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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R PER V.DURGA RAO, Judicial Member: The appeals in ITA No.427/Viz/2016, ITA No.456/Viz/2016 and CO No.07/Viz/2018 are emanated from the order of the Commissioner of Income Tax (Appeals) [CIT(A)] vide ITA No.65/CIT(A)/VJA/2015-16 dated 23.08.2016 for the assessment year 2009-10 and ITA No.428/Viz/2016 for the assessment year 2010-11 is emanated from the order of the CIT(A) vide ITA No.64/CIT(A)/VJA/2015-16 dated 23.08.2016.
ITA No.427/Viz/2016 2. Ground Nos.1.0, 1.3, 1.4, 1.5 are not pressed by the Ld.Counsel for the assessee and the same are dismissed as not pressed.
Only grounds for adjudication in this appeal are extracted as under : 1.1. The Learned CIT(A) failed to consider and dispose off the assessee plea that the Assessing Officer exceeded his jurisdiction while passing the order u/s 143(3) r.w.s. 263 of the I.T.Act in so far as addition pertaining to expenditure incurred by the assessee. 1.2. The Learned CIT(A) ought to have known that the Assessing Officer has to confine himself to the extent directions given to him in the order passed u/s 263 of the I.T.Act and any action other than this amounts to exceeding the jurisdiction which the Assessing Officer did so in the present case.
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The Ld.Counsel for the assessee has submitted that the Assessing Officer(AO) while passing the order in pursuance to the order passed by the Ld.CIT u/s 263 exceeded the jurisdiction and therefore the order passed by the AO cannot survive. He further submitted that the Ld.CIT by passing the order dated 24.03.2014 not specifically directed the AO to consider the expenditure incurred by the assessee. Therefore, it is beyond the jurisdiction and order passed by the AO, upheld by the CIT(A) was to be deleted.
On the other hand, the Ld.Department Counsel has submitted that the Ld.CIT by passing the order u/s 263 relating to the assessment year 2009- 10 , the Commissioner at page No.20 para No.10.2 specifically directed the AO to obtain relevant details and examine the issue in accordance with law. Accordingly, the AO has passed order u/s 143(3) r.w.s.263 of the Act dated 31.03.2015 and strongly supported the order passed by the authorities below.
We have heard both the sides, perused the material and gone through the orders of the authorities below. The only issue in this appeal is relating to the expenditure of Rs.9,04,986/-. With regard to the above expenditure, the Commissioner has considered all the details by order dated 24.03.2014
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and directed the AO to obtain the relevant details and examine the issue in accordance with law after following due procedure. The relevant portion of the order is extracted as under : “10.2. The assessee’s submissions are considered carefully. During the survey, the assessee offered an amount of Rs.2.4 crores towards unexplained investment in the work in progress for the assessment year 2009-10 in the firm’s hand. As admitted, he filed revised return and paid the taxes in the hands of the firm for the assessment year 2009-10. Later, the assessee retracted from his admission & filed revised returns from A.Ys. 2007-08 to 2010-11 admitting the income from all ventures in his hands as an individual. But no work-in-progress as admitted during the survey & as declared in the revised returns in firms hands, was admitted in the individual for A.Y. For every retraction, there should be a basis. The assessee has not produced any books of account or other material. Even the income & expenditure account and the balance sheet were not filed. In response to this office show cause notice with regard to the work in progress, the assessee submitted as under : “No details are available in regard to work in progress as on 31.03.2009 & it was not possible to estimate or value the work in progress as on 31.03.2009. From the above submission it is clear that there is no basis for retraction. Thus, it is clear that there is no basis for retraction. Wihtout books of account or other documentary evidences, the assessee has retracted from his admission made in the hands of M/s Durga Bhavani Constructions. The A.O.without calling for the relevant material or without conducting any enquiry for collecting the required material or examining the material available with him & objectively evaluationg all the relevant factors for the retraction, simply accepted the income returned for A.Ys 2007-08 to 2010- 11. Hence, the orders passed by the A.O. for each and every A.Y is erroneous and prejudicial to the interests of revenue. The A.O. is directed to obtain the relevant details & examine the issue in accordance with law & established procedure on this issue and after affording a reasonable opportunity to the assessee.”
6.1. From the above, it is clear that the AO while passing the order u/s 143(3) has passed the order without calling for the relevant material, without conducting any enquiry simply accepted the income returned by
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the assessee for the assessment year 2007-08 to 2010-11 and the Ld.Commssioner directed the AO to examine the relevant material and conduct enquiry and passed order in denovo in accordance with law. Therefore, from the above order of the Ld.CIT, it is very clear that the Ld.CIT directed the AO to examine the issue and passed orders accordingly. The AO has examined the issue passed the orders denovo in accordance with law. We find no infirmity in the order passed by the AO confirmed by the CIT(A) and accordingly this ground of appeal of the assessee is dismissed.
ITA 456/Viz/2016 7. When this appeal is taken up for hearing, Ld. Counsel for the assessee has submitted that the tax effect involved in this appeal is below Rs.10 lakhs and as per the CBDT Circular No.21/2015 dated 10.12.2015, the appeal filed by the revenue is not maintainable. Ld.DR relied on the grounds of appeal. In view of the above, this appeal filed by the revenue is not maintainable and accordingly dismissed.
ITA 428/Viz/2016 8. The only issue before us for consideration is whether the estimation of income at 12.5% made by the Ld.CIT(A) on amount of Rs.18,87,500/- is
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correct or not. The case of the assessee is that he has received payments from prospective buyers and he has to make payments to the site owners for the assessment year 2009-10, Rs.1,97,16,000/-and for the assessment year 2010-11, Rs.18,87,500/-. The AO has clubbed together and on total amount of Rs.2,16,03,500/- has estimated income of the assessee @12% of Rs.27,00,437.
On appeal, the Ld.CIT(A) by considering submissions of the assessee by taking into consideration of only assessment year under consideration i.e. 2010-11 made payment of Rs.18,87,500/-, estimated the income at Rs.2,35,938/- at 12.5% on 18,87,500/- and directed the AO to restrict the addition to Rs.2,35,938/- in lieu of Rs.27,00,437/- The relevant portion of Ld.CIT(A) order is extracted as under : “Assessee is a builder. He conducts his business with the funds received from fiat owners. The business of the assessee is to locate sites for construction of flats, finalizing the deal with site owner, obtaining approved plan for construction of flats from municipality , publicizing for sale of fiats, spending receipts from flat owners towards site cost, construction of fiats etc. and utilization of his profit for personal purposes. Actually there is necessity to prepare two cash flow statements one for receipts from flat owners and utilization thereof and another for his profit and utilization thereof. In the returns submitted by assessee, only second type of cash flow statement was filed and cash flow statement in respect of receipts from flat owners and utilization thereof was not prepared and filed. However venture wise details were filed along with the return in place of consolidated cash flow. In general the questions in the show cause notice for the asst. years 2007-08 to 2010-11 related to the cash flow statement not submitted by assessee. As the assessee under took more than one venture in each year and in the absence of regular books of accounts it is not possible to identify and arrive at profit in each venture separately. The total receipts on all
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ventures from flat owners were spent on construction of flats sites as per convenience of the assessee. No dividing line can be drawn between one venture and the other in the expenditure incurred by the assessee except on estimate basis put together. 5.3. Appellant reduced the payment made to site owners from the gross receipts of the respective assessment years. The usual practice while estimating the income is that the profit would be estimated on The entire sales, The builder normally estimates the cost of project, taking all the payments including the payments made to the land (site) owner, cost of construction of the entire project into account and then fixes the soiling price of flats taking into account his profit margin etc. 5.4. Appellant's explanation in this regard submitted in his letter dated 0501 2015 to Assessing Officer is reproduced below “Explanation by assessee – Normal procedure in this line of business is a) Site owner approaches the builder to develop the site by construction of apartments and b) the site owner agrees to draw the cost of site from the flat owners as and when registered sale deed is executed. cj Site owner and builder sign the registered sale deed. Site owner receives the proportionate cost of site and the builder receives the balance towards construction of fiat. The assessee being a builder receives amounts from the flat owners towards construction of flat while the site owner receives amount towards cost of site. Sine owner and builder sign the registered sale deed in favour of flat owner. Hence, the amount received by site owner is the exclusive property of site owner. The builder only derives income on the receipts towards cost of construction of flat paid by the flat owners.” 5.4,.1. Thus, appellant claimed that there is no element of profit to appellant in respect of payments made to site owners.
5.5. However, no site owner would sell his site for meager advance amount from appellant and wait for completion of construction of building and subsequent sale to prospective buyers to get his balance (*substantial) amount of cost of site. It is obvious that there are inherent defects in the cash flow statement / reconciliation submissions made by appellant. Appellant did not produce evidence for making payments to site owners through account payee cheque / account payee drafts to ascertain the correct quantum of payment. In
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the absence of relevant details and supporting evidence, element of profit in site purchase cost cannot be ruled out. Site cost claimed to have been paid to site owners by appellant for Asst.Years 2009-10 & 2010-11 (as per appellant’s submission before CIT during revision proceedings) is as follows :
Asst.Year Site Cost 2009-10 Rs.1,97,16,000 2010-11 Rs. 18,87,500/- For both A.Ys. it totaled to Rs.2,16,03,500/- 5.5.1. However, during Asst.Year 2010-11, the amount received towards site purchase payment was Rs.18,87,500/-. Hence, in my view, estimating the income at Rs.2,35,938/- @12.5% on Rs.18,87,500/- will be just and proper. Assessing Officer estimated the income atRs.27,00,437/- I.E.@12.5% ON 2,16,03,500/- WHICH INCLUDED RECEIPT OF Rs.1,97,16,000/- for Asst.Year 2009-10 also.
5.5.2. I, therefore, direct the Assessing Officer to restrict the addition of Rs.2,35,938/- in lieu of Rs.27,00,437/-“
The Ld.Counsel for the assessee has submitted that no addition can be made towards the site purchase payment made by the assessee. 10. On the other hand, the Ld.DR relied on the order of the AO. 11. We have heard both the sides, perused the records and gone through the orders of the authorities below. This is the only appeal filed by the assessee for the assessment year 2010-11. No cross appeal filed by the department. In this case, the AO has considered the assessment year 2009- 10 and 2010-11 towards the amounts received for site purchase payments for the assessment year 2009-10, Rs.1,97,16,000/- and for the assessment
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year 2010-11, Rs.18,87,500/- For both the assessment years total of Rs.2,16,03,500/-. The AO has estimated the income at Rs.27,00,437/- i.e. at 12.5% on Rs.2,16,03,500/-. On appeal, the Ld.CIT(A) has only considered the amounts towards the site purchase payments of Rs.18,87,500/- for the assessment year 2010-11 and estimated at Rs.2,35,938/- at 12.5% on Rs.18,87,500/-. We find no infirmity in the order passed by the Ld.CIT(A), this appeal filed by the assessee is dismissed. 12. In the result, appeal No.427/Viz/2016, ITA No.456/Viz/2016 and ITA No.428/Viz/2016 are dismissed. There is a delay of 365 days in filing the Cross Objection 07/18, no condonation is filed by the assessee and no explanation is also given by the Ld.Counsel for the assessee. In view of the above, Cross Objection filed by the assessee is dismissed. The above order was pronounced in the open court on 18th Apr, 2018.
Sd/- Sd/- (धड.एस. सुन्दर ससह) (िी.दुगाा राि) (D.S. SUNDER SINGH) (V. DURGA RAO) लेखासदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER धिशाखापटणम /Visakhapatnam ददनांक /Dated : 18.04.2018 L.Rama, SPS
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आदेश की प्रधतधलधप अग्रेधर्त/Copy of the order forwarded to:- 1. अपीलाथी / The Appellant- Sri Batchu Amarnath, D.No.23-31-3/B, Kommuvari Street, Satyanarayanapuram, Vijayawada 2. प्रत्याथी / The Respondent- DCIT, Circle-1(1), Vijayawada, ACIT, Circle-3(1) Vijayawada 3. The Pr. CIT, Vijayawada 4. The Commissioner of Income –Tax (Appeals), Vijayawada 5. धिभागीयप्रधतधनधध, आयकरअपीलीयअधधकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam 6.गाडाफ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, VISAKHAPATNAM