M/s. Sanghvi Developers, Ahmedabad V. The Dy.CIT, Central Circle-2(4), Ahmedabad

ITSSA 188/AHD/2015

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9792 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-10-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 23-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: P M MEHTA
• Keywords: Business expenditure; Document seized; Question of law; Procedural lapse; Documents seized
• Section: 143(3); 153A; 201; 64; 158BC; 43; 48; 13; 147; 131; 148; 37; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER MOHAN D. BHARWAD S/1, NEW UMANG SOCIETY, OPP. MADHAV BAUG, NIRNAYNAGAR, AHMEDABAD PAN: ADDPB0907D (APPELLANT) VS THE DCIT , CENTRAL CIRCLE - 2(4) , AHMEDABAD (RESPONDENT) M/S. SANGHVI DEVELOPERS, B/34, DHAVAL AVENUE, BESIDE ASSOCIATE PETROL PUMP, C.G. ROAD, AHMEDABAD PAN: ABVFS7887F (APPELLANT) VS THE DCIT , CENTRAL CIRCLE - 2(4) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI O.P. SHARMA , C IT - D . R. ASSESSEE BY: SHRI P.M. MEHTA, A.R. DATE OF HEARING : 23 - 10 - 2 019 DATE OF PRONOUNCEMENT : 19 - 12 - 2 019 / ORDER IT (SS) A NO. 190 &191 /AHD/20 15 ASS E SSMENT YEAR 2010 - 11 TO 2011 - 12 IT (SS) A NO. 188 &189 /AHD/20 15 ASS ESSMENT Y EAR 2010 - 11 TO 2011 - 12 I.T(SS).A NO. 188,189, 190 & 191/AHD/2015 A.Y. 2010 - 11 TO 2011 - 12 PAGE NO M/ S. SANGHVI DEVELOPERS & MOHAN D. BHARWAD VS. DCIT 2 P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE FOUR APPEAL FILED BY TWO DIFFERENT ASSESSEES FOR A.Y. 2010 - 11 & 2011 - 12 , ARI SE FROM ORDER OF THE CIT(A) - 12 , AHMEDABAD DATED 27 - 03 - 2 015 , IN PROCEEDINGS UNDER SECTION 153A R.W.S. 143(3) & 143(3 ) R.W.S. 153B(1)(B) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THESE FOUR APPEALS OF TWO DIFFERENT ASS ESSEES ARE BASED ON ISSUE S ARISED FROM IDENTICAL FACTS, THEREFORE, FOR THE SAKE OF CONVENIENCE, ALL THESE FOUR APPEALS ARE ADJUDICATED TOGETHER BY THIS COMMON ORDER. IT(SS)A NOS. 190 & 191/AHD/2015 A.Y. 2010 - 11 & 2011 - 12 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LD. CIT (APPEALS) HAS GROSSLY ERRED IN REJE CTING GROUNDS NO. 1 AND 2 OF THE APPELLANT' S APPEAL BEFORE HIM CHALLENGING T HE VALIDITY OF THE ASSESSMENT ORDER PASSED U/S. 153C R.W.S 153A R.W.S 143(3) OF THE INCOME - TAX ACT, 1961. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (AP PEALS) HAS ERRED IN CONFIRM ING THE ADDITION OF RS. 5,00,000 / - AS PROFIT OUT OF UNDISCLOSED RECEIPTS OF 'DHARABHAI COMPLEX' WHEN NO SUCH ADDITION IS) CALLED FOR. 3. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS ) HAS ERRED IN NO T ACKNOWLEDGING THE FACT THAT NO REAL INCOME HAD ACCRUED TO THE APPELLANT FOR THE PRESENT ASSESSMENT YEAR AS THE PROJECT OF DHARABHAI COMPLEX WAS STARTED IN THE CURRENT YEAR, WAS IN ITS INITIAL STAGE AND VERY MEAGER AMOUNT REALIZED BY WAY BOOKING IN THE CU RRENT YEAR. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT THAT ON - MONEY RECEIPT IS REQUIRED TO BE TAXED AS PER METHOD OF ACCOUNTING FOLLOWED BY APPELLANT. THE LD. CIT (APPEALS) OUGHT TO HAVE ACCEPTED THAT ON MONEY SHOULD BE TAXED IN THE YEAR IN WHICH SALES IN RESPECT OF CHEQUE COMPONENT IS OFFERED FOR TAX. 5. WITHOUT PREJUDICE TO THE ABOVE, IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN ESTIMATING PROFIT FROM THE PROJECT OF 'DHARABHAI COMPLEX' AT THE NETJGROFIT RATE OF 50% AS AGAINST 15% OFFERED BY THE APPELLANT WHEN THE LD. ASSESSING OFFICER HAS ACCEPTED THE NET PROFIT RATE OF 15% TOGETHER WITH THE METHOD OF ACCOUNTING FOL LOWED FOR THE SAME PROJECT IN ASSESSMENT YEAR 2012 - 13. 4. THE FACT IN BR IEF IS THAT A SEARCH ACTION U/S. 132 OF THE ACT WAS CONDUCTED IN GROUP CA S ES OF SANGHVI GROUP ON 9 TH MARCH, 2011. DURING THE COURSE OF SEARCH, ONE LOOSE PAPER FILE AS PER ANNEXURE A - 2 WAS FOUND AND I.T(SS).A NO. 188,189, 190 & 191/AHD/2015 A.Y. 2010 - 11 TO 2011 - 12 PAGE NO M/ S. SANGHVI DEVELOPERS & MOHAN D. BHARWAD VS. DCIT 3 SEIZED CONSISTING OF 42 PAGES. THESE DOCUMENTS WERE RELA TED TO THE ASSESSEE SHRI MOHAN BHARWAD . THE ASSESSING OFFICER STA T ED THAT PAGES FROM 39 TO 40 AND 42 PROVIDE DETAIL OF CASH AND CHEQUE RECEIPT IN RESPECT OF SALE OF SHOPS BELONG ED TO THE ASSESSEE, T HEREFORE, NOTICE U/S. 153C OF THE ACT WAS ISSUED TO THE ASSESSEE . I N RESPONSE TO THE NOTICE , THE ASSESSEE HAS FILED RETURN OF INCOME ON 22 ND NOV, 2012 DECLARING INCOME OF R S. 1 , 46 , 900/ - . THE ASSESSEE HAS ALSO RAISED OBJECTION REGARDIN G ISSUE OF NOTICE U/S. 153C WHICH THE ASSESSING OFFICER HAD STATED THAT IT WAS REBUTTED VIDE LETTER DATED 11 TH DECEMBER, 2011. THE ASSESSING OFFICER STATED THAT LOOSE PAPER FILE INVENTORIED AS ANNEXURE A - 2 PAGE NO. 40 SEIZED FROM THE RESIDENCE OF SHRI DHIR AJLAL V. SANGHVI WAS PERTAINED TO THE DETAIL OF TRANSACTION IN RESPECT OF CASH AS WELL AS CHEQUE ON S ALE OF SHOP IN RESPECT OF DHAR ABHAI COMPLEX DEVELOPED ON A PLOT OF LAND BELONG TO THE ASSESSEE. M/S. SANGHVI DEVELOPERS HAS DEVELOPED A COMMERCIAL CUM RES IDENTIAL BUILDING NAME LY THE DHARABH A I C OMP L EX AT NAVABADAJ/AHMEDABAD ON THE LAND BELONGING TO THE ASSESSEE. SHRI DHIRAJLAL SANGHVI IN HIS STATEMENT RECORDED U/S. 131 ADMITTED THAT THE FIGURE WRITTEN ON RIGH T HAND SIDE OF THE PAGES 1 TO 7 RELATED TO THE C ASH PORTION OF THE ACTUAL SALES CONSIDERATION . THE ASSESSING OFFICER HAS SUMMARIZED THE SUCH DETAI L IN THE ASSESSMENT ORDER IN PARA 5 AS UNDER: - SR. NO. SHOP NO. NAME OF THE PURCHASER DATE CASH ELEMENT OF ACTUAL SALE CONSIDERATION CHEQUE 1 G - L (G ROUND FLOOR) PARESHBHAI 50000 - IN F.Y 2009 - 10 450000 IN F.Y. 2010 - 11 RS.24,00,000/ - 200000 2 G - 2 CHETANBHAI 200000 IN F.Y 2010 - 11 RS.24,00,000/ - 2500000 3 G - 3 RS.24,00,000/ - I.T(SS).A NO. 188,189, 190 & 191/AHD/2015 A.Y. 2010 - 11 TO 2011 - 12 PAGE NO M/ S. SANGHVI DEVELOPERS & MOHAN D. BHARWAD VS. DCIT 4 4 G - 4 DINESHBHAI 50000 - IN F.Y 2009 - 10 RS.24,00,000/ - 450000 IN F.Y 2010. - 11 150000 5 G - 5 RAJUBHAI MORAKHIA 50000 - IN F.Y 2009 - 10 RS.23,51,000/ - 500000 IN F.Y 20 LO - LL 100000 6 F - 1 (FIRST FLOOR) SHAILESHBHAI PARIKH 2,00,000 IN F.Y 2010 - 11 RS. 10,00,000/ - 7 F - 2, 3, 4 , 5 PARIKHBHAI (MUMBAI) 800000 IN F.Y 2009 - 10 RS.40,00,000/ - 400000 12,00,000 IN F.Y 2010 - 11 TOTAL RS. 1,69,51,000/ - AS PER DETA IL GIVEN ABOVE, THE TOTAL CASH PORTION I N THE SALE CONSIDERATION WAS TO THE AMOUNT OF R S. 1 , 69 , 51 , 000/ - . CONSIDERING THE ABOVE DETAIL THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN WHY NOT THE AFORESAID AMOUNT BE CONSIDERED AS HIS UNACCOUNTED RECEIPT AFTER EXCLUDING THE AMOUNT PAYABLE TO SANGHVI DEVELOPERS. IT WAS SUBMITTED THAT 12.5% OF THE TOT AL COLLECTION WAS TO BE PAID TO M/S. SANGHVI DEVELOPER TOWARDS DEVELOPMENT CHARGES AN D THE REMAINING PART OF CASH COLLECTION OF 87.5% WAS PERTAINED TO THE ASSESSEE MOHAN D. BHARWAD. THE ASSESSEE SUBMITTED THAT HE HAS OFFERED THE INCOME @ 15% OF THE OVER AN D ABOVE INCOME @ 12.5% OFFERED BY SANGHVI DEVELOPERS. IT WAS ALSO SUBMITTED THAT ASSESSEE SHRI MOHAN B H ADWAD HAD FOLLOWED PERCENTAGE COMPLETION METHOD. IT WAS ALSO SUBMITTED TH AT INCOME HAS ACCRUED IN F.Y. 201 0 - 11 AND 2011 - 12 AND I.T(SS).A NO. 188,189, 190 & 191/AHD/2015 A.Y. 2010 - 11 TO 2011 - 12 PAGE NO M/ S. SANGHVI DEVELOPERS & MOHAN D. BHARWAD VS. DCIT 5 SUBMITTED COMPUTATION O F INCOME FOR F.Y. 2011 - 12. IT WAS SUBMITTED THAT T HE ASSESSING OFFICER HAD MADE ADDITION IN THE PRESENT ASSESSMENT YEAR WHEREAS SUCH INCOME HAD ALREADY BEEN TAXED IN SUBSEQUENT ASSESSMENT YEAR , THEREFORE, THE SAME WOULD AMOUNT TO DOUB L E TAXATION. THE ASSE SSEE HAS ALSO EXPLAINED THAT THE DO CUMENTS WERE EXECUTED IN F.Y. 2011 - 12 AND ALL THE INCOME WHICH HAD BEEN OFFERED IN F.Y. 2010 - 11 SHOULD BE TAKEN TO F.Y. 201 1 - 12. THE ASSESSING OFFICER HAD NOT ACCEPTED THE REPLY OF THE ASSESSEE STATING THAT CASH COMPONEN T FOR THE SALE OF SHOP OF RS.1 , 69 , 51 , 000/ - WAS REQUIRED TO BE CONSIDERED FOR TAXATION IN CURR ENT ASSESSMENT YEAR AS MOST OF THE CHEQUE PAYMENT HAD BEEN RECEIVED IN THE CURRENT YEAR. THE A SSESSING OFFICER WAS OF THE VIEW THAT PERCENTAGE COMPLETION METHOD W AS NOT APPLICABLE WITH REGARD TO ON MONEY RECEIPT AND THE SAME WAS REQUIRED TO BE TAXED IN THE YEAR OF REC EIPT. THE ASSESSING OFFICER STATED TH AT AMOUNT OF RS. 9 LACS RECEIVED IN THE F.Y. 2009 - 10 WAS RELATED TO ASSESSMENT YEAR 20 10 - 11 AN D THE AMOUNT OF R S. 1,60 ,51,000/ - WAS CONSIDERED IN THE CURRENT ASSESSMENT YEAR. THE AS SESSING OFFICER OBSERVED THAT AS PER DEVELOPMENT AGREEMENT WITH SANGHVI DEVELOPER 12 .5% OF RS. 1 , 60 , 51 , 000/ - TO THE AMOUNT OF R S. 20 , 06 , 375/ - WAS CONSIDERED INCOME BELONGING TO SANGHI V DEVELOPER AND THE REMAINING PART OF REC EIP T OF RS. 1 , 40 , 44 , 625/ - WAS TAXED IN THE HAND OF THE ASSESSEE. NAME A.Y TOTAL CASH ELEMENT IN ACTUAL CONSIDERATION TAXED IN THE SANGHVI DEVELOPERS INCOME OFFERED BY ASSESSEE BALANCE TO BE TAXED MOHAN BHARWA D 2010 - 11 9,00,000 1,12,500 7,87,500 2011 - 12 1,60,51,000/ - 20,06,375 7,05,000 1,33,39,625 TOTAL 169,51,000 21,18,875 7,05,000 141,27,125 - I.T(SS).A NO. 188,189, 190 & 191/AHD/2015 A.Y. 2010 - 11 TO 2011 - 12 PAGE NO M/ S. SANGHVI DEVELOPERS & MOHAN D. BHARWAD VS. DCIT 6 AS REPORTED IN THE CHART A SUM OF RS. 141 , 27 , 125/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSES SEE IN ASSESSMENT YEAR 2010 - 11 AND 2 011 - 12 . 5. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - DECISION 9. I HAVE C AREFULLY CONSIDERED THE ASSESSMENT ORDER, SUBMISSION OF THE APPELLANT AND MATERIAL AVAILABLE ON RECORD. THE FOLLOWING FACTS ARE OBSERVED FROM THE ABOVE - 9.1 SANGHVI GROUP WAS SEARCHED U/S 132 OF THE IT ACT ON 09.03.2011. DURING THE COURSE OF SEARCH IN SANG HVI GROUP, 2 LOOSE PAPER FILES CONTAINING DOCUMENT OF THE APPELLANT WAS FOUND AND SEIZED AND INVENTORISED AS A - 2 AND A - 29,THE FILE. A - 2 CONTAINED HAND WRITTEN NOTING OF CASH AND CHEQUE AMOUNT RECEIVED TOWARDS SALE OF SHOPS AT TT DHARABHAI COMPLEX'THE FILE A - 29 CONTAINED THE DETAILS OF ABOVE SHOP ALLOTTED/SOLD TO VARIOUS PERSONS I.E. NAME ,SHOP ALLOTTED AND CASH AND CHEQUE COMPONENT . AS THE DOCUMENTS PERTAINING TO THE APPELLANT WERE FOUND IN THE SEARCH IN SANGHV I GROUP THEREFORE AFTER RECORDING THE SATISFAC TION NOTICE U/S 153C WAS ISSUED IN THE CASE OF THE APPELLANT. 9.2 THE APPELLANT AND M/S SANGHVI DEVELOPER WERE INVOLVED IN DEVELOPING THE PROJECT 'DHARABHAI COMPLEX', SH. DHLRAJLAL V. SANGHVI IN HIS STATEMENT ADMITTED THAT THE CASH COMPONENT FO R SALE OF 10 SHOPS IN 'DHARABHAI COMPLEX' . WAS RS 1 ,69 ,51,000/ - . SH. DHIRAJ LAL SANGH VI IN STATEMENT U/S 131 ADMITTED THAT NOTING ON PAPER IS GENU INE OUT OF CASH COMPONENT OF RS. 1,69,51,000 OF DHARABHAI COMPLEX, CASH OF RS. 39 Y 51,000/ - WAS RECEIVED AND THE BALANCE W AS YET TO BE RECEIVED ON THAT DATE. 9.3 AS PER THESE DOCUMENTS, OUT OF 1,69,51,000/ - CASH RECEIPT IN AY 2010 - 11 AN D AY 2011 - 12 WAS OF RS. 9,00,000 / - AND RS.30,50,000/ - RESPECTIVELY AND THE BALANCE OF RS. 1,30,01,000/ - WAS OUTSTANDING OUT OF CASH RECEIPT. TH E ASSESSING OFFICER ON THE BASIS OF THESE DOCUMENTS FOUND THAT 12.5% FEE WAS PAYABLE TO THE SANGHVI DEVELOPERS THEREFORE OUT OF TOTAF AMOUNT OF RS. 1,69,51,0007 - DIVIDED THE RECEIPT IN THE RATIO OF 87.5% AND 12.5% IN THE HANDS OF THE APPELLANT AND SANGHVI DEVELOPERS. THE AO TAXED THE ABOVE AMOUNT IN AY 2010 - 11 AND AY 2011 - 12 ON THE RECEIPT BASIS AS UNDER: A.Y. TOTAL CASH ELEMENT IN ACTUAL CONSIDERATION TAXED IN SANGHVI DEVELOPERS INCOME OFFERED BY ASSESSEE BALANCE TO BE TAXED 2010 - 11 9,00,000 1,12,5 00 - 7,87,500 2011 - 12 1,60,51,0 00/ - 20,06,375 7,05,000 1,33,39,625 TOTAL 169,51,000 21,18,875 7,05,000 141,27,125 10. HOWEVER THE APPELLANT SUBMITTED A DIFFERENT STATUS OF ON MONEY RECEIVED. ACCORDING TO HIM ACTUAL CASH RECEIPT IN AY 20 10 - 11 AND AY 2011 - 12 WAS MUCH MORE THAN NOTED IN THE DOCUMENT FOUND AND SEIZED BY THE DEPARTMENT AND OUTSTANDING AMOUNT WAS LESS. AS. PER THE APPELLANT ACTUAL CASH, RECEIPT WAS RS. 11 LAKHS IN AY 2010 - 11 AND RS. 59 LAKHS IN AY 2011 - . 12 AS AGAINST RS. 9 L AKHS IN AY 2010 - 11 AND RS. 30.50 LAKHS IN AY 2011 - 12 WRITTEN/NOTED IN THE DOCUMENT FOUND. 10.1 DURING THE ASSESSMENT PROCEEDING THE APPELLANT CLAIMED THAT THE OUTSTANDING CASH OF RS. 99.51 LAKHS AND OTHER CASH RECEIPT OF RS. 7.00 LAKHS WAS RECEIVED IN AY 2 012 - 13 AND SAME WAS I.T(SS).A NO. 188,189, 190 & 191/AHD/2015 A.Y. 2010 - 11 TO 2011 - 12 PAGE NO M/ S. SANGHVI DEVELOPERS & MOHAN D. BHARWAD VS. DCIT 7 OFFERED FOR TAXATION