Shree Kuberji Buildcon, Surat V. Assistant Commissioner of Income Tax, Central Cir.4, Surat

ITSSA 51/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2006 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 20-05-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 08-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Loose papers
• Section: 68; 69; 132; 153A; 250; 69A

Judgement Text

आयकर अपीलीय अिधकरण,सुरत Ɋायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER (Hearing in Physical Court) आ. (खो और ज).सं./IT(SS)A No.49 & 51/SRT/2023 (AYs 2017-18 & 2019-2020) Shree Kuberji Buildcon, Block No.258, Kadodara Road, Saroli Road, Kumbharia, Surat- 395010 [PAN No. ADGFS 3338 C] Vs Assistant Commissioner of Income Tax, Central Circle-4, Surat, Aayakar Bhawan, Majura Gate, Sura-395001 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Kiran K. Shah, CA राजˢ की ओर से /Revenue by Shri Ashish Pophare, CIT-DR सुनवाई की तारीख/Date of hearing 21.05.2024 उद्घोषणा की तारीख/Date of pronouncement 30.05.2024 Order under section 254(1) of Income Tax Act PER BIJAYANANDA PRUSETH, A.M: 1. These two appeals by assessee emanate from separate orders of the Learned Commissioner of Income-tax (Appeals)-4 Surat [for short to as “Ld. CIT(A)”] under section 250 of Income-tax Act, 1961 (in short, ‘the Act’) dated 06.01.2023 and 09.01.2023 for assessment years i.e., 2017-18 & 2019-20, which in turn arose out of separate assessment orders passed by Assistant Commissioner of Income-tax, Central Circle-4, Surat / Assessing Officer (in short, “AO”) under section 153A of the Act both on 28.03.2022. Since the issues are common and the grounds of appeal raised by the appellant are similar, hence, the appeals were heard together and a consolidated order is being passed for the sake of brevity and convenience. Appeal in IT(SS)A IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 2 No.49/SRT/2023 for AY 2017-18 is treated as “lead” case. The assessee in its appeal has raised the following grounds of appeal:- “1) The learned CIT(A) grossly erred in confirming addition of Rs.1,70,000/- on account of estimate of profit at 13% on booking amount as discussed in para 6 of the appeal order. 2) The learned CIT(A) grossly erred in confirming the addition merely on booking amount though there was no sale of document or possession of the shop thereon. 3) The learned CIT(A) grossly erred in confirming the addition u/s 69A of the Act though the same is regular business income and thereby allowing the AO to tax the income applying section 115BBE of the Act. 4) The appellant reserve right to add, alter and withdraw any grounds of appeal.” 2. Facts of the case in brief are that appellant is a partnership firm engaged in the business of real estate development. The appellant has executed a project “Kuberji Valentine”. It filed return of income for assessment year 2017-18 on 14.11.2017 declaring ‘Nil’ income. The appellant was subjected to search and seizure operation as part of M/s Kuberji Group of Surat on 06.02.2020 u/s 132 of the Act. During the course of search operation, certain incriminating materials were found and seized. The AO issued notice u/s 153A and completed assessment u/s 153A of the Act determining the total income at Rs.3,00,000/- against the returned income filed of Rs.“Nil”. He has separately initiated penalty proceedings u/s 271AAC of the Act. In the assessment order, the AO made an addition of Rs.3,00,000/- towards net profit on “on-money” u/s 69A of the Act. Aggrieved by the addition, the appellant filed appeal before Ld. CIT(A). The ld CIT(A) after considering the replies and submission of IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 3 the appellant has held that 30% of the on-money receipts considered as net profit by the AO is higher and he restricted the same to 13% of the total on- money receipt as held by him in other group cases of Kuberji Group. It may be stated that the AO, during the course of search, found several instances of on- money receipt in respect of sale of units / shops of commercial projects of Kuberji Valentine executed by the appellant at Saroli / Kumbharia village, Surat Kadodara Road, Surat. The total on-money received by the assessee was Rs.41,32,40,000/- which has been decoded at pages 8 to 10 of the assessment order. The total undisclosed receipt was estimated by the AO was Rs.59,30,10,924/- for AYs 2017-18 to 2020-21 respectively. The on-money pertaining to present assessment year was estimated at Rs.10,00,000/- and 30% of the said amount was taken as net profit and same brought to tax u/s 69A of the Act. The quantification of on-money is given at pages 32 and 33 of the assessment order. The Ld.CIT(A) has discussed the facts of the case at paras-6 to 6.8 of his order. He has briefly discussed the contents of the seized materials found during the course of search action from different premises and the treatment given by the AO to such incriminating material. Thereafter, Ld.CIT(A) has reproduced the submission of appellant at para-6.9 of his order. The appellant argued that no addition can be made based on the dump papers. It has relied on various decisions which are at para-1.11 of assessee of assessee’s submission at page-11 of the order. It was also submitted that the margin of profit on the on-money @ 30% is too high. The reasons for such IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 4 claim was that the project is situated far away from the city area of Surat. The appellant had also taken interest bearing loan for the project namely, Kuberji Valentine. He given certain comparable cases where the margin was between 1.31% and 17% respectively, The appellant further argued that provisions of Section 69A r.w.s.. 115BBE of the Act are not applicable. He argued that the impugned amount subjected to the above provisions of the Act is business income and hence, is required to be taxed at normal rate. After considering the submission of the assessee, the Ld.CIT(A) found force in the reply of the assessee that the rate of net profit worked out by the AO is high. The Ld. AR of the assessee had argued that the project was situated in the outskirts of Surat city at Saroli / Kumbharia and hence, rates prevalent in the city project should not be applied to the case of the appellant. Further, the expenses for construction of the project, Kuberji Valentine, as per the District Valuation Office was much more than the value of work-in-progress shown by the appellant in the books of account, which shows that the appellant has indulged in incurring project expenses outside the books of account, which was met from the money collected by way of on-money. In view of these, factors, the Ld.CIT(A) opined that net profit @ 30% of on-money was high and he sustained the addition @ 13% of the on-money. Aggrieved, the assessee has filed present appeal before the Tribunal. IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 5 3. The Ld.AR of the assessee has strongly contested the estimation profit @ 13% of on-money and stated that there was no sole object and position of impugned sum was only on the booking amount. He also argued that Ld.CIT(A) has grossly erred in confirming the addition u/s 69A of the Act though the same is regular business income and, therefore, provisions of Section 115BBE of the Act are not applicable in the present case of assessee. 4. On the other hand, Ld.CIT-DR for the Revenue requested to confirm the addition made by the AO, which was @ 13% of the on-money which was most reasonable. 5. We have heard both the parties and perused the record including orders of lower authorities. We have also gone through the decisions relied upon by the Ld.AR in the assessment order. The AO had estimated on-money based on various documents and loose papers found and seized during search and seizure operation at the premises of the assessee. We find that there is no dispute regarding the quantum of on-money. The AO had estimated the net profit @ 30% of the on-money, which was restricted to 13% by the Ld.CIT(A). During the proceedings before Tribunal, Ld. AR submitted that both the issues are viz./, estimate of profit of on-money and application of provisions of Section 115BBE of the Act are covered by the decision of this co-ordinate Bench in cases of their sister concern, namely, Shree Kuberjee Associates and Shree Kuberjee Leisure & Infraspace LLP. On perusing the order, we find that IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 6 similar fact come up for consideration in the above cases in IT(S)A No.28- 31/SRT/2023 and IT(SS)A No.34-35/SRT/2023 AYs. 2019-20 and 2020-21 dated 22,12,2023. The relevant portion of the decision at para-11 to 14 is reproduced for ready reference and clarity: “11. We have considered the submissions of both the parties on merit and carefully perused. We have also deliberated on various case laws relied by Ld. AR for the assessee before the lower authorities as well as before us. As recorded above, the Assessing Officer worked out the figure of on-money in respect of all the units of assessee despite the fact that incriminating material indicates on-money in respect of certain units. Further Satakat was found only in respect of shop No. 3001 and 3002. The Assessing Officer has not considered the location of floor or frontage or entrance position. In commercial project, uniform rate is not possible irrespective of floors. Further no interpolation is permissible when there is no evidence in respect of 100% units. Further there is always difference in the rate so far as payment period is concerned. We find that the ld. CIT(A) on considering the various submissions of assessee accepted the contention of assessee that on the basis of incriminating material certain discount was allowed and prices were subjected to negotiation. On the basis of different factors affecting the rate on various floors, the ld. CIT(A) reduced 15% on the gross money in entire estimation. The ld. CIT(A) on considering the decision of various Tribunals and High Courts was of the view that profit rates of on-money in various cases ranges from 8% to 17% on the project situated in the city area. Since project of assessee was in the outskirts of city and that the assessee has already declared 7.4% profit and reasonable good amount in IDS 2016, the ld. CIT(A) restricted the addition to the extent of 13% thereby allowed partial/substantial relief. 12. Being a search case, we have independently examined the facts of the case. On examination of facts, we find that incriminating material is not found relating to each and every unit. The Assessing Officer extrapolated the rate in respect of all 384 units. No independent investigation of facts was carried out by Assessing Officer during assessment proceedings. There is no refinance in the assessment order that the search party while preparing appraisal report suggested collection of on money in respect of all the units. There is no allegation of Assessing Officer that units were sold below the Jantri rate. No other independent evidence or material to substantiate the on-money in respect of 100% of unit is brought on record. 13. We find that Hon’ble Jurisdictional High Court in CIT Vs Standard Tea Processing Co. Ltd. (2013) 34 taxmann.com 31 (Guj) held that the addition for undisclosed income on account of inflated purchase price can be made only for the period to which document found during the search is related and not for the entire block period. The Hon’ble Karnataka High Court in CIT Vs B. Nagendra Baliga (2014) 47 taxmann.com 331 (Kar) held that the Assessing Officer has not entitled to extrapolate undisclosed income detected in the course of search for a particular period to entire block period on estimate basis. Further the Coordinate Bench of Tribunal in ACIT Vs M/s Amar Corporation Ltd. ITA No. 2036/Ahd/2007 and in Sayan Textiles Park Ltd. Vs ACIT in ITA No. 360/Ahd/2014 also held that question of extrapolation can only arise only in a situation when the documents give an indication that it was a regular IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 7 occurrence in a systematic manner. Thus, in view of aforesaid factual and legal discussion, we uphold the order of ld. CIT(A) on our aforesaid observations. In the result, grounds of appeal raised by revenue as well as assessee are dismissed. 14. So far as taxing of addition under Section 115BBE of the Act is concerned, we find that no such provision was invoked by Assessing Officer while making addition in the assessment order. We further find that combination this bench in case of Dagina Jewellers (supra) held that when the source of income was explained and is apparently established, hence section 115BBE is not applicable for such business receipts. It was held that the provisions of Sections 68 and 69 are not applicable for trading transactions like deposit of cash out of cash sales and excess closing stock. While giving such finding, we have made reliance on the decision of Hon`ble Gujarat High Court in the case of Shilpa Dyeing & Printing Mills Ltd, Tax Appeal No. 290 of 2013, dated 04.04.2013. Thus, in view of aforesaid position, the Assessing Officer is directed to tax the addition under normal provision/rate applicable on assessee. In the result, the ground No. 2 of appeal is allowed.” 6. Since facts of the present case are similar, following the above decision of this co-ordinate Bench, we uphold the decision of Ld.CIT(A) in estimating the profit @ 13% of the on-money. The ground is, accordingly, dismissed. 7. However, we uphold the action of the Ld.CIT(A) that provisions of Section 115BBE of the Act are not applicable to the facts of the assessee for the subject assessment year. The ground of assessee’s appeal is allowed. 8. In the result, appeal of the assessee is partly allowed. IT(SS)A No. 51/SRT/2023 for A.Y. 2019-20 9. As recorded earlier, grounds of appeal raised in aforesaid appeal are similar except variation of amount as of in A.Y. 2017-18 wherein we have partly allowed the appeal of assessee. Therefore, following the reasons given in above decision, appeal of assessee is partly allowed. 10. In the result, assessee’s appeal is partly allowed. IT(SS)A No.49 & 51/SRT/2023 (A.Ys 17-18, 19-20) Shree Kuberji Buildcon 8 11. In combined result, both the appeals of assessee are allowed partly. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order pronounced in the open court on 30/05/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) [JUDICIAL MEMBER] [ACCOUNTANT MEMBER] स ु रत / Surat, Dated: 30/05/2024 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT 4. DR 5. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat