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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI MANISH BORAD
PER RAJPAL YADAV, JUDICIAL MEMBER: Revenue is in appeal before the Tribunal against order of ld.CIT(A)-III, Ahmedabad passed for Asstt.Year 2010-11.
Sole grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs.51,49,936/-.
Brief facts of the case are that the assessee has filed its return of income on 31.3.2011 declaring total income at Rs.17,92,047/-. The assessee at the relevant time was engaged in the business of construction of residential flats and commercial properties. It has developed a project viz. “Panchvati Bungalows” at Ranip, Ahmedabad. According to the AO a survey under
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2 section 133A of the Income Tax Act was carried out on 30.5.2008 in connection with search carried out in the group cases of “Adi-Avirat” on 23.5.2008. During the course of survey, certain documents were found exhibiting receipt of on-money. The assessee had sold two bungalows in the Asstt.Year 2008-09 and four bungalows in the Asstt.Year 2009-10 According to the AO, average price for these bungalows was Rs.33,67,334/- per bungalow. This price was determined on the basis of evidence found during the course of survey. In the Asstt.Year 2010-11, the assessee has sold 21 bungalows thereof, average price was worked at out Rs.20,79,850/-. The AO was of the opinion that since average price charged by the assessee ranges in- between Rs.25 lakhs to Rs.141 lakhs, therefore, the assessee should have estimated GP at 20% on the sale shown by the assessee and made addition of Rs.51,49,936/-. On appeal, the ld.CIT(A) has deleted addition by observing as under: “4. I have carefully considered the facts and the observations of the AO and the submissions made by the appellant. The issue which is to be decided is whether, in the absence of any evidence or material regarding any receipt of on-money during the assessment year under consideration, addition can be made on the basis of such addition made in earlier years on the basis of survey action ?. Secondly, whether the addition can be made on the basis of bunglows sold in subsequent year of the same project or whether in case of real estate the year is more important ?
4.1 Having carefully considering the above questions with reference to the submissions made and the above judgment of the Gujarat High Court in the case of CIT vs Jayaben Ratilal Sarathia Tax Appeal No. 914 of 2012 as also the decisions of the Hon'ble ITAT Mumbai in the case of Srinivas Developers P Ltd ITA No. 3495/Mum/2010 and Hon'ble ITAT Ahmadabad in the case of Dhara Associates ITA No 1946 to 1951/Ahd/2007, I am of the view that the ratio of above judgments is squarely applicable. It is noticed that the AO has made addition merely on the basis of admission made by the appellant in the earlier year during the course of survey on the basis of some notings in
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3 the note book but no such evidence or material is found during the year under consideration. Thus it is held that the addition at 20% of the alleged on-money worked out by the AO for the year under appeal on the basis of average sales price of earlier year is based merely on presumption and no extrapolation is justified beyond the period of survey as held by Gujarat High Court on the specific question that what is important is the 'year' and not the 'project' and as there was no material available with the AO with respect to sale transactions in the particular assessment year no addition could be made. In my considered view that the very addition made by the AO on such presumption is untenable since in the business of real estate, a project may last for a number of years and the sale price may even increase or decrease in later years depending upon the market trend. To hold on presumption that sale price including on-money found in one year will continue to be the same is against the common experience and is not based on any legal sanction. In any case, no addition is permissible merely on the ground that in some earlier year when some noting was found relating to some bungalows sold when no such evidence or noting is found in subsequent year. I therefore direct the AO to delete the addition of Rs.51,49,936/- made by the AO. Ground No.1 is therefore allowed. Since the addition itself is deleted, the alternative submission that the percentage of GP being only 6.89% as against 20% applied by the AO does not require to be considered.
As regards the notice for enhancement, for the same reasons and also since the facts in the case before the Hon'ble Rajkot Tribunal in the case of M/s Rushabh Vatika are quite different in as much as the amount was actually credited by the assessee in that case in its profit and loss account, the Tribunal was concerned with the said net profit declared by the assessee and therefore it was held that no further deduction was permissible. The Hon'ble Rajkot Tribunal has in fact held that the judgment of the Gujarat High Court in the case of Gurubachsingh Juneja and President Industries are not applicable in case of actual On-money found where the profit only can be added. The Hon'ble Tribunal has in fact distinguished the said judgments as the facts in the case before the Tribunal were different and there was clear admission of the gross amount which came to be credited by the assessee in its profit and loss account hence there was no case for making addition of merely profit thereon.
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4 4.2. Since the very addition made by the AO at 20% on alleged on- money is deleted by me as above, the enhancement notice does not stand. I hold accordingly.”
With the assistance of the ld.representatives, we have gone through the record. There is an old legal dictum, namely, falsus in uno falsus in omnibus. This dictum is applicable in criminal laws and it relates to credibility of witnesses. It contemplates that if a person was found deposing falsely then his conduct would always be doubted. Thus, if during the course of search and survey which is last resort to the Department, the assessee found in possession of incriminating materials which were formed as basis for concealed income, obviously for other period also, conduct of the assessee would not be free from doubt. In the present cases, during the course of survey, the assessee was found to be possessed certain incriminating material exhibiting receipt of money. This would give an indication to the AO to examine accounts of the assessee more suspiciously for other accounting years also, wherein same was sold. However, it is not an absolute rule. The AO could doubt accounts of the assessee as well as deal evidence by it. But he failed to bring any material on the record which can indicate that this year also the assessee might have charged higher price. He has simply harped on a belief of probability i.e. if in one year the assessee has charged higher price, and then it would have charged the higher price in the subsequent year also. To our mind, it could be an information for starting investigation, but it could not be considered as a uniform rule for assuming that on-money for sale of other bungalows. There may be additional facilities. There may be some other factors for negotiations. There may be down-trend in market price. All these factors are to be considered by the AO before arriving at a conclusion that income of the assessee deserves to be determined by adopting 20% of the gross profit on the turnover. The AO has not pointed out any defect in the
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5 books. He has not examined vendees of the bungalows. Therefore, we are of the view that the ld.CIT(A) has appreciated the facts in right perspective and no interference is called for.
In the result, appeal of the Revenue is dismissed. Order pronounced in the Court on 20th November, 2017 at Ahmedabad.
Sd/- Sd/- (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 20/11/2017