TMI Blog2016 (10) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... to be eliminated from the chargeability to tax and the rest amount is to be brought to tax as undisclosed income of the assessee. We find no infirmity in the orders of the ld. CIT(A) whereby ld CIT(A) has upheld the assessment orders of the AO by confirming that the cash ‘on-money’ was in-fact being received by the assessee in the previous year relevant to the impugned assessment year, hence, we uphold/sustain the appellate order dated 08-11-2011 passed by the ld. CIT(A) by dismissing the appeal of the assessee Unrecorded sales - Held that:- As with respect to the sales recorded during the instant assessment year excluding sales which were of the unsold inventory of the last year which we have directed to include ‘on money’ based on page 18 and back of page 18/annexure A-3, the additions shall be made on same proportion as were made in the assessment year 2007-08 in the ratio of sale to undisclosed income brought to tax as the conduct of the assessee is continuing as brought on record since 2005 meeting till the recording of statement on 14-03-2008 as set out above whereby conduct of the assessee based on preponderance of human probabilities points to the receipt of ‘on money’ r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These three appeals filed by the assessee firm for the assessment years 2007-08, 2008-09 and 2009-10 are directed against three separate orders of the learned Commissioner of Income Tax (Appeals)-39, Mumbai (Hereinafter called the CIT(A) ) dated 8th November, 2011, 8th November, 2011 and 30th October, 2012 respectively , the appellate proceedings before the learned CIT(A) arising from the three separate assessment orders , first dated 22nd December, 2009 passed u/s 143(3) read with Section 153A of the Income Tax Act,1961 (Hereinafter called the Act ) for the assessment year 2007-08 , and the rest two assessment orders dated 22nd December 2009 and 29th November, 2011 respectively passed by the learned Assessing Officer (hereinafter called the AO ) both u/s 143(3) of the Act. 2. First, we shall take up the assessee s appeal in ITA No. 76/Mum/2012 for the assessment year 2007-08 wherein the following grounds of appeal are raised by the assessee in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. In confirming an addition of unaccounted income based on presumptions and surmises and without apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 is respective average price taken for working purpose which works out as written 20,96,01,000 1,32,66,500 and the total as ₹ 22,28,67,500 mentioned on the said page, Whereas the actual sale is ₹ 21,20,89,625, which is duly recorded in the books of accounts and in the balance sheet for the year ended 31.3.2007 few fiats sold on discount hence the variation appears. 2. 1 The third hand written figure is ₹ 10,07,41,500 which is derived from the back side of page 18, the figure 18330 181320 is saleable commercial and Residential area of Shanti Dham project 550 500 is respective average price taken for working purpose which works out as mentioned on the said page as sales realization ₹ 10,07,41,500, whereas the actual sales is ₹ 9,17,40,754/- which is duly recorded in the books of account and the balance sheet for the year ended 31.3.2007. The sales figure of ₹ 10,07,41,500 includes the sales figures of building No A2/3 which till date is under construction (i.e. 70% of the work is completed). The saleable area of the said building is 39,900 sq. ft. The sale booked as on 31.3.2007 is ₹ 9,17,40,754/- which does not include the sale va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the assessee that no conclusion can be drawn from this rough sheet as it was merely an arithmetic working done for evaluation of management decisions and sales clearly do not represent actual sales. The A.O. rejected the contentions of the assessee in view of provisions of section 132(4A) of the Act. The A.O. observed that in view of provisions of section 132(4A) of the Act the loose papers and incriminating material found in the possession of the assessee belongs to the assessee and the contents thereof were true and that the same have been written/ handled by the person who were in-charge of the conduct of business. By merely denying that the papers have not been written in their hand writing , that they do not know about the contents of the same or filing affidavits from the buyers denying cash payments is not sufficient. Further, assessee is also involved in receiving cash i.e. out of book money, on the basis of which disclosure of ₹ 1.25 crores had also been made by assessee. Further from the analysis of Page No. 14 of loose paper file containing pages 1 to 24 seized during search operations, it is evident that assessee was involved in accepting cash i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the sale price of an individual flat could differ from another because they were sold at a different points of time and based on business decisions such as competition, need of funds, volatility, discounts to be given . Hence, the assessee submitted that no conclusion could be drawn based on a handwritten sheet which was at best provisional working. The assessee submitted that the AO erred in comparing sales shown in this rough loose sheet with the sales recorded in the books of accounts and then assuming that the balance represented the unaccounted sales of the assessee which is not recorded in the books of accounts and thus adding the same as undisclosed income of the assessee. Without prejudice it was submitted by the assessee that many of the flats sold were not at all sold in the relevant previous year and the AO is not justified in taxing the entire amount in the impugned assessment year. Thus, the assessee prayed before the learned CIT(A) to delete the addition of ₹ 2,50,89,061/- made by the AO vide assessment order dated 22-12-2009 passed u/s 143(3) r.w.s. 153A of the Act. The learned CIT(A) forwarded the submissions of the assessee along with the enclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above, during the course of Remand proceedings, it is stated by the assessee that following residential space and commercial space were not sold in the accounting year relevant to the A. Y. 2007-08 and the same were shown as inventory. However, subsequently, the same were sold out in later years for which the assessee has furnished relevant documents. Particulars Area rate per sq. ft. Amount (Rs. Saleable area of residential space 2865 x 1350 38,67,750/- Saleable area of commercial space 685 x 1300 8,90,500/- Total value of area not sold during the A.Y. 2007-08. 47,58,250/- 5. Shanti Dham, Sector -1 5.1 As per the aseessee seized material, the sale price was estimated of the saleable area of the said project as follows: Particulars Area rate per sq. ft. Amount (Rs. Saleable area of residential space 181320 x 500 9,06,60,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the accounting year and hence the ld. CIT(A) directed the A.O. to exclude the on-money determined for these unsold built up areas from the unaccounted income determined by the A.O. The ld. CIT(A) accordingly partly allowed the appeal of the assessee vide appellate order dated 08-11-2011. 6. Aggrieved by the appellate order dated 08-11-2011 of the ld. CIT(A) , the assessee is in further appeal before the Tribunal. 7. The ld. Counsel for the assessee submitted that there were search operations carried on by the Revenue on 13th March, 2008 in the case of Bharat Shah Group and the assessee was also covered in the said search operations. The ld. Counsel for the assessee submitted that assessee is a builder and the assessee is building a project in Meera Road, Thane which is an under developed area. . It was submitted that during the course of search operations carried out by the Revenue u/s 132(1) of the Act, apart from other seizures, one loose paper was found and seized which is marked as page No. 18 (having front and back marked 18 and 18a) of annexure A-3 from 811, Embassy Centre, Nariman Point, Mumbai which is placed in paper book page 22 -23 filed with the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not retracted by the assessee or the said partner of the assessee rather the statement is honored by declaring the said surrendered amount in return of income filed with the Revenue and due taxes being paid to the Revenue. It is submitted that the assessee is not disowning the said seized document being page 18 and back of page 18 (placed at page 22-23/paper book) by the Revenue during the search operations. The ld. Counsel submitted that the assessee was confronted by the Revenue during the course of recording of the statement whereby the assessee explained as answer to the question No. 10 that the documents were prepared by the accountant for the purpose of advance tax. Thus the ld. Counsel further submitted that in reply to question No. 27 it was submitted by Mr. Mukesh D Chowdhary, the partner of the assessee that due to price rise in building construction , the assessee was able to collect cash money of 20% over and above the sale price realized by the assessee in financial year starting from 1st April, 2007 onwards amounting to ₹ 1.25 crores upto the date of search which is not recorded in the books of accounts of the assessee and the assessee surrendered as an addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... values of Flats Shops in phase-I differs from the actual to what is shown in the a/c given. B.S. agreed that difference is obvious from the instances given by papaji and it should be discussed in detail with B.S./R.C. Chowdhary group. 3. Papaji pointed out that the rate charged for FR has a large difference B-S agreed that he will look in to it after verifying it. 4. Agreed that Dhirubhai's group's deposit in RNDC should be returned back at the earliest. 5. Papaji pointed out that N.D. had agreed to give 10/- p.s.f. on 5,50,000 sq. ft. fsi of RNDC over above the price settled . This was to be given in the form of diamond bangles worth approx. ₹ 30 lacs for which R/C N.D. along with papaji went to B.S. s office 2/3 times to give measurement. However it did not work out at that time. Therefore against that money ND offered his office as collateral security till such time this commitment was honoured. Since ND s commitment to XYZ have been carried out in 2003, 5 Years after his death. His commitment to us should also be honoured. 6. Shifting of the office at the site (RNDC) will be done after the commitments of ND is fulfilled which R/C is fully awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2008-09 . The ld. CIT D.R. relied on the decision of Hon ble Bombay High Court in the case of Surendra M. Khandhar v. ACIT [2009] 224 CTR 409 (Bombay) and submitted that the assessee has accepted that cash on-money has been received by the assessee. He further relied on the decision of Hon ble Bombay High Court in the case of Harish Textile Engineers Ltd. v. DCIT, [2015] 63 taxmann.com 66 (Bombay), in the case of Mahabir Prasad Rungta v. CIT, [2014] 43 taxmann.com 328 (Jharkhand) and also the decision of the ITAT Jaipur Bench in the case of Harishchand Brothers v. ITO [1998] 64 ITD 331(JP) and submitted that incriminating material has been found during the course of search operations which clearly indicates that the assessee had concealed its income. The learned CIT DR submitted that there is no infirmity in the order of the ld CIT(A) and the same should be confirmed. 9. In the rejoinder, the ld. Counsel for the assessee submitted that no enquiry has been made by the A.O. with the buyers and also with any other persons. The summary of the flats sold and in inventory was submitted in the paper book page 32-56. On being asked by the Bench, the ld. AR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely Mr Bharat S Shah group and Mr D G Chowdhary group whereby an understanding has been reached as well reiterated between the afore-stated both the partners group with respect to modus operandi for collection and consequent distribution of cash on money amongst both the partner groups arising from the sale of flats in the projects undertaken by the assessee which on its perusal leave no iota of doubt that assessee firm has indulged in collecting cash on-money from sale of flats in this project at Mira Road, Thane if read in conjunction with the seized material A-3 page 18 and back of page 18 , and also read along with the statement recorded during search operations of partner of the assessee Mr. Mukesh D Chowdhary on 14-03-2008 whereby the assessee firm surrendered ₹ 1.25 crores by admitting of having received cash on-money on sale of flats in the said project from the period 01-04-2007 till the date of search. As per seized material marked page 18 and back side of page 18/Annexure A-3 which is a seized document stated to be written by the accountant of the assessee prepared with reference to the date 31st March, 2007 as the said date duly find mentioned twice in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee maintained in regular course of busienss and hence on the same analogy the sales should also be actual sales keeping in view the use of word Sales Realisation and Sales in the said seized document. The contention of the assessee that the said document also showed inventory which is not sold by the assessee included in the sale figures , we find that inventory held by the assessee as at 31-03-2007 in Shanti Gardens project is insignificant while the most of the units already got sold out before 31-3-2007 while Shanti Dham project has unsold inventory of approx. 20%. Our view is also strengthened as the period of 2006-2008 witnessed period of boom in real estate Industry in India when the real estate inventory was moving at a very fast pace and also had shown sharp and steep appreciations over a short period of time . The real estate projects were selling at that period of time of 2006-08 in India at fast pace on the launch/prelaunch stage itself . The stupendous rise of the real estate in the period 2006- 08 can also be seen by the re-sale rates mentioned in the seized documents which was clarified vide question no. 7-9 in the statement recorded on 14-3- 2008 of Mr Mukesh D C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creased due to India s growing population, accentuated urbanisation, rising disposable incomes, rapidly growing middle class and youth population, low interest rates, fiscal incentives on interest and principal payments for housing loans and heightened customer expectations. Phase III (2009-2010) witnessed substantial slowdown and part recovery in demand because of the global economic downturn, which led to a decline in affordability and tight liquidity. The retreat of various real estate investors, accompanied by slowdown in the capital markets, has resulted in oversupply and falling prices. The Revenue has brought to tax only the difference between the sales figure recorded in the said seized document page 18 and back of page 18 of Annexure A-3 and the books of accounts maintained by the assessee as undisclosed income of the assessee. The above document page 18 and back of page 18 /Annexure A-3 has to be read together with in conjunction and in context of minutes of meetings held on 30-08-2005 between the Partner group whereby they have arrived at and reiterated understanding and modus operandi to generate on money cash from this project and also arrived at the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no 14 of loose paper containing pages 1-24 , which are minutes dated 30-08-2005 whereby the partner groups held meeting to decide about the modus operandi to generate and thereafter distribute cash on money amongst themselves from the projects undertaken by the assessee in the manner stipulated in the seized document corroborated by the seizure of document no 18/18a of Annexure A-3 which reflected the mismatch between sales recorded in the seized document and the books of account having reference to the date 31-03-2007 which is further corroborated by the statement dated 14-03-2008 of partner of the assessee Mr Mukesh D Chowdhary wherein the said partner of the assessee has admitted to having actually received cash on-money from the projects undertaken by the assessee of ₹ 1.25 crores from 01-04-2007 to the date of search . The conduct of the assessee through out starting with the commencement of the project Shanti Garden in 2005 is consistent till recording of statement on 14-03-2008 that the assessee indulged in collecting cash on-money from the projects undertaken by the assessee. The admission of the assessee vide statement recorded on 14-03-2008 of the partner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undisclosed income of the assessee have to be eliminated from the chargeability to tax and the rest amount is to be brought to tax as undisclosed income of the assessee. We find no infirmity in the orders of the ld. CIT(A) whereby ld CIT(A) has upheld the assessment orders of the AO by confirming that the cash on-money was in-fact being received by the assessee in the previous year relevant to the impugned assessment year, hence, we uphold/sustain the appellate order dated 08-11-2011 passed by the ld. CIT(A) by dismissing the appeal of the assessee. We order accordingly. 11. In the result appeal filed by the assessee in ITA No 76/Mum/2012 for the assessment year 2007-08 is dismissed. ITA No. 77/Mum/2012 for the assessment year 2008-09 12. The grounds raised by the assessee firm in this appeal filed with the Tribunal read as under:- The Commissioner of Income Tax (Appeals) Mumbai has erred :- 1. in confirming an addition although no papers were found during the Search proceedings to justify the said additions made. 2. in confirming an addition of on money earned on sale of flats on a purely estimated basis without any evidence being found either during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detail at that of time. We do submit that earning of such additional income is not a regular feature of this trade and the amount disclosed more than adequately covered the amounts which the promoters were aware of having receiving during the project. Further vide letter dated 26.10.2009, assessee made following submission:- Please find enclosed herewith the statement of sales during period 1.4.2007 to 13.3.2008. We have to state that due to the boom in the real estate business during the above said period we have been able to collect from some purchasers cash, money ranging from 10 to 20% on and above the sale price realized on some transactions depending upon the following factors 1) Buyers keen interest to buy a particular flat being his /her preferred choice due to reasons such as Garden/ Road Facing, view, cross ventilation, vastu, etc. 2) The urgent need of the buyer to strike a deal 3) His/her perception of the flat being a prime flat in the building We reiterate that cash money as mentioned above not exceeding 20% has been collected in some transaction only and earning such additional income is not our regular practice. We further state that the disclosu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be near completion. The assessee submitted that flats had been sold at a standard price and in certain cases where certain additional benefits were being given or where flats were better located or the buyer wanted to close in a deal, the assessee had been able to recover a premium and it was these premiums which had been offered to tax. Thus the assessee prayed that addition should not be made merely on the basis of presumptions when no adverse material to justify the addition is available. Thus , the assessee submitted that the cash collected towards bookings be restricted to the figure of ₹ 1.25 crores as surrendered/ disclosed and the balance addition made be deleted. The ld. CIT(A) rejected the contentions of the assessee on the ground that the assessee admitted that certain on money was received from the buyers of the flats and the seized material has proved that the assessee had received on money on sale of flats. Mr. Mukesh D. Choudhry has also admitted in the statement recorded u/s 132(4) of the Act that due to boom in the real estate market, the assessee collected 20% on money on the sale of flats and disclosed ₹ 1.25 crore as additional income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade based on surmises, conjectures and assumptions which is not permitted. Complete details have been submitted by the assessee before the authorities below. The ld. Counsel relied on the CBDT Instruction dated 18th December, 2014. The learned counsel for the assessee submitted that no extra addition can be made apart from surrender of ₹ 1.25 crores made by the assessee. The ld. Counsel submitted that the project was completed in May, 2009. The assessee is following project completion method of accounting hence estimate cannot be made. Occupation certificate was received in May, 2009. The ld. Counsel relied on the decision of the Tribunal in the case of Guruprerna Enterprises v. ACIT, (2011) 57 DTR (Mumbai Trib) 465 and in the case of Jalaram Jagruti Developers Pvt. Ltd. v. DCIT in ITA No. 5121 to 5123/Mum/08 for assessment years 2003-04 to 2005-06 dated 28th April, 2009.It was submitted that the above decision is affirmed by the Hon ble Bombay High Court. The assessee also relied upon decision of Jyoti Wire Indursties(Supra). 18. The ld. CIT D.R. relied upon the seized material marked as page 18 and back of page 18 /Annexure A-3 and the orders of the authorities below and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The ld CIT DR relied upon decision of Hon ble Bombay High Court in the case of Surender M Khandar(supra), decision of Hon ble Andhra Pradesh High Court in the case of Gopal Lal Badhruka v. DCIT(2012) 27 taxmaann.com 167(AP), and decision of Hon ble High Court of Allahabad in the case of CIT v. Lal Chand Jaiswal (2013) 40 taxmann.com 372(All. HC). Thus, in nutshell it was submitted by learned CIT DR that the search took place in the instant assessment year on 13-03-2008 wherein the assessee surrendered ₹ 1.25 crores during search operations but failed to explain how the figure of ₹ 1.25 crore was arrived at. The assessee has during recording of statement submitted that cash on money is 20% of sale price of flat. The addition of on money as made by ld. AO and as confirmed by ld. CIT(A)@ 20% of sales needed to be confirmed. 19. In the rejoinder, the ld. Counsel submitted that ₹ 1.25 crores has been surrendered by the assessee which has already been offered for taxation and there is no dispute as to the same. It was submitted that surrender was made to cover discrepancies and department cannot be allowed to improve its case.It was submitted that Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by we confirmed the additions in assessment year 2007-08 based on sold flats , needed to be confirmed in the instant assessment year on same basis on the inventory sold in the previous year relevant to the instant assessment year 2008-09 by relying on the seized document page 18 and back of page 18/annexure A-3. With respect to the other stock of flat in other sectors of the project so sold during the previous year relevant to the instant assessment year 2008-09, we have to see it in context of the conduct of the assessee since 2005 when meeting took place between partner groups on 30-08-2005 whereby understanding was arrived at as well reiterated to generate cash on money from sale of flats in the project and also to distribute the same amongst partner group which is reflected in seized material page 14 of loose paper folder containing page 1- 24, followed by seizure of documents page 18 and back of page 18 /Annexure A-3 and the statement of partner of the assessee dated 14-03-2008 whereby he admitted having received cash on money of ₹ 1.25 crores in the instant assessment year. This also need to be seen in context of real estate boom which was prevailing in Indian real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) which order of the learned CIT(A) we confirmed does not suggest that addition to the tune of 20% on the sales value were made by the Revenue as sustained by learned CIT(A) in immediately preceding assessment year 2007-08. Hence addition are to be sustained in the manner laid down by us in our above decision. We have considered the case laws relied upon by both the parties while arriving at the conclusions as set out above. We order accordingly. ITA No. 7421/Mum/2012 for the assessment year 2009-10. 21. In this appeal filed before the Tribunal , the assessee has raised the following grounds:- The Commissioner of Income Tax (Appeals) - 39, Mumbai has erred:- 1. in confirming an addition of unaccounted income based on presumptions and surmises and without appreciating correctly the facts of the case and practical realities. 2. in not appreciating that no addition could be made based on rough workings found at the premises which at best represented provisional figures and nothing more. 3. in not appreciating the explanations given by the appellant of various reasons why flats are sold at different prices and other submissions made by the appellant. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant to the assessment year 2009-10 , may look tempting at the first blush but the fact of the matter is that this period is post search period whereby previous year commenced on 01-04-2008 and ended on 31-03-2009 and the search took place on 13-03-2008 i.e. prior to commencement of previous year , no fresh tangible incriminating material is brought on record by the Revenue to enable us to arrive at conclusion that contumacious conduct of the assessee which existed prior to date of search on 13-03-2008 even continued after the date of search also to sustain the addition as made by the Revenue , as the conduct of the assessee prior to the search which is reflected in the seized materials and statements recorded on the date of search cannot be held to be also continuing in the post search period unless there is tangible and clinching incriminating evidence brought on record by the Revenue to prove continuation of contumacious conduct of the assessee even during the post search period .Hence based on our above reasoning and discussions, We order deletion of the addition of ₹ 1,18,500/-made by the AO and as sustained by learned CIT(A). The appeal of the assessee is , therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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