TMI Blog2015 (3) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect that the said document was not in his handwriting or in the handwriting of his employees and also Shri Sajjan Jain was not in his employment and belonged to M/s. Goel Construction Co. Pvt. Ltd. In the entirety of the facts and circumstances, we delete the addition of ₹ 12,30,767. - Decided in favour of assessee. Income from undisclosed sources - Addition of ₹ 5 lakhs - document seized from the business premises of the assessee - Held that:- The plea of the assessee was that the customers had come to the office to reconcile their respective accounts but since cheques of RC were continuously returning unpaid and after discussion he offered ₹ 5 lakhs cash as mentioned on the said page but actually he again backed out. The assessee in the said reply further stated that this fact could be proved from the entries on the left side of the page where it is noted that he had been allotted flat for ₹ 15,36,100 and he had only made payment of ₹ 7,89,760 and balance payment due was ₹ 7,46,340 and he had paid another sum of ₹ 1,95,000. The assessee further claimed that as the cheques of ₹ 2 lakhs again bounced and the balance payment re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guard Works v. CIT (Appeals) [2006 (9) TMI 100 - PUNJAB AND HARYANA HIGH COURT], Tudor Knitting Works P. Ltd. v. CIT [2015 (3) TMI 457 - PUNJAB & HARYANA HIGH COURT], KIM Pharma P. Ltd. v. CIT [2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT] we hold that the assessee is not entitled to the deduction under section 80-IB of the Act on the surrendered income of ₹ 1.70 crores as the surrendered income cannot form part of the business income and it is to be taxed as deemed income against which the business losses could not be set off - Decided against assessee. Undisclosed income - addition based on the seized document - Held that:- As per tabulated details the amount credited/paid totalled to ₹ 46,43,115 and the balance on each page was shown as receivable by Mr. Monga and his family members from the assessee vide letter dated August 10, 2008. Further sum of ₹ 13,00,000 is mentioned in the said letter as having been received by him. In totality thus, the total payments made by the assessee were of ₹ 46,43,115 + ₹ 13,00,000 and the addition is to be restricted to ₹ 59,43,115 as held by the Commissioner of Income-tax (Appeals). The balance being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessment years 2009-10 and 2010-11 against the order passed under section 153B(1)(b) read with section 143(3) of the Income-tax Act, 1961, in the case of sister concern M/s. Hill View Promoters. 2. All the appeals relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. I. T. A. No. 547/Chd/2013-Assessee's appeal 3. The assessee has raised the following grounds of appeal : 1. That the learned Commissioner of Income-tax (Appeals) has erred in law and facts is confirming the addition of ₹ 94,500 made by the Assessing Officer on account of entries contained in the hand written sheet marked A-1, page 81 and discussed in paragraph 5 of the assessment order. This amount of ₹ 94,500 is a part of the rotating capital investment by Sh. J. C. Bansal forming part of the declared amount of ₹ 30.70 lakhs before the hon'ble Settlement Commission. 2. That the learned Commissioner of Income-tax (Appeals) has erred in law and facts in confirming the addition of ₹ 12,30,767 made by the Assessing Officer on account of entries contained in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was asked to produce ledger account of Shri Sajjan Jain appearing in the books of account of the assessee and reconciles the transaction with regular books of account. Vide reply dated November 8, 2011, it was submitted that this document contained construction expenses and pertained to one of the contractor M/s. Goel Construction Co. it was stated that the payments shown on the above documents were included in the total payments made to the contractor M/s. Goel Construction Co. Pvt. Ltd. The Assessing Officer vide order sheet entry dated November 8, 2011, asked the assessee to produce Shri Mange Ram Goel of M/s. Goel Construction Co. Pvt. Ltd. The assessee failed to produce Shri Mange Ram Goyal and also no explanation was offered by the assessee. Vide order sheet entry, dated November 24, 2011, the assessee was asked to show cause why an amount of ₹ 12,30,767 should not added back to the taxable income of the assessee. The assessee vide reply, dated December 2, 2011, again did not offer any explanation on the above document and also the assessee again failed to produce Shri Mange Ram Goyal. It was simply stated in the written reply that the assessee has stringent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that the said document was a dumb document as the name of Shri Sajjan Jain in its books of account and that the handwriting was also not the assessee's/not its employees. It was further stated that since the paper related to construction expenses it belonged to M/s. Goyal Construction who had done work for the assessee but due to strain relationship thereafter Shri Goyal had left, which was also the reason why he could not be produced before the Assessing Officer. 7.4 I find that the assessee had not disowned the seized paper during the course of assessment proceedings. In fact it was slated then that the amount was part of the total payment made to M/s. Goyal Construction Co. This if correct could have been corroborated by the assessee which was not done even if the party could not be produced for examination. Copy of the account could have been produced with the books before the Assessing Officer which was not done. The said document was found in the office premises. The amounts are clearly written as also the dates, and the narrations show that payments have been made for material, hydraulic mobile oil, etc. The fact that the contractor worked for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental representative for the Revenue placed reliance on the order of the Commissioner of Income-tax (Appeals). 10. We have heard the rival contentions and perused the record. Pursuant to the search operation carried out at the official and residential premises of the assessee, certain documents were found during the course of search and the assessee was asked to explain the entries on the said documents. One such document found during the course of search was pages 82 and 78 of annexure A-1 which were handwritten sheets showing account of Shri Sajjan Jain, the payments in cash or by cheques with details. The expenditure on the said document totalled ₹ 12,30,767. The said document is scanned and is part of the assessment order at pages 5 and 6. The perusal of the said document reflects the expenditure being incurred both in cash and by cheque and the payments having been made for material and against various contracts are made in cash. The case of the assessee is that the said document does not relate to it and was not in the handwriting of the assessee or any of its employees. The assessee further stated that the said document belongs to an employee of M/s. Goel Construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Co. Pvt. Ltd., i.e., the contractor who were associated with the assessee for carrying on the construction work. The handwritten notings on said sheets also reflects the links on account of construction and the assessee was not undertaking any construction on its own and had employed three different contractors for carrying out the contract work at his site. In the abovesaid circumstances where the assessee has discharged his onus of establishing that he was not engaged in any contract work but on the other hand had employed contractors for carrying out the said work, there was no merit in holding that the said documents related to the assessee. Further, the assessee had also claimed that the said handwritten document did not belong to it but in fact belonged to an employee of M/s. Goel Construction Co. Pvt. Ltd. The Assessing Officer had asked the assessee to produce said person but because of the stringent relation with him, the said person could not be produced. However, the assessee requested the Assessing Officer to summon the said person and record his statement. The Assessing Officer failed in his duty in not summoning the said person and thus not verifying the genuinit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. In the entirety of the facts and circumstances, we delete the addition of ₹ 12,30,767. The ground of appeal No. 2 raised by the assessee is allowed. 11. The issue in ground No. 3 raised by the assessee is against the addition of ₹ 5 lakhs. The brief facts relating to the issue are that another document at page 57 of annexure 2 was seized from the business premises of the assessee. The said document was handwritten and reflected transaction in cheques and cash received from S/Shri Charanjit Lal and Rahul Chhabra. The assessee was asked to give complete transaction and also to reconcile the same. Vide reply dated November 18, 2011, it was stated by the assessee that the payment of Shri Rahul Chhabra were not regular and since the cheques bounced, he offered to pay ₹ 5 lakhs as cash. It was further submitted that Shri Chhabra backed out and the payment of ₹ 5 lakhs was never made. The Assessing Officer noted that the said fact does not support the contention of the assessee as the cheque payments were shown at ₹ 7,89,760 and another cash payment of ₹ 5 lakhs the total payment being ₹ 12,89,760. Consequently sum of ₹ 5 lakhs wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee had furnished reply before the Assessing Officer and the same reply was reproduced before the Commissioner of Income-tax (Appeals) as part of the written submissions which are reproduced by the Commissioner of Income-tax (Appeals) at pages 8 and 9 of the appellate order. The transaction with Shri Rahul Chhabra and Shri Charanjit Lal was in respect of flat purchased by them in Hill View-I, as stated by the assessee in his statement. The plea of the assessee was that the customers had come to the office to reconcile their respective accounts but since cheques of RC were continuously returning unpaid and after discussion he offered ₹ 5 lakhs cash as mentioned on the said page but actually he again backed out. The assessee in the said reply further stated that this fact could be proved from the entries on the left side of the page where it is noted that he had been allotted flat for ₹ 15,36,100 and he had only made payment of ₹ 7,89,760 and balance payment due was ₹ 7,46,340 and he had paid another sum of ₹ 1,95,000. The assessee further claimed that as the cheques of ₹ 2 lakhs again bounced and the balance payment remained at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the hon'ble Settlement Commission. 3. That the learned Commissioner of Income-tax (Appeals) has erred in law and facts in confirming the non-allowance of deduction under section 80-IB on a sum of ₹ 1,70,00,000 declared during the course of survey. During the course of survey and later on during the course of search no other source of income by the assessee had been identified except that the appellant is engaged in the real estate. 17. The issue in ground Nos. 1 and 2 raised by the assessee is against the addition of ₹ 19,95,000 and ₹ 5,11,373. Both additions were made in the hands of the assessee but the assessee pleads that the said amounts have been considered by Shri J. C. Bansal in his computation filed before the hon'ble Settlement Commission. 18. The brief facts relating to the issue are that during the course of search carried out at the premises of the assessee and the residential premises of the directors, certain documents were found and seized. Page 44 of annexure A-1 was seized from residence of Shri J. C. Bansal, H. No. 2048, Sector 15, Chandigarh. These documents relate to receipts and payments by the Bansal gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from whose possession the said documents were found, was carried out and he accepted that the papers contain entries relating to investment made by us in M/s. Saraswati Educational and Social Welfare Trust. He further stated that he had surrendered a sum of ₹ 1 crore as his additional income for financial years 2008-09 and 2009-10 on the basis of entries recorded on the said paper and also on the basis of annexure A-1 page 44 seized from his residence and as a group they had also surrendered sum of ₹ 2 crores over a period of two years. The Assessing Officer, however noted that sum totalling ₹ 15,11,373 was invested by M/s. Hill View Infrastructure Pvt. Ltd. and the assessee was asked to explain the sources. In reply the assessee furnished copy of account which revealed a sum of ₹ 10 lakhs had been reflected in the books of account through cheque. However, no details were furnished in respect of the balance sum of ₹ 5,11,373. The Assessing Officer thus, observed that the said investment has not been reflected in the books of account of the assessee. However, he further noted that the trust, i.e., Maa Saraswati Educational and Welfare Trust and Shri J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor, ShriJ. C. Bansal, which reflected certain investments being made by the assessee before us. The Assessing Officer confronted the said documents to the assessee and show caused the assessee to explain the sources of the said entries and also whether the said entries were recorded in the books of account regularly maintained by the assessee. In respect of the first document, i.e., page No. 44 of annexure A-1 found from the residence of Shri J. C. Bansal, the claim of the assessee was that it had certain over- lapping entries and was part and parcel of pages 46-47 of annexure A-1 seized from residence of Shri J. C. Bansal. The plea of the assessee in this regard was not accepted by the Assessing Officer and addition of ₹ 19,95,000 was made in the hands of the assessee on account of the notings relatable to the assessee on the said document No. 44 of annexure A-1. Further, another addition on protective basis was made on account of notings at pages 46-47 of annexure A-1 found from the residence of ShriJ.C. Bansal. The entries on the said documents totalled to ₹ 15,11,373. However, sum of ₹ 10,00,000 was reflected in the books of account of the assessee and hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried out. 24. In the entirety of the abovesaid facts and circumstances, where the applicant had also offered additional income before the Settlement Commission in the hands of Maa Saraswati Educational and Social Welfare Trust, we find no merit in the so called addition made in the hands of the assessee totalling ₹ 19,95,000. Accordingly, we direct the Assessing Officer to delete the addition of ₹ 19,95,000. Further, addition of ₹ 5,11,373 was made in the hands of the assessee on protective basis. In view of the settlement petition having been filed by Shri J. C. Bansal before the Settlement Commission, the Settlement Commission has already decided the issue in the hands of Maa Saraswati Educational and Social Welfare Trust and which also incorporates the additional income offered by Shri J. C. Bansal and further being assessed in his hands. In view thereof, we find no merit in the said addition of ₹ 5,11,373 and the same is directed to be deleted. Ground Nos. 1 and 2 raised by the assessee are thus allowed. 25. Ground No. 3 raised by the assessee is against order of the Commissioner of Income-tax (Appeals) in non-allowance of deduction under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 165 (P H) and also in National Legguard Works v. CIT (Appeals) [2007] 288 ITR 18 (P H). In the case of Home Tex v. CIT [2011] 59 DTR 165 (P H), the deduction was claimed under section 80-IB of the Act on the surrendered income on account of excess stock found on physical verification. 30. The learned authorised representative for the assessee placed reliance on the decision of the hon'ble Gujarat High Court in CIT v. Shilpa Dyeing and Printing Mills P. Ltd. [2013] 219 Taxman 279 (Guj) for the proposition that the additional income declared consequent to the survey has to be assessed as income under one of the heads of income under section 14 of the Act and could not be taxed separately. Earlier the hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290 (Guj) had held that the additional income surrendered by the assessee is to be assessed under section 69, 69A, 69B and/or 69C of the Act and the said decision of the hon'ble Gujarat High Court has been applied by the hon'ble Punjab and Haryana High Court in KIM Pharma P. Ltd. v. CIT [2013] 1 ITR-OL 137 (P H) and it has been held that the surrendered income cannot form part of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search, pages Nos. 59 to 67 of annexure A-2 were seized from the office of the assessee. The said documents were confronted to Shri Lalit Jindal whose statement was recorded on July 29, 2009, i.e., after the search. The document tabulated entries relating to receipt of payment from Budhiraja family and letter, dated August 10, 2008, addressed to Shri Lalit Jindal which contained entries relating to M-1 Plaza. In reply, Shri Lalit Jindal explained that the letter was written by Shri Anil Monga, resident of Greater Kailash- I, New Delhi, giving him detail of investments made by him in various projects. In the said letter, he has mentioned the expected price of the properties held by him and it was further stated by him that all the payments received from Mr. Monga had duly been accounted for in the books of account but some part in the payment relating to M-1, Plaza property have not been accounted for in the regular books of account which in-turn have been surrendered to the tune of ₹ 2 crores. The scanned copy of page 67 is available at page 3 of the assessment order which is a letter written to Shri Lalit Jindal on August 10, 2008, with regard to the investment in variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seized pages and the amount shown as credit/payment of ₹ 46,43,115 and outstanding totalling ₹ 1,28,69,362 which tallies with the figure as per letter, dated August 10, 2008, from Shri Monga described as receivable out of which ₹ 13 lakhs was shown as already received. The Commissioner of Income-tax (Appeals) held that the Assessing Officer having added ₹ 1,28,69,362 was not correct as the same was an outstanding amount. However, at page 15 paragraph (i) of the assessment order, amount of ₹ 59,43,115 was stated, i.e., ₹ 46,43,115 + ₹ 13,00,000 as received by Shri Monga. The said calculation was done by the Assessing Officer. The Commissioner of Income-tax (Appeals) thus held that the addition is to be restricted to ₹ 59,43,115. 36. The assessee is in appeal against the said addition of ₹ 59,43,115 and the Revenue is in appeal against the said restriction of ₹ 59,43,115. The learned authorised representative for the assessee elaborately took up the observations of the Assessing Officer and also the findings of the Commissioner of Income-tax (Appeals). The learned Departmental representative for the Revenue, however, pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for in the regular books of account. The same have been surrendered by us to the tune of ₹ 2 crores in Mella Infracon. The prop erties are in his wife's name and his Delhi address is Mrs. Ashma Monga, House No. A-40, Kailash Colony, New Delhi. 39. Along with the said letter, five other pages were attached and each page related to a different transaction between Mr. Monga and his family members with the assessee in respect of various investments made by the family of Mr. Monga in the projects floated by the assessee. The Assessing Officer requisitioned the assessee to produce Shri Monga but he was never produced despite the assessee stating that he was prepared to produce him. However, during the course of assessment proceedings, letter from Mr. Monga, dated November 21, 2011, was produced in which it is claimed that the figures in the said letters were notional figures. Further, though the assessee claimed that the entries were reflected in the books of account but the same were not produced to the satisfaction of the Assessing Officer. The payments received from Mr. Monga or made to Mr. Monga were not fully accounted for in the books of account. The director Shri Lali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,805. As per tabulated details at page 14, the amount credited/paid totalled to ₹ 46,43,115 and the balance on each page was shown as receivable by Mr. Monga and his family members from the assessee vide letter dated August 10, 2008. Further sum of ₹ 13,00,000 is mentioned in the said letter placed at page 67 as having been received by him. In totality thus, the total payments made by the assessee were of ₹ 46,43,115 + ₹ 13,00,000 and the addition is to be restricted to ₹ 59,43,115 as held by the Commissioner of Income-tax (Appeals). The balance being the amount payable by the assessee to Shri Monga and his family members is not includible as income of the assessee. Accordingly, we uphold the addition of ₹ 59,43,115 in the hands of the assessee and dismiss the grounds of appeal raised by both assessee and the Revenue in this regard. I. T. A. No. 561/Chd/2013-Revenue's appeal-assessment year 2007-08 40. The Revenue has raised the following grounds of appeal : (i) Whether on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in law as well as on fact by rejecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject. The contention of the assessee that it was a mere guidance note and not accounting standard, was found by the Assessing Officer to be not tenable as the guidance note discussed the Accounting Standard AS-7 and AS-9. The relevant paras of the guidance note are reproduced by the Assessing Officer at pages 9 and 10 of the assessment order. The Assessing Officer further observed that the hon'ble courts had held that the real estate developers should follow the percentage completion method. Reliance was placed on various decisions by the Assessing Officer in this regard and rejecting the plea of the assessee that profits of the assessee from business in real estate should not be ascertained until the venture/ project had come to an end, was rejected. In view thereof, the Assessing Officer applying the percentage completion method has tabulated income at part of pages 12 and 13 of the assessment order and noted that the assessee during the year under consideration had not booked any income and as per the calculation, the income of the assessee on business of real estate developers was determined at ₹ 12,34,000. 44. Before the Commissioner of Income-tax (Appeals), the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project completion method followed by the assessee would result in deferment of payment of taxes. Therefore, considering the discussion above, I do not find any merit on the part of the Assessing Officer to have worked out the income by applying the percentage completion method. Thus, the action of the Assessing Officer is held not tenable. The assessee succeeds on this ground of appeal. 45. The learned Departmental representative for the Revenue pointed out that the assessee had failed to follow the prescribed accounting standard, i.e., percentage completion method and had computed the income in its hands on project completion method which was incorrect and hence the order of the Commissioner of Income-tax (Appeals) be reversed. 46. The learned authorised representative for the assessee on the other hand, pointed out that the assessee had followed the accounting standard AS-9 while computing the income in the hands of the assessee which is one of the prescribed methods of accounting and hence, there is no merit in recomputation of income in the hands of the assessee. Further reliance was placed on CIT v. Bilahari Investment P. Ltd. [2008] 299 ITR 1 (SC), CIT v. Manish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case, we find that the assessee before us has been following the systematic method of accounting from year to year which has been accepted by the Department and no defects have been pointed out by the Department in the method of accounting adopted by the assessee and thus, there is no reason to reject the same. 51. The hon'ble Delhi High Court in CIT v. Manish Build Well P. Ltd. [2011] 245 CTR (Delhi) 397 had held that, It is well-settled that the project completion method is one of the recognised methods of accounting. It cannot be said that the project completion method followed by the assessee would result in deferment of the payment of the taxes which are to be assessed annually under the Income-tax Act. AS-7 issued by the ICAI also recognises the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method . 52. Where the assessee was following a particular method of accounting consistently, which has been accepted by the Department from year to year and in the absence of any defect being pointed out by the Assessing Officer that by following such met ..... X X X X Extracts X X X X X X X X Extracts X X X X
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