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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI SANDEEP GOSAIN & SHRI O.P.MEENA
Page 1 of 24 DCIT, Cen. Cir.-4, Surat Vs. Anupam Organiser /ITA No.2036/AHD/2016 for A.Y. 2013-14
आयकरअपील�यअ�धकरण,सुरत�यायपीठ,सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A No.2036/AHD/2016 �नधा�रण वष�/Assessment Year: 2013-14 Deputy Commissioner of V Anupam Organiser, Income Tax, s. F.P.No.12/13, TP No.37, Central Circle-4, Surat. Nr. Bhumi Residency, Althan, Surat. [PAN: AARFA 6954 C] अपीलाथ� / Appellant ��यथ�/Respondent �नधा�रतीक�ओरसे /Assessee by Shri Rajesh Upadhyay –AR राज�वक�ओरसे /Revenue by Shri Sreenivas T.Bidari - CIT-DR
सुनवाईकीतारीख/ Date of hearing: 09.12.2019 उ�घोषणाक�तार�ख/Pronouncement on: 13.12.2019 आदेश /O R D E R PER SANDEEP GOSAIN, JM: 1. This appeal by the Revenue is directed against the order of Ld.Commissioner of Income Tax(Appeals)-4, Surat dated 19.05.2016 for the assessment year 2013-14.
Grounds raised by the Revenue read as under: “[1] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition ofRs.6,02,77,106/- on account of ‘on money’ received out of books of account made on the basis of the clinching evidences seized from the premise of Shri Jayantilal Mulchand Patel who was proved as a broker for doing sales of shops/showroom of project Anupam Square developed by the assessee. Shri Jayantilal Mulchand Patel admitted on oath u/s.132(4) of theAct that documents seized from his premise are cash and cheque payments
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receipts in respect of Anupam Square project. Moreover, there is no evidence of expenses incurred to support the claim of expenditure. The Ld.CIT(A) further erred in holding that amount depicted in diary is true net income despite the fact that there were no evidence of expenses. [2] On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. [3] 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.” 3. Brief facts of the case are that the assessee a partnership firm is engaged in the construction business. A search action u/s.132 of the Act was carried out in the case of partners of Anupam Group. The assessee’s business office premises and site office were also covered under survey action u/s.133A of the I.T.Act, therefore, assessment u/s.143(3) was completed by the AO in this case, thereby determining the total income at Rs.9,02,77,106/- after making addition of Rs.6,02,77,106/- on account of business income receipt of ‘on money’.
Being aggrieved by the order of the AO, the assessee preferred appeal before the ld.CIT(A), and ld.CIT(A) deleted the entire additions made by the AO by holding that AO made additions taking 100% purported ‘on-money’ whereas while relying upon the higher judicial authorities including the Hon'ble Gujarat High Court wherein it was held the estimation of net income from total ‘on money’ receipts is justified and since in the case of assessee, the assessee had disclosed net profit of over 30% of total unaccounted ‘on money’ receipts, therefore, while relying upon various judgment had deleted the additions.
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Being aggrieved by the order of ld.CIT(A), the Revenue has filed the present appeal before us on the ground mentioned hereinabove. The sole Ground raised by the Revenue relates to challenging the order of ld.CIT(A) in deleting the additions on account of ‘on money’ receipt out of books of account. The ld.DR appearing on behalf of the Revenue relied upon the order passed by the AO and submitted that ld.CIT(A) has erred in deleting the addition of ‘on money’ received out of books of accounts made on the basis of the clinching evidences seized from the premises of Shri Jayantilal Mulchand Patel, who was proved as a broker for doing sales of shop/show room and the project Anupam Square developed by the assessee. It was further submitted that the said Shri Jayantilal Mulchand Patel admitted on oath u/s.132(4) of the Act that documents seized from his premises cash and cheque payments receipts in respect of Anupam Square Projects. It was further submitted that there is no evidence of expenses incurred to support the claim of expenditure. It was further submitted that the ld.CIT(A) erred in holding that amount defected in Diary is true net income despite the fact that there was no evidence of expenses. It was submitted that statement u/s.132(4) of Shri Jayantilal Mulchand Patel had categorically contained that there are cash and cheque payment receipts along with the date of which the payments were made by the purchasers and the said Shri Jayantilal Mulchand Patel was broker for the Anupam Square Project and had
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booked the showrooms/shops in the said project and received 1% commission as brokerage. Even the seized papers shown sales of Anupam Square, VIP Road, Surat the sale of which was done as a broker at the sale of which was done by the said broker Shri Jayantilal Mulchand Patel and cash and cheques were received deposits in the office of Anupam Organiser. The ld.DR further submitted that calculations in respect of sale of shops/show rooms was also done in coded formats on the seized papers. In this regard, the coded writing on the seized papers, the said broker Shri Jayantilal Mulchand Patel in his statement has stated that coding of numerical is done by removing certain signs which have been details in his statement and assessee himself has admitted the total amount found during the survey was Rs.3 crores in the diary as ‘on money’ from sale of shops at Anupam Square and without deduction.
On the other hand, the ld.AR relied upon by the orders passed by the ld.CIT(A) and reiterated the same arguments as was raised by him before the ld.CIT(A). The ld.AR also relied upon the written submissions filed before ld.CIT(A) which are contained in para no.6 of its order and the same is reproduced below: “6. During the appellate proceedings, the assessee submitted the following written submission and facts of the case according to it: "1. Brief facts of the case:: The appellant is a partnership firm has carried out project for Anupatn Square at Althan, Surat. As stated by The Au a survey action was carried out at business premises of the firm
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on 27.12.2013. In the case of Shri Ashok S. Rai a search u/s 132 was conducted by investigation wing of IT Department. The appellant firm has disclosed ‘on money’ Profit of Rs.3,00,00,000/- in survey u/s 133A of the Act. The said income was offered for taxation and due tax was fully paid. I am filing here with a copy of ITR, Computation and Audited. Account for A.Y.2013-14. Books of accounts of the firm are accepted and provisions of section 145(3) of the Act was not invoked by the AO in scrutiny assessment proceedings. As there was a search in case of partner, the AO after recording his satisfaction reopened the case of the appellant firm, on following ground: " The document seized shows cash transaction, showing coded numerical "50" w.r.t. to deal with Vistar engineers. The year is not mentioned on the page. The cash transaction between Anupam Organizer & Vistar Engineers needs investigation. The partnership firm started on 31.08.2010. So case needs to be investigated from A.Y.2011- 12 to A.Y.2013-14" After reopening the assessment the AO has completed the same for A.Y.2011-12, A.Y.2012-13 and A.Y.2013-14. In first two years there was no addition but in A.Y.2013-14 he made addition of Rs.6,02,77,106/-, entirely on admission of Mr. Jayanti Mulchand Patel and newspaper found from him in search by the Department. He has also initiated penalty proceedings u/s 271(1)(c) of the Act. are the subject matter of appellant's appeal to be decided by your judicial honor for which the appellant firm has raised six grounds. Each ground is argued in following manner. 2. Ground No. I:: Issue of notice u/s 153C r.w.s. 153A and a notice u/s 143(2) of IT Act:: Ld. ACIT has intentionally nothing stated regarding his notice issued u/s I53C r.w.s. 153A of the Act. In case appellant's case was scrutinized only because of the fact that there was a search in the case of Ashokkumar Sadanand Rai, one of the partners of the firm. I am enclosing here with the copy of satisfaction note dated 23.09.2014. Reason given by the AO is already reproduced by me at para 7. In the said reason there is nothing regarding statement and evidences found from Shri Jayani Mulchand Patel is stated. I am also enclosing here with a statement of partners of the firm recorded during survey u/s 133A of the Act. A statement was recorded on 29.12.2012 at 3.00p.m. Survey was conducted by a team of investigation wing of IT Department, Surat. A search, at residential premises of Jayati Mulchand Patel was completed on 28.12.2012 i.e. prior to start survey at appellant's business premises. Not a single question was asked or any evidence shown to the partners of the firm in survey proceedings. Ld. ACIT has also not recorded his satisfaction w.r.t. evidences found from Shri Jayanti Mulchand Patel. A disclosure made in survey was shown by the appellant firm in it's Return of Income-for A.Y.2013-14. The same is also accepted by the ACIT after making deep scrutiny of the case. He stated, in para 1 of assessment order that a notice u/s 143(2) was issued on 05.09.2013. In the said para he has also stated that ROI was filed on 13.09.2013. There is no notice u/s 143(2), after filing of return by the appellant. If is a departmental practice based on CBDT circular No. 06/2014 dated 02.09.2014 that when disclosure is fully shown in the return and payment of taxes are made, such cases should not be taken for scrutiny assessment. Considering all
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these facts assessment made by the AO u/s 143(3) r.w.s. 153C) is illegal and needs to be quashed. 3. Ground No. 2:: Violation of principal of natural justice:: The appellant has submitted, in assessment proceedings that Mr. Jayanti Mulchand Patel is not their broker but was only one of the customers in respect of office No.5 in Anupam Square, Surat. The firm has also stated that they have not sold any single unit through him. He was. not authorized to collect payment. He has not shown- any brokerage income received from appellant firm in his return of income prior to search at his premises. He is in no way connected with the firm except one of the buyers of an office. Statement made by him in his alleged affidavit was challenged on factual grounds. The appellant has also submitted a list of buyers including Name, Address, PAN, date of booking office/shop/show room purchased by them, consideration fixed as well as details of payments received from them. The Ld. ACIT, Cc - 4, Surat has issued summons to all the buyers and he either collected required information or may have recorded their statement. He has not given cross examination of Shri Jayanti Mulchand Patel though his affidavit, evidences found from him and his version was challenged in assessment proceedings. Ld. A>CIT has also not recorded outcome of his inquiries u/s 131, nowhere in assessment order. He has not written a single word in this connection, in his order. It is respectfully submitted that Shri Jayanti Mulchand Patel has also retracted his affidavit later on. An intention for all such act and omission on the part of the id. ACIT is to make heavy assessment only on presumptions and arithmetic calculation. Such order needs to be quashed only on the ground of violation of principal of natural justice, without going into the merits of the case. 4. Ground No. 3 arid 3.1:: Case on Merits :: The appellant firm is maintaining regular books of accounts. Books are audited and also submitted several times in assessment proceedings. Audit report was also placed on record. Income disclosed in survey was also accounted for in regular books of account. The AO has not pointed out any discrepancy in the books of accounts for F.Y.2012-13. Therefore he has accepted the books and provisions of section 145(3) was not invoked. Therefore his addition of Rs.6,02,77,106/- is not valid in law. 4.1 : Let me go through the assessment order where in the AO has entirely decided the issue on the basis of statement and evidences pertains to the case of Jayanti Mulchand Patel. Pg- Para Contents No. 7 1 to 3 General facts regarding the case 2 to 7 4 to Fact regarding survey at residence of Jayanti Mulchand 4.3 Patel on 28.12.2012, his statement u/s 132(4), ann. BS- 12, BS-1, BS-6, code No. in dairy found from him etc. were made basis for addition in appellant's case without offering cross examination.
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7 & 8 5 Affidavit of J.M. Patel is self serving cannot be relied upon without offering adequate opportunity. The appellant has rebutted contention of J.M. Patel through reply dated 16.02.2015 to the ACIT in assessment proceedings. Shri J.M. Patel himself-has retracted his version made in affidavit.
8 6 A small dairy impounded in survey from business premises of appellant. Total amount, as per dairy is offered in return for A.Y.2013-14 and ACIT has accepted the same. 9 to 11 7(a) to These are the details of sales submitted by the appellant (e) along-with Name, address, PAN, and Copy of sale deed. The AO has also issued summons to all buyers. None of them have accepted the fact stated by Jayanti Mulchand Patel. Sale deeds are as per the rates fixed by the government. 11 & 8 Imaginary arithmetic working of ACIT based" on seized 12 document collected from Jayanti Mulchand Patel on presumption and surmises. It has no evidentiary value.
13 to 7.1 to Again the ACIT has heavily relied on statement of Jayanti 18 8 M. Patel as well as evidences found from him and his statement u/s 132(4) dated 27.12.2012. It is settled law that statement of third person is not binding upon the appellant. The ACIT has paste one page and three pages from pocket dairy found from appellant in survey, on page 8 and on page 18, respectively, of his assessment order. This is a very strong evidence in favor of the appellant as there is no matching of handwriting, date and other items on which reliance is placed by the appellant. The AR of the appellant has stated to the AO to send BS-12, BS-6, BS-1 to the handwriting expert in order to arrive at the actual position that who has written it? 19 & 9 Even otherwise, the AO's presumptions and calculations 20 are accepted as truth, (in fact it is false and imaginary), he worked out gross receipts of ‘on money’, which can never be accepted as income chargeable to tax. The appellant has correctly disclosed income as per impounded pocket dairies found from the appellant in survey. Three pages are reproduced by the ACIT on page 20 of his order. 20 & 10 Only arithmetic calculation based on statement and 21 evidences found from Jayanti Mulchand Patel. Ld. ACIT has worked out additional income only on the version of Mr. J. M. Patel.
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In light of above it is very clear that the AO has made assessment only on the basis of version of Shri Jayanti Mulchand Patel. Three annexure found from him during search at his premises. Ld. ACIT has considered the same as the only truth and rejected all other evidences brought on record in assessment proceedings. 4.2 The ACIT presumed that the said Jayanti Mulchand Patel has worked as one of the brokers of the appellant for doing sales of shops/show rooms of project 'Anupam Squere' of Anupam Organizer. He has also stated that Shri Jayanti id Patel has received 1% commission from Anupam Squere. 4.3. TheACIT has relied on several loose papers namely page no. -73-, back of page no. -73- and -74- of Annexure BS-12 seized from the residence of Jayanti Mulchand Patel. He stated that these pages are related to the appellant. He has reproduced scan copy of these loose papers on page -3- of assessment order. In fact, the said documents cannot relied due to following reasons- (i) It has neither found from the business premises of the appellant firm in survey nor found from the residential premises of the partners of the appellant's firm during search. (ii) There is no indication of name, address, receipts, payment etc. on the said loose papers. (iii) It has not been prepared by the appellant firm or any of his partners. It has not been written by the partners of the firm or his employee. (iv) Shri Jayanti Mulchand Patel is not a broker for the appellant firm, but, only one of the customers who purchased show room No. 6 on 4th floor of Anupam Square building. The appellant has not paid any brokerage to him. Lr. ACIT has not assessed any income u/s. 69C in respect of brokerage expenses paid to the said Jr-MtsSotel 4n Assessment for A.Y. 2013-14, which- was completed u/s. 143(3). Meaning thereby, Shri Jayanti Mulchand Patel is not a broker of the appellant firm. He has also admitted the said fact on oath. Copy enclosed. The AO has issued notices u/s. 131 of the Act to almost all buyers of the show room in Anupam Square during the course of assessment proceedings in the appellant firm. None of the buyer has accepted the fact that they have purchased their premises in Anupam Square through Jayanti Mulchand Patel. The said Jayanti Mulchand Patel has also not shown any brokerage income in his ROI. (v) Lr. ACIT has tried to match figures of table with that of arithmetic calculation of loose paper namely page 73-74 of BS-12. But, the same is also not completely matched. I am pointing out few discrepancies which are listed hereinunder: a) In the table, details and description of 8 units are appearing. However, on Page 73-74 as extract, 7 arithmetic calculations are there. Because item no. 4 is a repetition of item no. 7. b) In calculation of 3rd-3, a numeric figure 45,46,000/- is appearing which is nowhere in the given table. c) In calculation of 3rd-3, brokerage 70,000/- is there. The same is also nowhere appearing in given table. If it is a brokerage figure than version of Jayanti Mulchand Patel that he is getting 1% brokerage is false.
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In the table, the 3rd item is 3rd floor Show room - 3, in the last column i.e. in column no. 7, a numeric figure of 75460=00 has been appearing. As per the interpretation of the AO, it should be 75,46,000/-. How the treatment is given by the AO, in his order, is not clear. Meaning thereby, the AO has adopted peak and choose method i.e. where numeric figures are as per his expectation, he has interpreted the same accordingly. Where numeric figures are not upto his expectation, the same were ignored or avoided or interpreted otherwise. d) In the given fable at 1st item, as per AO amount receivable is 54,878=40 and amount received is 56620=00, which is not possible because no buyer would make more payment than what is payable and i.e. also towards cash. e) In the given table at 2nd item, as per AO amount receivable is'25,647=66 and amount received is 27468=00, which is not possible because no buyer would make more payment than what is fixed to pay and i.e. also towards cash. f) In calculation of 2nd-8, brokerage 30,000/- is there. The same is also nowhere appearing in given table. If if is a brokerage figure than version of Jayanti Mulchand Patel that he is getting I % brokerage is false. g) In the given table at item no. 3, as per AO amount receivable is 45,118=98 and amount received is 75460=00, which is not possible because no buyer would make more payment than what is fixed to pay and i.e. also towards cash. h) In the given table, at item no. 4, details of show room no. 6,7 & 8 is appearing. If AO's finding are considered than cost of it should be 54,56,000, 54,87,800 & 25,41,600 respectively. The same is nowhere matched with the numeric figures mentioned in the table. Further, total amount receivable and received are also mismatched. j) In the given table, at item no. 5th, two numeric figures 7000=00 and 18000=00 are mentioned. And alphabetic words OK is also appearing. As per AO, the sale consideration of the said show room should be 25,00,000/- including On-money. k) In calculation of 2nd-8, 25,41,600/- and 2,04,900/- are not found in the table. There are also more facts coming out from these papers, but, only few are mentioned hereinabove. 4.4 Lr. ACIT has further tried to establish nexus of loose paper found and seized from Shri Jayanti Mulchand Patel and his statement u/s. 132(4) recorded during search af his premises. These papers are elaborately mentioned as Annexure BS-1, Page -1-, Annexure BS - 6, Page -5-, Annexure BS - 6, Page -1- and Annexure BS - 6, Page -4- on Page No. -4- and -5- of his assessment order. It is respectfully stated that these are the seized material found from Shri Jayanti Mulchand Patel af his premises. It has not been written by the appellant firm,
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any of his partner or employee. There is no name, address, mode, of payment, nature of payment etc. are written on it. It appears that on certain pages there is only arithmetical calculation. No name of the appellant firm or its project is found. Above all any statement given by Mr. Jayanti Mulchand Patel is to be binding upon him and not it. Cross examination of the said Mr. J. M. Patel is also not allowed. Interpretation and explanation offered by Mr. Jayanti Patel cannot be thrust on the appellant firm. 4.5 On the basis of Annexure BS-6 Page -4-, the AO arrived at a conclusion in para 4.2 of his order that total cash of Rs. 31,00,000/- + 4,00,000/- i.e. 37,00,000/-. He further stated that the portion of cash amount was 38,73,740/- . At many places he has stated that the explanation of seized papers given by Jayanti Mulchand Patel for numerical figure is 5000=00 or 5000/= means Rs. 5,00,000/- for cash transaction. However, for chaque transaction, there is no coding system. If the said explanation is correct than last numeric figure mentioned on Annexure BS-6 Page -4- should read as 373774000 instead of Rs. 3,73,740/-. But the AO has taken the figure as 3,73,740/- because of his own convenience. Thus, on one hand the AC has explanation regarding coding system given by Mr. Jayanti Mulchand Patel and on other hand, he has taken different view or interpretation of his own will and wish. 4.6 In para 4.3, the AO has stated that Annexure BS-1 Page 2-3 were seized from residence of Jayanti M. Patel. The said page is not written by the appellant or any of his partner or employee. Though he may have stated that he has played the role of broker, but, his version is not proved by any corroborative evidences. It is also hard to believe that no prudent man can carry out risk and liability of huge cash amount on his own solders for merger income of 1%. In fact, the appellant firm has not received any cash or chaque payment from Mr. Jayanti Mulchand Patel.; The partners of the appellant firm are well experienced in the line of business and had sold all units in their project of Anupam Square to the respective buyers. The ACIT himself has given list of such buyers, list no. 7, Page 9,10& 11 of his assessment order. None of the buyer has admitted the fact that they purchased their shop or office or show room through shri Jayanti Mulchand Patel. 4.7 (i)As stated by AO Mr. Jayanti Mulchand Patel was summonsed u/s. 131 of the I.T Act during the course of assessment proceedings. It is not stated that in whose case, he has been summonsed. I am filing herewith a copy of AC's show cause notice dated 06.02.2015. In para 3, page 6, he has stated that Mr. Jayanti Mulchand Patel was directed to give details regarding (a) his role in transaction with party,, (b) details of owner and sales value, (c) receipt of cash by Anupam Organizer i.e. name and address of the person from whom cash is received and to whom it was paid, and (d) details of commission income earned by him for the sale of show room at Anupam Square Project. (ii) On going through the said affidavit, if is respectfully stated that he has filled for Page -1- of Annexure BS - 1, which may be item no. 1 and item no. 6. Scan copy of page 1 is available on page 4 of assessment order, however, item 6 is nowhere available either in assessment order or in show cause notice. Secondly, in affidavit, there is an indication of page no. 73-74 of Annexure BS-12. Mr. Jayanti Mulchand Patel has not admitted anything regarding other seized loose papers on which the AO has relied on. Thirdly, at Sr. No. 1 to 5, Mr. Jayanti
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Mulchand Patel has given the details of payment but, there is nothing in the said affidavit which indicate that the respective buyers have made payment to him and in turn total payment (chaque and cash) are wholly rotate through him. The ACIT has made so many presumptions while framing assessment order. In law, the facts cannot be presumed. The said Mr. Jayanti Mulchand Patel himself has stated that he purchased show room no. 5 of 4th floor, Admeasuring 1240'sq. ft. for Rs. 17,12,600/-. He further stated on own that he has made total payment through chaque and there is no cash transaction for the said purchase. He has also admitted that He does not have any kind of other relation with the firm namely M/s. Anupam Organizer or its partners. The AO has incorrectly stated at Sr. No. ii Page 13 that Mr. J. M. Patel is associated with the partners of the M/s. Anupam Organizers. 4.8 In para 6, page 8, the AO has reproduced scanned page of a diary found from the premises of Anupam Organizer in Survey proceedings. He has also admitted and accepted the fact that the firm has disclosed Rs. 3,00,00,000/- being on-money profit and has shown in its return of income for A.Y. 2013-14. The firm has also made1 the payment of tax of the said sum and thereby profit is offered for taxation. 4.9 In para 7, page No. 9, 10 & 11 of assessment order, the AO has stated details of gross receipts shown by the appellant in his regular books of account. 4.10 In para 8, on page no. 11, the AO has given table in which total amount as well as cash amount and cheque amount are bifurcated by him as per his own convenience and requirement. Further, such calculation is based on loose paper found from the premises of Mr. J. M. Patel. It is pertain note here that the assessment was made u/s 143(3) of the Act and not u/s. 153BC r.w.s. 153A of the I.T Act. Therefore, arithmetic calculation made by him is not binding upon the appellant firm. There is no corroborative evidence record that the appellant firm and/or its partner have received Rs. 3,44,19,004/- including cash payment of Rs. 1,98,03,894/-. Secondly, in the given table it appears that the AO has presumed rate per sq. ft. at Rs. 3,932/- and 4,124/- on 2nd floor and Rs. 4,401/- on 4th floor. Likewise on 3rd floor, he took different rates of 3,328 and 3,708/-, which is not and never possible. In actual practice also the rates on higher floors are lower than the rates on lower floor. On the basis of numeric figures, he has tried, to work out cash and chaque portion in para 6 on Page 12 of his assessment order. He himself has presumed chaque and cash portion in the ration of 20:80 for ground floor shops for which there is no evidence on record. Likewise, for 1st floor, he presumed chaque and cash proportion in 35:65 ratio for which also there is no evidence with him. Likewise, on other floor, he has calculated such ratio which has no nexus with the actual business of the appellant firm. In light of above factual aspects there is no merits on imaginary additions made by the AO. 5. The AO has made proposal to invoke section 69A in respect of Rs.7,41,19,985/- being unexplained money/ concealed business income, on the basis of material seized from third party i.e. shri jayanti Mulchand Patel. Here also Ld. AC is legally not correct, looking to following statutory position of law.
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5.1 section 69A :: unexplained money etc. :: "69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.". 5.2 Thus, for invocation of section 69A following conditions are required to be fulfilled. (i) in any financial year immediately preceding the assessment year the assessee has made investments; (ii) Such investments are not recorded in the books of account, if any, maintained by the assessee for any source of income; (iii) the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory. If aforesaid conditions are cumulatively satisfied, then only, investments etc. can be taxed under deeming provisions of section 69A of the Act. Further, initial Onus is on the department. Reliance is placed on Hon'ble Hyderabad IT AT in D. Rajkumar & Co. Vs. ITO (022 ITD 0089). Copy of full judgment enclosed. 5.3 In the case of the appellant, extensive search was carried out by the department at residential premises of all partners of the firm. Simultaneously, business premises of the firm were also covered u/s 133A of the Act by the Investigation Wing. No unaccounted cash, stock, jewelry, investments or any other assets belonging to the firm were found from the premises of the firm. Merely because, there were certain interpolations on a piece of paper/s, being part of the ceased diary, the same could not be held to be the unexplained investment or income earned by the assessee firm or its partners or the concern in which they held interest. Thus, invocation of Section: 69A is arbitrary and illegal. 6. Addition made by the AO for Rs.6,02,77,106/- is also not justifiable due to following reasons :: In para 8 & 9, from page no. 17 to 20, the AO has discussed the fact of survey at the business premises of the appellant firm in which the firm has declared On-Money profit, in order to co-operate with the department. Though the AO was not agreement in such disclosure on film-icy ground, but ultimately, he has accepted the same, that can be seen from para 11 of his assessment order. In this para, he has given computation of income under the head Business. While computing such income, he has deducted Rs. 3 crores being net profit earned on receipt of On-Money declared in survey. Thus, the stand of the AO'is contradictory. On one hand, he is disputing and doubting disclosure made by the appellant firm and on other hand, he is accepting such disclosure, while finalizing assessment u/s. 143(3). The search party has recorded a statement of partners of firms of Anupam Group, during survey on 29.12.2013. The relevant question and answer of the said statement are reproduced hereinunder: "16. I am showing you the diaries Bl/l to BI/7, where
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entries were shown in different pages as 20000=00 with dates. Please indicate what these entries indicates? Ans. There is no meaning of = sign in these entries and the entire figure along with = to sign indicates the whole figure of the amount received by usr Further, I am clarifying that suppose the entry in diary No. Bl/l in Page No. 2 dated 30.09.2012 indicates Rs. 20,00,000/- (twenty lacs) and accordingly all the entries should be read. 17. Whether all these amounts received by you is reflected in your books of accounts or not and if reflected in what accounts you have credited these amounts and produce ledger copy of the same for verification? Ans. No, because these amounts are profit earned On-money receipts of our different projects indicated in each diary. We usually maintain these entries in the" form of diaries to prevent any misunderstanding between our partners and also to update other partners about the progress of the project executed by each partner in which he is in-charge. 18. If the same ratio as explained in your answer to question no. 16. If taken as a base in all the seven diaries found in your premises contains the following amounts which are enumerated as below. Whether do you agree with the totaling of the entries made by us or not? Annex. Bl/l Anupam Shrushti Rs. 50,00,000/- Annex. BI/2 Anupam Hights Rs. 2,00,00,000/ Annex. BI/3 Aishwariya Greens Rs.1,00,00,000/- Annex. BI/4 Ananya Vihar Rs. 50,00,000/- Annex. BI/5 Ocean Drive Rs. 3,50,00,000/- Annex. BI/6 Anupam Square Rs. 3,00,00,000/- Annex. BI/7 Anupam City Rs. 1,50,00,000/- Ans.. Yes, I agree with the dates and amounts mentioned in the above seven diaries and I have also consulted my partners who are in-charge for the respective projects and they have also confirmed the same. 19. As per the above diaries the total profit on on-money receipts indicated by you comes to Rs. 12 croresin seven projects executed by you and your group concerns. As you have already clarified vide your answer to question no. 17 that these receipts were not entered in to the regular books of accounts nor you paid any advance tax on these receipts as on date why the same should not be considered as your unaccounted profit on the above mentioned projects, please clarify? Ans. As J already agreed in my answer to questing no. 17, these amounts were not entered in my books of accounts nor I paid any tax on these amounts. Hence, I voluntarily offer the amounts totaling to Rs. 12 crores (twelve crores rupees only) along with my partners in respective firms as our unaccounted net income and on the same I and my partners would not claim any expenses thereof and we agree to pay the due taxes to the government in the financial year 2012-13 relevant to A.Y. 2013-14. In confirmation to this myself and my partners will abide this statement and they will confirm the same through their respective signature in this statement."
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6.1 In light of above submission, arithmetical working made by the AO in para 10 on page 20 and 21 of assessment order is not acceptable and it is strongly objected. If is very humbly stated that On-Money receipt of Rs. 9,02,77,106/- is based on a statement and loose paper found from Jayanti Mulchand Patel. The same could not be binding upon the appellant firm being a third person. Secondly, the assessment was made u/s. 143(3) and not u/s. 143(3) r.w.s. 153C of the Act. There is no evidence that any cash amount was passed upon the appellant firm. Thirdly, the same AO has accepted net On- Money profit in case of 6 firms of Anupam Group, however, in the case of appellant firm i.e. Anupam OrganizerfAnupam Square Project), he is not ready to accept additional income declared in survey being profit on receipt of On- Money. Such contradictory stand is not allow in the matter of Income Tax Assessment. 6.2 Without prejudice to above arguments in alternative, it is respectfully submitted that the AO has worked out gross On-Money receipts at page no. 21 of assessment order at Rs. 9,02,77,106/-. The AO wanted to tax entire gross receipts, which is also not legal considering one view taken by search party during their search operation at residence of partners and survey operation at business premises of various firms. A statement on oath was also recorded by them during the course of their action. From the said statement, if can be seen that income tax is to be charged only on net income/net profit even in the case of undisclosed income or receipts. Further, the said view is also supported by end number of judgments. Few of them are listed below: a. CIT vs Gurubachhan Singh J. Juneja [2008] 302 ITR 63 (GUJ.) b. CIT vs. Samir Synthetics Mill [2010] 326 ITR 410 (GUJ.) c. CIT v. President Industries [2002] 258 ITR 654 (Guj.) d. Dy. CIT vs. Panna Corporation [2012] 74 DTR 89 (Guj-HC) e. CIT vs. Balchand Ajit Kumar [MP HC] 263 ITR 610. f. CIT vs. Samir Synthetics Mill [2010] 326 ITR 410 (Guj) g. CIT vs. President Industries (Guj HC), 258 ITR h. Mohan Sadhani Vs. CIT 304 ITR 52 (MP) i. Agrawal Motors Vs ACIT68 ITD 407 (Jab), j. Sharda Real Estate Pnt.Ltd., ... vs A CIT, Ujjian (Judgment dated 21 August, 2012) ITAT, Indore Bench I.T(SS).A.Nos. I l l , 112 & 189/lnd/2012 A.Ys. : 2006-07, 2007-08 & 2008-09 k. Jay Builders VS. ACIT Tax Appeal No. 255 of 2012 [Guj-HC]: In this case, the honorable jurisdictional HC has held that where Tribunal accepted the contentions of the assessee that not the entire "ON-MONEY" received but only the profit element could be taxed in its hands limited the addition to 15% of the on - money receipts, no further examination at the end of the assessee is called for. Very recent judgments of Hon'ble Ahemedabad ITAT (full judgment) is attached for your perusal and reference. Considering above submission and settled legal position, your judicial honor is : prayed to allow appellant's appeal and oblige."
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We have heard Counsels of both the parties and we have perused
the material placed on record as well as the judgment cited by respective
parties. Before we decide the merits of this ground, it is necessary to
evaluate the order passed by the ld.CIT(A). The ld.CIT(A) has dealt with
this ground in para no.5 to 8. The operative portion is contained in para
no.8.3 to 8.3.1 and the same is reproduced below:
“8.3 Before, I venture into deciding the issue; I would like to discuss some background of the case. A survey action u/s. 133A of the IT Act was carried out in the main office premise of Anupam Sub-group at U-12, 13, 14, 15, - Navmangalam Complex, City Light Road, Surat. During the course of it, 7 (seven) small pocket diaries were recovered from the premise, from the cabin ~of~SPirr Ashok kumar Sadanand Rai. These were confronted to him in statement taken u/s. 132(4); and he admitted that these represent net profit on from 'on-money' receipts of different projects of the group, not recorded in the regular books of account and was net earnings after all expenses. The relevant portion of the statement is part of the submissions of the appellant; reproduced earlier in this order. The undisclosed/unaccounted net income accepted for different firms and projects, duly confirmed by other partners and based on different seized diaries is as under: Sr. No. Name of the Name of the project Pages Total concern Bl-l Anupam Anupam Shrushti 1 & 2 Rs. 50,00,000/- Enterprise BI-2 Anupam Anupam Heights 1 & 2 Rs. 2,00,00,000/- Infrastructure BI-3 Aishwarya Aishwarya Greens 1 & 2 Rs. 1,00,00,000/- Corporation BI-4 Ananya Ananya Vihar 1 & 2 Rs. 50,00,000/- Corporation B1-5 PNG Developers Ocean Drive 1 to3 Rs. 3,50,00,000/- BI-6 Anupam Anupam Square 1 & 2 Rs, 3,00,00,000/- Organizer BI-7 Sai Vihar Anupam City 1 & 2 Rs. 1,50,00,000/- Corporation Total Rs. 12,00,000,000/-
The unaccounted incomes accepted were duly disclosed in the returns filed subsequently in all the cases. Except in the case of the appellant firm, the incomes as disclosed for the firms/projects have been accepted in toto by the Assessing Officer (who without making any addition to the returned income has only changed the head of income to income from other sources, citing lack of
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substantive evidence in support of receipt of such 'on-money') without a rupee "O of addition on account of ‘on-money’. 8.3.1 Having discussed the background, and after considering all the material facts, the following pertinent observations are made: a) I agree that there is sufficient evidence in the case of Shri Jayanatilal Mulchand Patel, in the form of documents and his statement u/s. 132(4), confirmed again by way of an affidavit; to hold the transactions in the property as true, for determining his total income. This is so because the documents were seized from him, presumption u/s. 132(4A) is also available in his case and his statement also goes against him. b) However, I also agree .with the appellant that in its case the onus on the department is much more, and clinching corroborative evidence of the transactions as depicted in the documents seized from third person being true, is required. c) It is noteworthy that the department has failed to prove that Shri Jayantilal Mulchand Patel acted as a broker from independent sources, failed to recover any document depicting the transactions as such, despite of search and survey proceedings in appellant's case. The statement and affidavit of Shri Jayantilal Mulchand Patel has been used without affording opportunity of cross examination. On the side of the department's case, there is admitted proof that the appellant was indulging in taking 'on- money' outside books of account and also sort of circumstantial evidence in the form of cheque payments as per- documents seized from Jayanatilal matching exactly Shop/Office number wise with the payments appearing In the books of account of the assessed However, without deciding the evidentiary value of the documents seized from Jayanatilal and his statement/affidavit; in light of the observations above; I have mined the case from a different angle. Clearly, the assessee and the department have accepted that the diary (BI-6) found and impounded from appellant's premises; depict income from 'on- money' receipts and the AO has deducted the amount disclosed from the total addition of Rs. 9,02,77,106/-. As discussed in para 8.3 earlier, 7 (seven) small pocket diaries were recovered from the premise, it was admitted that these represent net profit on from 'on- money' receipts of different projects of the group, not recorded in the regular books of account and were net earnings after all expenses. The unaccounted incomes accepted were duly disclosed in the returns filed subsequently in all the cases. Except in the case of the appellant firm, the incomes as disclosed for the firms/projects have been accepted in toto by the Assessing Officer (who without making" any addition to the returned income has only changed the head of income to income from other sources, citing lack of substantive evidence in support of receipt of such 'on-money') without a rupee of addition on account of 'on-money'. Now, in as many as six cases the department did not find that any income from 'on-money' has been earned over and above that depicted in the type of diaries,
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which were found maintained separately for each project/firm. The appellant and all the other six assesses have been consistent in their submission that these diaries represented income from 'on-money' of these-projects net of all expense. In such circumstances, It is hard to believe that the seventh diary (Bl- 6) would contain only part of the actual net income from 'on-money'. I would like to make the following pertinent observations in this regard: 1) The receipt of incomes depicted in the diary (BI-6) are from 22.07.2012 to 10.12.2012; 2) Page 73 of annexure BS-12, seized from residence of Shri Jayanatilal, which contain summary of all the purported transactions; has clearly been made between 26.08.2012 and 30.10.2012. This can be seen from the dates of cheques recorded. Looking to all these, even if the documents seized from Shri Jayantilal along with his statement, were taken to be evidence against the appellant (without prejudice to my not deciding this aspect) for argument sake; the net income must have come into the transactions of net income as accepted from the first statement itself during the course of survey and as depicted in diary BI-6. The AO has taken 100% of the purported 'on-money' receipts as income, whereas the higher judicial authorities including the Hon'ble Gujarat High Court have held in many cases that the estimation of net income from total 'on-money' receipts is justified. The gist of the judgment of the Hon'ble Gujarat High Court in the case of Panna Corporation 74 DTR 0089 is as follows: "Whether entire receipt on account of on-money could be taxed in the hands of the assessee or only the income embedded in such receipt—Assessee, partnership firm received ‘on money’ of Rs.62 lakhs during the block period for sale of the flats, which the Assessing Officer brought to tax—Tribunal did not permit the revenue to collect the tax on the entire receipt believing it was only the income embedded in such receipt which can be subjected to tax—Held, consistently, this Court and some other Courts have been following the principle that even upon detection of ‘on money’ receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves—If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation." In the case of ITO vs. Saikrupa Construction Co. 13 SOT 459 (Mum), the Mumbai bench of the' Hon'ble ITAT has held that This is a case, where regular books of account are not maintained. The AO proceeded on the basis of papers found during the course of survey. Such papers apparently are not complete record of the income or expenditure of the assesse. Therefore, the total income cannot be properly calculated on the basis of such papers. In our view, the Id. CIT(A) has y directed that the profits of the assessee's business as a builder should be estimated by applying net profit rate of 15 percent of the total consideration as per the sale agreements and also on the ‘on money’ received by the assesse. We, therefore, confirm his order for all the four assessment years. In the case of Dhanvarsha Builders and Developers P Ltd. vs. DCIT 102 ITD 375 (Pune), --. "However, the undisclosed income detected as a consequence of
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search cannot be taxed in its entirely in the assessment year relevant to the previous year in which search was conducted, but on the method of accounting followed by assesse - There being no elaborate discussion on the point, matter remanded for determination of year of taxability keeping in view the method of accounting followed by assesse" It has been further held that "The receipt of 'on- money' is an objective fact. However, the income is a legal concept, which has to be arrived at after considering various other aspects such as: expenditure and the year of taxability. A businessman cannot be expected to know about all these matters. Such matters cannot be ignored in making assessment even if a confessionary statement is made. Therefore, after having fixed the quantum of 'on-money' the questions of computation of income and the year of taxability of such income remain open even in spite of the confessionary statement. On application of correct principles of law, only a sum of Rs. 14.74 lakhs is taxable against the confessed amount of Rs. 48.95 lakhs. (Para 6.3)"
If the ratio were applied, than even by the AO's working of total 'on-money income of Rs.3,00,00,000/- as disclosed by the appellant during the course of his statement u/s. 132(4) and in the income tax return is held to be a fair amount of income (net profit of over 30%) from such total receipts. Therefore, I hold that in the totality of all facts and circumstances, the amount depicted in the diary Bl- 6 is the true net amount of income from 'on-money' receipts, earned out of books of account. No further addition is justified and the addition of Rs. 6,02,77,106/- as made by the AO is directed to be deleted.” 8. After having heard the Counsels at length and perusal of the facts placed on record, we find the ld.AO while making the additions had basically relied upon the some loose documents seized during the survey at the residence of Shri Jayantilal Mulchand Patel, statement recorded u/s.132(4) of the Act and affidavit dated 04.02.2015 for coming to the conclusion that said person acted as broker for assessee and entries represented in the said seized documents are actual transactions. Apart from above, the AO also relied upon small diary impounded at the office of the assessee and noting therein, wherein acceptance of income of Rs.3 crore over and above declared in the books of accounts to hold that assessee had accepted taking ‘on money’ on sales. The ld.AO treated
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the cash portion mentioned on the very documents as true figures of ‘on money’ receipts of the shops/offices of the assessee and treated the entire ‘on money’ receipts so worked out as the net undisclosed income of the assessee and thus while giving credit of Rs.3 crores already accepted as unaccounted income, had made the additions whereas on the contrary the assessee contested the additions by submitting that the documents seized during the survey at the residence of Shri Jayantilal Mulchand Patel cannot be relied upon as he is a third party and no addition can be made on the submission of the third party without corroborative evidence. It was further submitted that the statement of third person and his affidavit as wrongly been relied upon without giving an opportunity of cross examination to the assessee, even though, assessee had sought permission for cross-examining of the said third person. Apart from that assessee also took a specific stand that the entire ‘on money’ receipt in such a case cannot be taken as net income and in this respect as relied upon various judicial decisions to claim that only a part of the gross receipts in form of unaccounted sale money received can be taxed as real income. The assessee has also taken a specific stand that Shri Jayantilal Mulchand Patel was never its broker and was rather a purchaser of only one property.
After appreciating the entire facts and circumstances of the case, we also find that it is an undisputed fact that survey action u/s.133A of
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the Act was carried out at the office premises of Anupam Group wherein during the course seven small pocket diaries were recovered from the premises. And the same were confronted by recording statement of u/s.132(4) of the I.T.Act wherein it was admitted that these represents net profit from “on money receipts” or different purchases of the group which were not recorded in the regular books of accounts and was net earnings after all expenses. The unaccounted income accepted by the assessee was duly disclosed in the returns filed subsequently in all the cases, except in the case of assessee firm, the income as disclosed for the firms/projects has been accepted in-toto by the AO.
From the material on record, we also find that there is sufficient evidence in the case of Shri Jayantilal Mulchand Patel in the form of documents and statement u/s.132(4) of the I.T.Act which confirm that the transactions in the property as true for determining his total income. Even the presumption of correctness is attached with the statement so recorded u/s.132(1)(a) of the I.T.Act which has not been rebutted or uprooted by the assessee.
At the same time, the Revenue/Department has also failed to prove that the said Shri Jayantilal Mulchand Patel acted as a broker by leading any independent evidence, and failed to recover any documents depicting the transactions as such. The statement and affidavit on Shri
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Jayantilal Mulchand Patel has been used by the Revenue without affording an opportunity of cross-examination to the assessee.
While considering the entirety of the facts, the ld.CIT(A) had rightly concluded that without deciding the evidentry value of the documents seized from the said Shri Jayantilal Mulchand Patel and statement or affidavit for examining the case from a different angle. The ld.CIT(A) rightly relied upon the judgments as mentioned in his order which has already been reproduced above and held that even if the ratio were applied, even then the AO’s working of total ‘on money’, the net income of Rs.3 crore as disclosed by the assessee during the course of his statement u/s.132(4) of the Act. And, thus, in this way Income Tax Return already filed by the assessee was rightly held to be a fair amount of income as taking the net profit of Rs.30% from such total receipts, therefore the ld.CIT(A) rightly concluded that in the totality of all the facts and circumstances, the amounts depicted in the diary even if taken to be true, the net amount of income from ‘on money’ receipts, earned out of books of accounts. Even then, no further additions are justified and thus rightly deleted the additions. We are also in agreement with the decision of the higher judicial authorities including that of jurisdictional Hon'ble Gujarat High Court wherein it was held in the case of Panna Corporation 74 DTR 0089 wherein it was held that the estimation of net income from total ‘on money’ receipt is justified and it was further held by the Hon'ble Gujarat High Court that “whether entire
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receipt on account of on-money could be taxed in the hands of the assessee or only the income embedded in such receipt—Assessee, partnership firm received ‘on money’ of Rs.62 lakhs during the block period for sale of the flats, which the Assessing Officer brought to tax— Tribunal did not permit the revenue to collect the tax on the entire receipt believing it was only the income embedded in such receipt which can be subjected to tax—Held, consistently, this Court and some other Courts have been following the principle that even upon detection of ‘on money’ receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves— If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation”. Even in the case of ITO vs. Saikrupa Construction Co. 13 SOT 45 (Mum) the Mumbai Bench of the Hon'ble ITAT has held that this is a case, where regular books of account are not maintained. The AO proceeded on the basis of papers found during the course of survey. Such papers apparently are not complete record of the income or expenditure of the assesse. Therefore, the total income cannot be properly calculated on the basis of such papers. In our view, the Id. CIT(A) has y directed that the profits of the assessee's business as a builder should be estimated by applying net profit rate of 15 percent of the total consideration as per the sale agreements and also on the ‘on money’ received by the assesse. We, therefore, confirm his order for all the four assessment years. And also in the case of Dhanvarsha Builders and Developers P Ltd. vs. DCIT 102
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ITD 375 (Pune) "However, the undisclosed income detected as a consequence of search cannot be taxed in its entirely in the assessment year relevant to the previous year in which search was conducted, but on the method of accounting followed by assesse - There being no elaborate discussion on the point, matter remanded for determination of year of taxability keeping in view the method of accounting followed by assesse" It has been further held that "The receipt of 'on- money' is an objective fact. However, the income is a legal concept, which has to be arrived at after considering various other aspects such as: expenditure and the year of taxability. A businessman cannot be expected to know about all these matters. Such matters cannot be ignored in making assessment even if a confessionary statement is made. Therefore, after having fixed the quantum of 'on-money' the questions of computation of income and the year of taxability of such income remain open even in spite of the confessionary statement. On application of correct principles of law, only a sum of Rs.14.74 lakhs is taxable against the confessed amount of Rs. 48.95 lakhs.
Considering the above judgments, we are of the view that although the AO has determined the total income at Rs.9,02,77,106/-, thus taking into account that in the Return of Income a fair amount of income (net profit of over 30%) from such total receipts has already been shown by the assessee i.e. amount of Rs.3 crores. Thus, no further additions are justified. We see no reason to interfere into or divert from the
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findings so recorded by the ld.CIT(A), accordingly ground no.1 of Revenue is dismissed.
In the result, Ground No.1 of the Revenue is dismissed.
Ground No.2 & 3 are general in nature and stands dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 13-12-2019.
Sd/- Sd/- (O.P.MEENA) (SANDEEP GOSAIN) (लेखा सद�यतथा/ACCOUNTANT MEMBER) (�याियक सद�यकेसम� /JUDICIAL MEMBER) सुरत/ Surat, �दनांक Dated: 13th December, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat