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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal filed by the Assessee is against the order of CIT(A)-9, Pune, dated 15-05-2017 for the A.Y. 2011-12.
Grounds raised by the Assessee read as under :
“1. In the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in confirming the addition of Rs.42,68,696/- made by the Ld. AO on account of reduction of sales wrongly considered the sales as per tentative P&L A/c taken during the survey exclusively on assumption/presumption without any authenticate bonafide grounds. The aforesaid addition being arbitrary, perverse, based on surmises and conjecture the Ld.CIT(A) ought to have deleted the said addition. The impugned addition may please be deleted.
2 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
In the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in confirming the addition of Rs.72,63,461/- made by the Ld. AO on account of suppression of sales exclusively on estimation basis and ignoring the facts and circumstances of the case. The aforesaid addition being arbitrary, perverse, based on surmises and conjecture the Ld.CIT(A) ought to have deleted the said additions. The impugned additions may please be deleted. 3. In the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in confirming the addition of the extent of Rs.88,78,829/- against the addition of Rs.1,20,00,000/- made by the Ld. AO on account of inflation of expenses exclusively on assumption/presumption and ignoring the supporting documents and corroborative evidence. The aforesaid addition being arbitrary, perverse, based on surmises and conjecture the ld. CIT(A) ought to have deleted the said addition. The impugned additions may please be deleted. 4. The appellant denies his liability to pay any interest u/s.234B and 234C of the I.T. Act, 1961 and hence the same may please be deleted. 5. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”
Before us, Ld. Counsel for the assessee mentioned that there was delay
of 51 days in filing the appeal before the Tribunal. In this connection, Ld.
Counsel referred to the affidavit dated 18-05-2018 filed by the assessee and
drew our attention to the reasons for the same. The reasons mentioned in
Para No.3 are reproduced below :
“3. After receiving the order of the Commissioner of Income Tax (Appeals) we handed over the same to our tax consultant Mr. Vishal S. Maheshwari to prefer an appeal before the Hon’ble Income Tax Appellate Tribunal and he undertook to do the needful. Accordingly the appeal was prepared well in time as is evident from the verification made on 24-07-2017 on the Form No.36. However because of rush of work regarding filing of returns etc. by oversight Mr. Vishal S. Maheshwari the tax consultant could not file the appeal before the stipulated date. Later on when it was realized that the appeal has not been filed the same was filed on 05-10-2017.
Considering the above, we are of the opinion that there was reasonable
cause for the assessee to file the appeal late by 51 days. Therefore, the delay
in filing the appeal is condoned and the appeal is admitted for adjudication.
Briefly stated relevant facts include that the assessee is a firm engaged
in the business of construction. Assessee filed the return of income declaring
total income of Rs.1,02,50,154/-. There was survey action u/s.133A of the
3 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
Act on 09-03-2011. At the end of the assessment proceedings, the AO made
additions worth Rs.2,36,94,157/-. Eventually, the assessment is completed
computing the total income at Rs.3,39,44,310/-. AO made additions on
account of reduction in sales, suppression of sales, inflation of expenses and
other disallowance of expenditure. During the survey action, the survey team
found a tentative trading and profit and loss account. On comparison the
figures appearing in the said tentative trading and profit and loss account did
not match with the final profit and loss account. As per the tentative profit
and loss account, the sales of flats shown works out to Rs.8,37,15,998/-
whereas as per the final accounts, sale of flats is only Rs.7,94,47,302/-. The
difference works out to Rs.42,68,696/-. On hearing the assessee’s
explanation on this discrepancy, the AO proceeded to add such difference of
Rs.42,68,696/-.
4.1 Further, AO made another addition of Rs.72,63,461/- on account of
difference in price of flats. AO analysed per sq.ft. rate of various flats and
found the rates are varying substantially qua the average rate for that year
(1757 per sq.ft. the down figure is 1141 per sq.ft.). AO calculated the average
price rate and found the difference of Rs.72,63,461/- is required to be added
to the income of the assessee. AO rejected the assessees explanation linked
to the price variation from customer to customer and the extent of advance
amounts paid by the buyer of the flat.
4.2 AO also made another addition of Rs.1.20 crores on account of
expenditure. This is the case where survey took place on 09-03-2011 and
during the survey action, assessee calculated the projected expenditure by
the end of the financial year which works out to Rs.1.20 crores. After
considering these claims, the net profit works out to Rs.1,87,64,975/-.
Assessee also offered additional amount of Rs.15 lakhs for omissions.
4 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
However, on examination of the books of account, this claim of Rs.1.20 crores
was not appearing in the same. For want of proof of incurring of the said
expenditure, the AO did not allow the said claim of Rs.1.20 crores. There was
another addition of Rs.1,62,000/- linked to the expenditure.
During the First Appellate proceedings, assessee agitated against the
major additions of Rs.42,68,696/-, Rs.72,63,461/- and Rs.1.20 crores. First
addition of Rs.42,68,696/- was discussed in Para No.5 of the order of CIT(A)
and the CIT(A) confirmed the same rejecting the assessee’s explanation. The
fact of the other addition of Rs.72,63,461/- is also the same and the addition
stands confirmed. The other addition of Rs.1.20 crores on account of
inflation of expenditure was partly allowed and confirmed the addition to the
extent of Rs.88,78,829/-. Thus, the CIT(A) granted part relief of
Rs.31,21,171/- being the difference in stock in trade. Accordingly, the CIT(A)
partly allowed the appeal of the assessee. Aggrieved with the same, the
assessee is in appeal with the above referred grounds.
We shall now take up the ground-wise adjudication.
Ground No.1 relates to the confirming of addition of Rs.42,68,696/-.
As discussed earlier, this amount constitutes the difference between the
figures appearing in the tentative financial statement and the finalized
financial statement. Otherwise, there is no evidence gathered by the AO
either during the survey action or during the post survey action involving the
assessee on this issue of total sales. Before us, it is the claim of the assessee
that the finalized figures for the financial year are adopted and therefore, the
tentative financial statement is not sacrosanct. Therefore, the addition made
by the AO is required to be deleted.
5 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
During the proceedings before us, the Bench called for a remand report
from the AO on this issue. The AO did not raise any adversarial comments
admittedly on this addition and against the assessee. Additions made on
such tentative papers are obviously unsustainable. Considering the same, we
are of the opinion that the addition is required to be deleted and in favour of
the assessee. Accordingly, the Ground No.1 stands allowed.
Ground No.2 relates to the addition of Rs.72,63,461/- on account of
difference in rates per sq.ft. of the constructed area of the flats. Details of
working for arriving on this addition is given in table available at Para No.5.2
of the assessment order. AO analysed around 22 flats and their sale prices,
i.e. rate per sq.ft. and noticed that the price vary from 1141 per sq.ft. to 1757
per sq.ft. In this regard, assessee’s explanation that the flats were booked
the customers at an earlier date and the agreements were made at the later
dates. Therefore, the difference in rates. From the advances paid by the
customers the price rate is reduced. Accordingly, rate per sq. ft. depends on
the customer and the advances received from the said customers. However,
the AO did not accept the said general explanation of the assessee. For want
of evidences the AO proceeded to make addition of Rs.72,63,461/-. On this
issue, AO submitted a remand report and the same is extracted as under :
“I. Agreement dates have been taken into consideration for determining the rates, however, the parties had booked their respective flats on earlier dates. Therefore, the date of booking may be adopted for determining the rates.
In this context, it is stated that the assessee has submitted the date of bookings, which was perused, from which it can be inferred that the AO has determined the rates on the basis of date of agreement and not as per booking date. Further, the average rate determined by the AO seems to be on a higher side as the AO has considered even a single agreement of a higher value in calculating the average. Therefore there is merit in the assessee's contention that the date of booking should be considered for determining the rates. Further if the average rate is calculated on the basis of rates at which maximum transactions have taken place, then the difference is worked out at Rs. 8,75,915/ - as against Rs. 72,63,461/ - as elaborated in Chart III below.
II) It is also submitted by the assessee that the rates of the flats were determined on the basis of amount of advance paid by the flat holders. Higher
6 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
the amount of advance, the rate was reduced by the assessee accordingly.
It has been perused and details have been mentioned in the column nos. 7 and 8 of the Chart I given below. As per details, the contention of the assessee, that the rates are determined on the basis of advances is not found to be correct.
Further, the AO also furnished various permutations and combinations
giving different charts in the report and submitted that the addition should
atleast be around Rs.8,75,915/- in place of Rs.72,63,461/-. In this regard,
assessee’s counsel mentioned that the addition of Rs.8,75,915/- is also not
required to be made and relied on the various decisions given the following
write up :
“3. Regarding the addition of Rs.72,63,461/- made on account estimated rate difference the Assessing Officer in Para 6 of the remand report has mentioned that while making the assessment the Assessing Officer has determined the rates on the basis of the date of agreement and not on the basis of the date of the booking. It is further mentioned in the remand report that the average rate determined by the earlier Assessing Officer is on the higher side as he has considered even a single agreement of higher value in calculating the average. The Assessing Officer has accordingly computed in the remand report the amount of difference at Rs.8,75,000/- as against the difference of Rs.72,63,461/- computed by the Assessing Officer in the assessment order on account of estimated rate difference.
3.1 It is submitted that no addition can be made to the income of the assessee on account of any difference arrived in the sale rates, merely by taking average of the sale rates of all the flats sold in a particular period, without bringing any material on record showing that the assessee has actually received anything more than the consideration recorded in the sale agreement of the flats.
Reliance is placed on the following case laws :
(a) M/s. Shivakami Co. Pvt. Ltd. 159 ITR 71 (SC) and Godavari Corporation Ltd. 200 ITR 567 (SC) (b) M.J. Cherian 117 ITR 3712 (Kerala) (c) M/s. Shah Realtors, Thane – ITA No.2656/Mum/2016
3.2 A perusal of chart 1 in Para 6 of the remand report clearly shows that where ever the flats have been sold at higher rates e.g. Flat No. A-05, Flat No. A-19, Flat No. D-09 and Flat No. D-05, no advance was received from the buyers, where as for all other sales, advance as mentioned in col. 8 of the chart has been received. Thus there is a complete justification for charging higher rates and lower rates for the respective sales depending up the advance paid by the buyers.
3.3 It is further submitted that the rate for sale of flats in a project will sometimes further vary depending upon, the location of the flats; whether the
7 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
flat is located on the front side or back side of the building; whether the flat has a good view, the terms of the payments and the specifications of the amenities to be provided in a particular flat. Therefore it is not possible to fix the same rate for all the flats in a project.”
Finally, he submitted that the issue may be remanded to the file of AO
for verification and deletion of such addition. In any case, as per Ld.
Counsel, the addition needs to be restricted to Rs.8,75,915/- only.
On hearing both the parties and considering the revised submissions
made by both the parties, we are of the considered opinion this issue requires
remanding to the file of AO for fresh consideration and for want of a speaking
order on all the grounds in general and new arguments raised before us.
Accordingly, the AO shall grant reasonable opportunity of being heard to the
assessee in accordance with the principles of natural justice. Thus, the
Ground No.2 raised by the assessee is allowed for statistical purposes.
Regarding the other addition of Rs.1.20 crores, we have already
explained the basic facts in the preceding paragraphs of this order. The said
amount of Rs.1.20 crores is the projected expenditure for the period
subsequent to the date of survey, i.e. 09-03-2011. The correctness of this
expenditure is the issue together with furnishing of evidences to the file of
AO. During the proceedings before us, as per the remand report, the AO
submitted that the said amount of Rs.1.20 crores does not appear in the
books of account of the assessee. On the other side, AO mentioned that
books of account are not available for verification. He however gave a finding
in para 4 of the remand report that the total expenditure as per the return of
income is only Rs.93,45,021/- (increase of expenditure on purchase account
amounting to Rs.78,36,493 + Direct expenditure of Rs.15,08,528/-). In this
regard, he furnished the following write up and the same is reproduced as
under :
8 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
“04. However, an analysis/comparison of the P&L account drawn at the time of Survey and the P&L account enclosed along with the Return of Income was done and it was revealed that the Purchase account has increased by Rs.78,36,493/- (Ref. Annex-A). It is also seen that certain expenses under the head viz., Electricity Expenses, Lift expenses, MSEB bill, Professional fees, Survey charges, VAT paid amounting to Rs.15,08,528/- which were not appearing in the Tentative P&L account are found in the final P&L Account. Therefore, the expenses which have been claimed in return of income for the first time are to the extent of Rs.93,45,021/- (Purchases Rs.78,36,493/- + other direct expenses : Rs.15,08,528). However the above expenses of Rs.93,45,021/- form a part of the construction expenses to be incurred of Rs.1.2 Cr cannot be established in absence of books of account on record.
It is further stated that during the assessment proceedings the assessee had submitted a list of hills mentioned as "After Survey fur dated 9/3/2011 Recorded bills" amounting to Rs.79,89,110/ -. The heading of the list clearly mentions that these bills have been recorded in the books after the survey implying that the expenses as per the bills might be incurred earlier but not recorded till the time of survey. On perusal of these bills it was seen that the bills pertained to purchase of material of various types related to construction. Out of the above, the bills pertaining to Sai Samrajya scheme are basically of the nature of items required for finishing work viz - lift expenses, electrical fittings, cleaning work, hardware, Consultant fees etc whereas the bills pertaining to Sai Sampada are of the initial stages of construction viz Binding wire, Plywood material etc. Thus total bills of material purchase were of 79,89,110/ -.Out of these part of the bills amounting to Rs 22,64,084/ - were of date after the survey and balance bills of Rs.57,25,026/- were dated before the survey.”
In response, Ld. Counsel for the assessee also filed the written
submissions stating that the expenditure actually incurred post survey period
is undisputedly Rs.93,45,021/- out of projected expenditure of Rs.1.20
crores. As per the assessee, the said figure stands substituted by the figure
of Rs.95,43,148/- on the basis of the bills accounted for after the survey
action. This gave rise to the difference of Rs.1,98,127/- and the same is
attributable to a mere calculation mistake made by the AO or by the assessee.
After hearing both the sides on this issue, we find it is accepted
position that the actual expenditure incurred is to the tune of Rs.93,45,021/-
which cannot be disallowed by the AO under any circumstances considering
the fact that the said expenditure was not only incurred but also constitute a
genuine expenditure. The difference works out to Rs.26,54,979/-. This
figure is arrived for the first time before us and therefore, it is in the interest
9 ITA No. 2332/PUN/2017 M/s. Sai Builders and Developers
of justice, this issue should be remanded to the file of AO for re-computing
the disallowable amount for addition out of the said sum of Rs.1.20 crores.
AO shall also note that the CIT(A) granted relief to the extent of Rs.31,21,171/- at the time of re-examination of this issue. Therefore, AO is
directed to examine this entire issue afresh with regard to the genuineness as
well as the correctness of the expenditure actually incurred during the year
under consideration and decide the issue after obtaining the evidences and also after granting reasonable opportunity of being heard to the assessee.
Thus, Ground No.3 raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical
purposes.
Order pronounced on 21st day of August, 2018.
Sd/- Sd/- िवकास अव�थी /VIKAS AWASTHY) (डी डी डी. क�णाकरा राव डी (िवकास अव�थी िवकास अव�थी िवकास अव�थी क�णाकरा राव क�णाकरा राव/D. KARUNAKARA RAO) क�णाकरा राव �याियक सद�य �याियक सद�य �याियक सद�य/JUDICIAL MEMBER लेखा सद�य �याियक सद�य लेखा सद�य लेखा सद�य/ACCOUNTANT MEMBER लेखा सद�य
पुणे / Pune; �दनांक / Dated : 21st August, 2018. Satish
आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-9, Pune. 4. The Pr. CIT-8, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy //
व�र� िनजी सिचव / Sr. Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.