SWATI PROCON P. LTD,AHMEDABAD vs. DCIT, CIRCLE-4(1)(1), AHMEDABAD

Appellant by : Shri Sakar Sharma, A.R. Respondent by : Shri Ajay Pratap Singh, CIT/DR Date of hearing : 22-03-2022 Date of pronouncement : 31-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-

The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad, (in short referred to as CIT(A)), dated 26-07-2018, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2014-15.

by the Assessee reads as under:

1. The Ld. CIT (A) erred on facts and in law in confirming addition of Rs. 6,85,00,000/-without appreciating that the very same amount had already been brought Page No 2 Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT to tax by the Assessing Officer while making assessment for A.Y. 2013-14 leading to taxation of same income twice.

2. The Ld. CIT (A) erred on facts and in law in confirming action of Assessing Officer without bringing any material on record that the income of offered of Rs. 6,85,00,000/- in A.Y, 2013-14 was not against sales for which sale deeds had been executed in the year under consideration but on account of gathering of evidences of undisclosed income in the course of survey action relevant to A.Y. 2013-14.

7.1 Before us, the contention of the ld. Counsel for the assessee was that the Revenue had completely misappreciated the facts of the case in understanding that the amount of 6,85,00,000/- adjusted in the sales of the preceding year i.e. assessment year 2013- 14 and reduced from the sales of the impugned year related to the surrender made by the assessee of Rs. 7 crores. That the fact actually was that Rs. 7 crores surrendered by the assessee was not in relation to unaccounted sales but related to bogus purchases booked by it which had been surrendered and adjusted in the accounts of the preceding year i.e. A.Y. 2013-14 by way of reducing purchases booked by it. In this regard, ld. Counsel for the assessee drew our attention first to the statement of Page No 4 Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT the Director of the company noted by the Revenue authorities, English translation which was placed before us, at P.B 55 as under: Q.18 I am showing you lose paper file Annexure No B-2 tell me details of about Page no 1 to 77 of it. Ans. This are rough papers related to Swati procon Private limited and other business and I am unable to provide explanation about it at present. Therefore the documents obtained from my office and taking care of it I declare Unaccounted income of Rs 7.00 Crore for F.Y. 2012-13 and I am ready to pay The Tax Liablity and additional tax liability related to it and I also agree that I won't claim any deduction or set off on it, this is my additional income over and above my regular income.

Details of additional income offered as a consequence of Survey Remarks Account in which additional Date on which Amount of income income disclosed has been accounting entry credited has been made Swati-5 Purchase Account 01-08-2012 2766018 Income disclosed during survey Swati-5 Purchase Account 28-08-2012 2423657 Income disclosed during survey Swati-5 Purchase Account 09-10-2012 3124331 Income disclosed during survey Swati-5 Purchase Account 11-10-2012 3335241 Income disclosed during survey Swati-5 Purchase Account 01-02-2013 42100000 Inflation in purchase by revering entries in the account of Achnal Infrastructure P Ltd. Inflation in purchase was at Rs. 4,20,42,5487- Purchase return On various dates 15473455 Purchase invoices found recorded in the books on the date of survey which were not representing actual purchases and therefore, such purchases were removed by crediting purchase return account Total additional income offered in Return of Income 69222702 based on incriminating material found during Survey Addition made by AO 1500000 Addition made u/s 143(3) for A.Y. 2013-14 by the Assessing officer

70722702 TOTAL ADDITIONAL income assessed in A.Y. 2013-14 as a consequence of survey Page No 7 Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT 10. Referring to the statement of the Director, the letter written by the assessee to the ITO post survey and to the details of additional income offered as a consequence of survey he pointed out that the disclosure/surrender primarily related to inflation in purchases made by the assessee and not to any unaccounted sales. He thereafter drew our attention to the profit and loss of the assessee for the period 1st March 2012 to 31st March 2013 relevant to A.Y. 2013-14 i.e. the preceding assessment year placed before us at paper book page 349 and pointed there from that the” purchase return” of 1.54 crores as reflected in the details of additional income offered as a consequence of survey stood adjusted in the purchases for the said year. He pointed out that the other items of purchase also accordingly stood adjusted in the relevant accounts. He also drew our attention to the fact that the “estimated sales on completion method” of 6,85,00,000/- stood separately reflected in the profit and loss account. He therefore contended that the surrender on account of incriminating documents found during survey related to bogus purchases made by the assessee and the revenue had erred in holding that the same related to sales of 6.85 crores reflected as estimated sales in the preceding year and reduced from the sales for the impugned year. For justification of the reduction of sales of the impugned year he further pointed out that the 6. 85 crores turnover was increased in the preceding year by including sale value of booked units of which more than 90% booking amount had been received but the sale deeds were executed in the subsequent year. That the said amount had been returned in the preceding year to avoid litigation since the assessee was subjected to survey during the year. In this regard, our attention was drawn to the notes to accounts forming part of the financial statements for the preceding year i.e. year ending 31st March 2013 mentioning the said facts had in its significant accounting policies as under: Swati Procon Private Ltd. Schedules forming part of the Accounts for the year ended March 31, 2014 Schedule 21: Notes to Accounts 1. Significant Accounting Policies (a)……………………. (b)……………………… Page No 8 Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT (c) Revenue Recognition: Revenue has been generally recognized upon sale deed execution and on the work completion method. However since significant payments received from customers the company has changed method of recognizing sales, from current year. The company has also recognized sale in case of partial completion of construction by reducing inventory (W.I.P) to the same extent. Costs include all direct materials and labor costs and those indirect costs related to performance.

Swati Procon Private Ltd. Schedules forming part of the Accounts for the year ended March 31, 2014 Schedule 20: Notes to Accounts 2. Significant Accounting Policies (a)……………………. (b)……………………… Page No 9 Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT (c) Revenue Recognition: Revenue has been generally recognized upon sale deed execution and on the work completion method. Costs include all direct materials and labor costs and those indirect costs related to performance.

11.1 Ld. Counsel for the assessee therefore contended that he had been correctly pleading before the lower authorities that the amount of 6.85 crores having already been included in its sales of the preceding year on Partial Completion Method and again being included in the sales in impugned year on Project Completion Method was therefore reduced from the same and the revenue subjecting it to tax tantamounted to double taxation. He contended that the revenue was misconstruing the said amount of Rs. 6.85 crores as representing the amount surrendered during survey which infact related to bogus purchases as demonstrated above and which stood accounted for in the books of the asessee for the preceding year. He therefore contended that the additions of Rs. 6,85 crores was incorrect on facts and needed to be deleted.

Having heard the contentions of both the parties, we find merit in the contention of the ld. Cousnel for the asessee that the facts relating to the issue in the present case have not been appreciated in the proper perspective. The Revenue, we find, has noted from the Notes to Accounts of the assessee for the impugned year that Rs.6.85 crs were reduced from the sales of the impugned year and correlating it and treating it to be the amount surrendered by the assessee during survey of Rs.7 Crs held, that the surrender disclosed in the preceding year had so therefore being reversed in the impugned year, which could not be allowed and therefore added the same to the income of the assessee. But the assessee has made out case before us from the various documents as noted above that the amount of 6.85 crores had nothing to do Page No 10 Swati Procon P. Ltd. Pvt. Ltd. vs. DCIT with the surrender made by the assessee which infact related to bogus purchases made by it and which stood surrendered by way of adjustment/reduction of purchases relating to assessment year 2013-14 i.e. preceding assessment year. That the amount of Rs./ 6.85 crores infact was included in the sales of the preceding year on partial completion method to avoid any litigation with the revenue and again in the impugned year on project completion method following the accounting standard prescribed for the business of real estate in which the assessee was and that therefore the said amount of 6.85 crores was double included in both in the sales of the preceding year and in the impugned year and therefore reduced from the sales of the impugned year. All these facts which have been demonstrated before us by way of various documents placed before us as noted above need verification and we find that the assessee has made out case for the addition of 6.85 crores being a double addition but since the facts as stated by the assessee need verification, having not been examined by the authorities below, We restore the issue back to the file of the A.O. to adjudicate the issue afresh in the light of the contentions made by the assessee before us and after considering the various documents and statements relied upon by the ld. Counsel for the assessee. Needless to add due opportunity of hearing be granted to the assessee. The grounds of appeal raised by the assessee are allowed for statistical purposes.