THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT vs. M/S SHREE HARI CORPORATION

This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act,1961’) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Surat Bench, Surat dated 17.03.2021 in the ITA No.1553/AHD/2017 for the A.Y. 2014-15 whereby the appeal preferred by the Revenue against the order passed by the CIT(A) came to be dismissed.

The Revenue has proposed the following two questions of law for the consideration of this Court: “[A] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is justified in confirming the findings of the CIT(A) in deleting the addition of Rs.5,20,95,322/- made by the Assessing Officer on account of estimation of profit embedded in the total unaccounted on money receipts from real estate business of the assessee ignoring the fact that the estimation of profit was made on the basis of evidences found during the course of search/survey proceedings and admissions made by two buyers of flats in their sworn in statements recorded under Section 131 of the Act as also on the basis of the C/TAXAP/126/2022 ORDER DATED: 17/01/2022 statement recorded from the partners of the firm under Section 132(4) of the Act wherein they have admitted receipts of money by the group from other real estate projects undertaken by the group? [B] Whether on the facts and in the circumstances of the case and in law, the Hon’ble is justified in not appreciating the fact that the estimation of profit and addition made by the Assessing Officer was on the basis of the evidences found during the course of search/survey proceedings and statements recorded under Section 131 and 132(4) of the Act and hence, the decision of the Appellate Tribunal was contrary to the facts of the case and, therefore, there is perversity in the order of the Appellate Tribunal?”

We have heard Mr. M.R. Bhatt, the learned Senior Counsel appearing for the Revenue.

It appears from the materials on record that the AO made addition based on an assumption that during the survey, the partner of the Firm in his statement stated that the project was of 288 flats and out of 30 shops, 18 shops were booked at the rate of Rs.2000/- per sq. ft. on the upper ground floor of the complex. The AO on the basis of such statement of the two buyers of the flats calculated the ‘on money’ to the tune of Rs.20.81 crore with respect to 288 flats. On the basis of the working shown in the table, which has been incorporated in the impugned order passed by the Tribunal, the AO worked out the total ‘on money’ on the project to the tune of Rs.22,83,81,290/-.

The assessee carried the matter in appeal before the Commissioner of Appeals. The assessee succeeded before the CIT(A). The CIT(A) took the view that there was no documentary evidence to substantiate the receipt of ‘on money’. The CIT(A) also noticed that no documents were recovered from the Firm during the search and survey proceedings. The CIT(A) did not approve the AO’s estimate of C/TAXAP/126/2022 ORDER DATED: 17/01/2022 the figure of ‘on money’ based merely on the two statements of the buyers. The Revenue thought fit to carry the matter to the Income Tax Appellate Tribunal. The Tribunal while affirming the order passed by the CIT(A) observed in paragraphs 7, 8, 9 & 10 as under:

We are of the view having regard to what has been stated about that we should not disturb the order passed by the Appellate Tribunal dismissing the Appeal filed by the Revenue thereby affirming the findings recorded by the CIT(A).

In view of the aforesaid, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA