The ACIT, Central Circle-2, Baroda V. Shri Jignesh V.Koralwala, Bharuch

ITSSA 262/AHD/2010

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9080 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-04-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 22-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLY JINDAL
• Keywords: Unexplained expenditure; Loose papers; Document seized; Documents seized
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A MOHAN ALANKAMONY, ACCOUNTAN T MEMBER ACIT, CENTRAL CIRCLE-2, BARODA (APPELLANT) VS SHRI JIGESH V. KORALWALA 81, KRISHNA NAGAR SOCIETY, NR. NAVI VASAHAT, BHARUCH PAN: AEFPK 2897 C (RESPONDENT) REVENUE BY: SRI SHELLY JINDAL, CIT- D. R. ASSESSEE BY: SRI HEMANT SUTHAR A.R. DATE OF HEARING : 12-04-2013 DATE OF PRONOUNCEMENT : 10-05-20 13 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE CONSOLIDATED ORDER OF LD. CIT(A)-IV, AHMEDABAD DATE D 01/04/2010 FOR ASSESSMENT YEARS 2003-04, 2004-05 & 2006-07. IT(SS)A NO. 262,263 &264/AHD/2010 ASSESSMENT YEAR 2003-04, 2004-05 &2006-07 IT(SS)A NOS. 262,263 &264/AHD/2010 A.Y. 2003-04,04- 05&06-07 PAGE NO ACIT VS. JIGNESH V. KORALWALA 2 2. AS THESE APPEALS BELONG TO SAME ASSESSEE AND WER E HEARD TOGETHER, THESE ARE BEING DISPOSED OF BY CONSOLIDATED ORDER. 3. REVENUE IN THESE APPEALS IS AGGRIEVED BY THE ACT ION OF LD. CIT(A) IN DELETING ADDITION OF RS 7,48,150/- FOR A.Y.2003-04, RS. 3,98,970 FOR A.Y. 2004-05 & RS. 1,38,750/- FOR A.Y. 2006-07 ON ACCOUN T OF ON MONEY RECEIPTS OUT OF RS. 8,95,300/-, 4,70, 970/- & 1,66,500/- RES PECTIVELY. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSING OFFIC ER ON EXAMINATION OF SEIZED DOCUMENTS FOUND THAT ASSESSEE HAD RECEIVED O N MONEY OF RS. 16,46,970/- IN THESE THREE YEARS OVER AND ABOVE THE INCOME DISCLOSED DURING THE COURSE OF SEARCH OF OVER RS. 2 CRORES. THE ASS ESSING OFFICER AFTER CONSIDERING THE REPLY OF THE ASSESSEE TAXED THE GRO SS RECEIPT AS INCOME OF THE ASSESSEE IN THESE THREE YEARS AND MADE THE ADDITION OF RS. 8,95,300/- DURING THE ASSESSMENT YEAR 2003-04, RS. 4,70,970/- DURING THE ASSESSMENT YEAR 2004-05 AND RS. 1,66,500/- FOR ASSESSMENT YEAR 2006 -07. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) AND PLACED REL IANCE ON THE FOLLOWING WRITTEN SUBMISSION. THE FACTS BRIEFLY STATED IN THE CASE OF THE APPELLA NT ARE THAT CONSEQUENT TO SEARCH ON 17/01/2007 AND SOME INCRIMI NATING LOOSE PAPERS / DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH, WHEREIN ON-MONEY TRANSACTIONS WERE NOTED. ON THE BASIS OF SUCH NOTINGS, THE ASSESSEE HAS OFFERED PROFIT 10% OF TOTAL ON-MONEY F OUND TO BE RECORDED DURING THE YEARS UNDER CONSIDERATION IN TH E RETURNS OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. PARTICULARS OF PROFIT OFFERED FOR TAXATION ON YEAR TO YEAR BASIS A RE AS UNDER: ASSESSMENT YEAR AMOUNT (RS.) 2003-04 85,700 2004-05 10,000 2006-07 18,500 IT(SS)A NOS. 262,263 &264/AHD/2010 A.Y. 2003-04,04- 05&06-07 PAGE NO ACIT VS. JIGNESH V. KORALWALA 3 THE APPELLANT HAS OFFERED THESE INCOME AS NET AFTER CONSIDERING ALL EXPENSES AS IN THE COURSE OF SEARCH PROCEEDINGS, VA RIOUS DOCUMENTS WITH RESPECT TO UNACCOUNTED EXPENDITURE WAS ALSO FO UND AND SEIZED. REFER ANNEXURE BI/3 OF THE PANCHNAMA DATED 17/1/200 7 AND EXPLANATIONS FURNISHED TO THE LD. A.O. BY THE APPEL LANT WITH RESPECT TO CONTENTS THEREOF ARE AS UNDER: PAGE NO. 83 CONTAINS THE PAYMENT OF RS.1,00,000/- A ND RS.1,50,000/- MADE TO SHRI JASHWANTBHAI PATEL OWNER OF M/S. ADITY A SUPPLIER AND VIRAL TRANSPORT. THESE TRANSACTIONS ARE ALSO NOTED ON PAGE NO.80 AND 58 OF DIARY' 2005 (PAGE NO. 1 TO 149) RESPECTIVELY AND SAME HAS BEEN PAID OUT OF THE ON-MONEY RECEIVED AND THEREFORE NO FARTHER REFERENCES IS TO BE TAKEN FOR ANY FURTHER ACTION. PAGE NO. 127 TO 136 CONTAINS THE PARTICULARS OF AMO UNT PAID TO AAJ ARCHITECT TOWARDS DRAWING ARCHITECT FEES IN RESPECT OF VARIOUS PROJECTS CARRIED OUT BY THE GROUP OF THE ASSESSEE. THE ASSES SES HAS PAID TOTAL AMOUNT OF RS. 7,05,963/- AND IT IS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF WHICH AN AMOUNT OF RS.1,85,000/- IS REP ETITION OF TRANSACTION REFLECTED ON PAGE NO. 81 & 82 AS EXPLAI NED ABOVE. PARTICULARS OF YEAR-WISE BREAK UP ARE AS UNDER: PAGE NO. OF SEIZED MATERIAL FINANCIAL YEAR AMOUNT PAID (RS.) REPETITION OF AMOUNT PAID AS PER PAGE NO. 81 & 82 AS ABOVE (RS.) NET AMOUNT NOT RECORDED IN REGULAR BOOKS OF ACCOUNT (RS.) 127 2004-05 35,000 35,000 NIL 128 & 129 2004-05 2,73,163 1,00,000 1,73,163 130 2004-05 35,000 35,000 NIL 131 2004-05 NIL NIL NIL 132 2003-04 40,000 NIL 40,000 133 2002-03 60,000 NIL 60,000 134 2003-04 50,000 15,000 35,000 135 2001-02 57,500 NIL 57,500 IT(SS)A NOS. 262,263 &264/AHD/2010 A.Y. 2003-04,04- 05&06-07 PAGE NO ACIT VS. JIGNESH V. KORALWALA 4 136 2002-03 1,55,300 NIL 1,55,300 TOTAL 7,05,963 1,85,000 5,20,963 PAGS NO. 139 TO 146 CONTAINS THE PARTICULARS OF MEA SUREMENT OF MARBLES PURCHASE WORTH RS.2,25,000/- ON 30/5/2003 F OR THE PURPOSE OF VARIOUS RESIDENTIAL HOUSING SCHEME DEVELOPED BY ASS ESSES GROUP. THIS EXPENDITURE IS NOT RECORDED IN REGULAR BOOKS O F ACCOUNTS OF THE ASSESSES GROUP. THE COP/ OF PANCHNAMA IS ENCLOSED. THE ID A.O. HAS REJECTED THE CONTENTION OF THE APPE LLANT AND HAS TREATED THE ENTIRE RECEIPT AS INCOME ON GROSS BASIS AND MADE THE ADDITION AS UNDER: ASSESSMENT YEAR ON-MONEY RECEIVED (RS.) PROFIT IN RESPECT OF ON-MONEY OFFERED IN RETURN FILED U/S 153(RS.) NET ADDITION MADE TO THE RETURNED INCOME 2003-04 9,81,000 85,700 8,95,300 2004-05 4,80,970 10,000 4,70,970 2006-07 1,85,000 18,500 1,66,500 SINCE THE ASSESSMENTS AND THE ISSUES INVOLVED IN TH E AFORESAID APPEALS ARE IDENTICAL, IT IS PRAYED THAT THE SAME BE CONSID ERED ON THE BASIS OF COMMON SUBMISSION. SUBMISSION: THE APPELLANT RESPECTFULLY SUBMITS THAT IN CASE OF BUILDER, WHERE ON- MONEY IS FOUND TO BE COLLECTED AND CERTAIN EXPENSES IN RELATION THERETO ARE ALSO FOUND TO BE INCURRED OUT BOOKS ONL Y NET INCOME CAN BE SUBJECTED TO TAX AND SAME IS REQUIRED TO BE ESTI MATED REASONABLY AS HAS BEEN HELD BY THE LARGE NUMBER OF AUTHORITIES LI STED BELOW. CIT VS. PRESIDENT INDUSTRIES, 258 CTR 654 (GUJ), WH EREIN IT HAS BEEN HELD THAT UNACCOUNTED SALES, WHEN THERE IS UNACCOUN TED SALES THE ONLY PROFIT CAN BE ADDED IN THE SALES NOT ENTIRE SALES. THE SIMILAR VIEW HAS IT(SS)A NOS. 262,263 &264/AHD/2010 A.Y. 2003-04,04- 05&06-07 PAGE NO ACIT VS. JIGNESH V. KORALWALA 5 BEEN CONFIRMED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GURUBACHHAN SINGH J JUNEJA, REPORTED IN 215 CTR (GU J) 509. KISHOR TELWALA VS. ACIT 64 TTJ 543 (AHD.) (MUM) ABHISHEK CORPORATION 63 TTJ 651 (AHD.) CULCUTTA CO. LTD 37 ITR 1 (SC) NARESHKUMAR B. AGARWAL VS. ACIT 104 TAXMAN 222 PARAM ANAND BUILDERS PVT. LTD VS. ITO (MUMBAI) 59 I TD 29 WALL STREET CONSTRUCTION LTD. VS. DCIT, ITAT, MUMBA I THIRD MEMBER BENCH 75 TTJ 653 ITO VS. SAIKRUPA CONSTRUCTION CO. 13 SOT 459 (MUM.) THE APPELLANT ALSO REFERS TO THE UNREPORTED DECISIO N OF AHMEDABAD BENCH OF ITAT IN THE CASE OF ITO VS. ANAND BUILDERS WHEREIN THE HONBLE TRIBUNAL HELD THAT ONLY 8 % OF GROSS RECEIP T COULD BE TAXED IN THE CASE OF A BUILDER OUT OF THE ON-MONEY. REFEREN CE TO THE HONBLE HIGH COURT WAS REJECTED AND SLP AGAINST SUCH REJECT ION WAS ALSO TURNED DOWN AS REPORTED IN 265 ITR 37 (ST.) CONSIDERING THE RATIO OF THE DECISIONS REFERRED AND CONSISTENTLY FOLLOWED BY THE JURISDICTIONAL TRIBUNAL IN A LARGE NO OF CASES, THE INCOME RETURNED BY THE APPELLANT BE DIRECTED TO BE ACCEPTED. 5. LD. CIT(A) AFTER TAKING INTO CONSIDERATION OF TH ESE SUBMISSIONS OF THE ASSESSEE GAVE RELIEF TO THE ASSESSEE BY OBSERVING A S UNDER:- 3.2 1 HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL AS WELL AS GONE THROUGH THE ASSESSMENT ORDE R. THERE IS NO DISPUTE ABOUT THE GROSS RECEIPTS OF ON-MONEY SO TAX ED BY THE ASSESSING OFFICER IN THESE ASSESSMENT YEARS. THE ON LY ISSUE IS TO BE DECIDED IN ALL THESE THREE APPEALS IS AS TO WHETHER THE ON-MONEY RECEIVED BY THE APPELLANT SHOULD BE TAXED AS A WHOL E OR THE PROFIT EARNED ON THE ON-MONEY RECEIPTS SHOULD BE TAXED. TH E APPELLANT HAD DISCLOSED CERTAIN PROFIT OF THESE GROSS RECEIPTS WH ICH CANNOT BE SAID TO BE CORRECT AS NOT BASED ON ANY REASONING. IT WAS TH E CONTENTION OF THE LEARNED COUNSEL THAT WHERE ON-MONEY IS FOUND TO BE COLLECTED OR RECEIVED AND CERTAIN EXPENSES IN RELATION THERETO A RE ALSO FOUND TO BE INQUIRED OUT OF BOOKS, ONLY NET INCOME CAN BE SUBJE CTED TO TAX AND IT(SS)A NOS. 262,263 &264/AHD/2010 A.Y. 2003-04,04- 05&06-07 PAGE NO ACIT VS. JIGNESH V. KORALWALA 6 SAME IS REQUIRED TO BE ESTIMATED REASONABLY AS HAS BEEN HELD BY THE LARGE NUMBER OF AUTHORITIES. IT IS EVIDENT FROM TH E SUBMISSION OF THE LEARNED COUNSEL THAT EVIDENCE OF INCURRING OF EXPEN SES WERE AVAILABLE IN THE SEIZED DOCUMENTS/MATERIAL. HE HAS GIVEN THE DETAILS OF SUCH EXPENSES WHICH ARE REPRODUCED IN PARA-3.1 A BOVE. AFTER CONSIDERING THE DETAILS OF SUCH EXPENSES AS PER SEI ZED MATERIAL, IT CANNOT BE HELD THAT THE GROSS RECEIPTS OF ON-MONEY ARE TO BE TAXED. THE LEARNED COUNSEL HAS RELIED ON VARIOUS AUTHORITI ES DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE APPELL ATE PROCEEDINGS. THE ASSESSING OFFICER HAD NOT GIVEN ANY REASON AS T O HOW THE CASE LAWS CANNOT BE APPLIED WHERE THE CASE LAWS ALSO INC LUDED THE DECISION OF THE JURISDICTIONAL TRIBUNAL. CONSIDERING THE FAC TS OF THE CASE, THE DETAILS OF THE EXPENSES INCURRED BY THE ASSESSEE AS PER SEIZED RECORD AND THE DECISIONS OF VARIOUS TRIBUNALS AS RELIED UP ON BY THE LEARNED COUNSEL, IT IS HELD THAT WHOLE OF THE GROSS RECEIPT S OF ON-MONEY CANNOT BE TAXED IN THE CASE OF THE ASSESSEE AND ONLY THE R EASONABLE PROFIT EARNED CAN BE TAXED. THE QUESTION THUS REMAINS AS T O WHAT AMOUNT OF PROFIT IS TO BE TAKEN FOR TAXATION. THE DECISIONS R ELIED UPON ARE REGARDING TAXING THE PROFIT FROM 3 PER CENT TO 15 P ER CENT OF THE GROSS RECEIPTS. HOWEVER, I COME ACROSS AN UNREPORTED DECI SION OF THE JURISDICTIONAL AHMEDABAD TRIBUNAL IN THE CASE OF AD INALH CONSTRUCTION DECIDED VIDE ORDER DATED 21.10.2005 IN ITA NO, 1975 AND 1976/AHD /1999. IN THAT CASE IT WAS HELD THAT E NTIRE ON- MONEY DID NOT REPRESENT THE RECIPIENTS INCOME BUT ONLY TO TH E EXTENT OF 15% THEREOF AND THE BALANCE 65 PERCENT BEING EXPENDED O N THE PROJECT ITSELF. THE TRIBUNAL THUS HELD THAT 15 PERCENT OF HE ON-MONEY RECEIPTS ARE ONLY SUBJECT TO TAX. REFERENCE MAY BE MADE TO P ARA-11 OF THE DECISION OF THE THIRD MEMBER BENCH OF THE AHMEDABAD TRIBUNAL IN THE CASE OF DY.CIT VS. PRAMUKH BUILDERS 112 ITD 179 (AHD.)( TM) FOR SUCH FINDING FOR THE ABOVE UNREPORTED DECISION. THE DECISION OF THE ASSESSING OFFICER FOR TAXING THE GROSS RECEIPTS IS NOT FACTUALLY CORRECT WHERE THE EVIDENCES OF EXPENDITURE INCURRED ARE AVA ILABLE IN THE SEIZED MATERIAL. IN VIEW OF ABOVE DISCUSSION AND RE LYING ON THE DECISION OF THE JURISDICTION TRIBUNAL, THE GROSS RE CEIPTS ARE SUBJECT TO TAX @ 15 PER CENT, THEREFORE, THE ADDITIONS ARE THU S SUSTAINED FOR RS. 1,47,150/- FOR THE A V. 2003-04, RS. 72.000/- FOR T HA A.Y. 2004-05 AND RS. 27,750/- FOR THE A.Y. 2006-07. REST OF THE ADD ICTIONS ARE DELETED FOR THESE APPEALS. THE SECOND GROUND OF ALL THESE THREE APPEALS IS ACCORDINGLY PARTLY ALLOWED. IT(SS)A NOS. 262,263 &264/AHD/2010 A.Y. 2003-04,04- 05&06-07 PAGE NO ACIT VS. JIGNESH V. KORALWALA 7 6. SINCE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSE E BY FOLLOWING THE AHMEDABAD TRIBUNAL DECISION IN THE CASE OF ADINATH CONSTRUCTION DECIDED VIDE ORDER DATED 21.10.2005 IN ITA NO. 1975 AND 176 /AHD.1999 WHEREIN IT WAS HELD THAT ENTIRE ON-MONEY DID NOT REPRESENT THE RECIPIENTS INCOME BUT ONLY TO THE EXTENT OF 15% THEREOF AND THE BALANCE 6 5 % BEING EXPENDED ON THE PROJECT AND NO CONTRARY DECISION WAS CITED BY T HE REVENUE AT THE TIME OF HEARING, WE FEEL NO NEED TO INTERFERE WITH THE ORDE R PASSED BY HIM AND THE SAME IS HEREBY UPHELD. 7. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (A.MOHAN ALANKAMONY) ( D.K.TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 10/05/2013 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#