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2015 (5) TMI 929 - ITAT AHMEDABAD

2015 (5) TMI 929 - ITAT AHMEDABAD - TMI - Undisclosed income - receipt of ‘on money’ - addition on seized materials and as admitted by the working partner of the assessee firm - Held that:- The undisputed facts emerged from the above discussion is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench rendered in the case of ITO vs. Shri Siddharth S.Patel (2010 .....

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unt would become for the assessment year in which the sale transaction is 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 .....

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al 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 (in the case of M/s.Ohm Developers) is allowed for statistical purposes in the terms as indicated hereinabove. - Decided in favour of assesse for statistical purposes. - IT (ss) Nos. 314/Ahd/2002, 320/Ahd/2002, 321/Ahd/2002 - D .....

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g out of separate two orders passed by the ld.CIT(A)-II, Ahmedabad both dated 24/09/2002), these were heard together and are being disposed of by way of this consolidated order for the sake of convenience. 2. This is second round of litigation. In the earlier round, both the Revenue and the Assessee had filed against had filed against two separate orders of the Tribunal dated 17/10/2008 (in Revenue s appeal) & 12/11/2003 (in Assessee s appeals) in IT(ss)A No.314/Ahd/2002 and IT(ss)A Nos.320 .....

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ccordingly. However, in respect of the Revenue s appeal in IT(ss)A No.314/Ahd/2002, the original file was placed before this Tribunal. 3. In Revenue s appeal, i.e.(IT(ss)A No.314/Ahd/2012), the Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A), Ahmedabad has erred in reducing the undisclosed income worked out at ₹ 3,08,01,600/-, as per the seized materials and as admitted by the working partner of the as .....

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ve 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 orde .....

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/2002 (in the case of M/s.Ohm Organizers) 1) The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition to the tune of ₹ 1,65,89,696/- on account of profit alleged to have been earned by the appellant firm from construction and sale of flats/shops at Yogi Complex Apartments, New Rander 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 Asses .....

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recorded in the impugned appellate order in the case of M/s.Ohm Developers are reproduced hereunder:- 03. Brief facts of the case are that the appellant firm is engaged in the business of construction activities. A search under section 132 of the Act took place on 29.10.1999 at the business and residential premises of the appellant which was concluded on 03.11.1999. The appellant filed a return disclosing undisclosed income of ₹ 10,86,199/- on 17.02.2000 in response to notice under sectio .....

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statement on oath and truth of the seized material while declaring undisclosed income of ₹ 10,86,199/- only through the block return. The glaring phenomenon of the appellant s 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 t .....

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t 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 Net Profit at ₹ 2,29,20,847/- and after allowing the benefit of undisclosed income of ₹ 10,86,199/- in the block returns .....

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educing the undisclosed income. The ld.CIT-DR submitted that the ld.CIT(A) is not justified in reducing the addition. He submitted that the AO has observed that the assessee had received on money of ₹ 5,39,63,889/-. Working partner of the assessee-firm accepted the receipt of this on money and admitted income during the course of search of ₹ 3,08,01,600/-. However, against this undisclosed income, the assessee had filed only undisclosed income of ₹ 10,86,199/-, mainly on the ba .....

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#8377; 2,29,20,849/-. He placed reliance on the assessment order. 4.1. On the contrary, ld.Sr.counsel for the assessee submitted that the controversy in all these appeals is with regard to the fact whether the sale consideration received by the assessee can be subjected to tax in the year under appeal and/or otherwise same is to be taxed as declared by the assessee on the basis of registration of the sale-deed. He submitted that there is no dispute with regard to the fact that the assessee has d .....

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ue 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 u .....

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eceived by the assessee both recorded in the books of accounts and on money has been offered for tax. He submitted that the only controversy is whether the receipts so offered for taxation is to be offered during the block period or the same has to be spread as per the sale-deed executed. He submitted that the Hon ble Gujarat High Court in the case of CIT vs. Ashaland Corporation reported at 133 ITR 55(Guj.) has held that unless the title of the assessee was extinguished, the title of the purcha .....

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e sale deed. He submitted that the Hon ble High Court further held that it was only on the 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. He submitted that in the case in hand the facts are identical, therefore in the light of the ratio laid down in the decision of the Coordinate Bench in ITA Nos.1852 & 1853/Ahd/2003 and in the judgement .....

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into the merits of addition on account of undisclosed income. The appellant has totally retracted from the statement recorded on oath during search regard the profit from construction business and taken an altogether different stand that income in the block return has been shown as per the actual sale of flats based on execution of sale deed. However, in the face of plethora of seized documents containing minute details of income and expenditure, the appellant cannot get away so easily. The Ass .....

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n 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 .....

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ellant 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 u .....

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see that the provision of section 2(47) of the Act would not be applicable in the case in hand. Reliance is placed on the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel passed in ITA Nos.1852 & 1853/Ahd/2003(supra), wherein the Hon ble Bench has held as under:- 12. We have heard both the sides and perused material placed before us. We find that the issue under consideration is covered by the following the decisions of the jurisdictional High Court: i) CIT Vs. .....

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ear. 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) tha .....

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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 on the decision of Coordinate Bench (ITAT C Bench Ahmedabad) in the case of M/s.D.R. Construction vs. ITO in ITA No.2735/Ahd/2010 for AY 2008-09, dated 08/04/2011. The Hon ble Coordinate Bench in paras-14 and 15 of its order has held as under:- 14. Once what is to be taxed is 'on money' then it has to be examined when can it be .....

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ove the receipts recorded in the books. No such evidence has been furnished. To the contrary it is undisputed position that out of this on money assessee has incurred various expenditure/investment. Therefore, on money as such and as a whole cannot be taxed over and above the income accruing on the basis of entries recorded in the books of account. From this it follows that 'on money' has to be treated as revenue receipt and not purely income. The explanation of the Id. AR in this regard .....

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l expenditure/investment incurred by it. 15. The next issue comes as to when the income out of such receipt would accrue to the assessee. In our considered view receipt of on money is part and parcel of money received on sale of flats by cheque. The amount received by cheque before actually transferring the flats to the purchasers will be in the nature of advance and cannot be said to have accrued to the assessee. Assessee has incurred expenditure/investment in the project in various years but i .....

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rs. 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 ͅ .....

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and of ₹ 1,82,09,630/- against sale of 55 flats/shops. The revenue is accordingly recognized only when flats/shops are sold and, therefore, both cheque portion/cash portion being the on money would accrue to the assessee in the year when flats/shops are sold. Therefore, in no way sum of ₹ 10 crores as a whole can be taxed in Asst.Year 2008-09 on the basis of expenditure as deemed income u/s.69C. 5.3. Further, the Hon ble Tribunal held as under:- 17. There cannot be two opinions on t .....

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use (v) in section 2(47) the position of law has changed and capital gains would accrue on payment of full consideration and handing over of the possession. In Meccane Industries Ltd. vs. CIT (2002) 254 ITR 175 (Mad.) Hon. Madras High Court held that capital gain would accrue in the year in which sale deed was executed. Hon.Andhra Pradesh High Court in CIT vs. Nawab Mahmood Jung Bahadur (1988) 172 ITR 592 held that capital gain would arise on transfer of asset liable to be taxed for the year in .....

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In the present case assessee is dealing in several immovable property i.e. flats and shops which he has constructed. A single flat is 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 .....

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kes 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 into existence or notice or presenting itself. Accrual connotes an intangible growth while arise a tangible shape so as to be receivable. From these concepts it f .....

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the prospective buyer would only be a liability and the liability as such cannot be treated as income as no such income accrued or arose to the assessee. Merely receiving a sum for future purchase of an immovable property cannot be a sale consideration even within the meaning of section 53A of Transfer of Property Act as property being not in existence. The possession thereof cannot be give to the prospective buyers and, therefore, the sum received for being adjusted against sale consideration w .....

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aracter as an advance against sale consideration then on money in cash will also carry the same character. Both types of receipts i.e. receipt through cheques and receipt through cash as on money will arise as income to the assessee as soon as transfer of immovable property is executed and not before, or possession thereof is handed over and for this it is necessary that such immovable property should be in existence. Therefore, we are of the considered that on money received by the assessee did .....

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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 S .....

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The assessee objected to the addition on the ground that even though the sale consideration of the project was received, the income has not accrued as sale deed has not been signed or possession in respect of flats has not been handed over. The assessee relied on the judgements of Hon ble Gujarat High Court in the case(s) of CIT vs. Asha Land Corporation (133 ITR 55)[Guj], CIT vs. Shah Doshi & Co. (133 ITR 23)[Guj.], Chdambaram Chettiar vs. CIT (4 ITR 309)[Mad.] and Kunjemat & Sons vs. C .....

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l sale consideration adopted by the AO at ₹ 7,88,02,178/-, the assessee had disclosed the sale consideration at ₹ 8,68,55,671/- and the taxes on such income has been paid. Therefore, the assessee cannot be subjected to double taxation. 6. The undisputed facts emerged from the above discussion is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench .....

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ed to tax when sale-deed is actually executed. Since the Hon ble Gujarat High Court has held that the amount would become for the assessment year in which the sale transaction is completed. In the case in hand, it is not disputed that saledeeds 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. F .....

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n 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 indi .....

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ereunder:- 10. I have carefully considered the submissions made by the appellant and also gone into the merits of addition on account of undisclosed income. The appellant has totally retracted from the statement recorded on oath during search regard the profit from construction business and taken an altogether different stand that income in the block return has been shown as per the actual sale of flats based on execution of sale deed. However, in the face of plethora of seized documents contain .....

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tted 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 mone .....

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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 Asse .....

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have based their findings on the basis of the statement of partners, without any other corroborative evidence. However, in respect of taxability of this figure we have already decided the Assessee s appeal in IT(ss)A No.320/Ahd/2002 (supra). Therefore, the AO is directed to compute the taxable income in accordance with the direction given in IT(SS)A No.320/Ahd/2002 (supra). Hence, the ground of the Revenue s appeal is dismissed. 8. Now, we take up the Assessee s appeal (in the case of M/s.Ohm Or .....

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on is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench rendered in the case of ITO vs. Shri Siddharth S.Patel in ITA Nos.1852 & 1853/Ahd/2003(supra). The provisions of section 2(47) would not be applicable. The assessee has disclosed the on money in the return of income in the year in which the sale-deed was executed. The Revenue has not rebutted this .....

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