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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GAGAN GOYAL
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D”, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.6657/Mum/2016 (A.Y. 2010-11) ITA No.6655/Mum/2016 (A.Y. 2011-12) ITA No.3762/Mum/2018 (A.Y. 2012-13) ACIT -27(2), Room No. 420, 4th Floor, Tower No.6, Vashi Railway Station Complex, Vashi, Navi Mumbai-400703. ...... Appellant Vs. M/s Merit Magnum Construction, Samruddhi, Office Floor, Plot No. 157, 18th Road, Nr. Ambedkar Garden, Chembur (East), Mumbai-400703. PAN: AACFV9391F ..... Respondent Appellant by : Sh. Paresh Shaparia Respondent by : Sh. Mahiita Nair, CIT-DR Date of hearing : 28/06/2022 Date of pronouncement : 23/09/2022 ORDER PER GAGAN GOYAL, A.M: These three appeals by the Revenue are directed against the order of Ld. Commissioner of Income Tax (Appeals)-37, Mumbai [hereinafter referred to as the [‘Ld. CIT(A)’] vide orders dated 01.08.2016 & 27.03.2018 for the Assessment Years (AY) 2010-11, 2011-12 & 2012-13 respectively. Firstly, we are taking ITA No.
2 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 6655/Mum/2016 for AY 2011-12 as lead case. Few of the grounds in all the appeals are same and few are different in respective years. Same we will deal with year wise through our consolidated order. 2. In ITA No. 6655/Mum/2016 for A.Y. 2011-12, the Revenue has raised the following grounds of appeal: “1. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's claim of deduction u/s 80IB of the Act. While doing so, the Ld. CIT(A) failed to appreciate the fact that the assessee had acted in contravention of provisions of section 801B(10)(1) of the Act. 2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating two separate building as one project, ignoring the documentary evidence on record suggesting that both are separate building. The Ld. CIT(A) further failed to appreciate the fact that the plot size of each building was less than one acre and hence, not eligible for deduction. 3. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition u/s.69C of the Act at Rs.6 crores. 4. On facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the fact that cash transactions recorded in impounded paper were confirmed by the Sr. Manager, Accounts as unexplained expenditure and relates to AY 2011-12; 5. On facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that provisions of sec.292C of the Act clearly attract. While doing so, the Ld.CIT(A) failed to appreciate the fact that the onus was on the assessee to prove that the contrary of what is recorded in loose paper was true and this onus has not been discharged in this case, 6. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition u/s.69C of the Act of Rs.2.5 crores. 7. On facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the fact that these transactions were recorded in the loose paper which were impounded during the course of survey action in assessee' premises.
3 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 8. On facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that provisions of sec.292C of the Act clearly attracts. While doing so, the Ld. CIT(A) failed to appreciate the fact that the onus was on the assessee to prove that the contrary of what is recorded in loose paper was true and this onus has not been discharged in this case. 9. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.” 3. In ITA No. 6657/Mum/2016 for A.Y. 2010-11. The Revenue has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's claim of deduction u/s. 80IB of the Act. While doing so, the Ld. CIT(A) failed to appreciate the fact that the assessee had acted in contravention of provisions of section 80IB(10)(1) of the Act. 2) On the facts and circumstance of the case and in law, the Ld. CIT(A) erred in treating two separate building as one project, ignoring the documentary evidence on record suggesting that both are separate building. The Ld. CIT(A) further failed to appreciate the fact that the plot size of each building was less than one acre and hence, not eligible for deduction. 3) On facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that interest income of Rs.1,09,01,149/- received from M/s. Supernal Realtors Pvt. Ltd. credited to WIP is not assessee's income. While doing so, the Ld. CIT(A) failed to appreciate the fact that the action of the assessee has the effect of reducing its WIP and increasing the profit, which is eligible for deduction u/s 801B of the Act. 4) On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,97,997/- Rs.4,35,584/- and Rs.1,57,65,105/- made u/s.68 of the Act. While doing so, the Ld. CIT(A) failed to appreciate the fact that during the course of assessment proceedings, no documentary evidence could be produced by the assessee explaining the nature and source of these cash deposits. 5) The Ld.CIT(A) erred in holding that transaction relating to Rs.1,57,65,105/- do not pertain to the assessee ignoring the fact the assessee could not provide the
4 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction address of these parties to whom the money claimed to belong, during the course of assessment proceedings. 6) The appellant prays that the order of the Ld. CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.”
In ITA No. 3762/Mum/2018, the Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the assessee's claim of deduction u/s.80IB(10) of the I T Act without appreciating the fact that the assessee had acted in contravention of provisions of section 80IB(10)(f) of the IT Act in much as the assessee did sale out three flats to the relatives of its partners as available in the web site of e-search Maharashtra.gov.in which is available in public domain. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in treating two separate building as one project, ignoring the documentary evidence on record suggesting that both are separate building. The Id. CIT(A) further failed to appreciate the fact that the plot size of each building was less than one acre and hence, not eligible for deduction. 3. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.” 5. Brief facts of the case are that the assessee is a partnership firm, filed its return of income on 29-09-2010 declaring total income at Rs. NIL. Subsequently, case was selected for scrutiny under CASS and relevant notices were issued to the assessee. The assessee firm engaged in the business of construction, development of real estates and other related activities like investments and finance etc. the assessee has declared profit from the business amounting to Rs. 1,81,22,323/- and claimed deduction u/s 80IB(10) of the Act on the same with respect to its project in Everest country side in Thane.
5 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 6. A survey action u/s. 133A of the I.T. Act was carried out in the premises of the assessee firm on 24.01.2012, wherein several incriminating documents pertaining to the year under consideration involving cash transactions were found and impounded. The Assessing Officer has made various addition to the assessee’s total income and also disallowed the benefits of Section 80-IB(10) to the assessee on the reasoning that more than one residential unit allotted as individual. The appellant has a housing project at Katarvadavali, Thane. It follows project completion method of accounting in respect of business of construction and development of real estate. There are various projects in firm namely Everest Milestone (Wadala), Everest Woods (Govandi). Everest Retreat (Malad-W Everest Odyssey (Powai). Everest Supercity (Powai). Everest Royalty (Kandivali), Balkum Village (Thane). Dombivali Project and Everest Countryside (Vadavall Thane). Everest Countryside: Project in Kasarwadavii, Thane has 2 housing project: Project 1-2 Building Iris and Jasmine Project 2-3 Building: Daffodil, Petunia and Marigold. Construction of buildings Iris and Jasmine is considered as one housing project and Construction of buildings Daffodil, Petunia and Marigold is considered as a separate housing project. All the sanctions for the buildings Iris and Jasmine are obtained together. During the F.Y. 2009-10 relevant to A.Y. 2010-11, one building namely Jasmine was completed on 22.07.2009 at Kasarvadavli, Thane. In the said year, profit of Rs. 1, 81, 22,323/- was declared and deduction u/s 80-1B (10) of the Income Tax Act, 1961 was claimed thereon.
6 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 7. The assessee has claimed deduction u/s 80IB (10) of the income tax Act with reference to its project Everest Countryside" at Kasarvadavali Thane to the tune of Rs.1,81,22,323/-.On being queried about the eligibility of deduction u/s.80IB (10) vide show cause notice dated 08.01.2013 as the assessee has allotted more than one flat to the family members of same person, The AR in response to same vide letter dated 15.01.2013 stated that “Your honour has informed that as per page-43 of Annexure B-4 we have sold 6 flats to Shri Janardhan Patil and family. The flats were provisionally booked by Shri Janardhan Patil and his family on 1 March, 2009 i.e. in A Y 2009-10, as mentioned in the said paper, and hence the booking was before the amendment in section 801B(10) w.e.f AY 2010-11. Therefore, we have not violated the condition of section 801B(10) as amended w.e.f A Y 2010-11, as we have not sold more than one unit to any individual buyer after 1 April, 2009.” In response to this AO’s observations were as under: “The explanation of the assessee has been considered. The assessee failed to understand that the assessee has been taking benefit of the amendment to clause (ii) to subsection 10 of section 80IB which states that (ii) in case where a housing project has been approved or is approved by the local authority on or after the 1st day of April, 2004 [but not later that 31st day of march, 2005] within four years from the end of financial year in which the housing project is approved by the local authority; (iii) In a case where a housing project has been approved by the local authority on or after the 1 day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority These amendments and Insertions were made in the finance Act 2010 w.e.f. 1/4/2010. The assessee firm wish to claim the benefit derived from said amendment and denies the liability arising out of the same. By stretch of imagination, the assessee can opt for the benefits of one limb of the said section and disown the other. The Finance Act (no.2), 2009 has Inserted clause (e) to sub section 10 of section 8018 stating that
7 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction (e) Not more than one residential unit in the housing project is allotted to any person not being an individual and (f) In a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely (i) The individual or the spouse or the minor children of such Individual; (ii) The Hindu Undivided family in which such individual is the karta; (iii) Any person representing such individual, the spouse of the minor children of such individual or the HUF in which such individual is the karta”. 8. We have thoroughly considered the objection of the AO in granting benefits of deduction under section 80-IB(10), submission of the assessee and order of the Ld. CIT(A). To dilute the issue to meet its logical and legal conclusion, we are tabulating here-in-below the relevant section, sub-section and sub-clauses in a tabular form to understand the legal position with reference to the matter under consideration.
Section Sub- Section Changes Inserted by Effective clause from The amount of deduction in 80-IB(10) “2008” Finance w.r.e.f. the case of an undertaking (No.2) Act, 1-4-2009 Substantiat developing and building 2009 ed for housing projects approved “2007” before the 31st day of March 2008 by a local authority shall be............ 80-IB(10) (a)(ii) in a case where a housing Insertion of Finance w.e.f. project has been, or, is “but not Act, 2010 1.4.2010 approved by the local later than authority on or after the 1st the 31st day day of April, 2004 but not later of March than the than 31st day of 2005”
8 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction March, 2005 80-IB(10) (a)(iii) in a case where a housing Insertion of Finance w.e.f. project has been approved by sub-clause Act, 2010 1.4.2010 the local authority on or after (iii) the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority 80-IB(10) (e) not more than one residential Insertion of Finance w.e.f. unit in the housing project is sub-clause (No.2) Act, 1.4.2010 allotted to any person not (e) 2009 being an individual 80-IB(10) (f) in a case where a residential Insertion of Finance w.e.f. unit in the housing project is sub-clause (No.2) Act, 1.4.2010 allotted to a person being an (f) 2009 individual, no other residential unit in such housing project is allotted to any of the following persons, namely..........
The Finance Bill 2009 was presented before the Lok Sabha on 06.07.2009 which received its assent on 19.08.2009 whereby the Finance (No.2) Act, 2009 was enacted. The Explanatory Notes to the Provisions of the Finance (No. 2) Act, 2009 and Circular No. 3/2010/[F. NO 142/13/2010-SO(TPL), dated 03.06 2010: Rationalising the provisions of deduction under section 80-IB(10). Applicability- These amendments have been made applicable with effect from 1st April, 2010 and will accordingly, apply in relation to assessment year 2010-11 and subsequent years. The amendments relate to restrictions on specific transactions
9 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction (Le, allotment of residential units). Therefore, they would apply to transaction after a specified date during the year Since the Finance (No. 2) Act, 2009 became law on 19 August, 2009, the restriction regarding allotment of residential units shall not only in respect of allotments made before 19-8-2009. The sub-section (10) has been the subject matter of many amendments A clause (e) and (f) have been inserted in sub-section (10) of section 80-IB Since these amendments are prospective and also clarified in the Explanatory Notes to the amendment, it is very clear that the conditions of allotment of residential units to a individual and his family members is applicable w.e.f. 19.08.2009. 9. To further crystallise the facts and conditions prescribed in section 80-IB(10), information as observed is being produced in tabular form as under: Sr.No. Provisions applicable as per Section Compliance by Documents 80 IB (10) Assessee 1 The project must be approved The project approved Copy of approval before 31st March, 2008 by a local by Thane Municipal dated 15.05.2006 is authority Corporation on enclosed at Page 15.05.2006 i.e. before No.50-51 31.03.2008. 2 The assessee has commenced As the project Copy of Approval development and construction of approved on dated 29.12.2006 is housing project on or after the 1st 15.05.2006, the enclosed at Page No. October 1998. construction started 52,-53. after 1.10.1998 3 If the housing project is approved on The construction of Copy of Occupancy or after 1st day of April 2005, the project is completed Certificate dated construction must be completed on 22.07.2009 i.e. 22.07.2009 is within 5 years from the end of the within 5 years of enclosed at Page No. financial year in which the housing approval of housing 54-55. project is approved by the local project. authority.
10 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 4 The size of plot of land which has a The total area of plot Copy of certificate minimum area of one acre. of land for project is issued by Architect 9520 sq. Meters i.e. M/s Vinay Patil & more than one acre. Associates dated 31.08.2011 certifying area of land is enclosed at Page No. 57. 5 The residential unit has maximum The entire residential Certificate from built up area of one thousand square unit has the area less Architect M/s Vinay feet where such residential unit is than 1000 sq.feet. Patil & Associates situated within the city of Delhi or dated 31.08.2011 Mumbai or within 25 KM from the certifying area of Municipal limits of these Cities. residential units is enclosed at Page no. 57. 6 Section 80-IB(10) – Sub-clause (e) The Buyers of Details of flat-wise, Where the buyer of residential unit residential units are party-wise sales is is not an individual, not more than individuals. No enclosed at Page No. one unit in project shall be allotted allotment is made to 58 to such Buyer. any person other than individuals. 7 Section 80-IB(10) – Sub-clause (f) A residential unit in The allotment in the housing project is relation to 6 Flats to allotted to a person an individual and his being an individual, relatives was done no other residential on 01.03.2009 i.e. unit in such housing prior to the project is allotted to amendment which is any of the following effective from person. Namely 19.08.2009. spouse or minor child The impounded or HUF....... pages no. 41 & 42 of Annexure B-4 is enclosed at Page No. 60-61 depicting the date of allotment.
11 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 10. The housing project known as Everest Countryside with buildings Jasmine & Iris was approved by Thane Municipal Corporation (Local Authority) on 15.05.2006, i.e. before 31.03.2008. The commencement of construction activity of Jasmine and Iris building was started after 15.05.2006 (i.e. after 01.10.1998) which is duly certified by Architect M/s, Vinay Patil & Associates Refer Page No 50-51. The total area of plot of land for project is 9520 sq. meters (approx. 2.35 acres) i.e. more than one acre (Conversion 1 Acre -4,046.86 sq Meters) which is duly certified by Architect M/s. Vinay Patil & Associates dated 31.08.2011 in support of the same Refer Page No 56-57. From the said total area of 9520 sq. Meters, an area of 4264 46 sq. meters was reserved in DP road. Without prejudice to the contention on the area of DP road not to be excluded from the total area for determining the one acre condition, even otherwise the balance area of the project excluding the DP road is 3255:34 sq. meters (Jasmine: 3998.66 sq. meters+ IRIS 1203.47+ for Road 52.66 sq. meters) which also is more than one acre. The construction of building "Jasmine" is completed on 22.07.2009 (i.e. within 5 financial years from the end of the FY in which the housing project was approved). Details of Plot Purchases: Sr.No. Survey Date of Name of the parties from whom Area Amount paid No. Of purchase plots are purchased Plots of plot 1. 42/4 06.09.2005 1) Amrutlal Patil 3521 Rs. 65,00,000/- Sq.mts.
12 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 2) Samir Patil 3) Kantilal Hirjibhai Ghaghra 4) Kailash T. Yadav 5) Paul Bartholomeo 2. 42/5 01.09.2005 1) Rahunath Ramdas Rawat 1392 Rs. 17,39,863/- sq.mts 2) Janardan Ramdas Patil 3) Sakharam Ramdas Raut 4) Padmakar Ramdas Raut 5) Gopal Ramdas Raut 6) Preman Ramdas Raut 7) Yashodabai Tangadi 8) Kalibai Bhoir 3. 41/1/1 01.09.2005 1) Addul Kadir Mehmud Patel 4601 Rs. 69,62,340/- & sq.mts 2) Mohammad Idris Mehmud 41/1/2 Patel 3) Shabanabanu Mehmud Patel 4) Saminabanu Mehmud Patel 5) Afrojbanu Abdul Latif Vasta 6) Akilbanu Majid Solkar 7) Samasdbanu Zuber Kotkar 8) Nasiarbanu Akbar Bhatkar 9) Bashir Mohammad Hussain Patel 10) Abdul Rub Mohammad Hussain Patel 11) Abdul Salam Mohammad Hussain Patel
13 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 12) Rashida Abdul Rauf Bubere 13) Hajira Nasir Mulla
Details of each flat, with numbers and carpet are, as under: IRIS JASMINE Type No. Of Flats Carpet area No. Of Flats Carpet area 1 BHK 2 482 sq.ft. - - 2 BHK 132 593 sq.ft. 28 593 sq.ft. 2.5 BHK 2 685 sq.ft. 14 652 sq.ft. Total 136 42
The built-up are of all the residential units in the said buildings are less than 1000 sq. feet as per the Certificate from Architect M/s. Vinay Patil & Associates dated 31.03.2011 certifying are of residential units. The approved housing project is only in relation to residential units and that there are no shops or commercial establishments in the said housing project, this fact is accepted by AO also. The buyers of residential units are individuals. The assessee has not sold more than one flat to one person or his relatives in both the buildings i.e. Jasmine and Iris after amendment in section 80-IB(10) by the Finance Act, 2009 w.e.f. 19.08.2009 (inserting clause (e) & (f) in section 80-IB(10). 11. The facts discussed supra are on records and not under challenge on factual or legal front. Same are clearly emanated from the order of AO and Ld. CIT(A). 12. We further rely on following pronouncements of Hon’ble Jurisdictional High Court and other High Courts/ITAT :-
14 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction “CIT Vandana Properties [2013] 353 ITR 36 (Bom). Whether construction of building E constitutes a 'housing project under section 80-1B(10). The expression housing project' is neither defined under section 2 of the Act nor under section 801B(10) Even under the Mumbai Municipal Corporation Act 1988 as also under the Development Control Regulations for Greater Mumbai, 1991, the expression housing project is not defined Therefore, the expression housing project' in section 80-1B(10) would have to be construed as commonly understood [Para 18] The expression housing project' in common parlance would mean constructing a building or group of buildings consisting of several residential units. In fact, the Explanation in section 80-IB(10) supports the contention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project. Therefore, it is clear that construction of event one building with several residential units of the size not exceeding 1000 square feet would constitute a housing project' under section 80-1B(10). [Para 19] The object of section 80-1B(10) in granting deduction equal to one hundred per cent of the profits of an undertaking arising from developing and constructing a housing project is with a view to boost the stock of houses for lower and middle income groups subject to fulfilling the specified conditions The fact that the maximum size of the residential unit in a housing project situated within city of Mumbai and Delhi is restricted to 1000 square feet clearly shows that the intention of the Legislature is to make available large number of medium size residential units for the benefit of the common man. However, in absence of defining the expression housing project' and in the absence of specifying the size or the number of housing projects required to be constructed on a plot of land having minimum area of one acre, even one housing project containing multiple residential units of a size not exceeding 1000 square feet constructed on a plot of land having minimum area of one acre would be eligible for section 80-1B(10) deduction..... [Para 26] The above judgment has been further accorded in the case of CIT vs Ackruti City Ltd. [2013] 31 taxman.com 275 (Bombay) where the question before the Hon'ble Court was as under: (b). Whether, on the facts and in the circumstances of the case and in law, the Tribunal is right in law in holding that deduction under Section 801B (10) on Gawan Pada project cannot be disallowed on the basis that area on standalone
15 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction basis under eligible component of project is less than one acre as long as total area of the plot is more than one acre? The Court has held as under In so far as question (b) is concerned counsel for the parties state that the same is covered in favour of the assessee and against the Revenue by the decisions of this Court in respondent assessee's own case being Income Tax Appeal No. 777 of 2001 rendered on 9th January 2013. In the above decision, this Court has followed its earlier decision in the matter of Vs. Vandana Properties (2012) 19 taxmann.com 316 ( Bom). In view of the above, we see no reason to entertain question (b). CIT Vs. Vora Property Developers (P) Ltd [2015] 373 317 (Madras) Section 80-IB of the Income Tax Act, 1961 Deduction-Profits and Gains from industrial undertakings other than infrastructure development undertakings (Housing project) Assessment Year 2007-08- Assessee company was engaged in business of construction and sale of residential flats-Assessee owned a land measuring 1.065 acres - it developed a residential project in said piece of land, assessee six housing towers which were approved by Chennai Metropolitan Development Authority (CMDA) by six separate permits assessee claimed deduction under section 80-IB(10) which was allowed by Assessing Officer- Pursuant to Commissioner’s order under section 263, Assessing Officer disallowed deduction granted earlier by holding that assessee had developed six separate projects sine angle piece of land and assessee did not fulfil essential condition of m area for a single project as land den under action 80-IB(10)- It was noted that when project fulfils criteria for being approved as a housing project, then deductions cannot be denied under section 80-IB(10)-Whether since project was approved by CMDA in accordance with Development Control Rules, assessee would be entitled to deduction under section 80-IB(10)-Held yes (Para 11) (in favour of assessee] Siddhivinayak Kohinoor Vs. ACIT (2015) 34 taxmann.com 32 (Pune Trib) Where two king projects developed by assessee were sanctioned by a common approval by focal authority, in view of fact that those projects were independent of each other, assessee's claim for deduction could be allowed for project in respect of which conditions specified in section 80-IB(10) were duly satisfied. CIT Vs. Shantiniketan Property Foundation (P) Ltd Tax Care (Appeal) Nos. 795 and 796 of 2009 dated 02.11.2012
16 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction Without prejudice to the submission hereinabove at Sr. No. 1, it is submitted that even if the two buildings are considered at separate housing projects yet the appellant is eligible to the claim of deduction as Section 80-IB(10) as the conditions as contemplated us 80-IB(10)(b) is that ‘the project is on the size of a plot of land which has a minimum area of one acre which means that the plot of land on which various housing projects are undertaken it required to be one acre or more. The condition does not require that each building of the project to be one acre or more Thereby, the appellant can have various independent building of a housing project (with area less than one acre) on such plot of land being more than one acre. The said ratio decendi have been pronounced by various courts and reliance is placed on the said judgements: CIT Vandana Properties (2013) 333 ITR 36 (Bom) CIT Ackriti City Lad (2013) 31 axmann.com 275 (Bombay) CIT Voora Property Developers (P) Ltd (2013) 373 ITR 317 (Madras) Accordingly, even if the area for the building Iris & Jasmine' taken separately is 3998.66 sq. mt .and 1203.47 sq.mt. respectively is less than one acre, the appellant cannot be denied the deduction u/s 80-IB(10) of the IT Act, 1961 since the plot of land on which such a housing project is undertaken it on land having more than one acre. In the assessment order for AY 2010-11, the Learned AO referring to some of the impounded page non Annexure -4 namely 14, 42. 45 (Refer Page No. 39-61), disallowed the benefits of Section 80-15(10) to the appellant on the only reasoning that more than one residential unit (6 Flats) in Jasmine building has been allotted to an individual Mr. Janardhan Paul the land owner) and his family members which is in viola of Section 80 1B(10) which was introduced by the Finance (No. 2) Act 2009 wf01.04.2010. In the said and there was no contention or ire of project not being on one acre land. However, for the AY under consideration i.e. AY. 2011-12, the appellant has not sold more than one flat to one person and or hit spouse or his minor children of the said individual or any persons as referred under sub-clause (ii) & (iii) to Section 80-IB(10)(a) in the buildings ‘Jasmine & Iris’. Accordingly the observation and contention of the AO that "the assessee had sold more than one flats to one person or his relatives in both the buildings namely “Jasmine & Iris" is factually incorrect thereby there is no non-compliance to Clause (e) and (f) of the Clause 10
17 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction of Sec. 80-IB. The party-wise details on sale of flat in “Jasmine & Iris” are enclosed herewith at page no 66-69. The copy of which was also furnished to AO during the course of assessment proceedings vide lettered 20.12.2013. The Learned AO has used the term ‘relative’ at Para 5.4 as Page No. 4 of the order which is a very vague where the restriction as contemplated under clause (f) (i (ii) to Section 80-IB(10) is only in respect of ‘spouse’, ‘minor children’ and Hindu Undivided family in which such individual is the ‘karta’ and so on i.e. not at all relatives are covered by the said clause. From the said details of such flats in Jasmine & Iris, it can be observed that not more than one residential unit has been sold to one particular individual. Further, it is also submitted that not more than one residential unit has been sold to the spouse or minor children of such individual or any persons as referred under sub- clause (ii) & (iii) to Section 80-IB(10)(f). Thereby, there is no violation of the said condition of section 80-IB(10). Accordingly, the appellant is entitled to the claim of deduction u/s 80-IB(10) of the Act. The Learned AO has contended that since the appellant was denied the claim of deduction u/s 80-IB(10) for AY 2010-11 and following the principle of consistency deduction u/s 80-IB(10) is denied in this assessment year also. In this regard it is submitted that even if in the same A.Y. the appellant has not complied to the conditions of Section 80-IB(10) in respect of certain residential unit/project but for the rest of the residential units/ project has duly complied to the conditions of Section 80-IB(10) then the appellant is allowed deduction u/s 80-IB(10) on proportionate basis i.e. for those units which comply to the conditions of Section 80-IB(10), the appellant is eligible to the claim of deduction proportionately. Thus, the argument of ‘consistency’ while granting the claim of deduction u/s 80-IB(10) is not applicable as long as the residential unit of ‘Iris’ building comply to the conditions to Section 80-IB(10). Even otherwise, each year is a separate assessment year and the non-compliance, if any, of any provisions in a particular year cannot be dragged to subsequent years so as to debar the appellant from the claim of beneficial provisions i.e. the conditions while granting deduction has to be reviewed and looked into afresh for deciding whether the appellant is eligible for the said deduction or not. The appellant relies on various judicial pronouncements which have held that the appellant is eligible to proportionate claim of deductions 80-IB(10) of the Act which is as under:
18 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction Vertex Homes (P) Ltd. Vs. DCIT (2015) 42 taxmann.com 285 (Hyderabad Trib.) Fact that assessee, a builder, had not completed construction of all blocks of housing project within stipulated period, would deprive assessee from availing of deduction under section 80IB(10) in respect of each of contemplated block on stand alone basis Viswas Promoters (P) Ltd. Vs. ACT (2013) 29 taxman.com 19 (Madras) Section 80-IB, read with section 80HHBA, of the Income-tax Act. 1961 Deductions- Profits and gains from industrial undertakings other than infrastructure development undertakings - Housing Project-Assessment years 2004-05 2008-09- Assessee, a developer, undertook several housing projects containing blocks of different sizes; some were of less than 1500 square feet area and other more than that- Assessee claimed proportionate deduction under section 80-IB(10) for those blocks which were of less than 1500 square feet area- Assessing Officer denied proportionate deduction on ground that each block could not be considered as a separate ‘housing project’- Whether going by definition of ‘housing project’ as given in section 80HHBA each block in a larger project had to be taken as an independent ‘housing project’ for purpose of claiming deduction under section 80- IB(10)-Held, yes- Whether, therefore, assessee was entitled to have benefit of deduction for residential flats satisfying less than 1500 square feet condition-Held yes (Para 13 and 14) [In favour of assessee] ACIT vs Ekra Sankalp Developers Mumbai (2015) 53 taxmanm.com 75 (Mumbai Trib.) Profits of housing property which otherwise satisfied condition of section 80IB(10), as referable to residential unit having a maximum built-up area as prescribed per clause (c) would qualify for deduction on proportionate basis thereunder to exclusion of other residential units. ITO vs. Satyananarayana Ramswaroop Agarwal [2014] 50 taxmann.com 11 (Pune Trib.) Section 80-IB of the Income-tax act, 1961-Deduction-Profits and gains from industrial undertakings other than infrastructure developments undertaking (Housing project)- Assessment year 2009-10- Whether where assessee undertook housing project but could not start work on building part since additional FSI in lieu of widening of project was not received from Municipal Corporation and consequently, architects could not design structure of building, proportionate
19 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction deduction under section 80-IB(10) could be allowed in respect of part of project completed during year-Held yes [in favour of assessee]” 13. Keeping in view the facts of the case as emanated from the order of AO, order of Ld. CIT(A), submissions of the assessee and judicial precedents relied upon by us clearly established that the deduction claimed by the assessee is well within the orbit of section 80-IB(10). Moreover, the amendment in section 80- IB(10) by inserting clause (e) & (f) w.e.f. 19.08.2009 has no impact on the matter of assessee, the allegation of AO in absence of clause (e) & (f) cannot affect the claim of the assessee, as the same has been done by the assessee before 19.08.2009. Any future amendment cannot be anticipated by the assessee and his actions of past cannot be judged by the amendment introduced by the legislation thereafter. In the light of above, Ground No.1 & 2 of the Revenue is dismissed. 14. With reference to Ground Nos. 3, 4 & 5, we have gone through the order of AO, order of Ld. CIT (A) and detailed submissions of the assessee. There was Survey u/s 133A of I.T. Act, 1961 on appellant's office at Chembur and various site offices, on 24th and 25th January 2012. In the course of survey proceedings, various pads, diaries and loose papers were impounded which were explained in the post survey proceedings by partner and staff in the course of recording statements u/s 131 of I.T. Act 1961. The AO based on one such impounded loose paper numbered 60 of Annexure A-15 which reflects a noting of '6 Cr - cash exp has made addition of the same u/s 69C on the reasoning that the same are expenditure in cash relating to the year 2011 as the impounded paper is on a pre- printed diary and the date on the page was 21-April. The appellant has explained the implication of the said loose paper during the course of assessment proceedings that the reference to '6 Cr cash exp' by Mrs. Rachana Jaisalmeria in
20 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction her statement was referring to the actual expenses incurred during F.Y.2005-09 of Rs. 5.92 crores which are duly reflected in books of account and return of income. The said explanations were not accepted by the AO and addition thereof u/s 69C of the Act was made. The AD has stated that one employee named Ms. Rachana Jaisalmeria has vide statement recorded admitted that that page no. 60 contained cash expenses of Rs. 6 crores in her handwriting. On the basis thereof, AO made addition thereof of Rs. 6 crores. 15. The observation of the Assessing Officer and the arguments and submissions of the appellant were carefully perused. The impounded page no. 60 of Annexure A-15 was carefully observed. During the appellate proceedings, appellant has stated that the impounded page is required to be read in toto and accordingly to be inferred i.e., the AO should not pick and choose those parts of the impounded material which suits him for making addition and rejecting those parts of the same impounded page which are in support of the assessee. The noting and jottings have been made in a pre-printed diary on a page dated 21 April (Thursday) which is without mention of the year. Accordingly, for making addition, presumption has been drawn by the AO that the diary is pertaining to year 2011 since 21-04 2011 was Thursday. On the said page along with the noting and jotting of '6 Cr cash exp', there are references to JDA, Security Deposit (SD) amount spent up-to 31st March 09 and reference to seeking of funds. However, there is no period of year mentioned in the printed diary. 16. Further, the appellant has explained that the notings of '6 Cr' were made by one of its employee Mrs. Rachana Jalsalmeria in her pre-printed diary based on information collected by her. The actual expenses are duly recorded in the regular
21 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction books of account are Rs.5, 92, 75,912/- for the F.Y 2008-09. To corroborate the contention in relation to the said transaction the appellant had furnished copy of submission dated 16.01.2014 wherein it had submitted the details of the said actual expenses of Rs. 5, 92, 75.912/- which is duly reflected in books of account of M/s Merit Magnum Construction was further explained that the nomenclature cash is pertaining to actual expenses incurred which meant actual outflow of funds and not in relation to expenses having been actually incurred in cash. This noting was made for getting funds in the form of Security Deposit from the JDA partner. It is also evident that in the same page in expenses spent up-to 31st March 09. Therefore, these expenses pertains to period ending 31.03.2009 i.e. relevant to A Y 2009-10 and on this ground itself the addition cannot be made in A.Y 2011-12. 17. In the case of CIT vs. Usha Stud Agricultural Farms Ltd - [301 ITR 384] - [Delhi High Court] held that since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessed, does not pertain to the year under consideration, under these circumstances, the Assessing Officer was not justified in making the impugned addition under Section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A). Further, in the case of Rita Stephen Pinto v/s. ITO [ITA No. 1219/Mum/2013] [ITAT Mumbai] - [March 2015]Section 68 stipulates that any unexplained sum found credited in the books of the assessee for any previous year, then the same may be taxed as income of the assessee for that previous year. Thus, section 69 of I.T. Act can only be invoked if the transaction has been taken in the relevant previous year for which assessment is being made and not the transaction taken in the earlier years. The Legislature has laid down
22 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to Income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 18. The Hon. Supreme Court, in Kale Khan Mohd. Hanif vs. CIT pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. If the prima facie inference on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue... Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to prove the matter further the AO must make proper enquiry before making any addition. In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.), it has been held that empowers the Assessing officer to make enquiry. If he is satisfied that these entries are not genuine he has every right to add these as Income from other sources. But before rejecting the assessee's explanation, A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. The AO had not made further enquiries to find out the truth regarding the genuineness of the transactions.
23 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 19. The Hon'ble Delhi High Court in the case of Bansal Strips (P.) Ltd. vs. ACIT 99 ITD 177 (Delhi) is held that in absence of adequate material as to nature and ownership of transaction, undisclosed income cannot be assessed in hands of assessee merely by arithmetically totalling various figures jotted down on loose documents found during search. The Hon'ble ITAT, Jaipur in the case of DCIT vs. Countrywide Buildstate (P.) Ltd. (2013) 35 taxmann.com 523 is held that for making addition under s.69B, the onus is on the Department to prove positively that the appellant has made unaccounted investment and this onus cannot be discharged merely by rejecting the explanation given by the appellant. The Hon'ble Delhi High Court in the case of Mahaan Foods Ltd. v. Dy. CIT (2009) 27 DTR 185/(2010) 123 ITD 590 (Del). held that although the contents of the relevant seized documents show that the amounts mentioned therein relate to some expenditure, in the absence of any other evidence found during the course of search or brought on record by the AO to show that the said expenditure was actually incurred by the assessee the same cannot be added to the undisclosed income of the assessee. 20. In view of the above discussion, we found force in the submission and argument or the appellant. The appellant has submitted sufficient evidence and proved that the said expenses are referred for discussion purposes. Further, it is also appear from Impounded documents that the notings were pertains to the period F.Y 2008-09. The said transaction has no implication for the A.Y. under consideration i.e. A.Y.2011 12. Further, the A.O. has neither established the nexus between the notings and business of appellant. Any document or entry recorded in the documents should be corroborated with positive finding. The documents found and seized might raise a strong suspicion but it could not be held as
24 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction conclusive evidence. The addition was made by you on the basis of statement. The statement of person is not sufficient evidence for making addition. The statement is an indicative only. Onus is upon the A.O. to prove that the document as undisclosed transaction of assessee. This onus has not been discharged. Accordingly no addition of undisclosed income could be made on the basis of such a document. Further it is also appears from notings that the notings and jottings were pertaining to the period F.Y.2008-09. 21. To further corroborate the contention of the appellant that the said transaction of Rs. 6 Cr is not unaccounted, reference is drawn to another noting and jotting i.e. transaction of Rs. 11 Crores reflected on the same page which is also duly accounted in the books. In view of the above observations, we are of the considered opinion that the noting and jotting of '6 Cr' pertains to the period F.Y. 2008-09 which is also reflected on the same impounded page and does not have any implications in A.Y. 2011-12. In view, of this ground nos. 3, 4 and 5 are dismissed. 22. With reference to Ground Nos. 6, 7 & 8, we have gone through the order of AO, order of Ld. CIT (A) and detailed submissions of the assessee. The AO based on impounded loose paper numbered 52 of Annexure A-19 has made addition of the same u/s 69C on the reasoning that the such type of expenses are common in construction type of business. The AO was of the view that no businessman will record such transaction on paper unless the same has taken place. Based on the said contention, the AD rejected the submission of the appellant made during the course of assessment proceedings and treated the same as unexplained cash expenses in the hands of the appellant u/s 69C of the Act.
25 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 23. The observations of the AO and the arguments and submissions of the appellant were carefully perused. During the appellant proceedings, the appellant has stated that there are many instances when a business proposals are being discussed by businessmen and he may make certain noting and jotting during the course of discussions/meetings or while evaluating any proposal. There are numerous judicial pronouncements which have held that not every noting and jotting of transaction in the Impounded and/or seized material would be an unaccounted transaction. At the outset this view of the Assessing Officer is rejected. Further, the AO merely on the basis of notings and jottings of 2.5 yrs back - 2.5 Crs by Hemant Doke' made addition u/s 69C of the Act without rebutting the explanation of the appellant to the Impounded page no. 52. 24. During the course of appellate proceedings, the appellant explained that the said impounded page has reference to various comparators and their associates like Mr. Hemant Doke, Mr.Pathak etc. There is also reference to Mr. Vikas Jain who according to appellant has taken over the Wadala SRA Project and represents to SRA department to be Developer on record and there are various cases pending at various forums. It has reference about the discussion by committee members that Mr. Vikas Jain of M/s Vee Corporation and about his involvement since last 2.5 years and his contacts & relations with Mr. Hemant Doke. The noting and jotting '2.5 yrs Back-2.5 Crs by Hemant Doke' was made during meeting and is related to various points raised by SRA Committee members Wadala Village Welfare Co-Op Housing Society Ltd. It does not refer to any payment by the appellant. It has been further contended by the appellant that the noting is made in the diary on 1/7/2010 and reference is to Rs. 2.5 Crs- 2.5 year back which goes to imply that if at all the transaction has taken place it
26 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction does not pertain to AY.2011-12. The said noting and jotting are mere rough in nature. The appellant states that it has not entered into any transaction of Rs. 2.5 Crores with Mr. Hemant Doke either as payment or as receipt. However, the AO has neither rebutted the explanation of the appellant nor brought on record any cogent finding that the transaction pertains to the appellant nor commented on the appellant's explanation. 25. The Hon'ble Delhi High Court in the case of Bansal Strips (P.) Ltd. vs. ACIT JTD 177 (Delhi) is held that in absence of adequate material as to nature and ownership of transaction, undisclosed income cannot be assessed in hands of assessee merely by arithmetically totalling various figures jotted down on loose documents found during search. The Hon'ble Hyderabad High Court in the case of DCIT vs. C. Krishna Yadav [2011] 12 taxmann.com 4 (Hyd.)is held that Section 69 of the Income-tax Act, 195)- Unexplained Investments-Assessment year 2002-03 - A search was carried out at residential premises of assessee by special Investigation team -In course of search, some loose papers/documents were seized On basis of said seized documents, Assessing Officer opined that assessee had made undisclosed Investment in various movable properties - He thus made addition to assessee's taxable income under section 69- On appeal, Commissioner (Appeals) deleted addition in respect of some of properties. On instant appeal, it was noted that addition was made by Accessing Officer only on basis of note books/loose slips which were unsigned. Further, Assessing Officer had not established nexus between note book/loose slips and business of assessee- There was no narration regarding address of parties concerned - Whether on facts, there was no valid seized material on record to come to conclusion that assessee had actually made investment in various properties Held, yes - Whether,
27 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction therefore, impugned addition made by Assessing Officer was to be deleted- Held, yes 26. The Hon'ble ITAT, Jaipur in the case of DCIT vs. Countrywide Buildstate (P.) Ltd. (2015) 35 taxmann.com 523 is held that for making addition under s.698, the onus is on the Department to prove positively that the appellant has made unaccounted investment and this onus cannot be discharged merely by rejecting the explanation given by the appellant. Such addition to be made under s.698 is contra distinct from the claim of the deduction or allowance made by the assessee wherein the addition can be made if the evidence so furnished or explanation so given by the appellant is found to be lacking or incorrect/reject able. In the case of addition under 5.69, the AO has to bring positive material to establish unaccounted investment/payment. In the instant case, no positive material could be brought out on record to establish that the impugned seized page in column No.4 reflects the actual cost of the properties named in column No.3 27. The Hon'ble Delhi High Court in the case of Mahaan Foods Ltd. v. Dy. CIT (2009) 27 OTR 1052010) 123 TTD 590 (Del) held that although the contents of the relevant seized documents show that the amounts mentioned therein relate to some expenditure, in the absence of any other evidence found during the course of search or brought on record by the AO to show that the said expenditure was actually Incurred by the assessee the same cannot be added to the undisclosed income of the assessee by Invoking the provisions of Sec. 69C- Assessee explained that the said entries represented estimates made by its employees in respect of
28 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction proposed expenditure-There is no evidence on record to rebut/controvert the said explanation Additions not sustainable. 28. Further the Hon'ble Delhi Tribunal in the case of Rakesh Goyal v. Asstt. CIT (2004) 87 TT) (Del.) 151 is held the finding of Hon'ble Tribunal was as under: “After perusing the findings of the CIT (A) and the submissions of both the parties, we do not find any infirmity in these findings. Firstly the finding of the CIT (A) has not been controverted by the learned Departmental Representative by filing any positive evidence. The copies of the pages found from the possession of the assessee are placed in the paper book and after going through these papers, we find that these are simply deaf and dumb documents and they cannot be considered for making any addition. This is a settled principle of law that any document or entry recorded in those documents should be corroborated with positive evidence. Here in the present case nothing has been corroborated or proved that assessee was dealing in money lending business.’ 29. From above discussion, it is found that various Courts have time and again held that in the case of addition u/s 69, the AO has to bring positive material to establish unaccounted investment/payment. It is clear from above discussion that the A.O. has not established the nexus between the noting and business of assessee. It is a settled principle of law that any documents or entry recorded in the documents should be corroborated with the positive finding. The document found and seized might raise strong suspicion, but it could not be held as conclusive evidence without bringing some corroborative material on record. On the basis of such a document, it cannot be said that there were cash transaction by the assessee. Onus is upon the A.O. to prove and find out the truth of facts. This onus has not been discharged. Accordingly no addition of undisclosed income could be made on the basis of such a document.
29 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 30. In the instant case, no positive material has been brought out on record to establish that the alleged expenses 2.5 Crs by Hemant Doke on the impugned Impounded page no. 52 is unaccounted expenses of the appellant. Even otherwise, the notings reflect the words 'by Hemant Doke and not to Hemant Doke'. Section 69 of I.T. Act can only be invoked if the transaction has been taken place in the relevant previous year for which assessment is being made and not the transaction taken in the earlier years. We have examined the contents of the document, date on the impounded paper, explanation of the appellant and the very fact that it refers to 2.5 yrs back’ It implies that the said transaction does not pertain to A.Y.2011-12. In the absence of any clear finding by the AO and from the above observations, the addition of Rs. 2,50,00,000/- can’t be confirmed. . In view, of this ground nos. 6, 7 and 8 are dismissed. 31. In the result, appeal filed by the Revenue is dismissed. ITA No. 3762/Mum/2018 for A.Y. 2012-13 32. Ground No. 1 & 2 are similar to what we have decided in ITA No. 6655/Mum/2016 (supra). The findings will be the same and applicable mutatis mutandis for this year also. Hence, Ground No. 1 & 2 raised by Revenue for this year also are dismissed. 33. In the result, appeal filed by the Revenue is dismissed. ITA No. 6657/Mum/2016 for A.Y. 2010-11 34. Ground No. 1 & 2 are similar to what we have decided in ITA No. 6655/Mum/2016 (supra). The findings will be the same and applicable mutatis
30 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction mutandis for this year also. Hence, Ground No. 1 & 2 raised by Revenue for this year also are dismissed. 35. Ground No. 3- During the A.Y.2010-11, the assessee has received interest of Rs.4, 65, 80,794/- the break-up of which is as under: i. Interest earned on Loans Given- Rs. 3, 56, 79,645/- ii. Interest paid to Allahabad Bank of Rs. 1, 09, 01,149/- transferred to Supernal Realtors Pvt. Ltd. The said interest income of Rs.4, 65, 80,794/- has not been credited to Profit & Loss A/c but has been credited to Work-In-Progress. The AO in the assessment order has observed that interest earned on loans given of Rs.3, 56, 79,645/- by no stretch of imagination can be reduced from WIP. The interest income set-off against the WIP helps assessee in reducing the WIP and thus increasing its profit on which assessee wished to claim tax holiday in the form of deduction u/s 80- 1B(10) available for the undertaking engaged in the business of developing and building housing projects. Thus by doing so, the assessee has reduced its WIP resulting in increase of eligible profits. The profit shown by the assessee is to tune of Rs.1, 81, 22,323/- on which deduction u/s 80-IB (10) is claimed. If the interest income which is not eligible for deduction u/s 80-IB (10) is reduced from the eligible profits, the same turns into loss as the interest income credited to P&L A/c. is more than the profits declared. Therefore in such case as there is no profit from the eligible business, the assessee is not entitled for deduction u/s 80 IB (10) of the Act. In view of the same the AO treated the interest income of Rs.4, 65, 80,794/- as Income from Other Sources.
31 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction The AO's observations in the assessment order and remand report, assessee’s submissions during the appellate proceedings and replies to the remand report were carefully perused. The assessee had during the course of its business, received funds against the advance from customers on account of purchase of flats. These funds were not required for immediate utilisation for the construction; the funds available were temporarily advanced as loans and Bank FDs. from which interest income was earned. In respect of the addition on account of interest earned on loans given of Rs.3,56,79,645/-, We agree with the view of the AO that the earning of interest income has no nexus to the business activity of the appellant so as to reduce the WIP and thereafter claim the benefits of deduction u/s 80-1B(10). The interest earned of Rs.3, 56, 79,645/- is in the surplus funds of the assessee which has no bearing or nexus to the WIP, it is purely in the nature of Income from Other Sources and not income earned during the course of business of the assessee. It is not the case that funds were not required for construction and the same were advanced to earn Interest. In view of the above, we confirm the treatment of interest earned of Rs.3, 56, 79,645/- as income from other sources by the Assessing Officer and Ld. CIT (A). During the appellate proceedings bore the Ld. CIT (A), the assessee had stated that the appellant had paid interest to Allahabad Bank ofRs.1, 10, 79,675/- during A.Y. 2009 10 on term loan for the period 01-04-2008 to 31-03-2009. The said interest paid to Allahabad Bank of Rs.1, 10, 79,675/- was transferred to WIP of the project Everest Mile Stone as on 31-03-2009. Subsequently, the assessees had formed a Special Purpose Vehicle (SPV) with Supernal Realtors Pvt. Ltd. (SRPL) for
32 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction the project of Everest Mile Stone and as per assessee’s understanding with SRPL, finance cost of Rs.1, 10, 79,675/- should be borne by SRPL. The said interest was required to be reversed from WIP as the same was to be borne by SRPL. The said interest of Rs.1, 09, 01,149/- by no stretch of imagination is interest income in the hands of the assessee but transfer of liability to SRPL. Accordingly, the interest paid to Allahabad Bank of Rs. 1, 10, 79,675 in the A.Y. 2009-10 was transferred to Supernal Realtors Pvt. Ltd in A.Y. 2010-11 by passing of accounting entry on 01.04.2009 and crediting the net interest of Rs. 1, 09, 01,149 to the WIP of the project Everest Milestone (Wadala) in A.Y. 2010-11.The assessee had submitted details of transaction and summary of above transactions and accounting entries are summarized in tabular form as under: A.Y. 2009-10-Accounting Treatment for Interest Paid to Amount (Rs.) Allahabad Bank Interest paid to Allahabad Bank in A.Y. 2009-10 1,10,79,675 Interest paid to Bank added as cast to WIP as on 1,10.79,675 31.03.2009
AY. 2010-11-Accounting Treatment for Interest Amount (Rs.) Reversal Reversal of Interest paid-Amounts transferred to SRPL -1,10,79,675 (Accounting Entry for Transfer of interest liability to SRPL) Interest paid to Allahabad Bank-AY 2010-11 2,18,630 Penal Interest reversal by Allahabad Bank -40,104 Interest Reversal Credited to WYP -1,09,01,149
33 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction
From the above facts, it can be observed that there is no interest Income earned by the assessee but it is actually interest paid to Allahabad Bank debited to WIP in A.Y. 2009-10 which is accounting entry only and it is reversed in A.Y. 2010-11. The assessee has rightly reduced the WIP to that extent in A.Y.2010-11 since earlier in A.Y.2009-10 the interest paid to Allahabad Bank was forming part of WIP. The observation of the AO are factually incorrect as there is no receipt of any Income per se, rather it is reversal of the Interest paid to Allahabad Bank of Rs.1,09,01,149/- which was earlier debited to WIP. The reversal of interest expenses from WIP by crediting the same in the year does not amount to interest income of the assessee. 36. We do not found any deficiency in the contentions of the assessee and consequent order of the Ld. CIT (A). Hence, we are not inclined to interfere in the order of Ld. CIT (A). In these terms ground No. 3 raised by the Revenue is dismissed. Ground No.4 & 5- There was Survey u/s 133A of 1. T. Act, 1961 on appellant's office at Chembur and various site offices, on 24th and 25th January 2012. In the course of survey proceedings, various pads, diaries and loose papers were impounded. The AO based on impounded loose paper numbered 41-43 of Annexure B-3 has made addition of the Rs.3, 97,997/- u/s 68. The AO in the order has stated that the assessee was provided with all the loose papers / documents after survey and sought page-wise details of transactions and its reflection in its books of accounts. It is stated by the AO that in all the statements recorded in response to 131 of the Act, assessee procrastinated in providing of details and
34 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction even till the date of the order, no details are provided. The AO was of the opinion that the cash transactions reflected in the impounded pages have not been recorded in its books of accounts. Accordingly, addition u/s 68 of the Act was made for the unaccounted cash receipts to the extent of Rs.3, 97,997/-. The AO in its remand report dated 07.10.2014 has referred to the impounded documents and stated the amounts were treated as unexplained and hence, liable to be assessed as income of the assessee as unaccounted business profits u/s 28 of the Act. Alternatively, since the amounts are claimed to be credited in the books of account by assessee, the same is liable to be added u/s 68 also as the source of the same is unexplained. In the said remand report the AO further raised another alterative plea that since the transactions of 'compensation for late payment received' are in the nature of 'compensatory interest' to be taxed as 'income from other sources'. During the appellate (proceedings, the appellant has submitted additional evidence before the Ld. CIT (A). The same has been forwarded to the A.O. for remand report. The observation of remand report forwarded to the assessee and assessee had submitted comments upon the remand report. The submission of the assessee furnished in response to the AO's remand report is reproduced as under by Ld. CIT (A):
“The relevant extracts of the AO's observation at Para No. 17 of the order u/s 143(3), dated 29.03.2013 is as under: "Therefore, it is not out of place to mention that the cash transactions have not been recorded in its books of accounts...........In view of the above, the cash
35 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction receipts recorded on these loose papers are treated as unexplained cash credits u/s 68 of the Income Tax Act” The relevant extract of the AO's observation at Sr. No. II of Page No. 4 of Remand Report dated 07.10.2014 is as under: "ii. The assessee has raised a technical ground that the AO has on one hand treated the amounts as unaccounted & on other hand added the same under Section 68 of the IT Act. It is submitted that the amounts were treated as unexplained and hence, liable to be assessed as income of the assessee as unaccounted business profits u/s 28 of the Act. Alternatively, since the amounts are claimed to be credited in the books of account by assessee, the same is liable to be added u/s 68 also as the source of the same is unexplained as is discussed in subsequent paragraphs." The details of cash receipts or explanations to impounded pages were never sought by the AO There was Survey u/s 133A of 1. T. Act, 1961 on appellant's office at Chembur and various site offices, on 24th and 25th January 2012. In the course of survey proceedings, various pads, diaries and loose papers were impounded. As required by Learned Assessing Officer the same were explained in the post survey proceedings by partner and staff in the course of recording statements u/s 131 of I.T. Act 1961. No further explanations were sought from the assessee in the assessment proceedings. Now it is not open for the AO to contest that the source is unexplained which even otherwise is reflected in the impounded page itself.
36 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction Accordingly, the allegations that the cash receipts were unexplained and thereby taxing the same is against the principles of natural justice.
Impounded material itself provides entire details of cash transaction. The said impounded pages (refer Pg. No.63-64 and 71-72 of the Paper book) by itself provides all details in relation to the cash receipts and details of the same being accounted in the books of account. The dates of deposits in bank account are reflected in the said impounded pages. The AO ought to have accepted the same as accounted which if otherwise should have been confronted to the appellant. However, no explanations were sought from the appellant nor any show cause notice in this regard was issued. The AO presumed the same as unaccounted thereby violating the principles of natural justice. There is no clarity about the section alleged to be contravened by the appellant The order u/s 143(3) was passed on the opinion that the cash transactions are not recorded in the books and addition u/s 68 was made. The remand report dated 07.10.2014 states that the cash receipts were unexplained and to be assessed as unaccounted business profits u/s 28 or alternatively be added u/s 68 as the source of the same is unexplained. The details of cash receipts as 'compensation for late payment' and 'sale proceeds from flat buyers' are itself reflected in the impounded pages and thereby cannot amount to 'after thought' as alleged by the AO.
37 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction Since the said cash receipts are duly accounted in the books of account there is no question of treating the same as unaccounted business profits u/s 28 of the IT Act, 1961. The details of cash receipts are elaborately reflected in the impounded pages itself and thereby the same cannot be considered as unexplained u/s 68. The said impounded pages reflect various detail namely, the customer name, building name, flat no. ERP receipt no. receipt date, amount, and nature of payment thereby. a) Identity of the buyer b) Genuineness of the transaction; and c) Creditworthiness of the buyer Is explained. Accordingly, the addition u/s 68 of the IT Act, 1961 is not warranted. Since the said income is already offered to tax by the appellant, addition either u/s 28 or 68 will amount to double taxation of the same. The assessee has received payments from buyers through proper banking channel and very nominal amounts like Rs. 1,000 Rs. 2, 15,000/- have been received in cash. The AO's assumption that 'normally, the payments from buyers are received through cheque / Demand Draft is not acceptable as normally the buyers pay token monies and also part payments in cash. The AO's observations in the assessment order and remand report, assessee's submissions during the appellate proceedings and reply to the remand report and the impounded pages in this regards were carefully perused. It is observed that
38 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction while passing the assessment order u/s 143(3) the AO was of the opinion that the cash transactions in the impounded pages were not reflected in the books of accounts and that they were unaccounted cash receipts thereby taxing the same u/s 68 of the Act. The AO on one hand has stated that the assessee had till the passing of the order not furnished the explanations called for whereas the appellant has argued that pursuant to recording of statement u/s 131 no further explanations were sought from the assessee in the course of assessment proceedings and no opportunity was given to explain the same. Now, following the principles of natural justice the appellant was given proper opportunity and submissions furnished are considered and this ground of appeal is accordingly adjudicated. 11.2 The Section 68 of the Act is in relation to "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof. The addition u/s 68 is to be made only in relation to transactions recorded in the books of the assessee. When the AO opines that transactions are not recorded in the books the same cannot be taxed u/s 68 of the Act. At the outset, the AO has made addition under wrong section of the Act and is hereby deleted. This ground, even on the merits is discussed herein below. The impounded page no.41-43 of Annexure B-3 were carefully perused and it is observed that the assessee has received total sum from customers of Rs 3,98,997/- (wrongly considered at Rs. 3,97,997 by the Learned AO) in cash. The said Impounded page itself reflects the nature, source and purpose of cash receipts namely customer name, building name, flat no. ERP receipt no. date of
39 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction receipt, amount, purpose, date of deposit in bank and bank a/c no. In the present case of the assessee the identity of the buyer; genuineness of the transaction; and creditworthiness of the buyer has been proven. Further, the same page no. 43 also reflects noting 'All cash deposited by Sales in A/c dept is timely deposited in Bank - Cash to be deposited in Bank is NIL' and the appellant has also satisfactorily demonstrated that the said cash transactions are duly recorded in the books of account. Copies of bank statements of the appellant were verified which reflected the cash receipts deposited in the bank accounts. The said impounded page / statement reflect various details as under:
Sr.No Customer Bldg. ERP Receive Amount Payment Bank Bank Remarks Name Name Receipt d Date Against Deposit A/c & Flat No. Date No. No.
The cash received from customers as reflected in the impounded paper have been duly deposited in the bank account of the assessee. The impounded pages itself which provides the date of deposits in the bank and the bank account in which the amounts have been deposited. The said cash has been deposited in HDFC Bank of the appellant on various dates as per details mentioned below:
Sr. No. HDFC Bank Account Date of deposit Amount No. 1 01462000017053 09.12.2009 11,040 2 01462000017053 23.12.2009 1,00,000
40 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 3 01462000017053 30.12.2009 97 4 01462000017053 30.12.2009 717 5 01462000017053 30.12.2009 770 6 01462000017053 09.12.2009 33,218 7 00602730000142 09.12.2009 8,571 8 00602730000142 09.12.2009 2,42,915 9 00602730000142 23.12.2009 1,000 10 00602730000142 30.12.2009 669 Total 3,98,997
From the above details it can be observed that receiving cash from customers is in the course of business which is duly deposited in bank. It is clear that all the cash receipts are received during the course of business of the appellant and the same are duly accounted in the books of account. In this regard, during the course of remand proceedings the appellant had furnished copies of Affidavits from the buyers / purchasers of the flat in relation to payments made towards their respective flats before the A.O. Therefore, there is no unaccounted cash receipt as found by the AO but the same is reflected in the books of account. As far as the alternate plea of the AO in its remand report is considered for treating the said compensation for late payment received of Rs.3,97,997/- the said Income is directly in relation to the business activity of the appellant and
41 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction requires to be taxable as 'business income' only and not as 'Income from Other Sources'. Therefore, the addition of Rs.3, 97,997/- cannot be sustained. In view of the above, the addition of Rs.3, 97,997/- is hereby deleted. This ground of appeal is allowed. 12. Ground No. 5: The AO based on another impounded loose paper numbered 90-91 of Annexure B-3 has made addition of the Rs.4, 35,584/- u/s 68. The AO in the order has stated that the assessee was provided with all the loose papers / documents after survey and sought page-wise details of transactions and its reflection in its books of accounts. The AO was of the opinion that the cash transactions reflected in the impounded pages have not been recorded in its books of accounts. Accordingly, addition u/s 68 of the Act was made for the unaccounted cash receipts to the extent of Rs.4, 35,584/-. The AO in its remand report dated 07.10.2014 has referred to the impounded documents and stated the amounts were treated as unexplained and hence, liable to be assessed as income of the assessee as unaccounted business profits u/s 28 of the Act. Alternatively, since the amounts are claimed to be credited in the books of account by assessee, the same is liable to be added u/s 68 also as the source of the same is unexplained. In the said remand report the AO further stated that normally the payments from buyers are received through cheque / demand and therefore the claim of the appellant that the cash receipts are from flat purchasers is not trustworthy and an 'after thought'. The AO's observations in the assessment order and remand report, assessee's submissions during the appellate proceedings and reply to the remand report and the impounded pages in this regards were carefully perused. It is observed that
42 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction while passing the assessment order u/s 143(3) the AO was of the opinion that the cash transactions in the impounded pages were not reflected in the books of accounts and that they were unaccounted cash receipts thereby taxing the same u/s 68 of the Act. The AO on one hand has stated that the assessee had till the passing of the order not furnished the explanations call for whereas the assessee has argued that pursuant to recording of statement u/s 131 no further explanations were sought from the appellant in the assessment proceedings and no opportunity was given to explain the same. Now, following the principles of natural justice the assessee was given proper opportunity and the submissions furnished are considered and this ground of appeal is accordingly adjudicated. The Section 68 of the Act is in relation to "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof. The addition u/s 68 is to be made only in relation to transactions recorded in the books of the assessee. When the AO opines that transactions are not recorded in the books the same cannot be taxed u/s 68 of the Act. At the outset, the AO has made addition under wrong section of the Act and is hereby deleted. This ground, even on the merits is discussed herein below. The impounded page no.90-91 of Annexure 8-3 were carefully perused and it is observed that the assessee has received total sum received from customers is Rs 4, 36,584/- in cash. The said impounded page itself reflects the nature, source and purpose of cash receipts namely customer name, building name, flat no. ERP receipt no. date of receipt, amount, purpose, date of deposit in bank and bank a/c no. In the present case of the appellant the Identity of the buyer; genuineness of
43 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction the transaction; and creditworthiness of the buyer has been proven. Further, the assessee has also satisfactorily demonstrated that the said cash transactions are duly recorded in the books of account. Copies of bank statements of the assessee were verified which reflected the cash receipts deposited in the bank accounts.. The impounded Page No. 90-91 is 'Statement of Cash Received from Customers for the period 01.09.2009 to 30.03.2009. The total sum received from customers is Rs.4, 35,584/-. Impounded page/ are submitted by assessee are as under: Sr.No Customer Bldg. ERP Receive Amount Payment Bank Bank Remarks Name Name Receipt d Date Against Deposit A/c & Flat No. Date No. No.
The cash received from customers as reflected in the impounded paper have been duly deposited in the bank account of the assessee and is reflected in the regular books of accounts. This is explicitly evident from the impounded page itself which provides the date of deposits in the bank and the bank account in which the amounts have been deposited. The said cash has been deposited in HDFC Bank of the appellant on various dates per details mentioned below: Sr.No. HDFC Bank A/c No. Date of Amount Deposit 1. 01462000017053 29.09.2009 1,000 2. 29.09.2009 2,15,000 01462000017053 3. 01462000017053 29.09.2009 1,64,500
44 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 4. 00602730000142 11.09.2009 32,715 5. 00602730000142 29.09.2009 13,722 6. 00602730000142 29.09.2009 8,650 Total 4,35,587
From the above details it can be observed that receiving cash from customers is in the course of business which is duly deposited in bank. It is clear that all the cash receipts are received during the course of business of the assessee. In this regard, during the course of remand proceedings the assessee had even furnished before the AO, copies of Affidavits from the buyers / purchasers of the flat in relation to payments made towards their respective flats. Therefore, there is no unaccounted cash receipt as observed by the AO. As far as the additional observation of AO in the remand report that the amounts having been received from flat purchasers is not trustworthy and is an 'after thought' is not correct. We fail to accept the same since the very same impounded page very explicitly reflects that the cash receipts are from flat purchasers (customer name, building name, flat no. etc) also depicting the bank account in which the same is deposited and it cannot by no stretch of imagination tantamount to an ‘after thought’. Therefore, this contention of the AO is also rejected. In view of the above, the addition of Rs.4, 36,584/- is hereby deleted. This ground of appeal is allowed.
45 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction
The AO based on another impounded loose paper numbered 85 of Annexure B-3 has made addition of the Rs.1, 57, 65,105/- u/s 68. The AO in the order has stated that the assessee was provided with all the loose papers / documents after survey and sought page-wise details of transactions and its reflection in its books of accounts. It is stated by the AO that in all the statements recorded in response to 131 of the Act, assessee procrastinated in providing of details and even till the date of the order, no details are provided. The AO was of the opinion that the cash transactions reflected in the impounded pages have not been recorded in its books of accounts. Accordingly, addition u/s 68 of the Act was made for the unaccounted cash receipts to the extent of Ps.1, 57, 65,105/-. The AO's observations in the assessment order and the assessee's submissions during the appellate proceedings were carefully perused. It is observed that while passing the assessment order u/s 143(3) the AO was of the opinion that the cash transactions in the impounded pages were not reflected in the books of accounts and that they were unaccounted cash receipts of the appellant thereby taxing the same u/s 68 of the Act. The AO on one hand has stated that the appellant had till the passing of the order not furnished the explanations called for whereas the assessee has argued that pursuant to recording of statement u/s 131 no further explanations were sought from the appellant in the assessment proceedings. Now, following the principles of natural justice the submissions furnished are considered and this ground of appeal is accordingly adjudicated.
46 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction The Section 68 of the Act is in relation to "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof. The addition u/s 68 is to be made only in relation to transactions recorded in the books of the assessee. When the AO opines that transactions are not recorded in the books the same cannot be taxed u/s 68 of the Act. At the outset, the AO has made addition under wrong section of the Act and is required to be deleted. This ground, even on the merits is discussed herein below.
The impounded page no.85 of Annexure B-3 were carefully perused and It is observed that the said page reflects a chart of party-wise group-wise investment with break-up of principal amount into 'cheque' and 'cash', interest on total principal amount and 'amount required to dissolve 5 Star with all the assets and liability. The appellant has stated that the said impounded page does not reflect the transactions pertaining to the appellant but belongs to M/s Five Start Developer Group. Further appellant has stated that the AO has not demonstrated as to how the cash amount of Rs.1, 57, 65,105/- pertains to a transaction of the appellant. The said impounded page / statement reflect various details as under:
INVESTMENT TOTAL TOTAL WITHDRAWAL BALANCE INTEREST ON TOTAL Amount GROUPWISE PRINCIPAL AMOUNT PRINCIPAL PRINCIPLE PRINCIPAL+ REQUIRED TO AMOUNT AMT AMOUNT INTEREST DISSOLVED 5 STAR WITH ALL CHEQUE + CHEQUE+ 24% PER THE ASSET AND CASH CASH ANNUM FOR 2 LIABILITY YEARS
The appellant has stated, during the appellate proceedings, that the said impounded page / excel working was related with M/s Five Star Developers Group The said impounded page clearly depicts the names of the group members
47 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction of M/s Five Star Developers, their Investments made I.e. the principal amount which is broken up into two parts namely cheque and cash. The impounded page clearly reflects in the first column investment group wise by aggregators, principal amount cheque, Cash, withdrawals, interest and amounts required to dissolve 5 Star with all assets and liabilities, etc. Appellant further stated that none of the transactions whether the cheque receipts or withdrawals are pertaining to the appellant. During the appellate proceedings, assessee has stated that he had entered into Agreement for Sale cum Assignment cum Development Deed dated 02.08.2007 with M/s. Five Star Developers where the seller parties are the same as reflected in the impounded page. The detailed break-up of payments made in cheques of Rs. 5.30 crores were also furnished. Further stated that in the bottom of the said impounded page there is handwritten noting of '5.31' by the appellant partner. The said noting is negotiation of deal. It is also appear from Agreement for Sale cum Assignment cum Development Deed dated 02.08.2007 executed between M/s. Five Star Developers - Vendors/Assignors and M/s. Vimal Builders - Developers/Assignees (Assessee) that assessee have paid to individual partners of the firm M/s Five Star Developers as per following chart: Sr.No. Payment made in cheque to Period Amount (Rs.) 1 Star Celebrate 13.08.2007- 1,73,14,000 27.05.2008 2 Amrutial Patel 15.08.2007- 63,31,000 28.05.2008 3 Kantilal G. Marivania 18.08.2007- 42,05,000 27.05.2008 4 Sameer A. Patel 21.05.2007- 8,00,000 01.05 2008
48 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction 5 Spimwell Polyplast 24.08.2007- 41,50,000 27.05.2008 6 SSJ Builder & Developers 27.08.2007- 12,00,000 01.05.2008 7 Perfect Services 30.08.2007- 20,00,000 05.05.2008 8 Gyandeep Real Estate 20.08.2007- 37,00,000 24.12.2007 9 Kailash Yadav 11.08.2007- 27,50,000 12.12.2007 10 Omkar Builders 27.08.2007- 27,50,000 28.12.2007 11 Paul Bartholomeo 31.08.2007- 25,00,000 31.05.2008 12 Ms Five Star Developers 10.08.2007- 53,00,000 29.10.2007 Total 5,30,00,000 From the said agreement it can be observed that the assessee had paid Rs. 5.30 crores against the said transaction in the F.Y. 2007-08 and F.Y. 2008-09 relevant to A.Y. 2008-09 and A.Y. 2009-10. The assessee has explained that the said excel working was given by M/s Five Star Developers Group during the course of negotiation. The impounded page clearly depicts the names of the group members of M/s Five Star Developers, their investments made in cheque and cash (Rs.1, 57, 65,105/-). The total principal cheque amount is Rs.1, 83, 31,350/- and the total principal cash amount is Rs.1, 57, 65,105/-. Each cash transaction is reflected party-wise/group-wise adjacent / corresponding to each cheque transaction. The Hon'ble Delhi High Court in the case of Bansal Strips (P.) Ltd. vs. ACIT 99 ITD 177 (Delhi) Is held that in absence of adequate material as to nature and ownership of transaction, undisclosed income cannot be assessed in hands of
49 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction assessee merely by arithmetically totalling various figures jotted down on loose documents found during search. The Hon'ble ITAT, Jaipur in the case of DCIT vs. Countrywide Buildstate (P) Ltd. [2013] 35 taxmann.com 523 is held that for making addition under s.698, the onus is on the Department to prove positively that the appellant has made unaccounted investment and this onus cannot be discharged merely by rejecting the explanation given by the appellant. The Hon'ble Delhi High Court in the case of Mahaan Foods Ltd. v. Dy. CIT (2009) 27 DTR 185/(2010) 123 ITD 590 (Del), held that although the contents of the relevant seized documents show that the amounts mentioned therein relate to some expenditure, in the absence of any other evidence found during the course of search or brought on record by the AO to show that the said expenditure was actually incurred by the assessee the same cannot be added to the undisclosed Income of the assessee. It is a settled principle of law that any documents or entry recorded in the documents should be corroborated with the positive finding. The document found and seized might raise strong suspicion, but it could not be held as conclusive evidence without bringing some corroborative material on record. On the basis of such a document, it cannot be said that there were cash transaction by the assessee. Onus is upon the A.O. to prove that the document gives rise to undisclosed transaction of assessee. This onus has not been discharged. Accordingly no addition of undisclosed income could be made on the basis of such a document. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. The legislative mandate is not in terms of the words "shall be charged to income-tax
50 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court In the case of CIT v. Smt. P. K. Nooriahan [1999] 237 ITR 570. Therefore, I find force in the submission and argument of the appellant. The appellant has submitted sufficient evidence and proved that the said transactions are not related with him. Further, the appellant has co-related with the impounded document that the said transaction pertains to FY 2007-08 and F.Y.2008-09 relevant to A.Y.2008-09 and A.Y.2009-10. It is also clear that since cheque transaction are not pertaining to the assessee; cash transactions also do not pertain to the assessee. Therefore, there is neither any unaccounted cash receipt nor cash transaction pertaining to the appellant. Further, the A.O. has neither established nor brought on record that the said transaction mentioned in the impounded documents pertains to the assessee. In view of the above, the ground no.5 raised by the Revenue is dismissed. 38. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open court on 23rd day of September, 2022. Sd/- Sd/- (AMIT SHUKLA) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 23/09/2022
51 ITA No. 6655, 6657 Mum 2016 & 3762 Mum 2018 M/s Merit Magnum Construction SK, Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकर आयु�(अ)/ The CIT(A)- 4. आयकर आयु� CIT 5. िवभागीय �ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाड� फाइल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai