M/s. DIVINE BUILDERS, MUMBAI V. ACIT CIR. 21(3), MUMBAI

ITSSA 97/MUM/2005

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9440 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 16-11-2009
• Assessment Year: misc
• Appeal Filed On: 02-03-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Keywords: Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER IT(SS) NO. 97/MUM/2005 (BLOCK PERIOD: 01.04.1989 TO 05.01.2000) M/S. DIVINE BUILDERS ACIT, CIRCLE 21(3) SUBIBL, OPP. I.I.T. MAIN GATE MITTAL COURT, NARIMAN POINT POWAI, MUMBAI 400076 VS. MUMBAI 400021 PAN - AADPT 6584 B APPELLANT RESPONDENT APPELLANT BY: SHRI RAKESH JOSHI RESPONDENT BY: MS. VANDANA SAGAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE BY THE ASSESSEE IS AGAINST THE O RDER OF THE CIT(A)- XXI, MUMBAI DATED 04.01.2004. THIS WAS ORIGINALLY D ISMISSED BY THE ITAT MUMBAI I BENCH VIDE ORDER DATED 9 TH JUNE 2008 AND SUBSEQUENTLY RECALLED VIDE ORDER DATED 25 TH FEBRUARY 2009 IN M.A. NO. 698/MUM/2008. 2. THE ASSESSEE HAS RAISED A SOLITARY ISSUE OF CONFIRM ATION OF ADDITION OF RS.13,94,000/- TO THE INCOME OF THE ASSESSEE. ASSES SEE ALSO RAISED AN ADDITIONAL GROUND OF APPEAL STATING THAT THE ASSESS MENT ORDER IS NONEST AND BAD IN LAW. THIS GROUND WAS NOT PRESSED DURING THE APPELLATE PROCEDURE AND WITHDRAWN BY THE ASSESSEE. 3. BRIEFLY STATED THERE WAS A SEARCH AND SEIZURE OPERA TION UNDER SECTION 132 OF THE I.T. ACT IN THE CASE OF RAY CONSTRUCTION GROUP ON 05.01.2000. DURING THE SEARCH ACTION CERTAIN INCRIMINATING DOCU MENTS IN CONNECTION WITH M/S. DIVINE BUILDERS WERE FOUND AND SEIZED. TH E INTIMATION UNDER SECTION 158BD OF THE I.T. ACT WAS RECEIVED ON 01.08 .2002 AND ACCORDINGLY PROCEEDINGS UNDER SECTION 158BD WERE INITIATED AND ASSESSMENT WAS COMPLETED VIDE ORDER DATED 30 TH AUGUST 2004. IN HIS ORDER THE A.O. DETERMINED THE TOTAL UNDISCLOSED INCOME AT RS.25,59 ,864/- MAKING VARIOUS ADDITIONS ON THE BASIS OF THE SEIZED MATERIAL. ONE SUCH ADDITION MADE IS WITH REFERENCE TO PAGE 18 OF THE ANNEXURE OF SUMMAR Y OF TRANSACTIONS FOR IT(SS) A NO. 97/MUM/2005 2 THE PERIOD 1994 TO 1997. THE ADDITION WAS MADE BY T HE A.O. IN PARA 6.5 OF THE ORDER STATING AS UNDER: - 6.5) PAGE 18 OF THIS ANNEXURE IS A CUMULATIVE SUMM ARY OF TRANSACTIONS FOR THE PERIOD 94-97. IN THIS SUMMARY FOLLOWING CAS H TRANSACTIONS OF SALE OF PROPERTY ARE ENTERED UNDER THE HEAD CASH: (I) SALES-DIVINE-404-TA PHILLIP RS.4,66,000/- (II) SALES-DIVINE-SNEHA DEEPTI RS.7,56,000/- (III) SALES-DIVINE RS.1,72,000/- RS.13,94,000/- ============== THE ASSESSEE COULD NOT EXPLAIN THE ABOVE THREE TRA NSACTIONS WITH THE HELP OF THE BOOKS OF ACCOUNTS. FROM THE ENTRIES IT IS VERY MUCH CLEAR THAT THE ASSESSEE HAD RECEIVED ON MONEY ON ACCOUNT OF SALE OF THE FLATS / PROPERTY TO THE DIFFERENT PERSONS. THE ASSESSEE FAI LED TO PRODUCE AGREEMENT COPIES OF THE SALE OF FLATS WHICH INDICAT ED THAT THE ABOVE MONEY WAS RECEIVED FROM THE PERSONS TO WHOM THE FLA TS WERE INTENDED TO BE SOLD. IN THE ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE, THE ENTIRE AMOUNT IS TREATED AS UNACCOUNTED CASH RECEIV ED BY THE ASSESSEE TOWARDS SALE OF THE FLATS FROM THE INTENDING BUYERS OF THE FLAT. AN ADDITION OF RS.13,94,000/- IS MADE TO THE TOTAL UND ISCLOSED INCOME FOR THE BLOCK PERIOD OF THE ASSESSEE. 4. BEFORE THE CIT(A) THE ASSESSEE HAS RAISED VARIOUS C ONTENTION ON THE ADDITION MADE IN THE ASSESSMENT ORDER AND THE CIT(A ), AFTER CONSIDERING ASSESSEES SUBMISSIONS, HAS DISCUSSED THIS ISSUE VI DE PARA 12 TO 14. VIDE PARA 15 HE HAS CONFIRMED THE ORDER OF THE A.O. BY H OLDING AS UNDER: - 15. I HAVE CAREFULLY EXAMINED THE APPELLANTS SUBM ISSIONS. THE APPELLANT IS ACCEPTING THAT THE AMOUNT OF RS.4,66,0 00/- AND RS.1,72,000/- ARE RECEIVED AS ON-MONEY ON ACCOUNT O F THE SALE OF THE FLATS. THIS IS ALSO EVIDENT FROM THE FACT THAT PAYM ENTS RECEIVED BY CHEQUE FROM INTENDING FLAT PURCHASERS FOR A TOTAL AMOUNT O F RS.22,57,250/- ARE SEPARATELY SHOWN. AS REGARDS THE APPELLANTS CONTEN TION THAT THE ENTRY OF RS.7,56,000/- RELATING TO SALES-DIVINE-SNEHA DEEPT I IS CONTRA-ENTRY, THE SAME IS NOT BORNE OUT BY PAGE 19 OF ANNEXURE A-8 RE LIED UPON BY THE APPELLANT SINCE ONE ENTRY IS OF RECEIPT OF THE AMOU NT AND THE OTHER ENTRY IS OF UTILISATION OF THE AMOUNT TOWARDS LOAN REPAYM ENT. THE APPELLANT HAS REFERRED TO PAGE 38 TO 41 OF THE APPELLATE ORDE R DATED 20.02.2003 OR M/S. RAY CONSTRUCTIONS. IN THIS ORDER, IT WAS ACCEP TED THAT M/S. EROS BUILDERS IS NOT A SEPARATE ENTITY BUT IS A BRANCH O F M/S RAY CONSTRUCTIONS. HOWEVER, AS REGARDS THE BUSINESS OF M/S. DIVINE BUILDERS IS CONCERNED, IT WAS OBSERVED THAT IT HAS BEEN EXPL AINED THAT THE CONCERN IS OWNED BY ONE SHRI P.P. THOMAS AND CASH LOAN OF R S.35,00,000/- WAS GIVEN BY SHRI M.T. KOCHUKUNJU AND THE AGREEMENT WAS THAT M/S. DIVINE BUILDERS WOULD PAY A PERCENTAGE OF PROFIT TO THE AP PELLANT FIRM (RAY CONSTRUCTIONS). IT WAS FURTHER HELD THAT A LOAN OF RS.35,00,000/- WAS OUT IT(SS) A NO. 97/MUM/2005 3 OF FUND IN ROTATION, THE CASH FLOW STATEMENT SHOWS AVAILABILITY OF RS.50,55,502/- WITH THE COMMON POOL AND INVESTMENT, THOUGH UNACCOUNTED FOR, COMES OUT OF THE MONEY IN CIRCULAT ION. THEREFORE, THE SOURCE OF THE LOAN OF RS.35,00,000/- WAS CONSIDERED . THE ADDITIONS MADE IN PARA 35 OF THE ASSESSMENT ORDER OF M/S. RAY CONSTRUCTIONS OF ON-MONEY RECEIVED IN CASH OF RS.6.39 LAKHS WAS DELE TED. THEREFORE, THE AMOUNT OF RS.13,94,000/- WAS ON-MONEY RECEIVED ON F LATS WAS NOT BROUGHT TO TAX IN THE CASE OF M/S. RAY CONSTRUCTION S. THE ON-MONEY OF RS.13,94,000/- IS TO BE ASSESSED IN THE HANDS OF TH E APPELLANT. THE APPELLANTS CONTENTION THAT RS.35,00,000/- PAID BY CASH FOR THE PURCHASE OF LAND BE ALLOWED AS DEDUCTION CANNOT BE ACCEPTED SINCE THE RECEIPTS OF ON MONEY HAVE NOT ARISEN OUT OF SALE OF THE LAND BU T RELATE TO AMOUNTS RECEIVED OUTSIDE THE REGULAR BOOKS OF ACCOUNT FROM THE INTENDING PURCHASERS OF FLATS PROPOSED TO BE CONSTRUCTED ON T HE LAND. THE APPELLANTS CONTENTION THAT PROJECT COMPLETION METH OD OF ACCOUNTING IS BEING FOLLOWED IS ALSO NOT RELEVANT SINCE THE ON-MO NEY RELATES TO TRANSACTIONS OUTSIDE THE REGULAR BOOKS OF ACCOUNTS AND THE ADDITION ARISES OUT OF EVIDENCE FOUND DURING THE COURSE OF S EARCH AND SEIZURE OPERATIONS. THE ADDITION OF RS.13,94,000/- MADE BY THE A.O. IS CONFIRMED. GROUND NO. 8 IS DISMISSED. 5. THE LEARNED COUNSEL, DRAWING OUR ATTENTION TO THE S UBMISSIONS MADE BEFORE THE CIT(A) AND ALSO TO THE COPY OF THE SEIZE D MATERIAL PLACED IN THE PAPER BOOK, SUBMITTED THAT THE CIT(A) HAS DELETED T HE ADDITION OF RS.6,38,000/- IN THE ASSESSMENT OF RAY CONSTRUCTION S AS IT WAS CONSIDERED ONLY AN AMOUNT RECEIVED BACK OUT OF RS.35,00,000/- ADVANCED OUTSIDE THE BOOKS OF ACCOUNT AND NO ADDITION WAS MADE AND AN AM OUNT OF RS.7,56,000/- WAS CONSIDERED AS CONTRA ENTRY. ACCOR DINGLY THESE AMOUNTS ARE NOT TO BE CONSIDERED AS UNDISCLOSED INCOME IN T HE HANDS OF THE ASSESSEE. THE MAIN ARGUMENT OF THE ASSESSEES COUNSEL IS COUN TERING THE FINDINGS GIVEN BY THE CIT(A) THAT THESE AMOUNTS ARE TAXABLE AS UNDISCLOSED INCOME. 6. THE LEARNED D.R., HOWEVER, REFERRED TO THE ENTRIES IN THE SEIZED PAPERS AND SUBMITTED THAT THERE IS A FINDING THAT THE ASSE SSEE HAS RECEIVED ON- MONEY OF RS.13,94,000/- WHICH WERE CONSIDERED BY TH E CIT(A) IN DETAIL AND CONFIRMED BY HIM. IT WAS SUBMITTED THAT THE ASSESSE ES EXPLANATIONS WERE CONSIDERED AND ACCORDINGLY THERE IS NO NEED TO GIVE ANY BENEFIT TO THE ASSESSEE. 7. WE HAVE CONSIDERED THE FACTS AND THE ISSUE THEREIN. AS CAN BE SEEN FROM THE ORDERS IT IS EVIDENT THAT AN AMOUNT OF RS. 35,00,000/- WAS RECEIVED OUTSIDE THE BOOKS OF ACCOUNT FROM M/S. RAY CONSTRUC TIONS AND THE AGREEMENT WAS THAT THE ASSESSEE HAS TO PAY PERCENTA GE OF PROFIT. ACCORDINGLY IT(SS) A NO. 97/MUM/2005 4 THE SEIZED MATERIAL DO INDICATE THAT AN AMOUNT OF R S.13,94,000/- WAS PAID AS ON-MONEY RECEIVED ON FLATS. IT IS A FACT THAT TH ESE AMOUNTS ARE NOT DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT A S THE SAID TRANSACTIONS WERE CONDUCTED OUTSIDE THE BOOKS OF ACCOUNT. THERE IS EVIDENCE ON RECORD THAT THE ASSESSEE HAS RECEIVED MONEY OUTSIDE THE BO OKS OF ACCOUNT THE SOURCE OF WHICH WAS CONSIDERED IN THE ASSESSMENT OF M/S. RAY CONSTRUCTIONS. PART OF THE AMOUNT WAS REPAID BY WAY OF ON-MONEY RECEIVED OF FLATS, THE DETAILS OF WHICH WERE EXTRACTED BY TH E A.O. IN THE ASSESSMENT ORDER. THE SEIZED PAPERS ALSO INDICATE THAT THERE A RE ON-MONEY RECEIPTS. THE CIT(A) ALSO HAS RIGHTLY CONSIDERED THAT THE AMOUNT OF RS.6.8 LAKHS WAS A PAYMENT TO M/S RAY CONSTRUCTIONS OUT OF THE PROCEED S OF THE ASSESSEE. IT WAS SUBMITTED THAT THE AMOUNT OF RS.7,56,000/- WAS A CONTRA ENTRY AND IT IS NOT ON-MONEY RECEIVED. THE CIT(A) HAS CONSIDERED THAT THIS CONTRA ENTRY HAS NO BEARING ON THE RECEIPT OF THE MONEY. ON EXAM INATION OF THE SEIZED PAPER WE ARE OF THE VIEW THAT THE ISSUE HAS NOT BEE N EXAMINED CORRECTLY. THE EXPLANATION WITH REFERENCE TO THE CONTRA ENTRY AND THE REASONS FOR MAKING THE CONTRA ENTRY HAS NEITHER BEEN ASKED NOR EXPLAIN ED. IF THIS CONTRA ENTRY PERTAINS TO ANY OTHER TRANSACTION THEN THE SAID AMO UNT CANNOT BE BROUGHT TO TAX AS INCOME ARISING OUT OF SALE OF FLATS. HOWE VER, THE ASSESSEE HAS NOT EXPLAINED THE NATURE OF THE CONTRA ENTRY PASSED AND WAS ONLY RELYING OF THE FACT THAT THIS IS ONLY A CONTRARY ENTRY. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE A.O. SHOULD EXAMINE THE NATURE OF THE CONT RA ENTRY AND SEE WHETHER THE ASSESSEES EXPLANATION IS BONA FIDE ON THE FACT S. IF THE ENTRY DOES NOT PERTAIN TO THE SALE OF FLATS AND REPAYMENT OF THE M ONEY TO M/S. RAY CONSTRUCTIONS THEN THE AMOUNT CANNOT BE BROUGHT TO TAX. OTHERWISE THE SAME IS TO BE UPHELD AS AMOUNT PAID BY THE ASSESSEE FIRM OUT OF THE SALE PROCEEDS RECEIVED OUTSIDE THE BOOKS OF ACCOUNT. SIN CE THIS ASPECT REQUIRES EXAMINATION VIS--VIS THE ENTRIES IN M/S. RAY CONST RUCTIONS, THE MATTER IS RESTORED BACK TO THE A.O. TO EXAMINE AFRESH AFTER O BTAINING THE NECESSARY DETAILS FROM THE ASSESSEE AND DECIDE THE ISSUE ACCO RDINGLY. THE ISSUE WITH REFERENCE TO THE AMOUNT OF RS.7,56,000/- IS, THEREF ORE, RESTORED TO THE A.O. THE AMOUNT OF RS.6.8 LAKHS IS, HOWEVER, CONFIRMED. ASSESSEES GROUND IS PARTLY ALLOWED. IT(SS) A NO. 97/MUM/2005 5 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH FEBRUARY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXI, MUMBAI 4. THE CIT XXI, MUMBAI CITY 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.