The DCIT, Central Circle-3, Surat V. M/s. Divine Developers, Mumbai

ITSSA 533/AHD/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1612 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Opportunity of cross examination; Additional evidence; Third party statement; Revised return
• Section: 143(3); 32; 6; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AN D SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER IT(SS)A NO. 533/AHD/2012 / ASSESSMENT YEAR: 2008-09 THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 3, SURAT .. APPELLANT VS M/S. DIVINE DEVELOPERS, A-501, KOTIA NIRMAN, OPP. LAXMI INDUSTRIES ESTATE, NR. LINK ROAD, MUMBAI .. RESPONDENT PAN : AAKFM 5243 A REVENUE BY : SHRI SANJAY AGRAWAL, CIT-DR ASSESSEE(S) BY SHRI HARDIK VORA, AR / DATE OF HEARING 18/02/2016 /DATE OF PRONOUNCEMENT 22/03/2016 / O R D E R PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, AHMEDABAD, DATED 27.08.2012 FOR ASSESSMENT YEAR 2008-09, ON THE FOLLOWING GROUN DS:- 1) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN ADMITTI NG ADDITIONAL EVIDENCES SUCH AS RECONCILIATION AND DETAILED BREAK -UP OF TOTAL CONSTRUCTED AREAS FOR R.Y. 2007-08 AND 2008-09 AND CLOSING STOCK AS ON 31.03.2008 AND 31.09.2009 WITHOUT GIVING THE AO OPPORTUNITY TO OFFER HIS COMMENTS, IN CONTRAVENTION TO THE PROVISIONS OF RULE 46A OF THE I.T. RULES. IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 2 2) THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.7,62,04,530/- MADE ON ACCOUNT OF UNDISCLOSED NET PROFIT, ON THE BASIS OF ADDITIONAL EVIDENCES FU RNISHED BEFORE HIM BY THE ASSESSEE. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ADDITION OF RS.7,62 ,04,530/-. 4) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTEN T. 2. THE ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN T HE BUSINESS AS BUILDER AND DEVELOPER. DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REDEVELOPMENT OF SLU M UNDER THE SPECIAL ACT OF THE GOVT. OF MAHARASHTRA. THE SCHEME WAS ADM INISTERED THROUGH THE SLUM DEVELOPMENT AUTHORITY, UNDER WHICH THE DWE LLERS WERE PROVIDED HOUSES FREE OF COST BY THE DEVELOPER AND T HE ASSESSEE WAS ENTITLED TO SPECIFIED FSI, WHICH COULD BE UTILIZED FOR THE CONSTRUCTION OF RESIDENTIAL /COMMERCIAL BUILDING FOR SALE IN OPEN M ARKET. THE ASSESSEE CONSTRUCTED A COMMERCIAL BUILDING FOR SALE IN GUNDA VALI TALUKA, ANDHERI. THE COMMERCIAL BUILDING CONSTRUCTED BY TH E ASSESSEE CONSISTS OF GROUND PLUS ELEVEN FLOORS. A SEARCH ACTION U/S 1 32 OF THE INCOME-TAX ACT WAS CARRIED OUT ON 16.07.2009 IN THE CASE OF RO YAL GROUP. DURING THE COURSE OF SEARCH, EVIDENCES WERE FOUND IN THE CASE OF DIVINE DEVELOPERS, I.E. THE ASSESSEE. ACCORDINGLY NOTICE U/S 153C OF T HE ACT DATED 18.01.2010 WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION ON 23.04.2010, DECLARING A TOTAL INCOME AT RS.3,58,17,705/- ALONG WITH AUDITED BALANCE SHEET AND PROFIT & LOSS A/C. THE ASSESSEE HAD NOT F ILED ANY RETURN OF INCOME UP TO THE DATE OF SEARCH, I.E. 16.07.2009 FO R THE ASSESSMENT YEAR 2008-09. THE ASSESSEE E-FILED ITS FIRST RETURN OF I NCOME DECLARING INCOME OF IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 3 RS 11,20,22,235/- FOR THE ASSESSMENT YEAR 2008-09 O N 27.07.2009. THEREAFTER, REALISING SOME MISTAKE IN CONSIDERING T HE TURNOVER FIGURE, THE RETURN WAS REVISED DECLARING THE TOTAL INCOME AT RS .3,58,17,705/- ON 30.09.2009. CONSIDERING THE ORIGINAL RETURN OF INC OME FILED FOR AN INCOME OF RS.11,20,22,235/- AND THE STATEMENT RECORDED U/S 132(4) DURING THE SEARCH AND THE RETURN OF INCOME FILED IN RESPONSE T O NOTICE U/S 153C FOR RS.3,58,17,705/-, THE ASSESSING OFFICER MADE THE AD DITION OF RS.7,62,04,530/- BEING DIFFERENCE OF RS.11,20,22,23 5/- AND RS.3,58,17,705/-. THE ASSESSING OFFICER HAS GIVEN T HE FOLLOWING REASONS FOR MAKING THE ADDITION OF RS.7,62,04,530/-, WHICH READ AS UNDER:- 10. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESS EE HAS PRODUCED BOOKS OF ACCOUNT FOR FY 2007-08 AND FY 200 8-09 FOR VERIFICATION WHICH ARE PLACED ON RECORD. HOWEVER THE CONTENTION OF THE ASSESSEE IS NOT ACCEP TABLE FOR THE REASONS THAT: 1) ASSESSEE HAS CONFIRMED THE DISCLOSURE OF RS.11,20,2 2,235/- IN THE STATEMENT RECORDED U/S 132(4) AT THE TIME OF SE ARCH. 2) THE ASSESSEE ITSELF HAS FILED RETURN OF INCOME U/S 139(1) IN RESPECT TO AY 2008-09 DISCLOSING THE SAID INCOME WH ICH WAS DISCLOSED DURING THE SEARCH THEREBY CONFIRMING THE DISCLOSURE. THE BOOKS OF ACCOUNTS FOR AY 2008-09 HAVE ALREADY B EEN AUDITED BY 31/10/2008 MUCH BEFORE THE DATE OF SEARC H AND HAVE BEEN FILED ALONG THE RETURN OF INCOME U/S 139(1). 3) THE BASIS ON WHICH THE REVISED RETURN IS FILED BY T HE ASSESSEE IS NOTHING BUT AFTER THOUGHT TO REDUCE THE TAXABLE PRO FITS ALREADY DISCLOSED. 11. HENCE THE INCOME DISCLOSED IN THE STATEMENT REC ORDED U/S 132(4) IS TRUE AND CORRECT INCOME AND THEREFORE THE DIFFERENCE OF RS.7,62,04,530/- IS ADDED TO THE INCOME RETURNED U/ S 153C OF THE ACT. IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 4 2.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE AS SESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED RELIEF TO T HE ASSESSEE AND THE SAME HAS BEEN OPPOSED BY THE REVENUE, INTER ALIA, SUBMITTING THAT THE CIT(A) HAS ERRED IN ADMITTING THE ADDITIONAL EVIDEN CES SUCH AS RECONCILIATION AND DETAILED BREAK-UP OF TOTAL CONST RUCTED AREAS FOR FY 2007-08 AND 2008-09 AND CLOSING STOCK AS ON 31.03.2 008 AND 31.09.2009 WITHOUT GIVING ANY OPPORTUNITY TO OFFER THE ASSESSE ES COMMENTS WHICH IS IN CONTRAVENTION TO THE PROVISIONS OF RULE 46A O F THE IT RULES. FURTHER, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A)HAS ERRED IN DELETING THE ADDITION OF RS.7,62,04,530/- MADE O N ACCOUNT OF UNDISCLOSED NET PROFIT ON THE BASIS OF ADDITIONAL E VIDENCES FURNISHED BY THE ASSESSEE. HE, ACCORDINGLY, PLEADED THAT THE OR DER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPP ORTED THE ORDER OF THE CIT(A). 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THAT THE ASSESSING OFFICER HA D NOWHERE FOUND FAULT IN THE BOOKS OF ACCOUNTS AND THE AUDITED STATEMENTS OF THE ASSESSEE. HE HAS SIMPLY RELIED ON THE STATEMENT RECORDED U/S 132 (4) DURING THE SEARCH AND THE FIRST RETURN OF INCOME FILED BY THE ASSESSE E DECLARING THE TOTAL INCOME OF RS.11,20,22,235/-. AFTER CONSIDERING AND VERIFYING THE TOTAL CONSTRUCTED AREA OF ALL ELEVEN FLOORS, CONSTRUCTED AREA SOLD IN FY 2007-08, CLOSING STOCK AS ON 31.03.2008, SALES DURING FY 200 8-09 AND CLOSING STOCK AS ON 31.03.2009, IT WAS ESTABLISHED THAT THE SALES OF 9TH AND 11 TH FLOOR OFFICE BUILDING WAS ACCOUNTED FOR IN FY2007-08 IN T HE UNAUDITED STATEMENT FOUND DURING THE SEARCH AND AT THE SAME T IME COST OF IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 5 CONSTRUCTION OF 9 TH AND 11 TH FLOOR WAS ALSO INCLUDED IN THE CLOSING STOCK OF 31.03.2008; SO, ON THE CREDIT SIDE, SAME AREA WAS A CCOUNTED FOR TWICE. 3.1 SALES PROCEEDS OF OFFICE PREMISES OF 9TH AND 11 TH FLOOR WERE RECEIVED IN FY 2008-09, I.E., JUNE 2008 ONWARDS AND THE SAME WAS RIGHTLY CONSIDERED AND OFFERED AS TURNOVER OF FY 2008-09 RE LEVANT TO AY 2009-10. FOR THE AY 2009-10, THE INCOME OF RS 4,75,45,402/- WAS OFFERED AND ASSESSED U/S. 153C R.W.S. 143(3) AS AGAINST NET PRO FIT OF RS 14,85,419/- SHOWN IN THE UNAUDITED STATEMENT SEIZED DURING THE SEARCH. THIS SHOWS THAT UNAUDITED STATEMENT WAS NOT COMPLETE AND CORRE CT. THE COMPARATIVE STATEMENT OF PROFIT AND LOSS A/C AND BALANCE SHEET BETWEEN THE AUDITED ACCOUNTS AND THE UNAUDITED ACCOUNTS FOUND DURING TH E SEARCH WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A), WHICH REVEALED THAT THE DIFFERENCE OF RS.7,66,50,000/- WAS MAINLY ON THE PA RT OF TURNOVER, WHICH WAS MISTAKENLY ADDED BY THE ACCOUNTANT IN THE TURNO VER OF FY 2007-08 AND ACCORDINGLY, IN THE NET PROFIT FOR THE YEAR UND ER CONSIDERATION, WITHOUT AFFECTING ANY AMOUNT OR MODIFICATION IN THE CLOSING STOCK. THUS THE FIGURES RELATED TO SALE OF OFFICES AT 9TH AND 1 1TH FLOOR WERE CONSIDERED AS PART OF SALES AND CLOSING STOCK AS WELL. THEREFO RE, THIS MISTAKE WAS RECTIFIED BY THE ASSESSEE BY FILING REVISED RETURN OF INCOME MUCH BEFORE THE RECEIPT OF NOTICE U/S 153C OF THE ACT. IN THIS BACKGROUND, THE CIT(A) RIGHTLY FOUND THAT THE MISTAKE WAS GENUINE AND THE FIGURES CORROBORATED WITH THE ACCOUNTS. 3.2 THE COPY OF THE STATEMENT RECORDED U/S 132(4) WAS SUBMITTED BY THE ASSESSEE AND FROM THAT STATEMENT, IT WAS FOUND THAT THE STATEMENT RECORDED ON 17.07.2009 DURING THE SEARCH OF ONE SHR I UJWAL KANKARIA, WHO IS NEITHER A PARTNER OF THE FIRM NOR ANY RELATI VE OF THE PARTNERS OF THE FIRM. THE ASSESSEE HAS SUBMITTED THAT NONE OF THE PARTNERS HAD MADE ANY IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 6 STATEMENT U/S 132(4). FURTHER THE SAID SHRI UJWAL K ANKARIA HAS ONLY STATED AS UNDER IN REPLY TO Q. NO. 15:- Q. NO 15: PLEASE SEE PAGE NO 304 OF FILE ANNEXURE B S-8, WHEREIN YOU HAVE WORKED OUT THE INCOME AT RS.11,20,22,240/- FOR DIVINE DEVELOPERS. SIMILARLY FOR DEV DEVELOPERS AT PAGE N O 180 OF FILE ANNEXURE BS-9, TOTAL INCOME IS WORKED OUT AT RS.1,8 3,34,410/-. PLEASE STATE WHY THE AMOUNT OF RS.13,03,56,650/- SH OULD NOT BE TREATED AS UNDISCLOSED INCOME. ANS: THE INCOME AND RECEIPTS ARE SHOWN IN THE BOOKS AND TAX IS DUE TO BE PAID. THE SAME IS BEING OFFERED TO TAX. THE ABOVE STATEMENT DOES NOT SPEAK OF ANY ACCEPTANC E OF UNACCOUNTED INCOME IN THE CASE OF ASSESSEE AND IS A THIRD PARTY STATEMENT BASED ON THE UNAUDITED STATEMENT OF ACCOUNTS. 3.3 THE SALES OF THE ENTIRE BUILDING WAS BOOKED AND RECEIVED BY BHOMIKA CONSTRUCTIONS PVT LTD (HEREINAFTER CALLED BCPL) AS PER AGREEMENT. THE SALES WERE DISTRIBUTED IN THE RATIO OF 52.50 : 47.50. AS PER THE AUDITED ACCOUNTS OF M/S BCPL, TOTAL TURNOVER OF RS 35,21,00,000/- WAS DISTRIBUTED IN THE AFORESAID RATIO AND THE ASSE SSEES SHARE AT 52.50% WORKED OUT TO RS.18,48,52,500/- AND THE SAME WAS RE FLECTED IN THE AUDITED ACCOUNTS OF THE ASSESSEE. THE SALES PROCEE DS OF 9 TH AND 11 TH FLOOR WAS RECEIVED BY BCPL IN FY 2008-09, WHICH IS CLEARL Y ESTABLISHED FROM THE COPY OF ACCOUNTS OF THE PURCHASERS OF 9 TH AND 11TH FLOOR IN THE BOOKS OF BCPL. THE BOOKS OF ACCOUNT OF BCPL WERE AUDITED ON 20.05.2008, WHICH WAS MORE THAN ONE YEAR PRIOR TO THE DATE OF S EARCH, I.E., 16.07.2009. THIS ALSO ESTABLISHES THAT THE SALES FIGURES OF 9TH AND 11TH FLOOR WAS WRONGLY INCLUDED IN THE UNAUDITED STATEMENT FOUND D URING THE SEARCH AND WERE RIGHTLY ACCOUNTED FOR IN THE AUDITED ACCOU NTS OF FY 2008-09. THE ASSESSING OFFICER HAS NOT CONTESTED THAT THE SA LE PROCEEDS OF 9 TH AND IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 7 11 TH FLOOR WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOU NT OF THE ASSESSEE. THE SAME ASSESSING OFFICER HAS ASSESSED THE SALES P ROCEEDS AND THE CORRESPONDING INCOME OF 9 TH AND 11TH FLOOR IN THE ASSESSMENT ORDER FOR THE AY 2009-10 PASSED BY HIM ON 30.12.2011, I.E., T HE SAME DAY WHEN HE PASSED THE ORDER FOR AY 2008-09. THUS, IT WAS EVIDE NT FROM THE RECORD THAT THE ASSESSING OFFICER HIMSELF HAS ASSESSED THE INCOME RELEVANT TO 9TH AND 11 FLOOR IN BOTH THE ASSESSMENT YEARS, I .E. AY 2008-09 AND 2009- 10 AND THE SAME WAS NOT FOUND JUSTIFIED. THE CLOSIN G STOCK OF FY 2007-08 WAS SOLD DURING FY 2008-09 AND WAS RIGHTLY REFLECTE D IN THE AUDITED ACCOUNTS OF THAT YEAR. IT IS MATTER OF RECORD. 3.4 FROM THE ABOVE, IT IS CLEAR THAT THERE WAS A BO NAFIDE MISTAKE COMMITTED BY THE ASSESSEE IN FILING THE ORIGINAL RE TURN OF INCOME OF AY 2008-09 FILED ON 27.07.2009 WHICH WAS RECTIFIED BY IT BY FILING REVISED RETURN ON 30.09.2009 EVEN BEFORE RECEIVING THE NOTI CE U/S 153C DATED 18.01.2010. RETURN OF INCOME FOR AY 2009-10 DECLARI NG A TOTAL INCOME OF RS. 4,75,47,402/- WAS FILED ON 30.09.2010 ON THE SA ME DAY WHEN THE REVISED RETURN OF INCOME WAS FILED FOR AY 2008-09. THE ASSESSING OFFICER SIMPLY RELIED UPON THE STATEMENT OF THIRD PARTY REC ORDED ON 17.07.2009 DURING THE SEARCH IN THE CASE OF ROYAL GROUP AND ON THE BASIS OF UNAUDITED STATEMENTS FOUND WITH THE THIRD PARTY. HE HAS NOT CHALLENGED THE AUDITED ACCOUNTS FILED BY THE ASSESSEE ALONG WI TH THE RETURN OF INCOME. HE HAS ALSO NOT EXCLUDED THE SAME SALES PRO CEEDS IN AY 2009-10, WHICH AMOUNTS TO DOUBLE TAXATION OF THE SAME AMOUNT OF INCOME RELATABLE TO SAME SALES PROCEEDS. 4. IN VIEW OF ABOVE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.7,62,04,530/- TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF DIFFERENCE I N SALES TURNOVER IN IT(SS)A NO. 533/AHD/2012 DCIT VS. DIVINE DEVELOPERS AY : 2008-09 8 UNAUDITED ACCOUNTS AND AUDITED ACCOUNTS, PARTICULAR LY WHEN THE ASSESSEE HAD ALREADY OFFERED CORRESPONDING INCOME IN AY 2009 -10 AND ASSESSED U/S 143(3) R.W.S. 153C BY THE SAME ASSESSING OFFICE R. THUS, THE ADDITION OF RS7,62,04,530/- WAS RIGHTLY DELETED BY THE CIT(A ). THESE FACTUAL AND REASONED FINDINGS OF THE CIT(A) NEED NO INTERFERENC E FROM OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND MARCH, 2016 AT AHMEDABAD. SD/- SD/- ANIL CHATURVEDI SHAILEND RA K. YADAV (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD; DATED 22/03/2016 BIJU T., PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' ' # / CONCERNED CIT 4. ' ' # ( ) / THE CIT(A) 5. &'( ! , ' ! , / DR, ITAT, AHMEDABAD 6. (- . / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD