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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
Date of Hearing – 19/10/2023 Date of Order – 30/11/2023
O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeals have been filed by the assessee challenging the common impugned order dated 02/05/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)–47, Mumbai, [“learned CIT(A)”], for the assessment years 2012-13 and 2014-15.
./2023 Assessee’s Appeal – A.Y. 2012-13 2. In this appeal, the assessee has raised the following grounds:– Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 “1. The Learned CIT(A) erred in facts and circumstances of the case and in law confirming additions when the AO had not furnished reply to the remand report sought from him - Without Prejudice to the above 2. The Learned CIT(A) erred in facts and circumstances of the case and in law confirming the action of the AO making addition from loose papers found in survey. Without Prejudice to the above - Without Prejudice to the above 3. The Learned CIT(A) erred in facts and circumstances of the case and in law confirming action of the AO making addition of receipts of cash based on statement recorded on oath not appreciating statement cannot be recorded in oath during survey and that such statements have no evidentiary value and that the statement was retracted - Without Prejudice to the above 4. The Learned CIT(A) erred in facts and circumstances of the case and in law confirming the action of the AO making addition of entire receipts of cash and not restricting to NP ratio as per decision of jurisdictional High Court - Without Prejudice to the above 5. The Learned CIT(A) erred in facts and circumstances of the case and in law confirming the action of the AO making addition of entire receipts of cash ignoring evidences furnished to AO that these are already accounted.
6. The Learned CIT(A)erred in facts and circumstances of the case and in law in confirming action of AO confirming additions of credit seen in balance sheet u/s 68 ignoring various documents furnished during assessment stage and those furnished during appellate proceedings with a request for admission of additional evidence under Rule 46A.
7. Reasons given by CIT(A) in confirming order of AO are wrong, insufficient and contrary to facts and evidence on record and in law. Appellant craves leave to amend, alter, modify or omit any of the aforesaid grounds of appeal as occasion may arise or demand.”
The brief facts of the case as emanating from the record are: The assessee is a domestic company and is engaged in the business of builders and developers. For the year under consideration, the assessee filed its return of income on 30/09/2012 declaring a total income of Rs. 12,62,136. The return filed by the assessee was selected for scrutiny and vide order dated 31/03/2015 passed under section 143(3) of the Act the total income of the assessee was assessed at Rs. 1,47,12,140. On the basis of the information gathered during the course of search on the Bhanwarlal Jain group of cases, survey action was carried out in the case of one of the beneficiaries, i.e. M/s Page | 2
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 Neminath group of cases to which the assessee belongs, wherein, several incriminating material were found and impounded. On analysis of the material, it was observed that the assessee was in receipt of “on money” amounting to Rs. 43,31,000 from various parties in respect of the sale of flats which was also duly admitted by the Director of the assessee and appearing in the books of the assessee. Accordingly, notice under section 148 of the Act was issued on 06/03/2017, and proceedings under section 147 of the Act were initiated. In response to the said notice, the assessee requested to treat the original return filed on 30/09/2012 as the return filed in response to the notice issued under section 148 of the Act. The objections raised by the assessee after receipt of reasons recorded for reopening the assessment were also disposed off and thereafter notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee.
During the course of survey action under section 133A of the Act carried out on the assessee, the statement of the Director of the assessee was recorded under section 131 of the Act, in which he admitted to having received “on money”, i.e. unrecorded cash element over and above the agreement value in respect of three projects, viz. Abhiman CHSL, Samata CHSL and Kurla-Mangal Prabhat CHSL in the manner tabulated as under:-
Sr. Name of the Project Cash received during the F.Y. No. 2012-13 2013-14 2014-15 1. Abhiman CHSL 36,51,000 2,90,25,000 Nil 2. Samata CHSL 1,18,20,400 1,19,36,067 30,00,000 3. Kurla-Mangal Prabhat CHSL Nil Nil 1,11,31,000 Total 1,54,71,400 4,09,61,067 1,41,31,000
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023
5. Thus, as per the Director of the assessee the total “on money” received in cash for the three financial years was Rs. 7,05,63,467. However, an amount of Rs. 6,75,63,467 only was declared as unrecorded income earned by way of cash element and was offered to tax. Upon analysis of the sales made in respect of each of the projects, during the reassessment proceedings, it was noticed that in respect of Kurla-Mangal Prabhat CHSL, the following agreement for sales were made during the year under consideration:-
Amount Total Cost / received Rate / Agreement Total Flat no. Area (Sq.Ft) Assumed to be Cash (as per Sq.Ft. (Total Date Consideration In Cheque papers Area) Impounded) A/703 560 17.02.12 74,92,500 1,51,000 76,44,000 13650 A/903 560 13.12.11 66,00,000 7,50,000 73,50,000 13125 B/904 560 13.12.11 66,00,000 7,50,000 73,50,000 13125 B/1103 560 10.12.11 72,00,000 14,50,000 86,50,000 15446 B/1104 560 10.12.11 72,00,000 12,30,000 84,30,000 15054 TOTAL 43,31,000
Since the Director of the assessee had already admitted and declared the cash element in respect of sales executed on various projects have not been recorded in the books and offered to tax, accordingly the assessee was asked to show cause as to why the amount of Rs. 43,31,000 being the cash element relating to sale of five residential Flats in the Kurla-Mangal Prabhat CHSL, during the year under consideration, be not brought to tax as undisclosed income of the assessee. In response thereto, the assessee submitted that there was no admission during the survey nor any material was impounded in respect of the assessment year 2012-13 or any “on money” received. The assessee further submitted that there is no receipt other than that is recorded Page | 4
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 in the books of account. The Assessing Officer (“AO”) vide order dated 29/12/2017 passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that the incriminating documents vividly depict the fact that “on money” in cash has been received and the same has been bifurcated project wise/housing society wise as the assessee is in the business of redevelopment of the building. It was further held that the Director of the assessee in a statement has categorically admitted receipt of “on money” and accordingly has offered the same as unaccounted money for various assessment years as detailed above. Accordingly, the AO, inter-alia, made the addition of Rs. 43,31,000 as the undisclosed income of the assessee.
The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that on careful perusal of not only the statement of the Director but also the facts of the case and the evidence found during the survey, it is clearly proved that the assessee has accepted “on money” in cash. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. The only dispute raised by the assessee is against the addition of Rs. 43,31,000 by treating the same as “on money” received in cash on the sale of residential flats in the projects of the assessee. As per the assessee, it has no connection with Bhanwarlal Jain or any of his entities. It is further the claim of the assessee that one of the beneficiaries who had obtained accommodation entry from Bhanwarlal Jain and group concern was having a business affair with the assessee. Further, as per the assessee, there
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 was no admission by any Director of any receipt of “on money” of Rs. 43,31,000 for the assessment year 2012-13. Even in the statement of the Director of the assessee recorded under section 131 of the Act, he only admitted to having received a total “on money” of Rs. 6,75,63,467 with regard to three projects, namely Abhiman CHSL, Samata CHSL and Kurla-Mangal Prabhat CHSL for the financial years 2012-13, 2013-14 and 2014-15. It is further the claim of the assessee that the five flats in Kurla-Mangal Prabhat CHSL, with respect to which the AO has claimed that “on money” was received in cash, were not sold in the year under consideration and therefore the amount of “on money” received cannot be taxed in the year under consideration. In support of its submission, the assessee has placed on record copy of agreements for the sale of three flats, forming part of the paper book from pages 57-59. Thus, as per the assessee the “on money” can only be taxed in the year in which the flats were sold. In support of its submission, the assessee placed reliance upon the decision dated 25/02/2013 of the Hon’ble jurisdictional High Court in CIT v/s Karda Constructions Pvt. Ltd., in of 2012, wherein the Hon’ble High Court upheld the findings of the Tribunal that cash receipts in respect of sale of flats are taxable in the year in which the flats were sold.
It is evident from the record that as per the AO, the five flats in Kurla- Mangal Prabhat CHSL were sold by the assessee in the year under consideration. In this regard, the AO has placed reliance on Annexure 3 of the document found during the course of survey in respect of the sale of various flats by the assessee in its project on which it received the consideration by way of cheque as well as cash. We find that the sale deeds now furnished by Page | 6
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 the assessee were not examined by any of the lower authorities. Further, we find that only in respect of three flats the assessee has furnished the sale deed in support of the submission that these flats were not sold in the year under consideration. Therefore, in view of the facts and circumstances as noted above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication, as per law, after examination of all details as may be submitted by the assessee. In the interest of justice, one more opportunity is granted to the assessee to submit all details to substantiate its claim. Since the assessee is a builder and developer, the AO, while adjudicating this issue, is also required to take into consideration whether the assessee has followed the percentage of completion method or project completion method for recognising its revenue and cost. As a result, the impugned order to this extent is set aside and grounds no. 1-5 raised in assessee’s appeal are allowed for statistical purposes.
Ground No. 6 raised in assessee’s appeal was not pressed during the hearing. Accordingly, the same is dismissed as not pressed.
Ground No. 7 is general in nature and therefore needs no separate adjudication.
In the result, the appeal by the assessee is partly allowed for statistical purposes. ./2023 Assessee’s Appeal – A.Y. 2014-15 13. In this appeal, the assessee has raised the following grounds:– Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 “1. The learned CIT(A) erred in facts and circumstances of the case and in law holding that action of AO resorting to assessment u/s 147 by recording factually incorrect reasons without prejudice to the above.
The learned CIT(A) erred in facts and circumstances of the case and in law holding that action of AO forming to assessment without disposing off specific objections raised on re-opening without prejudice to the above.
3. The Learned CIT(A) erred in facts and circumstances. of the case and in law confirming the action of the AO making addition of entire receipts of cash that the assessee is supposed to have received and not restricting to NP ratio as per decision of jurisdictional High Court without Prejudice to the above.
4. The Learned CIT(A) erred in facts and circumstances of the case and in law confirming the action of the AO making addition/s 43CA of flats in building under construction. Reasons given by CIT(A) in confirming order of AO are wrong, insufficient and contrary to facts and evidence on record and in law. Appellant crave leave to amend, alter, modify or omit any of the aforesaid grounds of appeal as occasion may arise or demand.”
14. The issue arising in grounds no. 1 and 2, raised in assessee’s appeal, is pertaining to the initiation of proceedings under section 147 of the Act.
15. The brief facts of the case pertaining to this issue, as emanating from the record, are: For the year under consideration, the assessee filed its return of income on 31/03/2016 declaring a total income of Rs. 13,73,150. On the basis of the information/documents gathered during the course of survey, it was noticed that the assessee was on receipt of “on money” amounting to Rs. 2,24,74,980 from various parties in respect of the sale of flats which have been admitted by the Director and also appears in the books of account of the assessee. Accordingly, notice under section 148 of the Act was issued on 03/03/2017, and proceedings under section 147 of the Act were initiated. In response to the said notice, the assessee requested that the original return of income filed on 31/03/2016 be treated as a return filed in response to the notice issued under section 148 of the Act. The learned CIT(A), vide impugned Page | 8
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 order, dismissed the ground raised by the assessee on this issue and upheld the initiation of proceedings under section 147 of the Act. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. It is evident from the record that proceedings under section 147 of the Act were initiated on the basis of the documents found during the course of survey on the assessee from which it was noticed that the assessee has received “on money” in cash on sale of flats in respect of its various projects. Further, the said fact was also admitted by the Director of the assessee and he offered to tax an amount of Rs. 6,75,63,467 during the survey proceedings received in cash as “on money”. The said documents corroborated by the statement of the Director constitute new and tangible material for initiating the reassessment proceedings in the case of the assessee and on the basis of the same, the AO initiated proceedings under section 147 of the Act and issued a notice under section 148 of the Act. In ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd, [2007] 291 ITR 500 (SC), the Hon’ble Supreme Court observed as under:
“16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is Page | 9
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC).”
Therefore, if there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. Thus, we are of the considered view that there was tangible material available with the AO for initiating the proceedings under section 147 of the Act. Further, we find that the objections raised by the assessee against the reopening of the assessment were also disposed off vide order dated 11/09/2017, forming part of the paper book from pages 41-45. Accordingly, we find no infirmity in the impugned order upholding the initiation of proceedings under section 147 of the Act. As a result, grounds no. 1 and 2 raised in assessee’s appeal are dismissed.
The issue arising in ground no. 3, raised in assessee’s appeal, is pertaining to the addition on account of “on money” received in cash by the assessee on the sale of flats in its project.
We have considered the submissions of both sides and perused the material available on record. In the year under consideration also reassessment proceedings were initiated on the basis of material found during the course of survey action in the case of the assessee in which it was noticed
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 that the assessee has received “on money” from various parties on sale of flats. In the assessment order dated 29/12/2017 passed under section 143(3) read with section 147 of the Act, the AO after placing reliance on the statement of the Director recorded during the course of survey came to the conclusion that the assessee has received an amount of Rs. 2,94,74,980 in cash from sale of flats during the year under consideration in following projects:-
ABHIMAN CHSL, BUILDING NO.8 Amount Total Cost / received Rate / Agreement Total Flat no. Area (Sq.Ft) Assumed to be Cash (as per Sq.Ft. (Total Date Consideration In Cheque papers Area) Impounded) 802 660 09.07.2013 55,00,000 42,00,000 97,00,000 14,697 902 660 19.08.2013 75,00,000 20,00,000 95,00,000 14,394 1002 660 25.09.2013 60,00,000 35,00,000 95,00,000 14,394 901 680 10.07.2013 77,25,000 8,00,000 85,25,000 12,537 1001 680 08.08.2013 96,25,000 5,00,000 1,01,25,000 14,890 1003 695 05.09.2013 70,00,000 46,25,000 1,16,25,000 16,727 TOTAL 1,53,25,000 SAMATA CHSL, BUILDING NO.8 Amount Total Cost / received Rate / Agreement Total Flat no. Area (Sq.Ft) Assumed to be Cash (as per Sq.Ft. (Total Date Consideration In Cheque papers Area) Impounded) 602 665 31.12.13 71,95,000 29,09,980 1,01,04,980 15,195 801 620 31.12.13 55,80,000 34,40,000 90,20,000 14,548 1202 665 13.08.13 79,72,500 30,00,000 1,09,12,500 16,410 TOTAL 93,49,980 KRULA-MANGAL PRABHAT CHSL, BUILDING NO.9 Amount Total Cost / received Rate / Agreement Total Flat no. Area (Sq.Ft) Assumed to be Cash (as per Sq.Ft. (Total Date Consideration In Cheque papers Area) Impounded) B/1203 560 18.04.13 75,60,000 28,00,000 1,03,60,000 18,500
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 B/703 560 31.10.13 83,25,000 20,00,000 1,03,25,000 18,438 48,00,000 TOTAL
In the present appeal also it is the claim of the assessee that these flats were not sold in the year under consideration and therefore the “on money” received in cash cannot be taxed in this year. Having considered the submissions of both sides, we are of the view that this issue is also similar to the issue considered in assessee’s appeal for the assessment year 2012-13. Accordingly, we restore this issue to the file of the AO for de novo adjudication with similar directions as rendered above in assessee’s appeal for the assessment year 2012-13. As a result, ground no. 3 raised in assessee’s appeal is allowed for statistical purposes.
The issue arising in ground no. 4, raised in assessee’s appeal, is pertaining to the addition made under section 43CA of the Act.
We have considered the submissions of both sides and perused the material available on record. The brief facts of the case pertaining to this issue are that during the reassessment proceedings, the assessee was asked to furnish the details of the sales agreement made in the relevant financial year. However, on verification of the details filed by the assessee, it was observed that during the year, the assessee sold some of the flats at consideration below the circle rate. Accordingly, the assessee was asked to show cause as to why the flats sold at the consideration below the circle rate should not be disallowed and added back to the total income of the assessee in view of the provisions of section 43CA of the Act. In the absence of any cogent
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 explanation from the assessee, the AO vide order dated 29/12/2017 proceeded to make an addition of Rs. 2,07,10,014 under section 43CA of the Act being the difference between sale consideration and the value adopted by the authority of state government. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us.
From the record, it is evident that the AO computed the disallowance under section 43CA of the Act in respect of the following flats sold by the assessee:-
Sr. Flat Shop Date of Agreement Market Particulars Project Difference No. No. Agreement Value Value Abhiman 1. Mangesh Wagle 1102 30.12.2013 1000000 7853120 6853120 CHS Ltd. Abhiman 2. Jyotsna Sawant 1102 10.10.2013 6000000 7496500 1496500 CHS Ltd. Abhiman 3. Sugandh Parab 1103 06.09.2013 7000000 7894394 894394 CHS Ltd. Abhiman 4. Sadhabahadur Gupta 802 10.07.2013 5500000 7497000 1997000 CHS Ltd.
Jayesh Shah HUF Samata 901 11.10.2013 5580000 7042000 1462000 6. Gokharn J. Mehra Samata 902 21.06.2013 5580000 7554000 1974000 7. Urvashi Raval Samata 903 16.01.2014 5580000 7398000 1818000 8. Purnima Pavle Samata 1101 18.04.2013 5580000 7377500 1797500 9. Vardisingh Chandana Samata 1103 18.04.2013 496000 7377500 2417500 TOTAL 20710014
As per the assessee, it is projects namely Abhiman CHSL, and Samata CHSL were under construction and were not ready for occupation as on 31/03/2014 and thus indicates that only agreement to sale was executed in respect of these flats during the year under consideration. In this regard, the assessee has placed on record the occupation certificate issued by the concerned authority in respect of Samata CHSL, and Abhiman CHSL dated Page | 13
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 23/07/2014 and 12/07/2022, respectively. Further, it was submitted that as per the provisions of section 43CA(3) of the Act, when the date of agreement fixing the value of consideration for the transfer of asset and the date of registration of such transfer of asset is not the same, then the value determined by the concerned authority for the purpose of payment of stamp duty in respect of such transfer on the date of agreement be considered as the full value of consideration received or accrued as a result of such transfer.
From the record, it is evident that before the lower authorities the assessee did not produce any details and the impugned disallowance was also computed by the AO on the basis of the documents impounded during the course of survey. Therefore, in view of the facts and circumstances as noted above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after the necessary examination of all the details as may be submitted by the assessee. In the interest of justice, one more opportunity is granted to the assessee to submit all the necessary documents before the AO in support of its claim qua the applicability of section 43CA of the Act. Needless to mention the AO shall have the liberty to call for any other documents/information for complete adjudication of this issue. With these directions, the impugned order passed by the learned CIT(A) on this issue is set aside and ground no. 4 raised in assessee’s appeal is allowed for statistical purposes.
In the result, the appeal by the assessee is partly allowed for statistical purposes.
Mumbai Shelter Housing Development Pvt. Ltd. ITA no.2381/Mum./2023 ITA no.2380/Mum./2023 27. To sum up, both the appeals by the assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 30/11/2023