DCIT CC 2(2) KOLKATA, KOLKATA vs. AKRITI SALES PVT LTD, KOLKATA

These are appeals preferred by the Revenue and CO by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-26 (hereinafter referred to as the “Ld. CIT(A)”] dated 23.12.2024 for the AY 2015-16.

3.1. The facts in brief are that a survey operation u/s 133A of the Act was conducted on 30.10.2014, at office premises of Arya Group of cases. The assessee is engaged in the business of construction and real estate development. The assessee filed the return of income on 27.02.2017, declaring total income of ₹3,51,13,710/-. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were duly issued and served upon the assessee. During the course of assessment proceedings, the ld. AO upon perusal of the impounded documents observed that during the survey operation it was found that the assessee had undisclosed sales of ₹4,21,39,911/- which were accepted by Shri Rajendra Kumar Mourya, the key person of the Arya Group. The Arya Group admitted that the undisclosed income was on account of cash received as advance against the booking of flats in A.Y. 2014-15 and in earlier years in his disclosures before the DDIT, Unit-2(3), Investigation Wing, Kolkata on 18.02.2015 and 20.02.2015. The ld. AO observed from the return of income that assessee did not include the undisclosed income on account of suppressed sales in the total income and accordingly, the assessee was asked to explain the 3.2. After hearing the rival contentions and perusing the materials available on record, we find that there was survey u/s 133A in the case of the assessee on 30.10.2014.The assessee is developer of properties and derives income from sale of flats. In the course of survey, some papers were found from which it was noticed that the assessee has received Rs. 4,21,39,900/- in cash as advance for sale of flats which was not disclosed in the books of accounts. In the same papers it was also found that the assessee incurred cash expenses of Rs. 1,35,40,555/- towards construction of flats which too were not recorded in the books. The assessee disclosed the entire amount of cash sale during the course of survey as its income. We note that in the books the assessee credited only the net cash amount of Rs. 2,85,99,365/-(Total cash received of Rs. 4,21,39,900/- cash expenses incurred of Rs. 1,35,40,555/-) which was added with the turnover and consequently shown in the income in the profit and loss account. We further note that the expenses 3.3. We also note that that the amount disclosed as income during survey was specifically admitted by the Id assessee as having been received as advance against the sale of flats which was noted by the ld. AO vide para 4.1 as well as para 4.3 of the assessment order. However, while computing the total income, the Ld AO reduced the said amount from the income from business computed by the assessee and again added back the same as cash credit u/s 68 of the Act. It may be noted that tax rate on business income as well as on the income as added u/s 68 of the Act by the AO was same during the assessment year in question. The assessee filed appeal before the Ld. CIT (A), objected to the treatment of business income as cash credit u/s 68 when the AO himself admitted that the income was derived from sale of flats. In other words, the income from business was proved from the impounded documents and accepted as such and even otherwise the presumption u/s 292C was applicable that the contents of the impounded papers in survey u/s 133A were true. The Ld. CIT(A) accepted that the contention of the assessee that the income was income from business which was proved from the seized papers itself by relying on the decision of Hon'ble ITAT Mumbai, in ACIT Vs Rahil Agencies dated 23.11.2016 However, the ld. CIT(A) allowed this issue partly by accepting the income disclosed and credited in the books of accounts of Rs.2,85,99,365/- only as income from business on the ground 3.4. In our opinion the conclusion of the ld. CIT(A) is wrong as the entire income of Rs. 421,39,900/- was from sale of flats which was business of the assessee and was also admitted fact by the lower authorities. When the same was so accepted, the income has necessarily to be assessed as business income whether or not the same was included in the turnover or not. In our opinion the assessee has wrongly included the amount of expenses in the computation of income of Rs.1,35,40,535/- , since the same was already spent as cash expenses towards construction of the sold flats. If the said amount was included in the turnover, the same amount was to be shown as expenses in the debit side. However, the assessee has neither included the said amount in the turnover nor debited the said amount as expenses in the profit and loss account. The result was the same and the income remained the same. Since however the amount was disclosed, the assessee did not claim the amount as expenses, yet the aforesaid amount was offered for assessment by including the same in computation of total income. There was no cash credit of the said amount in the books so as to be assessed u/s 68. The decision of Jodhpur Bench of ITAT in the case of Lovish Singhal (ITA No. 143/Jodh/2018) is also cited wherein number of judgements on the issue have been relied on. The amount contested by the department was added as income from other sources whereas the assessee himself declared he same as income