THE DCIT, CIRCLE-3,, SURAT vs. M/S. SHYAM CORPORATION, SURAT

The assessee firm engaged in the business of Development and Building of Residential Properties filed its return on 28.09.2008 through Electronic Media declaring total income at Nil for A.Y. 2008-09. The assessee has undertaken Residential Housing Project known as “Silver Crest”, on a plot of land admeasuring about 1.76 acres. This was the first year of commencement of development of the project by the assessee firm. Subsequently, a survey was conducted u/s 133A of the Act on 13.03.2008 where the partner of the firm namely Shri Kamleshbhai A. Panchani disclosed Rs.1 crore in the hands of the assessee, statement whereof was recorded u/s 131 of the Act on 25.03.2008. Such disclosure was shown as “unaccounted booking receipts” under “current liabilities and provision”. It was the case of the assessee that the firm was carrying only business activity being developing Residential Housing Project and since the project is being in progress and the ‘project completion method’ of accounting being adopted by the firm the disclosure was reflected under the head “Current Liabilities and Provisions” in the Balance Sheet for the year under consideration and the same shall be offered as income in the Profit and Loss account for Financial Year 2010-11; the project is completed in that year only. It was further the case of the assessee that in the event the receipt disclosed in survey if treated as income of the year then the same would qualify for deduction u/s 80IB(10) of the Act. On this count, the assessee also referred the CBDT Instruction No.4 of 2009 dated 30.06.2009. Further that reliance was made on the judgment and order dated 29.11.2000 passed by the Rajkot Bench in the matter of Shri Prabhudas S. Parekh, ITA No.308/Rjt/1998, where it was held that to claim the receipt disclosed in survey being on account of booking of plots was to be treated as income from business or profession. However, such explanation rendered by the assessee was not

At the time of hearing of the instant appeal, the Learned Representative of the Department vehemently argued against the order passed by the Learned CIT(A) on the particular ground that the assessee has failed to disclose the source of such unaccounted income to the tune of Rs. 1 crore. Neither the booking receipt nor the identity of the parties from whom such amount was received by the assessee was disclosed before the authorities below. He, therefore, relied upon the order passed by the Learned AO. On the other hand, Learned Representative of the assessee reiterated the stand taken by the assessee before the authorities below that the said specific disclosure of Rs.1 crore was nothing but unaccounted business receipts; such disclosure of income was made by the partners of the appellant firm during the course of survey at the business premises of the assessee firm. There is no other evidence of income was in possession of the Department. It was further contended by the Learned Representative of the assessee that there is no activity other than this particular business of Housing Development Project and therefore the Department in the absence of any evidence of other income ought to have relied upon the entire statement of the assessee recorded during the survey proceedings. Since the Department accepted the disclosure of Rs. 1 crore, the source whereof was also to be accepted as business receipts. Further that the Ld AR relied upon the recognized project completion method of accounting applicable to the developer and not the accounting standard AS-7 which is only applicable to the contractors. Such method of accounting in fact is also recognized by the CBDT Instruction No.4 of 2009 dated 30.06.2009 as also submitted by the Learned AR. Further that since this is the first year of the assessee no

We have heard the Learned Counsel appearing for the respective parties. We have perused the relevant materials available on record. We have gone through the order passed by the Learned AO and the Learned CIT(A) as well. It appears from the order passed by the Learned AO that while making addition the Learned AR harped upon the assessee’s inability to explain to establish sources of such 1 crore credited to its books of account as unaccounted receipts under the head “Current Liabilities and Provisions”. The nature and details of such amount was failed to have been provided by the assessee although it was claimed that the same was from the project under construction. Thus, the source of income disclosed during survey remains unexplained by the assessee. Since the source was not disclosed and the same cannot be classified under any head of income u/s 14 of the Act, according to the Learned AO the assessee was not entitled to the claim of deduction. This is deemed income of the nature covered under the scheme of Section 68, 69, 69A, 69B and 69C being treated separately, since it is not the income from salary, house property, profit and gains of the business or profession or capital gains nor the income from other sources became the provision of Section 68, 69, 69A, 69B and 69C treat unexplained investment, unexplained money, bullion etc. when the nature and source of investment has not been satisfactorily explained. Further that according to the Learned AR no evidence was filed by the assessee to show that the income disclosed during survey proceedings has generated from the projects which are under construction. Relying upon the judgment of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs.CIT (1997) 227 ITR 172 (SC), such undisclosed income to the tune of Rs.1 lac was added to the income of the assessee u/s 68, 69, 69C of the Act.

We find that the Learned CIT(A) correctly considered the disclosure made by the partner of the firm of Rs. 1 crore during survey as unaccounted business receipts as also the project completion method as adopted by the assessee in view of the explanation given by the Learned CIT(A) as indicated above by us. We, therefore, find no infirmity in the order that the appellant was not required to offer the unaccounted business receipts disclosed in survey as income during the year. We therefore, confirm the same.