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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Vishwanethra Ravi
Per Shri P.M. Jagtap, A.M.: This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-XII, Kolkata dated 18.12.2012 for the assessment year 2005-06, whereby he deleted the addition of Rs.62,16,162/- made to the total income of the assessee on account of alleged unaccounted sales.
The assessee in the present case is a Company, which is engaged in the business of construction and real estate development. The return of income for the year under consideration was filed by it on 31.10.2005 declaring total income of Rs.43,110/-. In the assessment originally completed under section 143(3) vide an order dated 31.12.2007, the total income of the assessee was determined by the Assessing Officer at ./2013 Assessment year: 2005-2006 Page 2 of 6 Rs.1,29,51,278/-. Subsequently, it was noticed by the Assessing Officer on perusal of the material available on record that the amounts of advances against flat and garage booking as appearing in the balance-sheet of the assessee as at 31.03.2005 had been reduced to Rs.88,85,748/- from Rs.1,76,45,498/- as at 31.03.2004. According to the Assessing Officer, this difference of Rs.87,59,750/- should have been booked by the assessee as sale of flats of the year under consideration. Since the assessee had recognized the income on account of sale of flats only to the tune of Rs.25,43,588/- in the year under consideration, the Assessing Officer entertained a belief that the income of the assessee to the extent of Rs.62,16,162/- (Rs.87,59,750/- minus 25,43,588/-) has escaped assessment. He, therefore, issued a notice under section 148 to the assessee, in reply to which, a request was made by the assessee in writing to treat the return of income originally filed as the return filed in pursuance in response to notice under section 148. During the course of assessment proceedings, the difference pointed out by the Assessing Officer in the booking of sales on the basis of reduction of amount of advances against flat and garage booking was explained by the assessee by making the following submissions:- “(a) You are aware that the assessee deals in real estate. (b) During the F.Y. 04-05 the advances were received against booking of flats and/or garages from the parties. c) The assessee company started construction but completion was matter of a long period of time which was viewed negatively by some of the parties. d) In course of time some of the parties lost interest to have flats and/or garages from the company being not as per their likings/having then no means of arranging the necessary funds to purchase the flat. e) The non-interested parties approached the company and requested to arrange for refunding the amount of advance so far made. f) The company being of repute started to refund the amount of advances as per the fund available to it. All such refunds are reflected in the bank statement which may kindly be perused”. ./2013 Assessment year: 2005-2006 Page 3 of 6 The above explanation of the assessee was not found acceptable by the Assessing Officer in the absence of any documentary evidence to support and substantiate the same. He held that when there was reduction in the current liabilities on account of advances received against flats, there could be no other interpretation than to conclude that sale had taken place giving rise to revenue. He accordingly treated the amount of Rs.62,16,162/- as unaccounted sales of the assessee and made addition to that extent to the total income of the assessee in the assessment completed under section 143(3)/147 vide an order dated 27.12.2010.
Against the order passed by the Assessing Officer under section 143(3)/147, an appeal was preferred by the assessee before the ld. CIT(Appeals) disputing therein the addition of Rs.62,16,162/- made by the Assessing Officer on account of alleged unaccounted sales and after considering the submissions made by the assessee as well as the material available on record before him, the ld. CIT(Appeals) deleted the said addition made by the Assessing Officer for the following reasons given in paragraph no. 4 of his impugned order:- “4. I have considered the finding of the A.O. in his order dt. 27- 12-2010 and the written submission filed by the A.R. during the appellate proceeding. Appeal on ground no. 1 is general in nature. Appeal on ground no. 2, 3, 4 and 5 are against the addition of Rs.62,16,162/- as undisclosed income. The A.O. in his assessment order has given the finding that during the year under consideration. The assessee had mode soles on account of sale of flat to the tune of Rs.23,13,588/- and on account of car parking of Rs.230000/- totalling Rs. 25,43,588/-. The A.O. has further given his finding that the assessee has reduced Rs.8759750/- in his books of accounts from advance received against flat booking and sales of garage. The A.O. arrived at this conclusion that since the sale of flat and garage during the year was only for Rs.25,43,588/-. Therefore, remaining amount of Rs.62,16,162/- i.e. (Rs.87,59,750/- - Rs.25,43,588/-) is assessee's undisclosed income. During the assessment proceeding the AR of the assessee explained that the difference amount of Rs.62,16,162/-was because of refund of Rs.80,00,000/- to one M/s. B. P. Podder Hospital and Medical Research Ltd. received against advance for flats and garage. The AO asked the AR to produce documents related to cancellation of flats for verification but the A.R. could not submit them on the ground that it was not readily available. Since, the assessment was getting barred by limitation 31-12- ./2013 Assessment year: 2005-2006 Page 4 of 6
2010. Therefore. the A.O. passed the order treating amount of Rs.6216167/- as undisclosed income of the assessee. During the appellate proceeding the A.R. repeated the same argument that the reduction in current liabilities to the tune of Rs.6216162/- was because of the cancellation of flats by M/s. B. P. Poddar Hospital and Medical research Ltd. The A.R. further submitted that the difference was because of refund made to parties owing to cancellation of flats. The A.R. has also submitted that for cancellation of flats and in order to make refunds against cancellation. The company does not pass any resolution for the same. Therefore, there is no document called Board's resolution or minute book for the same. However, ledger accounts of parties, bank statement showing refund for cancelled flats were presented before the A.O. During the appellate proceeding along with bank statements showing refund of money for cancelled flats, ledger accounts of the party concern a copy of letter from M/s. B. P. Poddar Hospital and Medical Research Ltd. requesting the cancellation of flat and refund of advance amount paid was also produced. The A.R. has also produced a copy of agreement between the Nissan Developers & Properties Pvt. Ltd., and M/s. B. P. Poddar Hospital and Medical research Ltd.
I have considered the finding of the A.O. and the written submission filed by the AR during the appellate proceeding. From the written submission and details filed it, clear that the assessee company had made refund for cancellation of flat to M/s. B.P. Poddar Hospital and Medical research Ltd. It is clearly mentioned in the ledger accounts of advance received for flat booking/cancellation and the refund for the same is reflected in the details of bank accounts of the assessee. Thus, it is clear that the diferential of current liability of Rs. 6216162/- is nothing but refund made against cancellation of flats to M/s. B. P. Poddar Hospital and Medical Research Ltd. Hence, assessee's appeal on grounds no. 2, 3, 4 and 5 are allowed”.
Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. As pointed out by the ld. D.R. from the relevant portion of the impugned order of the ld. CIT(Appeals), various details and documents were filed by the assessee in support of its case on the issue for the first time before the ld. CIT(Appeals) and the same constituting additional evidence was relied upon by the ld. CIT(Appeals) to give relief to the assessee without giving any opportunity ./2013 Assessment year: 2005-2006 Page 5 of 6 to the Assessing Officer to verify the same, which is in clear violation of Rule 46A of the Income Tax Rules, 1962. Although the ld. counsel for the assessee has not disputed this position, he has contended that the ld. CIT(Appeals) himself has verified the details and documents filed by the assessee for the first time before him and after having satisfied with the same, has allowed relief to the assessee.
As per specifically provided in sub-Rule 3 of Rule 46A of the Income tax Rules, 1962, ld. CIT(Appeals) shall not take into account any additional evidence produced by the assesese under sub-Rule 1 unless the Assessing Officer has been allowed a reasonable opportunity to examine the same. We, therefore, find merit in the contention of the ld. D.R. that the relief given by the ld. CIT(Appeals) to the assessee on the issue involved in this appeal is in clear violation of Rule 46A(3). We, therefore, set aside the impugned order of the ld. CIT(Appeals) giving relief to the assessee on the issue under consideration and restore the matter to the file of the Assessing Officer for deciding the same afresh after examining/verifying the details and documents furnished by the assessee for the first time before the ld. CIT(Appeals). Needless to observe that the Assessing Officer shall afford proper and sufficient opportunity of being heard to the assessee.