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Income Tax Appellate Tribunal, D Bench, Mumbai
Before: Shri P K Bansal & Shri Amarjit Singh
Per P.K. Bansal, Vice President
Both these cross appeals have been filed by the assessee and Revenue against the order of the CIT(A)-30, Mumbai date dated 19.02.2013.
The assessee in its appeal did not press ground No. 1. Therefore the only ground survived for our adjudication is ground No. 2 which reads as under: -
“2. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the addition of unapproved loans of Rs.32,50,000/-.”
(1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of an amount of Rs. 1,11,61,500/- on account of sale proceeds of three flats without appreciating the facts that during the course of assessment proceedings, assessee failed to avail the opportunities provided for furnishing the details along with documentary evidences in support of expenses to work out the profit and as such the assessing officer has correctly made addition u/s 68 of the Act. (2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.43,20,645/- being profit from Bhavani Shankar project without appreciating the facts that the assessee himself during the course of survey action as also during the course of assessment proceedings, in the statement given on oath, stated that the said profit was for the year under consideration i.e. A.Y. 2005-06 and has offered the same for taxation. (3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 47,42,331/- out of interest debited to Profit and loss account without appreciating the facts that during the course of survey action, when confronted with this issue, confirmed that a revised return will be filed and offer the same for taxation. (4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition to Rs. 32,50,000/- as against of Rs. 2,35,95,000/- made by the A.O. on account of unsecured loans without appreciating the facts that the assessee failed to furnish any documentary evidence or confirmations in respect of the loans and as such the Assessing Officer has correctly treated the same as in-genuine and made addition to that extent.
The learned D.R. at the outset brought to our knowledge that the Revenue has taken the following additional grounds of appeal: -
“1) Whether CIT(A) was justified in relying on additional evidence submitted before him without formally admitting these document as Additional Evidence as per Rule 46A of the Income-tax Rules, 1962. 2) Whether CIT(A) was justified in admitting additional evidence in violation of Rule 46A of I.T. Rules without giving opportunity to the Assessing Officer by way of remand. 3) The appellant prays that the order of the Ld. CIT (A) on the. above grounds be set aside and that of the A.O. be restored.
3 & 3137/Mum/2013 M/s. Deccan Enterprises 4) The appellant craves leave to add, delete, alter, amend and modify any or all grounds of appeal
.”
4. We, therefore, heard both the parties on admission of the additional grounds. After hearing the rival submissions we are of the view that the additional grounds taken by the Revenue are legal grounds and we, therefore, admit the same. The only issue involved in the additional ground taken by the Revenue relates to the grievances that the CIT(A) was not justified in admitting the additional evidences without giving an opportunity to the AO by way of remand. We heard the rival submissions on this ground and carefully considered the same. The learned D.R. carried us to the order of the CIT(A), especially paras, 3.1, 4.1 as well as paras 6 and 8.2 of the order of the CIT(A) which we perused. According to the learned D.R. the assessee has submitted additional evidences before the CIT(A) and the CIT(A) after admitting those evidences, without giving opportunity to the AO, allowed relief to the assessee. So far as acceptance of additional evidence in respect of ground No. 1, we noted that the AO has made an addition in the income of the assessee for a sum of `1,11,61,500/-. The AO noted that the assessee has furnished the following sales documents: -
Sr. Flat No. Flat owner Date of Value of the flat No. possession 1. 604, Vimlaben November, 2004 38,57,000 6th floor, D. Shah
2. 605, Dahyalal L. November, 2004 38,04,500 6th Floor Shah 3. 505, Haresh Mehta November, 2004 35,00,000 5th Floor TOTAL 1,11,61,500 The AO asked the assessee as to why these sales made during the impugned assessment year should not be added to the total income of the assessee. In the absence of any reply from the assessee the AO added the same in the total income of the assessee under Section 68 of the Income Tax Act. When the matter went before the CIT(A), the CIT(A) argued that the assessee is accounting income on project completion method basis.
4 & 3137/Mum/2013 M/s. Deccan Enterprises The CIT(A), we noted, took the view that the project has not even been completed till date and the income from sale of these three flats have not been offered to tax in any of the assessment years subsequent to A.Y. 2005-06. The CIT(A) further directed the AO to estimate the profit on sale @10% and reduced the said addition to `11,16,150/- by observing as under: -
….. Taxability of income cannot be postponed indefinitely only because appellant is following a method of accounting which is done to defer the taxability indefinitely. The Id. Counsel of appellant agreed that the amount may be taxed in the year under consideration with request that only the profit should be charged to tax. This request is justified. Once part sale of flats constructed is being brought to charge of tax, it means income being taxed on year to year basis which requires profit in contrast to sale to be charged to tax. I find that in the earlier years AO has applied profit rate of 10% on the amounts received as advances to be the profit on the project. For instance, in the year of assessment for asst. year 2001-02, appeal for which is concurrently being decided by me. In para no. 13 of the order dt. 11.02.04, the rate of 10% had been adopted by the AO. Therefore, same percentage rate is decided to be applied on the total sale proceeds of flats giving a profit of Rs. 11,16,I50/- being 10% the total sale proceeds on Rs.1,11,61,500/- in respect of three flats. The addition to income is restricted to Rs.11,16,I50/-. Appellant gets relief of balance amount.
From the order of the CIT(A) we noted that the assessee has not filed any additional evidence so that the CIT(A) was required to ask for the remand report from the AO. On that basis we cannot set aside the order of the CIT(A) but after hearing from the submissions of both the sides we noted that this issue is covered by the decision of this Tribunal in the case of the assessee in in which this Tribunal vide order dated 26.04.2017 while dealing with similar issue restored the issue to the file of the AO. We, therefore, in the interests of justice and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall redecide this issue afresh after giving proper opportunity to both the parties and decide this issue on the basis of the method of accounting consistently followed by the assessee. Ground No. 1 taken by the Revenue is statistically allowed.
5 & 3137/Mum/2013 M/s. Deccan Enterprises 6. Ground No. 2 in Revenue’s appeal relates to the deletion of addition of `43,20,645/- being profit from Bhavani Shankar project. After hearing the rival submissions and going through the order of the CIT(A) as well as the order of the AO we noted that the CIT(A) has given a finding of fact that the entire profit from the said project has duly been disclosed by the assessee during A.Y. 2004-05 which is apparent from the copy of the Profit & Loss Account and the Balance Sheet pertaining to A.Y. 2004-05. Since the assessment for A.Y. 2004-05 has also been completed by the same AO, therefore, the Profit & Loss Account and the Balance Sheet relate to A.Y. 2004- 05 cannot be regarded to be additional evidence. We therefore confirm the order of the CIT(A). Thus ground No. 2 taken by the Revenue is dismissed.
Ground No. 3 in Revenue’s appeal relates to deletion of the addition of `74,42,331/- out of the interest debited to the Profit & Loss Account. After hearing the rival submissions and going through the order of the CIT(A) we noted that the CIT(A), after appreciating the Profit & Loss Account for the impugned assessment year, which was also available before t he AO, which fact is apparent from the order of the CIT(A), found that the assessee has not debited interest in the Profit & Loss Account. We do not find any illegality or infirmity in the order of the CIT(A) in deleting the disallowance, especially when the entire interest has been capitalised by the assessee as is apparent from the Balance Sheet. Thus, ground No. 3 taken by the Revenue stands dismissed.
Ground No. 4 taken by the Revenue as well as the only ground taken by the assessee relates to the common issue relating to addition in respect of the unsecured loan. After hearing the rival submissions and ground through the order of the Tax Authorities below we found that the AO has made an addition amounting to `2,35,95,000/- on the basis of the Balance Sheet available with the AO as on 31.03.2005. When the assessee sent in appeal before the CIT(A), the CIT(A) has given a finding that the assessee has received fresh loans during the impugned assessment year only to the extent of `32,50,000/-. Therefore, he sustained the addition to `32,50,000/- and reduced the addition being made in respect of the 6 & 3137/Mum/2013 M/s. Deccan Enterprises opening balance of the unsecured loan. We noted that the assessee has not given any details or evidence before the AO. The assessee for the first time submitted the details before the CIT(A) and contended that there as an opening balance to the tune of `2,47,30,000/- and the fresh loans received were only `32,50,000/- and a sum of `43,85,000/- has been paid back during the impugned assessment year. The CIT(A) before accepting these details has not given any opportunity to the AO or any remand report, etc. had not been called for from the AO, as argued by the learned D.R. We, therefore, in the interest of justice and fair play to both the parties set aside this issue and restore this issue to the file of the AO with the direction that the AO shall redecide this issue afresh after giving proper and sufficient opportunity to the assessee. The assessee is also directed to produce all the necessary details and evidences before the AO whatever he filed before the CIT(A). He may also furnish any other evidences on which he my rely to discharge his onus as lay on him under Section 68 of the Income Tax Act. Thus, ground no. 4 taken by Revenue as well as ground No. 2 taken by the assessee are statistically allowed.
In the result, the appeal filed by the Revenue is partly allowed while the appeal filed by the assessee is statistically allowed.
Order pronounced in the open court on 15th November, 2017.