The Deputy Commr. Income Tax, Cen. Cir-2, Rajkot V. M/s KKP Marketing India Ltd., Bhuj

ITSSA 80/RJT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3522 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Keywords: Unexplained investment; Business income; Depreciation; Loose papers; Document seized; Tangible material; Documents seized; Unabsorbed depreciation; Set aside
• Section: 145; 132; 143(3); 153A; 139(1); 145(3); 22

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E- COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./IT(SS)A No. 90/Rjt/2018 िनधाᭅरण वषᭅ/Asstt. Years: 2012-2013 M/s. KKP Marketing India Ltd., Krishna Chambers-A, 1 st Floor, Nr. S.B.I. Bank, Station Road, Bhuj-Kutch. PAN: AADCK9674Q Vs. A.C.I.T., Central Circle-2, Rajkot. And आयकर अपील सं./IT(SS)A No. 80/Rjt/2018 िनधाᭅरण वषᭅ/Asstt. Years: 2012-2013 D.C.I.T., Central Circle-2, Rajkot. Vs. M/s. KKP Marketing India Ltd., Krishna Chambers-A, 1 st Floor, Nr. S.B.I. Bank, Station Road, Bhuj-Kutch. PAN: AADCK9674Q (Applicant) (Respondent) Assessee by : Shri kalpesh Doshi, A.R Revenue by : Shri Ajay Pratap Singh, CIT.D.R सुनवाई कᳱ तारीख/Date of Hearing : 26/04/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 15/07/2022 आदेश/O R D E R IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 2 PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned cross appeals have been filed at the instance of the Assessee and Revenue against the common order of the Learned Commissioner of Income (Appeals)-11, Ahmedabad dated 07/03/2018 arising in the matter of assessment order passed under s. 143(3) r.w.s. 153A of the Income Tax Act, 1961 (here-in- after referred to as "the Act") relevant to the Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal: 1. That the learned CIT(A) has wrongly confirmed the validity of the assessment u/s.153A of the I.T Act. 2.0 That, the learned CIT (A) has wrongly considered the sale of plots at KKP Township (Maska Township) and estimated profit @ 48.21 % and made addition of Rs. 2,77,14,778/- 2.1 That , the learned CIT (A) has not appreciated the nature of transaction as when the agriculture land on which whole township project was planned could not be converted into non-agriculture land and therefore the whole project could not be materialized and the land has not been transferred in the name of the appellant company and the whole project has been cancelled. 3.0 That, the learned CIT (A) has wrongly considered the sales of plots at KKP Global City and estimated profit @ 84. 68 % and made addition of Rs.28,55,583/- 3.1 That , the teamed CIT (A) has not appreciated the nature of transaction as when the agriculture land on which whole Global city project was planned could not be converted into non-agriculture land and therefore the whole project could not be materialized and the land has not been transferred in the name of the appellant company and the whole project has been cancelled. 4 That, the learned CIT (A) has wrongly confirmed addition of Rs. 24,33,808/- as investment in purchase of plot no. 409 without appreciating facts of the case. 5 That, the learned CIT(A) has wrongly confirmed the addition of Rs.50,00,000/- on account of unexplained investment in KKP Office. 6 That, the findings of the learned AO and CIT(A) are not justified and are bad-in-law . 7 The appellant craves to add, alter, amend or delete any of the above grounds of appeal. 3. At the outset, the learned AR for the assessee submitted that he has been instructed not to press ground No. 1 raised in the memo of appeal. Therefore, the same is dismissed as not pressed. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 3 4. The 1 st issue raised by the assessee in ground No. 2 and 2.1 is that the learned CIT-A erred in considering the sale of plots at KKP township and estimated profit @48.21% without appreciating the fact that the agriculture land could not be converted into non agriculture land. Therefore, the project was neither materialized nor the land was transferred to the appellant company. 5. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of real estate activities. There was a search and seizure operation carried out at the premises of the assessee dated 30 July 2013 under the provisions of section 132 of the Act. As a result of search, there were found various documents of incriminating in nature based on which the AO observed that the assessee has indulged in certain financial transactions as detailed below: i. Development of the projects on different pieces of lands namely as Mandvi Township Project and Global City Project. ii. Investment in the purchase of the plot. iii. Investment in the purchase of office premises. iv. Documents related to other investments. Discussion about the Mandvi township project: 6. There were certain seized documents recovered during the search which were marked as page Nos. 38, 16, 17, 37, 11 and 12. As per the seized documents it was discovered that the assessee has undertaken a development project namely Mandvi Township Project. These seized documents were containing various informations which are summarized as under: a. As per the seized document bearing page No. 38 dated 15 June 2011, the assessee has made sale of land admeasuring 20394.13 square yards amounting to ₹ 8,42,64,156.00 out of which a sum of ₹ 3,11,46,976.00 was received. Likewise there was the closing balance of the land admeasuring IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 4 41915.18 square yards which was valued at ₹ 14,67,03,130.00. Thus the total value of the impugned project based on seized document bearing page No. 38 was determined at ₹ 23,09,67,286.00 only. b. The seized documents bearing page Nos. 16 and 17, found during the course of search, were containing the details about the name of the buyer, plot numbers, area in square yard, rate of land in square yard, date wise payment received from the buyer, total value of area. As per the seized documents, the assessee has received a sum of ₹ 2,79,48,476.00 from the buyers against the sale consideration of ₹ 8,37,02,498.00 only. Likewise, there was receipt shown on the seized document bearing No. 37 against the impugned project amounting to ₹ 60,76,400.00. As such the assessee has shown receipt of ₹ 3,40,24,876.00 against the plot of sale of ₹ 8,07,02,498.00 only. c. Similarly, there were seized documents bearing page Nos. 11 and 12 containing the information about the sale of plots to various parties, receipt of advance and instalment for ₹ 2,56,21,598/- against the sale value of ₹ 5,15,41,042.00. d. Likewise, there were seized documents bearing page Nos. 20, 21 and 24 containing the cash and bank flow under the heading of KKP township wherein sale of plots was shown at ₹ 5,88,25,322.00. On the same seized documents, there were certain transactions for the purchase of plots bearing survey Nos. 59/1-3, 60 and 80 for the amount of ₹ 3,84,66,600.00, ₹ 2,48,75,223.00, and ₹ 5,67,48,000.00. There was recorded the information about the contribution made by the directors by way of cash and cheque in the project as discussed above. As per the seized documents, there was cash contribution by the director of ₹ 2,95,13,000.00 only. Similarly, on the seized document bearing page No. 25, there were the details of the amount contributed by various parties in the project along with the share of such parties. 6.1 It was also admitted by the director of the company namely Shri Ramjibhai H Patel that the bank entries reflecting in the seized documents are duly recorded IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 5 in the books of the assessee company. However the director namely Shri Ramjibhai H Patel did not pass any comment about the cash components which was contributed by the directors. As such, the director of the assessee company expressed his inability to answer these questions. 6.2 Similarly, there was an inspector, deputed to visit the project of Mandvi township who in turn submitted that various work related to the project such as boundary wall, gutter line, waterline were completed. Similarly the construction of cemented road was completed to the tune of 60% only. 6.3 In view of the above the AO summarized the information found from different seized documents in the manner as detailed below: S.No. As per page no Part of payment received Sale value of plots 1 Page 11 &12 2,56,21,598/- 5,15,41,042/- 2 Page 16 & 17 2,79,48,476/- 8,37,02,498/- 3 Page 37 60,76,400/- - Total 5,96,46,474/- 13,52,43,450/- 7. Based on the above the AO issued a show cause notice to the assessee proposing to make the addition of the investment made by the assessee in the project as well as the amount of profit earned by the assessee from such projects as discussed above. 7.1 However, the assessee before the AO submitted that the impugned project in dispute does not belongs to it. As per the assessee the project in dispute belongs to the partnership firm namely M/s KKP Township having PAN number AALFK7914J. 7.2 The assessee also submitted that the documents seized by the Revenue in the course of search were simply projections and hypothetical calculations. Therefore, no reference to such documents can be made while framing the assessment of the assessee. It was also contended that the project was not materialized in the year under consideration and therefore the question of sale does IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 6 not arise. Accordingly it can be safely concluded that there was no sale made by the assessee in the year under consideration. 7.3 However, the AO found that the assessee has not denied or made any submission with respect to the booking amount received of ₹ 5,96,46,474.00 against the proposed sale of ₹ 13,52,43,540.00. Likewise, the seized documents were containing cash and bank transactions and there was no doubt about the fact that the transactions shown in the bank were duly recorded in the books of accounts. Thus, the existence of cash transactions cannot be denied. The accounting entries shown in the books of accounts of the assessee with respect to the project in dispute, evidences that the project belongs to the assessee only and not to the partnership firm as contended by the assessee. In view of the above the AO rejected the contention of the assessee by rejecting the books of accounts under the provisions of section 145(3) of the Act and held as under: 10.4 In light of the above, it is held that the reply of the assessee is false and misleading. The books of the assessee is not reliable and they do not present a true and fair picture. They are liable to be rejected by invoking provisions of section 145 of the I T Act. Hence the same are rejected. Most of the transactions are in cash and are out of books. Therefore the investment and income is required to be worked out. As mentioned in the opening part of this order, the assessee has not co-operated and furnished any details during the course of assessment proceedings. Therefore, the best method to determine the investment and profit would be to rely on the assessee's own seized materials. 11. Page No 38 of annexure A/ 1 shows that the total saleable area for this project was 62309.31 sq yards. Out of this, the sold area works out to 20394.13 sq yards, which yielded Rs 8,42,64,156/-. As mentioned supra, there are details of detailed plot wise sales, which are already discussed supra. The balance stock works out to 41915.18 sq yards. This is the closing stock and this too is required to be included in the trading account. The stock is valued at Rs 3500 per sq yard which works out to Rs 14,67,03,130/-. The purchase details are mentioned on page No 24 of annexure A-l. All expenses are duly recorded therein. Therefore, the P&L account is reworked out as under:- Particulars Debit Particulars Credit Purchase cost for land at survey No.59/1-3 (Pg 24) 3,84,66,600 Sales as per page no. 38 of annA-1 8,42,64,156 Late Payment interest (Pg 24) 13,00,000 Closing stock as per page no.38 14,67,03,130 Land at S.No.60 (Pg 24) 2,48,75,223/- Land at S.No.80 (Pg 24) 5,67,48,000 IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 7 Extra payment (Pg 24) 1,00,000 Brokerage (Pg 24) 21,37,200 Land dastavej (Pg 24) 18,85,050 Expenses debited as per seized page no24 of annexure A-1 78,16,997 Net Profit 9,76,38,216 Total 23,09,67,286 Total 23,09,67,286 12. Therefore, profit from the project is worked out at Rs.9,76,38,216/- and the same is added to the total income. Penalty proceedings u/s.271(1)(c) is initiated for concealment of income. 8. Aggrieved assessee preferred an appeal to the learned CIT-A- 9. The assessee before the learned CIT-A submitted that an idea was conceived to establish the township by way of developing the plots in the name M/s KKP township on certain pieces of lands bearing survey numbers 59/1-3, 60 and 80 located at the village. All these pieces of land at that of point of time were agricultural lands belonging to the person namely Shri Devshi Somji Makani Patel. This project was to be developed by the partnership firm namely KKP township. In this project, the role of the assessee was limited to make the bookings and carrying out marketing activities for the sale of plots. 9.1 It was also agreed that the owner of the plots bearing survey numbers will convert the lands into non-agricultural land so that the plots could be developed on commercial basis. But the plot was not converted into non-agricultural land. Therefore, the assessee abandoned the project. As such the impugned land was not transferred and the ownership in the impugned land remain vested in the owner namely Shri Devshi Somji Makani Patel till 29 th May 2017. 9.2 In view of the above, the assessee before the learned CIT-A contended that all the documents found in the course of search are the loose papers containing the projections/estimations for the amount realized from the prospective buyers, the IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 8 name of the booking amount viz a viz the amount to be paid to the landowners. Furthermore, the financial transactions found written on the seized documents were not matching with the actual entries recorded by the assessee in its books of accounts. Thus, no nexus can be established based on the seized documents viz a viz the transactions recorded in the books of the accounts. Accordingly, the assessee submitted that no adverse inference can be drawn against the assessee based on the documents found during the course of search. 9.3 The assessee without prejudice to the above further contended that the AO while estimating the profit of the assessee from the activity of developing the plots has valued the cost of land at market value treating them as non-agricultural land, despite knowing the fact that the lands were in the nature of agricultural land. The assessee in support of its contention has furnished the market value of the different lands treating them as agricultural lands as detailed under: a) land urvey no 59/1-3 on dated 15/12/2011 Rs. 7,28,460/- b) land survey no 60 on dated 11/10/2011 Rs. 5,12,940/- c) land survey no 80 on dated 27/06/2011 Rs. 12,99,060/ 9.4 Thus, the assessee in view of the above contended that the cost of impugned agricultural lands can only be considered while working out the profit, rather than valuing the market value of such land, treating the same as non-agricultural lands. As such the closing stock of the land should have been valued at cost as applicable to the agricultural lands. 9.5 There were different pages found in the course of search containing different sales value. However the AO without application of mind and necessary verification has adopted the highest amount shown in the seized documents as the sales value which is not based on any scientific method. 9.6 The search team could not find any income of the assessee based on cash found during the course of search or any other tangible assets which was not IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 9 recorded in the books of accounts except the documents containing the financial transactions. As such in the absence of any tangible material, the income cannot be calculated based on the loose papers found during the course of search. 9.7 The assessee being a marketing agent, merely engaged in the activity of booking and marketing, can only at the most generate the commission income. However, even the commission income has not accrued to it in view of the cancellation of the contract/project. Thus the assessee suggested to calculate the profit on estimated basis after considering the comparable cases. 10. The ld. CIT-A based on the above submission of the assessee called for the remand report from the AO on certain issues as detailed below: 1) Factual status of the category of land i.e agriculture land or non-agriculture land as on date of search and date of assessment. 2) Factual status of ownership of land as on date of search and date of completion of assessment. 3) Position of development of project and ownership of the same as on date of search and date of assessment. 4) Documentary evidence of working of profit and calculation of closing stock. 11. The AO furnished the remand report vide letter dated 16-10-2017 before the ld. CIT-A containing the informations as detailed under: (i) Factual status of the category of the land i.e agriculture or non-agriculture land: There are 4 survey no. involved in this case viz 59/1/p1; 59/3; 60 & 81. As on 30/07/2-13 (date of search) Survey no 59/1/p1 59/3 60 81 Agriculture land Agriculture land Agriculture land Agriculture land Agriculture land NO-agriculture land N.A N.A N.A N.A As on 14/03/2016 (date of assessment) Survey no 59/1/p1 59/3 60 81 Agriculture land N.A N.A N.A N.A Non-agriculture land Agriculture land Agriculture land Agriculture land Agriculture land IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 10 (ii) Factual status of ownership of the land as on the date of the search and also on the date of completion of the assessment proceedings: As on 30/07/2013 (date of search) Survey no 59/1/p1 59/3 60 80 Ownership of land Patel Devshi Somji Makani Patel Devshi Somji Makani Patel Devshi Somji Makani Patel Devshi Somji Makani As on 14/03/2016 (date of assessment) Survey no 59/1/p1 59/3 60 80 Ownership of land Patel Devshi Somji Makani Patel Devshi Somji Makani Patel Devshi Somji Makani Patel Devshi Somji Makani As on 14/03/2016 (date of assessment) Survey no 59/1/p1 59/3 60 80 Ownership of land Patel Devshi Somji Makani Patel Devshi Somji Makani Patel Devshi Somji Makani Patel Devshi Somji Makani (iii) Position of development of the project and ownership over the same as on date of search and on the date of completion of assessment. On the spot inspection result reveals that there are development under taken on the said land like cemented road, Boundary wall etc. Underground drainage system has also been placed. The structure appears to be 4-5 years old. Also there is a electricity pole along with transformer, in side the boundary wall. There are logos of the assessee on each slab of the said boundary wall, which read as ‘KKP’. Photos of these developments has been taken and print out of the same is enclosed with this report. (iv) Documentary evidence for working and profit of the assessee and the valuation of closing stock, certified copy of the documents need to be enclosed with the report. The details of working of profit and valuation of closing stock has already been discussed in body of assessment order. Scanned copy of seized loose papers were also part of assessment order and passed at appropriate place to arrive at logical conclusion of the same, where ever needed. The profit & Loss account has been worked out at page no.30 of the assessment order on the basis of loss paper seized. There is reference of page no.24 & 38 of annexure A-1 seized. 12. The Ld. CIT(A) after considering the submission of the assessee and the remand report of the AO observed that there was no existence of the partnership firm as alleged by the assessee. As such the assessee failed to furnish the copy of the partnership deed, details of the partners, bank accounts, capital contribution to justify its stand. 12.1 The learned CIT(A) also observed that the assessee has received the booking amount through banking channel as well as in cash which evidences that the project was launched by the assessee. According to the learned CIT(A) it is prevailing practice for entering into a contract/agreement with the landowner and applying for IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 11 nonagricultural application in the name of the owner but simultaneously carries out the activity of developing the project. Finally, the registry is made between the buyer and the landowner for the respective plots. From the conduct of the assessee, it is evident that the assessee has adopted this practice in order to avoid the expenses to be incurred on the registration of the properties. 12.2 There was no evidence furnished by the assessee about the fact that the assessee has returned the booking amount in view of the cancellation of its project. In the absence of necessary information it is implied that the impugned project was not merely based on the seized documents but also it was actively getting developed, maybe on a later date. 12.3 The learned CIT(A) further found that the transactions pertaining to the year under consideration based on the seized documents should only be considered for the purpose of the making of the addition. Thus, the transactions pertaining to the year under consideration should only be taken into account. The learned CIT(A) has confirmed the addition made by the AO in part by observing as under: Mandvi Township Sale Value of land Sale value of land Sale value Sold Square Yards 20394.18 Receivable 84264156 Balance Square Yards 41915.18 Amount Receivable % of amount 57486100 Total land Square Yards 62309.36 68.22 Therefore Effective Square Yards 13913.17 (20394, 13* 68,225£f Cost of land Survey No. 59/1-3 38466600 Survey No. 60 24875223 Survey Ho. 80 §3748000 Total Cost 120089823 IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 12 Total Square Yards 62303.31 Cost Per Square Yard — 192742 {120089823/S23Q9.31 ) Effective Square Yards 13S13-17 Effective Cost of land 26315104 (13913.17 1927.32) Effective Cost of land Other Expesrtes , Late payment Interest * 1300000 ............ ... . Extra Payment 100000 Brokerage 2137200 Land dastavej 1885050 Expenses debited as per seized page no.24 of Annexure 7816997 TOTAL OTHER EXPENSES 13239247 Total Square Yards 62309.31 Expenses Per Square Yard 212.48 (13239247/62309.31) Effective Expenses Per Square Yard 2956218 (13913.17*212.48) Net Profit 27714778 NP % 48.21 Profit @ 20% 11497220 As calculated above, net profit of the appellant for the year under consideration from this project comes to Rs.2,77,14,778/- . However, the appellant contended as under: 1.Expenses related to conversion of land to N.A Pending. 2.No sales have been made as the land is not transferred. 3. Still the land is in the name of seller and no transaction carried out. 4. All the development expenses are also pending. 5. Profit @ 48.21% is unrealistic. 6. Profit @ 6% has been considered as fair and reasonable by ITAT in case of City Developers. 7.No administrative expenses considered. Profits & Loss Account Particulars Debit Particulars Credit Cost of land 26815104 Income 57486100 Other Expenses 2956218 Net Profit 27714778 IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 13 Net Profit @ 20% 11497220 The contentions of the appellant have been considered but not found acceptable. The appellant’s contentions that profit @ 48.21% is unrealistic, but it has been calculated on the basis of seized documents after considering cost of land and expenses proportionately, therefore, there is no further scope of downsize the profit. Profit at this rate on sale of plot of land is not unusual and sometime it may be more than this. The case of City Developers cited by the appellant where the Hon’ble ITAT, Rajkot has estimated profit @ 6% is not relied upon, as the facts of the case are not identical. The above calculation has been made strictly according to figures related to the financial year relevant to assessment year under consideration and all the figures are from seized documents itself. The appellant has been allowed all allowable expenditure noted down in these seized papers. Therefore, addition of Rs.2,77,14,778/- are confirmed as profit of this project for this assessment year. Remaining additions of Rs.6,99,23,438/- are deleted. This ground of appeal is partly allowed. 13. Being aggrieved by the order of the learned CIT(A), both the assessee and the revenue are in appeal before us. The revenue is in appeal against the deletion of the addition of Rs. 6,99,23,438.00 whereas the assessee is in appeal against the confirmation of the addition made by the AO for Rs. 2,77,14,778.00. 14. The relevant extract of the ground of appeal of the Revenue reads under: On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in law and on facts in restricting the addition of Rs.2,77,14,778/- against the addition of Rs.9,76,38,216/- made on account of profit from KKP Township. 15. The learned AR before us filed two paper books running from pages 1 to 322 and contended that the land was being in the nature of agricultural land which was not converted and therefore the same was not acquired by the assessee. This fact can be verified from the remand report furnished by the AO which is placed on record. Thus, the question of making sale of the land does not arise and therefore no addition of whatsoever is warranted. 15.1 On the other hand, the learned DR before us vehemently supported the stand of the authorities below by reiterating the findings contained in the respective orders which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity. Both the learned AR and the DR before us vehemently supported the order of the authorities below. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 14 16. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there is no ambiguity to the fact that there were found various documents containing the information about the project to be developed by the assessee, other financial transactions in cash and bank. As far as the development of the project is concern, this fact was also admitted by the assessee before the learned CIT-A that it is proposed to undertake the impugned project. But it was contended that the project was abandoned for the reason that the land was not converted into non-agricultural land. 16.1 There was also admission by the assessee about the receipt of money in cash and bank from the prospective buyers in connection with the impugned project. The relevant admission of the assessee before the learned CIT(A) reads as under: The advances for the booking of the plot of land for both the project is as under: A.Y KKP TOENSHIP PROJECT GLOBAL CITY PROJECT 2011-12 2,54,38,776 83,64,341 2012-13 2,83,86,100 33,72,318 TOTAL 5,38,24,876 1,17,36,659 The amount received on account of advances by the directors for the booking of plots as detailed as under: A.Y. Amount 2011-12 40,00,000 2012-13 2,91,00,000 Total 3,31,00,000 The amount of advances given for the plot of land for the KKP Township Project. A.Y 2011-12 2012-13 Bank 10,00,000 1,39,46,672 Cash 4,19,12,900 3,50,94,700 TOTAL 4,29,12,900 4,90,41,372 The number of advances given for the plot of land for the GLOBAL CITY project. A.Y 2011-12 2012-13 IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 15 Bank 0 0 Cash 0 82,50,000 16.2 Besides the above, the AO in his remand report dated 16-10-2017 has also submitted the progress about the development of the project on the impugned land. The relevant extract of the remand report reads as under: (iii) Position of development of the project and ownership over the same as on date of search and on the date of completion of assessment. On the spot inspection result reveals that there are development under taken on the said land like cemented road, Boundary wall etc. Underground drainage system has also been placed. The structure appears to be 4-5 years old. Also there is a electricity pole along with transformer, in side the boundary wall. There are logos of the assessee on each slab of the said boundary wall, which read as ‘KKP’. Photos of these developments has been taken and print out of the same is enclosed with this report. (iv) Documentary evidence for working and profit of the assessee and the valuation of closing stock, certified copy of the documents need to be enclosed with the report. The details of working of profit and valuation of closing stock has already been discussed in body of assessment order. Scanned copy of seized loose papers were also part of assessment order and passed at appropriate place to arrive at logical conclusion of the same, where ever needed. The profit & Loss account has been worked out at page no.30 of the assessment order on the basis of loss paper seized. There is reference of page no.24 & 38 of annexure A-1 seized. 16.3 A conjoint reading of the above facts clearly reveals that the assessee was engaged in the activity of developing the project as discussed above and to this effect he has also taken money through the banking channel from the prospective customers. There was no evidence furnished by the assessee that the money received from the customers towards the booking amount was returned back to them. Thus we hold that the documents found during the course of search were not merely representing the loose and dumb documents but the same were corroborated by the banking entries contained/ recorded therein which were duly recorded in the books of accounts of the assessee. It is the settled law that the documents/loose papers have to be read as a whole and not in piecemeal. In simple words once part of the entries recorded in the seized documents are matching with the books of accounts, then other part of the entries though not recorded in the books of accounts but it shall be presumed to be true. As such part of the entries have been duly corroborated by the banking entries. Thus we hold that the seized documents/loose-papers found in the course of search are representing the IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 16 incriminating documents which can be relied upon/referred for making the addition in the hands of the assessee in the course of assessment. 16.4 The next question arises for quantifying the amount to be added based on the seized documents. As such the AO, has quantified the amount of addition of ₹ 9,76,28,216/- based on the seized documents which was reduced by the learned CIT-A to Rs. 2,77,14,778/- only. Before, we take up the issue for quantification of the amount of profit based on the seized documents/loose papers found during the course of search, we note that admittedly, the transactions recorded in connection with the project on hand in the seized documents were reflecting the business receipts/ sale of the project. Thus, a profit based on the estimate in a scientific manner can be deduced to unearth the undisclosed income. In this regard we find support and guidance from the order of the Hon’ble Gujarat High Court in the case of CIT vs. President Industries reported in 258 ITR 654 where it was directed to make the addition only to the extent of gross profit. The relevant extract of the order is reproduced as under: ‘The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income, answers by itself in the negative.” 16.5 From the above, there remains no ambiguity that the profit from the unaccounted business receipts should be calculated embedded therein. We are also conscious to the fact that there is no standard jacket formula to work out the income of the assesse from the unaccounted receipts. One has to apply some guesswork based on some scientific method depending upon different facts and circumstances. It is also significant to note that in the present case the project of the assessee was cancelled. The assessee before us produced the sample copy of cancel agreement. 16.6 Therefore, further receipt of any amount from such project was not possible except what is stated in the seized materials. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 17 16.7 In this regard, we note that the assessee has made reference to certain companies which were engaged in the similar line of activities. Some of the example for the sake of reference are reproduced as under:- The comparative profits accepted in the case of assessee’s having similar line of activities are as under for your consideration: (A) M/s Mavani Developers the assessments are done by the said officer on the identical business activities u/s.153A Particulars A.Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 Turnover 631799 8071153 8556611 Net Profit 22392 124665 501090 Net Profit Percentage 3.5% 1.5% 5.8% Assessment order u/s143(3) RWS 153A u/s143(3) RWS 143A u/s143(3) RWS 153A (B) New Home Developers, Mehul Park: Particulars A.Y. 2008-09 A.Y. 2010-11 A.Y. 2011-12 Turnover 52,08,700 2,13,700 1,32,800 Net Profit Before Interest and remuneration to partner 3,12,522 12.822 7,988 Net Profit Percentage 6% 6% 6% Assessment order u/s143(3) RWS 153A u/s143(3) RWS 143A u/s143(3) RWS 153A (C) M/s City Developers Particulars A.Y. 2009-10 A.Y. 2010-11 A.Y. 2011-12 Turnover 2,12,71,008 34,10,570 4,04,900 Net Profit Before Interest and remuneration to partner 12,76,260 2,04,634 24,294 Net Profit Percentage 6% 6% 6% Assessment order u/s143(3) RWS 153A u/s143(3) RWS 143A u/s143(3) RWS 153A Therefore, considering the facts and circumstances of the case, it is respectfully submitted to delete the addition and decide the appeal of the appellant.” IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 18 16.8 From the above table, we note that the profit declared by different assessee engaged in similar line of business with respect to two companies namely M/s New Home Developers and City Developers stands on an average at the rate of 6% before the interest and remuneration to the partners whereas in the case of M/s Mavani Developers, it stands in the range of 1.5% to 5.80%. Admittedly, the net profit of any company depends upon the different factors and therefore no standard formula can be drawn to work out the profit embedded in the unaccounted business receipts. 16.9 It is also important to note that the income cannot be calculated based on piece of papers until and unless it is supported/corroborated by the tangible materials. For instance, if the assessee, on papers, has earned an income of Rs. 10 crores, the same should be available either in the form of some investments or the same should have been incurred for any other purpose. But we find that the authority below has not brought anything on record suggesting the income-based on some tangible materials except the documents found in the course of the search. Considering the facts involved in the case on hand, we deem it fit and appropriate to direct the authorities below take 4% of the turnover as the income of the assessee which is chargeable to tax. We also note that the learned CIT-A has also calculated the income of the assessee in 2 different assessment years whereas the AO was pleased to make the addition for the year under consideration only. Since, we have directed to make the addition based on percentage of the turnover as discussed above, there is no loss to the revenue for computing the income in one year only instead of computing the same into two different assessment years. Accordingly, we direct the revenue not to disturb other year of the assessee for calculating the income embedded in the unaccounted business receipts. Thus the ground of appeal of the assessee is partly allowed whereas the ground of appeal of the Revenue is dismissed. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 19 17. The issue raised by the assessee in ground No. 3 and 3.1 is that the learned CIT-A erred in considering the sale of plots at KKP Global City and estimated profit @84.68% without appreciating the fact that the agriculture land could not be converted into non agriculture land. Therefore, the project was neither materialized nor the land was transferred to the appellant company. 18. There were certain seized documents which were marked as page No. 38, 18, 19, 30 to 33, 22 and 23. As per the seized documents it was discovered that the assessee has undertaken a development project namely Global City project. These seized documents were containing the information which is summarized as under: a. As per the seized document bearing page No. 38 dated 15 June 2011, the assessee has made sale of land admeasuring 11242.34 square yards amounting to ₹ 3,97,00,640.00 out of which a sum of ₹ 91,64,341.00 was received. Likewise there was the closing balance of the land admeasuring 33915.89 square yards which was valued at ₹ 12,20,97,204.00. Thus the total value of the impugned project based on seized document bearing page No. 38 was determined at ₹ 16,17,97,844.00 only. b. The seized documents bearing page No. 18 found during the course of search was containing the details about the name of the buyer, plot numbers, area in square yard, rate of area, date wise payment received from the buyer, total value of area. As per the seized documents, the assessee has received a sum of ₹ 86,85,441.00 from the buyers against the sale consideration of ₹ 3,78,14827.00 only. c. Similarly, there were seized documents bearing page No. 6 containing the information about the purchase of land revenue survey no. 450-451 which clearly shows that the assessee has made payment of Rs. 1,55,03,500.00 as detailed under: i. Payment through bank on different dates 71,00,000.00 ii. Payment by cash 82,50,000.00 iii. Brokerage paid through bank 1,11,112.00 IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 20 iv. Brokerage paid in cash 42,388/- d. The seized documents bearing page No. 19 found during the course of search containing the details about the purchase of land survey no. 450-451, development expenses and sale through bank and cash. As per these details, the assessee has purchased land survey no. 450-451 for Rs. 1,53,50,000/-, the payment of which for Rs. 82,50,000/- was paid in cash and Rs. 71,00,000/- was paid through banking channel, and incurred development expenses of Rs. 90,85,255/-in which Rs. 65,44,563/- was paid in cash and Rs. 25,40,572/- was paid through banking channel. There was also mentioned about the sale of land survey no 450-451 for Rs. 4,56,48,250/- and sale of KKP arcade of Rs. 2,21,00,000/-. Therefore, the total sale of Rs. 6,77,48,250/- and total expenses of Rs. 2,44,35,225/- was worked out leading to the profit which come out at Rs. 4,33,13,025/- only. e. The seized documents bearing page No. 30-33 found during the course of search was containing the details about the amount to be received, amount received and interest cost on delayed payment related to land survey no 450- 451. In such papers the amount to be received was shown at Rs. 7,35,,57,500/-(6,44,62,500.00 + 11,00,000.00 + 10,00,000.00), amount received at Rs. 5,66,53,250/- and interest payment at Rs. 74,90,189/- only. f. On page 22 & 23 of the seized document, it was shown the details of investment made by the parties, their amount, interest, profit, repayment, and balance related to KKP golden project City 19. Based on the above, the AO issued SCN to the assessee proposing to assess why the investment and profit should not be added to the income of the assessee. The submission of the assessee was summarized by the AO as detailed under: IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 21 i. The project does not belong to it but it belongs to a separate entity namely KKP township and the project global city belongs to the entity known as KKP global city. ii. The KKP Global City Project was not materialized during the year under consideration. iii. There was no sale made by the assessee and therefore, there was no revenue generation from the impugned project. iv. The working based on seized paper represents the projection and hypothetical calculation. The profit amounting to Rs. 4,33,13,025/- is nothing but a projection. v. The profit sheet is up to 25-06-2010, still payments are going to be made against development expenses, administrative expenses, marketing expenses, and other which were not considered on that sheet. In view of the above and in the absence of conclusive evidence of net profit calculation, then the only recourse available to apply presumptive percentage to compute the profit. The payment made through banking channel does not require any explanation about the source and cash payment made out of booking payment received from customers. 19.1 However the AO rejected the contention of the assessee by observing that the papers found during the search indicate the whole project has been sold unaccounted which is also evident from the profit sharing sheet available record. The assessee has not disclosed the true picture of the seized material. Therefore, there was no option other than to work-out the profit on the basis of the seized material. Thus, the AO calculated the profit on seized page bearing no 19 treating the same as income of the assessee. 20. Aggrieved assesse preferred an appeal before the Ld. CIT(A) who partly allowed the ground of appeal of the assessee. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 22 21. Being aggrieved by the order of the CIT(A), the assessee and revenue both are in appeal before us. 22. Both the learned AR and the DR vehemently supported the order of the authorities below to the extent favourable to them. 23. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note the identical issue has been decided in ground no. 2 raised by the assessee and the revenue vide paragraph No. 16 of this order. The ground of appeal of the assessee was allowed in part whereas the ground of appeal of the revenue was dismissed. 24. The issue raised by the assessee in ground number 4 is that the learned CIT(A) erred in confirming the addition made by the AO for ₹ 24,33,808 on account of investment in the purchase of plot. 25. At the outset we note that, the learned CIT(A) has deleted the addition made by the AO by observing that the impugned loss pertains to the financial year 2010- 2011 corresponding to assessment year 2011-2012 and therefore no addition in the year under consideration is warranted. The relevant finding of the learned CIT(A) reads as under: The second contention of the appellant is that all 9 plots were purchased in F.Y. 2010-11 i.e relevant to A.Y. 2011-12 and not relevant to A.Y. 2012-13. The copies of sale deeds have been filed and the same are placed on record. The contention of the appellant is found factually correct. All the 9 plots mentioned in page 8 of Annexure-A/1 are found to have been registered during the financial year 2010-11 i.e relevant to AY 2011-12 The A.Y 2011- 12 is prior to the assessment year 2012-13 i.e under consideration in AY 2011-12 and not in this year. Hence, the addition made for this year on this issue are deleted. The contention regarding telescoping benefit will be decided by the A.O in A.Y. 2011-12 after due consideration. The Assessing Office may initiate proceedings as per provisions of the Act to assess this income in AY 2011-12. 25.1 From the above finding of the learned CIT(A) , we note that there is no grievance to the assessee against the addition made by the AO in the year under consideration for the reason that the same has been deleted by the learned CIT(A) IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 23 as discussed above. It is also equally important to note that the above deletion made by the learned CIT(A) has not been challenged by the revenue before the higher forum .it means the order of the learned CIT(A) has reached the finality .as per our understanding , there is no grievance to the assessee which needs to be addressed. As such the ground raised by the assessee becomes infructuous and therefore we dismiss the same as infructuous. 26. The next issue raised by the assessee is that the learned CIT-A erred in confirming the addition of ₹50 lakhs subject to the direction for the deletion of the impugned addition in the event the income of the assessee from the project is sustained. 27. The AO based on the seized documents bearing page numbers 21, 22 and 24, containing the details of the payment in cash for ₹50 lakhs for the purchase of the office at 1 st floor Krishna Chamber-A station road, Bhuj, proposed to make the addition to the total income of the assessee on the reasoning that the same was not disclosed in the financial statements and this fact was also admitted by the assessee director Dhamjibhai patel in his statement. Moreover, the AO also observed that the assessee during the assessment proceedings has also not explained the source of investment in the impugned office. Thus the addition was made to the total income of the assessee. 27.1 The assessee carried the matter before the learned CIT-A and contended that it was the plan of the assessee to take up a big office as it was projecting to execute the projects namely KKP township and KKP Global City. Therefore, the assessee has made the provision for the purchase of the office. However, as the assessee failed to execute the projects, therefore there was not purchased any office as alleged by the AO. Accordingly the assessee prayed for not making any addition for the impugned office. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 24 27.2 Without prejudice to the above, the assessee also submitted that it has already acquired office along with the furniture which is reflecting in the balance sheet and therefore to that extent the addition was not sustainable. 27.3 The learned CIT(A) after considering the submission of the assessee and the order of the AO held that the assessee failed to produce the source of investments with respect to the office and the furniture shown in the balance sheet. Thus according to the learned CIT(A), no benefit can be extended to the assessee on account of the investment in office and the furniture shown in the balance sheet. But the learned CIT(A) was of the view that the benefit of telescoping can be granted to the assessee in the event the income from the projects namely KKP Township and KKP global City is sustained to the total income of the assessee. As such the learned CIT(A) found that he has already confirmed the addition for Rs. 2,77,14,778 and Rs. 28,55,583/- in respect of these projects representing the income in cash from the projects. Therefore the learned CIT(A) was of the view that the impugned investment in the office is out of such undisclosed income which cannot be added again to the total income of the assessee otherwise it would lead to the double addition. Thus the learned CIT(A) deleted the addition made by the AO for ₹ 50 lakhs with the direction that the addition has to be sustained in the event the addition with respect to the project income is confirmed. Thus the learned CIT(A) deleted the addition in terms of the direction as discussed above. 28. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 29. The learned AR before us contended that there was no office purchased by the assessee as alleged by the revenue. As such, the assessee was planning to acquire the office along with furniture and other items but the same was not materialized. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 25 30. On the other hand the learned DR before us vehemently supported the order of the authorities below. 31. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion we note that the additions have been made by the AO on the basis of the entry found in the loose papers/seized papers during the search proceedings wherein the payment of ₹50 lakhs in cash for the purchase of the office was recorded. This fact was also admitted by the director of the assessee namely Dhamjibhai Patel in his statement. However, the learned CIT-A was pleased to delete the addition subject to the direction that the income of the assessee has already been enhanced on account of undisclosed income of Rs. 2,77,14,778 and Rs. 28,55,583/- from the activities of the project carried out by it. Thus, if the same is sustained then the impugned investment in the office can be presumed out of such income from the projects. Thus in such a situation no addition is warranted as the investment the project will be treated as application of the income from the projects as discussed above. In the event, if the addition is not sustained with respect to the projects as discussed above, then the impugned addition of ₹50 lakhs will continue to be sustained. 31.1 First of all, we have to see whether the assessee has made any investment in the office for ₹ 50 lakhs by way of making payment in cash. In this regard, we find that the AO in his order has specified the address of the office i.e. 1 st floor, Krishna Chamber-A, Station road, Bhuj. Once the address of the office is available with the authorities below, then it is not difficult for the revenue to verify whether the assessee has purchased the impugned office. The verification could have been done from the office of the registrar of properties to find out who is the real owner of the property whether he the assessee or some other party. If the name of the assessee is appearing in the registered documents, then the matter ends there. It means the assessee has made investment in the property and therefore the addition was liable to be sustained. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 26 31.2 However, in the event if it is discovered that the impugned office is owned by some other party. Then, the AO was under the obligation to carry out necessary verification from the party by issuing notice under section 133(6)/131 of the Act in order to find out that whether any agreement has been entered between the assessee and the party. However, before us no such exercise has been carried out by the authorities below. 31.3 A document containing the detailed for the payment of cash to purchase the office does not give the authority to the AO to take adverse view against the assessee that the assessee has purchased the impugned office until and unless it is supported by the corroborative evidence. None of the authorities below, has brought anything on record suggesting that the assessee has made investment in the impugned property. Thus, we are not convinced with the finding of the authorities below. We also note that CBDT in its instructions issued vide F. No. 286/98/2013- IT(Inv.II) dated 18 th of December 2014 has also discouraged its officers to make any addition merely on the basis of the statement. The relevant extract of the circular is reproduced as under: “Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Boards has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the IT Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely.” IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 27 31.4 In view of the above we hold that the revenue has not brought any iota of documentary evidence suggesting that the assessee has made purchases of the office as discussed above. Accordingly in the absence of any evidence for having made such investment in the office, we are not inclined to uphold the finding of the authorities below. Thus, we set aside the order of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 31.5 In the result, the appeal filed by the assessee is partly allowed. Now coming to the Revenue’s appeal ITA No. 80/RJT/2018 for A.Y. 2012- 13 32. The issue raised by the revenue in ground no. 1 is that the Ld. CIT(A) erred in deleting the disallowance of current year loss of Rs. 28,05,915/- only. 33. The assessee has filed return of income for the year under consideration declaring loss of Rs. 28,05,915/- only. However, the AO has taken the income of the assessee as NIL while computing the total income of the assessee after making certain addition as discussed in the assessment order. 34. Aggrieved assessee preferred an appeal before the Ld. CIT(A) and submitted that the assessee has filed the return of income along with the audited financial statement declaring loss of Rs. 28,05,915/- only. However, the AO without considering the return of the assessee considers the income of the assessee at Rs. NIL without any discussion and without pointing out any defect in its claim. The Ld. CIT(A) allowed the appeal of the assessee by observing that the AO was not correct to disallow the claim of loss without pointing out any defect in the claim of the assessee. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 28 35. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 36. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 37. We have heard the rival contentions of both the parties and perused the materials available on record. The assessee has filed its original return of income under section 139(1) of the Act declaring a loss of Rs. 28,05,915/- only. The amount of Rs. 28,05,915/- was comprising of the following figures: i. ordinary business loss ₹ 26,79,472/- ii. unabsorbed depreciation ₹ 1,26,443/- 38. The assessee in response to the notice issued under section 153(A) to file the return of income has contended that the return filed under section 139(1) can be assumed as if return filed in response to the notice issued under section 153A of the Act. The AO without verifying the impugned loss has computed the income of the assessee taking the income declared in the return of income at rupees nil which is wrong for the reason that the AO without pointing out any defect in the return of income of the assessee has taken the total income at rupees nil. In our considered view, the AO without any cogent reason cannot reject the loss declared by the assessee treating the same as nil. Thus, we are of the view that the order of the learned CIT(A) is proper and correct in accordance with the provisions of law and therefore no interference is warranted the finding of the learned CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. 39. The issue raised by the Revenue in ground no. 2 is that the Ld. CIT(A) erred in restricting the addition to Rs. 2,77,14,778 against the addition of Rs. 9,76,38,216/-on Account profit from the project namely, KKP township. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 29 40. At the outset we note that the issue raised by the revenue has already been decided along with the appeal of the assessee vide IT(SS)A No. 90/RJT/2018 vide paragraph No. 16 of this order. The impugned ground was decided against the revenue. Hence, the ground of appeal filed by the revenue is dismissed. 41. The issue raised by the revenue in ground no. 3 is that the Ld. CIT(A) erred in restricting the addition to Rs. 28,55,583/- against the addition of Rs. 4,33,13,025/-on Account profit from project Global City. 42. At the outset we note that the issue raised by the revenue has already been decided along with the appeal of the assessee vide IT(SS)A No. 90/RJT/2018 vide paragraph No. 23 of this order. The impugned ground was decided against the revenue. Hence, the ground of appeal filed by the revenue is dismissed. 43. The issue raised by the Revenue in ground no. 4 is that the Ld. CIT(A) erred in deleting addition of Rs. 12,20,97,204/- made on account of unexplained stock of global city project. 44. As per seized documents bearing page no 38, assessee has a plot of land available for sale admeasuring 45158.23 sq yard out of which the assessee had sold 11242.34 sq yard and balance available for sale 33915.89 sq yard. The assessee itself worked out the value of this stock is Rs. 12,20,97,204/- as evident from the seized document but the same is not reflected in the books of account of the assessee. Therefore the AO same treated as unexplained stock and added to the total income of the assessee. 45. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and submitted in addition to the submission furnished earlier in in respect of Global city project, that the land was not acquired by the assessee and the land still is the name of third parties. Therefore there is no reason to estimate the stock in the hand of the assessee. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 30 46. Assessee further submitted that the AO on one hand in his finding mentioned that the whole project of global city was sold out of books and on the other side added the closing stock value in the hand of the assessee. 47. The Ld. CIT(A) allowed the appeal of the assessee by observing that the plot of land under consideration was not registered in the name of the assessee till 31-03-2017. In Gujarat as per land revenue rules agriculture land cannot be purchase by non-agriculturalist. Therefore until the agriculture land is not converted into non agriculture land, no project could be completed on such land. Therefore only real income can be taxed and not notional income. Stock was not owned by the assessee on any day, thus the addition in respect of stock is not justified. 48. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 49. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favorable to them. 50. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the land on which the assessee was alleged of constructing the project under the name and style of KKP global city was not owned by the assessee as on 31 March 2017. Furthermore, the land was agricultural land and it was not possible to be registered in the name of the assessee being a company. As per the rule of the Gujarat government, a company cannot hold an agricultural land in its name. Thus it appears that the assessee was not the owner of the impugned land. 50.1 In addition to the above, we also note that the revenue authorities were available with all the details about the ownership of the land with them but none of them has taken the pain to verify from the concern party whether, the land in IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 31 dispute has been sold to the assessee. Thus, in the absence of any information available on record suggesting that the land in dispute was belonging to the assessee, we do not find any infirmity in the order of the learned CIT-A. In addition to the above, the AO in his order has given categorical finding that the entire piece of land has been sold out in the year under consideration. If that be so, then there is no possibility for the assessee of keeping the land as stock in trade. As such the finding of the AO is contrary to the facts available on record. The learned DR at the time of hearing has not brought anything contrary to the finding given by the learned first appellate authority. Thus we don’t not find any reason to interfere in the order of the learned CIT(A). Hence ground of appeal of the Revenue is hereby dismissed. 51. The issue raised by the revenue in ground no. 5 is that the Ld. CIT(A) erred in deleting protective addition of Rs. 9,74,40,653/- made on account of unexplained investment in both projects. 52. As per page 24 of the seized material it was found that there was the unexplained investment amounting to Rs. 7,30,05,428/-( 2,95,13,000/- +4,34,92,426/-) in KKP township project and as per page 10 of the seized material, there was unexplained investment amounting to Rs. 2,44,35,225/- in Global City Project. Therefore the total unexplained investment is of Rs. 9,74,40,653/- only. Accordingly, the assessee was asked to explain the same but the assessee failed to do so. However, the Revenue is trying to trace the investors and initiated proceeding separately in their hands to make substantive addition. Therefore, the AO in order to safeguard the interest of revenue has made the addition of unexplained investment to be taxed in the hands of the actual parties to the total income of the assessee on protective basis. 53. Aggrieved assessee preferred an appeal before the Ld. CIT(A) and contended that there was no development of the project as it was cancelled. All the IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 32 informations containing on the loose paper were an estimation of income. But in reality, the transaction was not executed. 53.1 Further, the assessee submitted that the AO on one hand is computing the huge profit on sale of plot, closing stock, and on the other hand, the addition of the investment on purchase of the property which is not justifiable. 54. The Ld. CIT(A) deleted the protective addition made by the AO observing that the document found during the search contains the name of the investors with the details of projects, amount of investment, interest paid, profit given to them along with date. Therefore the investment made in the purchase of property by these parties should be considered in the hands of these parties and thus the addition on protective assessee in the hand of the assessee was not justifiable. 55. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 56. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favorable to them. 57. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in this ground of appeal relates whether the assessee has made any investment in the projects namely Mandavi Township and Global City amounting to ₹ 9,74,40,653.00. The AO was of the view that the investment has been made in the impugned project amounting to ₹ 9,74,40,653.00 which is based on the seized documents as discussed above. But the AO was fairly considered in his assessment order that the impugned investments in the projects have been made by other parties and therefore no addition on substantive basis is warranted in the hands of the assessee. However, the AO in order to protect the interest of the revenue, has also made the addition in the hands of the assessee on protective basis. Nevertheless, the learned CIT-A was pleased to delete the addition IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 33 made in the hands of the assessee after observing the fact that the parties who have invested the money in the projects were very much appearing in the seized documents along with their names, details of the amount of interest, profit, payment, and date of payment. As per the learned CIT-A, once necessary details are available about the parties who made investment in the impugned project, there was no reason of making any addition in the hands of the assessee. 57.1 Admittedly, the assessee company was established dated 24-05-2010 and the present assessment year before us is the 2 nd year of its operation. There is no detail available on record suggesting that the assessee has earned any income. Thus there is no possibility of having made such a huge investments by the assessee in the impugned projects. Thus, certainly no addition on substantive basis is warranted. The issue before us revolves whether the addition is required to be made in the hands of the company on protective basis in the given facts and circumstances. The answers stands in negative. It is for the reason that the necessary details of the investors are already available on record. Furthermore, there was no information brought on record suggesting that the assessee has made any income suggesting the investment of such magnitude in the impugned land/projects. Thus, we are of the view that under any circumstances the protective addition cannot be converted into substantive addition. 57.2 Furthermore, the addition based on protective is made in a situation where there is a possibility that the addition if deleted from the hands of one party then where the substantive addition was made then the protective addition can be revived. However, in the given facts and circumstances we are of the view that there is no possibility of reviving or converting protective addition on substantive basis in the hands of the assessee. Thus, we are of the view that there is no infirmity in the order of the learned CIT(A). Hence we do not want to disturb the finding of the learned CIT(A). Thus the ground of appeal of the revenue is hereby dismissed. 57.3 In the result, the appeal of the Revenue is hereby dismissed. IT(SS)A Nos. 80 & 90/Rjt/2018 A.Y. 2012-12 34 58. In the combined Result, the appeal of the assessee is partly allowed whereas the appeal filed by the revenue is hereby dismissed. Order pronounced in the Court on 15/07/2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 15/07/2022 Manish