The ACIT, Central Circle-1, Surat V. M/s. Avani Corporation, Surat

ITA 677/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2221 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Corroborative evidences; Block assessment
• Section: 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.677/AHD/2014/SRT / ASSESSMENT YEAR: 2011-12 THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, SURAT. VS. AVANI CORPORATION, WESTERN SOMCHINTAMANI RESIDENCY, B/7, RAJ HANS RESIDENCY, PAL, ADAJAN ROAD, SURAT. [PAN: 5AAOFA 2149 J] ( / APPELLANT) ( !' /RESPONDENT) / ASSESSEE BY : SHRI RASESH SHAH, CA /REVENUE BY : SHRI J.K.CHANDNANI, SR.DR /DATE OF HEARING : 20-06-2018 / DATE OF PRONOUNCEMENT : 07-09-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (CI T(A) FOR SHORT) DATED 09.12.2013 FOR THE ASSESSMENT YEAR (A.Y) 2011-12. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS FOLLOWS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 7,85,00,000/- BEING DEDUCTION U/S. 80IB OF THE I.T. ACT. 2 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION 2. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON A CCOUNT OF DISALLOWANCE OF DEDUCTION U/S. 80IB (10) IGNORING T HE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENC ES WHICH CAN PROVE THAT THE ON MONEY WAS ACTUALLY RECEIVED F ROM THE PROJECT OF THE ASSESSE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS OUGHT TO HAVE UPHELD THE ORDER U/S. 143( 3)C OF THE ACT. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSING OFFICER (AO) WAS RIGHT IN DISALLOWING THE BENEFIT OF S. 80I B OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') IMPUGNED AMOUNT OF RS. 7, 85,00,000/- BY HOLDING THAT THE UNDISCLOSED INCOME OFFERED TO TAX IS NOT E ARNED FROM THE ON MONEY OF THE PROJECT HENCE, THE SAID UNDISCLOSED IN COME CANNOT BE TREATED AS BUSINESS INCOME. THE LD. DR FURTHER SUB MITTED THAT THE AO WAS RIGHT IN TREATING THE UNDISCLOSED INCOME LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND RESTRICTING THE DEDUCTION U/S. 80IB OF THE ACT TO THE AMOUNT OF RS. 5,94,77,051/- AS THERE WAS NO PROOF THAT THE INCOME OFFERED BY THE ASSESSEE FOR TAXATION WAS ACT UALLY OWN MONEY FROM THE PROJECT ON WHICH THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80 IB OF THE ACT. 4. THE LD. DR VEHEMENTLY POINTED OUT THAT THE LD. C IT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 7, 85,00,000/- BEING 3 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION DEDUCTION U/S. 80IB OF THE I.T. ACT. HE FURTHER SU BMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS R IGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTI ON U/S. 80IB (10) OF THE ACT IGNORING THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY SUPPORTING EVIDENCES WHICH CAN PROVE THAT THE ON MONEY WAS ACT UALLY RECEIVED FROM THE PROJECT OF THE ASSESSE. THE LD. DR SUBMITTED TH AT THE LD. FIRST APPELLATE AUTHORITY HAS GRANTED RELIEF TO THE ASSES SEE WITHOUT ANY BASIS AND JUSTIFIED REASON THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 5. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRES ENTATIVE (AR), SUPPORTING THE ORDER OF THE LD. CIT(A), SUBMITTED T HAT THE APPELLANT WAS ENGAGED IN THE CONSTRUCTION ACTIVITY AND THE PROJEC T NAME AS WESTERN SOMCHINTAMANI, WHEREIN SEVERAL UNITS WERE ALREADY S OLD BEFORE THE SEARCH OPERATION. THE LD. AR VEHEMENTLY POINTED OU T THAT DURING THE SEARCH OPERATION THE MAIN PARTNER SHRI MANISH K. SH AH ON BEHALF OF THE ASSESSEE ADMITTED IMPUGNED AMOUNT OF RS. 7.85 CRORE S AS UNACCOUNTED INCOME OF THE SAID PROJECT AND THE TOTAL DISCLOSURE , INCLUDING THE DISCLOSURE MADE IN THE APPELLANT FIRM, WAS OF RS. 2 3.15 CRORES BASED ON THE ENTRIES OF A SMALL POCKET DIARY IDENTIFIED AS B F & S SEIZED AND FOUND DURING THE SEARCH ACTION. THE LD. AR SUBMITTED TH AT THE AO WAS AWARE OF THE FACT THAT THE ENTIRE DISCLOSURE OF RS. 7.85 CRO RES HAS BEEN MADE IN THE 4 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION NAME OF PROJECT, WHEREIN ON MONEY WAS RECEIVED ON S ALE OF UNITS AND THE PROJECT WAS ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT. 6. DRAWING OUR ATTENTION TOWARDS RELEVANT OPERATIVE PART OF THE FIRST APPELLATE ORDER, THE LD. AR SUBMITTED THAT SINCE P ROJECT WAS THE ONLY SOURCE OF THE INCOME OF THE APPELLANT FROM THE RELE VANT FINANCIAL YEAR AND THE AO HAS NOT BROUGHT ANY ADVERSE MATERIAL OR MATE RIAL ON RECORD TO SHOW THAT THE APPELLANT HAS HAD ANY OTHER SOURCE OF INCOME IN ADDITION TO SAID PROJECT THEN, THE AMOUNT SURRENDERED DURING TH E SEARCH OPERATION HAS TO BE TREATED AS INCOME FROM THE SAME PROJECT W HICH WAS ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT. THE LD. AR SUBMITT ED THAT AS PER RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT O F GUJARAT IN THE CASE OF CIT VS. SUMAN PAPER AND BOARDS LTD. 314 ITR 119 (GU J.) , THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80IB OF THE ACT IN BLOCK ASSESSMENT FOR THE BLOCK PERIOD AND IT WOULD BE OPEN TO THE REVENU E TO SEEK PROCEDURE COMPLIANCE OF THE RELEVANT PROVISIONS OF THE ACT. THE LD. AR ALSO PLACED RELIANCE ON THE ORDERS OF ITAT, AHMEDABAD IN THE CA SE OF ACIT VS. SHREE PADMAVATI DEVELOPERS IN ITA NO.268/AHD/2010 , WHEREIN ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUMAN PAPER AND BOARDS (SUPRA) HAS BEEN FOLLOWED. THE LD. AR ALSO PLACED RELIANCE ON THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF ACIT VS. VIRAT GEMS IN ITA NO.3541 & 3756/AHD/2008 DATED 15.11.2010 . FINALLY, THE LD. AR SUBMITTED THAT THE 5 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION AO MADE ADDITION WITHOUT ANY BASIS AND BY TAKING A UNJUSTIFIED AND UNREASONABLE APPROACH WHICH WAS RIGHTLY DELETED BY THE LD. CIT(A) HENCE, THE FIRST APPELLATE ORDER MAY KINDLY BE UPHELD. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FIRST OF ALL, WE MAY POINT OUT THAT UNDISPUTEDLY THE ASSESSEE IS ENG AGED IN THE BUSINESS OF CONSTRUCTION AND THE PROJECT WESTERN SOMCHINTAM ANI IS ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT AND THE AO GRANTED T HE DEDUCTION OF RS. 5,94,77,051/- ON THE SAME PROJECT DURING THE PERIOD . FROM THE TABLE REPRODUCED BY THE AO IN PARA 4 OF THE ASSESSMENT OR DER, IT IS ALSO DISCERNABLE THAT THE PARTNER OF THE ASSESSEE FIRM S HRI MANISH K. SHAH DURING THE COURSE OF SEARCH OPERATION ON THE BASIS OF A DIARY FOUND AND SEIZED DURING THE SEARCH OPERATION, ADMITTED THAT T HE ENTRIES IN THE DIARY ARE RECORDED IN COURSE BY DELETING TWO ZEROS FROM T HE FACTUAL FIGURES AND THE SAME HAVE NOT BEEN RECORDED IN THE BOOKS OF ACC OUNTS AND HE SURRENDERED RS. 23.15 CRORES ON THE STRENGTH OF THI S DIARY IN THE HANDS OF VARIOUS GROUP FIRM/CONCERN INCLUDING THE PRESENT AS SESSEE AND AMOUNT OF RS. 7.85 CRORES WAS INCLUDED IN THE SAID AMOUNT OF DECLARATION. IN THIS TABLE THE AO HIMSELF HAS NOTED THAT IMPUGNED AMOUNT HAS BEEN OFFERED AS INCOME ON BEHALF OF ASSESSEE FIRM BY ITS PARTNER ON WESTERN SOMCHINTAMANI PROJECTS, WHICH WAS ENTITLED FOR DEDU CTION U/S. 80IB OF THE ACT. HOWEVER, NOT AGREEING WITH THE EXPLANATION OF THE ASSESSEE THE AO 6 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION TREATED THE SURRENDERED AMOUNT AS INCOME OF THE ASS ESSEE FROM OTHER SOURCES AND DEDUCTION U/S. 80IB OF THE ACT WAS DENI ED TO THE ASSESSEE. 8. FROM THE FIRST APPELLATE ORDER, IT IS DISCERNABL E THAT THE LD. CIT(A) FOR GRANTED RELIEF TO THE ASSESSEE BY EVALUATING AND CO NSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND BY OBSERVIN G THAT THE IMPUGNED AMOUNT WAS DECLARED BY THE PARTNER OF THE ASSESSEE FIRM DURING SEARCH AND SEIZURE OPERATION AND SURRENDERED AMOUNT OF RS. 23.15 CRORES INCLUDES THIS AMOUNT OF RS. 7.85 CRORES WHICH WAS S URRENDERED ON BEHALF OF THE ASSESSEE FIRM ON ITS PROJECT OF WESTERN SOMC HINTAMANI. AGREEING WITH THE CONTENTION OF THE LD. AR, THE LD. CIT(A) O BSERVED THAT THE ADDITIONAL INCOME DECLARED WAS PART OF REGULAR BUSI NESS INCOME OF THE APPELLANT AND IT WAS NOT FROM ANY OTHER SOURCES AND THE DISCLOSURE OF ADDITION INCOME HAS NOT BEEN DOUBTED BY THE AO AND THE AO HAS ALREADY GRATED DEDUCTION U/S. 80IB OF THE ACT IN RESPECT OF REGULAR INCOME OF THE PROJECT WHICH CLEARLY INDICATE THAT THE PROJECT WAS ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT. WE ARE ALSO IN AGREEMENT WIT H THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT SINCE THE ONLY SOURCE OF INC OME OF THE APPELLANT FIRM IS THE INCOME FROM CONSTRUCTION OF PROJECT NAMED AS WESTERN SOMCHINTAMANI AND SAID PROJECT IS UNDISPUTEDLY ELIG IBLE FOR DEDUCTION U/S. 80IB OF THE ACT. ON CAREFUL CONSIDERATION OF ENTIR E FACTUAL SITUATION OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE AO WAS NOT CORRECT IN 7 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION TREATING THE DECLARED INCOME ON PROJECT SPECIFIC BA SIS ON THE BASIS OF DIARY WHICH WAS SEIZED DURING THE SEARCH OPERATION AND SA ME WAS TO BE TREATED AS BUSINESS INCOME ON THE BASIS OF CONTENTS OF THE DIARY WHICH REVEAL THAT THE NAMES OF THE PERSONS AND FLATWISE D ETAIL OF OWN MONEY WAS RECORDED AND THE SURRENDER WAS ALSO MADE ON THE BASIS OF ENTRIES IN THE DIARY. THEN, THE SURRENDERED AMOUNT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME OF TH E ASSESSEE WITHOUT BRINGING OUT ANY ADVERSE MATERIAL OR EVIDENCE TO SH OW THAT THE ASSESSEE ACTUALLY EARNED DECLARED AMOUNT FROM THE OTHER ACTI VITIES OR BUSINESS WHICH WAS NOT ENTITLED FOR DEDUCTION U/S. 80IB OF T HE ACT. PER CONTRA, FROM THE STATEMENT OF SHREE MANISH K. SHAH AND FACTS REV EALED AND SURRENDERED BY HIM DURING THE SEARCH OPERATION, IT IS CLEAR THAT THE AMOUNT SURRENDERED ON BEHALF OF PRESENT ASSESSEE FI RM WAS NOTHING, BUT THE AMOUNT OF ON MONEY WHICH WAS RECEIVED FROM TH E RESPECTIVE FLAT OWNERS/ALLOTTEES AND NOT RECORDED IN THE BOOKS OF A CCOUNTS OF THE ASSESSEE THUS, THE SAME WAS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. FURTHER, AS PER RATIO OF DECISION O F HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUMAN PAPER & BOARDS (SUPRA), THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80IB OF THE ACT ON THE AMOUNT IN THE BLOCK ASSESSMENT FOR THE BLOCK PERIOD. 8 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION 9. IN VIEW OF ABOVE DISCUSSION THE CONCLUSION DRAWN BY THE LD. AO CANNOT BE HELD AS REASONABLE, VALID AND SUSTAINABLE AND THE LD. CIT(A) WAS RIGHT IN DEMOLISHING THE SAME BY HOLDING THAT T HE UNACCOUNTED INCOME DECLARED BY THE ASSESSEE FIRM DURING THE COU RSE OF SEARCH/SURVEY, HAS TO BE HELD AS BUSINESS INCOME ON WHICH THE DE DUCTION U/S. 80IB OF THE ACT IS TO BE ALLOWED AND THE AO WAS NOT JUSTIFI ED IN DISALLOWING THE SAME TREATING THE SAME AS INCOME FROM OTHER SOURCE S. 10. THE LD. AR HAS DRAWN OUR ATTENTION TOWARDS ORDE R OF THE ITAT, AHMEDABAD DATED 27.10.2016 IN THE CASE OF ACIT VS. AMBICA ENTERPRISES IN ITA NO.679/AHD/2014 AND SUBMITTED THAT THE TRIBUNAL HAS DISMISSED APPEAL OF THE REVENUE CONFIRMING THE ORDER OF THE L D. CIT(A) WHICH GRANTED DEDUCTION U/S. 80IB(10) OF THE ACT ON THE A MOUNT OF RS. 1.14 CRORES WHICH WAS ALSO SURRENDERED DURING THE SAME S EARCH AND SEIZURE OPERATION ON ITS PROJECT WESTERN HEIGHTS AND THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE ALSO SIMILAR AND IDENTICAL. FROM THE COPY OF THE FIRST APPELLATE ORDER, IT IS CLEARLY DISCERNABLE TH AT THE ISSUED INVOLVED IN THE PRESENT CASE IS QUITE IDENTICAL AND SIMILAR AS THE AMOUNT OF RS. 23.15 CRORES SURRENDERED BY SHRI MANISH K. SHAH DURING SE ARCH OPERATION ALSO INCLUDES AMOUNT OF RS. 1.14 CRORES, WHICH WAS DECLA RED AND OFFERED TO TAX ON BEHALF OF AMBICA ENTERPRISES ON ITS PROJECT WESTERN HEIGHTS WHICH WAS ALSO ENTITLED FOR DEDUCTION U/S. 80IB OF THE AC T. 9 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION 11. NOW AT THIS JUNCTURE, WE RESPECTFULLY CONSIDER THE RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. MHASKAR GENERAL HOSPITAL IN TAX APPEAL NO.1474 OF 2 009 DATED 09.08.2011 (GUJ) , AS RELIED BY THE LD. AR, WHEREIN LAST PARA AT PG. 6 THEIR LORDSHIP HELD THAT WHEN THE ASSESSEE HAS SOLE BUSIN ESS OF RUNNING A HOSPITAL AND IT HAD NO OTHER SOURCE OF INCOME AND T HEREFORE, TREATING THE UNDISCLOSED INCOME AS INCOME FROM OTHER SOURCES WAS NOT JUSTIFIED. ON RESPECTFUL PERUSAL OF THE SAME, WE ARE INCLINED TO OBSERVE THAT IN THE PRESENT CASE WHEN THE SURRENDER HAS BEEN MADE ON SP ECIFIC PROJECT OF WESTERN SOMCHINTAMANI, WHICH WAS ENTITLED FOR DEDUC TION U/S. 80IB (10) OF THE ACT THEN, WITHOUT BRINGING OUT ANY ADVERSE M ATERIAL OR EVIDENCE TO SHOW THAT THE ASSESSEE HAS OTHER SOURCE OF INCOME W HICH WAS NOT ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT, THE AM OUNT SURRENDERED ON THE STRENGTH OF DIARY HAS TO BE TREATED AS ON MONEY R ECEIVED FROM THE RESPECTIVE FLAT BUYERS/ALLOTTEES AS THE DIARY ALSO DISCLOSED THE DETAILS OF AMOUNT RECEIVED BY THE ASSESSEE FROM THE FLAT OWNER S/ALLOTTEES. IN THIS SITUATION, THE AMOUNT OF ON MONEY WHICH HAS BEEN OFFERED TO TAX, CANNOT BE TREATED AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AND THE SAME IS BUSINESS INCOME OF THE ASSESSEE FROM TH E PROJECT WHICH WAS ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT DURING THE RELEVANT PERIOD. OUR CONCLUSION ALSO GETS STRONG SUPPORT FROM THE DECISI ON OF HONBLE 10 ITA NO.677/AHD/2014/SRT (A.Y: 2011-12) AVANI CORPORATION JURISDICTIONAL HIGH COURT IN THE CASE OF SUMAN PAPER & BOARDS (SUPRA) AND ITAT, AHMEDABAD IN THE CASE OF AMBICA ENTERPRISES (SUPRA). WE ARE UNABLE TO SEE ANY PERVERSITY, AMBIGUITY OR ANY OTHE R VALID REASON TO INTERFERE WITH THE SAME AND HENCE, WE UPHOLD THE SA ME. ACCORDINGLY, GROUNDS OF REVENUE BEING DEVOID OF MERITS ARE DISMI SSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 0 7 TH SEPTEMBER, 2018. / SURAT ; DATED : 07 TH SEPTEMBER, 2018 / EDN ! $ / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. # ( ) / THE CIT(A)-VI, BARODA; 4. CCIT, BARODA; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER, // TRUE COPY // // TRUE // COPY // / ) / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER