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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Mahavir Prasad & Shri Amarjit Singh
Revenue by: Shri O.P. Sharma, CIT-D.R. Assessee by: Shri Mahesh S. Chhajed, A.R. Date of hearing : 10-08-2021 Date of pronouncement : 08-11-2021 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- IT(SS)A Nos. 197/Ahd/2013 & 198/Ahd/2013 for A.Y. 2009-10 & 2010-11 filed by assessee and A.Y. 2009-10 I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 2 M/s. Uma Shakti Corporation vs. ACIT filed by revenue, arise from order of the CIT(A)-1, Ahmedabad dated 18- 02-2013, in proceedings under section 143(3) r.w.s. 153A of the Income Tax Act, 1961; in short “the Act”. All these appeals are adjudicated together since similar issues and identical facts are pertained to the appeals. for A.Y. 2009-10 filed by assessee
2. The assessee has raised following grounds of appeal:- “1 . The Order passed by the Ld. CIT (A) is against, law equity and justice.
2. The Ld. CIT (A) has erred in law and on facts in considering the payment of Rs. 40,00,000/- to the partners of M/S. Uma Shakti Corporation by the appellant as unaccounted income and thus the Ld. CIT(A) has erred in law and on facts in estimating net profit of Rs. 12,00,000/- @30% on alleged unaccounted sales of Rs. 40,00,000/-
3. The Ld. CIT(A) has erred in law and on facts in considering the payment of Rs. 40,00,000/- made to Deepak Prajapati by the appellant firm as unaccounted sales income and thus the Ld. CIT (A) has erred in law and on facts in estimating net profit of Rs. 12,00,000/- @30% on alleged unaccounted sales of Rs. 40,00,000/-.
4. Alternatively The Ld. CIT (A) has erred in law and on facts in not allowing deduction made for purchase of land of Rs. 2,50,00,000/- from the profit of the project.”
There was a search action u/s. 132 of the act on 4th March, 2010 at the 3. residential premises of Shri Vikas R. Patel at 23 Umiya Banglow Ghatlodia Ahmedabad. During the course of search a memorandum of understanding dated 7th April, 2007 was found and seized pertaining to land at Chandlodia as per page 1 to 6 of annexure A-1. As per the said MOU, Shri Brijesh S. Patel and Shri Mahendra D. Patel (first party) agreed to purchase the aforesaid land at Chandlodia at final plot no. 32 IT-29 of survey no. 217/1 and 218/2 from Shri Anil Kumar G. Darji, Shri Amit Kumar K. Patel and Shri Narendara R. Patel (second party) @ Rs. 10171/- per sq. yard. As per the statement of Shri Vikash R. Patel recorded on the day of search the unaccounted payment to the tune of Rs. 2.5 cores in cash was made. The I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 3 M/s. Uma Shakti Corporation vs. ACIT registered sale deed for this land was executed at Rs. 20 lacs between the aforesaid sellers and M/s. Uma Shakti Residency on 31st October, 2007. During the course of assessment proceedings with regard to the issue of unaccounted cash payment of Rs. 2.5 crores, the assessee claimed that the source of cash payment was out of the unaccounted collection received from the client of the assessee firm for Uma Shakti Residency project. It is claimed that the payment of Rs. 2.5 lacs including cheques of Rs. 20 lacs were given to land owners against land payment. The detailed submission dated 29th Nov, 2011 submitted by the assessee has been incorporated by the Assessing Officer in the assessment order at page no. 2 to 8. The assessee also submitted that this payment was made from its own unaccounted collection and unaccounted collection of M/s. Umiya Tirth Apartment Project (UTAP) for extra work to be carried out in the flats. It was submitted that collection of UTAP members and UTRE members were used by the partners for making payments to the sellers of land at Chandlodia. It is also submitted that collection of UTAP was started from 20th Jan, 2007 out of such collection and same was used for making part payment to farmers of land. In its submission, the assessee has submitted unaccounted fund to the amount of Rs. 87 lacs were used from the collection of UTAP and the remaining payment of Rs 163 lacs were used from the collection of UTRE project of the assessee firm for making payment to the owner of the lands at Chandlodia. In this regard, the assessee firm has submitted the fund flow statement which is reproduced as under:- INFLOW AMOUNT OUTFLOW AMOUNT Year 2006-07 (from 22-02-07 to 31-03-07)
I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 4 M/s. Uma Shakti Corporation vs. ACIT Collection from members of Umiya 7600000 UTRE land purchase out of 4100000 Tirth Residency (UTRE) part of Rs. members collection 300.19 lacs (Uma Shakti Corporation Residency Project)
Fund received from partners Sh. 400000 Balance 3900000 Brijesh & Vikas (UTAP) I TOTAL 8000000 TOTAL 8000000
Year 2007-08 (from 01-04-07 to 31-03-08)
Balance 3900000 UTRE land purchase out of 20900000 members collection Collection from members of Umiya 20225000 Balance 11525000 Tirth Residency (UTRE) part of Rs. 300.19 lacs (Uma Shakti Corporation Residency Project)
Fund received from partners Sh. Brijesh 8300000 0 & Vikas (UTAP) TOTAL 32425000 TOTAL 32425000 Year 2008-09 (from 01-04-08 to 31-03-09)
Balance 11525000 Refund given to Partner Sh. Brijesh 4000000 & Vikas (UTAP) for land funds from UTAP.
Collection from members of Umiya 3789000 Refund at the time of 1250000 Tirth Residency (UTRE) part of Rs. cancellation of booking to 300.19 lacs (Uma Shakti Corporation members Residency Project) .«*,
0 Fund given to Partner - 4000000 Dipakbhai (land - Survey no. 206 - Enclave)
0 Balance 6064000 TOTAL 15314000 TOTAL 15314000 I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 5 M/s. Uma Shakti Corporation vs. ACIT
Year 2009-10 (from 01-04-09 to 31-03-10)
Balance 6064000 Refund given to Partner Sh. Brijesh 4700000 & Vikas (UTAP) for land funds from UTAP.
Collection from members of Umiya 1005000 Refund at the time of cancellation of 1350000 Tirth Residency (UTRE) part of Rs. booking to members 300.19 lacs (Uma Shakti Corporation Residency Project)
Fund given to Partner - 1000000 Dipakbhai (land - Survey no. 206 - Enclave)
0 Balance -04-03-10 19000 TOTAL 7069000 TOTAL 7069000 The Assessing Officer has not agreed with the submission of the assessee. The Assessing Officer has rejected the affidavits as evidences on the followings grounds:- “1. The affidavit submitted by M/s Uma Shakti Residency contains the declaration by the member with respect to total amount contributed in cash and through cheque. However, the affidavit does not mention the date on which such contribution was made by the member. Thus, it cannot be said that the member contributed the amount in cash on the same date as that appearing in the cash flow of-unaccounted receipts submitted by the firm-M/s Uma Shakti Residency.
2. The affidavit mentions that details of contribution in cash and in cheque are as per Annexure - A & Annexure-B. However, the two ledgers attached (with respect to member's contribution in cash and cheque made to the firm -M/s Uma Shakti Residency) along with the affidavits do not contain the signature of the member. Moreover, these ledgers have been prepared by the firm-M/s Uma Shakti Residency itself. In view of this, date wise ledger of member's cash contribution prepared by the firm-M/s Uma Shakti Residency cannot be accepted as genuine/authentic.
3. The original notebook whose copy is now furnished by M/s Uma Shakti Corporation (claiming it to be the record of member's unaccounted receipts) was never found/impounded/seized during the search. The same was also never produced before the department. Rather, the copy of this notebook is now produced after more than 20 months of the search. Thus, it cannot be accepted as genuine/authentic and is rather a creation of an afterthought exercise.”
Further the Assessing Officer has rejected the correctness of the date of unaccounted cash collection particularly for the period before the existence I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 6 M/s. Uma Shakti Corporation vs. ACIT of the assessee partnership. The operative para in the assessment order is reproduced as under:- “1. The cash flow of these unaccounted receipts cannot be accepted as neither any original document of unaccounted collections/receipts' was impounded/seized during the course of search/survey on 04/03/10 nor the affidavit contains the date of receipt of cash contribution made by the members.
As per the cash flow of unaccounted receipts of Rs 3,00,19,000 submitted by the M/s. Uma Shakti Residency, it has received the entire unaccounted receipts prior to its coming into existence on 20/10/07. As per this cash flow, the inflow of unaccounted receipt has started as early as 22/02/07 i.e. full eight months prior to execution of partnership deed of the firm. Further, the registered deed of the land at Survey No 217/1 & 217/2, Chandlodiya for M/s Uma Shakti Residency was executed only on 31/10/07. This cash flow of unaccounted receipts of Rs 3,00,19,000 cannot be accepted because no one would invest in the project of a firm which is not having even the land with it. On the similar grounds no one would invest in the project of the firm which has not come into existence at the very first instance. Since the firm was not in existence and there was no land in the firm prior to 31/10/07, there was no approved project plan. Without the approved project plan, it cannot be accepted that members would have contributed on-money for their chosen flats from the project plan which never existed. Further, as per the cash flow of unaccounted receipts, members had contributed on-money for 'chosen flat Nos' and received this amount back. When there was no project plan at the very first place, it cannot be accepted that the members would have chosen their flats as well. Thus, cash flow submitted by the firm-M/s Uma Shakti Residency cannot be accepted and is hereby rejected.
Thus, unaccounted receipts have been introduced in order to explain the source of unaccounted investment of Rs 2,50,00,000 made in land at Survey No 217/1 & 217/2, Chandlodiya for M/s Uma Shakti Residency. Thus, unaccounted cash flow now submitted by the firm M/s Uma Shakti Residency is a creation of an afterthought exercise I meant to cover the investment of Rs 2,50,00,000 in land at Survey No 217/1& 217/2, I Chandlodiya. The unaccounted cash flow thus furnished by the firm -M/s Uma Shakti I Residency is rejected.”
Therefore, the Assessing Officer stated that cash flow submitted by the assessee firm at the assessment stage was an creation of an afterthought exercise with the purpose of covering the unaccounted investment of Rs. 2.50 crores made by the other persons, therefore, the same was rejected by the Assessing Officer. The assessee submitted that cash of Rs. 87 lacs were given to its partner and Shri Vikash R. Patel and Shri Brijesh Patel for acquisition of Chandlodia land from the unaccounted collection of UTAP and such of Rs. 40 lacs was refunded in A.Y. 2009-10 and Rs. 47 lacs was returned in A.Y. 2010-11. The source of such collection was shown from the withdrawals from unaccounted collection of USRP. In view of the I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 7 M/s. Uma Shakti Corporation vs. ACIT aforesaid fact, since the unaccounted collection remained unexplained, therefore, such repayment of Rs. 40 lacs and 47 lacs was added to the total income of the assessee firm pertaining to the financial year 2008-09 and financial year 2009-10 respectively. Further, the Assessing Officer has also added Rs. 40 lacs as the payment of claimed to himself to Shri Dipak G. Prapati by the assessee firm since its source remained unexplained.
The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) was of the view that the entire unaccounted sale of on money receipts cannot be taxed in the hands of the assessee and only estimated profit of such unaccounted receipts can be taxed in the hands of the assessee. Therefore, he has restricted the addition to the extent of estimated profit of 30% of the unaccounted sale of Rs. 40 lacs each of the payment made to the two partners to Rs. 12 lacs each.
Heard both the sides and perused the material on record. A search u/s. 132 of the act was conducted in the cases of Umya Group on 4-3-2010 and subsequent dates. During the course of search at the residential premises of Shri Vikas R. Patel who subsequently became a partner of the assessee firm , a memorandum of understanding dated 7-4-2007 pertaining to land as referred above in this order was found, where the assessee firm had developed residential project under the name Umiya Tirth Residency. During the course of search action, Shri Vikash Patel in his statement recorded u/s. 132(4) of the Act on the day of search had admitted that unaccounted payment to the tune of Rs. 2.5 cores was paid for the purchase of the above referred plot of land by Shri Vikash R. Patel, Shri Brijesh S.
I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 8 M/s. Uma Shakti Corporation vs. ACIT Patel and Shri Mahendra D. Patel for acquiring the impugned land at Chandlodia from Shri Anilkumar G. Dargi, Shri Amit Kumar K. Patel and Shri Narendra R. Patel. As per the seized documents marked as annexure A-1/13, the detail of such unaccounted payment made is reproduced as under:- Payments — Noted in Seized Date Amount Remarks papers VikaPatel (Res) -A- 1/1 3 22-02-07 500000 Cash to Anil G. Darji VikaPatel (Res) -A- 1/1 3 23-02-07 600000 VikaPatel(Res)-A-l/13 25-03-07 3000000 VikaPatel (Res) -A- 1/1 3 03-04-07 7500000 VikaPatel (Res) -A-l/1 3 07-04-07 200000 VikaPatel (Res) -A-l/1 3 09-04-07 1200000 VikaPatel(Res)-A-l/ll 19-05-07 1500000 Cash to Anil G. Darji VikaPatel (Res) - A- 1/11 27-05-07 3000000 VikaPatel (Res) -A-l/ 12 19-06-07 2000000 Cheq from Uma Shakti Corporation (UTAP) of Navnirman Bank in favor of Alka Automobiles VikaPatel (Res) -A-l/ 1 2 19-06-07 1500000 Cash VikaPatel (Res) - A- 1/1 4 11-07-07 2000000 Cash to Anil G. Darji TOTAL 25000000 It is demonstrated from the above referred material evidence of seized document that during the course of search action unaccounted cash payment I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 9 M/s. Uma Shakti Corporation vs. ACIT to the amount of Rs. 2.30 crores were paid between two dates from 22.2.2007 to 19.6.200. During the course of assessment proceedings after approximately 22 months of the search action the assessee claimed that amount of Rs. 87 lacs were given to its two partners Shri Vikas R. Patel and Shri Brijesh Patel for acquisition of Chandlodia land out of the unaccounted collection of Umiya Tirth Apartment (UTAP) which was situated near the project of the assessee Umiya Tirth Residency (UTRE). The assessee submitted that this 87 lacs fund of the UTAP project was used by the partners for making payments to seller in cash for the aforesaid land. The assessee claimed that remaining cash payment of Rs. 1.63 lac for the purchase of land Chandlodia land was given from the unaccounted collection made from the members of Umiya Tirth Residency (UTRE) which was the project of the assessee firm. During the course of assessment proceedings, the assessee has also submitted inflow/outflow chart in its submission dated 23-11-2011 which is reproduced as under:- INFLOW AMOUNT OUTFLOW AMOUNT Year 2006-07 (from 22-02-07 to 31-03-07) Collection from members of Umiya 7600000 UTRE land purchase out of 4100000 Tirth Residency (UTRE) part of Rs. members collection 300.19 lacs (Uma Shakti Corporation Residency Project)
Fund received from partners Sh. 400000 Balance 3900000 Brijesh & Vikas (UTAP) I TOTAL 8000000 TOTAL 8000000
Year 2007-08 (from 01-04-07 to 31-03-08)
I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 10 M/s. Uma Shakti Corporation vs. ACIT Balance 3900000 UTRE land purchase out of 20900000 members collection Collection from members of Umiya 20225000 Balance 11525000 Tirth Residency (UTRE) part of Rs. 300.19 lacs (Uma Shakti Corporation Residency Project)
Fund received from partners Sh. Brijesh 8300000 0 & Vikas (UTAP) TOTAL 32425000 TOTAL 32425000 Year 2008-09 (from 01-04-08 to 31-03-09)
Balance 11525000 Refund given to Partner Sh. Brijesh 4000000 & Vikas (UTAP) for land funds from UTAP.
Collection from members of Umiya 3789000 Refund at the time of 1250000 Tirth Residency (UTRE) part of Rs. cancellation of booking to 300.19 lacs (Uma Shakti Corporation members Residency Project) .«*,
0 Fund given to Partner - 4000000 Dipakbhai (land - Survey no. 206 - Enclave)
0 Balance 6064000 TOTAL 15314000 TOTAL 15314000
Year 2009-10 (from 01-04-09 to 31-03-10)
Balance 6064000 Refund given to Partner Sh. Brijesh 4700000 & Vikas (UTAP) for land funds from UTAP.
Collection from members of Umiya 1005000 Refund at the time of cancellation of 1350000 Tirth Residency (UTRE) part of Rs. booking to members 300.19 lacs (Uma Shakti Corporation Residency Project)
Fund given to Partner - 1000000 Dipakbhai (land - Survey no. 206 - Enclave)
I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 11 M/s. Uma Shakti Corporation vs. ACIT
0 Balance -04-03-10 19000 TOTAL 7069000 TOTAL 7069000 Vide aforesaid chart the assessee has given the detailed information about the unaccounted cash receipts collected from the project of the assessee i.e. M/s. Uma Shakti Residency. The total unaccounted cash collection of this project was shown at Rs. 3,00,19,000/-. However, during the course of search action no such document/material in support of the detail furnished during the course of assessment was found and seized. Therefore, the Assessing Officer has asked the assessee to substantiate its claim of unaccounted collection in respect of M/s. Uma Shakti Residency. In response vide letter dated 29-12-2011, the assessee has furnished affidavits from clients towards unaccounted collection. He stated that during the course of search no evidence with respect to unaccounted collection receipt in respect of Uma Shakti Residency was seized and impounded. The Assessing Officer further stated that during the course of assessment the assessee has submitted affidavits of some of the clients containing declaration with respect to contribution made in cash and through cheques. The Assessing Officer has found that in the affidavits no specific date of the amount in cash contributed by the client was mentioned as reflected in the cash flow of unaccounted receipts furnished by the assessee. The Assessing Officer has also stated that ledgers attached along with the affidavits were not contained the signatures of the members and these ledgers have been prepared by the assessee firm without giving any supporting evidences of genuineness of transactions. The Assessing Officer has also stated that assessee firm has come into existence only on 22-10- 2007. Therefore, the I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 12 M/s. Uma Shakti Corporation vs. ACIT assessee could not substantiate that how the client can contribute the amount in cash before the formation of the assessee firm. The Assessing Officer has also stated that the client would make investment in the project after the existence of firm, therefore, it cannot be accepted that client would have contributed on money for chosen flats from the project plan which was never existed. The Assessing Officer has also stated that there was no project plant at the first place, it cannot be accepted that members would have chosen flats from the project plan as well. During the course of F.Y. 2008- 09 relevant to the assessment year under consideration , the assessee firm claimed in the fund flow statement that an amount of Rs. 40 lacs each was refunded to the partner Shri Brijesh Patel and Shri Dipak G. Prapati in respect of unaccounted funds used for the acquisition of impugned land. In view of the reason mentioned at para 3 of this order, the Assessing Officer has treated the claim of cash repayment of Rs. 40,00,000/- each to Shri Brijesh Patel and Shri Dipak G. Prapati as unexplained and added to the total income of the assessee. However, the ld. CIT(A) has restricted the addition to the extent of 30% as estimated profit on unaccounted cash collection out of which repayment to the two partners was made during the year under consideration. The operative para of the findings of the ld. CIT(A) is reproduced as under:- “9. I have gone through the assessment order and the submission of the A.R. carefully. It is seen that the Assessing Officer has made addition of Rs. 40,00,000/- from unaccounted collection of the appellant-firm to the partners Shri Dipak G. Prajapati on the ground that source of such payment was shown from the unaccounted collection of the appellant-firm. However, the cash flow of unaccounted collection of the appellant-firm has been rejected, the source of such cash payment to Shri Dipak G. Prajapati of Rs. 40,00,000/- remains unexplained. 9.1 The appellant-firm stated that: (i) There was extra collection of Umiya Tirth Residency Project of the appellant-firm amounted to Rs. 3,00,19,000/-, such details were furnished to AO in the assessment proceedings, as the collection book was not seized 7 impounded at the time of search 7 I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 13 M/s. Uma Shakti Corporation vs. ACIT survey and it was claimed that payment of Rs. 40,00,000/-was made from such extra collection from the members of appellant-firm. (iv) In AY 2008-09, Ld. AO rejected the extra collection from members stating that no one would made investment in the project of a firm, which is not having even the land with it. Whereas the facts of AY 2009-10 are different, as the deed for purchase of land was executed in last year i.e. on 30.10.2007. (v) Without prejudice to the submission in AY 2008-09, it is submitted that as huge amount is taxed in the hands of partners, such repayment may kindly be consider as given to partners from the extra collection of the firm. 9.2 In view of the above facts and appellate order of AY 2008-09, where it has been held that it is evident that the payments for lands are made in cash, at the same time no material with regard to on-money collection 7 extra collection is seized 7 impounded. As seen in the other group concerns, namely Uma Shakti Corporation, Uma Shakti Corporation Kalol Project and Uma Vir Infrastructure, extra collection 7 receipts details are seized 7 impounded, which shows that the group is maintaining records of such extra collection along with accounted collection. In the appellant- firm, land payment evidences are seized, which clearly indicates that the firm has undoubtedly collected on-money from members to recover cost of land as well as some portion of profits thereon. In most of cases, the unaccounted receipts/ on-money for the flats are collected immediately after the project starts, but as the collection details are not seized / impounded, no benefit can be given to the appellant-firm, as the firm came in existence on 20.10.2007 and sale deed was executed on 30.10.2007. In the light of such facts on record and in absence of seized material related to collection details, it can be said that the on-money / extra collection was received only the firm came into existence because by that time payment for purchase of land had already been made. The last payment for purchase of land was made on 11.07.2007, hence possession of land can be said to be received on that date. After the formation of the firm the bookings for the flats would certainly have started. Under such circumstances, the extra collection'/ receipts can be said as received only after 20.10.2007, but as the land payments are already made before 11.07.2007, no benefit of such extra collection was given against land payments. This is the reason why cash payment of Rs. 1,43,00,000/- for purchase of land was confirmed in the hands of partners - Shri Vikas R. Patel, Shri Brijesh S. Patel and Shri Dipak G. Prajapati at Rs. 47,66,666/- each. 9.3 In view of the above facts and appellate order of AY 2008-09. it is evident that firm has collected on-money collection / extra collection to the extent of payments made of Rs. 40,00,000/- and utilized such extra collection for making of payment to Shri Dipak G. Prajapati of Rs. 40,00,000/-, such payments are sourced through the extra collection / receipts for the housing project of the appellant firm. As the source is explained, the payment to the partner cannot be said as unexplained. Accordingly, it is held that the firm had collected on-money / extra collection from members and utilized it for payment to partner for land payments. Since the source is explained, addition of Rs. 40,00,000/- is not justified. However, it is seen that the firm has not offered any income on this unaccounted receipts/ on-money. The unaccounted receipts/ on-money was clearly taxable. The AR of the appellant argued that the entire unaccounted receipts/ on-money cannot be treated as income. He relied on various case-laws to support his contention. 9.4 The germane issue that needs to be decided is as to whether the entire unaccounted receipts can be taxed as income or only the profit element on such unaccounted sales / unaccounted receipts / on-money receipts can be brought to tax. This is a fact that many details relating to unaccounted expenditure have not been found during the course of search proceedings. The contention of the appellant is that many such receipts vouchers and bills were available at the time of search but were not seized by the department. The AR also contended that many of such documents were lying at various places including the residence of the accountants and site offices which were also not covered during the search proceedings. The fact that the entire details and evidences of the unaccounted expenditure was not seized during the course of search and seizure proceedings, that does not mean that there would be no associated expenditure at all for the purpose of making unaccounted sales. The definite possibility of having expenditure towards I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 14 M/s. Uma Shakti Corporation vs. ACIT development of land, maintenance and security charges, administrative, obtaining various permissions, additional buildings costs and marketing costs etc. cannot be ruled out. Such expenditure may have been debited in the books of accounts partially and sometimes it may not have been debited at all. It is also an undisputed reality that even purchase of land requires unaccounted consideration to be paid in cash in addition to the amount of such consideration recorded in the books and usually paid by cheque. In such situations the entire unaccounted sales / unaccounted receipts / on-money receipts cannot be subjected to tax as income of the assessee. Only the estimated profits on such unaccounted sales can be assessed to tax with a macro- perspective view of the issue under consideration. Further, the contention of the AO that only in respect of manufacturing concerns, the gross profits can be taxed in respect of unaccounted sales is totally devoid of merits. The basic principle in administering direct taxes is to tax the income and not the gross receipts of the assessee. The entire unaccounted sales / unaccounted receipts / on-money receipts cannot be said to be the income of the assessee unless there are evidence in possession of the AO to indicate that all the expenses have already been debited and the unaccounted income has been applied elsewhere clearly indicating that it was the surplus generated from unaccounted sales / unaccounted receipts / on-money receipts. Thus, the principle of taxing only the profits in respect of unaccounted sales applies to all concerns / entities including trading concerns, developers, builders etc. is well founded and cannot be faulted with. 9.5 The Courts have taken a consistent view that the entire amount of unaccounted receipts / unaccounted sales / on-money receipts cannot be brought to tax in the cases of builders and developers. Only the net profit embedded in the gross unaccounted receipts can be taxed. In the case of CIT vs Gurubachhan Singh J. Juneja [2008] 302 ITR 63 (GUJ.) it has been held by the Hon'ble High Court of Gujarat that :- "In absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales the finding of the Tribunal that only the gross profit on the said amount can be brought to tax does not call for any interference. " 9.6 Similarly the facts of the case of CIT vs. Samir Synthetics Mill [2010] 326 ITR 410 (GUJ.) are that as a result of search by the Excise Department in the business premises of the assessee, various discrepancies were noted in the production of the assessee. The assessee could not even be able to reconcile the production, sales and the closing stock although the specific opportunity was provided by the Assessing Officer. Accordingly addition to the assessee's income was made on account of suppression of sale consideration. It was held by the Tribunal as under: "Under these circumstances, we agree with the Commissioner of Income-tax (Appeals) that the assessee failed to explain the suppression of production of 18,80,500 meters of cloth. We also fully agree that any addition that is to be made is not in respect of the sale consideration but only in respect of the profit. As in this case no evidence has been brought out on record which may prove that the assessee has claimed all the expenses in the profit and loss account it is a case only of suppression of the sale consideration. In our opinion, in this regard, the judgment of the jurisdictional High Court in the case of CIT v. President Industries [2002] 258 ITR 654 (Guj.) is fully applicable" 9.7 Considering the concurrent findings of CIT(A) as well as Tribunal regarding the amount of addition on account of papers found during the search, it has been held by the Hon'ble High Court of Gujarat that there is no merit in the Department's appeal since whether there was any suppression of sale or not is basically a question of fact. Thus, in the above case the addition was justified on account of suppression of the sale consideration but only to the extent of profit.
The next important issue is the quantum of unaccounted sales / unaccounted receipts / on- money receipts. In the instant case it is seen that the entire details of unaccounted sales / unaccounted receipts / on-money receipts were not found during the course of search. The details were only partly found during the search. The appellant itself has come forward and disclosed the entire receipts of unaccounted sales / unaccounted receipts / on-money receipts. The AO also has accepted the quantum of unaccounted sales / unaccounted receipts / on-money receipts shown by the appellant. The AO has only objected to the claim of the appellant that some part of the unaccounted sales / unaccounted receipts / on-money receipts was for extra work to be done based I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 15 M/s. Uma Shakti Corporation vs. ACIT
on the fact that no agreement between the appellant and the flat owner was found during the search operation. 10.1 So far as the contention of the AO, that in the present case no evidence of on-money receipts in respect of the case was found and, therefore, there was no requirement of any extrapolation as well as estimation of income unlike other cases, is concerned, it makes no difference at all as to whether the entire unaccounted receipts is determined by way of extrapolation based on "•the/single instance of on-money receipts or on the basis of complete evidence of on-money receipts. Once the quantum of entire unaccounted receipts / sales is undisputed, the manner of arriving at the same by way of extrapolation or on the basis of complete evidence is hardly a relevant factor for the purpose of estimation of profits on such unaccounted sales. 10.2 In view of the above, I am of the considered opinion that the entire unaccounted sales / on money receipts cannot be taxed in the hands of the appellant and only estimated profits on such unaccounted receipts can be taxed in the hands of the appellant. 10.3 So far as the estimation of profit which should be taxed in the hands of the appellant is concerned, it is seen that the Hon'ble Income Tax Settlement Commission has determined the net profit which should be charged in respect Rushabh Vatika and Silver Springs @ 30% in place of 20% disclosed in the returns of income as well as in the application submitted before the Settlement Commission. 10.4 In view of the above and considering the order of the Settlement Commission in respect of Silver Springs wherein profit has been estimated @ 30% instead of 20% offered in the return of income, it would be fair and reasonable to adopt the same rate of estimated profit in the case of the appellant. The unaccounted sales in the present case is Rs.40,00,000/-. The estimated profits on such unaccounted sales @ 30% amounting to Rs. 12,00,000/- is accordingly taxed in the case of the appellant. The addition made by the AO is hence reduced from Rs. 40,00,000/- to Rs. 12,00,000/-.”
It is undisputed fact that the assessee firm was not existed during the period when the unaccounted cash payment was made for acquiring the land at Chanlodia. Subsequent affidavits were not supported with any relevant evidences as discussed above in this order. After considering the facts and finding of the ld. CIT(A) as supra we find that ld. CIT(A) is justified in holding that the assessee firm had collected on money during the year under consideration since the firm has come into existence on 20-10-2007 and no benefit of such cash collection can be given to the assessee firm for the period before its existence on 20-10-2007. However, the assessee has not offered the unaccounted cash collection during the year ,therefore, ld. CIT(A) is justified for restricting the addition to the extent of 30% of the amount after taking into the consideration that expenditure towards development of land and other as mentioned in his findings cannot be ruled I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 16 M/s. Uma Shakti Corporation vs. ACIT out. Therefore, we do not find any error in the order of ld. CIT(A) and both the ground of appeal nos. 1 and 2 are dismissed. Finding of Ground No. 3
6. In this alternative ground of appeal, the assessee stated that alternatively, the ld. CIT(A) has erred in law and on facts in not allowing deduction made for purchase of land of Rs. 25,00,000/- from the profit of the project. Without reiterating the facts as supra in this order, it is undisputed fact that the unaccounted payment of Rs. 2.5 crores were paid during the period 22-2-2007 to 11-7-2007 as elaborated in this order as per the documents marked A-1/13 seized during the course of search. The assessee firm had come into existence on 20-10-2007 and the assessee firm was not existed during the period of making unaccounted cash payment. Affidavit obtained afterwards during the course of assessment proceedings were not supported with relevant evidence. No client would make any payment before the existence of the assessee firm and without launching of the project without the existence of the assessee firm and in the absence of planned/approved project, the claim of the assessee is purely based on assumption and not tenable. Therefore, we do not find any merit in the alternative ground of appeal of the assessee and the same stands dismissed.
IT(SS)A No. 198/Ahd/2013 A.Y. 2010-11 filed by assessee Ground No. 2:- 7. Without reiterating the fact as reported vide IT(SS)A No. 197/Ahd/2013 of this order while adjudicating the appeal of the assessee for A.Y. 2009-10 on similar fact, assessee has challenged only the decision of the ld. CIT(A)
I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 17 M/s. Uma Shakti Corporation vs. ACIT in restricting the addition of cash received of Rs. 3,00,19,000/- as unaccounted sale to 30% at Rs. 66,05,700/-. During the course of assessment proceedings, the Assessing Officer noticed that assessee has shown cash flow of unaccounted collection of Rs. 3,00,19,000/- in Uma Shakti Residency, however, in the return of income filed for the year under consideration the assessee has offered undisclosed income of Rs. 50,00,000/- therefore, the Assessing Officer has added the remaining unaccounted collection in the total income of the assessee for the year under consideration. The ld. CIT(A) after taking into consideration the cash flow statement furnished by the assessee stated that out of total unaccounted cash collection of Rs. 3,00,19,000 a sum of Rs. 80,00,000/- has already been held to be unaccounted receipt for assessment year 2009-10 which has been restricted @ 30% as estimated profit therefore the remaining unaccounted receipt of Rs. 22,01,900/- was restricted to the estimated profit @30% of unaccounted sale to the total amount of Rs. 66,05,700/- As the facts and issues involved in ground of appeal vide IT(SS)A No. 198/Ahd/2013 Assessment Year 2010-11 are similar as in Assessment Year 2009-10 therefore after applying the decision adjudicated vide IT(SS)A No. 197/Ahd/2013 as supra in this order, this ground of appeal of the assessee is dismissed.
Ground No. 3 :- As the facts and issues involved in ground of appeal
vide IT(SS)A No. 198/Ahd/2013 Assessment Year 2010-11 are similar as in Assessment Year 2009-10 therefore after applying the decision adjudicated vide IT(SS)A I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 18. M/s. Uma Shakti Corporation vs. ACIT No. 197/Ahd/2013 as supra in this order, this ground of appeal of the assessee is dismissed.
Ground Nos 1 & 2 9. Without reiterating the facts as elaborated supra for A.Y. 2009-10 during the course of assessment, the Assessing Officer has made addition of Rs. 47,00,000/- and an amount of Rs. 10,00,000/- shown to be made to Shri Brijesh Patel and Shri Deepakbhai partners of the assessee firm during the year under consideration out of the unaccounted collection of Rs. 3,00,19,000/- shown in the cash flow statement. The ld. CIT(A) has deleted the addition on the ground that unaccounted receipt of Rs. 3,00,19,000/- out of which the aforesaid repayment were made had already been added therefore these additions were not justified.
10. After taking into consideration the material fact on record and findings of the ld. CIT(A) it is undisputed fact that the whole amount of unaccounted receipt has already been added by the Assessing Officer during the year under consideration out of which the aforesaid repayment were made to the partners, therefore, we consider that again adding such repayment is amount to double addition which is not justified. Therefore, we do not find any merit in the ground no. 1 and ground no. 2 of the revenue and the same stand dismissed.
Ground No. 3:-
I.T(SS).A Nos. 197 & 198/Ahd/2013 & ITA 1371/Ahd/2013 A.Y. 2009-10 & 2010-11 Page No 19 M/s. Uma Shakti Corporation vs. ACIT
As the facts and issues involved in ground no. 3 of appeal vide Assessment Year 2009-10 are similar as in ground no. 2 of IT(SS)A No. 198//Ahd/2013 Assessment Year 2010-11 therefore after applying the decision adjudicated vide IT(SS)A No. 198/Ahd/2013 as supra in this order, this ground of appeal of the revenue is dismissed.
In the result, the appeal IT(SS)A 197/Ahd/2013 & 198/Ahd/2013 filed by assessee and appeal ITA 1371/Ahd/2013 filed by revenue are dismissed.
Order pronounced in the open court on 08-11-2021 Sd/- Sd/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 08/11/2021 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद