The ACIT, Central Circle-1, RAJKOT-GUJARAT V. M/s. Rushab Vatika, RAJKOT-GUJARAT

ITA 51/RJT/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85424 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: DM RINDANI
• Keywords: Income from undisclosed sources; Loose papers; Question of law; Wrong claim; Capital expenditure
• Section: 145; 37; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBULAL , RAJKOT BENCH: RAJKOT , , BEFORE SHRI ANIL CHATURVEDI , A CCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER . / I.T.A. NO . 51/ RJT/ 2013 ( / ASSESSMENT YEAR : 2010 - 11 ) THE ASSTT.CIT CENTRAL CIR - 1 RAJKOT / VS. M/S.RUSHABH VATIKA 301, TRADE CENTRE SARDARNAGAR MAIN ROAD RAJKOT ./ ./ PAN/GIR NO. : AALFR 0187 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M.L. MEENA, CIT - DR / RESPONDENT BY : SHRI D.M. RINDANI, C.A. / DATE OF HEARING 04 /12/2014 / DATE OF PRONOUNCEMENT 18 /12/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - IV, AHMEDABAD ( CIT (A) IN SHORT ) DATED 19/12/2012 PERTAINING TO ASSESSMENT YEAR (AY) 2010 - 11 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO RS.51,98,616/ - OUT OF TOTAL ADDITION OF RS.4,15,88,930/ - MADE ON ACCOUNT OF SUPPRESSION OF PROFIT ON SALE OF PLOTS AND ACCORDINGLY GIVEN RELIEF OF RS.3,63,90,314/ - . ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 2 - 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ON THE ABOVE POINT. 2. B RIEFLY STATED FACTS ARE THAT A SEARCH ACTION WAS CARR IED OUT AT THE BUSINESS PREMISES OF THE PARTNERS OF THE ASSESSEE - FI RM ON 15/09/2009. THE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143(3) OF THE I NCOME TAX ACT ,1961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS FRAMED VIDE ORDER DATED 21/02/2012, THEREBY THE ASSESSING OFFICER (AO IN SHORT ) MADE ADDITION OF RS.4,15,88,930/ - AGAINST THE DECLARED INCOME OF RS.1,67,36,536/ - . WHILE MAKING THE ASSESSMENT THE AO TREATED THE ENTIRE ON MONEY RECEIPTS AT RS.5,19, 86,163/ - AS THE INCOME OF THE ASSESSEE - FIRM. AGAINST THIS, THE ASSESSEE FILED AN APPE AL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS RESTRICTED THE ADDITION TO THE EXTENT OF 30% OF THE ON MONEY RECEIPTS, THEREBY THE ESTIMATED PROFIT S OF SUCH UNA CCOUNTED SALES AMOUNTING TO RS.1,55,95,849/ - WAS SUSTAINED AND THE ASSESSEE WAS GIVEN RELIEF OF RS.4,15,88,930/ - . 3. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGAINST IN RESTRICTING THE ADDITION TO RS.51,9 8 ,616/ - ON ACCOUNT OF SUPPRESSION OF PROFIT ON SALE OF PLOTS. 4 . THE LD.CIT - DR REITERATED THE SUBMISSIONS MADE IN THE WRIT TEN SUBMISSIONS. HE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN RESTRICTION THE ADDITION. THE WRITTEN SUBMISSION OF THE LD.CIT - DR IS REPRODUCED HEREUNDER: - ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 3 - WRITTEN SUBMISSION FACTS OF THE CASE A SEARCH U/S. 132 OF THE ACT WAS CONDUCTED AT BUSINESS AND RESIDENTIAL PREMISES OF SHRI CHANDRAKANT M.SHETH ON 15/9/2009. THE ASSESSEE IS ENGAGED IN PLOTTING OF LAND ACTIVITIES. IT HAD DEVELOPED A PROJECT KNOWN AS 'RUSHAV VATIKA' AT AHMEDABAD. DURING THE C OURSE OF SEARCH, INCRIMINATING MATERIALS WERE FOUND EVIDENCING RECEIPT OF ON - MONEY (BEING CASH COMPONENT OF THE TRANSACTION) ON SALE OF PLOTS WHICH HAS SINCE BEEN QUANTIFIED AT RS.5,19,86,163/ - AS 'ADDITIONAL CASH SALES DISCLOSED DURING THE SEARCH AND CRED ITED AS SUCH TO THE AUDITED PROFIT AND LOSS ACCOUNT OVER AND ABOVE THE AMOUNT RECEIVED THROUGH CHEQUES. THE SAID SUM OF ON MONEY (RS.5,19,86,163) SHALL HEREIN AFTER BE REFERRED TO AS THE IMPUGNED SUM. IT IS ADMITTED BY THE ASSESSEE AND ACCEPTED BY BOTH THE AO AND THE LD.CIT(A) THAT THE IMPUGNED SUM HAS BEEN COLLECTED IN CASH ON SALE OF PLOTS OF LAND OVER AND ABOVE THE AMOUNT COLLECTED THROUGH CHEQUES. AS PER THE COMPUTATION OF INCOME ACCOMPANYING THE AUDIT REPORT, THE ASSESSEE HAD WORKED OUT INCOME FOR THE PURPOSE OF TAX AS UNDER: - NET PROFIT AS PER P&L ACCOUNT 53103690 51986163 LESS ADDITIONAL CASH SALES DISCLOSED DURING SEARCH CREDITED TO P&L ACCOUNT SEPARATELY TREATED ADD :TDS INTEREST 11,776 ADD: PROVISION FOR INCOME TAX 5200000 ADD: DONATION U/S.80G TREATED SEPARATELY 20,000 ADD: GP @ , 20% ON ACCOUNT OF ADDITIONAL SALES 10397233 15629009 DISCLOSED DURIN G SEARCH (RS.5 1986 163 X 20%) LESS: DEDUCTION U/S.80G 10,000 TAXABLE PROFIT 16736536 ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 4 - NET PROFIT SHOWN AT RS.53103690 IN THE AUDITED P&L ACCOUNT IS INCLUSIVE OF THE UNACCOUNTED ON MONEY RECEIPT OF RS.5,19,86,163 / - THE IMPUGNED SUM. FOR TAX PURPOSE, THE ASSESSEE PROCEEDED TO WORK OUT ITS TAXABLE INCOME IN THE SAID COMPUTATION OF INCOME IN WHICH THE ASSESSEE FIRST EXCLUDED THE IMPUGNED SUM FROM THE NET PROFIT SHOWN IN THE AUDITED PROFIT AND LOSS ACCOUNT AND THEREAFTER ADDED BACK ONLY 20% OF THE IMPUGNED SUM WITH THE RESULT THAT THE AMOUNT OF NET PROFIT AS SHOWN IN TH E AUDITED PROFIT AND LOSS ACCOUNT STOOD REDUCED BY 80% OF THE IMPUGNED SUM IN THE COMPUTATION OF INCOME FOR INCOME TAX PURPOSES. IN THE COMPUTATION OF INCOME FILED WITH THE RETURN OF INCOME ON THE BASIS OF WHICH TOTAL INCOME HAS BEEN RETURNED, THE ASSESSE E HAS THUS EXCLUDED 80% OF THE IMPUGNED SUM (RS.51986163) AND RESULTANTLY REDUCED ITS NET PROFIT TO RS.16736536/ - FOR TAX PURPOSES AS AGAINST RS.53103690/ - SHOWN IN THE AUDITED PROFIT AND LOSS ACCOUNT AND ACCORDINGLY OFFERED SUCH REDUCED AMOUNT OF NET PROF IT TO TAX. THE A.O. HOWEVER, DID NOT ACCEPT THE AFORESAID TREATMENT GIVEN TO THE IMPUGNED SUM IN THE COMPUTATION OF INCOME AND THEREFORE BROUGHT THE IMPUGNED SUM BEING ENTIRE COLLECTION OF ON - MONEY IN CASH TO THE CHARGE OF INCOME TAX. SINCE THE ASSESSEE HAD ALREADY OFFERED A SUM OF RS.10397233/ - BEING 20% OF THE ON - MONEY FOR TAX, THE AO BROUGHT THE REMAINING SUM, I.E. RS.41588930/ - TO THE CHARGE OF INCOME TAX, WITH THE FOLLOWING OBSERVATIONS; - THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED BUT THE SAME IS NOT ACCEPTABLE. VIDE PARA (2) OF THE ABOVE SUBMISSION, THE ASSESSEE HAD TAKEN THE PLEA THAT THE ENTIRE UNDISCLOSED SALES SHOULD NOT BE TREATED AS INCOME SINCE SALES DO NOT CONSTITUTE INCOME., PARTICULARLY WHEN NO EVIDENCE OF UNDISCLOSED INCOME IS FOUND. H OWEVER, THIS IS FALSE, IN LIGHT OF THE DETAILED DISCUSSION OF INCRIMINATING EVIDENCE MADE IN THE FIRST PART OF THIS ORDER. FURTHER THE ASSESSEE HAD NOT FURNISHED ANY DETAILS OF EXPENSES TO JUSTIFY THE OFFERING OF ONLY 20% PROFIT FROM SALE OF PLOTS. IN FACT , ALL THE EXPENSES HAVE ALREADY BEEN LOOKED IN THE REGULAR BOOKS OF ACCOUNTS. THE DIFFERENCE BETWEEN THE PURCHASE PRICE/DOCUMENTED PRICE PLUS THE EXPENSES AND THE SALE PRICE IS THE PROFIT MARGIN OF THE ASSESSEE, WHICH HAS TO BE BROUGHT TO TAX. THEREFORE, T HE ASSESSEE HAS FAILED TO JUSTIFY ITS CLAIM OF HAVING EARNED ONLY 20% FROM SALE OF PRICE. THE LD.CIT(A) FAILED TO APPRECIATE THE FACTS SAND EVIDENCES DISCUSSED IN THE ASSESSMENT ORDER BY THE A.O. BASED ON THE EVIDENCES COLLECTED DURING THE COURSE OF SEARC H U/S.132 AND STATEMENT OF SHRI CHANDRAKANT M. SHETH RECORDED . THE REAL CONTROVERSY ON THE FATS OF THE CASE IS WHETHER THE NET PROFIT SHOWN BY THE ASSESSEE FIRM ITSELF IN ITS AUDITED PROFIT AND LOSS ACCOUNT, WHICH HAS ALSO BEEN CERTIFIED BY THE TAX AUDIT OR IN TERMS OF SECTION 44AB TO BE TRUE AND CORRECT PROFIT ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 5 - OF THE ASSESSEE FROM ITS BUSINESS CAN BE DISCARDED BY THE ASSESSEE WITHOUT BRINGING ANY MATERIAL ON RECORD TO ESTABLISH THAT THE SAID PROFIT AND LOSS ACCOUNT AND AUDIT REPORT IS INCORRECT. ANOTHER R ELATED ISSUE THAT NEEDS TO BE CONSIDERED IS WHETHER NET PROFIT SHOWN BY THE ASSESSEE FIRM IN ITS AUDITED PROFIT AND LOSS ACCOUNT CAN BE REDUCED BY 80% OF THE IMPUGNED SUM WITHOUT THERE BEING ANY DETAIL OR MATERIAL ON RECORD TO SHOW THAT EXPENSES TO THE EXT ENT OF 80% OF THE IMPUGNED SUM WERE AT ALL INCURRED BY THE ASSESSEE AND ALLOWABLE AS SUCH U/S.37 OF THE INCOME TAX ACT. THE ONLY GROUND ON WHICH SUCH EXCLUSION COULD BE SOUGHT WOULD PERHAPS BE ON THE GROUND THAT 20% OF THE IMPUGNED SUM REPRESENT NET PROFI T WHILE REMAINING 80% REPRESENTS EXPENSES. IN THIS CONNECTION, REFERENCE MAY BE MADE TO THE PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT WHICH DEALS WITH DEDUCTION OF EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. DEDUCTION ON ACC OUNT OF EXPENSES INCURRED BY AN ASSESSEE IS PERMISSIBLE ONLY WHEN IT IS ESTABLISHED BY HIM THAT (I) EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND SUCH EXPENSES ARE NOT IN THE NATURE OF PERSONAL OR CAPITAL EXPENDITURE; ( II)SUCH EXPENSES HAVE BEEN INCURRED IN THE YEAR IN WHICH DEDUCTION IS CLAIMED AND (III) DEDUCTIBILITY OF SUCH EXPENDITURE IS NOT HIT BY EXPLANATION TO SUB - SECTION (1) OF SECTION 37. IT IS THE ASSESSEE FIRM WHICH WAS CLAIMING DEDUCTION OF 80% OF THE IMPUGNE D SUM FROM NET PROFITS AND HENCE THE BURDEN WAS OBVIOUSLY ON IT TO ESTABLISH THAT THE REQUIREMENTS OF SECTION 37 WERE SATISFIED. THERE ARE THREE PRINCIPAL REASONS AS TO WHY 80% OF THE IMPUGNED SUM ( OR 70% AS DETERMINED BY THE LD.CIT(A) CANNOT BE ALLOW ED AS DEDUCTION TOWARDS EXPENDITURE. ONE, SUCH EXPENDITURE HAS NOT BEEN SHOWN IN THE BOOKS OF ACCOUNT AND THEREFORE CLAIM FOR SUCH EXPENDITURE IS COMPLETELY INCONSISTENT WITH THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND AUDITED BY THE TAX AUDITOR. CIT(A) HAS NEITHER CALLED FOR REMAND REPORT AS DISCUSSED THE ISSUE OF JUSTIFICATION OF EXPENDITURE IN LIGHT OF EXPLANATION TO SUB SECTION (1) OF SECTION 37. PERUSAL OF THE APPELLATE ORDER ( PARA 5) PASSED BY THE ID.CIT(A) SHOWS THAT THREE JUDGMENTS WERE CITED BY THE ASSESSEE BEFORE THE ID. CIT(A) IN SUPPORT OF ITS SUBMISSION THAT ONLY NET PROFILE RATE COULD BE APPLIED ON THE IMPUGNED SUM. THESE JUDGMENTS ARE: (I) CIT V. GURBACHANSINGH JUNEJA, 302 ITR 63 (GUJ): (II) CIT V. PRESIDENT INDUSTRIES, 258 ITR 654 (GUJ) AND (III) 201 ITR 008 .FIRST TWO JUDGMENTS DEAL WITH ASSESSMENT OF PROFIT ON UNACCOUNTED SALES OUTSIDE THE BOOKS OF ACCOUNT. IN THE CASE BEFORE US, ARE ALTOGETHER DIFFERENT FROM THOSE IN THE AFORESAID FIRST TWO JUDGMENTS. AS REGARDS THIRD JUDGMENTS, THE ASSESSEE HAS NOT GIVEN FULL CITATION, HOWEVER, WE HAVE PERUSED THE JUDGMENT AVAILABLE AT PAGE 8 OF VOLUME 201 OF INCOME TAX REPORTS NAMELY, THE JUDGMENT. IN CIT V. GRIFFON LABORATORIES. THE SAID JUDGMENT DOES NOT DEAL WITH THE ISSUE UNDER APPEAL. THE LD. CIT (A) HAS ALSO RELIED UPON THE JUDGMENT IN CIT V. SAMEER SYNTHETICS MILL, 326 ITR 410 (GUJ) WHICH DEALS WITH APPLICATION OF NET PROFIT RATE TO TURNOVER. FOR ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 6 - REASONS SIMILAR TO THOSE GIVEN EARLIER, THIS JUDGMENT IS ALSO NOT APPLICABLE. IT DESERVES TO BE MENTIONED ONCE AGAIN THAT THE REAL CONTROVERSY BEFORE US IS NOT THE ONE MADE OUT BY THE ASSESSEE BUT AS TO WHETHER (I) NET PROFIT SHOWN BY THE ASSESSEE - FIRM ITSELF IN ITS AUDITED PROFIT & LOSS ACCOUNT CAN AT ALL BE DISCARDED BY THE ASSESSEE WITHOUT BRI NGING ANY MATERIAL ON RECORD TO SHOW THAT THE ITEMS TOGETHER WITH FIGURES INCORPORATED IN THE PROFIT & LOSS ACCOUNT ARE INCORRECT: AND (II) 80% OF THE IMPUGNED SUM CAN BE TREATED AS EXPENDITURE, AS CLAIMED BY THE ASSESSEE IN THE ABSENCE OF ANY EVEN BASIC D ETAILS, MATERIAL OR EVIDENCE IN SUPPORT THEREOF. NONE OF THE JUDGMENTS CITED BY THE ASSESSEE BEFORE THE CIT(A) OR RELIED UPON BY THE CIT(A) SAYS THAT THE ASSESSEE CAN DISCARD ITS OWN AUDITED PROFIT & LOSS ACCOUNT WITHOUT BRINGING ANY DETAIL OR EVIDENCE ON RECORD TO ESTABLISH THAT THE ITEMS AND FIGURES MENTIONED IN THE AUDITED PROFIT & LOSS ACCOUNT ARE INCORRECT. THE ASSESSEE - FIRM HAS NOT PROVED THAT ITS OWN PROFIT & LOSS ACCOUNT THE CORRECTNESS OF WHICH HAS BEEN DULY CERTIFIED BY THE ASSESSEE AS WELL AS ITS AUDITOR IS INCORRECT. IN THIS FACT - SITUATION, NONE OF THE JUDGMENTS RELIED UPON BY THE ASSESSEE OR BY THE LD. CIT (A) WOULD HELP THE ASSESSEE. IN VIEW OF THE FORGOING, I DO NOT AGREE WITH THE CIT (A) THAT 30% THE IMPUGNED SUM ALONE IS LIABLE TO BE TAXED. HIS ORDER SUFFERS FROM SEVERAL INFIRMITIES SOME OF WHICH ARE AS UNDER : (I) LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT EVEN THE AO WAS NOT AUTHORIZED BY LAW TO DISCARD THE NET PROFIT SHOWN IN AUDITED PROFIT & LOSS ACCOUNT WITHOUT INVOKING S ECTION 145 (3). IT WAS NOT OPEN TO THE LD. CIT(A) TO DISCARD AUDITED PROFIT & LOSS ACCOUNT WITHOUT BRINGING ANY MATERIAL ON RECORD TO ESTABLISH THAT THE SAID PROFIT & LOSS ACCOUNT WAS INCORRECT. HE OUGHT TO HAVE FURTHER APPRECIATED THAT THE NET PROFIT ON T HE BASIS OF WHICH THE AO HAS ASSESSED THE PROFITS OF THE ASSESSEEE'S BUSINESS WAS BASED ON AUDIT REPORT AND THAT THE ASSESSEE GAVE NO MATERIAL TO ESTABLISH THAT THE SAID AUDIT REPORT WAS INCORRECT. (II) HE ALSO FAILED TO NOTICE THAT THE ASSESSEE - FIRM ITSELF HAS SHOWN THE IMPUGNED SUM AS PART OF ITS NET PROFIT IN THE AUDITED PROFIT & LOSS ACCOUNT AND THEREFORE IT WAS LIABLE TO BE INCLUDED IN ITS ENTIRETY FOR TAX PURPOSES SUBJECT TO STATUTORY ALLOWANCE/DISALLOWANCES AND NOT 70% THEREOF. THERE IS NO REFE RENCE TO THE AUDITED PROFIT AND LOSS ACCOUNT AND AUDIT REPORT IN THE ENTIRE OPERATIVE PORTION OF HIS ORDER I.E. PARA 6 OF THE ORDER OF CIT(A). HE THUS FAILED TO CONSIDER THE MOST RELEVANT EVIDENCE I.E. AUDITED PROFIT AND LOSS ACCOUNT. HE ACTED UPON THOSE SUBMISSIONS OF THE ASSESSEE WHICH WERE NEITHER SUPPORTED BY ANY EVIDENCES ON UNACCOUNTED ON MONEY RECEIPT AND EXPENDITURE. HE STRAIGHTAWAY APPLIED CERTAIN DECISIONS REFERRED TO BY THE ASSESSEE WITHOUT ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 7 - EXAMINING AS TO WHETHER THE CASE OF THE ASSESSEE FITS I N THOSE FACT SITUATIONS OR NOT. HAVING NOTED THAT THERE WAS NO EVIDENCE TO ESTABLISH THAT THE ASSESSEE FIRM HAD INCURRED ANY EXPENDITURE TO EARN THE IMPUGNED SUM, THE ID.CIT(A) STILL ALLOWED 70% OF THE IMPUGNED SUM AS EXPENDITURE IGNORING THE FACT THAT THE CLAIM FOR SUCH DEDUCTION WAS NOT ONLY INCONSISTENT WITH THE ASSESSEE'S OWN AUDITED BOOKS OF ACCOUNT BUT ALSO THE STATUTORY PROVISIONS CONTAINED IN THE INCOME TAX ACT. HE PROCEEDED TO ASSUME WITHOUT THERE BEING ANY EVIDENCE ON RECORD THAT THE ASSESSEE FIRM MUST HAVE PAID UNACCOUNTED MONEY FOR PURCHASING THE LAND AND DEVELOPING IT BEFORE SELLING THEM. MATERIALS AVAILABLE ON RECORD CLEARLY INDICATE THAT THE IMPUGNED SUM WOULD HAVE GONE COMPLETELY UNTAXED IF THE REVENUE AUTHORITIES HAD NOT CARRIED OUT SEARCH OPERATIONS. NO EVIDENCE WAS FOUND EVEN AT THE TIME OF SEARCH THAT THE ASSESSEE HAD INCURRED ANY EX PENDITURE OVER AND ABOVE THOSE REFLECTED IN THE BOOKS. IN THE FACE OF RECOVERY OF SUCH MATERIALS DURING SEARCH OPERATIONS, THE ASSESSEE HAD NO OPTION EXCEPT TO CREDIT THE IMPUGNED SUM AS A WHOLE TO ITS PROFIT AND LOSS ACCOUNT. AFTER CREDITING THE IMPUGNED SUM TO THE PROFIT AND LOSS ACCOUNT AS A RESULT OF DETECTION BY THE REVENUE, THE ASSESSEE MADE VET ANOTHER ATTEMPT TO EVADE PAYMENT OF LEGITIMATE TAXES DUE TO THE STATE BY EXCLUDING 80% OF THE IMPUGNED SUM FROM NET PROFIT WORKED OUT BY THE TAX AUDITOR IN TH E AUDITED PROFIT AND LOSS ACCOUNT, WHICH THE ASSESSEE FAILED TO SUBSTANTIATE. THE ASSESSEE HAS DELIBERATELY SUPPRESSED AND THEREBY CONCEALED THE PARTICULARS AND/OR FURNISHED INACCURATE PARTICULARS OF ITS TRUE INCOME ERNE THE RETURN OF INCOME BY CLAIMING DE DUCTION TO THE EXTENT OF 80% WITH FULL KNOWLEDGE THAT CLAIM FOR SUCH DEDUCTION WAS INCONSISTENT WITH ITS OWN AUDITED BOOKS OF ACCOUNT AND STATUTORY PROVISIONS OF THE INCOME TAX ACT AND THEREFORE COMPLETELY UNTENABLE ON FACTS AND IN LAW. IT IS AN OPEN AND S HUT CASE OF BOGUS CLAIM FOR DEDUCTION TO THE EXTENT OF 80% OF THE IMPUGNED SUM SO AS TO EVADE PAYMENT OF LEGITIMATE TAXES DUE. FURTHER, NEW FACTS REVEALED OUT OF THE SUBMISSION AND PRESENTATION OF ASSESSEE 'S SUBMISSION AND PRESENTATION BEFORE HON'BLE ITAT RAJKOT BENCH, RAJKOT. THE ON MONEY RECEIPTS OVER AND ABOVE MONEY RECEIVED BY CHEQUES HAS SHOWN IN PROFIT & LOSS ACCOUNT AGAINST UNACCOUNTED SALES OF 32 PLOTS AND REMAINING 24 PLOTS HAS BEEN TAKEN IN THE NEXT YEARS WITHOUT ANY BASIS, SINCE ALL THESE PL OTS 32+24=56 HAS BEEN SOLD IN THE SAME FINANCIAL YEAR AS PER THE STATEMENT DEPOSITED ON OATH DURING THE COURSE BY CHANDRAKANT SHETH AND POST SEARCH INQUIRES AS DISCUSSED IN ASSESSMENTS ORDER PARA 3.8 AND 3.9 IN PAGE 10 TO 13. THE ENTIRE RECEIPT AGAINST THE SALES OF THOSE 24 PLOTS SHALL BE LIABLE TO TAX DURING THE ASSESSMENT YEAR TO THE RELEVANT FINANCIAL YEAR UNDER THIS APPEAL. ACCORDINGLY HON'BLE MEMBERS ARE REQUESTED TO KINDLY CONSIDER THIS PORTION OF UNACCOUNTED INCOME, AND DIRECT THE ASSESSING OFFICER, SUITABLY. SD/ - (DR.MITH A LAL MEENA) COMMISSIONER OF INCOME TAX, ITAT RAJKOT ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 8 - 4. 1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE IN THE SYNOPSIS, WHICH ARE IN THE FOLLOWING TERMS: - SYNOPSIS OCT, 2009 PARTICUL A RS: - SEARCH ACTION CONDUCTED U/S 132 AT PREMISES OF A PARTNER OF THE RESPONDENT - FIRM AT RAJKOT. LOOSE PAPERS SHOWING BOTH DISCLOSED AND UNDISCLOSED PORTIONS OF SALE OF PLOTS BELONGING TO THE FOUND. ON BEHALF OF FIRM, PARTNER SURRENDERED THE UNDISCLOSED SALES AMOUNT AND IN THE STATEMENT U/S 132(4), AGREED TO PAY TAX WITH INTEREST ON THE INCOME/PROFIT ARISING OUT OF UNDISCLOSED SALES (PAGE 11, 13) AND NOT ON GROSS SALES FOUND IN SEARCH. 29 - 09 - 2010 PARTICULARS: - IN RETURN OF INCOME OF THE FIRM PROFIT ELEMENT COMPUTED @ 20% OF SALES OFFERED TO TAX. (PAGE 17) IN BOOKS OF THE FIRM, ENTRY FOR RECORDING GROSS UNDISCLOSED (ON MONEY) SALES WAS MADE (PAGE 23). A SPECIFIC AND SEPARATE DISCLOSURE IN THE RETUR N OF INCOME AND IN THE AUDITED ACCOUNTS WAS MADE TO CLARIFY THIS ASPECT OF ACCOUNTING AND INCOME COMPUTATION. (PAGE 26,17) PARTNER HAS NOT TAKEN BENEFIT OF CAPITALISATION/ TELESCOPING OF GROSS SALES BUT OF PROFIT ELEMENT ONLY (WHICH IS EVEN GRANTED BY SET TLEMENT COMMISSION TO THE PARTNER IN INDIVIDUAL CAPACITY) (PAGE 48) 21 - 02 - 2012 PARTICULARS: - THE DEPT. TREATED THE ENTIRE UNDISCLOSED (ON - MONEY) SALES AS INCOME AS AGAINST PROFIT @ 20% SHOWN. IT MAY BE STATED THAT NO EVIDENCE OF UNEXPLAINED/UNDISCLOSED EXPENDITURE WAS FOUND DURING SEARCH . 11 - 09 - 2012 PARTICULARS: - THE SETTLEMENT COMMISSION, IN CASE OF THE ASSOCIATE CONCERN, IN RESPECT OF A PLOTTED LAND DEVELOPMENT SCHEME SITUATED IN AHMEDABAD IN PROXIMITY OF AND SIMILAR KIND OF SCHEME OF THE FIRM, ACCEPTED THE PRINCIPLE OF TAXING INCOME ONLY AND NOT THE GROSS UNDISCLOSED ON - MONEY. THE COMMISSION SETTLED THE RATE OF PROFIT @ 30%. (PAGE 57) 19 - 12 - 2012 PARTICULARS: - THE C.I.T. (APPEALS) - IV, AHMEDABAD, UPHELD THE PRINC IPLE OF PROFIT ON SALES AS INCOME AND ESTIMATED THE RATE OF PROFIT @ 30% OF ON - MONEY SALES. 30 - 05 - 2013 PARTICULARS: - AGAINST THE ORDER OF THE C.I.T.(APPEALS) DETERMINING PROFIT RATE @ 30% AS AGAINST 100% ASSESSED BY THE DEPT., THE REVENUE PREFERRED SECOND APPEAL. THE HON'BLE RAJKOT TRIBUNAL PASSED AN EX - PARTE ORDER, REVERSING THE ORDER OF C.I.T.(APPEALS), FOR REASONS STATED IN THE ORDER OF TRIBUNAL. ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 9 - 06 - 08 - 2013 PARTICULARS: - THE ASSESSEE PREFERRED A MISCELLANEOUS APPLICATION (M. A.), CONTENDING THAT THERE WERE SEVERAL ERRORS IN THE ORDER OF THE TRIBUNAL. 31 - 12 - 2013 PARTICULARS : - THE HON'BLE TRIBUNAL ALLOWED THE M.A. THE ORDER PASSED BY IT HAS BEEN RECALLED AND THE DEPT.'S APPEAL IS RESTORED FOR FRESH HEARING AND DISPOSAL. CONTENTIONS IN BRIEF: I ) DUR ING SEARCH, IT WAS NOT ASKED ANY QUESTION OR WAS NOT REQUIRED BY THE AUTHORISED OFFICER TO ADMIT OR TO SPECIFY THE QUANTUM OF INCOME OR THE EXPENDITURE THERETO OR THE RATE OF PROFIT. THUS, IT WAS LEFT TO THE ASSESSEE. (PAGE 11,13) WHO AGREED TO DECLARE INCOME ONLY. II ) THE ASSESSEE DISCLOSED PROFIT @ 20% ON UNDISCLOSED SALES AMOUNT IN THE RETURN OF INCOME, WITH SPECIFIC NOTES IN ACCOUNTS. DURING ASSESSMENT, THE FIRM WAS SHOW CAUSED ONLY TO EXPLAIN THE BASIS OF 20% PROFIT RATE AND NOTHING FURTHER (PAGE 45). THE ASSESSEE WAS NOT EVEN CALLED UPON OR REQUIRED TO SPECIFY AND PROVE THE EXPENSES INCURRED. BUT IN THE ASSESSMENT, THE A.O. STATED THAT THE ASSESSEE DID NOT PROVE THAT UNACCOUNTED EXPENSES WERE INCURRED TO EARN UNACCOUNTED(ON - MONEY) SALES. III ) FURTHER, THE ASSESSEE EXPLAINED AND JUSTIFIED THE ADOPTION OF 20% RATE BY CITING SEVERAL INSTANCES. IN THE ORDER U/S 158BC OF THE SAME PARTNER OF THIS FIRM, THE DEPT. ITSELF IN PAST HAS APPLIED 12% PROFIT RATE ON UNDISCLOSED ON - MONEY SALES ON LAND PLOTS FOUND DURING SE ARCH IN THE YEAR 2002 (PAGE 46 - 47). IV) IN PARTNER'S ASSESSMENT U/S 158BC DATED 30 - 9 - 2004, DEPT. ITSELF ACCEPTED PROFIT THEORY ON LAND PLOTS @ 12% (COPY ANNEXED). V) ONLY BOOK - KEEPING ENTRY DOESN'T CREATE INCOME OF A PERSON (46 ITR 144) (SC). ENTRY RECORDING SALES WAS EXPLAINED IN AUDITED ACCOUNTS, HENCE IT CANNOT BE DISREGARDED; ADMISSION IS NOT NECESSARILY CONCLUSIVE (91 ITR 18) (SC), IT CAN BE EXPLAINED. VI) ASSESSEE IS NOT SELF ESTOPPED BY THE TREATMENT GIVE B Y ASSESSEE IN ITS OWN BOOKS OF ACCOUNT (82 ITR 363 SC; 75 ITR 191 SC, 81 DTR 202). VII) IN SUBSEQUENT YEAR, ASSESSEE HAS ACCOUNTED FOR IN ITS BOOKS ONLY PROFIT @ 20% ON ON - MONEY SALES FOR A.Y. 2011 - 12 (PAGE 79 & 84). THIS RETURN IS ACCEPTED BY DEPT. U/S 139(1). SD/ - PARTNER 4. 2 . APART FROM THAT, THE LD.COUNSEL FOR THE ASSESSEE HAS MADE RELIANCE ON THE FOLLOWING JUDGEMENTS OF HON BLE APEX COURT AND OF VARIOUS HON BLE HIGH COURT S : - ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 10 - 1 . JUDGEMENT OF HON BLE SUPREME COURT IN THE CASE OF PULLANGODE RUBBER PRODUCE CO.LTD. VS. STATE OF KERALA & ANR. (1973) 91 ITR 18 (SC). 2 . JUDGEMENT OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. SHOORJI VALLABHDAS & CO. (1962) 46 IT R 144(SC). 3 . JUDGEMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. PANNA CORPORATION (2012) 74 DTR (GUJ.) 89. 4 . JUDGEMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.SAMIR SYNTHETICS MILL (2010) 326 ITR 410 (GUJ.) 5 . JUDGEMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GURUBACHCHAN SINGH J.JU NEJA (2008) 302 ITR 63 (GUJ.) 6 . JUDGEMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (2002) 258 ITR 654 (GUJ.). 7 . JUDGEMENT OF HON BLE MADHYA PRADESH HIGH COURT IN THE CASE OF MAN MOHAN SADANI VS. CIT (2008) 304 ITR 52 (MP). 8 . JUDGEMENT OF HON BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP). 9 . JUDGEMENT OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.M. OMER (1992) 201 ITR 608 (CAL.). 4.3. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT UNDER THE IDENTICAL FACTS, THE HON BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF DCIT VS. PANNA CORPORATION(SUPRA) HAS HELD THAT ONLY PROFIT ELEMENT SUBMITTED INTO THE ON MONEY RECEIPT IS LIABLE TO BE TAXED. 5. WE HAVE HEARD THE R IVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENTS RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE. THE ONLY CONTROVERSY IN THE PRESENT APPEAL IS WHETHER THE LD.CIT(A) W AS JUSTIFIED IN RESTRICTING THE ADDITION. THE UNDISPUTED FACTS EMERGE FROM THE RECORDS ARE THAT THE AO ON THE BASIS OF THE STATEMENT AND THE MATERIAL SEIZED DURING THE COURSE OF S EARCH PROCEEDINGS DETERMINED THE ON ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 11 - MONEY RECEIPTS OF RS.5,19,86,163/ - RELATED TO THE RUSHABH VATIKA PROJECT OF ASSESSEE - FIRM. OUT OF 105 PLOTS OF THE PROJECT , SHRI CHANDRAKANT M.SHETH IN HIS STATEMENT ACCEPTED THE RECEIPT OF ON MONEY WITH REGARD TO 56 PLOTS ONLY. FROM THE RECORDS, IT IS TRANSPIRED THAT THE AO HAS NOT MAD E ANY FURTHER ENQUIRY EXCEPT THE ASSESSMENT I S MADE ON THE BASIS OF THE STATEMENT AND THE MATERIAL SEIZED DURING THE COURSE OF SEARCH ACTION. THE ASSESSEE - FIRM IS IN THE DEVELOPMENT OF THE HOUSING PROJECT. AT PAGE NOS.11 & 12 OF THE ASSESSMENT ORDER , THE AO HAS OBSERVED THAT THE ASSESSEE HAD RE GISTERED THE SALE - DEEDS IN RESPECT OF 32 PLOTS IN WHICH THE A HAS RECEIVED CASH COMPONENT OF RS.2,42,36,414/ - AND ALSO RECORDED THAT IN RESPECT OF OTHER 24 PLOTS, THE SALE - DEEDS WERE NOT EXECUTED, WHEREIN THE A SSESSEE HAD RECEIVED CASH COMPONENT TO THE TUNE OF RS.2,19,87,225/ - . THE AO PROCEEDED TO MAKE ADDITION ON THE ENTIRE CASH RECEIPTS ; HOWEVER, THE LD.CIT(A) RESTRICTED ADDITION TO THE EXTENT OF 30% OF SUCH RECEIPT TREATING THE SAME AS PROFIT EMBEDDED INTO THE RECEIPTS. WHILE DOING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 6.4 SO FAR AS THE CONTENTION OF THE AO, THAT IN THE PRESENT CASE COMPLETE EVIDENCE OF ON - MONEY RECEIPTS IN RESPECT OF ALL THE CASES WAS FOUND AND, THEREFORE, THERE WAS NO REQUIREMENT OF A NY EXTRAPOLATION AS WELL AS ESTIMATION OF INCOME UNLIKE OTHER CASES / PROJECTS OF THE SAME GROUP LIKE SILVER SPRINGS, IS CONCERNED, IT MAKES NO DIFFERENCE AT ALL AS TO WHETHER THE ENTIRE UNACCOUNTED RECEIPTS IS DETERMINED BY WAY OF EXTRAPOLATION BASED ON T HE SINGLE INSTANCE OF ON - MONEY RECEIPTS OR ON THE BASIS OF COMPLETE EVIDENCE OF ON - MONEY RECEIPTS. THE MOOT ISSUE IS THAT THE ENTIRE QUANTUM OF UNACCOUNTED RECEIPTS IS NOT DISPUTED BY THE APPELLANT AT ALL IN BOTH THE PROJECTS. ONCE THE QUANTUM OF ENTIRE UN ACCOUNTED RECEIPTS / SALES IS UNDISPUTED, THE MANNER OF ARRIVING AT THE SAME BY WAY OF EXTRAPOLATION OR ON THE BASIS OF COMPLETE EVIDENCE IS HARDLY A ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 12 - RELEVANT FACTOR FOR THE PURPOSE OF ESTIMATION OF PROFITS ON SUCH UNACCOUNTED SALES. 6.5 IN VIEW OF THE A BOVE, I AM OF THE CONSIDERED OPINION THAT THE ENTIRE UNACCOUNTED SALES / ON MONEY RECEIPTS CANNOT BE TAXED IN THE HANDS OF THE APPELLANT AND ONLY ESTIMATED PROFITS ON SUCH UNACCOUNTED RECEIPTS CAN BE TAXED IN THE HANDS OF THE APPELLANT. 6.6 SO FAR AS THE ESTIMATION OF PROFIT WHICH SHOULD BE TAXED IN THE HANDS OF THE APPELLANT IS CONCERNED, IT IS POINTED OUT BY THE APPELLANT THAT THE HON BLE COMMISSION HAS DETERMINED THE NET PROFIT WHICH SHOULD BE CHARGED IN RESPECT OF THE PROJECTS KOTHARIYA 1 72, SILVER STONE AND SILVER SPRINGS @ 30% IN PLACE OF 20% DISCLOSED IN THE RETURNS OF INCOME AS WELL AS IN THE APPLICATION SUBMITTED BEFORE THE SETTLEMENT COMMISSION. THIS IS ALSO A FACT THAT BOTH SILVER SPRINGS AND RUSHABH VATIKA ARE NEARBY PROJECTS SITUA TED IN CHEKHLA VILLAGE HAVING IDENTICAL BUSINESS OF SELLING OF PLOTS OF LAND. THE HON BLE COMMISSION WHILE ESTIMATING THE PROFITS OF SILVER SPRINGS @ 30% HAS DULY CONSIDERED THE BUSINESS ACTIVITIES OF NEARBY RUSHABH VATIKA PROJECT FOR THE PURPOSE. THEREFOR E, IT CANNOT BE DISPUTED THAT THE ESTIMATION OF PROFITS OF THE APPELLANT IN RESPECT OF RUSHABH VATIKA PROJECT HAS TO BE IN TUNE WITH THE ESTIMATION OF PROFITS IN THE CASES OF SILVER SPRINGS AS SETTLED BY THE COMMISSION UNLESS ANY DIFFERENTIATING EVIDENCE I N RESPECT OF RUSHABH VATIKA PROJECT IS BROUGHT ON RECORD. IT IS FURTHER NOTED THAT SHRI MUKESH M. SHETH, A KEY PERSON OF THE GROUP IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT HAS CLEARLY ADMITTED THE FACT OF UNACCOUNTED SALES AND OFFERED TO TAX THE INC OME OR PROFIT ARISING OUT OF THE SAID UNACCOUNTED SALES. THE ENTIRE UNACCOUNTED SALES HAS NOT BEEN OFFERED / DISCLOSED AS INCOME AS INCOME AS IS EVIDENT FROM THE PERUSAL OF THE STATEMENT RECORDED. 6.7 IT IS FURTHER NOTED THAT THE APPELLANT HAS SHOWN THE GROSS PROFIT OF RS.67,34,398/ - ON ITS ACCOUNTED SALES OF RS.3,69,66,577/ - IN RESPECT OF RUSHABH VATIKA PROJECT. THUS, THE GROSS PROFIT SHOWN ON THE ACCOUNTED SALES IS 18.22%. THEREFORE, THE CONTENTION OF THE APPELLANT, THAT FOR THE SAME SCHEME OF LAND PLO TS, THE DEPARTMENT HAS TAXED THE INCOME @ 12% FOR BLOCK PERIOD ENDING ON ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 13 - 12.09.2002 WHICH HAS BECOME FINAL, IS NOT JUSTIFIED SO FAR AS THE PRESENT YEAR IS CONCERNED WHEREIN DISCLOSED GROSS PROFIT ON ACCOUNTED SALES IS 18.22%. IT IS ALSO AN ADMITTED FACT TH AT IN RESPECT OF UNACCOUNTED SALES, THE MARGIN OF PROFIT IS ALWAYS HIGHER. 6.8 IN VIEW OF THE ABOVE AND CONSIDERING THE ORDER OF THE SETTLEMENT COMMISSION IN RESPECT OF SILVER SPRINGS WHEREIN PROFIT HAS BEEN ESTIMATED @ 30% INSTEAD OF 20% OFFERED IN THE RETURN OF INCOME, IT WOULD BE FAIR AND REASONABLE TO ADOPT THE SAME RATE OF ESTIMATED PROFIT EVEN IN THE CASE OF RUSHABH VATIKA PROJECT OF THE APPELLANT. THE TOTAL UNACCOUNTED SALES IN THE PRESENT CASE IS RS.5,19,86,163/ - . THE ESTIMATED PROFITS ON SUCH UN ACCOUNTED SALES @ 30% ACCOUNTING TO RS.1,55,95,849/ - IS ACCORDINGLY TAXED IN THE CASE OF THE APPELLANT. SINCE THE APPELLANT HAS ALREADY DISCLOSED PROFIT OF RS.1,03,97,233/ - @ 20% ON THE QUANTUM OF UNACCOUNTED SALES, THE BALANCE AMOUNT OF RS.51,98,616/ - IS , THEREFORE, SUSTAINED OUT OF TOTAL ADDITION MADE BY THE AO AT RS.4,15,88,930/ - . 5.1. WE FIND THAT THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS AS WELL AS FACTS OF THE CASE, HAS CONFIRMED THE ADDITION TO THE EXTENT OF 30% OF THE CASH RECEIPTS (ON M ONEY). THE REVENUE IS ASS A IL ING THIS FINDING ON THE GROUND THAT THE ENTIRE RECEIPTS IS REQUIRED TO BE TAXED AS THE ASSESSEE FAILED TO SUBS TANTIATE THE CORRESPONDING EXPENDITURE. THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON TH E JUDGEMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT VS. PANNA CORPORATION (TAX APPEAL NO.323 & 325 OF 200):: (2012) 74 DTR (GUJ.) 89, DATED 16/06/2012 , WHEREIN , UNDER THE IDENTICAL FACTS, THE HON BLE HIGH COURT , AFTER CONSIDERING VARIOUS JUDICIAL PRONOUN CEMENT HELD AS UNDER: - 14. WE MAY RECALL THAT THE TRIBUNAL, IN THE IMPUGNED JUDGEMENT, RELIED ON ITS PREVIOUS JUDGEMENT IN CASE OF KISHOR MOHANLAL TELWALA. THE SAID JUDGEMENT OF THE TRIBUNAL WAS APPARENTLY CARRIED IN APPEAL BY THE REVENUE. THE HIGH COURT BY A SPEAKING ORDER DATED 24.4.2000, DISMISSED THE APPEAL HOLDING THAT NO ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 14 - QUESTION OF LAW WAS INVOLVED. SIGNIFICANTLY, IN CASE OR KISHOR MOHANLAL TELWALA, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION. IN HIS CASE, UNACCOUNTED RECEIPT OF R S.1.47 CRORES WAS DETECTED. IN THIS BACKGROUND, THE DIVISION BENCH CONFIRMED THE VIEW OF THE TRIBUNAL AND DID NOT ACCEPT THE CONTENTION OF THE REVENUE THAT AS NO ACCOUNTS HAD BEEN MAINTAINED TO SUBSTANTIATE THE EXPENDITURE INCURRED BY THE ASSESSEE, THE ENT IRE AMOUNT RECEIVED BY THE RESPONDENT SHOULD BE TREATED AS INCOME. THE COURT CONCLUDED THAT THE TRIBUNAL WAS JUSTIFIED IN CONSIDERING THAT THE RESPONDENT ASSESSEE OUGHT TO HAVE SPENT REASONABLE AMOUNT FOR THE PURPOSE OF RECEIVING SUCH GROSS RECEIPT. 15. IT CAN, THUS, BE SEEN THAT CONSISTENTLY, THIS COURT AND SOME OTHER COURTS HAVE BEEN FOLLOWING THE PRINCIPLE THAT EVEN UPON DETECTION OF ON MONEY RECEIPT OR UNACCOUNTED CASH RECEIPT, WHAT CAN BE BROUGHT TO TAX IS THE PROFIT EMBEDDED IN SUCH RECEIPTS AND NOT THE ENTIRE RECEIPTS THEMSELVES. IF THAT BE THE LEGAL POSITION, WHAT SHOULD BE ESTIMATED AS A REASONABLE PROFIT OUT OF SUCH RECEIPTS, MUST BEAR AN ELEMENT OF ESTIMATION. 16. IN VIEW OF THE LEGAL POSITION THAT NOT THE ENTIRE RECEIPTS, BUT THE PROFIT ELEME NT EMBEDDED IN SUCH RECEIPTS CAN BE BROUGHT TO TAX, IN OUR VIEW, NO INTERFERENCE IS CALLED FOR IN THE DECISION OF THE TRIBUNAL ACCEPTING SUCH ELEMENT OF PROFIT AT RS.26 LAKHS OUT OF TOTAL UNDISCLOSED RECEIPT OF RS.62 LAKHS. IN OTHER WORDS, WE ACCEPT THE LE GAL PROPOSITION, THE TRIBUNAL ACCEPTING RS.26 LAKHS DISCLOSED BY THE ASSESSEE AS PROFIT OUT OF TOTAL UNDISCLOSED RECEIPT OF RS.62 LAKHS, WOULD NOT GIVE RISE TO ANY QUESTION OF LAW. 5.2. WE FIND MERIT IN THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS COVERED BY THE JUDGEMENT OF HON BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF DCIT VS. PANNA CORPORATION(SUPRA). T HE HON BLE GUJARAT HI GH COURT IN THE CASE OF DCIT VS. PANNA CORPORATION(SUPRA) HAS RECORDED THE FACTS IN PARA - 2 , AS UNDER: - ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 15 - 2. THE RESPONDENT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF CONSTRUCTION OF FLATS AND RESIDENTIAL COMPLEXES. THE ASSESSEE STARTED CO NSTRUCTION OF A TOTAL OF 120 FLATS IN A COMPLEX CALLED ASHOPLAB A PARTMENTS IN THE CITY OF SURAT. THE SCHEME CONTAINED THREE TYPES OF FLATS ADMEASURING 725 SQUARE FEET, 750 SQUARE FEET AND 975 SQUARE FEET RESPECTIVELY. THE FLATS WERE SOLD AT A DISCLOSED RATE OF RS.185/ - PER SQUARE FEET. A SEARCH WAS CARRIED OUT ON 4.7.1996. INITIALLY, A DISCLOSURE WAS MADE OF UNDISCLOSED INCOME OF RS.3.5 LAKHS BY A PARTNER OF THE ASSESSEE FIRM SHRI K. R. SARDARA. THIS DISCLOSURE WAS CONFIRMED BY THE OTHER PARTNER OF THE FIRM SHRI JANAKBHAI P. BALAR IN HIS STATEMENT ON 5.7.1997. IN RESPONSE TO NOTICE ISSUED BY THE DEPARTMENT, THE ASSESSEE FILED RETURN DECLARING UNDISCLOSED INCOME OF RS.26 LAKHS. DURING THE SEARCH OF THE RESIDENTIAL PREMISES OF SHRI BALAR, A LOOSE PAPER NO. 31 WAS FOUND AND SEIZED. THE PAPER PERTAINED TO DETAILS OF SALE OF TWO OF THE FLATS. THE STATEMENT OF SHRI BALAR UNDER SECTION 132(4) OF THE INCOME TAX ACT, 1961 WAS RECORDED ON 4.7.1996. ON THE BASIS OF THE CONTENTS OF THE LOOSE PAPER AND THE STATEMENT OF THE PARTNER, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE PARTNERSHIP FIRM WAS COLLECTING UNACCOUNTED CASH FROM THE PURCHASERS OF THE FLATS. HE ESTIMATED SUCH CASH COLLECTION AT RS.1 LAKH PER FLAT. SINCE FOR THE BLOCK PERIOD UNDER CONSIDERATION, 62 FLATS WERE SOLD, HE BELIEVED THAT THE ASSESSEE HAD EARNED UNDISCLOSED INCOME OF RS.62 LAKHS DURING THAT PERIOD. HE, ACCORDINGLY, PASSED AN ORDER DATED 30.7.1997 AND ORDERED COLLECTION OF TAX AND INTEREST ETC. ON SUCH BASIS. 5.3. IN THE CASE IN HAND ALSO, THE AO HAS SUBJECTED THE ENTIRE UNACCOUNTED RECEIPT FOR TAXATION. THEREFORE, IN VIEW OF THE BINDING PRECEDEN T OF THE JURISDICTIONAL HIGH COURT REN DERED IN THE CASE OF DCIT VS. PANNA CORPORATION (SUPRA), WE DO NOT SEE ANY GOOD REASON TO INTERFERE WITH THE FINDING OF THE LD.CIT(A). MOREOVER, THE REVENUE HAS NOT PLACED ANY CONTRARY JUDGEMENT OF THE HON BLE SUPREME COURT OR THE JURISDICTIONAL HIGH COURT AND ALSO IT IS NOT DISPUTED BY THE REVENUE THAT IN GROUP CASE OF THE ASSESSEE AND CASES PERTAINING TO THE AYS 2008 - 09 & 2009 - 10 IN ASSESSEE S OWN CASE THE REVENUE HAS ACCEPTED THE TAXABILITY ITA NO. 51 / R JT / 2013 ACIT VS. M/S.RUSHABH VATIKA ASST.YEAR 2010 - 11 - 16 - OF 30% OF THE RECEIPTS BEFORE THE SETTLEMENT COMMISSION. THUS, GROUND S RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVE NUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THURSDAY , THE 18 TH DAY OF DECEMBER , 2014 AT AHMEDABAD SD/ - SD/ - ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD ; DATED 18 / 12 /20 14 . . , . . ./ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - IV, AHMEDABAD 5. , , /DR,ITAT, RAJKOT 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, RAJKOT 1 . DATE OF DICTATION .. 1 0 /12 .12.2014 (DICTATION - PAD 7 +3 PAGES ATTACHED AT THE END OF THIS FILE) 2 . DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1 2 .12.14 3 . OTHER MEMBER 4 . DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S .. 5 . DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6 . DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P .S . 18.12.14 7 . DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18.12.14 8 . DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9 . THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER .. 10. DATE OF DESPATCH OF THE ORDER