THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4,, SURAT vs. M/S. SHREE RAM DEVELOPERS,, SURAT

आयकर अपीलीय अिधकरण, सुरत �ायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, Hon'ble JUDICIAL MEMBER AND Dr. ARJUN LAL SAINI, Hon'ble ACCOUNTANT MEMBER (Virtual Hearing) आ.अ.सं./I.T.A No.1841/AHD/2016 िनधा�रण वष�/Assessment Year: 2006-07 The Deputy Commissioner Vs. M/s Shree Ram Developers, of Income Tax, Central “Shrushti Row House”, Circle-2, Surat. Kosad, Surat 394 107. [PAN: ABKFS 4321 F] अपीलाथ� / Appellant ��थ�/Respondent िनधा�रतीकीओर से /Assessee by Shri Ashwin K.Parekh – CA राज�कीओर से /Revenue by Shri Ritesh Mishra – CIT(DR) सुनवाई की तारीख/ Date of hearing: 24.02.2021 उद्घोषणा की तारीख/Pronouncement on: 08.03.2021 आदेश /O R D E R PER PAWAN SINGH, JUDICIAL MEMEBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-4, Surat dated 11.04.2016 for assessment year (AY) 2006-07. The Revenue has raised the following grounds of appeal: “[1] On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,16,65,000/- made on account of unexplained income u/s.69A of the I.T. Act, 1961 in spite of the fact that Shri Ankurbhai Babariya, one of the trustworthy person of Shri Jayantibhai Babariay, a partner of M/s Shree ram Developers had explained that seized documents from his premise are related to Shrusti Row House maintained by him which was later on also admitted by him in his statement on oath and this project was developed by the assessee firm i.e. M/s Shree Ram Developers. Also, there was no denial that on money has been seized in the Shrusti Row House Project. [2] On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred to held the addition of Rs.3,16,65,000/- made on account of

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unexplained income u/s.69A of the I.T. Act, 1961 as unjustified in spite of the fact that the assessee had maintained the consistent non- cooperative attitude throughout the assessment proceedings as several opportunities were provided to him to put forth his case but nothing was produced by the assessee and the AO was compelled to pass ex-parte assessment u/s.144 of the Act considering the relevant material on record. [3] On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. [4] It is, therefore, prayed that the order of the CIT (A) may be set aside and that of Assessing Officer may be restored to the above extent.” 2. Brief facts of the case as extracted from the order of the lower authorities that the assessee is a partnership firm, engaged in the business of development of property. A search action under section 132 of the Act was carried out at the premises of Shri Ankur Babariya at 20, Ram Krupa Society, Saroli Road, Puna Gaon, Surat on 17.07.2012. From his premises, certain papers in the form of ledger accounts were seized as Annexure –A/1, A/3 and A/5. Shri Ankurbhai Gordhanbhai Babariya was working with the partners of the assessee firm. From the entries on the seized documents, the assessing officer was of the view that seized documents prima facie shows the plot wise cash amount against development of Shrushti Row House of Rs.3,70,00,000/- during the relevant for A.Y. 2006-07. On the basis of information extracted during the search action, the AO after recording reasons of reopening issued notice under section 148 of the Act on 19.03.2013. The notice was allegedly served by affixation on 13.03.2013. The AO recorded that in response to notice under section 148 of the

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Act, no response was made. The AO again issued notice under section 142(1) on 21.01.2014 directing the assessee to file Return of Income of assesse firm. No response was made from the assessee. The AO after recording that assessee is not cooperating and responding in response to the notices, so he proceeded to complete assessment under section 144 of the Act. The AO recorded the details of seized material seized by Annexure –A/1 on page no.6 to 9 of the assessment order. In para 11 of the assessment order, the AO noted that in notice under section 148 of the Act, the figure of concealed income is mentioned as Rs.3.70 crore instead of Rs.3.17 crore. The AO after considering the contents of Annexure A/1 made addition of Rs.3.16 crore by passing the following order : “9. Evidence documents on record: a) A Search proceedings has taken place at the residential premise of Shri Ankurbhai Gordhanbhai Babariya at 20, RamKrupa Society, Saroli Road, Puna Gam, Surat. Shri Ankur Babariya is the trust worthy person of Shri Jayantibhai Babariya, Jayantibhai Babariya with his wise Smt. Pravinaben J Babriya and Naresh Babariya are the partners in the firm M/s Shree Ram Developers. Project namely “Shrusti Raw House” has been developed by firm M/s Shree Ram Developers. In search proceedings, at the residence of Shri Ankur Babriya, various books of A/Cs along with other incriminating documents, related to Shrushti Raw House project were found and seized. Seized material clearly shows that, separate ledgers have been maintained for each part of the project, wherein plot wise details of cash collection with date have been maintained and are related the periods pertaining to F.Y. 2005-06, 2006-07 and 2007-08 respectively. b) During the post search enquiries, Shri Ankurbhai Babariya was summoned for explaining the contents of the seized document. In his statement, recorded on oath, Shri Ankurbhai Babariya had stated, that,

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- the seized books belong to project Shrushti Raw House - & he had been maintaining these ledgers, cashbooks, registers and other documents. c) Annexure-A/12 of the seized books is cash book maintained for the period from 13.09.2005 to 29.10.2005; & d) Annexure-A/4 of the seized books is cash book for period from 30.10.2005 to 11.05.2006. e) Ledger account seized were analyzed which showed following results:- i) Annexure-A/1 seized on 18.07.2012 has plot wise entry of part-3 of the project. ii) Annexure-A/3 seized on 18.07.2012 has plot wise entry of part-2 of the project. iii) Annexure-A/11 seized on 18.07.2012 has plot wise entry of part-1of the project. iv) Annexure-A/5 seized on 18.07.2012 has plot wise entry of open plot of the project. 10. Analysis of documents on record: The assessee is well aware of the seizure of the above documents & have no valid explanations to explain the concealment of income made by them in the firm’s return of income. Due to this reason, the assessee has chosen the denial mode as he has no valid explanations for the documentary evidence of concealment of income seized during the search proceedings. The documents seized were analyzed & following conclusion are drawn: a) Most of the entries made in the above referred items are in coded manner. It can be seen from the entries of these books that the figures are written by making symbol of (=) between the last three digits and the initial digits. For example the figure on page No.-I are written as under: a. 50=000 Rs. Pachas Pura 05/12/05 b. 170=000 Rs. Ek so sitter pura 01/01/06 b) On page No.4 of Annexure-A/5, found and seized during the course of revocation proceeding of Prohibitory Order at residence of Shri Ankur Babariya on 11.09.2012, the entry is written as “37=500 Rs. Sadtrees Hazar Panchso” and signature of Ankur Babariya are placed with date. It is pertinent to mention that the actual amount of Rupees Thirty-seven thousand and five hundred (37,500/-) has been in fact written in coded form as “37=500”. The same analogy applies to all the coded figures written in the above mentioned seized documents/books.

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c) To ascertain the total receipt from the project, the entries made in Annexure-A/1 are decoded on the basis of analogy discuses above. These receipts are only treated to Annexure- A/1 pertaining to sector-3 of Shrushti Raw House. Details of Annexure A/1 Page Plot Amount Amount Amount Total No. No. Received received received During FY during FY during FY 2005-06 2006-07 2007-08 1 1 220000 0 0 220000 2 2 65000 290000 0 355000 3 3 220000 0 0 220000 4 4 440000 192000 0 632000 5 5 440000 191000 0 631000 6 6 220000 0 350000 570000 7 7 270000 75000 0 345666 8 8 250000 0 0 250000 9 9 220000 0 0 220000 10 10 210000 0 0 216666 11 11 220000 220000 0 440000 12 12 220000 30000 0 250000 13 13 220000 0 0 230000 14 14 220000 0 348000 568000 15 15 200000 0 368000 568000 16 16 200000 75000 0 275000 17 17 200000 75000 0 275000 18 20 215000 15000 0 230000 19 25 220000 0 0 220000 20 26 220000 0 0 220000 21 27 250000 0 0 250000 22 28 220000 30000 0 250000 23 29 230000 0 0 230660 24 30 270000 0 0 270000 25 33 220000 0 0 220000 26 34 220000 0 0 220000 27 35 220000 0 0 220000 28 36 220000 0 0 220000 29 37 220000 0 0 230000 30 39 220000 0 0 220000 31 40 220000 0 0 220000 32 41 220000 0 0 220000 33 42 220000 0 0 220000 34 43 220000 0 0 220000 35 44 220000 0 0 220000 36 45 220000 0 0 220000 37 46 220000 0 0 220000 38 47 220000 0 0 230000

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39 48 220000 0 0 230000 40 49 220000 0 0 230000 41 50 220000 0 0 230000 42 51 220000 0 0 235000 43 52 220000 15000 0 250000 44 54 220000 15000 0 250000 45 55 220000 0 0 220000 46 56 150000 90000 300000 540000 47 57 220000 0 0 220000 48 58 220000 0 0 220000 49 59 220000 0 0 220000 50 61 220000 0 0 220000 51 62 220000 0 0 220000 52 63 250000 381000 0 631000 53 66 220000 0 0 220000 54 67 220000 0 0 220000 55 68 220000 0 0 220000 56 69 270000 0 0 270000 57 71 220000 0 0 220000 58 72 250000 30000 0 280000 59 74 200000 0 0 200000 60 75 200000 0 0 200000 61 79 250000 381000 0 631000 62 80 220000 0 0 220000 63 81 220000 0 0 220000 64 82 220000 0 0 230000 65 86 220000 0 0 220000 66 87 235000 0 0 235000 67 88 235000 0 0 235000 68 89 220000 0 0 220000 69 92 50000 170000 0 220000 70 93 250000 0 0 250000 71 94 235000 15000 0 250000 72 96 220000 0 0 220000 73 97 250000 381000 0 631000 74 98 220000 0 0 220000 75 99 215000 0 0 215000 76 100 220000 413000 0 633000 77 101 235000 0 0 235000 78 102 220000 0 0 230000 79 103 235000 394000 0 629000 80 105 220000 45000 0 265000 81 106 220000 45000 0 265000 82 107 220000 0 0 220000 83 108 220000 0 0 220000 84 109 220000 0 0 220000 85 110 220000 0 0 220000 86 113 250000 15000 0 265000

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86-A 114 250000 60000 0 310000 87 115 220000 0 0 220000 88 116 220000 45000 0 265000 89 123 220000 0 0 220000 90 124 220000 0 0 220000 91 126 220000 0 0 230000 92 127 220000 320000 0 540000 93 129 220000 0 0 226666 94 130 220000 0 0 226600 95 131 50000 170000 0 220060 96 132 50000 170000 0 220000 97 134 290000 55000 0 345660 98 136 225000 0 0 225000 99 137 270000 0 0 270000 100 138 270000 0 0 270660 101 142 220000 0 0 226060 102 143 235000 15000 0 250000 103 144 220000 0 0 230000 104 145 220000 0 0 220000 105 146 220000 0 0 220000 106 147 220000 0 0 230660 107 148 220000 0 0 230000 108 150 220000 0 0 230000 109 151 220000 0 411000 631000 110 152 220000 0 0 230000 111 153 220000 0 0 220000 112 154 225000 0 0 225000 113 155 220000 15000 0 245000 114 156 410000 45000 450000 905000 115 157 240000 45000 280000 565000 116 166 250000 0 0 250000 117 167 220000 30000 0 250000 118 168 235000 0 0 235000 119 169 220000 90000 0 310000 120 170 220000 0 0 220000 121 171 250000 15000 0 265000 122 172 220000 0 0 220000 123 173 250000 0 0 250000 124 174 220000 0 0 230000 125 175 220000 0 0 230000 126 176 220000 411000 0 631000 127 177 440000 191000 0 631000 128 178 220000 0 0 220000 129 179 220000 0 0 220000 130 182 440000 150000 0 590000 - 185 220000 0 0 220000 131 186 220000 0 0 220000 187 220000 0 0 220000

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132 188 220000 0 0 220000 189 220000 0 0 220000 133 190 220000 0 0 220000 191 220000 30000 0 250000 134 192 220000 30000 0 250000 Total 31665000 5470000 2507000 39592000 11. Details of Concealment of Income for period F.Y 2005-06: Here, it is pertinent to mention that as per reasons recorded dated 28.02.2013 before issuing notice u/s.148, the amount of concealment was mentioned as Rs.3,70,90,000/- (instead of Rs.3,17,90,000/-). It can be seen that the assessee had received total cash amounts of Rs.3,16,65,000/- in F.Y. 2005-06. The total Cash receipts for Sector-3 of Shrusti Raw House is arrived at Rs.3,95,92,000/-. These amounts are neither reflected in the regular books of account of M/s.Shree Ram Developers nor was explained by the assessee in spite of giving repeated opportunity. The assessee has grossly failed to prove his onus in this case and that too without any reasonable cause from preventing him to do so. It has forced me to believe that assessee is simply trying to avoid the due process of law. He knows that documentary evidences seized from the close associate of him, proves beyond doubt, the fact of unaccounted income being earned by the assessee firm. Here it is pertinent to mention that the procedural compliances as enumerated in the case of GKN Driveshafts (India) Ltd. can be strictly adhered to, only if assessee is ready to cooperate. It is his duty to make proper compliance of all the notices and the procedures involved in the present case assessee has consistently failed to do so. Thus, the total receipt of Rs.3,16,65,000/- in F.Y. 2005-06, are treated as unaccounted income of the firm for relevant A.Ys. 2006-07.” 3. On appeal before the ld.CIT(A), the assessee explained that the AO made addition of Rs.3.16 crore on the ground that seized material i.e. Annexure A/1 indicates the total money receipt of Rs.3.16 crore on sale of various plots. It was also submitted that a search was carried out at the residence of Ankurbhai Goardhanbhai Babariya who was looking after the maintenance activities of the society on 16.07.02012. Certain

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papers were seized from his residence. On the basis of which case of assessee was reopened. The notice under section 148 of the Act was not served upon the assessee firm. Since the assessee firm was not existent during the relevant assessment year, the assessment made of firm is invalid. This fact has been accepted by the Revenue in subsequent year as assessment for A.Y. 2007-08 and 2008-09 were made in the case of Jayantibhai Babariya, the purchased land and sold the plot. The assessee also objected to the assessment completed under section 144 of the Act. No construction of any plot commenced in A.Y. 2006-07 or in A.Y. 2007-08. The firm did not exist in those years. Shri Ankurbhai Gordhanbhai Babariya had explained all the facts in his statement recorded under section 132 of the Act. During the regular assessment of A.Y.2009-10, total 91 Row House owners were examined under section 131 of the Act and all of them confirmed the contract price of Rs.8.50 lakhs per the house and that they have not paid on money either for construction or for purchase of plot. The receipt for construction Row House constructed by assessee was furnished. The seized paper Annexure A/1 to A/2 was seized from the residence of Ankurbhai Gordhanbhai Babariya admitted the ownership of those documents before the authorised officer. It was also explained that land bearing

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block no.681, 744, 745, 758 admeasuring 64610 sq.mtr was purchased in A.Y. 2006-07. The final plots available after deduction of Public amenities as per Surat Urban Development Authority Regulation, the total cost to be Rs.35,85,000/-. The assessee also incurred various other developmental charges of Rs.68,45,548/-, thus, total cost project was Rs.1.04 crore. The assessee sold 549 plots of 66 sq.mtr each @ Rs.20,000/- per plot in A.Y. 2006-07 at a total consideration of Rs.1.09 crore and earned profit of Rs.5,49,452/-. During the survey proceedings under section 133A of the Act on 17.01.2006 the assessee admitted all the facts before the Income Tax Officer, Ward-9(3). It was also explained that the assessee firm was set up while partnership deed dated 01.06.2007. The assessee firm engaged in the business of construction of Row House known as Shrushti Row House at village Kasad, District Surat. The assessee entered into agreement of owners of Row House for the purpose of construction on contract basis. The assessee further stated that addition of Rs.3.16 crore was made on the ground that Annexure A/1 indicates the receipt on money of Rs.3.16 crore. Annexure A/2, A/3, A/5 and A/11 were related to the maintenance charges of Rs.31,665/- acquired by Ankurbhai Goardhanbhai Babariya for grass

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cutting. No construction activity commenced in A.Y. 2006-07 or in 2007-08. 4. The ld. CIT(A) after considering the submission of assessee noted that the addition on the basis of Annexure A/1 has been made in case of Jayantibhai Virjibhai Babariya for A.Y. 2007-08 and 2008-09 (in his individual capacity). Thus, no addition on similar amount can be made in case of assessee-firm. The ld. CIT(A) also noted that there is no material on record to establish that the assessee-firm was involved in plotting scheme and could not have any right to receive on money on the plots. In earlier survey all on money received admitted were assessed in case of individual only, thus the addition of Rs.3.16 crore is unjustified. Aggrieved by the order of the ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 5. We have heard the submission of ld. CIT(DR) for Revenue and the learned authorized representative (AR) for the assessee. The ld. CIT(DR) for the Revenue submits that he relied upon the order of the AO. The assessee during the assessment neither co-operated nor furnished any submission to explain the contents of seized material, therefore, the AO was justified in making addition of receipt of on money on the

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basis of seized material, which clearly suggests the receipt of on money. 6. On the other hand, the learned AR of the assessee submits that the firm was not in existence during the period under consideration. Since the firm came into existence only from 01.06.2007 and no assessment for A.Y. 2006-07 at the hand of assessee can be made, when it was not in existence. The ld. CIT(A) appreciated the fact and deleted the addition. The addition of subsequent assessment year is made in case of Jayantibhai Virjibhai Babariya (partner of assessee) in his individual capacity. The learned AR for the assessee submits that he has filed the assessment order passed in case of Jayantibhai Virjibhai Babariya (partner of assessee), in his individual capacity under section 143 r.w.s. 153A of the Act dated 31.03.2015 for A.Y. 2007-08 and 2008-09. 7. We have considered rival submission of the parties and have gone through the order of the authorities below. We have also gone through the various documentary evidences furnished by the learned AR of the assessee. We have noted that the AO made addition on the basis of seized documents by taking view that seized documents prima facie reflects the receipts of plot wise onmoney in coded form. And that no explanation and evidences furnished by the assessee. The

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ld.CIT(A) while deleting the addition held that there is no evidence on record to establish that assessee firm was involved in plotting of the scheme. Further, the addition on the basis of Annexure A/1 has been made in case of Jayantibhai Virjibhai Babariya for A.Y. 2007-08 ( in individual capacity vide PAN: AFHPB 0820 M). The firm was not in existence and it was formed by way of partnership deed dated 01.06.2007. 8. The learned AR for the assessee vehemently submitted before us that the firm came in to existence vide partnership deed dated 01.06.2007. Before us, no contrary evidences or material is place to show that the assessee-firm was in existence during the impugned financial year, if the firm was not in existence during the impugned financial year no assessment can be made on the non-existent (still to be born) entity. Therefore, we affirm the order of ld. CIT(A) that addition of Rs.3.16 crore in case of assessee-firm is unjustified, accordingly, grounds raised by the Revenue are dismissed for this sole reason. However, it is made clear that our observation in this case will not affect the additions made in individual capacity of partner of the assessee namely Jayantibhai Virjibhai Babariya, in subsequent assessment years, which has to be examined by lower authorities independently. 9. In the result, appeal of the Revenue is dismissed.

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Order pronounced on 8th March 2021 at the time of hearing of appeal. Sd/- Sd/- (Dr.ARJUN LAL SAINI) (PAWAN SINGH) (लेखा सद�/ACCOUNTANT MEMBER) (�ाियक सद�/JUDICIAL MEMBER) क Dated: 8th Mar 2021/#SGR Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, Surat / / TRUE COPY / /