TMI Blog2015 (5) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed. In the case in hand, it is not disputed that sale-deeds were executed in the year subsequent to the year under appeal. Therefore, in view of the binding precedent, we are of the considered view that the authorities below were not justified in taxing the amount including ‘on money’ during the year under appeal. Further, the assessee has submitted that it has offered for tax the amount including ‘on money’ in the year whenever sale-deed was executed. This fact is also not controverted by the Revenue by placing any contrary material on record. Therefore, the AO is hereby directed to verify whether the assessee has offered for taxing the amount as its income in the year when the sale-deed was executed. If it is found that the assessee has offered the amount in the year in which the sale-deed was executed, then the AO would delete the addition made in this year. We are conscious of the fact that this Tribunal had taken a contrary view, since now the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel is brought to our notice and no distinguishing fact is pointed out by the ld.Sr.D.R. In the light of the above discussion, the appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) ought to have upheld the order of the AO. 3. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the AO be restored to the above extent. 3.1 In Assessees appeals; i.e. IT(SS)A Nos.320 321/Ahd/2002 for block period AYs 1990-91 to 1999-2000 upto 29.10.1999, the Assessees have raised the following grounds of appeals in its respective appeals:- (a) IT(SS)A No.320/Ahd/2002 (in the case of M/s.Ohm Developers) 1) The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition to the tune of ₹ 2,18,34,648/- on account of profit alleged to have been earned by the appellant firm from construction and sale of flats at Chandan Park Apartments, City Light Road, Surat. 2) The learned Commissioner of Income Tax (Appeals) erred in law and on facts in upholding the time barred assessment order passed by the learned Assessing Officer. 3) It is, therefore, prayed that the above addition be deleted and the time barred order be quashed as invalid and void ab-initio. 4) The appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual and legal aspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case is that no return of income was ever filed though business of construction was being carried on since financial year 1996-97. During the post search period the appellant has shifted a stand that income is disclosed on accrual basis. 05. The main issue is regarding receipt of on money which has been accepted by the appellant. Annexures B-2/25 and B-2/26 seized from the site office of M/s.Chandan Park at City Light, Surat are actual ledger of the flat holders which contain the details of payments received upto 31.03.1999. Annexure B-2/26 reflects the receipt of payments from 01.04.99 to the date of search. Shri Ketan O.Der admitted in a statement on oath that the total sale consideration of flats in Chandan Park is ₹ 7,88,02,178/- which included both on money and official price where as the document price is at ₹ 2,48,38,289/- only, thus difference of both at ₹ 5,39,63,889/- is the on money . Shri Ketan O. Der identified the flat holders and accepted the veracity of details contained in the said documents. 3.3. The ld.CIT(A) had partly allowed the appeal of the assessee. While partly allowing the appeal, the ld.CIT(A) directed the AO to adopt the Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stock-in-trade. He submitted that the assessee has treated the flats as stock-in-trade and not as capital asset, therefore the provisions of section 2(47) of the Act would not be applicable in the case of the assessee. He submitted that the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench (ITAT D Bench Ahmedabad) in the case of ITO vs. Shri Siddharth S.Patel passed in ITA Nos.1852 1853/Ahd/2003 for AYs 1997-98 1998-99, dated 23/04/2010. The ld.Sr.counsel for the assessee also placed on record the Chart showing the total area sold, recorded consideration received, on money received and total sale consideration received. He pointed out that as per this Chart, the assessee has declared upto 29/10/1999 sales of 32,050 sq.ft., official consideration received is ₹ 44,87,102/-, on money consideration of ₹ 99,01,675/- and total consideration of ₹ 1,39,88,777/-. In respect of AY 2000-01 total sq.ft. area sold is 33,715 and recorded sale consideration amount of ₹ 49,65,000/-, on money consideration is ₹ 94,17,237/- and total consideration is of ₹ 1,43,82,237/-. Similarly, for AYs 2001-02, 2002-03, 2003-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... face of plethora of seized documents containing minute details of income and expenditure, the appellant cannot get away so easily. The Assessing Officer has worked out net profit at ₹ 2,61,78,438/- at page 28 of the assessment order. Shri Sunil Desai, partner admitted estimated profit from ₹ 2,08,65,000/- to ₹ 3,08,01,600/- on the basis of cost of construction involved. Shri Ketan O.Der admitted receipt of on money at ₹ 5,39,63,889/- in a statement under section 132(4) of the Act. Shri Shantilal Patel, partner admitted profit of ₹ 2,29,20,847/- on the basis of Annexure BS-1/11. The figures contained in income expenditure statement reproduced in para 6 above cannot be imaginary and also the appellant cannot brush aside the same by calling it a solitary paper prepared by the partner for some other purpose. The judicial pronouncement relied upon by the appellant are not helpful because i) these are not delivered in the case of block assessment, (ii) the appellant has been found in possession of on money as evidenced by seized material which was not there in both the judgements and (iii) it is a case of glare tax evasion when the appellant is caught wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 027, represented its income earned in that year. The amount which the assessee received in Samvat year 2027 was only an advance and would become profits in its hands only on completion of sale in favour of the society. It was only on completion of the sale that the amounts which the assessee had received in Samvat year 2027 and the balance of the sale price which it had received in Samvat year 2028 became the profit of the assessee. ii) CIT Vs. Ashaland Corporation, 133 ITR 55 (Guj) wherein the following has been held: i) that the assessee received a total sum of ₹ 2,13,772 in advance towards the sale price of the land which it had agreed to sell to the society, but the receipt could not be considered to be its income. The business of the assessee was to purchase and sell land. Unless the title of the assessee was extinguished, the title of the purchaser could not arise. Both could not be the exclusive owners of the same property at the same time. So long as the assessee continued to be the owner, it could not be said that his title was divested and that the sale had resulted in any profit to him. 5.2. The ld.Sr.counsel for the assessee has also placed reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the buyers. Advance money received by the assessee can never be his income. It would only be a liability shown in the balance sheet as advances from the customers and will be adjusted against the sale proceeds of the flats when flats are transferred to the purchasers. Therefore, accrual of income to the assessee will not arise on the date when it receives cheque or cash against sale on flats but will arise when flats are transferred to the buyers. Till then it will only be an advance. We notice that assessee has booked the flats from Asst.Year 2008-09 on wards and received advances by way of cheque. It has also received advance in cash which is now declared as on money in the statement given by Shri Ravi Khandelwal. In a chart given before us by the assessee, names of the prospective buyers and their PANs have also been given and also the date of booking. There were 122 such buyers and from whom on money in cash to the extent of ₹ 10 crores is stated to be received. The outstanding amount against them is also shown. The area of the premises booked, rate at which it is booked and the date of booking all fall in the FY 2006-07 and 2007-08. But as per certificate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a capital asset for the purchaser but for the assessee all the flats together constitute stock-in-trade. As assessee is dealing in capital asset, as stock-in-trade, the basic principle of accrual of income will remain the same i.e. profit on sale of flat will accrue to the assessee when flat is in existence and the same is transferred to the purchaser through the transfer deed. The profit would arise to the assessee only on execution of transfer deed which may be registered in the same year or may be in the subsequent year. Hon.Supreme Court had occasion to consider the concept of accrual or arising of income in the case of E.D. Sassoon Co.Ltd. Ors. vs. CIT (19154) 26 ITR 27 (SC) wherein it is held that there is no difficulty in understanding what is receipt. It conveys a clear and definite meaning and there cannot be any expression which makes its meaning plain then the word receiving itself. The words accrual/arise are not defined in the Act. Accruing is synonymous with arising in the sense of springing as a natural growth or a result. Accrual would indicate a sense of growing up by way of addition or increase or as an accession or addition while arise would mean coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on execution of transfer deed whichever happens earlier. 18. Thus on the basis of above judgments we hold that advance money received either by way of cheque or by way of cash will partake the character of taxable income when registered sale deed of the flats is executed in subsequent years. As a result, the sum of ₹ 10 crores will not taxable in Asst.Year 2008-09. The appeal of assessee is accordingly allowed. 5.4. In the case in hand, the admitted position is that during the course of search, certain documents were seized. On the basis of the documents, the AO observed that the total price related to the sale of flats was ₹ 7,88,02,178/- against the documented price of ₹ 2,48,38,289/-. The AO observed that on the statement taken on oath of Shri Shantilal Patel admitted that the receipts contain net profit of ₹ 2,29,20,847/-. Before the AO, the explanation of the assessee was that substantial amount of the sale consideration was pending for collection. Before the AO, in response to the notice issued, the assessee submitted that total sale consideration is ₹ 1,39,88,777/- only rather than ₹ 7,53,83,326/- as entered in the assessee s workin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the binding precedent, we are of the considered view that the authorities below were not justified in taxing the amount including on money during the year under appeal. Further, the assessee has submitted that it has offered for tax the amount including on money in the year whenever sale-deed was executed. This fact is also not controverted by the Revenue by placing any contrary material on record. Therefore, the AO is hereby directed to verify whether the assessee has offered for taxing the amount as its income in the year when the saledeed was executed. If it is found that the assessee has offered the amount in the year in which the sale-deed was executed, then the AO would delete the addition made in this year. We are conscious of the fact that this Tribunal had taken a contrary view, since now the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel in ITA Nos.1852 1853/Ahd/2003 is brought to our notice and no distinguishing fact is pointed out by the ld.Sr.D.R. In the light of the above discussion, the appeal of the assessee (in the case of M/s.Ohm Developers) is allowed for statistical purposes in the terms as indicated hereinabove. 7. Now, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked out by the partner was not ₹ 500/- per sq.ft. But ₹ 450/- per sq.ft. And the Assessing Officer adopted ₹ 3,08,01,600/- instead of ₹ 2,08,65,000/-. The appellant cannot treat the amount of sales which has gone into his pocket just a booking amount now when through out the search proceedings the partners admitted the correctness of profit worked out in the seized documents. The chart prepared by the appellant is as per hi own convenience and does not reflect true picture of state of affairs of the business. Under these circumstances I would direct the Assessing Officer to adopt net profit at ₹ 2,29,20,847/- and after allowing the benefit or undisclosed income of ₹ 10,86,199/- in the block return, take the total undisclosed income at ₹ 2,18,34,648/- and accordingly charge tax. 7.3. It is not disputed that the AO adopted the maximum figure of net profit on the basis of statement of Shri Sunil Desai partner of assesseefirm, however, the ld.CIT(A) adopted the figure declared by Shri Ketan O.Der another partner. Both the authorities have based their findings on the basis of the statement of partners, without any other corroborative evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has offered for taxing the amount as its income in the year when the sale-deed was executed. If it is found that the assessee has offered the amount in the year in which the sale-deed was executed, then the AO would delete the addition made in this year. We are conscious of the fact that this Tribunal had taken a contrary view, since now the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel in ITA Nos.1852 1853/Ahd/2003 is brought to our notice and no distinguishing fact is pointed out by the ld.Sr.D.R. In the light of the above discussion, the appeal of the assessee (in the case of M/s.Ohm Developers) is allowed for statistical purposes in the terms as indicated hereinabove. 8.3. Since the facts and issues are identical to the case of M/s.Ohm Developers(supra), we, for the same reasoning, allow the appeal of the assessee (M/s.Ohm Organisers) for statistical purposes in the terms as indicated hereinabove. 9. In the combined result, the appeal of the Revenue is dismissed, whereas Assessees appeals are allowed for statistical purposes. Order pronounced in the Court on Friday, the 8th day of May, 2015 at Ahmedabad. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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