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Raviraj Kothari Associates Versus Deputy Commissioner of Income Tax, Circle – 2, Pune

On-money received - document seized during survey - Held that:- 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 agreeme .....

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n-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 assessee. - In so far as contention of the assessee that addition to the extent of net profit should be made, as the entire on-money received cannot be the profit of the assessee, we do not intent to agree with this contention. The assessee has disclosed the entire expend .....

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. the shop in respect of which the document was seize during survey is upheld. Whereas, in the absence of any material to show that on-money was received in respect of other shops sold or booked during the financial year 2006-07, the addition on account of on-money is not sustainable. The principle of extrapolation of ‘on-money’ on the other shops sold/booked during the period relevant to assessment year under appeal is rejected in the absence of any material on record.- Decided partly in favour .....

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u/s. 133A was conducted at the business premises of Raviraj Group on 27-09-2006. The assessee in joint venture with Sanand Properties Pvt. Ltd. had developed a commercial project Fortaleza at Kalyani Nagar, Pune. The profits arising from the said project were to be divided between the assessee and Sanand Properties Pvt. Ltd. in the ratio of 65% and 35%. During the course of survey a document (Letter of Intent) giving details of sale of Shop No. 129 in Vitoria-II Building was found and seized. Th .....

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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 yea .....

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rred an appeal before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals) the assessee made three alternate submissions : i. To restrict the addition to 65% of the total addition in the hands of assessee as the remaining 35% share in joint venture is held by M/s. Sanand Properties (P.) Ltd. ii. To restrict the addition to the extent of evidence found during survey without extrapolating the difference in cost to other shops sold/booked during the year. iii. T .....

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ssued in favour of Mrs. Usha Majummdar and Ms. Punam Majummdar seized during survey action. The ld. AR of the assessee referred to the impounded document at page 17 of the paper book. The ld. AR asserted that a perusal of document (Letter of Intent) would show that it does not bear any date. There are no signatures / initials of the assessee. The documents have signatures of one of the purchasers only. The addition cannot be made on the basis of a single undated document by extrapolating the rat .....

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t for the single paper seized during survey there was no other document found during survey action which would indicate that the assessee 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 mad .....

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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 evidence found during the course of survey. Similarly, in the case of Rajnik & Co. Vs. ACIT reported as 251 ITR 561 (AP) there was an admission by the partner .....

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i. D N Kamani HUF Vs. DCIT, 70 ITD 77 (Pat.) (TM); ii. Elite Developers Vs. DCIT, 73 ITD 379 (Nag.); iii. Abhishek Corporation Vs. DCIT, 63 TTJ 651 (Ahd. Trib.); iv. Kishor Mohanlal Telwala Vs. ACIT, 107 taxman 86 (Ahd. Trib.); v. Shri V. Subramani Vs. ACIT in ITA Nos. 1047 & 1046/Mds/2011 (ITAT Chennai) decided on 27-07-2012. 5. Per contra Shri Hitendra Ninawe representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in confirming the addition ma .....

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urse of search the rate mentioned is above the Collector rate. This clearly shows that the assessee has suppressed the income from sale of shops. The ld. DR referred to the decision rendered by the Tribunal in the case of Sanand Properties (P) Ltd. Vs. ACIT in ITA No. 1657/PN/2011 for assessment year 2007-08 decided on 28-02-2013. The ld. DR contended that the Tribunal in the case of Sanand Properties (P) Ltd. Vs. ACIT (supra), the other partner of the assessee in joint venture has affirmed the .....

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erting 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 f .....

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ties Pvt. Ltd. has developed a commercial complex Fortaleza at Kalyaninagar, Pune. The document that was impounded during course of survey is a letter of intent issued in favour of Mrs. Usha Manummdar and Ms. Punam Majummdar in respect of Shop No. 129, Vitoria-II Building in the aforesaid Fortaleza commercial complex. The total saleable area of shop is 360 sq. ft. As per the letter of intent the sale price of shop is at the rate of ₹ 6500/- per sq. ft. Whereas, as per sale agreement the co .....

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ions have been made by the Assessing Officer in assessment year 2007-08 are as under : 8. The Assessing Officer rejected the books of account furnished by the assessee on the ground that the assessee has not fully and truly recorded the sale consideration of the shops in the books, therefore, the results shown in the books of the assessee are not reliable. The assessee had filed affidavit of Mrs. Usha Manummdar in support of his contentions. The Assessing Officer issued summons u/s. 133A to Mrs. .....

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ived, as the profits of the project were shared between the assessee and Sanand Properties Pvt. Ltd. in the ratio of 65% and 35%. The ld. AR of the assessee has made three alternate submissions before us. i. To delete the entire addition. ii. To restrict the addition to the extent of documentary evidence seized during survey. Further, to restrict 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 .....

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red 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 .....

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ao Vs. ACIT (supra). In the case of Rajnik & Co. Vs. ACIT (supra), the Hon'ble High Court held that there was abundant material on record showing that the assessee has suppressed turnover and there was admission in the sworn statement of a partner of the assessee firm admitting that there was day-to-day suppressions throughout the assessment years for the entire Block period. Similarly, in the case of Khopade Kisanrao Manikrao Vs. ACIT (supra), where onmoney in respect of land deal was e .....

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epted on11 money. The Assessing Officer made addition in respect of other 10 transactions entered into by the assessee during the financial year without there being any material on record. Thus, it is clearly evident that the facts in the present case are at variance from the facts of the decisions on which reliance has been placed by the Commissioner of Income Tax (Appeals) for confirming the addition. Thus, the ratio laid down in those cases would not apply in the facts of present case, being .....

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ized 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. 1 .....

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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 assessee. In so far as contention of the assessee that addition to the extent of net profit should be made, as the entire on-money received cannot be the profit of the assessee, we do not intent to agree with this contention. The assessee has disclosed the entire expenditure in its books of account. The assessee has not been able to show the additional expe .....

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ng the search on the premises of one G certain documents were seized which showed that G had purchased a flat and made payments in cheques as well in cash. However, in the books of account of the assessee all the cheque amounts and cheque numbers tallied but the cash payments were not shown. The assessee denied any nexus of the seized documents with the sale of flat to G. The Assessing Officer examined certain buyers but did not find any excess sale proceeds received. During the course of search .....

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sale of flat to G. However, there was difference of opinion in making addition on the remaining 15 other flats. While the Judicial Member deleted the addition for remaining 15 other flats on the ground that there is no direct evidence of on-money payments. On the other hand, the Accountant Member upheld addition of undisclosed income, to be calculated on the basis of average rate of floor area of all the flats. The Third Member concurring with the view of the Judicial Member held that the undis .....

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ing 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 Commissi .....

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ing the provisions of section 145 of the Income Tax Act.Section 145 provides the method of accounting. According to this section income chargeable under the head "Profits and gains of business or profession "or 1ncome from other sources" is to be computed in accordance with the method of accounting regularly employed by the assessee. When accounts are correct and complete but method employed is such that income cannot properly be deducted therefrom, computation is to be made on su .....

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document seized from Shri H.S. Grewal did indicate that the assessee received ₹ 3.35 lakhs in cash as "on money" on sale of flat to him and this amount was not accounted for in the books of account. It could, therefore, be said that so far as the said amount of ₹ 3.35 lakhs is concerned the books of account maintained were not correct and complete and the assessing officer could resort to assessment of income estimate invoking the provisions of section 145 of the Income Tax .....

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f sections 68,69,69A, 69B and 69C may be applied but nowhere it is provided in this Chapter that provisions of section 145 would be applicable in computing the undisclosed income in the block assessment and there being 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 i .....

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48 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 must have reason to believe that any income chargeable to tax has escaped assessmen .....

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erein. The assessing officer during the course of regular assessment proceedings for the assessment year 1992-93 examined the flat buyers under the provisions of section 131 of the Income Tax Act but no incriminating material came on record from their cross-examination. Further, during the course of block assessment proceedings also the assessing officer again made an effort to ascertain from the remaining fifteen flat buyers the "on money" paid, if any, to the assessee HUF by way of s .....

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