DCIT, New Delhi V. M/s. Amrapali Realtors, Delhi

ITA 5277/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2697 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: AMIT GOEL
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 143(3); 68; 6; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C , NEW DELHI BEFORE SH. I.C. SUDHIR , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 5045 /DE L/ 2014 ASSESSMENT YEAR : 2007 - 08 M/S. AMRAPALI REALTORS, R - 19, 3 RD FLOOR, MAIN SHAKARPUR MARKET, VIKAS MARG, NEW DELHI VS. DCIT, CENTRAL CIRCLE - 7, NEW DELHI PAN : AAMFA9540M (APPELLANT) (RESPONDENT) AND ITA NO. 5277/DEL/2014 ASSESSMENT YEAR : 2011 - 12 DCIT, CENTRAL CIRCLE - 7, NEW DELHI VS. M/S. AMRAPALI REALTORS, R - 19, 3 RD FLOOR, MAIN SHAKARPUR MARKET, VIKAS MARG, NEW DELHI PAN : AAMFA9540M (APPELLANT) (RESPONDENT) ASSESSEE BY SH. AMIT GOEL, ADV. DEPARTMENT BY SH. A.K. SAROHA, CIT(DR) DATE OF HEARING 21.06.2017 DATE OF PRONOUNCEMENT 31.07.2017 ORDER PER O.P. KANT , A. M. : THESE TWO A PPEALS BY THE ASSESSEE AND THE R EVENUE ARE DIRECTED AGAINST TWO SEPARATE ORDER DATED 14/07/2014 PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS) - I, NEW DELHI [IN SHORT THE CIT - (A) ] FOR ASSESSMENT YEAR 2007 - 08 AND 2011 - 12 RESPECTIVELY. THE 2 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 APPEALS BEING CONNECTED WITH SAME ASSESSEE , WERE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO. 5045/DEL/2014 FOR AY 2007 - 08 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO. 5045/DEL/2014 ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.45,00,000/ - MADE BY THE ASSESSING OFFICER. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THE AMOUNT OF RS.45,00,000/ - AS INCOME OF A.Y. 2007 - 08 INSTEAD OF FOR A.Y. 2011 - 12 AS RETURNED BY THE ASSESSEE. THE APPELLANT CRAVES LEAVE TO ADD ONE OR MORE GROUND OF APPEAL OR TO ALTER/MODIFY THE EXISTING GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. THE AFORESAID GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3 . BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME , DECLARING INCOME OF RS. 21, 310 / - ON 31/10/2007. SUBSEQUENT TO A SEARCH AND SEIZURE A CTION UNDER SECTION 132 OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) ON 09/09/2 010, A NOTICE UNDER SECTION 15 3A OF THE ACT WAS ISSUED ON 07/04/2011 AND IN RESPONSE THE ASSESSEE FILED RETURN DECLARING INCOME OF RS.21, 310 / - ON 27/08/2012 . DURING THE COURSE OF SEARCH, FOLLOWING INCRIMINATING RECEIPTS RELATING TO THE ASSESSEE WERE FOUND: D ATE P ARTICULARS A MOUNT 05/06/2006 A DVANCE FROM CUSTOMERS AMRAPALI RS. 40,00,000/ - 07/08/ 2006 ADVANCE FROM CUSTOMERS AMRAPALI RS.5,00, 000/ - 3 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 TOTAL RS. 45,00,000/ - 3 .1 ON THE BASIS OF THE INCRIMINATING DOCUMENTS CONFRONTED DURING THE ASSESSMENT PROCEEDING, THE ASS ESSEE SURRENDERED AMOUNT OF RS.45,00, 000/ - . ACCORDING TO THE ASSESSEE THE CASH RECEIPTS HAD BEEN RECEIVED FROM CUSTOMERS ON ACCOUNT OF BOOKING OF FLATS , THUS, IT APPORTIONED THE CASH RECEIPT AS PER THE PERCENTAGES OF COMPLETION METHOD AND TAKEN THE SAME IN THE INCOME IN PROPORTION TO THE COMPLETION OF THE CONSTRUCTION , IN ASSESSMENT YEAR 2011 - 12. 3 .2 THE ASSESSING OFFICER WAS NOT CONVINCED AND ACCORDING TO HIM THE CASH RECEIPT FOUND TO BE RECEIVED IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR IN CONSIDERATION, BUT NOT RECORDED IN THE BOOKS OF ACCOUNTS WAS TO B E TREATED AS UNEXPLAINED INCOME O F THE ASSESSEE UNDER SECTION 6 9A OF THE ACT IN THE YEAR UNDER CONSIDERATION I.E. AY 2007 - 08: 3 .3 T HE LD. CIT - (A) UPHELD THE FINDING OF THE ASSESSING OFFICER WITH FOLLOWING OBSERVATIONS: 3.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE, IT IS UNDISPUTED THAT THE AMOUNT OF RS.45,00,000/ - RECEIVED BY THE APPELLANT AS ADVANCE FROM CUSTOMERS IN JUNE AUGUST. 2006 WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, AND WAS ADMITTED AS UNDISCLOSED INCOME. HO WEVER, THE SAID INCOME WAS OFFERED FOR TAXATION IN FY 2010 - 11 RELATING TO AY 2011 - 12, WHICH IS FACTUALLY INCORRECT AND CONTRARY TO ADMISSION OF APPELLANT S PARTNER. THE AMOUNT OF ADDITIONAL INCOME ADMITTED IS NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOU NT AND HENCE THE POC METHOD, APPLICABLE TO DETERMINE THE PROJECT INCOME, APPLICABLE TO TRANSACTIONS DULY RECORDED IN THE BOOKS AND REFLECTED IN THE P&L AND BALANCE SHEET, IS NOT APPLICABLE TO ADMITTEDLY UNRECORDED OR UNACCOUNTED TRANSACTIONS. IT IS A SETTL ED PRINCIPLE OF LAW THAT INCOMPARABLE CANNOT BE COMPARED. TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT CANNOT BE COMPARED WITH TRANSACTIONS WHICH ARE 4 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 UNRECORDED. THE UNRECORDED SALES PROCEEDS OF THE FLATS WAS CONSUMED AND ENJOYED BY THE PARTNERS AT THE TI ME OF RECEIPT. THERE WAS NEVER THE INTENTION TO RECORD THESE RECEIPTS IN THE BOOKS OF ACCOUNT AND THUS THESE TRANSACTIONS CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING INCOME OF THE PROJECT AS PER THE POC METHOD. 3 .4 AGGRIEVED , THE ASSESSEE IS IN AP PEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 3 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY DISPUTE IS IN RESPECT OF THE ASSESSMENT YEAR IN WHICH THE AMOUNT OF RS.45,00, 000/ - SHOULD BE ASS ESSED. THERE IS NO DISPUTE ON THE AMOUNT OF ADDITION. ACCORDING TO THE ASSESSEE, THE AMOUNT REPRESENTED CASH RECEIPT AGAINST BOOKING OF VILLAS FROM CUSTOMERS AND THUS SHOULD BE ASSESSED IN ASSESSMENT YEAR 2011 - 12 FOLLOWING THE PERCENTAGE OF COMPLETION METH OD FOR RECOGNIZING THE REVENUE FROM SALE OF REAL ESTATE. THE CONTENTION OF THE LOWER AUTHORITIES IS THAT THE AMOUNT IN QUESTION WAS NOT RECORDED IN REGULAR BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION AND THEREFORE IT CANNOT BE CONSIDERED FOR RECOGNI ZING R EVENUE AS PER PERCENTAGE OF COMPLETION METHOD. 4. WE FIND THAT THE SAID AMOUNT OF CASH RECEIPT HAS BEEN FOUND TO BE RECORDED IN INCRIMINATING MATERIALS SEIZED DURING THE COURSE OF SEARCH ACTION UNDER SECTION 132 OF THE ACT. DURING ASSESSMENT PROCEEDING, THE ASSESSEE HAS DULY SURRENDERED THIS AMOUNT FOR TAX. AS THIS A MOUNT IS FOUND TO BE CREDITED IN THE SEIZED DOCUMENT, THE ASSESSEE WAS REQUIRED TO OFFER EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SUM SO CREDITED. THE ONLY EXPLANATION GIVEN BY THE ASSESSEE WAS THAT AMOUNT REPRESENTED ADVANCE FROM CUSTOMERS. IT MANIF ESTS FROM THE ORDER OF THE LOWER AUTHORITIES THAT ASSESSEE HAS NOT PROVIDED THE LIST OF THE CUSTOMER 5 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 FROM WHOM THE SAID ADVANCE WAS RECEIVED. IN ABSENCE OF NAME AND ADDRESS OF THE PERSONS FROM WHOM THE SAID ADVANCES WERE RECEIVED, THE EXPLANATION GIVEN BY THE ASSESSEE CANNOT BE SAID SATISFACTORY EXPLANATION. THE ASSESSEE HAS NOT DISPUTED THE CREDITING OF THE SAID AMOUNT AND THE ONLY DISPUTE IS WITH REGARD TO THE YEAR IN WHICH IT SHOULD BE TAXED. IN TERMS OF SECTION 68 OF THE ACT IF THE EXPLANATION OFFERED B Y THE ASSESSEE IS NOT FOUND TO BE SATISFACTORY BY THE ASSESSING OFFICER , THE SUM SO CREDITE D MAY BE CHARGED TO INCOME TAX A S THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT WAS CREDITED IN THE BOOKS. IN VIEW OF ABOVE FACTS AND CIRCUMST ANCES, IN OUR OPINION THE ASSESSEE HAS NOT DISCHARGED ITS ONUS IN TERMS OF SECTION 68 OF THE ACT AND THEREFORE , THE ASSESSING OFFICER WAS JUSTIFIED IN ASSESSING THE INCOME IN THE ASSESSMENT YEAR CORRESPONDING TO THE DATE IT WAS SHOWN TO BE RECEIVED IN THE SEIZED DOCUMENTS. 5. WE HAVE ALSO NOTED FROM THE RECORDS OF ASSESSMENT YEAR 2011 - 12, WHICH ARE AVAILABLE BEFORE US IN ITA NO. 5277/DEL/2014, THAT THE A SSESSEE DECLARED THE SUM OF RS. 45,00,000 / - IN QUESTION IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEA R 2011 - 12, BUT THE ASSESSING OFFICER REDUCED THE SAID INCOME WHILE ASSESSING THE INCOME UNDER SECTION 143(3) OF THE ACT. THE LD. CIT - (A) ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER. WE OBSERVE THAT ASSESSEE HAS NOT FILED EITHER APPEAL OR CROSS OBJECTIO N BEFORE THE ITAT AGAINST THE SAID FINDING OF THE LD. CIT - (A) , WHICH LEAD TO A CONCLUSION THAT ASSESSEE HAS ACCEPTED THE FINDING OF THE LD. CIT - (A) AND IT SHOULD BE TAXED IN AY 2007 - 08. 6. IN VIEW OF OUR DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD. CIT - (A) ON THE ISSUE IN DISPUTE, ACCORDINGLY THE GROUNDS OF APPEAL ARE DISMISSED. 6 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 ITA NO. 5277/DEL/2014 FOR AY 2011 - 12 7. THE G ROUNDS OF APPEAL RAISED BY THE R EVENUE IN ITA NO. 5277/DEL/2014 ARE AS UNDER: 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT - (A) HAS ERRED IN DELETING THE ADDITION OF DISALLOWANCES OF RS.39,53,310/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF INTEREST FREE LOAN & ADVANCES. 3. THE APPELLANT CRAVE S LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY ISSUE INVOLVED IS WHETHE R THE INTEREST AMOUNTING TO RS. 39,53, 310/ - IS DISALLOWABLE IN THE HANDS OF THE ASSESSEE OR NOT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FIRM HAS GIVE N INTEREST FREE ADVANCES OF RS.13,01,18, 975 / - TO ITS PARTNERS WHEREAS INTEREST AMOUNTING TO RS.78,07,138/ - WAS PAID FOR TERM LOAN TAKE N FROM CORPORATION BANK. ACCORDING TO THE ASSESSING OFFICER, THE ASSESS EE CLAIMED ONLY INTEREST OF RS.39,53, 310/ - , THEREFORE HE DISALLOWED THE INTEREST OF RS.39,53,310/ - CLAIMED ON BORROWED FUND. THE LD. CIT - (A) HELD THAT THE INTEREST EXPENDITURE WAS NOT RELATED TO BORROWED FUNDS BUT IT WAS PAID TO CUSTOMERS AGAINST ADVANCES RECEIVED FOR DELAY IN HANDING OVER POSSESSION OF THE FLATS BUILT BY THE ASSESSEE. BEFORE US, T HE LD. S ENIOR DR RAISED SERIOUS QUESTION MARK ON THIS FINDING OF THE LD. CIT - (A) . ACCORDIN G TO T HE LD. S ENIOR DR , IN THE GROUNDS OF APPEAL BEFORE THE LD. CIT - (A) , THE ASSESS EE CLAIMED THAT INTEREST OF RS. 39,53,310/ - WAS TOWARDS TERM LOAN FROM THE BANK, WHICH WAS UTILIZED FOR PURPOSE OF 7 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 CONSTRUCTION OF VILLAS. THE LD. COUNSEL OF THE ASSESSEE COULD NOT CONTROVERT THIS FACT. THE FINDING OF THE LD. CIT - (A) ON THE ISSUE IN DISPUTE IS REPRODUCED AS UNDER: 3.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE. THE INTEREST EXPENDITURE OF THE APPELLANT IS NOT RELATED T O BORROWED FUNDS BUT HAS BEEN PAID TO CUSTOMERS AGAINST ADVANCES RECEIVED FOR DELAYS IN HANDING OVER POSSESSION OF THE FLATS BUILT BY THE APPELLANT. THUS, THERE IS NO CONNECTION OF THE INTEREST PAID WITH ANY BORROWED FUNDS AND NO INTEREST CAN BE DISALLOWED ON THE LOGIC THAT APPELLANT GAVE INTEREST FREE ADVANCES WHILE ITSELF INCURRING INTEREST ON BORROWED FUNDS. THE DISALLOWANCE IS BASED ON INCORRECT ASSUMPTIONS AND IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 9. W E FIND THAT THE LD. CIT - (A) HAS NOT MENTIONED SOURCE OF THE INFORMATION THAT INTEREST WAS PAID TO CUSTOMERS AGAINST ADVANCES RECEIVED FOR DELAY IN HANDING OVER POSSESSION OF THE FLATS BUILT BY THE ASSESSEE AND IT WAS NOT RELATED TO BORROWED FUNDS. LD. CIT - (A) HAS NEITHER PROVIDED AN Y OPPORTUNITY OF HEARING TO THE ASSESSING OFFICER ON THE ISSUE NOR ANY REMAND REPORT WAS CALLED FROM THE ASSESSING OFFICER. WE FIND THAT THE ASSESSEE HAS CLAIMED THAT INTEREST WAS PAID ON FUNDS BORROWED FROM THE CORPORATION BANK WHEREAS THE LD. CIT - (A) HAS MENTIONED THAT INTEREST WAS NOT RELATED TO BORROWED FUNDS. IN OUR OPINION , BEFORE DECIDING AN ISSUE IN DISPUTE , IT IS ESSENTIAL TO ASCERTAIN CORRECT FACTS OF THE CASE. APPARENTLY, THE LD. CIT(A) HAS NOT MENTIONED FROM WHERE HE GOT THE FACT OF INTEREST PAI D TO CUSTOMERS FOR DELAY IN HANDING OVER FLATS, AND THUS , CORRECTNESS OF THE FACT NEED TO BE EXAMINED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FEEL IT APPROPRIATE TO RESTORE THE ISSUE IN DISPUTE TO THE FILE OF THE LD. CIT - (A) FOR DECIDING A FRESH IN ACCORDANCE WITH LAW AFTER ASCERTAINING CORRECT FACTS OF THE ISSUE IN DISPUTE. IT IS NEEDLESS TO MENTION THAT ADEQUATE OPPORTUNITY 8 ITA NO . 5045/DEL/2014 & 5277/DEL/2014 OF BEING HEARD SHALL BE PROVIDED BOTH TO THE ASSESSEE AND THE ASSESSING OFFICER. 10. IN THE RESULT, THE APPEAL OF T HE R EVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 11. TO SUM UP, APPEAL OF THE ASSESSEE IS DISMISSED AND THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 1 S T JULY , 201 7 . S D / - S D / - ( I.C.SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 S T JULY , 201 7 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI