ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJAHMUNDRY vs. HASINI INFRA CONSRTUCTIONS& DEVELOPERS, KAKINADA

Per contra, the Ld. DR submitted that in the sworn

statements recorded by various contractors, they have denied

8 carrying out of any additional work as per the agreements and

stated that these documents were signed as per the directions of

the Managing Partner of the assessee-firm Mr. Chindripu Murali.

The Ld. DR therefore submitted that the assessee has diverted its

income through his employees and contractors and therefore

pleaded that the order of the Ld. AO be upheld. The Ld DR also

referred to sworn statements recorded by various contractors

stating that they have not performed any work but has only acted

only on the directions of the Managing Partner Shri Chindrippu

Murali. Countering the arguments of the Ld. DR, the Ld. AR

submitted that the details of agreement with contractors with

whom it was entered into and who are in receipt of the funds

directly from the customers have filed their return of income by

admitting the Net Profit of 8% on the agreement values. The Ld.

AR therefore pleaded that since the contractors have already

admitted the income while filing their return of income, again it

cannot be added in the hands of the assessee.

available on record as well as the orders of the Ld. Revenue

Authorities. It is the case of the Ld. AO that the assessee has

sold various flats from various projects at a uniform rate of Rs.

9 3,400/- per sq ft but the assessee has failed to disclose the

turnover as per the agreed rates. However, the Ld. AO has erred

in giving credit to the turnover already declared by the assessee

while framing the assessment. The Ld. AO has relied on the

documents seized vide A/HICD/GNT/03, wherein no details

about the amount of receipts from the customers, either by way

of cash or cheque, are available in such documents. The Ld. AO

merely relied on the total value of sales against each flat as

mentioned in the documents but has failed to record how the

total value was received by the assessee. Further, as

demonstrated by the Ld. AR the assessee has entered into two

agreements viz., one is sale agreement and another one is an

agreement for carrying on the additional works. The sale

agreement was entered into directly with the customers by the

assessee adopting the rate of Rs. 2,000/- per sq ft whereas

agreement for additional works was entered into with various

employees of the firm / contractors directly by the customers.

We also find that various customers have directly made the

payments for the additional works done in their respective flats

to the concerned contractors and subsequently the contractors

have made the payments to the suppliers of the material for

carrying out the additional works. From the sworn statements

10 recorded by various contractors, we find that there is no denial

by the various contractors that the amounts were received by

them, except for the fact that it was under the directions of the

Managing Partner of the assessee-firm Mr. Chindripu Murali. The

contractors / employees of the assessee-firm have also agreed

that the amounts received from the customers for carrying out

the additional works were directly paid to the suppliers of the

material. Further, from the sworn statements we also find that

the amounts for additional works were received by Cheque and

various payments made to the suppliers of the material was also

made through banking channels. The Ld.AO has also not

brought on record any material to show that the amounts for

additional works were received by the assessee. The Revenue is

also not disputing the fact that the employees / contractors

received the payments from the customers directly in their bank

accounts. In the light of the discussions as above, we find that

the Ld. AO has no material justification for adopting the uniform

rate of Rs. 3,400/- per sq ft in the hands for the assessee as its

turnover for the impugned assessment year. We also find from

the arguments put forth by the Ld. AR as well as the material

placed before us, there are two different agreements entered into

by various customers ie., one for the sale of flat and another

11 agreement is for carrying out the additional works. It is also

clearly demonstrated and established by the Ld. AR that the

customers have directly made the payments to the contractors as

per the additional works agreement. The only contention of the

Revenue is that since the additional works are carried out

through the employees of the assessee, therefore the Revenue

considered it as diversion of turnover of the assessee. However,

we find that since the customers have directly made the

payments to the contractors for the additional works carried on

by them and either the receipts or payments have not been

passed through the assessee’s books of account, it cannot be

considered as a turnover of the assessee. Therefore, considering

the above facts and circumstances of the case, in our considered

view, we are inclined to delete the addition made by the Ld.

CIT(A) on the differential amount of Rs. 1,400/- sold by the

assessee and direct the Ld. AO to delete the addition partially

sustained by the Ld. CIT(A). Accordingly, Grounds No. 3, 4 & 5

are disposed off and allowed.

jurisdiction of the Ld. AO is not adjudicated since the other

12 grounds raised by the assessee are adjudicated in favour of the

assessee on merits.

adjudication.

AY: 2017-18) is allowed.

& 2019-20), since the assessee has raised the identical issue in

both these appeals, which is similar to that of the issue

adjudicated by us while deciding the assessee’s appeal in ITA No.

9/Viz/2023 (AY: 2017-18) in the above paragraphs of this order,

our decision given therein in the assessee’s appeal for the AY

2017-18 mutatis mutandis applies to these appeals also. Thus,

both the assessee’s appeals in ITA Nos. 10 & 11/Viz/2023 (AYs:

2018-19 & 2019-20) are allowed.

II

ITA Nos.24 & 25/Viz/2023 (AYs: 2018-19 & 2019-20) (Revenue’s Cross Appeals)

the orders of the Ld. CIT(A)-3, Visakhapatnam in DIN & Order No.

13 ITBA/APL/S/250/2022-23/1047514389(1) for the AY: 2018-19 &

ITBA/APL/S/250/2022-23/1047514632(1) for the AY: 2019-20

dated 18/11/2022 arising out of the orders passed U/s. 153A &

143(3) of the Act respectively.

are that the assessee is a firm deriving income from Real Estate business

filed its original return of income for the AY 2018-19 on 28/10/2018

admitting a total income of Rs. 81,46,560/-. A search and seizure

operation U/s. 132 of the Act was conducted on 28/03/2019 in the case

of the assessee-firm at its registered premises wherein certain

incriminating material was found and seized. Subsequently, the case was

centralized by the order of the Ld. Principal Commissioner of Income

Tax-2, Visakhapatnam vide order in F.No. Pr. CIT-2/SP/127/2019-20,

dated 14/10/2019. Accordingly, notice U/s. 153A of the Act was issued

on 04/01/2021 and served electronically. In response, the assessee filed

return of income on 06/02/2021 admitting the same income of Rs.

81,46,560/-. Subsequently, notice U/s. 143(2) of the Act dated

13/2/2021 and notice U/s. 142(1) of the Act dated 17/3/2021 were

issued and served on the assessee. In response to the notices, the

assessee furnished the information as called for by the Ld. AO.

Considering and examining the information furnished by the assessee,

14 the Ld. AO found that the assessee-firm has suppressed its receipts for

its various projects. The Ld. AO therefore framed the assessment by

making an addition of Rs. 2,47,75,250/- to the returned income and

determined the assessed income at Rs. 3,29,21,810/-. The Ld. AO while

making the above addition, rejected the books of accounts of the

assessee and adopted the uniform rate of Rs. 3,400/- per sq ft as sold by

the assessee and proposed the net profit @ 12.5% considering the income

admitted by the similar business concerns. Aggrieved by the order of the

Ld. AO, the assessee filed an appeal before the Ld. CIT(A).

and pleaded that uniform rate of Rs. 3,400/- per sq ft cannot be adopted

by the Ld. AO. After considering the submissions made by the assessee

and on the basis of the various case laws relied on by the assessee, the

Ld. CIT(A) concluded that the assessee has already declared an amount

of Rs. 2,000/- per sq ft sold by the assessee and directed the Ld. AO to

tax the balance of Rs. 1,400/- per sq ft sold by the assessee adopting the

estimate rate of 8% by relying on the decision of the ITAT,

Visakhapatnam Bench in the case of M/s. Yugandhar Housing Pvt. Ltd

vs. ACIT, Central Circle, Viajayawada in ITA Nos. 83 to 88/Viz/2022,

dated, 30/08/2022. Aggrieved by the order of the Ld. CIT(A), the

Revenue filed the instant appeal before the Tribunal.

2018-19 as follows:

“1. The order of the Ld. CIT(A) is erroneous on grounds of facts and law. 2. The Ld. CIT(A) erred in restricting the addition made to 8% of only the unaccounted turnover, since as regards the accounted turnover, the assessee could not produce the updated books of account and the supporting evidences like bills, vouchers and other documents in support of the entries made in the books of account. Besides, in view of the fact that the assessment completed in this case was U/s. 153A of the Act to assess the total income of the assessee, the same is statutorily not limited to only assess undisclosed income consequent to search action. Reference in this regard is made to the decision of the Hon’ble Kerala High Court in the case of E.N. Gopakumar vs. CIT (2016) 75 taxmann.com 215 (Kerala), wherein it was held that assessment proceedings generated by issuance of a notice U/s. 153A(1)(a) can be concluded against interest of the assessee including making additions even without any incriminating material being available against the assessee as a result of search U/s. 132 on the basis of which notice was issued U/s. 153A(1)(a). 3. The Ld. CIT(A) erred in holding that the AO had adopted uniform rate of Rs. 3,400/- per sft on the basis of comparative cases since, as can be seen from the assessment order, the rates adopted are done project / venture wise and are different for different projects and that too on the basis of seized material as also the statements of the persons concerned. Besides, the Ld. CIT(A)’s observation that the AO had adopted the said rate on the basis of comparative cases is misplaced since the AO’s remark was actually in respect of profit percentage adopted at 12.5% and not otherwise. Also the seized material contained details of cash receipts on sale of residential units in the venture Hasini Platinum County in addition to the payments received through

16 banks, which was not repudiated by the assessee firm. 4. The Ld. CIT(A) erred in overlooking the fact that, the assessee firm had entered into two agreements with the customers for sale of each flat, one for sale of basic structure and other for additional works. The additional works agreements were normally in the names of workers or employees of the assessee firm, who are receiving payments from customers and transferring the money to parties to whom the payments were due from the firm as per the directions of the Managing Partner of the firm. Sworn Statements were recorded from the employees of the assessee firm and all of them had denied to have undertaken such works or even did not have idea of any such agreements. Thus, it was obvious that the receipts from additional works were effectively used by the firm only, but that the same were not disclosed in the returns. 5. The Ld. CIT (A) erred in not appreciating the AO’s action of rejection of the books of account on valid grounds. 6. The Ld. CIT(A) erred in holding that only the net profit on unaccounted turnover can be brought to tax since, as regards the unaccounted turnover, the relatable expenditure would have already found its way into the regular books of account and it is only the suppressed receipts sans and expenditure that need to be taxed. Given such a situation, the question of estimation against unaccounted turnover will not arise. 7. Any other ground urged at the time of hearing.

2019-20 as follows:

“1. The order of the Ld. CIT(A) is erroneous on grounds of facts and law. 2. The Ld. CIT(A) erred in restricting the addition made to 8% of only the unaccounted turnover as this case

17 was taken up for complete scrutiny being the assessment year relevant to the year of search U/s. 132 and the books of account were rejected as the assessee could not produce the updated books of account and the supporting evidences like bills, vouchers and other documents in support of the entries made in the books of account.

18 5. The Ld. CIT (A) erred in not appreciating the AO’s action of rejection of the books of account on valid grounds. 6. The Ld. CIT(A) erred in holding that only the net profit on unaccounted turnover can be brought to tax since, as regards the unaccounted turnover, the relatable expenditure would have already found its way into the regular books of account and it is only the suppressed receipts sans and expenditure that need to be taxed. Given such a situation, the question of estimation against unaccounted turnover will not arise. 7. Any other ground urged at the time of hearing.

both the appeals is with respect to estimation of profit @ 8% by

the Ld. CIT(A) as against the estimation of profit made by the Ld.

AO @ 12.5% .

and sustained by the Ld. CIT(A) in its appeals for the AYs 2017-

18, 2018-19 & 2019-20 (I.T.A. Nos.9, 10 & 11/Viz/2023), which are

adjudicated by us in favour of the assessee as discussed in the above paragraphs.

2018-19 & 2019-20, contesting the estimation of net profit by the Ld.

CIT(A), we hold that since the quantum sustained by the Ld. CIT(A) for

the AYs 2018-19 & 2019-20 itself is deleted while adjudicating the

19 assessee’s appeals for the AYs 2018-19 & 2019-20 (supra), we are of the view that the grounds raised by the Revenue have no legs to stand. Accordingly, the grounds raised by the Revenue are dismissed.