The DCIT, Circle-3, Surat V. M/s. Shyam Corporation, Surat

ITA 571/AHD/2012

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1923 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Salary income; Deemed to accrue or arise in india
• Section: 131; 69; 69C; 143(3); 133A; 69B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ITA NO.571/AHD/2012 (ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE - 3, SURAT VS. M/S. SHYAM CORPORATION, SILVER CREST, F.P. NO.67 & 70, T.P.S. NO.14(PAL), PAL, SURAT - 395 005. [PAN NO. ABEFS 9360 G] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : MS. ANUPAMA SINGLA, SR.D.R. RESPONDENT BY : -- DATE OF HEARING 19/11/2018 DATE OF PRONOUNCEMENT 14/12/2018 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 23.11.2011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- II, SURAT ARISING OUT OF THE ASSESSMENT ORDER DATED 22.11.2010 FOR THE ASSESSMEN T YEAR 2008-09 PASSED BY THE DCIT, CIR-3, SURAT UNDER SECTION 143(3) OF THE INCO ME TAX ACT, 1961 (THE ACT) WITH THE FOLLOWING GROUNDS: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A)-II, SURAT HAS ERRED IN DELETING ADDITION OF RS.1,00,00, 000/- MADE UNDER SECTION 68, 69 AND 69C OF THE I.T. ACT, WITHOUT APPRECIATIN G THE FACT THAT ASSESSEE FAILED TO OFFER AN EXPLANATION REGARDING THE SOURCE OF RS.1,00,00,000/- CREDITED IN ITS BOOKS OF ACCOUNT AS WIP, EVENTHOUGH DURING THE COURSE OF SURVEY U/S 133A OF THE I.T. ACT ON 13.03.2008, THE PARTNERS OF THE ASSESSEE FIRM ACCEPTED RS.1,00,00,000/- AS THE RECEIPT OF TH E FIRM FROM UNDISCLOSED SOURCES. - 2 - ITA NO.571/A/12 DCIT VS. SHYAM CORPORATION ASST.YEAR 2008-09 [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET-ASIDE AND THAT OF AO MAY BE RESTORED TO THE ABOVE EXTENT. 2. THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF DEV ELOPMENT AND BUILDING OF RESIDENTIAL PROPERTIES FILED ITS RETURN ON 28.09.20 08 THROUGH ELECTRONIC MEDIA DECLARING TOTAL INCOME AT NIL FOR A.Y. 2008-09. THE ASSESSEE HAS UNDERTAKEN RESIDENTIAL HOUSING PROJECT KNOWN AS SILVER CREST, ON A PLOT OF LAND ADMEASURING ABOUT 1.76 ACRES. THIS WAS THE FIRST YEAR OF COMMENCEMENT OF DEVELOPMENT O F THE PROJECT BY THE ASSESSEE FIRM. SUBSEQUENTLY, A SURVEY WAS CONDUCTED U/S 133A OF TH E ACT ON 13.03.2008 WHERE THE PARTNER OF THE FIRM NAMELY SHRI KAMLESHBHAI A. PANC HANI DISCLOSED RS.1 CRORE IN THE HANDS OF THE ASSESSEE, STATEMENT WHEREOF WAS RECORD ED U/S 131 OF THE ACT ON 25.03.2008. SUCH DISCLOSURE WAS SHOWN AS UNACCOUNTED BOOKING R ECEIPTS UNDER CURRENT LIABILITIES AND PROVISION. IT WAS THE CASE OF THE ASSESSEE THA T THE FIRM WAS CARRYING ONLY BUSINESS ACTIVITY BEING DEVELOPING RESIDENTIAL HOUSING PROJE CT AND SINCE THE PROJECT IS BEING IN PROGRESS AND THE PROJECT COMPLETION METHOD OF ACC OUNTING BEING ADOPTED BY THE FIRM THE DISCLOSURE WAS REFLECTED UNDER THE HEAD CURREN T LIABILITIES AND PROVISIONS IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION AND THE SAME SHALL BE OFFERED AS INCOME IN THE PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2 010-11; THE PROJECT IS COMPLETED IN THAT YEAR ONLY. IT WAS FURTHER THE CASE OF THE ASSE SSEE THAT IN THE EVENT THE RECEIPT DISCLOSED IN SURVEY IF TREATED AS INCOME OF THE YEA R THEN THE SAME WOULD QUALIFY FOR DEDUCTION U/S 80IB(10) OF THE ACT. ON THIS COUNT, T HE ASSESSEE ALSO REFERRED THE CBDT INSTRUCTION NO.4 OF 2009 DATED 30.06.2009. FURTHER THAT RELIANCE WAS MADE ON THE JUDGMENT AND ORDER DATED 29.11.2000 PASSED BY THE R AJKOT BENCH IN THE MATTER OF SHRI PRABHUDAS S. PAREKH, ITA NO.308/RJT/1998, WHERE IT WAS HELD THAT TO CLAIM THE RECEIPT DISCLOSED IN SURVEY BEING ON ACCOUNT OF BOOKING OF PLOTS WAS TO BE TREATED AS INCOME FROM BUSINESS OR PROFESSION. HOWEVER, SUCH EXPLANAT ION RENDERED BY THE ASSESSEE WAS NOT - 3 - ITA NO.571/A/12 DCIT VS. SHYAM CORPORATION ASST.YEAR 2008-09 FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM, THE A SSESSEE HAS FAILED TO ESTABLISH THE SOURCE OF INCOME OF RS.1 CRORE CREDITED TO ITS BOOK S OF ACCOUNTS AS UNACCOUNTED RECEIPTS AND PLACED UNDER THE HEAD CURRENT LIABILITIES AND PROVISIONS. ULTIMATELY, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 68/ 69/ 69C OF THE ACT. IN APPEAL, LEARNED CIT(A) DELETED THE ADDITION. HENCE THE INSTANT APPE AL BEFORE US FILED BY THE REVENUE. 3. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED REPRESENTATIVE OF THE DEPARTMENT VEHEMENTLY ARGUED AGAINST THE ORDER PASS ED BY THE LEARNED CIT(A) ON THE PARTICULAR GROUND THAT THE ASSESSEE HAS FAILED TO D ISCLOSE THE SOURCE OF SUCH UNACCOUNTED INCOME TO THE TUNE OF RS. 1 CRORE. NEITHER THE BOOK ING RECEIPT NOR THE IDENTITY OF THE PARTIES FROM WHOM SUCH AMOUNT WAS RECEIVED BY THE A SSESSEE WAS DISCLOSED BEFORE THE AUTHORITIES BELOW. HE, THEREFORE, RELIED UPON THE O RDER PASSED BY THE LEARNED AO. ON THE OTHER HAND, LEARNED REPRESENTATIVE OF THE ASSESSEE REITERATED THE STAND TAKEN BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT THE SAID SPECIFIC DISCLOSURE OF RS.1 CRORE WAS NOTHING BUT UNACCOUNTED BUSINESS RECEIPTS; SUCH DIS CLOSURE OF INCOME WAS MADE BY THE PARTNERS OF THE APPELLANT FIRM DURING THE COURSE OF SURVEY AT THE BUSINESS PREMISES OF THE ASSESSEE FIRM. THERE IS NO OTHER EVIDENCE OF INCOME WAS IN POSSESSION OF THE DEPARTMENT. IT WAS FURTHER CONTENDED BY THE LEARNED REPRESENTAT IVE OF THE ASSESSEE THAT THERE IS NO ACTIVITY OTHER THAN THIS PARTICULAR BUSINESS OF HOU SING DEVELOPMENT PROJECT AND THEREFORE THE DEPARTMENT IN THE ABSENCE OF ANY EVIDENCE OF OT HER INCOME OUGHT TO HAVE RELIED UPON THE ENTIRE STATEMENT OF THE ASSESSEE RECORDED DURIN G THE SURVEY PROCEEDINGS. SINCE THE DEPARTMENT ACCEPTED THE DISCLOSURE OF RS. 1 CRORE, THE SOURCE WHEREOF WAS ALSO TO BE ACCEPTED AS BUSINESS RECEIPTS. FURTHER THAT THE LD AR RELIED UPON THE RECOGNIZED PROJECT COMPLETION METHOD OF ACCOUNTING APPLICABLE TO THE D EVELOPER AND NOT THE ACCOUNTING STANDARD AS-7 WHICH IS ONLY APPLICABLE TO THE CONTR ACTORS. SUCH METHOD OF ACCOUNTING IN FACT IS ALSO RECOGNIZED BY THE CBDT INSTRUCTION NO. 4 OF 2009 DATED 30.06.2009 AS ALSO SUBMITTED BY THE LEARNED AR. FURTHER THAT SINCE THI S IS THE FIRST YEAR OF THE ASSESSEE NO - 4 - ITA NO.571/A/12 DCIT VS. SHYAM CORPORATION ASST.YEAR 2008-09 SALE HAS BEEN REGISTERED BY HIM. THE LEARNED AR ULT IMATELY RELIED UPON THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. 4. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE RESPECTIVE PARTIES. WE HAVE PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE ORDER PASSED BY THE LEARNED AO AND THE LEARNED CIT(A) AS WELL. IT APPEARS FROM THE ORDER PASSED BY THE LEARNED AO THAT WHILE MAKING ADDITION THE LEARNED AR HARPED UPON THE ASSESSEES INABILITY TO EXPLAIN TO ESTABLISH SOURCE S OF SUCH 1 CRORE CREDITED TO ITS BOOKS OF ACCOUNT AS UNACCOUNTED RECEIPTS UNDER THE HEAD CUR RENT LIABILITIES AND PROVISIONS. THE NATURE AND DETAILS OF SUCH AMOUNT WAS FAILED TO HAV E BEEN PROVIDED BY THE ASSESSEE ALTHOUGH IT WAS CLAIMED THAT THE SAME WAS FROM THE PROJECT UNDER CONSTRUCTION. THUS, THE SOURCE OF INCOME DISCLOSED DURING SURVEY REMAINS UN EXPLAINED BY THE ASSESSEE. SINCE THE SOURCE WAS NOT DISCLOSED AND THE SAME CANNOT BE CLA SSIFIED UNDER ANY HEAD OF INCOME U/S 14 OF THE ACT, ACCORDING TO THE LEARNED AO THE ASSE SSEE WAS NOT ENTITLED TO THE CLAIM OF DEDUCTION. THIS IS DEEMED INCOME OF THE NATURE COVE RED UNDER THE SCHEME OF SECTION 68, 69, 69A, 69B AND 69C BEING TREATED SEPARATELY, SINC E IT IS NOT THE INCOME FROM SALARY, HOUSE PROPERTY, PROFIT AND GAINS OF THE BUSINESS OR PROFESSION OR CAPITAL GAINS NOR THE INCOME FROM OTHER SOURCES BECAME THE PROVISION OF S ECTION 68, 69, 69A, 69B AND 69C TREAT UNEXPLAINED INVESTMENT, UNEXPLAINED MONEY, BU LLION ETC. WHEN THE NATURE AND SOURCE OF INVESTMENT HAS NOT BEEN SATISFACTORILY EX PLAINED. FURTHER THAT ACCORDING TO THE LEARNED AR NO EVIDENCE WAS FILED BY THE ASSESSEE TO SHOW THAT THE INCOME DISCLOSED DURING SURVEY PROCEEDINGS HAS GENERATED FROM THE PR OJECTS WHICH ARE UNDER CONSTRUCTION. RELYING UPON THE JUDGMENT OF TUTICORIN ALKALI CHEMI CALS AND FERTILIZERS LTD. VS.CIT (1997) 227 ITR 172 (SC), SUCH UNDISCLOSED INCOME TO THE TUNE OF RS.1 LAC WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 68, 69, 69C OF THE A CT. - 5 - ITA NO.571/A/12 DCIT VS. SHYAM CORPORATION ASST.YEAR 2008-09 IN APPEAL, THE LEARNED CIT(A) CONSIDERED THE FACT T HAT THE ASSESSEE DOES NOT HAVE ANY OTHER INCOME OTHER THAN THE SAID BUSINESS OF CO NSTRUCTION AND DEVELOPMENT OF HOUSING PROJECT. IT WAS FURTHER OBSERVED THAT THE S TATEMENT DURING SURVEY PROCEEDINGS MADE BY THE PARTNERS TOWARDS SPECIFIC DISCLOSURE IS NOTHING BUT UNACCOUNTED BUSINESS RECEIPTS BEING THE SOLELY BASE FOR OFFERING SUCH UN ACCOUNTED INCOME OF THE ASSESSEE. IT WAS THE FINDING OF THE LEARNED CIT(A) THAT THE DEPA RTMENT WAS NOT IN POSSESSION OF ANY OTHER EVIDENCE OF INCOME AGAINST THE ASSESSEE. ACCO RDING TO HIM, THE SPECIFIC STATEMENT THAT THE DISCLOSURE WAS ON ACCOUNT OF UNACCOUNTED CURRENT BUSINESS RECEIPTS OUGHT TO HAVE BEEN ACCEPTED BY THE LEARNED AO SINCE THERE IS NO OTHER ACTIVITY OTHER THAN THIS BUSINESS OF THE ASSESSEE. WE FIND THAT THE REVENUE HAS ACCEPTED THE STATEMENT OF THE PARTNER OF THE FIRM IN A PIECEMEAL IN THE SENSE THE DISCLOSURE OF RS. 1 CROR E SINCE FAVORABLE TO IT, ACCEPTED THE SAME AND THE SOURCE HAVING NOT BEEN ACCEPTED IN THE ABSENCE OF DETAILS THEREOF PROVIDED BY THE ASSESSEE IN OUR CONSIDERED VIEW, IS IMPROPER AND NOT JUSTIFIABLE. IF THE RECEIPTS IS CONSIDERED IN THE HANDS OF THE APPELLANT BY THE LEA RNED AO THEN IT HAS TO BE CONSIDERED AS A BUSINESS RECEIPTS OR NOT AT ALL. THE RATIO OF THE JUDGMENT PASSED IN THE MATTER OF RADHE DEVELOPERS BY THE JURISDICTIONAL HIGH COURT H OLDING THAT THE ACT DOES NOT ENVISAGE TAXING ANY INCOME WHICH DOES NOT FALL UNDE R THE HEADS MENTIONED IN SECTION 14 IF APPLIED THEN THE FINDING OF THE LEARNED AO IN TA XING THE RECEIPTS U/S 68, 69, 69C IS NOT PROPER AS THE SAME WAS DECLARED AS UNACCOUNTED BUSI NESS RECEIPTS OF THE CURRENT YEAR. SO FAR AS THE METHOD OF ACCOUNTING AS FOLLOWED BY THE ASSESSEE IS CONCERNED THE SAME WAS RIGHTLY ACCEPTED BY THE LEARNED CIT(A) SINCE PROJEC T COMPLETION METHOD HAS BEEN RECOGNIZED BY ICAI AS THE METHOD OF ACCOUNTING OF A DEVELOPER; EVEN FOR INCOME TAX PURPOSES THE SAME IS RECOGNIZED BY AND UNDER INSTRU CTION NO.4 OF 2009, DATED 30.06.2009 BY THE CBDT. - 6 - ITA NO.571/A/12 DCIT VS. SHYAM CORPORATION ASST.YEAR 2008-09 5. WE FIND THAT THE LEARNED CIT(A) CORRECTLY CONSID ERED THE DISCLOSURE MADE BY THE PARTNER OF THE FIRM OF RS. 1 CRORE DURING SURVEY AS UNACCOUNTED BUSINESS RECEIPTS AS ALSO THE PROJECT COMPLETION METHOD AS ADOPTED BY THE ASS ESSEE IN VIEW OF THE EXPLANATION GIVEN BY THE LEARNED CIT(A) AS INDICATED ABOVE BY U S. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER THAT THE APPELLANT WAS NOT REQUIRED TO OF FER THE UNACCOUNTED BUSINESS RECEIPTS DISCLOSED IN SURVEY AS INCOME DURING THE YEAR. WE T HEREFORE, CONFIRM THE SAME. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 14/12/2018 SD/- SD/- ( AMARJIT SINGH ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 14/12/2018 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-II, SURAT. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 10/12/2018 (DICTATION PAGES 8) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11/12/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 13/12/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER