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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: Shri T.R. Senthil Kumar & Shri B.M. Biyani
आदेश/ORDER
PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue as against the order dated 12.03.2019 passed by the Commissioner of Income Tax (Appeals)-3, Bhopal, arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2014-15.
2.1. The brief facts of the case is that the assessee is a partnership firm engaged in the business of development and construction of
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housing projects. For the Assessment Year 2014-15, the assessee filed its Return of Income declaring total income of Rs. 2,95,30,480/-. The case was selected for scrutiny and made an estimated addition of on-money received at 30% and profit at 34% thereon of Rs. 2,06,93,612/- was added as the income of the assessee.
Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) held as follows: 4.1 Ground No. 1 to 3: Through these grounds of appeal the appellant has challenged the addition of Rs. 2,06,93,612/- on account of profit on on-money. The appellant is engaged in the business of construction and development of immovable housing projects. Assessments for the assessment years 2007-08 to 2013-14 in case of the assessee were pending. The appellant moved settlement applications seeking to resolve the disputes with Revenue arising in the said pending assessments for the said assessment years. In the settlement applications, the appellant had made additional disclosures of undisclosed incomes. It had admitted to have received on- money through sale of the housing properties. The disclosure of undisclosed income during settlement proceedings after search u/s 132 of the Income Tax Act, relating to those earlier assessment years does not lead to similar undisclosed income for other subsequent assessment year.
4.1.1 The AO could not telescope additional disclosures for particular years in settlement proceedings and made addition in subsequent years. The AO has not realized that the evidence pertains to the period preceding 30-11-12, and that there is no evidence to hold the view that unaccounted on-money in cash has been received by the assessee firm subsequent to 1- 4-2013. The business conditions undergo frequent changes and what has been received in a certain project or in a certain year cannot become a thumb rule for all times to come, especially keeping in mind the slow down and recession in the real estate sector.
4.1.2 The addition of 30% of total advance against booking has been accepted/ made in the order of Settlement Commission but the same is related to search years only and not for the current year under consideration. The assessee has hiked the prices and the same has now been taken by the assessee in books itself. It is very clear that if at all any such thing existed in search years; the same is not there now in the current assessment year. After search, no corroborative evidence from which it could be established that the assessee continued receiving any such on-money amount in the current year under consideration. In relation
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to the year under consideration, no incriminating material is found either in search or thereafter, evidencing receipt of on-money. There is no admission statement by the assessee in the current year with respect to receipt of on- money.
4.1.3 The AO is not at all justified in assuming that the amounts received from customers against housing units booked in earlier years are required to be considered for working of on-money and profit thereon as the final price including on-money was decided at the time of booking only and the payments were made subsequently. The on-money receipt in real estate business depends on various factors like location of a project, facilities provided, circle rate prevailing in that area etc. Therefore, it is not necessary that two housing projects of the same builder will have similar percentage component of on-money, leave aside, different housing projects undertaken by different builder.
4.1.4 The appellant relied on the decision of Hon'ble ITAT, Pune Bench in the case of Ashoka Infrastructure Ltd. v/s ACIT 163 DTR 321 wherein it was held that evidence found during the course of search indicating that full toll receipts were not recorded in the books for certain period can be utilized for extrapolation of income for the relevant Financial year. However, the said material cannot be made the basis for working out the income for other years for which no incriminating documents or entries were found. The appellant further relied on the decision in the case of Principal CIT vs. Income-Tax Settlement Commission and another; 409 ITR 495 (Guj) where in it was held that additional disclosure of undisclosed income for one assessment year during settlement proceedings, does not amount to untrue disclosure for other assessment years under settlement proceedings. Commission accepting disclosures made by assessees and passing orders on their settlement applications. Order of Settlement Commission not erroneous.
4.1.5 The Hon'ble Supreme Court in its several decisions have held that the principle of res judicata is inapplicable in tax matters and the general rule is not to apply this doctrine. In Installment Supply P Ltd. AIR 1962 SC 53, Hon'ble Apex Court held that in the tax matters, there is no question of res judicata because each year's assessment is final only for that year and does not govern later years. In Radhaswami Satsang 193 ITR 321, the Hon'ble Supreme Court observed that each assessment is a separate unit. Decision in one year may not carry forward and held for a subsequent year. An issue which is significant only for a particular year once decided cannot be held res judicata for a subsequent year. The evidence of one year cannot be utilized for another year. The said evidence material cannot be made the basis for working out the income in the hands of the assessee for other years for which no incriminating documents or entries were found in search.
4.1.6 Reliance is further placed on the ratio laid down by the Hon'ble Bombay High Court in the case of CIT vs. M/s. Thakkar Popatlal Velji
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Sales Ltd. in Income Tax Appeal No. 2266 of 2013, judgment dated 29.03.2016, which has confirmed the ratio laid down by the aforesaid Pune Bench of Tribunal. The claim of Revenue in the said decision was that where the register evidencing the sales were found for certain period, the Revenue was entitled to extrapolate the sales recorded therein for the entire assessment year. The Hon'ble High Court vide para 9 held as under:-
“9. So far as the next submission on behalf of the Revenue viz. of extrapolation of evidence found during search is concerned, this Court in All Cargo Global Logistics Ltd. had negatived the revenue"s submission before it that the assessment under section 153A of the Act is not to be restricted only to the incriminating material found during the course of search but would extend to other material also. Therefore in the facts of present case, this issue is covered by the decision of this Court in All Cargo Global Logistics Ltd. in favour of the respondent-assessee inasmuch as it restricts the assessment to be made only to the incriminating material found during the course of search.”
4.1.7 It has been held by several Courts that no income could be estimated for the other years on the basis of evidence found for one particular year especially when there was no incriminating evidence pertained to any other assessment year. Reliance is placed on:-
(i) Royal Marwal Tobacco Products (P) Ltd (120 TTJ 387) (Ahd) (ii) H.C. Chandna (P) Ltd. vs. DCIT (91 TTJ 243 (Del)) (iii) ACIT vs. Smt. Radha Rani (101 TTJ 1017 (JP)) (iv) ACIT vs. Ambica Food Industries Ltd. (110 TTJ 680 (Hyd)) (v) ACIT vs. M.M. Sales Agencies (97 TTJ 575 JP)
4.1.8 When no evidence was found for particular year, no addition on this account is to be made in the hands of the appellant. When the evidence is found the same is to be restricted for that part only. The evidence cannot be used for extrapolation the receipt for balance period. No evidence has been brought on record to established that the same practice has been followed by the appellant subsequently. The addition is to be made for the period for which incriminating documents were found. The evidence for one year cannot be utilized for another year to estimate the income. The evidence found during the course of search could not be utilized for extrapolation of income for the relevant financial year. The said material cannot be made the basis for working out the income in the hands of appellant for other years for which not incriminating document were found during the course of search. Therefore, the addition made by the A.O. amounting to Rs. 2,06,93,612/- is Deleted. Therefore, the appeal on these grounds is Allowed.
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Aggrieve against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: (1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,06,93,612/- made by Assessing Officer on account of profit on on-money of the Income Tax Act,1961 (2) The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal. 4.1. The Ld Sr. DR Mr. Ashish Porwal appearing for the Revenue submitted that Ld. CIT[A] erred in deleting the addition of Rs.2,06,93,612/- made by the Assessing Officer on account of profit of on-money which was admitted by the assessee before the Settlement Commission pursuant to the search action for the earlier assessment years. Since many of the construction activities are on-going projects, the AO is correct in making addition on account of On Money for this assessment year also, which is liable to be restored and the Revenue appeal is to be allowed.
Per contra Ld. Counsel Shri Ashish Goyal appearing for the assessee submitted before us a Paper Book consisting of various documents, Compilation of Case Laws and reiterated the submis sions made before the lower authorities. Ld Counsel brought to our notice a Tabulated chart of sale price of flats before Search period and new revised price of flats post Search period at page no.116 of the Paper book. Thus submitted that after Search action, there is an increase of 30% in price of flats, which are ranging from Rs.289 to Rs.1150 for each projects namely Atlantis Duplexs, Atlantis Flats, Heritage Duplexs, Tulip Green, Tulip Heights, etc. Thus there is no question any on-money transaction, after the search action in the case of the assessee. Further the assessee increased the price
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of the flats in the cost of the flats itself and therefore that AO without appreciating the above price variation, again made addition at 30% of the cost as on-money without legally valid ground and the same was deleted by the Ld CIT[A], after considering various case laws and the same does not require interference and Revenue appeal is liable to be dismissed.
We have given our thoughtful consideration and perused the materials available on record as well as Paper Book filed by the assessee. The solitary ground raised by the Revenue namely whether Ld. CIT[A] is correct in deleting the addition of Rs.2,06,93,612/- made by the Assessing Officer on account of profit on on-money on sale of flats/plots. There was a survey action u/s.133A of the Act on 06-11-2012 at the office premises of the assessee and certain documents were impounded. Soon thereafter there was a Search action u/s.132 of the Act on 30.11.2012 and seized several documents. It was thereafter the assessee, its Associated Firm and its Partners approached the Income Tax Settlement Commission for various assessment years [in assessee’s case relating to the Asst. Yrs. 2011-12 to 2013-14] and offered the receipt of on-money of 30% of its Total receipts as additional income and settled the cases.
6.1. It is further seen from records that during the assessment proceedings for the present assessment year 2014-15 the Ld AO asked for the details of purchasers from whom booking advance is received as on date of search namely 30-11-2012. In reply the assessee provided the list of purchasers who booked before search
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and the receipts from them amounted to Rs.14,14,23,445/= [which are available at pages 106 to 115 of the Paper Book]. After the Search action the assessee revised the prices of the flats/plots and submitted comparative price changes of various projects of the assessee, wherein there is a difference of 30% increase in price of flats/plots which are ranging from Rs.289 to Rs.1150/= for each projects namely Atlantis Duplexs, Atlantis Flats, Heritage Duplexs, Tulip Green Plots/Flats, Tulip Heights, etc. [which is available at page no.116 of the Paper book]. This revised price is reflected in the Books of accounts and offered for taxation by the assessee. However the Ld AO while passing the assessment order did not accepted the revised/hiked price of the plots, but estimated the receipt of on-money at 30% on the sales and advances for this asst year 2014-15 and determined the additional income as Rs.2,06,93,612/=. In our considered view, the Ld AO has neither justified the above addition nor accepted the increased price made by the assessee pursuant to the search action.
6.2. The Hon’ble Apex Court in the case of Installment Supply Pvt Ltd -Vs- Union of India reported in 1962 AIR 53 SC clearly held that in Tax matters, there is no question of res judicata, because each year’s assessment is final only for that year and does not govern later years, because it determines only the tax for a particular period by following Privy Council case laws namely House of Lords in Society of Medical Officers of Health -Vs- Hope [valuation officer] and Broken Hill Proprietary Company Ltd -Vs- Municipal Council of Broken Hill.
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6.3. In the most celebrated case of Radhaswami Stasang 193 ITR 321, the Hon’ble Apex Court held that each assessment is a separate unit. Decision in one year may not carry forward and held for a subsequent year. An issue which is significant only for a particular year once decided cannot be held res judicata for a subsequent year. The evidence of one asst. year cannot be utilized for another asst. year without necessary material records or evidences. It is settled law by various Courts that income could not be estimated for the other years on the basis of evidence found for one particular year, especially when there was no incriminating evidence pertained to any other assessment year.
6.4. It was also held that the theory of extrapolation is not logical method for determining the actual total Income and it is established law that the assessment should be made on the basis of only incriminating documents found during the course of survey/search proceedings. Further entire edifice of the addition has been made by the AO only in the realm of extrapolation of the figures of on-money received by the assessee before the date of search to the period of post search. There is no material to indicate, even remotely, that the assessee indulged in receipt of on-money during the post search period as well. In our considered opinion, such an approach cannot be accorded imprimatur. Thus we do not find any infirmity in the order passed by the Ld CIT[A] deleting the addition made by the AO. Thus the Ground raised by the Revenue is devoid of merits and liable to be dismissed.
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In the result the appeal filed by the Revenue is hereby dismissed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963/open court on 16./05/2023.
Sd/- Sd/- (B.M. BIYANI) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore: Dated 16/05/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file.
By order
Assistant Registrar Income Tax Appellate Tribunal, Indore Bench, Indore
Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 20/04/2023 2) Date on which the typed draft is placed before the Dictating /04/2023 Member & Other Member 3) Date on which the approved draft comes to the Sr. P.S./P.S. /04/2023 4) Date on which the fair order is placed before the Dictating /04/2023 Member for pronouncement 5) Date on which the fair order comes back to the Sr. P.S./P.S. /04/2023 6) Date on which the file goes to the Bench Clerk /04/2023 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order
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