The DCIT, Central Circle-2, Vadodara V. The Rise Infra, Vadodara

ITSSA 557/AHD/2019

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5892 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-07-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 05-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 139; 143(3); 143(2); 153; 153C

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ “डी”, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद । ।। । IN THE INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD ी , एवं ी म रं व ंत मह व र, म ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTNAT MEMBER आयकर(SS) अपील सं /IT(SS)A No.557/Ahd/2019 र /Assessment Year : 2014-15 The DCIT Central Circle-2 Vadodara 390 007 न म/ v/s. The Rise Infra 6, Janakpuri Society Near Dawat Hotel Manjalpur, Baroda – 390 011 ल े ख सं./PAN:AAHFT 6945 L %&ी '(/ (Appellant) )* '(/ (Respondent) Assessee by : -None- Revenue by : Shri Samir Tekriwal, CIT-DR स क र /Date of Hearing : 04/07/2024 क र /Date of Pronouncement: 10/07/2024 आ श/O R D E R PER SHRI MAKARAND V. MAHADEOKAR, AM: This appeal is filed by the Revenue as against the order passed by the Ld.Commissioner of Income-tax(Appeals)-12, Ahmedabad [hereinafter referred to as “the Ld.CIT(A)”], dated 28/09/2019, arising out of the assessment order passed by the Assessing Officer (AO) under section 153 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 29/12/2017 relevant to the Assessment Year (AY) 2014-15. IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 2 Facts of the case: 2. The brief facts of the case are that the assessee-firm is engaged in the business of construction and development of housing projects. A search was conducted on Akshar Group of cases of Baroda on 22/09/2015 during which certain documents belonging/pertaining/relating to the assessee were seized from the premises of Shri Dharmesh J. Patel at Baroda. Separately survey proceedings were carried out at the site office of assessee firm on 22/09/2015 in which certain loose papers/registers/diaries, etc. were impounded on 24/09/2015. On the basis of such material impounded, during the course of survey proceedings carried out at the premises of the assessee-firm, the ld.Assessing Officer held that the papers give evidence about cash received by the assessee firm on each unit of the project. Accordingly, the ld.Assessing Officer concluded that the assessee-firm has accepted unaccounted cash of Rs.3.99 lakhs for each unit sold. 2.1. Accordingly, the ld.Assessing Officer made additions for unaccounted on-money received amounting to Rs.2,43,39,000/- for AY 2014- 15 (and similarly additions were also made for AYs 2013-14, 2015-16 and 2016-17). 2.2. The assessee filed an appeal before the Ld.CIT(A), stating that the AO was erred in treating Rs.3,99,000/- as unaccounted cash receipts for all the units without any evidence. The assessee also filed additional grounds before the Ld.CIT(A) challenging the jurisdiction of AO u/s.153C of the Act in absence of any incriminating material pertaining to assessee. IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 3 2.3. The Ld.CIT(A) deleted the addition. The relevant part of the common order of the Ld.CIT(A) passed for AYs 2013-14 to 2016-17 is reproduced hereunder:– “5.12 No doubt the Page 11 of Annexure Al (found from the site office of the appellant firm) has the heading D-405 and as per the provisions of section 292C there was a presumption in the favour of the Revenue that the said paper related to the appellant and accordingly the noting on that page were about unit 2-405 of The Rise I, a project of the appellant comprising of 320 numbers of 2 BHK / 3 BHK flats. This presumption is a rebuttable presumption, and it was for the appellant to explain the contents of Page 11 and to satisfy the AO that the related transactions were duly recorded in the books of accounts and there was no element of any undisclosed income. In my considered view the appellant has discharged its onus of rebutting the presumption in favour of the Revenue because it has been explained before the AO that – The document pertains to a transaction of booking of Flat No. D/ 405 in the Project 'The Rise Infra' by one Mr. Hardik Shukla for a total consideration of Rs. 14.00 Lakhs. Against such agreed consideration, a sum of Rs. 6.63 Lakhs is received and is recorded in the regular books of accounts. The noting of Rs. 3.76 lakhs in cash includes Rs. 0.23 Lakh recorded in the books of accounts and the balance amount of Rs. 3.53 lakhs represent the amount received towards the extra work to be done by the Contractor introduced by the appellant. As a matter of service to him, one of the partners had undertaken the responsibility of completion of work by the Contractor introduced. In this respect, an MoU was also effected as per the copy enclosed at page nos. 1 - 4 of the Paper Book. Subsequently, the booking was cancelled on 17.06.2015 and the entire amount was to be refunded. The copy of Cancellation Agreements is enclosed at page no. 5 - 16 of the Paper Book and the copy of account of Shri Shukla in the books of the appellant is enclosed at page no. 17 of the Paper Book. It was also submitted that on cancellation of the booking, the same is allotted to another person Shri Palash Pal. Prior to the cancellation of the booking of the Flat, the MoU was also cancelled by a Cancellation Agreement dated 08.04.2015, the copy of which is placed at page no. 17 - 20 of the Paper Book. 5.13 In my considered opinion, the above explanation of the appellant is reasonable and should have been accepted by the AO, but however, if the IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 4 same was not found satisfactory by the AO, the said explanation could be rejected only if cogent materials to falsify such explanation were brought on record by. the AO. This has not been done by the AO. In fact, there was neither any material seized/impounded, nor any statement recorded in the context of the appellant firm that unaccounted on money in cash has been accepted by the firm or its partners. If the explanation given by the appellant was suspected by the AO, the AO had to either reject the books of the appellant by bringing materials on record or examine Shri Hardik Shukla and Shri Palash Pal to make a case in favour of the Revenue. The AO has not even given a finding as to when (i.e. in which financial year) Flat D-405 was sold and when the receipt related thereto should be recognised for the purpose of Revenue as per the Accounting Standard/the accounting policy of the firm. 5.14 Under the circumstances I am inclined to hold that the AO should not have presumed receipt of on-money towards unit sold. 5.15 Even if it is conceded that the Page 11 of the Annexure Al is a testimony of receipt of on-money in cash in the case of unit D-405, at the best any extrapolation, if at all, could have been made for the year surveyed i.e. A.Y. 2016-17 (the survey being in F.Y. 2015-16) or the year in which the revenue on account of Flat D-405 was / was to be recognised as per the accounting system followed by the appellant. This is also well settled law that extrapolation cannot be resorted to for earlier years. The appellant has also cited various case laws in the regard that extrapolation without any evidence is unwarranted and unsustainable and that the extrapolation on account of on-money done by the AO is against the settled principles of law. The decisions of jurisdictional ITAT of Ahmedabad and of the jurisdictional High Court of Gujarat in context of limitation on extrapolation are binding on the CIT(A) in Gujarat. 5.16 Furthermore the decisions of the jurisdictional ITAT of Ahmedabad in CIT Vs Abhishek Corporation and of the jurisdictional High Court of Gujarat in CIT Vs President Industries wherein it has been held that the on-money per se cannot be the income of an assessee and that only the profit embedded in such on-money receipt can be subjected to tax are binding on the CIT(A) in Gujarat. IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 5 5.17 Thus in all these circumstances I do not find any basis to uphold the addition of Rs.6,87,30,000/- made by the AO for A.Y. 2013-14. The AO is directed to delete the addition. The related grounds succeed. 5.18 The appeal for A.Y. 2013-14 is allowed. 6. A.Y. 2014-15 6.1 In response to notice u/s 153C return of income for A.Y. 2014-15 was filed on 28/03/2017 showing total income at R$.23,59,570/- same as the income shown in the return u/s 139 filed on 07/10/2014. The assessment was completed determining total income of Rs.2,66,98,570/- making an addition of Rs.2,43,39,000/- on account of unaccounted cash received on sale of flats as per Para 5 of the assessment order. The facts of the case for A.Y. 2014-15 for the purpose of proceedings u/s 153C and for the assessment order u/s 153C r.w.s. 143(3) are same as those for A.Y. 2013-14. The reasoning of the AO and the submission of the appellant are also similar. The A.Y. 2014-15 is an abated proceeding because on the day of search, there remained the time available for issue of notices u/s 143(2) and so the appellant is not protected by the case laws which prohibit making of any addition without there being related incriminating material found during the search. However other discussions made in the appeal for A.Y. 2013-14 hold good for A.Y. 2014-15. Accordingly following the decision for A.Y. 2013-14 the AO is directed to delete the addition of Rs.2,43,39,000/-. The related grounds succeed. 6.2 The appeal for A.Y. 2014-15 is allowed.” 3. Aggrieved by the order of the Ld.CIT(A), the assessee is before us with following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the ld, CIT(A) has erred in admitting additional ground without providing an opportunity to the AO under Rule 46A of the I.T. Rule, 1962. IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 6 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.2,43,39,000/- without appreciating that the documentary evidences regarding receipt of on money was impounded from the business premises of the assessee. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.2,43,39,000/- without appreciating that the assessee failed to substantiate the claim and genuineness of extra work which was claimed to be received in cash. 4. It is, therefore, prayed that the order the Ld. CIT(A)-12, Ahmedabad may be set aside and that of the AO may be restored to the above extent. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal." 4. At the time of 33 rd hearing, none appeared on behalf of the assessee nor any written submission was filed. The Ld.Departmental Representative stated that the AO was wrong in treating the entire receipt as profit and adding the same to the income of the assessee. He further requested to add a reasonable gross profit margin and give relief to the assessee. 5. We have heard the Ld.Departmental Representative and perused the material available on record. 6. The primary issue in the appeal pertains to whether the AO was justified in making additions based on the presumption of receipt of ‘on- money’ in cash for all units sold during the relevant assessment years without any concrete evidence. The Ld.CIT(A) has extensively dealt with the issue and observed that the AO's presumption was not backed by IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 7 concrete evidence. The Ld.CIT(A) further observed that the AO failed to bring on record any material to substantiate that the assessee received ‘on- money’ in cash for all units. 6.1. The Ld.CIT(A) concluded that even if Page No.11 of Annexure A1 indicated receipt of on-money for unit D-405, any extrapolation should be confined to the year surveyed, i.e., A.Y. 2016-17. This view is consistent with the decisions of the Hon’ble Jurisdictional High Court and the ITAT, which hold that extrapolation without evidence for earlier years is not sustainable in law. 6.2. In the case of CIT Vs. Abhishek Corporation and CIT Vs. President Industries, the Hon’ble Jurisdictional High Court has held that only the profit element embedded in the ‘on-money’ receipt can be subjected to tax and not the entire receipt itself. However, when the addition resorting to extrapolation cannot be sustained, no gross profit relating to such unsustained addition can be considered. 6.3. In light of these findings, we agree with the Ld.CIT(A) that the AO's action of extrapolating unaccounted cash receipts for all units sold in earlier years based on a single document is not justified. Therefore, the order of the Ld.CIT(A) deleting the addition of Rs.2,43,39,000/- for A.Y. 2014-15 is upheld. IT(SS)A No.557/Ahd/2019 The DCIT vs. The Rise Infra Asst. Year 2014-15: 8 6.4. In conclusion, we find no merit in the grounds of Revenue's appeal. Accordingly, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 10 th July, 2024 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमद ब द/Ahmedabad, $द ंक/Dated 10/07/2024 % .सी. यर, . .स./T.C. NAIR, Sr. PS आद() क * +ल,प अ-(, /Copy of the Order forwarded to : 1. अपील ./ / The Appellant 2. *0य./ / The Respondent. 3. संबं1 आयकर आय 2 / Concerned CIT 4. आयकर आय 2 )अपील (/ The CIT(A)-12, Ahmedabad 5. , 3 4ीय * 1 ,आयकर अपील य अ1 कर ,र ज क%/DR,ITAT, Ahmedabad, 6. 4 6 7 ल /Guard file. आद() स र/ BY ORDER, स0य ,प * //True Copy// सह यक पंजीक र (Asstt. Registrar) आयकर अपील य अ1 कर , ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 05.1.2024 2. Date on which the typed draft is placed before the Dictating Member. : 07.1.2024 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 10.7.24 7. Date on which the file goes to the Bench Clerk. : 10.7.24 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order :