TMI Blog2008 (10) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ote book showing details of shops/flats marked as Annexure A/2 was seized. This note book contained details of shop/flat numbers, its area and its dimensions, its members, name and address of the persons who had booked the flats. In another seized record marked as Annexure A/3 named "Mehta Delux Collection Book" details of amount received from sale of shop/flat have been entered. The actual cost of the shop/flat and payments received on difference dates are mentioned. At the left hand bottom of the page of this ledger, the figures of "on-money" received are written in coded form. On the basis of the above documents/ diary it was held by the Assessing Officer that the assessee is selling the shops taking on money at the rate of Rs. 800 per sq. ft. whereas the assessee is accounting for Rs. 400 per sq. ft. in the books of account. Accordingly, after further verification of the Annexure, it was concluded by the Assessing Officer that the actual cost comes to Rs. 1,05,58,800 whereas the assessee has shown this amount at Rs. 42,69,751. Thus, the difference amount not accounted comes to Rs. 62,89,049. The Assessing Officer on the basis of Annexures A/2 and A/3 calculated the "on-money" b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the members produced before the Assessing Officer clearly indicate that the sum paid by them by way of cheques and cash tallies with the cash book i.e., Annexure A/3. The Assessing Officer, therefore, overlooked such a good piece of evidence and seized materials. 4. The CIT(A) after considering the submissions of the assessee deleted the addition by observing to quote as under: "3.5 I have carefully gone through the observation of the Assessing Officer as well as the copies of the relevant seized documents and the arguments of the appellant. I am of the opinion that the Assessing Officer has found out a formula on the basis of which he made the addition by ignoring the actual seized materials during the course of search. In para 5.2 of the assessment order, he has mentioned this fact by stating that "this according to the formula employed by the assessee the cash receipts would be twice the cheques receipts and they constitute the on-money receipt towards this sale". In my opinion there is no need of following any formula when the actual unaccounted books are available and seized. Annexure A/3 is the most important seized materials which contained actual on-money receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of flats belonging to third parties, entire receipts of on-money/premium cannot be treated as undisclosed income of the appellant only net profit rate can be applied on unaccounted sales/receipts for making addition. In this case, the Hon'ble Members have discussed a case where they decided that the net profit rate of earlier year should be applied for this purpose. The net percentage in this case comes to 19 per cent. Whereas in the instant case, the appellant has shown 32 per cent which is quite high. 3.9 After careful consideration of the argument of the appellant and perusal of the case laws cited by him I am of the opinion that the Assessing Officer was not justified in making any addition and the result shown by the appellant are very reasonable in these type of businesses and the same has been shown on the basis of the seized materials found at the time of search. In view of the foregoing discussion, the addition made by the Assessing Officer is deleted." 5. The learned DR supported the order of the Assessing Officer and submitted that details of on-money accepted by the assessee for Rs. 11.50 lakhs should have been added to the income of the assessee. The learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to accept the income at 32 per cent of the aforesaid amount as disclosed by the assessee in the block return. Hence, we modify the order of the CIT(A) and direct the Assessing Officer to take the entire amount of Rs. 11.50 lakhs as the income of the assessee from on-money. Thus, the ground of appeal of the revenue is allowed as above. 8. In the result, the appeal of the revenue is partly allowed as above. Per I.S. Verma, Judicial Member.-I have gone through the draft order proposed by the ld. Brother Shri N.S. Saini, Accountant Member, wherein he has proposed the confirmation of an addition of Rs. 11.50 lakhs accepting the assessee's version that the total on-money received by the assessee during the block period was only Rs. 11.50 lakhs and has rejected the plea that taxable income, out of 'on-money' of Rs. 11.5 lakhs, was only Rs. 3,60,000 [as accepted by the CIT (Appeals)], but as explained hereinafter, I have not been able to persuade myself to agree with the ld. AM and, therefore, proceed to pass a separate order. 2. The brief facts as have been revealed from the records and are relevant for disposal of this appeal are that in consequence upon sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 400 per Sq. yds. The payments received over and above the said rate (on-money) had been utilized for majority unaccounted expenses incurred." 4.1 The Assessing Officer, therefore, computed the 'on-money' at Rs. 55,63,200 and the relevant calculation appearing at page No. 5 of the assessment order, which are in the following terms:- ----------------------------------------------------------------- "1. Total No. of shops 52 ----------------------------------------------------------------- 2. Total area of shops 9035 sq. ft. ----------------------------------------------------------------- 3. Total sale consideration of Rs. 1,05,58,800 the 52 shops (as per Ann. A-3) ----------------------------------------------------------------- 4. Quantum of on-money in total 1,05,58,800X2/3 Rs. 70,39,200 Consideration based on Confession made by the partners (800 : 400 ratio) ----------------------------------------------------------------- 5. Less: (i) On money estimation: 6 Shops not sold till search date Sale consideration (shop Nos. 43, 44, 46 to 50) On-mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the ld. DR has submitted that, in case, the gross 'on-money' is found to be at Rs. 11,50,000, then the Tribunal should sustain the whole of the 'on-money' and no relief on account of any expenditure claimed to have been incurred outside the books of account be allowed. 8. The ld. counsel for the assessee, on the other hand, has supported the order of the CIT (Appeals), after relying on the decision of ITAT Ahmedabad Bench in the case of Abhishek Corpn. 9. I have considered the rival submissions and the facts and circumstances of the case. 10. So far as controversy in the present case is concerned, I am of the opinion that there are two issues for consideration of the Tribunal, i.e.,:- (1) What was the gross 'on-money' received by the assessee during the block period? (2) What should be the assessee's undisclosed income out of such 'on-money' received by it for the block period? 11. So far as first issue is concerned, the Assessing Officer has computed the gross 'on-money' on the basis of total number of shops having been sold/ unsold, etc., but the assessee's case is that all the shops in question were not sold. In case of shops having been sold, the assessee's case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident of ITAT with a request that following questions may be referred to a Third Member or pass such order as the Hon'ble President may think fit: (1) Whether on the facts and circumstances of the case and in law, the issue relating to quantum of gross money received by the assessee during the block period be remanded back for fresh consideration by the CIT (Appeals), or the quantum of gross 'on-money' received by the assessee should be accepted as claimed by the assessee? (2) What should be the taxable income out of 'on-money' received by the assessee? Per N.S. Saini, Accountant Member.-There being difference of opinion between the Members in this appeal the matter is being referred to the Hon'ble President of the Tribunal under section 255(4) of the Income-tax Act, 1961 for the opinion of the Third Member. As I am not in agreement with the questions as framed by my learned Brother, JM, separate questions are framed by me for reference to the Third Member or to pass such orders as the Hon'ble President may desire:- (1) Whether on the facts of the case where the Ld. Departmental Representative agreed with the claim of the assessee before the Tribunal that on the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In response to the notice, assessee filed the return of income for the block period on 7-2-2002 showing total undisclosed income at Rs. 3,60,000. 6. During the course of search operations, authority seized two note books, which were annexed as Annexure 'A-2' and Annexure 'A-3'. Annexure 'A-2' contains shop/flat numbers, its area and its dimensions, name of members, name and address of the person who had booked the flat, while Annexure 'A-3' named "Mehta Delux Collection book" contained details of amount received from sale of shop/flat. Actual cost of shop/flat and its area were mentioned at the left hand bottom of the pages of this ledger and the figures are written in coded form, which are in the figures of thousand. Receipts from sale proceedings of shops have not been accounted for in these Annexure (books). From the diary, it is assumed that assessee took 'on-money' for sale of shops/flat and shop No., name of the purchaser, actual value of the shop (including 'on-money') have been written. According to the Assessing Officer, these entries proved that the assessee was selling the shops taking 'on-money' at the rate of Rs. 800 per sq. ft. whereas the assessee has accounted fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to substantiate his submissions with any evidences. Annexure 'A/3' was explicit document which showed quantum of sale consideration receivable by the assessee, which the assessee has split into two components-cheque portion and cash portion and the ratio is 1:2. According to the formula employed by the assessee, the cash receipts would be twice the cheque receipts and they constituted 'on-money' receipt towards this sale. It is held by the Assessing Officer that it is an admitted position by way of concession under section 132(4) during the course of search that the assessee did collect 'on-money' on sale of shops in the ratio of 1:2 of the total sale consideration computed at the rate of Rs. 1,200 sq.ft. i.e., Rs. 400 by cheque and Rs. 800 by cash. The computation of 'on-money' by the Assessing Officer based on Annexures A/2 and A/3 is as under: ----------------------------------------------------------------- 1. Total No. of shops 52 ----------------------------------------------------------------- 2. Total area of shops 9035 sq. ft. ----------------------------------------------------------------- 3. Total sale consideration of Rs. 1,05,58,800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hops which have not been sold, on-money has been calculated. It is interesting to note that the appellant is shown to take "on-money' on the shops which are neither booked nor sold. I am, therefore, of the opinion that the addition should be made on the basis of the seized materials, i.e., Annexure A-3 and according to which the "on-money' received comes to Rs. 42,69,752 and not Rs. 1,05,58,800. 3.6 The appellant has also contended that the Assessing Officer has erred in not accepting the income offered in block return, i.e., 32 per cent of the Rs. 11.50 lakhs which comes to Rs. 3.60 lakhs which is more than any other comparable cases of similar business. 3.7 Before me, the appellant has submitted that the appellant had collected on-money of Rs. 11.5 lakhs during the block period for meeting out the unaccounted expenses incurred in connection with NA/NOC permission, plan approved procedure and such other unaccounted expenses as these works were also entrusted, by the society to developers (i.e., appellant). Considering the nature of business and facts in normal course of construction business, there would be very little scope of surplus of Rs. 2 to 3 lakhs out of said on-money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs as the income of the assessee from on-money. The relevant findings of the learned AM are as under: "7. We have heard the rival submissions and perused the orders of the lower authorities and the material available or record. In the instant case a search and seizure operation was carried out on 28-6-2000. In the aforesaid search documents marked A/2 and A/3 were seized. In the said documents it is evident that the assessee has collected on-money over and above the sale price accounted for in the regular books of account of the assessee. The assessee has disclosed receipt of such on-money at Rs. 11.50 lakhs in the block return filed by it and the department has also conceded the above figure before us. The only dispute before us is that the assessee has disclosed income at the rate of 32 per cent of the above on-money of Rs. 11.50 lakhs; whereas the contention of the revenue is that as all the expenses were recorded in regular books of account the entire amount of Rs. 11.50 lakhs ought to have been treated as income of the assessee. We find that the assessee could not point out any search material in which any expenses for the purpose of aforesaid business through was incurred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ops having been sold/unsold etc., but the assessee's case is that all the shops in question were not sold. In case of shops having been sold, the assessee's case is that there were few shops with respect to which the payments were still outstanding; meaning thereby that the assessee had not received the 'on-money' with respect to such sold shops also. According to assessee, the gross 'on-money' received by it during the block period was only Rs. 11,50,000. 12. In view of aforesaid contradictory claims of the parties and the fact that the CIT(A) has not given any reason for accepting the assessee's claim on this point, I am of the opinion that it was incumbent upon the CIT(A) first to verify the claim of the parties, with respect to the gross 'on-money' before arriving at the conclusion for sustaining or deleting the addition which he failed to do. In view of aforesaid facts and circumstances of the case, I am, therefore, of the opinion that the issue relating to quantum of gross 'on-money' by the assessee during the course of block period itself requires reconsideration at the end of the CIT(A) and, therefore, the same is restored back to the file of Assessing Officer with the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected by the learned JM and he would be in a position to demonstrate as to how much was the actual 'on-money' received by the assessee and what the income from the undisclosed sources out of such 'on-money' receipt. 15. In these circumstances, I am of the considered view that the matter should be remanded back to the file of the CIT(A) for fresh decision in light of the observations of the learned Judicial Member in the aforesaid order. 16. The matter may be placed before the Division Bench for passing an order in accordance with the majority view. Per I.S. Verma, Judicial Member.-In consequence upon the difference of opinion among the Members, the following questions were referred to by the Hon'ble President of Income-tax Appellate Tribunal for the consideration and opinion of the Third Member: Questions proposed by the Judicial Member (1) Whether on the facts and circumstances of the case and in law, the issue relating to quantum of gross money received by the assessee during the block period be remanded back for fresh consideration by the CIT (Appeals), or the quantum of gross 'on-money' received by the assessee should be accepted as claimed by the assessee? (2) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
