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Income Tax Appellate Tribunal, “A” BENCH, PUNE
आदेश / ORDER
PER ANIL CHATURVEDI, AM
ITA No.2271/PUN/2014 filed by the assessee and ITA No.45/PUN/2015
filed by the Revenue are cross appeals and are emanating out of the order of
Commissioner of Income Tax (Appeal) – I, Pune, dated 21.10.2014 for A.Y.
2008-09.
The facts as culled out from the material on record are as under:
Assessee is an individual stated to be engaged in the business of building
construction and development activities. Assessee filed the return of income for
AY 2008-09 on 26.11.2010 declaring total income of Rs.5,96,21,710/-. The
case was reopened by issuing notice u/s.148 and thereafter the assessment
was framed u/s 143(3) r.w.s 147 of the Act vide order dtd. 31.12.2010 and the
total income was determined at Rs.11,25,21,710/-. Aggrieved by the order of
AO, Assessee carried the matter before CIT(A) who vide order dtd. 21.10.2014
(in appeal no.Nsk/CIT(A)-I/493/2013-14) granted partial relief to the Assessee.
Aggrieved by the order of Ld CIT(A), Assessee and Revenue are now in appeal
before us. The grounds raised by the Assessee in ITA No.2271/PUN/2014
reads as under:
“1.The learned CIT(A) erred in confirming the disallowance of deduction on account of estimated accrued liability of Rs.4,01,64,364/- without appreciating that the said amount was allowable while computing the income of the assessee. 2. The learned CIT(A) erred in confirming the disallowance of construction expenditure of Rs.3,45,38,840/- on the ground that the assessee in the appellate proceedings had not pressed for the claim of deduction without
3 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
appreciating that the claim made by the assessee was justified in law and accordingly, the deduction of Rs.3,45,38,840/- ought to have been allowed.
The assessee submits that she had inadvertently accepted the disallowance of Rs.3,45,38,840/- and it is submitted that the said deduction may kindly be allowed even though, the assessee had not pressed for the same in the appellate proceedings before the CIT(A).
The appellant further submits that she would apply for rectification of the order of learned CIT(A) on the ground that she had agreed for the addition under a mistaken impression of fact and law and hence, it should not be considered as binding on her. In view of this position, the necessary relief may kindly be allowed.
The learned CIT(A) erred in allowing a deduction of Rs.1,99,45,036/- being 78% of the total expenditure of Rs.2,55,70,558/- (being the expenditure incurred for purchase of transfer of development rights (TDR) and payment of royalty to PCMC) without appreciating that the actual expenditure incurred till date was Rs.3,02,77,109/- and therefore, 78% of the said expenditure amounting to Rs. 2,36,16,145/- should have been allowed as a deduction while computing the income of the assessee.
The learned CIT(A) further erred in not appreciating that the assessee was required to incur further expenditure on payment of premium to PCMC on account of purchase of TDR and therefore, the assessee submits that she should be allowed deduction on account of any further payment made by her to PCMC on account of premium.
The appellant further prays for considering all the facts/events/evidences till the decision of Hon'ble ITAT for deciding the issue on merits.
The appellant requests for admission of additional evidences, if any, in support of above grounds of appeal.
The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
On the other hand the grounds raised by the Revenue in ITA
No.45/PUN/2015 reads as under:
“1.Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in confirming the addition of RsA.15 crores as substantive addition whereas the AO has considered it as protective addition in view of the fact that the amount of RsA.15 crores is required to be added u/s.68 of the I.T. Act as unexplained cash credit on the ground that the same is credited in the books of the assessee for A.Y.2007-08 thereby addition was made on substantive addition for A.Y.2007-08?
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in not sustaining the addition of Rs.5,29,OO,OOO/- made by the AO based on the declaration made by assessee based on documents impounded during survey and admission made on oath u/s.131 of the Act, which have remained un retracted?
4 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
3.The appellant craves leave to add, amend or alter any of the above grounds of appeal.”
Since the grounds raised by Assessee and Revenue are interconnected all
the grounds are considered together:
A survey action was undertaken at the Assessee’s business premises on
20.2.2008. During the course of survey the statement of Assessee was recorded
wherein disclosure of Rs 4.15 crore was made on account of cash receipts that
was offered as unaccounted additional income, Rs 5 crore on account of sales
to Approach property group and Rs 7 crore on account of regular business
profits including rental income. However, in the return of income, the Assessee
disclosed the income of Rs 5.96 crore. The Assessee was therefore asked to
explain as to why the income declared during the course of survey not be
treated as the income of the Assessee. In response to the aforesaid, Assessee
interalia filed an affidavit wherein it was stated that the actual income
disclosed during the survey u/s 133A was Rs 11.26 crore (Rs 7.11 crore being
regular income and Rs 4.15 crore being additional income disclosed on account
of cash receipts). The Assessee was asked to explain as to why the difference of
Rs 5.29 crore (Rs 11.26 crore as per affidavit – Rs 5.97 crore as per the return
of income filed on 26.11.2010) not be added to the total income. The
submissions of the assessee was that at the time of survey the expenses
incurred for sales already booked were not considered and further Assessee
had also to incur Rs 6.01 crore for the area which is already sold. The
submissions of the Assessee were not found acceptable to AO as according to
him the estimate of expenses was in the nature of contingent liability. He
accordingly made addition of Rs 5.29 crore. Aggrieved by the order of AO,
Assessee carried the matter before CIT(A) who decided the issue by observing
as under:
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“9. In order to verify the contents of statement of Ms Anuja A. Phal, wherein she had referred to some papers of Annexure A, found and impounded from the office premises of the appellant at Premier Plaza in relation to receipt of 'on-money' of Rs. 4.15 crore, the AO was asked to provide copies of the same. The AO vide letters dated 08/07/2014 and 20/08/2014 has, however, stated that the same were not readily traceable. Notwithstanding above, a scanned copy of page 21 of Annexure- 1 showing cash receipt of Rs. 4.15 crore as 'on- money' has already been reproduced in para 3 of the order. The appellant had admitted an undisclosed income of Rs. 4.15 crore on the basis of this document.
9.1. As regards year of taxability of 'on-money' of Rs. 4.15 crore, in my order passed on 21/10/2014 in respect of appeal for the A.Y.2007-08 in the case of the appellant, I have held that the unaccounted 'on-money' of Rs.4.15 crore received by the appellant is required to be taxed during the year under consideration i.e. A.Y. 2008-09 and consequently the same is required to be deleted from A.Y.2007-08. A perusal of the profit and loss account of the appellant for A.Y. 2008-09 given in para 3.2 above, revealed that she has already taken into account Rs. 4,15,00,000/- that she had declared as her undisclosed income on account of receipt of 'on-money' from M/s Approach Properties to whom the appellant had sold substantial portion of B, C, D & E buildings of Premier Plaza i.e. area measuring approx. 73,953 sq. feet for approximately 24.19 crore in A.Y. 2008-09. While the appellant had shown Rs.14.75 crore as "advance against sale of shops" against M/s Approach Properties in A.Y. 2007- 08, she has shown Rs.24.19 crore as sale consideration from Approach Properties and included the same under the head 'sales' in A.Y. 2008-09. A noting regarding receipt of cash of Rs. 4.15 crore on page No.21 of bundle No.1 impounded during the course of survey on 29/02/2008 and subsequent statement of the appellant admitting that this amount represented 'on- money' which was not reflected in the regular books of account and therefore, amounted to her undisclosed income on account of 'On-money', is not disputed. Further, it is dearly established that the said 'on-money' of Rs.4.15 crore was shown by the appellant as her undisclosed income in the P & L account for A.Y. 2008-09. Though initially she declared this undisclosed income for A.Y.2007-08, subsequently she included the same in her return for A.Y.2008-09. Reasons for taxability of the said undisclosed income in AY. 2008-09 have already been discussed in detail in the appellate order dated 21/10/2014 in the appellant's own case for A.Y. 2007-08. While it is not disputed that this amount was received during A.Y. 2007-08, the undisclosed 'on-money' is taxable in AY. 2008-09 as the appellant has booked sale to M/s Approach Properties in the P & L account of this year only i.e. AY. 2008-09. In AY. 2007-08, the appellant had shown approx. Rs.14.75 crore received from M/s Approach Properties as advance for booking of shops in Premier Plaza. Various case laws including that of jurisdictional High Court of Mumbai have held that 'on-money' received on account of sale of flats is required to be taxed in the year in which the sale is shown-in the books. Since it is clearly established from the profit and loss account that the appellant has included this undisclosed income of Rs. 4.15 crore for the purpose of her computation of income for AY. 2008- 09, no separate addition on this account is required even on protective basis as held by the AO in his assessment order. The separate addition of Rs. 4.15 crore made by the AO on protective basis is therefore, deleted.
9.2 As regards AO's emphasis on tentative profit and loss account submitted by the appellant as on the date of survey action i.e, 29/02/2008 showing a net profit of Rs. 7,11,36,154/-, the appellant has submitted that major obligation in respect of purchase of TDR and related expenditure (premium to PCMC) etc. were not claimed. Appellant has submitted that the profit shown in the tentative P & L
6 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
a/c was, therefore, erroneous. Appellant in response to AO's notice u/s 143(2) asking for the difference between income declared at the time of survey u/s 133A and as per return submitted on 26/11/2010, vide letter dated 29/12/2010 had stated that at the time of preparing the tentative works and profit and loss account of 29/02/2008, expenses required to be incurred for sales, already booked, were not considered as that time she was not aware of the same. As regards appellant's claim of future cost of area sold amounting to Rs.6,01,09,400/- included in the "other direct expenses" amounting to Rs.6,18,43,305/- shown in the profit and loss account for A.Y. 2008-09 (schedule 9), the appellant has furnished a certificate from a private architect stating that an expenditure of Rs.7,69,37,675/- was required to be incurred to authorize the project. Out of this Rs. 6.01 crore was stated to be in respect f area which was already sold. Shri Parmar, the private architect in his certificate dated 25.10.2010 has stated that while the total saleable area of premier plaza was 280141.24 Sq. ft. after loading TDR and paying premium to PCMC, presently part of the project was unauthorized. The details of the future expenses are given as under:
Sr. Particulars Amount No. 1. Compound Wall 26,58,250/- 2. Side Road 35,02,500/- . 3. Parking Flooring 56,03,540/- 4. Water Fountain 35,05,000/- 5. Light Fountain 5,00,100/- 6. Common area tiling/tree 950000/- 7. Sign board tiling/tree 388710/- 8. Gate 1355000/- 9. Internal Bridge 1514500/- 10. Dome 1855200/- 11. Electricity/ 600500/- Transformer/Meter 12. Water proofing 1104500/- 13. Street Light 700895/- 14. Seating Arrangement 406450/- 15. Plumbing 361790/- 16. Water Connection 410000/- 17. Liasioning fee 595000/- 18. Coloring 739000/- 19. Trees beauty 295050/- 20. Drainage Pipeline 812500/- 21. Parking Sytem 13867850/- 22. TDR costing 25940 sq.ft 20752000/- @800 23. PCMC premium 14459340/- Total 76937675/-
9.3 During the course of perusal of the impounded documents, it was found that there were certain differences in regard to work-in-progress, expenses and sales figure, vis-a-vis shown by the appellant in the final profit and loss account. The appellant was confronted with these findings vide letter dated 02/07/2014. Further, impounded papers interalia included a copy of sale agreement with M/s Approach Properties for shop No.5, B wing for Rs. 1.5 crore. The appellant was required to furnish details in this regard also. The appellant was also confronted with the noting on page 1 of annexure 20 showing a receipt of Rs. 6 lac in cash from M/s Approach Properties. The appellant vide letter dated
7 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
08/07/2014 stated that the figures found recorded in the impounded papers (page 24 of Annexure 18) were estimates/tentative figures and she was not in a position to reconcile the same with the total figures mentioned in the profit and loss account. She further stated that since the books of accounts for A.Y.2007-08 were audited, the figures mentioned therein need to be taken as the final figures. As regards receipt of Rs. 6 lac found recorded on page 1 of Annexure 20, the appellant stated that this paper showed amounts received by accountant for payment to contractors, etc. on behalf of customers and hence the same were not reflected in either of the parties books. As regards sale agreement with M/s Approach Properties for sale of shop, the appellant admitted that this was in lieu of cash that was received from M/s Approach Properties to build confidence between both the parties. She further stated that no such shop was sold to M/s Approach Properties as is evident from the details furnished by her.
9.4 As regards appellant's claim for future cost of area sold, it was further seen that the appellant has shown to have incurred an expenditure of Rs. 4,92,68,533.61 only as on 31/12/2012 as against Rs.7,69,37,675/- claimed in the architect's certificate. Further, there was a wide variation in the estimated expenses claimed by the appellant vis-a-vis expenses stated to have been actually incurred upto 31/12/2012 in respect of various items of civil construction including compound wall, side wall, etc. A perusal of the architect certificate reveals that the appellant has not incurred any expenses on parking, flooring, light fountains, common area tiling/tree, sign board tiling, electricity / transformer/meter, water proofing, parking system, etc. The appellant had claimed the future cost of the area sold in the return of income for A.Y. 2008-09. AO in his remand report dated 28/01/2014 has stated that due to paucity of time, the expenses were verified on test check basis. The appellant's books of account for AY. 2008-09 are not audited. The appellant's certificate from a private architect in regard to future cost of area sold cannot be relied upon for want of supporting documentary evidences. In many cases expenses have been shown on the basis of quotations only. It is further seen that while quotation has been obtained from X payment is shown to have been to Y. Further, the appellant has not been able to reconcile the differences in some of figures of work in progress, sales, future expenses found recorded in documents impounded during survey vis a vis P & L A/c furnished by the appellant along with the return of income for A.Ys. 2007- 08 and 2008-09. The appellant’s contention that the figures found recorded in papers found during survey were estimates and tentative is without any documentary proof. Last but not the least, the appellant in her letter dated 24/07/2014 has accepted that due to non- availability of documents and also due to non-availability of the accountant who was working at that time, she was not in a position to substantiate various details in regard to construction expenses requisitioned vide this office letter dated 02/07/2014. She further stated that in order to buy peace of mind, due to non-availability of further explanation of the various papers impounded during survey and also to finalize the matter she was not pressing for the construction expenses of Rs.3,45,38,840/- out of Rs. 6,01,09,400/- that she had claimed in the P & L A/c under the head future cost of area sold.
9.5 In view of the facts and discussion given above, the appellant's claim for future cost amounting to Rs. 3,45,38,840/- on civil work is devoid of .merit and hence not acceptable in AY. 2008-09. The same is, therefore, rejected. The appellant has, however, shown to have purchased TDR of 2498.85 sq. mtr. for Rs.1,14,50,910/- from various persons for which she has filed details including agreements of transfer of development rights (TDR). She has also paid a premium of Rs. 1,41,19,650/- to Pimpri Chinchwad Municipal Corporation (PCMC) in lieu of the said TDR. It has been further found that as per paragraph No.29, page No.21 of the development agreement dated 13/09/2002 with PCMC, the appellant was
8 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
allowed to use additional FSI/TDR on payment of royalty as per the prevailing market rate to PCMC for such additional FSI/TDR. The appellant, therefore, purchased TDR of 2498.85 sq. mtr. for Rs.1,14,50,910/- and aid royalty/premium of Rs. 1,41,19,650/- for 1568.50 sq.mtr. to PCMC on 27/02/2012. The appellant has filed a letter dated 27/04/2010 from PCMC asking for a payment of 1,44,52.,40/- in lieu of TDR of 2409 sq. mt. These expenses on TDR and premium to PCMC are, therefore, ascertained liability for which a proper provision has been made by the appellant under the head "current liabilities & provisions" in her books of account for AY. 2008-09 (schedule 4). In response to order sheet noting dated 29/05/2014, the appellant also filed statements reconciling the area of shops in the said project as per approved building plans with the saleable area. The appellant vide letter dated 21.10.2014 has further submitted that she has paid additional Rs.47,06,550/- to PCMC on 28.08.2014 on account of royalty for T.D.R purchased for the said project. The appellant has also filed a letter certifying therein that none of the shop purchaser in the said project has paid/ contributed any amount for purchase of T.D.R. or for payment of premium or T.D.R. to P.C.M.C. over and above the agreed price of the shop. The appellant has stated to have used the entire FSI/additional FSI in construction of Premier Plaza. The appellant has, however, sold only 78% of the total saleable area till 31/03/2008 as per the\architect's certificate. The appellant has shown to have sold 218867.05 sq. ft. out of total saleable area of 280141.24 sq. ft. upto 31/03/2008. As appellant had sold only 78% of the saleable area till AY. 2008-09, expenditure to the extent of 78% only incurred on purchase of TDR and payment of premium to PCMC is permissible as expenses for A.Y. 2008-09. In view of the above, 78% of the total expenditure incurred on purchase of TDR ( Rs. 1,14,50,910/-) and payment of premium to PCMC (Rs.1,41,19,650/-) amounting to Rs. 1,99,45,036/- is allowed. Balance of the future expenditure of Rs.4,01,64,364/-[Rs. 6,01,09,400/- - Rs.1,99,45,036/- ] is disallowed and added back to the appellant's income. Needless to say that appellant's claim for allowability of the remaining expenses on purchase of TDR and payment of premium shall be considered in the year when the remaining 22% saleable area is sold and sales reflected in the books. The appellant has shown to have sold shops Nos. 19 (Wing B, G, F), 15 and 15A (Wing D, G, F) for Rs.1.48 crore in AY. 2009-10. There has been no sales in AY. 2010-11 and thereafter.
9.6 Thus total disallowance on accrued liability works out to Rs.4,01,64,364/-. The appellant gets a relief of Rs.1,99,45,036/- only (i.e. Rs.6,01,09,400/- - Rs.4,01,64,364/-). Business income disclosed by the appellant in the computation of income will be recomputed as under:-
Business income disclosed by the appellant In computation of income Rs.5,69,23,536/-
Add :- Disallowance of on account of estimated accrued Liability as discussed above Rs.4,01,64,364/-
Total Business Income Rs.9,70,87,900/-
AO is directed accordingly.”
Aggrieved by the order of CIT(A), ‘Assessee’ and ‘Revenue’ are now before
us.
9 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
Before us, Ld AR reiterated the submissions made before AO and CIT(A)
and further submitted that in the return of income filed, Assessee had declared
net taxable income of Rs 5.69 crore which was after considering the future
expenses of Rs 6.01 crores. He submitted that since Assessee could not furnish
the full details of the probable expenses of Rs 3.45 crores, the same was not
pressed and accordingly the Assessee offered the total business income of Rs
9.14 crores (Rs 5.69 crore as per computation of income and Rs 3.45 crore
being disallowance on account of estimated accrued liability not pressed. He
therefore, submitted that the disallowance of balance expenditure that has
been upheld by CIT(A), be allowed. Ld DR on the other hand took us through
the findings of AO and submitted that on the basis of documents impounded
during survey, Assessee had declared the “on money” and that was rightly
considered as income by the AO. He thus, supported the order of AO.
We have heard the rival submissions and perused the material on record.
The issue in the present grounds is with respect to disallowance of expenditure
that was claimed by the Assessee and deletion of addition made u/s.68 of the
Act. We find that CIT(A) while deciding the issue has noted that the expenses
have been claimed on the basis of architect certificate. He has noted that there
was wide variation between the estimated expenses claimed by the Assessee vis
a vis the expenses stated to have been actually incurred by the assessee, the
Assessee’s books are not audited, in many cases the expenses have been
shown on the basis of quotation, it was noted that in many cases the
quotation has been obtained from X but the payments have been made to Y.
Considering the aforesaid and for the reasons given in the order, CIT(A) granted
partial relief to the Assessee. With respect to grievance of Revenue on the issue
of deletion of addition u/s. 68 of the Act, we find that CIT(A) has noted that
“on-money’ of Rs.4.15 Crores was shown as undisclosed income by Assessee in
AY 2008-09 as Assessee had booked sale to Approach Properties in AY 2008-09
10 ITA No.2271/PUN/2014 ITA No.45/PUN/2015 A.Y. 2008-09
& since the aforesaid amount was included as undisclosed income, no separate addition on protective basis was called for and therefore, he directed its deletion. Before us, no fallacy has been pointed in the findings of Ld CIT(A). We therefore find no reason to interfere with the order of CITA(A) and thus, the ground of Assessee & Revenue are dismissed.
In the result, appeal of Assessee and Revenue are dismissed. 8.
Order pronounced on this 24th day of April, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 24th April, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeal)-I, Nashik. 4. The CIT-V, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.