Asstt. CIT Cent. Cir. 2, Nashik V. Shri N.L. Potdar, Poddar House, Nashik

ITA 947/PUN/2003

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3314 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 04-08-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Keywords: Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM I.T.A. NO. 947/PN/2003 BLOCK PERIOD: 1-4-1990 TO 11-8-2000 ASSTT. CIT CENT. CIR. 2, NASIK APPELLANT VS. SHRI N.L. PODDAR, PODDAR HOUSE PATIL LANE -3 COLLEGE ROAD NASIK PAN AATPP 0804 A RESPONDENT APPELLANT BY : SHRI HARESHWAR SHARMA RESPONDENT BY: WRITTEN SUBMISSIONS ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-I NAGPUR DATED 03-06-2003 ON TH E SOLE GROUND THAT THE CIT(A) ERRED IN DELETING THE ADDITI ON OF RS. 5,79,713/-. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THERE WA S A SEARCH ACTION AT THE RESIDENTIAL AND BUSINESS PREMISES OF PODDAR GROUP OF NASIK ON 11-8-2000 TO WHICH THE ASSESSEE B ELONGS. THE ASSESSEE IS A BUILDER AND DEVELOPER. IN RESPON SE TO NOTICE ISSUED U/S 158BC OF THE ACT, THE BLOCK RETURN WAS F ILED BY THE ASSESSEE DECLARING UNDISCLOSED INCOME AT RS. 78 LAK HS, WHICH WAS DETERMINED BY THE A.O AT RS. 83,96,790/- INTER ALIA ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 2 MAKING CERTAIN ADDITIONS AND DISALLOWANCES. ONE OF THE DISALLOWANCES MADE BY THE A.O WAS IN RESPECT OF ASS ESSEES CLAIM U/S 80-IB(10) AMOUNTING TO RS. 5,79,713/-. O N THE BASIS OF SEIZED MATERIAL, THE ASSESSEE HAD DRAWN PR OFIT AND LOSS ACCOUNT, BALANCE SHEET AND STATEMENT OF CASH S HORTAGE TO WORK OUT THE PEAK SHORTAGE. ACCORDINGLY, THE NET PR OFIT HAS BEEN COMPUTED AT RS. 49,63,211/- OUT OF WHICH THE A SSESSEE HAD DEDUCTED AN AMOUNT OF RS. 5,79,713/- U/S 80-IB( 10) OF THE ACT. ON EXAMINATION OF THE RECORDS, THE A.O NO TICED THAT THE CLAIM FOR DEDUCTION U/S 80-IB(10) HAS BEEN MADE IN RESPECT OF CERTAIN RECEIPTS ON ACCOUNT OF ASSESSEE S PROJECT NAVNIRMAN ENCLAVE WHICH IS COVERED U/S 80-IB(10). THESE RECEIPTS ARE IN RESPECT OF PAYMENTS RECEIVED FROM T HE PURCHASERS OF PREMISES IN NAVNIRMAN ENCLAVE. THE A.O HAS MENTIONED THAT THE RECEIPTS ARE NOTED IN LOOSE PAPE RS BUNDLE (ANNEX. A-1, PAGE NOS. 1 TO 20) AND NOT ACCOUNTED B Y THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNTS AND THE S AME HAS BEEN CREDITED AS ON MONEY RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS. THE A.O HAS POINTED OUT THAT SINCE THE C LAIM OF DEDUCTION IN RESPECT OF THE UNACCOUNTED RECEIPTS AP PEARED TO BE OUT OF CONTEXT THE ASSESSEE WAS ASKED TO SUBSTAN TIATE THE CLAIM CONSIDERING THAT THE SAME ARE IN RESPECT OF U NACCOUNTED RECEIPTS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT OF RS. 5,79,713/- IS ATTRIBUTABLE TO THE PROJECT NIWAS PARK (ROW HOUSE) AND NAV NIRMAN ENCLAVE (APARTMENT) WHICH IS COVERED ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 3 U/S 80-IB(10). THE CONDITIONS IN SECTION 80-IB(10 ) ARE APPROVED BY LOCAL AUTHORITY BEFORE 13-3-2001. RESID UARY SECTION 158BH PROVIDES FOR APPLICABILITY OF ALL OTH ER PROVISIONS OF THE ACT. SECTION 158BB(1) REQUIRES THE A.O TO C OMPUTE THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD WHICH SHALL BE THE TOTAL INCOME OF ALL THE PREVIOUS YEARS. IT WAS FUR THER SUBMITTED THAT THE CLAIM FOR DEDUCTION UNDER CHAPTE R VI-A ALLOWABLE IN RESPECT OF DISCLOSED INCOME CANNOT BE SNATCHED AWAY MERELY BECAUSE THE INCOME IS NOT RECORDED IN T HE BOOKS OF ACCOUNT. ACCORDINGLY, THE ASSESSEE REQUESTED THA T THE UNDISCLOSED INCOME BE COMPUTED AFTER ALLOWING DEDUC TION UNDER CHAPTER VIA. IT HAS BEEN FURTHER EXPLAINED T HAT THE ONLY REASON FOR INCLUDING THE RECEIPTS IN ASSESSEES HA NDS IS FOR SIMPLIFICATION OF COMPUTATION PROCESS. HENCE, IT W AS CLAIMED THAT THE DEDUCTION U/S 80-IB(10) BE ALLOWED. HOWEVE R, THE A.O DID NOT ACCEPT THE SUBMISSIONS MADE ON BEHALF OF TH E ASSESSEE AND ADDED THE AMOUNT OF RS. 5,79,713/- TO THE INCOM E OF THE ASSESSEE WHICH WAS DELETED BY THE CIT(A) OBSERVING THAT THE IMPUGNED AMOUNT UNDISPUTEDLY RELATES TO THE FIRM IN THE FORM OF ON MONEY FROM CUSTOMERS. IN BLOCK ASSESSMENT, AD DITION CAN BE MADE ON THE BASIS OF SEIZED MATERIAL PROVIDE D IT CAN BE LEGALLY ASSESSED IN THE RIGHT HANDS. AS THE INCOME DOES NOT BELONG TO THE APPELLANT BUT IT RELATES TO THE FIRM, THE SAME CANNOT BE ADDED IN THE HANDS OF THE APPELLANT. THE LEARNED CIT(A) THUS HAS DIRECTED THE LEARNED AO TO DELETE T HE SAME IN ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 4 THE HANDS OF THE APPELLANT AND ALSO TO TAKE THE NEC ESSARY ACTION AS REQUIRED IN THE CASE OF THE FIRM AS ALSO TO EXAMINE THE CLAIM U/S 80-IB(10) IN CASE OF FIRM. MERELY BEC AUSE THE ASSESSEE DECLARES ANY INCOME WHICH OTHERWISE CANNOT BE ASSESSED, SUCH INCOME CANNOT BE ADDED THOUGH THE AS SESSEE HAS DECLARED TO OFFER. THE UNDISCLOSED INCOME IN TH E BLOCK ASSESSMENT HAS TO BE COMPUTED AS PER THE PROVISIONS OF LAW. THE DEDUCTIONS UNDER CHAPTER VI-A THEREFORE ARE TO BE ALLOWED IN COMPUTING THE UNDISCLOSED INCOME. THE IMPUGNED INCOME IS ELIGIBLE FOR DEDUCTION U/S 80-IB(10) AND THEREFO RE CANNOT BE ADDED MERELY BECAUSE IT IS OFFERED BY THE ASSESSEE. 3. THUS, THE CIT(A) ACCEPTING THE CLAIM OF THE ASSE SSEE DIRECTED THE A.O TO REDUCE THE GROSS INCOME FROM TH E UNDISCLOSED INCOME OF THE ASSESSEE. NOT BEING SATIS FIED WITH THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BE FORE US. THE LEARNED DR SUPPORTED THE ORDER OF THE A.O. ON THE OTHER HAND, THE ASSESSEE FILED WRITTEN SUBMISSIONS STATIN G AS UNDER: AS MENTIONED ABOVE, THE IMPUGNED AMOUNT IS IN THE FORM OF ON MONEY FROM CUSTOMERS OF A PROJECT WHICH IS UNDERTAKEN BY THE FIRM. THE SAID PROJECT IS AN ELIG IBLE UNDERTAKING U/S 80-IB(10) AND THE ENTIRE PROFITS AR E ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. THE QUESTION OF DEDUCTION U/S 80-IB(10) HAS BECOME FINA L BY WAY OF AN ORDER OF THE HON TRIBUNAL ALLOWING THE SA ME TO THE FIRM. THE INCOME THOUGH UNACCOUNTED IS NOT TAXA BLE IN VIEW OF THE ORDER OF HON TRIBUNAL ALLOWING THE DEDUCTION U/S 80-IB(10). FURTHER, THE SAID INCOME UNDISPUTEDLY BELONGS TO THE FIRM. IN THE CASE OF TH E FIRM THE BLOCK ASSESSMENTS HAVE BEEN COMPLETED BY ACCEPT ING THE BLOCK RETURN. THERE IS NO ACTION IN THE CASE OF THE FIRM BY THE DEPARTMENT. EVEN IF IT IS TO BE CONSIDE RED IN ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 5 THE HANDS OF THE FIRM, THE SAME IS NOW ELIGIBLE FOR DEDUCTION U/S 80-IB(10) IN VIEW OF THE ORDER OF THE HON TRIBUNAL. IT IS THEREFORE SUBMITTED THAT THE IMPUGN ED AMOUNT CANNOT BE ADDED IN THE HANDS OF THE APPELLAN T AS ALSO THE SAME IS NOT LIABLE TO BE TAXED FOR THE DED UCTION U/S 80-IB(10). 2. THE APPELLANT HAD ADMITTED TO OFFER THE INCOME WHICH WAS REFLECTED IN THE SEIZED BUNDLE. THE OFFER TO DECLARE IN THE INDIVIDUAL HANDS WAS MADE OUT OF PRA CTICAL CONVENIENCE AND FOR SIMPLIFICATION. THE OFFER WAS M ADE BY THE APPELLANT IN RESPECT OF OVERALL TRANSACTIONS REFLECTED IN THE SEIZED BUNDLE AND INCOME THERE FRO M. IT COULD NOT HAVE BEEN INTERPRETED THAT EVEN IF THERE IS NO INCOME OR ANY INCOME WHICH IS NOT TAXABLE WILL ALSO BE OFFERED. IN FACT THE ACTUAL WORKING OF INCOME FROM THE SEIZED BUNDLE CAME TO RS. 74,65,682/- WHICH WAS FUR THER ROUNDED OFF TO RS.78,00,000/- CONSIDERING A MARGIN OF RS. 3,34,318/- AS ERRORS AND OMISSIONS IN PLACE OF 1,15,00,762/- WHICH HAS BEEN ACCEPTED BY AO EXCEPT TWO ADDITIONS AS STATED ABOVE. IT IS THEREFORE SUBM ITTED THAT OFFER OF THE APPELLANT HAS BEEN UNDERSTOOD AS TO DERIVE THE CORRECT INCOME FROM THE SEIZED BUNDLE AS AGAINST THE GENERAL ADMISSION OR OFFER MADE AT THE TIME OF SEARCH. IT IS THEREFORE SUBMITTED THAT THE OFFER WAS REDUCED IN THE SUBSEQUENT WORKING TO DERIVE THE COR RECT INCOME AS PER LAW. RELIANCE IS PLACED ON THE DECISI ON OF NAGPUR BENCH IN THE CASE OF CIT VS SANMUKHDAS WADHWANI 85 ITD 734 WHEREIN THE HON TRIBUNAL HAS HELD THAT IF AN ASSESSEE COMMITS A PATENT MISTAKE O F LAW OR FACT WHILE FILING HIS BLOCK RETURN U/S 158BC, HE CANNOT BE ASSESSED ON SUCH INCORRECT INCOME MERELY ON THE BASIS OF ADMISSION MADE IN THE RETURN. IF THE ASSES SEE HIMSELF HAS RETURNED THE INCOME ON ADHOC BASIS WITH OUT ANY BREAK UP OF THE SAID AMOUNT AND A DETAILED WORK ING MADE SUBSEQUENTLY REVEALED THAT TOTAL INCOME ASSESS ABLE IN HIS HANDS IS LOWER THAN THE RETURNED INCOME, SAM E HAD TO BE ASSESSEE AT SUCH LOWER AMOUNT ESPECIALLY WHEN THE SAID WORKING WAS VERIFIED AND FOUND CORRECT BY THE AG. 3. THE APPELLANT HAS UNDER THE MISUNDERSTANDING OF LAW AND ON FACTS HAS ADDED THE IMPUGNED AMOUNT IN T HE PROFIT AND CLAIMED DEDUCTION U/S 80-IB(10). AS THE INCOME PER SE CANNOT BE ADDED IN THE HANDS OF APPEL LANT, THE SAME CANNOT BE ADDED AS RIGHTLY HELD BY THE LEA RNED CIT(A). 4. THE AMOUNT EVEN IF IS CONSIDERED IN THE HANDS OF ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 6 THE ASSESSEE, IT IS ATTRIBUTABLE TOWARDS THE SHARE OF PROFIT FROM THE SAID FIRM AS HE WAS A PARTNER IN M/S. NAVNIRMAN DEVELOPERS. THE AMOUNT RECEIVED TOWARDS SHARE OF PROFIT IS NOT TAXABLE AND THEREFORE CANNOT BE ADDED. 5. IN VIEW OF THE ABOVE FACTUAL AND LEGAL SUBMISSIO NS, IT IS PRAYED THAT THE ORDER OF LEARNED CIT(A) DELET ING THE ADDITIONS MAY KINDLY BE CONFIRMED. 4. HAVING GONE THROUGH THE WRITTEN SUBMISSIONS FILE D BY THE ASSESSEE, WE FIND THAT THE A.O HAS NOT TAKEN CORREC T VIEW IN CONSIDERING THE FIRM'S INCOME IN THE HANDS OF THE A SSESSEE. UNDISPUTEDLY THE RECEIPTS OF RS. 5,79,713/- RECEIVE D BY THE ASSESSEE WAS RELATED TO ON-MONEY ON SALE OF ROW HOU SES CONSTRUCTED BY M/S. NAV NIRMAN DEVELOPERS. THEREFOR E, QUESTION OF CONSIDERING UNACCOUNTED RECEIPTS AS INC OME IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIABLE AT ALL. CH APTER XIV B WHICH IS SELF CONTAINED CODE, DEFINES THE EXPRESSIO N UNDISCLOSED INCOME CHARGEABLE TO TAX IN THE SPECI AL ASSESSMENT AND THE MANNER AND METHOD OF COMPUTATION OF SUCH INCOME IS ALSO SPECIFIED THEREIN. IN ACCORDAN CE WITH THOSE SPECIAL PROVISIONS, THE A.O IS REQUIRED TO DE TERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN A SPECIFI C MANNER AND THE FINDING OF THE A.O REGARDING UNDISCLOSED IN COME IS TO BE BASED ON THE MATERIAL FOUND AS A RESULT OF SEARC H. A COMBINED READING OF THESE PROVISIONS MAKES IT CLEAR THAT THE AMOUNT WHICH IS TAXABLE AS UNDISCLOSED INCOME IN TH E BLOCK ASSESSMENT SHOULD FALL WITHIN THE SCOPE AND AMBIT O F THE ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 7 DEFINITION EXPRESSLY GIVEN IN CHAPTER XIV B AND THE AMOUNT WHICH IS NOT COVERED BY THE SAID DEFINITION CANNOT BE SUBJECTED TO TAX IN BLOCK ASSESSMENT EVEN THOUGH DECLARED AS SUCH BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE BLOCK PERIOD. FURTHER, THE PROCEDURE LAID DOWN IN CHAPTER XIV B A LSO REVEALS THAT THE A.O HAS TO DETERMINE THE UNDISCLOS ED INCOME OF THE BLOCK PERIOD IN THE MANNER SPECIFIED IN SEC. 158BB AND THIS EXERCISE IS INDEPENDENT OF THE RETURN FILED BY THE ASSESSEE FOR THE BLOCK PERIOD IN THE MANNER SPECIFIED IN SEC . 158BB. IF ANY INCOME IS NOT TAXABLE BY VIRTUE OF ANY PROVISIO N OF THE ACT THEN IT CANNOT BE TAXED MERELY BECAUSE IT WAS OFFER ED BY THE ASSESSEE IN HIS RETURN OF INCOME AND THEREFORE CANN OT BE ANY ESTOPPELS AGAINST THE STATUTE. FURTHER, EVEN IF AN ASSESSEE DECLARES AN INCOME IN THE RETURN, THE A.O CANNOT AS SESS IT MERELY ON THAT BASIS AND HE HAS TO CONSIDER ITS TAX ABILITY IN THE LIGHT OF OTHER CIRCUMSTANCES DE-HORS THE ADMISS ION MADE IN THE RETURN. AS HELD BY THE HONBLE SUPREME COUR T IN THE CASE OF NARAYANAN VS. GOPAL (AIR 1960 SC 235) AN AD MISSION IN THE RETURN IS NOT CONCLUSIVE AND IT WOULD BE DEC ISIVE ONLY IF NOT SUBSEQUENTLY WITHDRAWN OR PROVED TO BE ERRONEOU S. IT IS WELL ESTABLISHED THAT THE OBJECT OF AN ASSESSMENT I S TO DETERMINE THE CORRECT INCOME AND SUBSEQUENTLY THE C ORRECT TAX LIABILITY. UNDER THE CIRCUMSTANCES, ANY AMOUNT WHI CH IS NOT ASSESSABLE AS UNDISCLOSED INCOME IN THE BLOCK PERIO D CANNOT BE ASSESSED AS SUCH MERELY FOR THE REASON THAT THE SAME WAS ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 8 DECLARED BY THE ASSESSEE IN THE RETURN FOR BLOCK PE RIOD AND THERE CANNOT BE ANY ESTOPPELS AGAINST THE STATUTE. IT THEREFORE, FOLLOWS THAT IF THE ASSESSEE COMMITS A PATENT MISTA KE OF FACT OR LAW WHILE FILING RETURN OF UNDISCLOSED INCOME U/S 1 58BC HE CANNOT BE ASSESSED ON SUCH INCORRECT INCOME MERELY ON THE BASIS OF ADMISSION MADE IN THE RETURN. IT IS UNDISP UTED FACT THAT THE ON-MONEY ON SALE OF ROW HOUSES CONSTRUCTED BY M/S. NAV NIRMAN DEVELOPERS IS REQUIRED TO BE ASSESSED IN THE HANDS OF THE FIRM ONLY. IN VIEW OF THESE FACTS, WHE N THE UNACCOUNTED ON-MONEY RECEIPTS ARE TAXABLE IN THE HA NDS OF FIRM, IT CANNOT BE ASSESSED IN THE HANDS OF THE ASS ESSEE EVEN THOUGH THE ASSESSEE HAD OFFERED THE SAME FOR TAX IN HIS HANDS. ACCORDINGLY, THE INCOME PERTAINING TO M/S. NAV NIRM AN DEVELOPERS ON ACCOUNT OF ON-MONEY RECEIPT ASSESSED BY THE A.O IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIABLE . THEREFORE, THE CIT(A) HAS RIGHTLY DIRECTED THE A.O TO REDUCE T HE GROSS INCOME FROM THE UNDISCLOSED INCOME OF THE ASSESSEE TO THAT EXTENT. ACCORDINGLY WE UPHOLD THE FINDINGS OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REV ENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER 2010. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRAKUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE,DATED THE 21 ST SEPTEMBER 2010 ANKAM ITA NO. 947/PN/2003 SHRI N.L. PODDAR BLOCK PERIOD: 1-4-1990 TO 11-8-2000 , 9 COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT- (CENTRAL) NAGPUR (4) CIT(A)-I NAGPUR (5) THE D.R. A' BENCH, PUNE TRUE COPY BY ORDER, ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCHES, PUNE