MARUTI DEVELOPERS,,SURAT vs. THE INCOME TAX OFFICER,WARD-9(3),, SURAT

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 1 of 13 आयकर अपीलीय अिधकरण,सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT �ी सी.एम.गग�, �याियक सद�य तथा �ी ओ.पी.मीना, लेखा सद�य के सम� BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A No’s.1017 & 1018/AHD/2015/SRT िनधा�रण वष�/Assessment Years : 2001-02 & 2002-03 Maruti Developers, Vs. The Income Tax Officer, 142, Keshav Park Society, Ward-9(3), Surat. Ved Road, Surat – 395 004. [PAN: AALFM 5747 P] अपीलाथ� Appellant ��यथ�/Respondent िनधा�रती क� ओर से /Assessee by Shri A.P.Nanavatya – CA राज�व क� ओर से /Revenue by Shri Vinod Kumar – Sr.DR सुनवाई क� तारीख/ Date of hearing: 25.10.2018 16.11.2018 उ�ोषणा क� तारीख/Pronouncement on आदेश /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. These two appeals filed by the Assessee are directed against separate orders of ld. Commissioner of Income Tax (Appeals)-V, Surat(in short “the CIT (A)”) both dated 14.12.2012 pertaining to Assessment Years 2001-02 and 2002-03 respectively which in turn has arisen from the order passed by the Income Tax Officer, Ward-

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 2 of 13 9(3), Surat(in short “the AO”) both dated 26.03.2010 under section 271(1)(c) of Income Tax Act,1961 (in short ‘the Act’). ITA No.1017/AHD/2015/SRT for A.Y. 2001-02 : 2. Ground no.1 & 2 relates to confirming the action of the AO in levying penalty of Rs.32,81,040/- u/s.271(1)(c) of the Act.

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 3 of 13 business activity. Therefore, the AO treated the opening capital shown of Rs.13,25,000/- in the name of four partners as unexplained cash credit u/s.68 of the Act and added to the total income on which penalty proceedings u/s.271(1)(c) of the Act were also initiated for furnishing of inaccurate particulars of income. Similarly, it was seen that the booking advance of Rs.70,45,000/- received from eleven parties shown by the assessee in the return of income was also treated as unexplained cash credit u/s.68 of the Act and penalty proceedings u/s.271(1)(c) of the Act were initiated. In reply to show cause notice u/s.274 r.w.s 271(1)(c) of the Act dated 24.12.2007 no reply was filed. The CIT(A) vide appellate order dated 14.08.2008 has dismissed the appeal of the assessee and confirmed the action of the AO. Therefore, another show cause notice dated 09.03.2010 was served upon the assessee in compliance to which nothing was heard from the assessee, therefore, the AO observed that the assessee had furnished inaccurate particulars of income to the tune of Rs.83,70,000/- and accordingly, the AO levied a minimum penalty of Rs.32,81,040/- being 100% of tax sought to be evaded. 4. Being aggrieved, the assessee has filed an appeal before the CIT(A). The CIT(A) has confirmed the levy of penalty by observing

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 4 of 13 that the assessee was unable to provide evidence in regard to source of the cash credit of Rs.70,45,000/- and introduction of capital by partners of Rs.13,25,000/- during the appellate proceedings also. The appellants conduct during the appellate proceedings strengthened the fact that he is not having any evidence or proof to substantiate the source of the cash credit and introduction of the capital. Therefore, the CIT(A) after citing some case laws in favour of the Revenue has confirmed the levy of the penalty u/s.271(1)(c) of the Act. 5. Being aggrieved, the assessee has filed this appeal before this Tribunal. The ld.Counsel submitted that the penalty was levied on the addition of Rs.70,45,000/- as unexplained cash credit u/s.68 of the Act on which quantum appeal has been admitted by the Hon'ble Gujarat High Court in the case of assessee vide in Tax Appeal No.69/2016 dated 16.02.2016, therefore, the issue of unexplained cash credit is debatable, hence no penalty u/s.271(1)(c) of the Act is leviable in respect of said addition. The ld.Counsel of the assessee has also submitted that the assessee has entered into an agreement to sale with possession dated 08.02.2011 of open land at survey no.54 constitute as FP.No.28/B admeasuring 1340 sq.mtrs. The assessee has also entered into

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 5 of 13 development agreement of said land dated 08.02.2001 and the assessee has also paid consideration of Rs.27 lakhs. According to the development agreement, the appellant was entitled to divide the land into smaller plots for the purpose of selling the said plots. In pursuance of such intention, the assessee and the seller of land has divided the plot into smaller such plots and has also received certain amount as booking advances. However, the seller of land has sold the aforesaid land to the third party divesting the appellants of its possession of said land with rights, title, interest. The assessee has filed suit in District Court Surat and such suit is still pending and process of suit may take still longer time. It was also held that the appellant may loose the suit or afford to continue in aforesaid suit due to cost consideration or eventually suit may got compromise and area of original land may not continue to be same. Under these circumstances, the assessee decided to refund plot booking advances to various parties with a condition that no interest shall be paid and all plot booking advance parties shall not have any rights, titles and interest in either original size of plot or smaller size of plot or in consideration thereof. All parties making payment of booking advances shall swear an affidavit confirming payment of booking advances

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 6 of 13 without interest and forgoing all rights, titles and interest in the plot which they have booked. The assessee has re-paid all the parties booking advances and whichever parties have received repayment of such booking advances such parties have executed an affidavit confirming receipt of booking advances by cheque and the credit into respective bank account parties booking plots before notary. This evidence has been cropped up subsequent to completion of assessment and penalty proceedings and such evidence shall go to the roots of the assessment as well as penalty appeals. According to finding recorded in appellate order of ITAT an appellate order of CIT(A) in respect of penalty. The appellant has provided all documents on identification but still the ld.Assessing Officer (AO) has not satisfied due to fact that the assessee could not provide any details of source of earning, therefore, the ld.AO was not satisfied with bonafide of loan transactions and therefore full amount of booking advance has been added and also penalty has been imposed. The assessee has preferred an appeal before Hon'ble Gujarat High Court and prior to its hearing of appeal against the assessee. The aforesaid evidence has taken place and thereby the assessee has requested to admit the aforesaid additional evidence for the purpose of

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 7 of 13 adjudication of the aforesaid appeal under Rule 29 of the Appellate Tribunal, Rules 1963. It was further submitted that the assessee is not able to secure possession of land at plotting was organized as the assessee was presuming civil suits since last 15 years and since civil suits are pending and further prosecution require huge financial resources, unlimited patience for uncertain period. The assessee has therefore filed affidavits from various persons notarized before the notary from whom booking advance has been taken and repaid with the request that the assessee was not having the possession of the plot and therefore it has repaid the booking advances. Therefore, such evidences of re-payment of booking advances has arisen now. Therefore Shri Rameshbhai Narsinhbhai Patel for and on behalf of M/s.Maruti Developers executed an affidavit for the purpose of seeking application for admission of additional evidence before the Hon'ble ITAT pending appeal of penalty for A.Y. 2001-02 and 2002-03 in ITA No.1017 and 1018/Ahd/2015. 6. On the other hand, the ld.Senior Departmental Representative(Sr.DR) has relied on the orders of the Lower Authorities and submitted that the assessee was not able to furnish

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 8 of 13 any reply, therefore the Lower Authorities are justified in their action and in confirming the penalty imposed. 7. We have heard the rival submissions and perused the material on record, we find that the AO has levied penalty on the addition of Rs.75,45,000/- on account of unexplained cash credit u/s.68 of the Act in respect of amount received as advance towards plot booking from various persons. This addition has been confirmed by the CIT(A) as well as ITAT. However, the assessee has filed an appeal before the Hon'ble High Court of Gujarat wherein the substantial question of law has been admitted by Hon'ble High Court in Tax appeal No.69/2016 dated 16302.2016 as under : “3. The following substantial question of law arises for consideration: “Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in making addition of Rs.70,45,000/- as unexplained cash credit under section 68 of the Income Tax Act 1961?”

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 9 of 13 addition of Rs.70,45,000/- as unexplained cash credit u/s.68 of the Income Tax Act, 1961. Similarly, in Tax Appeal No.70/2016 dated 16.02.2016 the question of unexplained addition of Rs.1,11,500/- as unexplained cash credit u/s.68 of the Income Tax Act was not admitted due to smallness of the amount involved. Since the addition of 70,45,000/- has been admitted by the Hon'ble High Court as substantial question of law therefore the issue becomes debatable in nature, therefore, the penalty levied and confirmed by the CIT(A) is also becomes a debatable issue. Further, the penalty is also levied in respect of addition of introduction of capital to the tune of Rs.13,25,000/-. It is further seen that the assessee has filed an application under Rule 29 of the Tribunal Rules in the form of additional evidence being affidavits from 29 persons who have received back the booking advance by cheque from the assessee. It has been claimed that the possession of land was not handed over to the assessee and a civil suit is pending before the District Court Surat as the owner of the plot of land refused to hand over possession and also failed to repay amount of consideration paid to him as consideration for contract of agreement to sale. Further, in the meantime Urban Land Selling Act 1976 was replaced in 2002 consequently, ban on absolute

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 10 of 13 transfer of land in excess of 1000 sq.mtr was removed and therefore owner of the land was always in search of new buyers and it was easy for owner of land to convince buyer as position of buyer as that the owner of the land. It is easy for owner of land to convince buyer as position of buyer with the owner of the land. The assessee has repaid all booking advance to various persons from whom booking advance was taken, payment by way of account payee cheques, these facts have been confirmed by affidavit which states the receipt of booking amount by way of cheque and said parties have also stated that said cheque handed over by M/s. Maruti Developers has been deposited into respective bank account of said various parties including stating their bank account number and name of the branch at which such cheque is deposited. Such piece of evidence was not in the form of affidavit is vital evidence which was not available at the time of penalty order, therefore Looking to the facts and circumstances of the case and law, we are of the view that these additional evidences are necessary for proper appreciation of the issue under appeal and would cause of substantial justice. Such evidence may ultimately turn out to the benefit of either taxpayer or the Revenue. Reliance is placed in the case of CIT v. Text Hundred India (P)Ltd.[2011]

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 11 of 13 351 ITR 57 (Del): 197 Taxman 128(Del) : 51 DTR 241(Del) wherein it was observed as follows: “13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo-moto-motu action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well-settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect.”

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 12 of 13

I.T.A.No. 1018/Ahd/2015/A.Y. 2002-03 10. Ground no.1 & 2 relates to confirming the action of the AO in levying penalty of Rs.40,001/- u/s.271(1)(c) of the Act.

Maruti Developers Vs. ITO, Ward-9(3), Surat. /ITA No’s.1017 & 1018/Ahd/2015/SRT/AY: 2001-02 & 02-03 Page 13 of 13 11. We have heard the rival submissions and perused the relevant material on record. The penalty is levied as the AO has treated the booking advance of Rs.1,11,500 as unexplained whereas the assessee has is now claiming that same is returned back to buyer as possession of land could not be given to buyers. Since the facts for this year are identical as that for the assessment year 2001-02. Therefore, this penalty appeal under section 271(1)(c) is also set-aside to the file of the AO to be decide afresh after considering additional evidence admitted while deciding the penalty appeal for A.Y. 2001-02, in earlier part of this order. 12. In the result, the appeals of the assessee are allowed for statistical purposes for the assessment year 2001-02 and 2002-03 in I.T.A.No.1017 & 1018/Ahd/2015. 13. The order pronounced in the open court on 16.11.2018.

Sd/- Sd/- (C.M. GARG) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER सुरत/ Surat, �दनांक Dated: 16 November, 2018/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat