RAAMA ENTERPRISES,VADODARA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(3), VADODARA, VADODARA

The facts of the case are that the assessee firm is a builder and real estate developer. During the course of survey u/s. 133A of the Act on 16-09-2016, assessee offered a sum of Rs. 1,99,45,000/- as its business receipt for taxation. It filed e- return on 27-09-2017 admitting total income of Rs. 2,71,24,680/- which included the disclosure under survey.

The assessee has raised following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the addition of Rs. 1,99,45,000/- u/s 68 of the Act, despite the said amount having already been offered as business income in the return of income and subjected to both direct and indirect taxes.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in holding that the surrendered income during survey constituted unexplained cash credits, without appreciating that the assessee had duly explained the source as contracting receipts from its construction business.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in applying the provisions of section 115BBE retrospectively at the enhanced rate of 60%, though the survey was conducted on 16.09.2016, prior to the amendment brought in by the Taxation Laws (Second Amendment) Act, 2016.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in disregarding the evidences placed on record, including VAT and Service Tax returns, ledger extracts, and audited financial statements, which corroborated that the surrendered amount was part of regular business turnover.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in failing to appreciate that section 68 is not attracted where the source and nature of receipts are explained and already accounted for in the books of accounts, and where taxes have been duly discharged.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in not considering that the surrendered income related to multiple years of the project and not exclusively to AY 2017-18, thereby resulting in unjust taxation in a single year.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in upholding the addition 2

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in failing to appreciate that the Assessing Officer issued a faulty show-cause notice dated 24.12.2019, proposing addition u/s 69B on alleged unaccounted expenditure, which was factually incorrect and later altered to section 68, thereby vitiating the assessment proceedings for lack of application of mind.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in sustaining the addition without considering that the assessee had declared higher than presumptive profit margins prescribed u/s 44AD, thereby negating any allegation of suppression of income.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in passing order without providing effective and reasonable opportunity of being heard.

On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in sustaining initiation of penalty proceedings u/s 270A(1) of the act.

It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted.

Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

Ld. A.R. of the assessee submitted that assessee had offered income as construction receipts. It had paid Service Tax and VAT on the said declaration. It did not disclose any unaccounted expenses. AO had not controverted these facts.

On the other hand, Sr. D.R. relied on the order of the CIT(A).

Assessee raised objection pertaining to invocation of provision of section 115BBE of the Act. Section 115BBE operates only when the income falls within one of the deeming provisions namely section 68/69/69A/69B/69C/69D. As the entire income offered during survey represented assessee’s business receipts, we are not in agreement with the tax computation in assessment made u/s. 115BBE of the Act. AO is directed to treat the disclosure made u/s. 133A as assessee’s business receipts and tax accordingly.

In the result, the appeal of the assessee is allowed.