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TMI Blog2016 (10) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... ing total saleable area of 360 sq. ft. was sold to Mrs. Usha Majummdar and Ms. Punam Majummdar at the cost of Rs. 6500/- per sq. ft. The total consideration as per the letter of intent seized was Rs. 23,40,0000/-. Whereas, in the sale agreement the price of the same shop was shown as Rs. 2500/- per sq. ft. i.e. at the total consideration of Rs. 9,00,000/-. During the course of scrutiny assessment proceedings the explanation furnished by the assessee for difference in price as shown in letter of intent seized during the survey action and sale agreement was rejected by the Assessing Officer. The Assessing Officer treated the difference between the two rates as 'onmoney'. The Assessing Officer extrapolated the cost mentioned in the letter of intent seized during the survey to the other shops booked/sold during financial year relevant to the assessment year 2007-08. The Assessing Officer identified 13 shops that were booked/sold during financial year 2006-07. Out of 13 shops, 2 shops were sold to the relatives of the promoters. The Assessing Officer after excluding the 2 shops sold to relatives of promoters computed the 'on-money' received in the respect of the remaining 11 shops by ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has received on-money. There is no iota of evidence to show that the assessee had received on-money on the other shops as well. The ld. AR referred to chart at page 5 of the impugned order to show that the gross profit ratio and the net profit ratio were consistent in preceding two financial years. The ld. AR submitted that if at all the addition has to be made it should be in respect of shop, in respect of which letter of intent was impounded during survey and the addition should be restricted to profit element of the on-money received by the assessee. The ld. AR made an alternate prayer that if the findings of Assessing Officer with respect to extrapolation of on-money are to be upheld, then the extrapolation should be restricted to net profit only. The ld. AR contended that the decisions on which the Commissioner of Income Tax (Appeals) has placed reliance to confirm the addition are not applicable in the facts and circumstances in the case of assessee. The ld. AR contended that in the case of Khopade Kisanrao Manikrao Vs. ACIT reported as 74 ITR 25 (Pune-Trib.) (TM). The assessee had admitted the receipt of on-money amount and the admission of assessee was supported by cogent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are reflected in the books of account and the 'on-money' received by the assessee is pure profit of the assessee. The ld. DR vehemently supported the findings of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal of the assessee. 6. Controverting the submissions of ld. DR, the ld. AR referred to page 5 of the impugned order wherein the GP ratio and the net profit ratio for the financial years 2004-05, 2005-06 and 2006-07 were computed. The ld. AR contended that if the entire on-money as alleged by the Revenue is added, it would give illogical calculations of net profit and gross profit in the assessment year under appeal. The net profit and the gross profit of the assessee over the period of time is consistent. The ld. AR prayed for setting aside the findings of Commissioner of Income Tax (Appeals). 7. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which the ld. AR of the assessee has placed reliance. The additions has been made in the case of assessee on the basis of a document (letter of intent) seized during survey action in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrict the addition to the extent of net profit on the undisclosed income. iii. To accept the extrapolation made by the authorities below in respect of eleven shops, subject to the addition of net profit element only. 9. It is an undisputed fact that during the course of survey, only single document i.e. letter of intent in the name of Mrs. Usha Majummdar and Ms. Punam Majummdar was found and seized by the Department. Apart from the said letter of intent no other document was found or seized to show that the assessee had received on-money from any other vendee. The Assessing Officer extrapolated the onmoney element on the other sale transactions entered into by the assessee in respect of shops booked/sold in the financial year 2006-07. The extrapolation has been done on the presumption that since the assessee has accepted on-money in respect of Shop No. 129, the assessee must have received on-money on the sale of other shops as well. The addition has been merely made on the preponderance of probabilities. The Commissioner of Income Tax (Appeals) in the impugned order has placed reliance on the decision of Hon'ble Supreme Court of India in the case of Commissioner of Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to delete the entire addition. A document was seized during the course of survey from the premises of the assessee, the assessee has not been able to explain the reason for executing such documents. The document seized (letter of intent) is on the joint letter head of the assessee and Sanand Properties Pvt. Ltd. The letter of intent specifically mentions the description of shop, area and the per sq. ft. rate. Admittedly, the assessee has entered into sale agreement with Mrs. Usha Majummdar and Ms. Punam Majummdar in respect of same Shop No. 129 which has been mentioned in the letter of intent. However, in the sale agreement the rate of shop has been stated to be much lower than what has been stated in the letter of intent. Thus, the document seized cannot be termed as dumb document. An inevitable conclusion that can be drawn from the seized document and the sale agreement is that the difference between the rate mentioned in those two documents is the 'on-money' that has been received by the assessee. Therefore, the difference between the rate stated in the letter of intent and the sale agreement is the undisclosed income which has to be added in the income returned by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining 15 flats sold was not justified and has been rightly deleted. The relevant extract of the findings of the Third Member are as under : "7.10 The assessing officer has computed the undisclosed income relating to the said fifteen flats at Rs. 42,18,134 only on presumption that the assessee HUF might have received "on money" from fifteen flat buyers also when he has taken Rs. 3.35 lacs as "on money" from Shri H. S. Grewal looking to the location and there being prevalent practice of receiving "on money" in property transactions. Thus, the undisclosed income computed is solely based on presumption and not on any concrete material. The Tribunal in the aforecited case of Sunder Agencies has also field the view that scheme of Chapter XIV-B gives no power to the Revenue to draw presumption in regard to undisclosed income. Further, in the case of W.D. Estate (P) Ltd. (supra) the addition sustained by the Commissioner (Appeals) partly influenced by a report of the Finance Ministry wherein a notorious practice of payment of black money in real estate transaction in metropolitan city of Bombay was discussed, was deleted by the Tribunal treating the addition being on hear say evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such provision made no undisclosed income could be computed on estimate basis invoking the provisions of section 145based on the said document relating to the flat solds to Shri H. S. Grewal in respect of remaining fifteen flats sold to others. Further, when specific addition is made based on the said document, there could be no addition made on estimate basis based on the same documents. 7.12 As regards the question whether such addition could be made in the normal course as per provisions of section 147, read with section 148, of the Income Tax Act, it is mentioned thatsection 147 provides that if the assessing officer had reason to believe that any income chargeable to tax has escaped assessment for any assessment year he may, subject to the provisions ofsections 148 to 153 assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his knowledge subsequently in the course of proceedings under this section or recompute the loss or the depreciation allowance or any other allowance, as the case may be for the assessment year concerned. Thus, for assessing an escaped income under section 147 the assessing officer ..... 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