TMI Blog2015 (10) TMI 2315X X X X Extracts X X X X X X X X Extracts X X X X ..... In the entirety of the facts and circumstances, we delete the addition - Decided in favour of assessee. Undisclosed income of the assessee - assessee had failed to furnish any proof that the cheques issued by Shri Chhabra had bounced again and again - Held that:- no merit in the claim of the assessee in this regard and in the absence of the assessee having furnished any evidence to prove its case that sum of ₹ 5 lacs was offered against cheuqes being dishonoured, does not establish the case of the assessee. In case the cheques were being dishonoured then how the total of ₹ 7,89,760/- has been taken and it does not talk of any dishonour of cheques. In the absence of any evidence filed to prove its case we find no merit in the plea of the assessee and we uphold the addition of ₹ 5 lacs in the hands of the assessee as income from undisclosed sources. - Decided against assessee. Addition on entries contained in seized papers A-l page 44 - assessee pleads that the said amounts have been considered by Shri J.C.Bansal in his computation filed before the Hon'ble Settlement Commission - Held that:- Where the applicant had also offered additional income before the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth assessee and the revenue in this regard. Percentage completion method rejected by CIT(A) - determination of profit from the real estate business of assessee - Held that:- 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 method, income had escaped assessment, we find no merit in the order of the Assessing Officer in holding that percentage completion method should be applied to the assessee for the year under consideration. It is the prerogative of the assessee to arrange its affairs in such a manner and follow any recognized method of accounting to compute its profits. In view thereof, we find no merit in the order of the Assessing Officer in re-computing the income in the hands of the assessee. Upholding the order of Commissioner of Income Tax (Appeals) - Decided against revenue. - ITA No.547 /Chd/2013, ITA No.561 /Chd/2013 , ITA No.548 /Chd/2013, ITA No.562 /Chd/2013, ITA No.549 /Chd/2013 , ITA No.563 /Chd/2013, ITA No.564 /Chd/2013, ITA Nos.558 & 559 /Chd/2013 - - - Dated:- 6-6-2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Commissioner of Income Tax (Appeal) has erred in law and facts in confirming the addition of ₹ 5 lacs made by the Assessing Officer as per para 7 of the Assessment Order. This para deals with page 57 of A-2; a handwritten sheet showing transactions in cheques and cash received from customers Charanjit Lai and Rahul Chabra. The entry of 5 lacs is a part of the total transaction entered into with them and entered into our regular books of accounts. Hence the addition of ₹ 5 lacs made as such is unwarranted and against the facts of the case. 4. That the appellant craves for permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal. 4. The ground No.1 raised by the assessee is not pressed and the same is dismissed as not pressed. 5. The issue in ground No.2 is against the addition of ₹ 12,30,767/- made on account of entries contained in hand written sheet found during the course of search. 6. The brief facts of the case are that search and seizure operations were conducted at both the residential and business premises of the assessee i.e. part of Bansal Group of cases on 7.7.2009. The assessee was engaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which are reproduced by the CIT (Appeals) at pages 5 and 6 of the appellate order. The main contention of the assessee before the CIT (Appeals) was that M/s Goel Construction Company was the contractor of the assessee during the said assessment year and payment to the tune of ₹ 1.30 crores had been made and against which there may be certain notings made by several of the contractors since he was maintaining the project office at the site. Further it was contended that the said documents did not belong to the assessee and the notings were not in the hand writing of the assessee or any of its employees. At the site office since many persons were working, no cognizance could have been taken of the said papers for making addition in the hands of the assessee. The assessee further contended that there was no account of Shri Sajjan Jain in the books of account. The next contention raised by the assessee before the CIT (Appeals) was that though paper has been found from assessee s premises but the presumption under section 132 (4)A) of the Act was not absolute but rebuttable and since there was no link or connection of the said document with the assessee, there was no justificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r- thought Thus I have no reason not to confirm the action of the AO. The assessee fails on this ground of appeal. 8 The assessee is in appeal against the order of CIT (Appeals). The learned A.R. for the assessee pointed out that the assessee was engaged in the business of Real Estate and certain payments were made to one M/s Goel Construction Co. Pvt. Ltd., whose copy of account is placed at pages 25 top 27 of the Paper Book. The said payments were made from 1.9.2006 to 30.12.2006 approximately ₹ 61 lacs. The document found from the premises of the assessee was hand written document. Under the provisions of section 132 (4) of the Act, the issue is whether any query was raised during the assessment proceedings. The Assessing Officer during the assessment proceedings had raised query to the assessee and reply against the same is placed at page 19 of the Paper Book. It was clarified to the Assessing Officer that Shri Sajjan Jain was employee of M/s Goel Construction Company and the document belonged to the said company, who was maintaining the project office at site of the assessee. The learned A.R. for the assessee pointed out that the first aspect to be seen is that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Goel Construction Company Pvt. Ltd., who had maintained the project office within the site where the work was being carried on and the amounts mentioned on the said paper related to the expenditure incurred by him on account of construction carried out by him, for which regular payments were made by way of cheques. It was further pointed out by the assessee that notings on the said sheets like hydraulic mobile oil, etc. and other notings depicts the account maintained by his men for the purpose of petty cash expenses. During the financial year 2006-07 the payment to the extent of ₹ 1.30 crores was made to M/s Goel Construction Co. Pvt. Ltd. Another reply was filed before the Assessing Officer, copy of which is placed at page 28 of the Paper Book in which the assessee claimed that it had stringent relations with Mr.Goyal and despite best efforts he could not be produced for recording his statement and the Assessing Officer was requested to exercise his authority and summon him to verify the facts. The Assessing Officer at page 7 of the assessment order acknowledged written reply filed by the assessee and commented upon the stringent relationship with Mr.Goyal and inability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s Goel Construction Co.Pvt Ltd. and/or his employee Shri Sajjan Jain, who in turn was operating from the site of the assessee and had created temporary office at the said site. In the above facts and circumstances, we are of the view that the Assessing Officer has failed to discharge his onus in not summoning the said Mr.Goyal to establish the nature of the transaction i.e. the nature of hand written entries. In the absence of the same the assessee could not be burdened with the entries on the said seized documents. We find no merit in the aforesaid addition made in the hands of the assessee on the basis of entries on hand written sheet which did not belong to him. Once the assessee is not carrying on any construction work, then the natural corollary is that it would not make any payment for the purpose of construction and when hand written sheet depicted construction payments, the same could not be treated as the document belonging to the assessee. Further the assessee clearly pointed out that the name of the person on the said sheet was Mr.Sajjan Jain, who was employee of M/s Goel Construction Co.Pvt. Ltd. and the said facts could have been verified by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks as claimed, then the same could have been shown to the AO. This exercise would have proved its case. Therefore considering the discussion above and the fact that the contentions of the assessee have not been substantiated, the action of the AO in adding the same is confirmed. The assessee fails in this ground. 13. The learned A.R. for the assessee pointed out that despite claim of the assessee no enquiry was made by the Assessing Officer and the CIT (Appeals) and hence there was no merit in the said addition. 14. The learned D.R. for the Revenue placed reliance on the order of the CIT (Appeals). 15. We have heard the rival contentions and perused the record. The assessee has placed at page 24 of the Paper Book the copy of the seized document i.e. page No.57 of Annexure-A-2. There were various entries on the said document in respect of one Shri Charanjit Lal and others relating to Shri Rahul Chhabra. On the right side of the said document there is totaling of ₹ 7,89,760/ and on the other side there is figure of ₹ 5 lacs and there is totaling of ₹ 12,89,760/-. After that there is mention of cash of ₹ 7 lacs and on the left side there is figure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 :: Assessee's Appeal A.Y. 2008-09 16. The assessee has raised the following grounds of appeal: 1. That the Learned Commissioner of Income Tax (Appeal) has erred in law and facts in confirming the addition of ₹ 1995000/- made by the learned assessing officer as per para 6 of the Assessment Order. The addition was made on the basis of entries contained in seized papers A-l page 44. Even on the facts of the case the addition as made was not warranted because this paper A-l page 44 was owned and had duly been considered by Sh. J.C Bansal who has filed the petition before the Hon'ble Settlement Commission. The petition as filed has since been admitted by the Hon'ble Settlement Commission. 2. That the learned Commissioner of Income Tax (Appeal) has erred in law and facts in confirming the addition of ₹ 511373/- made by the Learned Assessing Officer on protective basis as per para 7 of the Assessment Order. The addition was made on the basis of entries contained in seized papers pages 46 . 47 of A-l. Even on the facts of the case the addition as made was not warranted because pages 46 . 47 were owned had duly been considered by Sh. J.C Bansal wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffered in the hands of Shri J.C.Bansal during assessment year 2008-09 by way of application before the Hon'ble Settlement Commission. The Assessing Officer rejected the plea of the assessee as no evidence was filed to prove that the receipts/entries appearing on page 44 were part of pages 46 and 47. The said document was also confronted to Shri J.C.Bansal and he stated that the paper contains entries relating to investment made by us on M/s Saraswati Educational Trust, out of which some of the entries are recorded in the books of account and some are not recorded. The Assessing Officer, thus held that the plea of the assessee that page No. 44 was extract of page No. 46-47 was an afterthought and could not be relied upon as the assessee had made an investment of ₹ 19,95,000/- which was not recorded in its books of account, the said sum was added as undisclosed income under section 69 of the Income Tax Act. 19. The entries at page 46 and 47 of Annexure A-1 seized from the residence of Shri J.C.Bansal related to receipt and payments by the Bansal Group, the scanned copies of the said documents are reproduced by the Assessing Officer at pages 6 and 7 of the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been passed in the case. Similarly, the addition of ₹ 511,373/- made on protective basis was also upheld by the Commissioner of Income Tax (Appeals). The assessee is in appeal against the order of the Commissioner of Income Tax (Appeals). 21. The ld. AR for the assessee pointed out that Maa Saraswati Educational Welfare Trust had filed a settlement petition and had offered the said sum as part of its additional income before the Settlement Commission. The ld. AR for the assessee referred to the order of Settlement Commission filed at pages 38 to 60 of the Paper Book and pointed out that the Trust had offered ₹ 1.50 Cr as additional income and Shri J.C.Bansal had paid ₹ 40 lacs in addition to the additional income of ₹ 22.50 lacs. 22. The ld. DR for the revenue placed reliance on the order of the Commissioner of Income Tax (Appeals). 23. We have heard the rival contentions and perused the record. Search on the premises of the assessee was conducted and also on the residential premises of the Director of the assessee company. Certain incriminating documents were found and seized from the residence of the Director, Shri J.C.Bansal, which reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the contentions of the applicant and had adhered to short working of the undisclosed income. The Commissioner of Income Tax was against directed by the Bench to verify the contention of the applicant. In the report dated 16.01.2013, the Commissioner of Income Tax stuck to his working of undisclosed income. Thereafter the Commissioner of Income Tax (Investigation) verified the claim of the assessee and it was mentioned in the report dated 08.04.2013 that there was either duplication or triplication of entries on four different sets of papers. The said order of the Settlement Commission further deals with various entries at pages 46 47 of Annexure A-1. The Settlement Commission vide para 5 had considered pages 46 and 47 of Annexure A-1 for calculating the undisclosed income of the Trust for the assessment year 2008-09. The revised working was tabulated at pages 48 and 49 of the Paper Book and the undisclosed income of the Trust was calculated at ₹ 1.72 Cr for assessment year 2008-09. For assessment year 2009-10 and 2010-11 also similar working was carried out. 24. In the entirety of the abovesaid facts and circumstances, where the applicant had also offered additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Punjab Haryana High Court in National Legguard Works Vs CIT another (supra) wherein it was held that in case of amounts surrendered, the burden was on the assessee to prove that the amount represented profits on which deduction was permissible under Chapter VI-A. The deduction in the said case was claimed under section 80HHC of the Act. 29. The Hon'ble Punjab Haryana High Court in M/s Tudor Knitting Works Pvt. Ltd. Vs CIT (supra) in case of surrendered income and claim of deduction under section 80IB of the Act had upheld the order of Tribunal which in-turn had applied the ratio laid down by the Hon'ble Punjab Haryana High Court in National Legguard Works Vs CIT another (supra). The Hon'ble High Court had upheld the order of Tribunal in view of the ratio laid down by the Hon'ble Punjab Haryana High Court in Home Tex Vs CIT (2011) 59 DTR Judgements 165 and also in National Legguard Works Vs CIT another (supra). In the case of Home Tex Vs CIT (supra), the deduction was claimed under section 80IB of the Act on the surrendered income on account of excess stock found on physical verification. 30. The ld. AR for the assessee placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pressed. 33. The only issue raised vide ground No. 1 is against the upholding of addition of ₹ 59,43,115/- out of total addition of ₹ 1.28 Cr based on the seized document. The revenue by way of ground No. (iii) is aggrieved by the restriction of the addition of ₹ 59,43,115/- as against ₹ 1.28 Cr made by the Assessing Officer. Since both the grounds of appeal i.e. ground No. 1 raised by the assessee and ground No. (iii) raised by the revenue relate to the same issue, we adjudicate both the grounds of appeal together. 34. The brief facts relating to the issue are that during the course of search, pages No. 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 29.07.2009 i.e. after the search. The document tabulated entries relating to receipt of payment from Budhiraja family and letter dated 10.08.2008 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de an addition of ₹ 1,28,68,362/- holding that page 67 was nothing but summary of pages 59 to 66. 35. The Commissioner of Income Tax (Appeals) has dealt with this issue vide para 18 of his consolidated order. The statements of the assessee are reproduced under para 18.1 at pages 25 to 30 of the appellate order. The Commissioner of Income Tax (Appeals) elaborately dealt with the issue at page 30-31 of the appellate order and concluded that at page 15 of the assessment order. A table has been drawn by the Assessing Officer which enumerates the total amount of transactions from the seized pages and the amount shown as credit/payment of ₹ 46,43,115/- and outstanding totaling ₹ 128,69,362/- which tallies with the figure as per letter dated 10.08.2008 from Shri Monga described as receivable out of which ₹ 13 lacs was shown as already received. The Commissioner of Income Tax (Appeals) held that the Assessing Officer having added ₹ 128,69,362/- was not correct as the same was an outstanding amount. However, at page 15 para (i) of the assessment order, amount of ₹ 59,43,115/- was stated i.e. ₹ 46,43,115/- + ₹ 13,00,000/- as received by Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-08 addressed to Sh. Lalit Jindal, which contains entries relating to M-l, Plaza. Please explain. A. This letter has been written by Sh. Anil Monga R/0 Greater Kailsah-lf New Delhi to me giving details of investment made in our various projects. He has mentioned the expected price of the properties held by him. All the payments received from Sh. Anil Monga have duly been accounted for in the books of accounts. However there may be some part in the payment relating to M-l plaza property which have not been accounted for in the regular books of accounts. The same have been surrendered by us to the tune of ₹ 2.00 crores in Mella Infracon. The properties 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 4,50,000/- which in no case can be added in the hands of the assessee. Further, the page 61 reflected cash payments of ₹ 2,00,000/- and ₹ 8,00,000/- which were paid by the assessee before us to the family members of Shri Monga and as the same were not reflected in the books of account, the said amounts are to be treated as income from undisclosed sources in the hands of the assessee. Another page was No. 60, on which as against total amount of transaction, ₹ 2,34,542/-, ₹ 1,98,740/- was paid and the balance was ₹ 35,805/-. As per tabulated details at page 14, the amount credited/paid totaled 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 10.08.2008. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence, it was submitted that the percentage completion method should not be adopted which in any case, was not compulsory. The Assessing Officer, rejecting reply of the assessee observed that the Guidance Note on real estate developers had been issued in order to clarify the issue as to whether real estate developers shall account income on project completion method or proportionately over the period of project. 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 10 of the assessment order. The Assessing Officer further observed that the Hon'ble Courts had held that 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 Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chit discount consistently over the years, is not required to be substituted by percentage completion method. In GIT (v) Manish Buildwell (P) Ltd. (2011) 245 CTR 397 (Del), it was enunciated that project completion method is one of the recognized methods of accounting. That it cannot be said that the 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 AO 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 ld. DR 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 ld. AR 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method. 50. Applying the abovesaid principles 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 Vs Manish Buildwell (P) Ltd. (supra) had held that It is well-settled that the project completion method is one of the recognized 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 IT Act. AS-7 issued by the ICAI also recognizes 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 acce ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
