THE DCIT CENTRAL-2, INDORE vs. SHRI JITENDRA SINGH RATHORE, INDORE

आदेश/ O R D E R

Per B.M. Biyani, AM:

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19 order of first-appeal dated 25.01.2023 passed by learned

Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 25.06.2021 passed by ACIT, Central Circle-2, Indore [“AO”] u/s 143(3) of Income-tax Act,

1961. is an appeal in the matter of assessee ‘Shri

Ajit Jain’ wherein the revenue is challenging the order of first-appeal dated 23.01.2023 passed by same CIT(A) which in turn arises out of a separate assessment-order dated 25.06.2021 passed by same AO u/s 143(3) of Income-tax Act, 1961.

“1. Whether on the facts and in the circumstances of the case and in law. the Ld. CIT(A) was justified in deleting the addition of Rs 1,33,15,863/- out of addition of Rs 1,49,17,500/- made on account of disclosure of additional income by the assessee during survey u/s 133A of the Income tax Act, 1961, ignoring the fact that the assessee has made a voluntary disclosure of additional income on account of on-money received from customers? 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) was justified in accepting the version of the assessee that several bookings were cancelled and the assessee had refunded the corresponding booking amounts, ignoring the fact that the assessee had failed to establish his claim of refund of booking advances to customers during the assessment proceedings?

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing additional expenses of Rs 100/-per sq. ft on account of finance cost, administrative expenses and other operating charges, ignoring that the assessee has not filed any evidence even before CIT(A), in support of claim of such expenses.” – Shri Ajit Jain:

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,33,15,863/- out of addition of Rs 1,49,17,500/- made on account of disclosure of additional income by the assessee during survey u/s 133A of the Income tax Act, 1961, ignoring the fact that the assessee has made a voluntary disclosure of additional income on account of on-money received from customers? 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) was justified in accepting the version of the assessee that several bookings were cancelled and the assessee had refunded the corresponding booking amounts, ignoring the fact that the assessee had failed to establish his claim of refund of booking advances to customers during the assessment proceedings? 3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing additional expenses of Rs 100/-per sq. ft on account of finance cost, administrative expenses and other operating charges, ignoring that the assessee has not filed any evidence even before CIT(A), in support of claim of such expenses.

In his statements, ‘Shri Ajit Jain’ admitted total undisclosed income of Rs. 2,98,35,000/- having been earned by him and his partner ‘Shri Jitendra Singh Rathore’ [each having 50% share amounting to Rs. 1,49,17,500/-]

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19 from sale of plots in aforesaid project. ‘Shri Ajit Jain’ also agreed that the undisclosed income shall be separately offered and tax shall be paid thereon by him and his partner ‘Shri Jitendra Singh Rathore’ and that his partner ‘Shri Jitendra Singh Rathore’ has given consent. Thereafter, the cases of both assessees were subjected to compulsory scrutiny on account of survey. During scrutiny proceedings, on perusal of returns, the AO found that the assessees have not offered the undisclosed income admitted during survey. The AO queried the assessees to explain the reason of not offering additional income in returns. The assessees filed replies as also Retraction to Statements. But the AO was not convinced with assessees’ submissions who ultimately passed respective assessment-orders of both assessees making an addition of Rs. 1,49,17,500/- in the hands of each assessee.

Aggrieved, both assessees went in first-appeals to CIT(A) and succeeded partly to a large extent. Now, the revenue is aggrieved by the impugned orders of first-appeal passed by CIT(A) and has come in these appeals.

Accordingly, in subsequent discussions, we shall be adjudicating the shall also apply mutatis mutandis to other ITA No. 113/Ind/2023.

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19

However, during first-appeal, the CIT(A) has accepted that the sale of 1,900 square feet was made in subsequent AY 2022-23 and there was a cancellation of sale of 49,900 square feet resulting in refund to customers.

Accordingly, the CIT(A) accepted effective sale of 18,400 square feet [70,200 (-) 1,900 (-) 49,900]. Further, the CIT(A) also allowed additional cost of Rs. 100/- per square feet having been incurred by assessee on account of finance expenses, administrative expenses and other expenses and thereby accepted effective rate of profit at Rs. 325/- [Rs. 425 (-) Rs. 100]. Ultimately, the CIT(A) granted relief of Rs. 1,33,15,863/- to assessee as under:

3.2.6 ….. Hence, it is evident that appellant alongwith his associate has only sold land admeasuring 18400 sq. ft. Therefore, the share of appellant in total land comes at 9200 Sq.Ft. Thus, the actual profit of appellant on sale of his share is worked out to Rs. 29,90,000/- [9200*325/- per Sq. Ft.]. The appellant has offered profit of Rs. 13,88,363/-. Therefore, the appellant would get relief of Rs. 1,33,15,863/- and addition of Rs. 16,01,637/- (Rs. 29,90,000 – Rs. 13,88,363) is confirmed.

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19 that the effective sale was only 18,400 square feet. Further, the CIT(A) has rightly given benefit of additional cost of Rs. 100/- after due consideration.

“4.3 In view of the above it is clear that the Shri Ajit Jain has given statement in peaceful mind after knowing the facts. Thus, retraction of assessee is not acceptable. Further in reply of the assessee, it is submitted that "In respect to above the total plot area booked 70200 Sq. ft. booking of 51800 sq ft has been cancelled by the parties and the amount received in respect of the same has been refunded to them, further we booked sale for 18400 sq. ft. (9200 sq ft being 50% for the assessee's share) as per actual which were registered in the year under consideration, and accounted the same while furnishing our income tax return". The above contention of the assessee is also not acceptable because after giving sufficient opportunity & laps of too much times, the assessee didn't submitted any evidences of cancellation of Plots and supporting documents regarding refunded to them. Thus, the assessee is misguiding the department and the undisclosed income accepted during survey on account of on-money received, after considering the land & development cost is duly justified.” [Emphasis supplied] 9. Referring to above para of assessment-order, Ld. DR contended that the AO has categorically mentioned that the assessee did not submit any evidence of cancellation of plots and supporting documents regarding refunds made to customers. So far as the additional cost of Rs. 100/- allowed by CIT(A) is concerned, Ld. DR submitted that the CIT(A) has allowed the same on ‘reasonability basis’ without having any iota of evidence from assessee’s side. Therefore, the assessment-order passed by AO is very much correct and CIT(A) is wrong in giving substantial relief to assessee. Ld.

DR prayed to uphold the AO’s order. Page 6 of 10 Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19 assessee that out of total area of 70,200 square feet, the bookings of 51,800 square feet was cancelled and the actual sale was only 18,400 square feet.

Then AO did not accept this submission of assessee by making a categorical observation that no evidence of cancellation of bookings and no supporting document of refund was submitted. The CIT(A) however accepted the claim of cancellation of bookings. Ld. DR for revenue has strongly contended that the AO has made a clear-cut noting that no evidence was filed before him qua the cancellation of bookings and refunds to customers. However, the assessee is claiming to have filed reply including documentary evidences to the office of AO through an email dated 25.06.2021. It is a claim of assessee that the AO is wrong in not considering assessee’s reply. During hearing, when we asked Ld. AR as to why the reply of assessee was e-mailed to the office of AO when the e-filing system on designated portal of Income-tax Department was already in vogue? In reply, Ld. AR narrated that the AO issued notice dated 30.03.2021 requiring the assessee to file reply by 05.04.2021 and the window for e-filing portal was closed thereafter, hence the assessee had to e-mail documents on 25.06.2021. At the same time, Ld. AR expressed that a part reply dated 23.04.2021 was field to AO but the supporting documents were not filed with that reply. This submission made by Ld. AR is a clear pointer to show that the assessee has not filed evidences to AO within the time specified by AO in notice dated 30.03.2021 u/s 142(1) and subsequently the assessee has chosen the route of sending documents through e-mail on 25.06.2021 which is exactly the same date on which the Page 8 of 10

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19 AO passed assessment-order (25.06.2021) or at the feg end even if the date of digital signing (29.06.2021) by AO is considered. Therefore, in such a situation, the AO has made this observation “The above contention of the assessee is also not acceptable because after giving sufficient opportunity & laps of too much times, the assessee did not submitted any evidences of cancellation of Plots and supporting documents regarding refunded to them.”

Further, when it was a case of Central Circle on account of survey, the assessee could have filed his reply physically to the office of AO but the same was also not done. The assessee claims to have filed documents through e-mail but the fact remains that the AO was unable to examine the documents of assessee. Needless to mention that the documents of assessee are such that substantial verification is involved. During first-appeal, the CIT(A) has accepted the assessee’s version of cancellation of bookings against clear-cut adverse finding made by AO that no evidence was filed by assessee before him. The CIT(A) has taken no pain to seek remand-report from AO or invite comments of AO qua the documents before giving benefit of cancellation of bookings. Furthermore, the CIT(A) has allowed deduction of additional cost of Rs. 100/- on ‘reasonability basis’ without any evidence.

In such a situation, we are unable to support the order passed by CIT(A). On a careful consideration, we find it most appropriate to remand these matters to the file of AO to enable the AO to consider the reply dated 25.06.2021 being claimed to have been e-mailed by assessee and make a fresh adjudication. It is made clear that the AO shall give necessary opportunities

Shri Jitendra Singh Rathore & Shri Ajit Jain & 113/Ind/2023 – AY 2018-19 of hearing to assessee and pass a proper order after taking into consideration the assessee’s reply dated 25.06.2021 and any other submission as the assessee may choose to file before AO. The assessee is also directed to ensure participation before AO without seeking unnecessary adjournments failing with the AO shall be at liberty to pass an appropriate order in accordance with law. Since we have remanded these matters to AO for adjudication afresh, other pleadings made by both sides are not required to be mentioned.

Order pronounced in open court on 13/05/2025