DURING PENDENCY OF APPEAL BEFORE IT. IN THE PRESENT CASE, THE ISSU E RAISED IN ADDITIONAL GROUND IS LEGAL ISSUE WHICH GO ES TO THE ROOT OF THE MATTER AND FOR DECIDING THE LEGAL ISSUE NO NEW FACTS ARE REQUIRED TO BE CONSIDERED AS ALL THE FACTS ARE ALREADY RECORDED IN THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, AT THE T IME OF HEARING OF THIS APPEAL BY THIS TRIBUNAL ON 09/03/2020, THE LD. AR HANDED OVER A COPY OF SEARCH WARRANT ISSUED TO THE ASSESSEE. ON EARLIER OCCASION, AT THE TIME OF EXECUTION OF SEARCH WARRANT, THE COPY OF THE SAME WAS NOT FURNISHED TO THE ASSESSEE A ND ONLY ACKNOWLEDGMENT WAS OBTAINED AT THE BACK OF THE SEARCH WARRANT ON 29/02/2016. HENCE, THERE IS MERIT IN THE ARGUMENT OF THE LD. AR THAT THE ASSESSEE WAS NOT IN POSSESSION OF SEARCH WARRANT ON EARLIER OCCASION. BEING SO, AFTER GETTING THE COPY OF TH E SEARCH WARRANT, THE ASSESSEE HAS FILED THE ADDITIONAL GROUND. HENCE, WE FIND REASONABLE CAUSE IN FILING THE ADDITIONAL GROUND ON 10/03/2020 AND THE SAME IS ADMITTED. ACCORDINGLY , WE ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION. 5. FIRST COMMON GROUNDS OF APPEALS AND ALL THE ADDITIONAL GROUNDS ARE RELATING TO QUESTIONING THE VALIDITY OF ASSESSMENTS ON THE REASON THAT THERE IS NO VALID SEARCH IN THE CASE OF ASSESSEE AND ONLY MATERIALS GATHERED IN THE COURSE OF SURVEY ACTION WAS USED TO FRAME ASSESSMENTS. HENCE, THESE GROUNDS ARE ADJUDICATED COLLECTIVELY. 5.1 THE FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE ACTION WAS CONDUCTED IN THE CASE OF THE ASSESSEE COMPANY, ITS GROUP CONCERNS AND ITS DIRECTORS ON 29/02/2016 I.T.A. NOS. 487 - 489/COCH/2019 7 AND 21/04/2016 ON THE BASIS OF SEARCH WARRANT DATED 26/02/2016 AND 19 /04/2016 ISSUED BY DIT (INV.), KOCHI AND JDIT (INV.), KOCHI RESPECTIVELY. SEARCH U/S. 132 OF THE I.T. ACT WAS CARRIED ON AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AND AT RESIDENCE S OF ITS DIRECTORS. NOTICES U/S. 153A WERE ISSUED FOR THE ASSESSMENT YEARS 2010 - 11 TO 2015 - 16 AND NOTICE U/S. 142(1) WAS ISSUED FOR THE ASSESSMENT YEAR 2016 - 17 ON 25/09/2017, REQUIRING THE ASSESSEE TO FILE THE RETURNS OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 TO 2016 - 17. IN COMPLIANCE TO THIS, THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2011 - 12 TO 2016 - 17. THE ASSESSEE HAD NOT FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2010 - 11, CITING THE REASON THAT THE COMPANY WAS INCORPORATED ON 29/07/2010 AND HENCE, WAS NOT IN EXISTENCE DURING F.Y. 2009 - 10 RELEVANT TO A.Y. 2010 - 11. ALL THE ROIS FILED IN RESPONSE TO NOTICE U/S. 153A WERE SELECTED FOR SCRUTINY. THE DETAILS OF NOTICES ISSUED AND THE ROIS FILED BY THE ASSESSEE ARE AS FOLLOWS: SL. NO. ASST. YEA R DATE OF ISSUE OF NOTICE U/S. 153A/142(1) DATE OF FILING THE ROI RETURNED INCOME (RS.) DATE OF ISSUE OF NOTICE U/S. 143(2)/142(1) 01 2010 - 11 25.09.2017 NOT FILED 02 2011 - 12 25.09.2017 31.10.2017 ( - )85,042 08/11/2017 03 2012 - 13 25.09.2017 31.10.2017 95,390 08/11/2017 04 2013 - 14 25.09.2017 02 . 11 . 2017 ( - )26,08,780 08/11/2017 05 2014 - 15 25.09.2017 31.10.2017 ( - )15,59,520 08/11/2017 06 2015 - 16 25.09.2017 31.10.2017 NIL 08/11/2017 07 2016 - 17 25.09.2017 13.09.2017 ( - )26,81,692 27/10/2017 THE ASSESSING OFFICER OBSERVED THAT AS PER SECTION 153A OF THE I.T. ACT, WHERE SEARCH IS INITIATED U/S. 132 IN THE CASE OF A PERSON, THE ASSESSING OFFICER SHALL ISSUE NOTICE TO SUCH PERSON AND ASSESS OR REASSESS HIS TOTAL INCOME IN RESPECT OF EACH OF SIX A SSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO PREVIOUS YEAR IN I.T.A. NOS. 487 - 489/COCH/2019 8 WHICH SEARCH IS CONDUCTED. THUS, AFTER GOING THROUGH THE SEIZED MATERIAL AS WELL AS DOCUMENTS COLLECTED DURING THE SEARCH U/S. 133A OF THE I. T . ACT, THE ASSESSING OFFICER COMPLETED THE ASSESSMENTS U/S. 143(3) R.W.S. 153A OF THE I.T. ACT FOR A.YS 2014 - 15 TO 2016 - 17 VIDE ORDER DATED 30/12/2017 AS PER DETAILS GIVEN BELOW: ASSESSMENT YEAR TOTAL INCOME TAX DEMANDED 2014 - 15 28,56,35,976 15,53,40,290 2015 - 16 15,17,67,094 7,30,79,550 2016 - 17 1,11,37,131 48,97,400 TOTAL 44,85,40,201 23,33,17,240 5.1.1 ON APPEAL, THE CIT(A) OBSERVED THAT DURING SEARCH PROCEEDINGS ON A GROUP OF ASSESSES AND PREMISES, BOTH PROCEEDINGS U/S. 133A AND 132 OF THE I.T . ACT ARE A COMMON PHENOMENON. WHERE COMMERCIAL ENTERPRISES/PREMISES, NOT INVOLVING SEIZURE OF VALUABLES ARE CONCERNED, ACTION U/S. 133A IS CONTEMPLATED WHEREAS RESIDENCES AND PREMISES WHERE VALUABLES ARE LIKELY TO BE SEIZED ARE COVERED U/S. 132 OF THE ACT . THUS, THE CIT(A) OBSERVED THAT SOME PREMISES IN THE CASE OF AN ASSESSEE MAY BE COVERED U/S. 133A AND OTHERS U/S. 132 OF THE ACT. IN THIS CASE, THERE WAS A SURVEY U/S. 133A IN RESPECT OF THARIF BUILDERS P. LTD., BESIDES A WARRANT U/S. 132 OF THE I.T. AC T WAS ALSO ISSUED ON 26/02/2016 BY THE DIT(INV.), KOCHI IN THE CASE OF M/S. THARIF BUILDERS PVT. LTD., SHRI P.K. MOHAMMED KU TTY HAJI, SHRI HAMZA PUTHUKKUDY AND ON THE BASIS OF THE ABOVE WARRANT OF AUTHORIZATION SEARCH WAS CARRIED OUT AT THE RESIDENCE OF SHR I P.K. MOHAMMEDKUTTY HAJI ON 29/02/2016. ACCORDING TO THE ASSESSING OFFICER, WARRANT U/S. 132 OF THE I.T. ACT WAS ISSUED ON 19/04/2016 BY THE JDIT(INV.), KOCHI IN THE CASE OF M/S. THARIF BUILDERS P. LTD. AND I.T.A. NOS. 487 - 489/COCH/2019 9 SEARCH WAS CONDUCTED ON 21/04/2016 AT THE OFFICE PREMISES OF M/S. THARIF BUILDERS P. LTD. THE ASSESSEE AND THE BUILDER HAD COMMON DIRECTORS NAMELY, SHRI P.K. MOHAMMEDKUTTY HAJI AND SHRI HAMZA SON OF SHRI P.K. MOHAMMEDKUTTY HAJI. S INCE THE INCRIMINATING DOCUMENTS WERE SEIZED DURING THE COURSE OF SEARCH ON THE ASSESSEE COMPANY RELATING TO PONMUNDAM PROPERTIES, THE CIT(A) HELD THAT THE PROCEEDINGS INITIATED U/S. 153C IN THE CASE OF M/S. PONMUNDAM PROPERTIES PVT. LTD. AFTER RECORDING THE SATISFACTION AND OBTAINING THE APPROVAL OF JCIT, CENTRAL, KOCHI ARE IN CONSONANCE WITH THE INCOME TAX ACT. ACCORDINGLY, HE REJECTED THE CONTENTION OF THE ASSESSEE THAT AN ASSESSMENT U/S. 153A CANNOT BE DONE IN THE CASE OF A SURV E Y U/S. 133A OF THE ACT. 5.2 AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT SEARCH WARRANT IN FORM NO.45 WAS ISSUED ON 26 - 02 - 2016 IN THE NAME OF S H RI MOHAMMED K UTTY HAJI, S H RI HAMZA PUTHUKUDI AND THARI F BUILDERS PVT LTD AND THE PLACE OF SEARCH WAS THE RESIDENCE OF S H RI MOHAMMEDKUTTY HAJI. IT WAS SUBMITTED THA T ON THE SAME DATE ON 26 - 02 - 2016 AN ORDER FOR SURVEY U/S.133A IN RESPECT OF THARIF BUILDERS PVT . LTD . WAS ALSO ISSUED AND ON 29 - 02 - 2016 SEARCH WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF S H RI MOHAMMED K UTTY HAJI AND S URVEY U/S.133A WAS ALSO CONDUCTED IN TH E ASSESSEES BUSINESS PREMISES ON THE SAME DATE . ACCORDING TO THE LD. AR, AS PER THE ORDERS OF SEARCH ON 26 - 02 - 2016, THE RESIDENCE OF S H RI MOHAMMED K UTTY HAJI WAS COVERED BY THE SEARCH WARRANT AND CONDUCTED THE SEARCH ON 29 - 02 - 2016 AS PER RULE 112 OF I.T.R ULES , 1962 AND THE SURVEY, AS PER ORDER DT.26 - 02 - 2016, WAS CONDUCTED ON THE ASSESSEE COMPANY ON 29 - 02 - 2016. HENCE , I.T.A. NOS. 487 - 489/COCH/2019 10 THE CLAIM OF THE ASSESSING OFFICER THAT THE SEARCH WAS CONDUCTED IN THE ASSESSEES BUSINESS PREMISES WAS NOT JUSTIFIED. ACCORDING TO THE LD . AR, THERE WERE NO IMPOUNDED DOCUMENTS INDICATING ANY CONCEALMENT OF INCOME RECEIVED FROM THE ASSESSEES P REMISES BY THE SURVEY U/S.133A OF THE ACT , BUT TWO SHEETS OF PAPERS WERE RECEIVED FROM THE RESIDENCE OF SRI MOHAMMED KU TTY HAJI REGARDING THE RECEIPT OF CONSIDERATION BY CHEQUE AND CASH IN RESPECT OF 20 AGREEMENT S FOR THE SALE OF SHOP ROOMS. THE LD. AR SUBMITTED THAT THE ASSESSMENTS WERE COMPLETED WITHOUT ANY REFERENCE TO THE SEIZED DOCUMENT AND THE A SSESSMENT S WERE COMPLETED ON THE PRESUMPTION THAT ENT IRE BUILDING WAS SOLD FOR A CONSIDERATION OF RS. 62,47,79,873/ - AND A NET PROFIT OF RS. 45,77,22,783/ - WAS TREATED AS INCOME OF THE ASSESSEE COMPANY. 5.3 THE LD. AR SUBMITTED THAT AS PER THE SEARCH WARRANT, NO SEARCH WAS CARRIED OUT IN THE ASSESSEE COMPA NYS PREMISES AS CLAIMED BY THE ASSESSING OFFICER, NO SEARCH WARRANT WAS ISSUED ON 19 - 04 - 2016 AND NO SEARCH WAS CONDUCTED EITHER ON 29 - 02 - 2016 OR ON 21 - 04 - 2016 AS CLAIMED BY THE ASSESSING OFFICER . FURTHER, IT WAS SUBMITTED THAT NO PANCHANAMA IN THE NAME OF THE ASSESSEE COMPANY WAS PRODUCED BY THE REVENUE BEFORE THE BENCH, EVEN AFTER SPECIFIC REQUEST BY THE ASSESSEE S REPRESENTATIVE IN THIS RESPECT. IT WAS SUBMITTED THAT EVEN THOUGH THE SEARCH WAS AUTHORIZED IN THE NAME OF THE ASSES SEE COMPANY, NO SEARCH WAS CARRIED OUT AND SURVEY U/S.133A WAS CONDUCTED IN THE ASSESSEE S BUSINESS PREMISES. THE LD. AR SUBMITTED THAT AUTHORIZATION FOR THE SEARCH ON THE ASSESSEE COMPANY AND SURVEY U/S.133A ON THE ASSESSEE COMPANY WER E ORDERED ON THE SA ME DATE 26 - 02 - 2016. I.T.A. NOS. 487 - 489/COCH/2019 11 THE AUTHORIZED OFFICERS OPTED FOR THE SURVEY U/S.133A IN THE ASSESSEES BUSINESS PREMISES AND NO SEARCH WAS CARRIED OUT AS PER RULE 112 OF INCOME TAX RULES , 1962 . ACCORDING TO THE LD. AR, THE SEARCH SHOULD BE CARRIED OUT IN THE PRES ENCE OF PANCHAS AND NO PANCHANAMA WAS PREPARED FOR SEARCH IN THE CASE OF THE ASSESSEE CO MPANY. THE LD. AR RELIED ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF G.K. SEN N IAPPAN (284 ITR 220) WHEREIN IT WAS HELD THAT MATERIAL GATHERED IN THE COURSE OF SURVEY U/S. 133A CANNOT BE REGARDED AS RELEVANT MATERIAL FOR THE PURPOSES OF COMPUTATION OF UNDISCLOSED INCOME U/S. 158BB. IT WAS HELD THAT A S PER THE SAID SECTION, THE UNDISCLOSED INCOME OF THE BLOCK PERIOD HAS TO BE COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER SHOULD BE RELATABLE TO SUCH EVIDENCE. THUS, ANY OTHER MATERIAL CANNOT FORM BASIS FOR COMPU TATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. IN SUPPORT OF HIS CONTENTION, THE LD. AR ALSO RELIED ON THE FOLLOWING DECISIONS OF THE TRIBUNAL: 1. REGENCY MAHAVIR PROPERTIES VS. ACIT (2018) 169 ITD 35 (ITAT, MUM.). 2. ACIT VS. K.G. INVEST P. LTD. (201 7) 57 ITR (TRIB.) 62 (DELHI). THUS , IT WAS SUBMITTED THAT S INCE THE ASSESSEE WAS SUBJECTED TO SURVEY U/S.133A O N 29/02/2016 , THE ASSESSMENT U/S.153A IS ILLEGAL AND VOID. 5.4 THE LD. DR SUBMITTED THAT THERE WAS SEARCH ACTION U/S. 132 OF THE I.T. ACT ON 29/02/2016 AND 21/04/2016 ON THE BASIS OF SEARCH WARRANT DATED 26/02/2016 AND 21/04/2016 ISSUED BY DIT (INV.), KOCHI AND JDIT (INV.), KOCHI RESPECTIVELY. THE LD. I.T.A. NOS. 487 - 489/COCH/2019 12 DR SUBMITTED THAT THE SEARCH ACTION WAS CARRIED ON IN THE BUSINESS PREMISES OF THE ASSESS EE COMPANY AND THE RESIDENCES OF THE DIRECTORS OF THE GROUP CONCERN. ACCORDING TO THE LD. DR, THE CONTENTION OF THE LD. AR IS TOTALLY MISCONSTRUED AND THIS ADDITIONAL GROUND IS TO BE REJECTED. THE LD. DR SUBMITTED THAT THERE WAS SEARCH ACTION U/S. 132 OF THE I.T. ACT ALONG WITH SURVEY U/S. 133 A OF THE I.T. ACT ON 29/02/2016. AND THE MATERIALS GATHERED DURING THE COURSE OF SURVEY U/S. 133 A OF THE I.T. ACT COULD ALSO BE USED WHILE MAKING ASSESSMENT U/S. 153A OF THE I.T. ACT . THE LD. DR RELIED ON THE FOLLOW ING CASES LAWS: 1. CIT VS. S. AJITKUMAR(102 CCH 0002) WHEREIN THE SUPREME COURT HELD THAT ANY MATERIAL OR EVIDENCE FOUND/COLLECTED IN SURVEY WHICH HAD BEEN SIMULTANEOUSLY MADE AT PREMISES OF CONNECTED PERSON COULD BE UTILIZED WHILE MAKING BLOCK ASSESSM ENT IN RESPECT OF ASSESSEE U/S. 158BB. 2. CIT VS. DEVESH SINGH (24 TAXMANN.COM 26) (ALL.) (FB) WHEREIN THE ALLAHABAD HIGH COURT HELD THAT ASSESSMENT IN INDIVIDUAL CAPACITY OF EACH PERSON NAMED IN WARRANT OF AUTHORIZATION WHICH WAS ISSUED IN JOINT NAMES, IS PERFECTLY WITHIN JURISDICTION OF ASSESSING AUTHORITY. 5.5 REGARDING JOINT WARRANT , T HE LD. D R SUBMITTED THAT THERE IS SPECIFIC PROVISION U/S. 192 AS PER WHICH WARRANT WHICH I S ISSUED JOINTLY IS VALID AND THE ASSESSING OFFICER IS WELL WITHIN HIS JURISDICTION OF MAKING ASSESSMENT U/S. 153A OF THE ACT. HE RELIED ON THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF CIT VS. KHYBER FOODS (23 TAXMANN.COM 27) WHEREIN IT WAS HELD T HAT WHERE A COMMON SEARCH WARRANT WAS ISSUED FOR SEARCHING SEVERAL ASSESSES, IN PURSUANCE OF WHICH RETURN WAS FILED AND ASSESSMENT WAS CONTESTED ONLY ON MERITS, ASSESSMENT ORDER COULD NOT BE SET ASIDE ON GROUND THAT SEARCH WARRANT WAS INVALID. I.T.A. NOS. 487 - 489/COCH/2019 13 5 .6 WE HA VE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THIS CASE, THERE WAS SEARCH ACTION U/S. 132 OF THE ACT ON THE BUSINESS PREMISES OF THE ASSESSEE COMPANY AND RESIDENCES OF ITS DIRECTORS ON 29/02/2016 AND 21/04/2016 ON THE BASIS OF SEARCH WARRANT D ATED 26.02.2016 AND 19.04.2016 ISSUED BY DIT(INV.), KOCHI AND JDIT(INV.), KOCHI RESPECTIVELY. IN ADDITION TO THIS, THERE WAS SURVEY ACTION U/S. 133A OF THE I.T. ACT ON 29/02/2016 . THE LD. AR HAS PLACED COPY OF FORM NO. 45 DATED 26/02/2016 WHEREIN IT WAS STATED AS FOLLOWS: IF A SUMMONS UNDER THE SUB - SECTION (1) OF SECTION 37 OF THE INDIAN INCOME TAX ACT, 1922, OR UNDER SUB - SECTION 131 OF THE INCOME TAX ACT, 1961, OR A NOTICE UNDER SUB SECTION (4) OF SECTION 22 OF THE INDIAN INCOME TAX ACT, 1922 OR UNDER SUB - SECTION (1) OF SECTION 142 OF THE INCOME TAX ACT, 1961, IS ISSUED TO SHRI MOHAMMED KUTTY H AJI @ THARIF MALL, SHRI HAMZA PUTHUKUDY, THARIF BUILDERS PVT. LTD. (NAME OF PERSON) TO PRODUCE OR CAUSE TO BE PRODUCED BOOKS OF ACCOUNT OR OTHER DOCUMENTS WHICH WILL BE USEFUL FOR, RELEVANT TO, PROCEEDINGS UNDER THE INDIAN INCOME TAX ACT , 1922, OR UNDER THE INCOME TAX ACT, 1961, HE WOULD NOT PRODUCE OR CAUSE TO BE P RODUCED SUCH BOOKS OF ACCOUNTS OR O T HER DOCUMENTS AS REQUIRED BY SUCH SUMMONS OR NOTICE. THE LD. DR HAS ALSO PLACED COPIES OF PANCHNAMAS ON RECORD TO PROVE THAT SEARCH WAS CARRIED OUT IN THE PRESENCE OF PANCHAS AND PANCHANAMA S WERE PREPARED FOR SEARCH IN THE CASE OF THE ASSESSEE CO MPANY . AS PER PANCHANAMA, THE BO OKS OF ACCOUNTS MARKED AS CHN/IT/023/15 - 16/RR/A1 TO 12 WAS IMPOUNDED ON 01/03/2016 AND THE BOO KS OF ACCOUNTS MARKED AS CHN/IT - CIT/023/ CS/ A1 TO 1 6 WAS IMPOUNDED ON 26/04/2016 . S TATEMENT S WERE RECORDED FROM SHRI P.J. HAMZA ON 10/06/2016 AND FROM SHRI ABDUL BASHEER ON 29/02/2016 AT KOZHIKODE. THE ASSESSING OFFICER HAS MADE THE ADDITIONS ON THE BASIS OF FOLLOWING MATERIALS : I.T.A. NOS. 487 - 489/COCH/2019 14 SL. NO. IMPOUNDED/SEIZED MATERIAL NUMBER D ESCRIPTION 1. CHN/ADI/CLT/23/CM/A - 4 PAGES 2 TO 12, IMPOUNDED FROM THE OFF ICE OF M/S. THARIF BUILDERS PVT. LTD., KOZHIKODE REGISTRATION FORM/TERM SHEET/CUSTOMER DATA SHEET USED BY M/S. NUE TOWN FOR BOOKING SHOP ROOMS 2. CHN/IT - CLT/023/CS - 01 PAGE 98, SEIZED FROM THE RESIDENTIAL PREMISES OF SHRI MOHAMMEDKUTTY HAJI, TIRUR COMPUTER PRINTOUT HAVING BREAKUP OF AMOUNT RECEIVED IN CASH AND CHEQUE FOR THE SALE OF SHOP ROOMS 3. CHN/IT - CLT/023/CS - 01 PAGE 158, SEIZED FROM THE RESIDENTIAL PREMISES OF SHRI MOHAMMEDKUT T Y HAJI, TIRUR MANUSCRIPT TABLE DATA SHOWING BREAKUP OF CASH AND CHEQUE PORTION ADOPTED IN THE SALE OF SHOP ROOMS IN THARIF MALL 5.7 IN OUR OPINION, THERE IS NO ERROR IN FRAMING ASSESSMENTS U/S. 153A OF THE I.T. ACT ON THE BASIS OF THE SEIZED RECORDS. THE ASSESSMENTS WERE FRAMED BY THE ASSESSING OFFICER ON THE BASIS OF THE INCRIMINATED DOCUMENTS FOUND DURING THE SEARCH AND STATEMENT RECORDED DURING THE COURSE OF SEARCH. BEING SO, THE ASSESSING OFFICER IS COMPLETELY JUSTIFIED IN FRAMING THE ASSESSMENTS U/S. 153A OF THE I.T. ACT. FOR THIS PROPOSITION, RELIANCE IS PLACED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF TRAVANCORE DIAGNOSTICS P. LTD. VS. ACIT (390 ITR 167) WHEREIN IT WAS HELD THAT WHEN SUPPRESSION HAD BEEN FOUND FROM THE DOCUMENTS AND THE STATEMENT ON RECORD, THE ASSESSING OFFICER WAS COMPLE TELY JUSTIFIED IN ADOPTING THOSE FIGURES FOR THE WHOLE YEAR AND FOR THE NEXT YEAR WHICH WAS BASED ON SOUND RATIONALE, SINCE FROM THE STATEMENT ON BEHALF OF THE ASSESSEE, THE SUPPRESSION WAS FOUND TO BE CONTINUED. IN VIEW OF THE UNCONTROVERTED AND ADMITTE D STATEMENT GIVEN ON BEHALF OF THE ASSESSEE U/S. 133A AND THE DOCUMENTS IMPOUNDED DURING THE SURVEY, WHICH WERE ALSO VIRTUALLY ADMITTED BY THE ASSESSEE, I.T.A. NOS. 487 - 489/COCH/2019 15 THERE WAS NO ERROR IN THE ORDER OF THE TRIBUNAL IN ACCEPTING THE MATERIALS ON RECORD IN ORDER TO ARRIVE AT AN ASSESSMENT. RELIANCE IS ALSO PLACED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HOTEL MERIYA (332 ITR 537) WHEREIN IT WAS HELD AS UNDER: (II) THAT THE PARTNER OF THE ASSESSEE HAD IN UNAMBIGUOUS TERMS STATED THAT 20 PE R CENT OF THE SALES OUTTURN WAS SUPPRESSED AND ONLY 80 PER CENT WAS RECORDED IN THE ACCOUNT BOOKS AND IT WAS THE PRACTICE FROM THE VERY BEGINNING. SO, IT WAS JUST AND APPROPRIATE TO PRESUME THAT THERE WAS UNIFORM CONCEALMENT OF INCOME IN ALL THE ASSESSMEN T YEARS DURING THE BLOCK PERIOD. HENCE THE ASSESSEE WAS LIABLE TO BE ASSESSED DURING THE BLOCK PERIOD AT A UNIFORM RATE. HENCE, WE CANNOT SAY THAT THERE WAS NO SEARCH ACTION U/S. 132 OF THE INCOME TAX ACT SO AS TO FRAME ASSESSMENTS U/S. 153A OF THE I.T . ACT. THE ASSESSMENTS WERE ALSO BASED ON MATERIAL GATHERED DURING THE COURSE OF SURVEY U/S. 133A OF THE I.T. ACT. IN VIEW OF THE ABOVE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT, WE ARE INCLINED TO DISMISS THIS GROUND OF THE ASSESSEE. THUS, THE ADDITIO NAL GROUND FOR ALL THE ASSESSMENT YEARS IS REJECTED. 5.8 REGARDING COMMON GROUND NO. 1, THIS GROUND AND THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ONE AND THE SAME. HENCE, THIS GROUND OF APPEAL S RAISED BY THE ASSESSEE FOR ALL THE ASSESSMENT YEARS IS REJECTED. 6 . THE CRUX OF SECO ND AND THIRD GROUND OF APPEALS IS WITH REGARD TO ESTIMATING THE COLLECTION OF CASH OUTSIDE THE BOOKS OF ACCOUNTS AT RS.32,87,986/ - WITHOUT THE I.T.A. NOS. 487 - 489/COCH/2019 16 SUPPORT OF ANY SEIZED DOCUMENTS AND NOT GIVING DUE CREDIT OR DEDUCTIONS TOWARD S WORK IN PROGRESS RELATING TO UNACCOUNTED CASH RECEIPTS . 6.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. DURING THE PERIOD UNDER CONSIDERATION THE ASSESSEE HAD UNDERTAKEN CONSTRUCTION AND SALE OF A COMMERCIAL BUILDING BY THE NAME OF THARIF MALL AT TIRUR. THE ASSESS EE HAD ENTERED INTO DEVELOPMENT AGREEMENT DATED 18/12/2012 FOR CONSTRUCTING A SHOPPING MALL ON THE LAND BELONGING TO M/S. PONMUNDAM PROPERTIES PVT. LTD., A GROUP CONCERN OF THE ASSESSEE COMPANY. BOTH THESE COMPANIES HAD COMMON DIRECTORS, VIZ. SHRI P.K. MOHAMMEDKUTTY HAJI, SHRI HAMZA, SON OF SHRI P.K. MOHAMMEDKUTTY HAJI. AS PER THE DEVELOPMENT AGREEMENT, 67 SHOP ROOMS HAVING TOTAL SALEABLE AREA OF 8214.08 SQ. FT./ 78,624.28 SQ FT WERE TO BE CONSTRUCTED AND THE LAND OWNER WAS ENTITLED TO GET POSSESSION OF 27% OF TOTAL SALEABLE AREA ON FIRST AND SECOND FLOOR OF THE MALL AS CONSIDERATION FOR ITS LAND AND THE SALE OF SHOPS IN THE MALL WAS ENTRUSTED BY THE ASSESSEE BUILDER VIDE AGREEMENT DATED 10/03/2014 TO A EXCLUSIVE BROKER M/S. NEU TOWN PROPERTY MANAGEMENT & DEVELOPERS FOR MARKETING AND IDENTIFYING POTENTIAL CUSTOMERS, NEGOTIATING AND FINALIZING TERMS AND CONDITIONS FOR SALE OF SHOPS IN THE MALL. AFTER ANALYSIS OF THE SEIZED DOCUMENTS, STATEMENTS OF DIRECTORS AND BROKER, THE ASSESSING OFFICER FOUND THAT SALE VALUES OF THE SHOPS IN THE MALL WERE SUPPRESSED IN THE ACCOUNTS OF THE ASSESSEE AND IN ALL THE CASES ROUGHLY 50% OF THE SALE VALUE WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. THE DETAILS OF ON - MONEY ARE AS FOLLOWS: I.T.A. NOS. 487 - 489/COCH/2019 17 NAME ROOM NO. AREA TOTAL AMOUNT CASH CHEQUE AGREEMENT VALUE ABDUL AZEEZ PORAKKOTUPALATHU 3 589.26 5430820 2715150 2715670` 2960080 ABDUL LATHEEF 4 587.48 5331381 2664222 2667159 2907203 ABDUL RAHIMAN MELE VEETIL 212 419.85 3065000 1565000 1500000 1635000 ANITHA ASHRAF ASHITHA ABITHA 2 550.79 4782790 2391395 2391395 2606621 ANTONY PHILIP&MARYKUTTY K.J. 304 567.48 4026500 1972000 2054500 2239 40 5 NIYAZ ABDUL NAZER 6 512.62 4476240 2238120 2238120 2439551 JAYARAJNARANGOLI 5 559.34 5155558 2577780 2577778 2809778 CHONORI AHAMED HANEEFA 101 - A 493.43 4588899 2300000 2288899 A H KOCHUMON 202 550.79 4597995 2300000 2297995 1703769 MOHAMMED KOYA K.V. 204 605.5 501962 2540981 2540981 1873033 ALI YUSUF KUNCHU 301 - A 493.25 3601455 1800000 1801455 ALI YUSUF KUNCHU 301 - B 494.82 3602186 1800000 1812186 MOHAMED NAUFAL 302 550.79 4133679 2050000 2083679 NAHLA YUSUF 316 - A 426.18 3111114 150000 1561114 RIFADALIMINHAJ 316 - B 426.18 3111114 150000 1561114 RIYAZ KOCHU MON 401 - A 493.43 3092326 1500000 1592326 SREEKUMAR 403 589.26 3712000 1856000 1856000 6.1.1 FLOORWISE AVERAGE RATE PER SQ. FEET IS AS FOLLOWS: NAME ROOM NO. FLOOR IN THE MALL AREA RECEIVED IN CASH AGREEMEN T VALUE TOTAL SALE CONSIDERATI ON AVERAGE RATE PER SQ. MTR. ROUND ED TO PERCENTAGE OF SALE PROCEEDS RECEIVED IN CASH ABDUL AZEEZ PORAKKOTUPALATHU 3 GROUND 589.26 2715150 2960080 5675230 9631.11 ABDUL LATHEEF 4 GROUND 587.48 5331381 2907203 5571425 9483.6 ANITHA ASHRAF ASHITHA ABITHA 2 GROUND 550.79 2391395 2606621 4998016 9074.27 9100 47.84 NIYAZ ABDUL NAZER 6 GROUND 512.62 2238120 2439551 4677671 9125.03 JAYARAJNARANGOLI 5 GROUND 559.34 2577780 2809778 5387558 9631.9 AVERAGE SQ FT RATE APPLICABLE IN GROUND FLOOR 2799.49 12586667 13723233 26309900 9398.1 CHONORI AHAMED HANEEFA 1A FIRST 493.43 2300000 2517789 4817789 9763.88 9000 47.74 ABDUL RAHIMAN MELE VEETIL 212 SECOND 419.85 1565000 1635000 3200000 7621.77 A H KOCHUMON 2 SECOND 550.79 2300000 2527794 4827794 8765.22 MOHAMMED KOYA K.V. 4 SECOND 605.5 2540981 2795079 5336060 8812.65 AVERAGE SQ FT RATE APPLICABLE IN SECOND FLOOR S ECOND 1576.14 6405981 6957873 13363854 8478.88 7600 47.94 ANTONY PHILLIP&MARYKUTT Y K.J. 304 THIRD 587.48 1972000 2239405 4211405 7168.59 ALI YUSUF KUNCHU 1 A THIRD 493.25 1800000 1 9 81601 3781601 7666.23 ALI YUSUF KUNCHU 1 B THIRD 494.82 1800000 1993405 3793405 7666.23 MOHAMED NAUFAL 2 THIRD 550.79 2050000 2292047 4342047 7883.31 I.T.A. NOS. 487 - 489/COCH/2019 18 NAHLA YUSUF 16A THIRD 426.18 1550000 1717225 3267225 7666.3 RIFADALIMINHAJ 16 - B THIRD 426.18 1550000 1717225 3267225 7666.3 AVERAGE SQ FT RATE APPLICABLE IN THIRD FLOOR THIRD 2978.8 10722000 11940908 22662908 7608.07 7100 47.31 RIYAZ KOCHU MON 1A FOURTH 493.43 1500000 1751558 3251558 6589.7 SREEKUMAR 3 FOURTH 589.26 1856000 2041600 3897600 6614.4 AVERAGE SQ FT RATE APPLICABLE IN FOURTH FLOOR FOURTH 1082.69 3356000 3793158 7149158 6603.14 6500 46.94 BASED ON THE ABOVE 2 TABLES THE TOTAL SALE CONSIDERATION RECEIVED BY THE GROUP IS WORKED OUT AS BELOW: FLOOR SOLD AREA IN SQ. FT. IN EACH FLOOR RATE PER SQ FT IN THE FLOOR TOTAL SALE PRICE COLLECTED % OF SALE PRICE COLLECTED IN CASH OUT OF SALE PROCEEDS AMOUNT COLLECTED IN CASH GROUND FLOOR 15508.34 9100.00 14,11,25,894 47.84 7,75,14,628 FIRST FLOOR 18066.4 9000.00 16,25,97,60047.74 47.74 7,76,24,094 SECOND FLOOR 17105.75 7600.00 13,00,03,700 47.94 6,23,23,774 THIRD FLOOR 15696.74 7100.00 11,14,46,854 47.31 5,27,25,507 FOURTH FLOOR 12247.05 6500.00 7,96,05,825 46.94 3,73,66,974 TOTAL 78624.28 62,47,79,873 30,75,54,977 6.1.2 THUS, IT WAS FOUND THAT THE ASSESSEE HAD MADE SALES AMOUNTING TO RS.62,47,79,873/ - OUT OF WHICH RS.30,75,54,977/ - WAS COLLECTED IN CASH WHICH WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT. THE BIFURCATION OF THE ABOVE AMOUNTS IS AS FOLLOWS: ASSESSMENT YEARS SALE VALUE ( RS.) 2014 - 15 39,24,98,837/ - 2015 - 16 21,12,16,375/ - 2016 - 17 2,10,64,661/ - TOTAL 62,47,79,873/ - 6.1.3 THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT AND THE TOTAL INCOME AS FOLLOWS: I.T.A. NOS. 487 - 489/COCH/2019 19 A.YS - WISE SALES NARRATION RUPEES IN CRORES A TOTAL SALE VALUE 62,47,79,873/ - B SALE PROCEEDS RECEIVED IN CASH (NOT REFLECTED IN THE BOOKS OF ACCOUNTS 30,75,54,977/ - C GROSS AMOUNT ACCOUNTED IN THE BOOKS OF THE COMPANY (A - B) 30,75,63,673/ - D COST TO THE COMPANY FOR THE CONSTRUCTION OF MALL 16,11,88,680/ - E COST OF LAND 35,01,250/ - F GROSS PROFIT (ACCOUNTED PORTION)(C - (D+E) 14,28,73,743/ - G LESS COMMISSION PAID IN CASH TO SELLING AGENT (1%) 35,00,000/ - H NET PROFIT (IN THE BOOKS OF ACCOUNTS) (F - G) 13,93,73,743/ - J CASH PORTION 31,83,49,040/ - TOTAL INCOME (H + J) 45,77,22,783/ - AY VALUE ( RS.) PROFITS PROFIT RECOGNIZED BY ASSESSEE DIFFERENCE ( RS.) 2014 - 15 39,24,98,837 23,12,16,375 13,55,106 28,61,95,226 2015 - 16 21,12,16,375 15,47,40,175 29,73,081 15,17,67,094 2016 - 17 2,10,64,661 16,13,453 1,38,18,823 TOTAL 62,47,79,873 45,77,22,783 59,41,640 45,17,81,143 I.T.A. NOS. 487 - 489/COCH/2019 20 7. ON APPEAL, THE CIT(A) FOUND THAT IN THE CASE OF THE ASSESSEE - COMPANY, THE ASSESSING OFFICER HAD ASSUMED THAT THE FULL CONSTRUCTED AREA OF 78624.28 SQ. FT. OF CONSTRUCTED AREA IN THE GROUND FLOOR, 1 ST FLOOR, 2 ND FLOOR, 3 RD FLOOR AND 4 TH FLOOR WAS NOT ONLY SOLD DURING THE ASSESSMENT YEARS 2014 - 15, 2015 - 16 AND 2016 - 17, BUT ALSO THE CONSTRUCTION WAS COMPLETED. ACCORDING TO THE CIT(A), THE ASSESSING OFFICER ESTIMATED THE TOTAL SALE VALUE FOR THESE ASSESSMENT YEARS AT RS.62,47, 79,873/ - . THE SALE VALUE WAS ARRIVED AT BY MULTIPLYING 78,624.28 SQ. FT. AREA TREATED AS SOLD BY THE RATE PER SQ. FT. FOR THE RELEVANT FLOOR AREA TO ARRIVE AT RS.62,47,79,873/ - AS TOTAL SALE VALUE FOR THE THREE ASSESSMENT YEARS, 2014 - 15, 2015 - 16 AND 2016 - 17 AS FOLLOWS: FLOOR SOLD ARE IN SQ. FT. IN EACH FLOOR RATE PER SQ. FT. IN THE FLOOR TOTAL SALE PRICE COLLECTED GROUND FLOOR 15508.34 9,100 14,11,25,894 FIRST FLOOR 18066.40 9,000 16,25,97,600 SECOND FLOOR 17105.75 7,600 13,00,03,700 THIRD FLOOR 15696.74 7,100 11,14,46,854 FOURTH FLOOR 12247.05 6,500 7,96,05,825 TOTAL 7 86 24.28 62,47,29,873 7.1 THUS , ACCORDING TO THE CIT(A), THE TOTAL SALE VALUE WAS ESTIMATEDAT RS.62,47,79,873/ - AND FROM THIS SALE, THE PROCEEDS RECEIVED IN CASH WAS ESTIMATED AT RS.30,75,54,977/ - WHICH WAS REDUCED TO ARRIVE AT THE CHEQUE AMOUNT. THE CIT(A) OBSERVED THAT THE COST OF CONSTRUCTION OF MALL AT RS.16,11,88,680/ - WAS REDUCED WHICH IS THE ACTUAL AMOUNT SPENT AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE UPTO 31/03/2017 . FROM THE ABOVE, THE CIT(A) FOUND THAT THE COST OF LAND AT RS.35,01,250/ - WAS REDUCED, I N SPITE OF THE FACT THAT THERE WAS NO COST OF LAND PAID AS PER THE DEVELOPMENT AGREEMENT SINCE 27% OF THE CONSTRUCTED AREA WAS THE I.T.A. NOS. 487 - 489/COCH/2019 21 COMPENSATION FOR TRANSFERRING 73% OF THE LAND RIGHT. ACCORDING TO THE CIT(A), THE COMMISSION PAID TO SELLING AGENT WAS AT 1% AT RS.35,00,000/ - WAS REDUCED BY THE ASSESSING OFFICER. AS A RESULT OF ABOVE, THE NET PROFIT IN THE BOOKS OF ACCOUNT WAS RS.13,93,73,743/ - AND THE CASH PORTION WHICH W AS ALSO AN ESTIMATED AMOUNT AT RS.31,83,49,040/ - WAS ADDED AND THE TOTAL AMOUNT OF RS.45,77,22,783/ - WAS ARRIVED AT. THE TOTAL INCOME ARRIVED AT APPORTIONED ASSESSMENT YEAR WISE IS AS FOLLOWS: A.Y. TOTAL INCOME 2014 - 15 28,75,50,332 2015 - 16 15,47,40,175 2016 - 17 1,54,32,276 TOTAL 45,77,22,783 7.2 THE CIT(A) CALLED FOR LAY OUT PLAN AND FLOOR WISE DETAILS WHICH WERE FURNISHED BY THE ASSESSEE. FROM THIS, THE CIT(A) SUMMARIZED THE ABOVE AS FOLLOWS: FLOOR AREA AS PER ASST. ORDER AREA EARMARKED FOR LAND OWNER AREA FOR WHICH AGREEMENT ENTERED UPTO 31.03.2016 BALANCE (UNSOLD AS ON 31.03.2016) GROUND FLOOR 15,508.34 - 7,285.36 8,222.98 FIRST FLOOR 18,066.40 11,094.00 5,904.07 1,068.33 SECOND FLOOR 17,105.75 - 5,207.13 804.62 THIRD FLOOR 15,696.74 - 4,869.15 10,827.59 FOURTH FLOOR 12,247.05 - 2,706.08 9,540.97 TOTAL 78,624.28 22,188.00 25,971.79 30,464.49 7.3 THEREFORE , THE CIT(A) HELD THAT THE COMPUTATION ADOPTED BY THE ASSESSING OFFICER WAS NOT CONSISTENT WITH THE FACTS OF THE CASE AS THE ENTIRE BUILDING FLOOR AREA I.T.A. NOS. 487 - 489/COCH/2019 22 OF 78624.28 SQ. FT. WAS NOT SOLD DURING THE A.Y. 2014 - 15, 2015 - 16 AND 2016 - 17. THE FLOOR AREA SOLD UP TO 31/03/2016 WAS 25971.79. ACCORDING TO THE CIT(A) THE AREA OF 22188 SQ. FT. WAS NOT HANDED OVER TO THE LAND OWNER IN THE COMPLETED CONDITION, AS PER THE DEVELOPMENT AGREEMENT WITH THE LAND OWNER UP TO 31.03.2016. THE BALANCE FLOOR AREA OF 30464.49 OWNE D BY THE ASSESSEE REMAINED UNSOLD AS ON 31/03/2016. THIS IS EVIDENCED BY THE OCCUPANCY CERTIFICATE IN RESPECT OF FIRST AND THE SECOND FLOOR OF THE BUILDING WHICH WAS RECEIVED ONLY ON 09/11/2016 (A.Y. 2017 - 18). THE CIT(A) OBSERVED THAT MAJOR WORKS WERE STI LL PENDING AS ON 15/01/2019 AND THE ASSESSEE HAD BEEN FOLLOWING AN ACCOUNTING SYSTEM WHEREIN THE EXPENDITURE AND THE REVENUE AFTER ROUTING THROUGH THE P&L ACCOUNT WAS CAPITALIZED AS WORK IN PROGRESS AND ONLY A CERTAIN PORTION OF THE REVENUE WAS OFFERED AS INCOME AFTER THE SAME WAS RECOGNIZED BY ASSESSEE AS RELATING TO COMPLETION OF THE CONCERNED SHOP. SINCE SUBSTANTIAL AMOUNT OF WORK WAS STILL TO BE UNDERTAKEN IN THE MALL BEFORE THE SHOPS CAN BE RECOGNIZED BY THE ASSESSEE FOR PROFIT PURPOSES, THE CIT(A) WA S OF THE VIEW THAT THE CONSTRUCTION WAS INCOMPLETE AND IT IS NOT POSSIBLE TO ARRIVE AT THE PROFITS FOR THE ABOVE ASSESSMENT YEARS. ACCORDING TO THE CIT(A), THE ASSESSING OFFICER MADE A WRONG PRESUMPTION THAT NOT ONLY THE CONSTRUCTION WORK WAS COMPLETED BUT ALSO THAT THE COMPLETE FLOOR AREA WAS CONSTRUCTED AND FINISHED, LOCAL CERTIFICATION OBTAINED AND POSSESSION HANDED OVER TO THE BUYER. FROM THE LAY OUT PLAN, THE CIT(A) OBSERVED THAT 30465S Q. FT. OF SALEABLE AREA RELATING TO THE SHARE OF THE ASSESSEE WAS NOT ALLOTTED AND SOLD DURING THE A. YS 2014 - 15 TO 2016 - 17. I.T.A. NOS. 487 - 489/COCH/2019 23 7.4 T HE LD. AR SUBMITTED BEFORE CIT (A) THAT THE BUILDING CONSTRUCTION WITH A TOTAL AREA OF 78,624.28 SQ. FT WAS ONLY PARTLY COMPLETED AS ON 31 - 03 - 2016 RELATING TO AY 2016 - 17. THE LD. AR SUBMITT ED THAT IN THESE ASSESSMENT YEARS, THE PROJECT WAS NOT COMPLETED AND IT IS ONLY WORK IN PROGRESS SHOWN BY THE ASSESSEE IN ITS BALANCE SHEET. EVEN IF THERE ARE UNACCOUNTED COLLECTIONS IN THE FORM OF CASH, IT CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. IT TAKES THE CHARACTER OF ADVANCE RECEIVED BY WAY OF CHEQUE. THE RECEIPT OF MONEY IN CASH CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE INCOME WILL BE REC OGNIZED ONLY ON COMPLETION OF PROJECT AND REGISTRATION OF SALE DEED IN FAVOUR OF THE PURCHASER. HE ALSO SUBMITTED THAT THE ASSESSEE HAS NOT OBTAINED OCCUPANCY CERTIFICATE AND THE MAJOR WORKS ARE PENDING FOR COMPLETION. HE DREW OUR ATTENTION TO THE FOLLOWI NG WORKS WHICH ARE REQUIRED AS ON 31 - 03 - 2016 FOR THE COMPLETION OF THE PROJECT. THE DETAILS OF THE WORKS TO BE COMPLETED ARE AS UNDER : DETAILS OF WORKS TO BE COMPLETED : 1 PARKING BUILDING WORK 2 ELECTRICAL WORK 3 PANEL WORK 4 DG PURCHASE 5 THEATER WORK 6 LIGHT 7 INSIDE CIVIL WORK 8 ELECTRICAL CONNECTION 9 BALANCE WORKS OF LIFT & ESCALATORS 10 FOOD COURT FINISHING 11 TRANSFORMER 12 AC WORK 13 AIR VENTILATION 14 FLOORING WORK 15 SS HAND RAIL WORK - CORRIDOR I.T.A. NOS. 487 - 489/COCH/2019 24 16 FIRE PROTECTION SYSTEM 17 PAINTING WORK 18 FALSE CEILING WORK 19 VDF FLOORING IN PARKING AREA INCLUDING PAINTING 20 STRUCTURAL GLAZING WORK & GLASS WORK 21 INTERLOCK 22 OUTSIDE CLADDING WORK 23 POSTER BOX 24 SEATING PLAZA 25 FTTH 26 ELECTRICAL BUILDING & STP TANK 27 COMPOUND WALL 28 BIOGAS 29 MS STRUCTURAL STEEL WORK DG 30 DRAINAGE 31 ESCALATOR CLADDING 32 CABLING WORK OF CCTV & PA SYSTEM 33 PLUMBING WORK 34 STP WORK 35 TOILET PD DOOR WORK 36 HAND RAIL STAIRS 37 PLUMBING WORK 38 LPG LINE 39 HOUSEKEEPING MACHINES 40 SIGNAGE INCLUDING PARKING FLOOR 41 BOOM BARRIO, METAL DETECTOR, TRAFFIC MIRROR, AIR CURTAIN, WALKY TALKY 42 OPENING DOORS - STAIR & TOILET ENTRY 43 AC/LED PLATFORM SETTING INSIDE FALSE CEILINGS 44 LIGHT STRING WORK 45 WATER TREATMENT PLANT 46 GLASS BRIDGE 47 CABLING WORK FTTH 48 MOTOR 49 WELL 50 GROOVE WORK 51 SHOP FRONT GLASS SUPPORTED WORK 52 PATHWAY I.T.A. NOS. 487 - 489/COCH/2019 25 7. 5 T H US, IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER ASSUMED THAT THE FULL AREA OF 78,624.28 SQ FT ARE COMPLETED DURING THE AY 2014 - 15, 2015 - 16 AND 2016 - 17 AND ESTIMATED THE SALE VALUE AT RS.62,47,79,878/ - WHICH IS NOT JUSTIFIED . 7 .6 FURTHER, F ROM THE DEVELOPMENT AGREEMENT, THE CIT(A) FOUND THAT THE ASSESSEE HAD NOT PURCHASED 40028.59 SQ. FIT BUT HAD ENTERED INTO DEVELOPMENT AGREEMENT WITH PONMUDAM PROPERTIES PVT. LTD. FOR DEVELOPING THE MALL IN LIEU OF THE AFORESAID LAND THE ASSESSEE WOULD PART WITH 27% OF THE TOTAL BUILT UP FLOOR AREA TO THE LAN D OWNER COMPANY AS A SALE CONSIDE RATION FOR THE AFORESAID LAND. THUS, IT WAS OBSERVED THAT THE LAND DOES NOT COME TO VEST WITH THE ASSESSEE COMPANY TILL SUCH TIME THE 27% OF THE TOTAL CONSTRUCTED AND FINISHED FLOOR AREA, ALONG WITH THE TENANCY ARRANGEMENTS , AS PER THE DEVELOPMENT AGREEMENT IS HANDED OVER TO THE LAND OWNER COMPANY. DURING THE RELEVANT ASSESSMENT YEARS, THE ASSESSEE COMPANY HAD NOT BEEN ABLE TO FULFIL THE TERM AND CONDITION OF THE DEVELOPMENT AGREEMENT BY VIRTUE OF WHICH THE TRANSFER OF LAND FROM THE LAND OWNER COMPANY TO THE ASSESSEE COMPANY CAN BE SAID TO HAVE BEEN DONE AND HENCE, NO AMOUNT FOR THE AFORESAID LAND CAN BE ACCOUNTED FOR IN THE HANDS OF THE ASSESSEE COMPANY DURING THE RELEVANT ASSESSMENT YEARS. HENCE, THE CIT(A) ACCEPTED THIS GROUND OF APPEAL OF THE ASSESSEE. 53 SS CLADDING IN LIFT 54 EXTERNAL SIGNAGE I.T.A. NOS. 487 - 489/COCH/2019 26 8. THE CIT(A) OBSERVED THAT DURING THE RELEVANT ASSESSMENT YEARS, A SUBSTANTIAL PORTION OF THE PROPOSED MALL WAS UNSOLD AND THE ASSESSEE WAS IN RECEIPT OF UNDISCLOSED INCOME FROM ITS VARIOUS PURCHASERS. ACCORDING TO TH E CIT(A), THE SEIZED RECORDS REVEALED THAT THE SHOPS ON EACH OF THE FLOOR THERE ARE DOCUMENTED PROOF FOR THE AMOUNT OF ON - MONEY RECEIVED AND THE RATIO OF THE ON - MONEY RECEIVED IN CASH BEARS A SPECIFIC RATIO TO THE CHEQUE AMOUNT RECEIVED FOR EACH OF THE FL OOR, AS COMPUTED BY THE ASSESSING OFFICER. THE CIT(A) OBSERVED THAT THE AVERAGE ON - MONEY COMPONENT FOR EACH OF THE SHOPS ALLOTTED, IN EACH OF THE FLOORS, WAS COMPUTED BY THE ASSESSING OFFICER BY EXTRAPOLATING THE FINDINGS OF THE SEIZED DOCUMENTS FOR ALL T HE SHOPS SOLD. IN VIEW OF THESE FACTS, THE CIT(A) OPINED THAT THE TOTAL INCOME OF THE ASSESSEE COMPANY WILL HAVE TO BE COMPUTED DURING EACH OF THE RELEVANT ASSESSMENT YEARS IN ORDER TO TAKE INTO ACCOUNT THE ON - MONEY RECEIPTS OF THE ASSESSEE. ACCORDING TO THE CIT(A), THE ASSESSING OFFICER HAD WORKED OUT THE FLOOR PERCENTAGE OF SALE PROCEEDS COLLECTED IN CASH WHICH IS UNACCOUNTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY . SINCE THE WHOLE AMOUNT OF CASH MONEY WAS RECEIVED BY THE ASSESSEE AT THE TIME OF SIGNING OF THE AGREEMENT TO SALE, THE CIT(A) COMPUTED THE FLOOR WISE CHEQUE AMOUNT RECEIVED, % OF SALE PROCEEDS COLLECTED IN CASH AND THE TOTAL SALE PROCEEDS COLLECTED IN CASH FOR EACH A.YS AS FOLLOWS: I.T.A. NOS. 487 - 489/COCH/2019 27 SUMMARY O F TOTAL COLLECTION IN CASH ASSESSMENT YEARS 2014 - 15 2015 - 16 2016 - 17 TOTAL AMOUNT RECEIVED IN CASH (5+7+9 10 SL. NO. FLOOR 1 CHEQUE % 2 % OF SALE PROCEEDS COLLECTED IN SALE 3 CHEQUE AMOUNT RECEIVED 4 SALE PROCEEDS COLLECTED IN CASH (4/2*3) 5 CHEQUE AMOUNT RECEIVED 6 SALE PROCEEDS COLLECTED IN CASH (6/2*3) 7 CHEQUE AMOUNT RECEIVED 8 SALE PROCEEDS COLLECTED IN CASH (8/2*3) 9 1A GROUND FLOOR 52.16 47.84 - - 31288966 28697548.6 - - 1B. FIRST FLOOR 52.26 47.74 - - 1739112 15887747.8 2802586 2560188.59 18447936.4 2A SECOND FLOOR 52.06 47.94 6979542 6427184.85 6915583 68287.53 1781210 1640246.01 144357.18 2B THIRD FLOOR 52.69 47.31 2054500 18447218 9493104 8442984.44 5618400 5044723.93 15332430.2 3A FOURTH FLOOR 53.06 46.94 - - 4675679 4136380.93 1204543 1065609.66 5201990.59 TOTAL 8271906.65 57232949.3 10310768.2+ 87206601.2 5090977 = 15401745.2 8.1 FROM THE ABOVE, THE CIT(A) OBSERVED THAT THE ASSESSEE HAD COLLECTED AN AMOUNT OF RS.8,72,06,601.2/ - ON - MONEY WHICH WAS UNDISCLOSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEARS. SINCE THE AFORESAID AMOUNT WAS NOT DISCLOSED IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE, THE SAME BEING REVENUE RECEIPTS COLLECTED FOR THE PURPOSE OF BUSINESS JUST LIKE THE AMOUNT COLLECTED IN CHEQUE FROM THE VARIOUS PURCHASERS, THE CIT(A) HELD THAT IT CANNOT BE CAPITALIZED AND HAVE TO BE OFFERED TO TAXES SEPARATELY DURING THE RELEVANT ASSESSMENT YEARS. ACCORDING TO THE CIT(A) , THE ASSESSEE HAD ALREADY BOOKED AND CAPITALIZED ALL THE CONCERNED EXPENSES AS WORK IN PROGRESS AGAINST THE DISCLOSED RECEIPTS AND THE ON - MONEY COLLECTED HAD NO LOAD OF ANY EXPENSES AND BEING NOT REC ORDED IN THE BOOKS OF ACCOUNTS WAS FREELY AVAILABLE TO THE ASSESSEE AS INCOME OF THE RELEVANT ASSESSMENT YEARS. THE CIT(A) STATED THAT THE ASSESSEE HAD RETURNED THE INCOME I.T.A. NOS. 487 - 489/COCH/2019 28 FOR A.Y. 2014 - 15, 2015 - 16 AND 2016 - 17 AS RS. ( - ) 5,59,250, NIL, RS. ( - ) 26,81,692/ - RESPECTIVELY. THE CIT(A) TREATED THE AFORESAID ON - MONEY RECEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES AND HENCE, THE SAME WAS ADDED TO THE RETURNED INCOME OF THE ASSESSEE FOR THE RELEVANT AYS IN ORDER TO ARRIVE AT THE TOTAL ASSESSED INCOME: TOTA L INCOME ASSESSED PARTICULARS ASSESSMENT YEARS 2014 - 15 2015 - 16 2016 - 17 1. ROI ( - )5,59,250 NIL ( - )26,81,692 2. UNDISCLOSED ON - MONEY RECEIVED BY THE APPELLANT WHICH CANNOT BE CAPITALIZED AND WILL BE TAXED DURING THE RELEVANT AYS 82,71,906.65 5 , 72 , 32 , 949.3 1 , 54 , 01 , 745.2 3. TOTAL INCOME ASSESSED 2,43,15,152.85* 5,72,32,949.3 1,27,20,053.2 *ERROR IN THE FIGURE IN CIT( A) ORDER WHICH IS CORRECTED. 8. 2 THE CIT(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS I.E., 2014 - 15 TO 2016 - 17 AT RS.27,28,736/ - , RS.6,74,35,704/ - AND RS.1,38,38,144/ - RESPECTIVELY. 8.3 AGAINST THIS, THE ASSESSEE IS IN APPEAL BEF ORE US. THE LD. AR SUBMITTED THAT T HE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE DEVELOPMENT OF COMMERCIAL BUILDING WITH SEVERAL SHOP ROOMS . THE LD. AR SUBMITTED THAT THE LAND OF THE PROJECT I.T.A. NOS. 487 - 489/COCH/2019 29 BELONGED TO PONMUNDAM PROPERTIES PVT . LTD. AND THE BUI LDING CONSTRUCTION WAS DONE AS PER DEVELOPMENT AGREEMENT BETWEEN THE LAND OWNER AND THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT IN R ESPECT OF THE LANDOWNE R, PONMUNDAM PROPERTIES PVT LTD , THE ASSESSING OFFICER C OMPLETED THE ASSESSMENT ON THE ASSUMPTION THAT THE FULL PROPERTIES WERE SOLD AS PER THE DEVELOPMENT AGREEMENT. ACCORDING TO THE LD. AR, T HE PROPERTY WAS GIVEN TO THE DEVELOPER, THE ASSESSEE COMPANY ONLY FOR THE PURPOSE OF CONSTRUCTION AND NO SALE OF THE L AND - RIGHT HA D TAKEN PLACE. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER OVERLOOKED THE FACT THAT NO REGISTRATION OR TRANSFER WAS DONE BY THE LAND OWNER TO ANY PERSON. THE LD. AR SUBMITTED THAT THE PONMUNDAM PROPERTIES PVT LTD HA D FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) - III, KOCHI AND ENTIRE ASSESSMENT WAS CANCELLED, AS PER ORDER DATED 10 - 04 - 2019 IN ITA NO. 46,47,48/C/CIT (A) - III/ 2018 - 19 FOR THE REASON THAT THERE WAS NO TRANSFER OF PROPERTY AND THE INCOME FIXED AT RS. 16,55,60 ,46 6/ - AND THE TAX DEMAND RS . 9,47,77,960/ - WERE TOTALLY CANCELLED. THE REVENUE HAS NOT FILED ANY APPEAL TO THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, KOCHI AND THE MATTER HAS BECOME FINAL. 8. 4 THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER AND TH E CIT(A) HA D NOT RELIED UPON ANY SEIZED MATERIAL OR IMPOUNDED MATERIAL FOR THE PURPOSE OF ASSESSMENT, BUT COMPLETED THE ASSESSMENT ASSUMING THAT ENTIRE BUILT - UP AREA IS SOLD AT VALUE AS FIXED BY THE ASSESSEE . IN FACT, THE BUILDING IS YET TO BE COMPLETED AND ONLY AGREEMENTS ARE ENTERED INTO WITH 50 CUSTOMERS FOR AN AREA OF 25971.79 SQ FT. AND I.T.A. NOS. 487 - 489/COCH/2019 30 NO PROPERTY WAS SOLD BY REGISTERED DOCUMENT TO THE CUSTOMERS. IT WAS SUBMITTED THAT THE LAND - RIGHT WAS ALSO NOT TRANSFERR ED TO THE CUSTOMERS BY THE LAND - OWNER, PONMUNDAM PROPERTIES PVT LTD. THE LD. AR SUBMITTED THAT THE CIT(A) R EJECTED THE ASSESSMENT ORDER S AND RELIED UPON THE SEIZED DOCUMENTS REGARDING 20 AGREEMENTS FOR THE RECEIPT OF CONSIDERATION IN CASH AND ESTIMATED TH E RECEIPT OF CONSIDERATION IN CASH ON A THEORY OF PROBABILITY AND POSSIBILITY. IT WAS SUBMITTED THAT THE CIT(A) W ITHOUT ANY EVIDENCE, WHATSOEVER, ESTIMATED PROBABLE CASH RECEIPT FROM CUSTOMERS WITHOUT ANY EVIDENCE AND ENQUIRY AND THE C IT(A) HAS NOT CONSID ERED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE FOR CONSIDERING THE RECEIPT OF AMOUNT FROM CUSTOMERS AS LIABILITY IN THE BALANCE SHEET AND ONLY 8% OF THE RECEIPT WAS CONSIDERED AS THE INCOME OF THE ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEARS. THE LD. AR SUBMITTED THAT THE TOTAL EXPENDITURE INCURRED IN RESPECT OF VARIOUS PROJECTS IN PROGRESS AMOUNTED TO RS.14,59,82,871/ - AND HAS BEEN CLASSIFIED AS PROJECT WORK IN PROGRESS. DURING THE YEAR RECEIPT OF INCOME WAS RECOGNIZED ON THARIF MALL PROJECT AT 8 % AS GROSS PROFIT CONSIDERING THE LOW PROFITABILITY AND SLOWDOWN IN THE OVERALL MARKET SCENARIO. 8. 5 THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY HA D ENTERED INTO AGREEMENT WITH THE BUYERS OF THE SHOPPING AREA TO THE EXTENT OF 25,911.79 SQ FT AS FOLLOWS: SUMMARY FLOOR AREA IN SQ.FT GROUND 7285.36 FIRST 5904.07 I.T.A. NOS. 487 - 489/COCH/2019 31 8.6 THE LD. AR SUBMITTED THAT THE CIT(A) RE JECTED THE ASSESSMENTS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX OF THE TOTAL SALE OF THE PROPERTIES GIVEN BEFORE THE COMPLETION OF THE BUILDING AND WITHOUT THE SUPPORT OF ANY REGISTERED DOCUMENT. THE CIT(A) FOUND THAT 50 AGREEMENTS WERE ENTERED WITH THE CUSTOMERS FOR THE SALE OF THE FLOOR AREA, EVEN BEFORE THE COMPLETION OF THE PROJECT AS UNDER: ASSESSMENT YEAR NO OF AGREEMENT TOTAL AREA IN SQ.FT 2014 - 15 3 2694.96 2015 - 16 37 18848.72 2016 - 17 10 4428.11 TOTAL 50 25971.79 8. 7 THE LD. AR SUBMITTED THAT OU T OF THE ABOVE 50 AGREEMENTS THE DETAILS OF SALE AND RECEIPT OF CONSIDERATION BY CHEQUE AND CASH ARE FOUND IN RESPECT OF 20AGREEMENTS ONLY, FROM THE DOCUMENTS SEIZED AT THE TIME OF SEARCH, FROM THE RESIDENCE OF S HRI P. K . MOHAMMED K UTTY HAJI, THE CHAIRMAN OF THE COMPANY. IN RESPECT OF THESE 20 AGREEMENTS FOR A TOTAL OF 9471.43SQ . FT . AS DETAILED BELOW RS. 3,52,21,109/ - WAS RECEIVED BY CHEQUE AND RS. 3,60,42,509/ - WAS RECEIVED BY SECOND 5207.13 THIRD 4869.15 FOURTH 2706.08 TOTAL 25971.79 I.T.A. NOS. 487 - 489/COCH/2019 32 CASH AND THE TOTAL AMOUNT RECEIVED IS RS. 7,12,63,618/ - IN RESPECT OF THE FLOOR AREA AS UNDER: DETAILS IN RESPECT OF 20 AGREEMENTS A. Y SQ FT SOLD BY CHEQUE AS PER BOOKS BY CASH AS PER SEIZED DOCUMENTS AY 2014 - 15 587 20,54,500 19,72,000 AY 2015 - 16 4456.32 1,84,28,528 1,75,50,673 AY 2016 - 17 4428.11 1,47,38,081 1,65,19,836 TOTAL 9471.43 3,52,21,109 3,60,42,509 8. 8 IN RESPECT OF THE REMAINING 30 AGREEMENTS THE TOTAL FLOOR AREA OF 16500.36 .SQ FT . THE LD. AR SUBMITTED THAT RS. 5,82,26,337/ - WAS RECEIVED BY CHEQUE. THE LD. AR SUBMITTED THAT THE CIT(A) ESTIMATED THE PROBABLE RECEIPT OF CASH IN RESPECT OF REMAINING 30 AGREEMENTS WITHOUT EVIDENCE. ACCORDING TO T HE LD. AR, THE CIT(A) FO UND RS. 5,82,26,337/ - WAS RECEIVED BY CHEQUE AS PER BOOKS AND ESTIMATED THE RECEIPT OF CASH RS. 5,12,01,107/ - . DETAILS IN RESPECT OF 30 AGREEMENTS A. Y SQ FT SOLD BY CHEQUE AS PER BOOKS BY CASH AS ESTIMATED BY CIT(A) AY 2014 - 15 2107.96 69,79,542 13,15,986 AY 2015 - 16 14392.40 5,12,46,795 4,98,85,031 AY 2016 - 17 0 0 0 TOTAL 16500.36 5,82,26,337 5,12,01,107 I.T.A. NOS. 487 - 489/COCH/2019 33 8. 9 TH E LD. AR SUBMITTED THAT TH IS ESTIMATE WAS ON THE BASIS OF TH E TWO SHEETS OF PAPERS SEIZED FROM THE RESIDENCE OF SHRI P. K . MOHAMMED KUTTY H AJI AND ADOPTING THIS IN ASSESSEES CASE SHOULD BE ONLY U/S 153C OF THE ACT AFTER RECORDING SATISFACTION AS REQUIRED UNDER THE ACT WHICH WAS OMITTED B Y THE CIT (A) IN THE APPELLATE ORDER. 8 . 9. 1 THE L D. AR SUBMITTED THAT THE TOTAL AMOUNT OF CONSIDERATION RECEIVED IN CASH, OUT OF THE 20 AGREEMENTS, FROM THE SEIZED DOCUMENTS IS RS.3,60,42,509/ - AS UNDER: AY 2014 - 15 RS. 19,72,000 AY 2015 - 16 RS.1,75,50,673 AY 2016 - 17 RS.1,65,19,836 TOTAL RS.3,60,42,509 AS AGAINST THIS , IT WAS SUBMITTED THAT THE CIT(A) HA D ESTIMATED A SUM OF RS. 8,72,43,526/ - AS RECEIPT OF CONSIDERATION IN CASH WHICH RESULTED IN ASSESSING A SUM OF RS.5,12,01,017/ - IN EXCESS OF THE ACTUAL COLLECTION. THE LD. AR SUBMITTED THAT THE CIT(A) C ONSIDERED THE AMOUNT OF RS. 8,72,43,526/ - AS UNDISCLOSED INCOME FOR ALL THE 3 YEARS TOGETHER. THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY WAS FOLLOWING THE METHOD OF ACCOUNT OF CREDITING ALL THE AMOUNTS RECEIVED FR OM THE CUSTOMERS AS ONE OF THE ITEMS OF CURRENT LIABILITIES AND EXHIBITED IN THE BALANCE SHEET. IT WAS SUBMITTED THAT THIS AMOUNT RECEIVED FROM THE CUSTOMERS COMPRISED OF VALUE FOR THE LAND RIGHT AND VALUE FOR THE BUILDING AND THE VALUE OF THE LAND RIGHT R ECEIVED WAS CREDITED TO LAND VALUE OF THARIF MALL PAYABLE. OUT OF THE VALUE RE CEIVED FOR THE BUILDING, THE LD. AR SUBMITTED THAT 8% WAS TREATED AS INCOME IN THE RESPECTIVE I.T.A. NOS. 487 - 489/COCH/2019 34 YEARS AND THE BALANCE BUILDING VALUE WAS SHOWN AS LIABILITY. THE LD. AR SUBMITTED TH AT THE 8% PROFIT WAS CREDITED TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD INCOME RECOGNIZED FROM THARI F M ALL AND THE SAME AMOUNT WAS DEBITED TO BUILDING WORK IN PROGRESS. THE LD. AR DREW OUR ATTENTION TO THE FOLLOWING AMOUNT OF CURRENT LIABILITIES EXHIBITED IN THE BALANCE SHEET OF THE COMPANY: A.Y. LAND VALUE CONSTRUCTION VALUE AS ON 31 - 03 - 2014 24,39,190 65,94,852 AS ON 31 - 03 - 2015 2,12,51,511 5,74,57,854 AS ON 31 - 03 - 2016 2,52,33,239 6,82,14,207 8. 9 .2 THE LD. AR REFERRED TO THE DETAILS OF INCOME RECOGNIZED BY CREDITING PROFIT AND LOSS ACCOUNT AND DEBITING WORK IN PROGRESS ARE AS UNDE R: 8.9 . 3 THE LD. AR SUBMITTED THAT THE PROJECT EXPENSES WAS RS. 16,13,58,086/ - . THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE FOR THE 4 ASSESSMENT YEARS ARE AS UNDER: ASSESSMENT YEAR INCOME RECOGNIZED AY 2014 - 15 13,55,106 AY 2015 - 16 29,73,081 AY 2016 - 17 16,13,453 TOTAL 59,41,640 I.T.A. NOS. 487 - 489/COCH/2019 35 ASSESSMENT YEAR TOTAL 2013 - 14 2014 - 15 2015 - 16 2016 - 17 1) COST OF CO N STRUCTION 1,43,06,630 5,92,72,040 5,03,28,871 3,13,39,499 15,52,47,040 2) INDIRECT EXPENSES - 7,95,816 4,25,068 3,90,630 16,11,514 3)DEPRECIATION 13,01,688 19,05,472 12,92,372 44,99,532 TOTAL 1,43,06,630 6,13,69,544 5,26,59,411 3,30,22,501 16,13,58,086 8.9. 4 THE LD. AR SUBMITTED THAT ALL THE A BOVE EXPENSES WERE ONLY AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY ON THE BASIS OF WHICH THE RETURN S OF INCOME WERE FILED. THERE WER E NO EXPENSES WHICH WERE NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS. THE LD. AR SUBMITTED THAT THE N ET PROFIT COMPUTED ON THE BASIS OF COLLECTION AND EXPENDITURE BASED ON THE FACTS GIVEN ABOVE WILL BE AS FOLLOWS: - COLLECTION PARTICULARS AMOUNT IN RESPECT OF 20 AGREEMENTS TOWARDS CONSTRUCTION COST BY CHEQUE RS 3,52,21,109 IN RESPECT OF 20 AGREEMENTS TOWARDS CONSTRUCTION COST BY CASH RS. 3,60,42,509 TOTAL (A) 7,12,63,618 IN RESPECT OF REMAINING 30 AGREEMENTS TOWARDS CONSTRUCTION COST BY CHEQUE RS. 5,82,26,337 IN RESPECT OF REMAINING 30 AGREEMENTS TOWARDS CONSTRUCTION COST BY CASH ESTIMATED BY CIT(A) RS 5,12,01,017 TOTAL (B) 10,94,27,354 I.T.A. NOS. 487 - 489/COCH/2019 36 TOTAL COLLECTION FROM 50 AGREEMENTS AS ABOVE BY CHEQUE 9,34,47,446 TOTAL COLLECTION FROM 50 AGREEMENTS AS ABOVE BY CASH 8,72,43,526 TOTAL C ( A+B) 18,06,90,972 ASSESSMENT YEAR WISE DETAILS ARE AS UNDER: - ASSESSMENT YEARS CHEQUE AMOUNT CASH AMOUNT TOTAL 2014 - 15 90,34,042 32,87,986 1,23,22,028 2015 - 16 6,96,75,323 6,74,35,704 13,71,11,027 2016 - 17 1,47,38,081 1,65,19,836 3,12,57,917 TOTAL 9,34,47,446 8,72,43,526 18,06,90,972 EXPENDITURE TOTAL CONSTRUCTION COST AND EXPENDITURE INCLUDING DEPRECIATION IS AS FOLLOWS : NET SURPLUS(E=C - D) = 18,06,90,972 - 16,13,58,086 = 1,93,32,886/ - NET PROFIT 8% OF RS.19332886 = 1546631/ - ASSESSMENT YEAR TOTAL 2013 - 14 2014 - 15 2015 - 16 2016 - 17 1) COST OF CONSTRUCTION 1,43,06,630 5,92,72,040 5,03,28,871 3,13,39,499 15,52,47,040 2) INDIRECT EXPENSES - 7,95,816 4,25,068 3,90,630 16,11,514 3)DEPRECIATION 13,01,688 19,05,472 12,92,372 44,99,532 TOTAL (D) 1,43,06,630 6,13,69,544 5,26,59,411 3,30,22,501 16,13,58,086 I.T.A. NOS. 487 - 489/COCH/2019 37 INCOME ALREADY CLEARED AS UNDER: ASSESSMENT YEARS PROFIT 2014 - 15 13,55,106 2015 - 16 29,73,081 2016 - 17 16,13,453 TOTAL 59,41,640 8.9. 5 THE LD. AR SUBMITTED THAT S INCE SUBSTANTIAL PORTION OF THE BUILDING IS YET TO BE COMPLETED, THE NET DIFFERENCE BETWEEN TOTAL COLLECTION AND EXPENDITURE RS.1,93,32,886/ - IS NOT A PROFIT. ACCORDING TO THE LD. AR, THE PROFIT PORTION IS ESTIMATED @8% OF RS.1,93,32,886/ - IS RS.15,44,631/ - . IT WAS SUBMITTED THAT THE REMAINING AMOUNT IS TO BE TREATED ONLY AS ADVANCE FROM THE CUSTOMERS FOR THE FUTURE EXPENDITURE FOR THE COMPLETION OF BUILDING. THE ADDITIONAL PROFIT TO BE CONSIDERED ONLY 8% OF RS.1,93,32,886/ - RS .15,46,631/ - AS SHOWN ABOVE. THE AMOUNT TO BE DIVIDED FOR THE ASSESSMENT YEARS AS FOLLOWS: ASSESSMENT YEARS PROFIT 2014 - 15 131,464 2015 - 16 10,42,429 2016 - 17 3 , 72,738 TOTAL 15,46,631 8.9.6 IN VIEW OF THE ABOVE , THE LD. AR SUBMITTED THAT THE ADOPTION OF RS.8 , 72 , 43 , 526/ - AS THE INCOME IS INCORRECT AND THE ABOVE AMOUNTS MAY BE ACCEPTED. I.T.A. NOS. 487 - 489/COCH/2019 38 8.9. 7 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE RECEIVED THE AMOUNT BY WAY OF CASH TOWARDS SALE OF SHOPS AND THERE IS PROPORTIONATE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE WHICH IS TO BE GIVEN DEDUCTION. FURTHER, HE SUBMITTED THAT THE ASSESSEE HAS TREATED THE COST OF CONSTRUCTION RELATING TO THE TOTAL PROJECT AS WORK IN PROGRESS ONLY TAKING THE PORTION OF THESE RECEIPTS AS INCOME IN THESE ASSESSMENT YEARS. IT WAS SUBMITTED THAT THE AS SESSEE HAD OFFERED INCOME IN THESE ASSESSMENT YEARS AT LESSER OF THE TOTAL COST INCURRED BY THE ASSESSEE AS PROFIT IN THESE ASSESSMENT YEARS AND THE BALANCE WAS SHOWN AS WORK IN PROGRESS IN THE BALANCE SHEET. ACCORDINGLY, ON THE SAME PRINCIPLES, THE INCOM E IS TO BE ASCERTAINED ON THE UNACCOUNTED CASH RECEIPTS ON SALE OF SHOPS. 9. THE LD. A R SUBMITTED THAT T HERE ARE NO VALID SEIZED MATERIALS TO SUSTAIN THE ADDITIONS . T HE LD. AR SUBMITTED THAT THE BUILDING CONSTRUCTION WITH A TOTAL AREA OF 78,624.28 SQ FT WAS ONLY PARTLY COMPLETED AS ON 31 - 03 - 2016 RELATING TO AY 2016 - 17. THE LD. AR SUBMITTED THAT IN THESE ASSESSMENT YEARS, THE PROJECT WAS NOT COMPLETED AND IT IS ONLY WORK IN PROGRESS SHOWN BY THE AS SESSEE IN ITS BALANCE SHEET. EVEN IF THERE ARE UNACCOUNTED COLLECTIONS IN THE FORM OF CASH, IT CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. IT TAKES THE CHARACTER OF ADVANCE RECEIVED BY WAY OF CHEQUE. THE RECEIPT OF MONEY IN CASH CANNOT BE TREATED A S INCOME OF THE ASSESSEE. THE INCOME WILL BE RECOGNIZED ONLY ON COMPLETION OF PROJECT AND REGISTRATION OF SALE DEED IN FAVOUR OF THE PURCHASER. HE ALSO SUBMITTED THAT THE ASSESSEE HAS NOT OBTAINED OCCUPANCY CERTIFICATE AND THE MAJOR WORKS ARE PENDING I.T.A. NOS. 487 - 489/COCH/2019 39 FOR C OMPLETION. HE DREW OUR ATTENTION TO THE VARIOUS WORKS AS MENTIONED IN PARA 7.4 OF THIS ORDER WHICH ARE REQUIRED ON 31 - 03 - 2016 FOR THE COMPLETION OF THE PROJECT. 10 . T H US, IT WAS SUBMITTED THAT THE ASSESSING OFFICER ASSUMED THAT THE FULL AREA OF 78,62 4.28 SQ. FT ARE COMPLETED DURING THE AY 2014 - 15, 2015 - 16 AND 2016 - 17 AND ESTIMATED THE SALE VALUE AT RS.62,47,79,878/ - WHICH IS NOT JUSTIFIED . T HE LD. AR SUBMITTED THAT THE BUILDING CONSTRUCTION WITH A TOTAL AREA OF 78,624.28 SQ FT WAS ONLY PARTLY COMPLETED AS ON 31 - 03 - 2016 RELATING TO AY 2016 - 17. THE LD. AR SUBMITTED THAT IN THESE ASSESSMENT YEARS, THE PROJECT WAS NOT COMPLETED AND IT IS ONLY WORK IN PROGRESS SHOWN BY THE ASSESSEE IN ITS BALANCE SHEET. EVEN IF THERE ARE UNACCOUNTED CO LLECTIONS IN THE FORM OF CASH, IT CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. IT TAKES THE CHARACTER OF ADVANCE RECEIVED BY WAY OF CHEQUE. THE RECEIPT OF MONEY IN CASH CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE INCOME WILL BE RECOGNIZED ONLY O N COMPLETION OF PROJECT AND REGISTRATION OF SALE DEED IN FAVOR OF THE PURCHASER. HE ALSO SUBMITTED THAT THE ASSESSEE HAS NOT OBTAINED OCCUPANCY CERTIFICATE AND THE MAJOR WORKS ARE PENDING FOR COMPLETION . 11. T H US, IT WAS SUBMITTED THAT THE ASSESSING OFFICER ASSUMED THAT THE FULL AREA OF 78,624.28 SQ FT ARE COMPLETED DURING THE AY 2014 - 15, 2015 - 16 AND 2016 - 17 AND ESTIMATED THE SALE VALUE AT RS.62,47,79,878/ - WHICH IS NOT JUSTIFIED. I.T.A. NOS. 487 - 489/COCH/2019 40 12. THE LD . DR SUBMITTED THERE IS VALID SEIZED MATERIALS FOR ESTIMATING THE COLLECTION OF CASH OUTSIDE T HE BOOKS OF ACCOUNTS AT RS.32,87,986/ - AND ALSO NO DEDUCTION COULD BE GIVEN TOWARDS ANY EXPENDITURE INCURRED BY THE ASSESSEE AS THE A D DITIONS WAS MADE U/S 69A OF THE I.T. ACT A ND ENTIRE UNACCOUNTED CASH COLLECTIONS TO BE CONSIDERED AS INCOME OF ASSESSEE. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THE PRESENT CASE, THE ASSESSEE HAS COLLECTED UNACCOUNTED SALE RECEIPTS IN THE FORM OF CASH FOR THE ASSESSME NT YEARS 2014 - 15 TO 2016 - 17. THE CIT( A) EXTRAPOLATED THE INCOME ON THE BASIS OF THE SEIZED DOCUMENTS IN RESPECT OF 50 AGREEMENTS AND ESTIMATED THE UNDISCLOSED INCOME FOR THESE ASSESSMENT YEARS. THE CONTENTION OF THE LD. AR IS THAT THESE ENTIRE UNACCOUNTE D SALE RECEIPTS CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE IN THESE ASSESSMENT YEARS AND MATCHING PRINCIPLES IS TO BE FOLLOWED AND DEDUCTIONS TOWARDS CORRESPONDING COST OF CONSTRUCTION IS TO BE CONSIDERED WHICH WAS SHOWN AS WORK IN PROGRESS IN THE BALANCE SHEET. HE SUBMITTED THAT THE COST OF CONSTRUCTION RELATING TO THE UNACCOUNTED COLLECTIONS WHICH WAS SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND REFLECTED IN THE BALA NCE SHEET AS WORK IN PROGRESS. HE DREW OUR ATTE NTION TO THE CORRESPONDING ENTRY IN THE BALANCE SHEET SHOWN AS WORK IN PROGRESS IN ALL THE ASSESSMENT YEARS. WE HAVE GONE THROUGH THE BALANCE SHEET RELATING TO ALL ASSESSMENT YEARS AND FOUND THAT THERE IS ENTRY RELATING TO WORK IN PROGRESS IN ITS BALANCE SHEET. THE ASSESSEE HAS ACCOUNTED ENTIRE COST OF CONSTRUCTION INCURRED BY ASSESSEE AFTER SHOWING A FIXED PERCENTAGE OF INCOME ON IT AND BALANCE WAS SHOWN IN THE BALANCE SHEET AS WORK IN PROGRESS. AS SEEN FROM THE I.T.A. NOS. 487 - 489/COCH/2019 41 ORDER OF THE CIT(A), THE ENTIRE UNACCOUNTED COLLECTIONS WERE CONSIDERED BY THE CIT(A) AS UNDISCLOSED INCOME OF ASSESSEE WHICH IS REPRODUCED ELSEWHERE IN THIS ORDER , WE FIND THAT THERE IS ALSO CLERICAL MISTAKE IN THE S AID COMPUTATION. 13.1 IF WE CONSIDER THE ENTIRE INCOM E AS COMPUTED B Y CIT(A) IN THE HANDS OF THE ASSESSEE, THE PERCENTAGE OF PROFIT IS WORKED OUT AT EXORBITANT RATE WHICH IS HUMANELY IMPOSSIBLE TO EARN SUCH A RATE OF PROFIT BY A DEVELOPER AND IT GIVES DISTORTED PICTURE OF THE ASSESSEES BUSINESS AFFAIRS. IT MEANS THAT THER E IS ERROR IN THE COMPUTATION OF UNDISCLOSED INCOME BY THE CIT(A). IN OTHER WORDS, A PART OF WORK IN PROGRESS SHOWN BY THE ASSESSEE IN ITS BALANCE SHEET IS ALSO RELATING TO THE UNACCOUNTED CASH RECEIPTS COLLECTED BY THE ASSESSEE. THEREFORE, WE HAVE TO C ONSIDER THE COST OF CONSTRUCTION RELATING TO THE UNACCOUNTED SALE RECEIPTS COLLECTED BY WAY OF CASH BY THE ASSESSEE. THE ASSESSEE FURNISHED THE DETAILS OF COLLECTIONS AS WELL AS COST OF CONSTRUCTIONS AS BELOW: ASSESSMENT YEAR WISE DETAILS ARE AS UNDER: - ASSESSMENT YEARS CHEQUE AMOUNT RS. CASH AMOUNT RS. TOTAL RS. 2014 - 15 90,34,042 32,87,986 1,23,22,028 2015 - 16 6,96,75,323 6,74,35,704 13,71,11,027 2016 - 17 1,47,38,081 1,65,19,836 3,12,57,917 TOTAL 9,34,47,446 8,72,43,526 18,06,90,972 I.T.A. NOS. 487 - 489/COCH/2019 42 EXPENDITURE TOTAL CONSTRUCTION COST AND EXPENDITURE INCLUDING DEPRECIATION IS AS FOLLOWS : ( IN RS .) 13.2 IN OUR OPINION, IT IS PROPER TO CONSIDER THE ABOVE COST OF CONSTRUCTION AFTER DUE VERIFICATION OF IT BY ASSESSING OFFICER WITH WIP DISCLOSED BY ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO GIVE DUE CREDIT TOWARDS COST OF CONSTRUCTION RELATING TO THE UNACCOUNTED SALE RECEIPTS COLLECTED BY THE ASSESSEE WHICH WAS INCLUDED IN THE WORK IN PROGRESS THAT WAS SHOWN BY THE ASSESSE E IN ITS BALANCE SHEET. WITH THIS OBSERVATION, WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSE OF RE - QUANTIFICATION OF THE ADDITION IN RESPECT OF UNACCOUNTED CASH RECEIPTS UNEARTHED BY THE DEPARTMENT DURING THE COURSE OF SEARCH/SURVEY ACTION. THE ASSESSING OFFICER IS DIRECTED TO COMPARE THE ABOVE COST OF CONSTRUCTION WITH THE WORK IN PROGRESS SHOWN BY THE ASSESSEE IN ITS BALANCE SHEET. 13.3 IN OTHER WORDS, THE TOTAL W ORK IN PROGRESS SHOWN BY THE ASSESSEE IN ITS BOO KS OF ACCOUNTS IN EACH ASSESSMENT YEAR IS TO BE APPORTIONED BETWEEN ACCOUNTED COLLECTIONS AND UNACCOUNTED COLLECTIONS IN THEIR RESPECTIVE RATIO SO AS TO ARRIVE AT ASSESSMENT YEAR TOTAL 2013 - 14 2014 - 15 2015 - 16 2016 - 17 1) COST OF CONSTRUCTION 1,43,06,630 5,92,72,040 5,03,28,871 3,13,39,499 15,52,47,040 2) INDIRECT EXPENSES - 7,95,816 4,25,068 3,90,630 16,11,514 3)DEPRECIATION - 13,01,688 19,05,472 12,92,372 44,99,532 TOTAL (D) 1,43,06,630 6,13,69,544 5,26,59,411 3,30,22,501 16,13,58,086 I.T.A. NOS. 487 - 489/COCH/2019 43 CORRECT UNDISCLOSED INCOME OF ASSESSEE FOR EACH ASSESSMENT YEAR. THE RESULTANT FIGURE WOULD B E THE UNDISCLOSED INCOME OF THE ASSESSEE FOR EACH ASSESSMENT YEAR AND THERE IS NO QUESTION OF TAKING ANY PERCENTAGE OF IT AS INCOME OF ASSESSEE AS ARGUED BY LD. AR. FURTHER, WE HAVE ALREADY HELD IN EARLIER PARA WHILE ADJUDICATING THE COMMON GROUND NO.1 IN THE APPEALS AND ADDITIONAL GROUNDS OF APPEALS THAT ESTIMATION OF UNACCOUNTED RECEIPTS IS JUSTIFIED IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. H OTEL MERIYA (332 ITR 537). THUS , THERE IS NO CHANGE IN FIXATION OF UNACCOUNT ED RECEIPTS I.E. RS . 8,72,43,526 / - AND IT DOES NOT REQUIRE TO ADJUDICATE THE COMMON GROUND NO.2 IN ALL THESE THREE APPEALS AND ASSESSEE IS ONLY ENTITLED FOR PROPORTIONATE DEDUCTION TOWARDS COST OF CONSTRUCTION AND ACCORDINGLY AO HAS TO RECOMPUTE THE UNACCOUNTED INCOME FOR ALL THREE ASSESSMENT YEARS AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS NEEDLESS TO SAY THAT THE ADDITION MADE BY THE ASSESSING OFFICER HEREIN IS NOT U/S. 69 OR 69A OF THE I.T. ACT. IT IS WITH REFERENCE TO THE UNACCO UNTED SALE RECEIPTS WHICH IS PART OF THE ASSESSEES TURNOVER. BEING SO, THE RESTRICTION IMPOSED U/S. 69 OR 69A OF THE I.T. ACT WITH REGARD TO GRANTING OF DEDUCTION TOWARDS EXPENDITURE DOES NOT APPLY. I.T.A. NOS. 487 - 489/COCH/2019 44 THUS, THE GROUND NO.2 IS DISMISSED & GROUND NO.3 IS ALLOWED IN THESE THREE APPEALS FOR ALL THE ASSESSMENT YEARS. 1 4 . IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MAY, 2020 . SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 19 TH MAY, 2020 GJ COPY TO: 1 . M/S. THARIF BUILDERS, THARIF ARCADE, PUTHIYARA, KOZHIKODE - 673 004. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 2, KOZHIKODE. 3. THE COMMISSIONER OF INCOME - TAX (APPEALS) - III, KOCHI. 4 . THE COMMISSIONER OF INCOME - TAX, CENTRAL, KO CHI. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN