DCIT CENT. CIR 5(3), MUMBAI vs. SHRI PARTH VINOD GADHIYA, MUMBAI

ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 Assesseeby : : Dr. P. Daniel, Advocate Department by : Shri A. K. Kardam, CIT D.R. Date of Hearing : 22.03.2022 Date of Pronouncement : 13.04.2022 आदेश / O R D E R PER BENCH : 1. The Revenue and the Assessee have filed the above mentioned appeals and cross appeals against the orders passed by the Ld. Commissioner of Income Tax (Appeals) – 53, Mumbai [hereinafter in short “Ld. CIT(A)”] for the Assessment Year/s 2014-15, 2015-16 and 2016-17.Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order.

Assessment Year : 2014- (Revenue Appeal) and 1705/Mum/2021 (Assessee’s Appeal) 3.1 Grounds raised by the revenue :

1. On the facts and circumstances of the case, the Ld. CIT(A) has erred while deleting the addition of profit derived from unaccounted on money of Rs. 1,09,82,023/-, in observing that there is uncertainty in ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 revenue being received and therefore, Accounting Standard-9 is applicable, hence, no income has accrued, despite the fact that the Assessing officer has considered receipts only to the extent offered by the assessee as income.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred, in observing that there is uncertainty in revenue being received and therefore, Accounting Standard-9 is applicable, hence, no income has accrued, despite the fact that the Assessing officer has considered receipts only to the extent offered by the assessee as income and thereby ignoring the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd us CIT (1997) 227 ITR 172, wherein the Hon'ble Supreme Court has categorically mentioned that accounting practice cannot override any provisions of the Act though this is a case where the income was already received as per the impounded records and is taxable U/s 5 of the Act.

3. On the facts and circumstances of the case, the Ld CIT(A) has erred in allowing expenses of Rs.1,16,83,600/- explicitly prohibited by law and those incurred for purposes other than business, ignoring incriminating material establishing the same and further, without any proper, reasonable and acceptable explanation of the assessee regarding the same.

4. On the facts and circumstances of the case, the Ld. CIT(A) has erred by ignoring the crucial relevant facts and has decided on inadequate and irrelevant facts and hence, the finding is perverse.

5. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made on account of bogus LTCG exemption claim arising out of the transactions in penny stocks Comfort Fincap and Sunrise Asian, ignoring the incriminating finding regarding 32000% rise in the share price of an infrequently traded scrip within a period of 6 months giving 15 times return, not providing information regarding investment decision, the lack of response from /absence at the specified address of the exit providers when investigated by the assessing officer, confirmations from the brokers regarding the dubious nature of the transaction, findings of the SEMI, and thereby perverse.

6. On facts and in circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 2,18,34,200/ granting relief without considering the Principals land down in the decisions of Hon ble Supreme Court in the cases of Sumati Dayal Vs. CIT (1995) 80 Taxman 89 (SC) and Durga Prasad Mare - CIT (1971) 82 ITR 5- 10 (SC) that apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the rest of human probabilities.

7. That the appellant craves to add, alter, modify or abrogate any grounds of appeal at the time of hearing.

ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 3.2 Grounds raised by the assessee :

1. The Ld. CIT(A) has erred in confirming the disallowance of Rs. 19,85,000/- pertaining to Land Development expenses identified by the Ld AO from the seized material adopting pick and chose approach which is erroneous and bad in law required to be annulled.

2. The Ld. CIT(A) has erred in confirming the disallowance of Rs. 11,35,000/- pertaining to plot purchase and plot PATE expenses identified by the Ld AO from the seized material adopting pick and chose approach which is erroneous and bad in law required to be annulled.

3. The Ld. CIT (A) has erred in confirming the disallowance of Rs. 7,66,000/- pertaining to brokerage expenses identified by the Ld AO from the seized material adopting pick and chose approach which is erroneous and bad in law required to be annulled.

4. The Ld. CIT (A) has erred in confirming the disallowance of Rs. 10,41,000/- pertaining to SLC work expenses identified by the Ld AO from the seized material adopting pick and chose approach which is erroneous and bad in law required to be annulled.

5. The appellant craves to add, amend, alter, substitute, and modify any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing. ITA no. 1529/Mum/2021 (Assessee’s Appeal) Assessment Year : 2015-16 4.1 Grounds of the assessee :

1. The Ld. CIT(A) has erred in confirming the part of estimation carried out by the Ld. AO of profit of Shakti Lake City project from seized material at Rs. 1,84,49,461/- adopting very high percentage of profit margin, which being erroneous needs to be deleted.

2. The appellant craves to add, amend, alter, substitute, modify any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing. (Revenue Appeal) and 1531/Mum/2021 (Assessee’s Appeal) Assessment Year : 2016-17 5.1 Grounds of the revenue :

1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs.8,81,06,919/- to Rs 1,11,83,684/- which was made by the Assessing officer on the basis of entries of ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 receipts relatable to specific units of plots sold after deducting the expenditure related to the business recorded in some impounded records by applying Accounting Standard-9 and holding that there is uncertainty in revenue being received and hence, no income has accrued, overlooking the fact that the receipts and payments were in the form of unrecorded cash transactions, and accounting standards were not applicable on the same.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in ignoring the decision of Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd us CIT/1997) 227 ITR 172, wherein the Hon’ble Supreme Court has categorically mentioned that accounting practice cannot override any provisions of the Act though this is a case where the income was already received as per the impounded records and taxable U/s 5 of the Act.

3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs.8,81,06,919/- to Rs. 1,11,83,684 /- , which was made by the Assessing officer by computing the profit on the basis of transactions recorded in books of accounts taken together along with the unaccounted cash receipts and payments recorded in impounded diaries and other documents. By holding that part of the revenue was not realized if accounting standards are applied and allowing certain expenditure which were disallowed by the assessing officer, ignoring the detailed reasoning and facts given by the assessing officer, even though the assessee has never disclosed the cash transactions before the department.

4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs.8,81,06,919/ to Rs.1,11,83,684/- based on the entries in the impounded records without giving any findings that, entries are not correct holding that the amounts received are mere advances by applying Accounting Standard 9, without confirming from sellers, or allowing the AO opportunity to verify the same.

5. On the facts and circumstances of the case, the Ld. CT(A) has erred in has erred in restricting the addition of Rs. 8,81,00,919/ to Rs 1,11,83,684/- of profit derived from unaccounted transactions by allowing expenses of Rs 71,01,796/- explicitly prohibited by law and those incurred for purposes other than business, ignoring incriminating material establishing the same and further, without any proper, reasonable and acceptable explanation of the assessee regarding the same.

6. On the facts and circumstances of the case, the Ld. CIT(A) has erred by ignoring the crucial relevant facts and has decided on inadequate and irrelevant facts and hence, the finding is perverse.

5.2 Grounds raised by the assessee : Page 5 of 12 A.Y.2014-15 & 2016-17 ITA No.1705, 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17

2. The appellant craves to add, amend, alter, substitute, and modify any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing.

6. The principal issue of dispute is with regard to determination of consolidated income of the assessee based on the unaccounted money received by the assessee from Shakti Lake City Project. The AO worked out accounted and unaccounted receipts and expenses under various heads from seized material and from submissions made by the assessee during the course of assessment proceedings and made additions to the returned income of the assessee for the respective assessment years under appeal. The additions made by the Ld. AO for the respective assessment years of unaccounted monies with regards to Shakti Lake City Project are as follows: Assessment Year 2014-15 Rs. 1,09,82,023 Assessment Year 2015-16 Rs. 2,25,73,084 Assessment Year 2016-17 Rs. 8,81,06,919

The Ld. CIT(A) in his common appellate order dt. 06.07.2021 for all the assessment years has dealt at length with the seized material evaluated by the Ld. AO, unaccounted on-money income worked out by the Ld. AO, submissions made by the assessee during the course of assessment proceedings, submissions and explanations provided by the assessee on more than one occassions, remand reports submitted by the Ld. AO, responses and rejoinders filed by the assessee, etc. during the course of appellate proceedings. The Ld. CIT(A) has worked out the unaccounted on-money receipts of the assessee on following lines: Table 1 (a) : A.Y. 2014-15 A.Y. 2015-16 A.Y. 2016-17 (Amounts as per Chart at Pt. 8.1.1 of the AO Order) Phase A 74,341,100 29,602,505 26,460,358 Phase B 66,786,511 18,832,152 18,616,311 Phase C 30,300,500 9,423,100 19,923,289 Owner Plot - 16,650,000 16,500,000 House Sell - 5,800,000 563,500 Plot Profit Sale 2,887,800 - - DTF 72,000 24,000 3,000 Dhirubhai - - 770,000 Golden ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 Makaan - - 5,000 Return - - 14,490 Less: Sales - - 4,831,000 - Return 21,174,000 Closing Stock * - - 43,465,029 153,213,911 75,500,757 126,320,977 (*Closing Stock working as per CIT (A) Order on -Page 92 Table 1 (b):

WORKING OF STOCK IN HAND AS ON 31.3.2016 : per Assessee per AO per CIT(A) Stock in Hand (in sq. yards) 3,501.04 10,471.38 9,859.66 Rate per sq. yard adopted 8,500.00 5,734.13 4,408.37 Closing Stock (in Rs.) 29,758,840 60,044,254 43,465,029 Reference (@ pt. 8.2.2 of (@ pt. 8.2.2.7 (@ pg. 92 of Assessment of Assessment CIT(A) Order) Order) Order) Further to this, before computing the income from the receipt of unaccounted money, the Ld. CIT(A) has deleted some of the disallowances of expenses made by the Ld. AO for detailed reasons mentioned in the appellate order and the summary of the allowable total expenditure in respect of Shakti Lake City Project as worked out by the Ld. CIT(A) is as follows: Table 2: Description Amount (in Rs.) Project Expenses as considered by the 27,75,89,984 AO from impounded and seized material Disallowance deleted out of Plan Passing 19,83,000 Expenses (Pg. 33 of CIT(A) Order) Disallowance deleted out of Plot 22,48,000 Purchase and Plot Pete Expenses (Pg. 35 of CIT(A) Order) Disallowance deleted out of Site 1,17,75,000 Expenses (Pg. 36 of CIT(A) Order) Disallowance deleted out of expenses 69,03,021 claimed from Loose Papers as per Annexure A-357 of seized material (Pg. 36 of CIT(A) Order) Total Expenditure of the Project as 30,04,99,005 worked out by the Ld. CIT(A)

ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 From the aforesaid workings, the Ld. CIT(A) has worked out the unaccounted income pertaining to Shakti Lake City Project on the following lines:

Table 3: Details AY. 2014-15 AY. 2015- AY. 16 2016- 17 Unaccounted On-money Receipts 15,32,13,911 7,55,00,757 12,63,20,977 % adopted by the AO for 51% 18% 31% proportionate allowance of expenditure at Pt. 8.4 in any of the assessment orders Proportionate % of total expenditure 15,32,54,492 5,40,89,820 9,31,54,691 of Rs. 30,04,99,005/- as worked out by CIT(A) Net Income of Shakti Lake City (-) 40,581 2,14,10,937 3,31,66,286 Project derived by the CIT(A) Income of the project considered by 6,60,996 29,61,476 2,19,82,602 the assessee in the Return of Income Additions confirmed by the CIT(A) -* 1,84,49,461 1,11,83,684 (Note: * The Income of the project for A. Y. 2014-15 considered by the assessee being higher, is not altered and hence adopted by the Ld. CIT(A))

Against the aforesaid additions confirmed by the Ld. CIT(A), re-computing and deleting the additions made by the Ld. AO as summarised hereinabove, the revenue has filed present appeals before us for the Assessment Years 2014-15 and 2016-17. The revenue has not filed any appeal for Assessment Year 2015-16 before us. The assessee has also filed appeals before us for the Assessment Years 2014-15, 2015-16 and 2016-17 against the order of the Ld. CIT(A). Before us the Ld. CIT D.R. contended that the additions made by the Ld. AO with regards to unaccounted on-money income of SLC Project be confirmed and the order of the Ld. CIT(A) be set aside for the Assessment Year 2014-15 and 2016-17. He further contended that the workings made by the Ld. AO based on impounded and seized material should be adopted without any alterations and reworkings made by the Ld. CIT(A) for the respective assessment years under appeal. The Ld. AR submitted before us that the working of unaccounted on-money income made by the Ld. CIT(A) is after considering the assessment order, remand report of the Ld. AO called during the appellate proceedings, rejoinder to the remand report and several submissions and explanations provided by the assessee during the course of appellate proceedings before the CIT(A).

ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 We have heard both the parties and perused the details, documents, assessment orders and the order of the Ld. CIT(A) on the issue of determining of unaccounted income from on-money in respect of SLC Project. The Ld. CIT(A) has reviewed the submissions made by the assessee in reference to the impounded and seized material, has also evaluated the remand report filed by the Ld. AO and the rejoinder to the remand report filed by the assessee, Accounting Standards laid down by the Institute of Chartered Accountants of India with regards to determination of income in context of Real Estate Projects. The Ld. CIT(A) has adopted the unaccounted on-money receipts for each of the assessment years as worked out by the Ld. AO and not disputed by the assessee before us as worked out in Table 1 above. The Ld. CIT(A) has also worked out the Stock in Hand at Rs. 43,465,029/- at Table 1(b) above based on seized material and impounded records which is again not disputed by the Ld. DR and the Ld. AR before us. The Ld. CIT(A) has also given detailed reasoning in the appellate order while considering allowability of some of the expenses disallowed by the Ld. AO and computed the allowable expenditure at Rs. 30,04,99,005/- as detailed in Table 2 above. Based on a very detailed working of unaccounted on-money and allowable project expenditure of the SLC Project, the addition is re-computed by the Ld. CIT(A) for the respective assessment years as detailed in Table 3 above. The Ld. CIT(A) has confirmed following disallowance after reducing the amounts worked out by the Ld. AO in his appellate order for assessment year 2014-15. Table 4: Disallowance confirmed out of Plan 19,85,000 Passing Expenses (Pg. 33 of CIT(A) Order) Disallowance confirmed out of Plot 11,35,000 Purchase and Plot Pete Expenses (Pg. 35 of CIT(A) Order) Disallowance confirmed out of Site 10,41,000 Expenses (Pg. 36 of CIT(A) Order) Disallowance confirmed out of expenses 1,12,000 claimed from Loose Papers as per (this disallowance is not contested in Annexure A-357 of seized material (Pg. appeal by the assessee before us) 36 of CIT(A) Order)

The assessee has preferred appeal against the aforesaid disallowances confirmed by the Ld. CIT(A). Before us, the Ld. AR contended that the disallowances confirmed by Page 9 of 12 A.Y.2014-15 & 2016-17 ITA No.1705, 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 the Ld. CIT(A) are estimation based and therefore the disallowance of these expenditure be further reduced by at least 50% and by granting relief, the project expenditure of Rs. 30,04,99,005/- be further increased by at least Rs. 20,80,500/- (50% of Rs. 41,61,000/-- sum of Rs. 19,85,000/-+Rs. 11,35,000/-+ Rs. 10,41,000/-) 7. Having heard both the parties, and after considering the submissions, contentions, working of the AO and the reworking of the CIT(A), we hold as follows:

ASSESSMENT YEAR 2014-15 Grounds of Revenue Appeal: Ground no. 1 and 2 are dismissed and the addition deleted by the CIT(A) is confirmed and the unaccounted on-money income of SLC Project as worked out by the Ld. CIT(A) in detailed in Table 3 is affirmed. Accordingly, this ground of the revenue are dismissed. Ground no. 3 is dismissed since we are upholding the disallowance worked out by the CIT(A) and accordingly, this ground of the revenue is dismissed while upholding the order of the CIT(A). Ground no. 4 is general in nature and since the Ld. CIT(A) has evaluated all the relevant facts on records in his well reasoned order. This ground is accordingly dismissed. Ground no. 5 and 6 raised by the revenue about the deletion made by the Ld. CIT(A) of addition made by the AO u/s 68 in respect of long term capital gain of Rs. 2,18,34,200/-, we respectfully follow the judgment of the co-ordinate bench of the Hon’ble ITAT, B Bench, Mumbai in the case of family member of the appellant, Vinod L. Gadhiya Vs DCIT CC 5(3), dt. 29/01/2021 and agree with the deletion made by the Ld. CIT(A). The Ld. DR has also not disputed the order of the coordinate bench of the Hon’ble ITAT relied upon by us. Accordingly, this Ground of Appeal of the Revenue is dismissed.

Grounds of Assessee Appeal: Ground no. 1 to 4 of the assessee disputing the disallowance confirmed by the Ld. CIT(A), we hold that the unaccounted on-money income worked out by the Ld. CIT(A) in Table 3 above, is a well reasoned and carefully evaluated working and we do not intend to change this working for respective assessment years. These Grounds of the assessee are accordingly dismissed.

ITA Nos.2248-49/Mum/2021 A.Y.2014-15 & 2016-17 1529,1531/Mum/2021 A.Y.2014-15 to 2016-17 ASSESSMENT YEAR 2015-16 Grounds of Assessee Appeal: Ground no. 1 of the assessee disputing the unaccounted on-money income of SLC Project of Rs. 1,84,49,461/- on the ground that the profit percentage is on higher side is again not tenable, since the profit of the project for all the years under consideration is worked by the Ld. CIT(A) as detailed in Table 3 above. This ground of appeal of the assessee on a standalone year ignoring the other facts of the SLC Project based on the seized material cannot be ignored just because the arithmetical working of profit margin is on higher side. This Ground of the assessee is accordingly dismissed and the order of the CIT(A) is confirmed.

ASSESSMENT YEAR 2016-17 Grounds of Revenue Appeal: Ground no. 1 to 4 are dismissed and the addition deleted by the CIT(A) is confirmed and the unaccounted on-money income of SLC Project as worked out by the Ld. CIT(A) in detailed in Table 3 is affirmed. Ground no. 5 is dismissed since we are upholding the disallowance worked out by the CIT(A) and accordingly, this ground of the revenue is dismissed while upholding the order of the CIT(A). Ground no. 6 is general in nature and since the Ld. CIT(A) has evaluated all the relevant facts on records in his well reasoned order. This ground is accordingly dismissed.