9911796707
TMI Blog2016 (10) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... , interalia, was covered in the search operations but pursuant to search warrants drawn in respect of premises not belonging to the assessee. However, it was claimed by the assessee that search at the said premises did not lead to discovery of any unaccounted assets, investments or incriminating evidence whatsoever relating to the assessee. Copy of the panchanama drawn in joint names, interalia, incorporating the name of the assessee was filed. (enclosed at pages 15 - 119 and pages 124-130 of the Assessee's Paper Book-I). During the course of search operation u/s 132 of the Act on 15.03.2008 at the office premises of Prime Down Town Estates Pvt. Ltd (in short PDTEPL), a group company formerly known as Bharat Shah Estates P. Ltd., at 3rd Floor, 55 Gamdevi Road, Gamdevi, Mumbai, certain loose papers were found and seized by the search party and marked as Annexure A-1, pages 1 to 19.These loss papers contained recordings made in respect of on-money allegedly received by the assessee for Legend project. However, it was claimed by the assessee that the said papers were found in course of search operation of another person i.e. a distinct company independently assessed under the Act, bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Jalaram Jagruti Developers Pvt Ltd. Wherein unaccounted cash receipts were entered in the regular books of accounts whereas in the instant case the assessee has neither admitted the existence of unaccounted cash receipts nor accounted them in its regular books of accounts. 4. The AO observed that during the course of search u/s 132 of the Act on the office premises of PDTEPL on 15-03-2008 an Annexure A1 containing loose papers pages 1 to 19 were seized and copy of which are attached to the assessment order as Annexure A. The assessee before the AO explained the contents of these seized papers as under:- "1. Page Number 1 to 16 appear to be rough estimates of working prepared by some-one, as can be seen from explanation appearing on page 12 of loose paper seized on 16.03.3006 (total pages 133). It appears that the working is estimated receipts on proposed sales of flats. 2. It appears that the working was done on the basis of possibility of sale of built up area of 2550 sq. ft. 4550 sq. ft. and 5675 sq. ft as the company was then trying to construct flats of built up area of 2550 sq. ft. and 5675 sq. ft. 3. As the flats were proposed to be sold on the basis of built ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue thinking and consideration, as and when events like rate finalization, rate renegotiation, cash received, cheque /draft received have taken place. It contains all or most of details in respect of the sale transactions mentioned therein, viz- XI. Name of the main person negotiating for purchase of flat. XII. Contact details of said person. XIII. Super built up area XIV. The rate finally decided to be charged per sq. f. & super built up area. XV. Total money receivable XVI. Breakup of money receivable into accounted and unaccounted portion. XVII. Where renegotiation of rate has taken place, the renegotiated rate, revised total consideration and its breakup XVIII. Details of cheque received from time to time XIX. Details of cash received from time to time. XX. Details of balance receivable 17. It is clear, therefore that your contention that these papers are rough workings only is clearly wrong, as discussed above. It is not rough working, but a systematic working. 18. Assessee repeatedly claimed that SH represents Special House i.e. buyers have been offered to get the interiors done, which include tiling, furniture & fixture etc., for an additional ate of Rs. 5000 p.s.f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of US dollars, assessee h. company has claimed that, it might be regarding provision of substantial imported items for special house, as it was possible for the company top import such items as per government policy, however it has failed to provide any evidence to substantiate this claim of yours. All these seems to be part of your afterthought process. 19. Further, as contended by assessee, SH means special house, in which 5000 rs. PSF are charged for furniture, tiles etc. But, as it is evident from the loose papers itself that claim of the assessee is wrong, as on page no. 10, there is mention of sale of sample flat on 10th floor to Mr. Naresh Shah (sample flat means fully furnished flat, which is shown to prospective buyers) On this page, it is clearly mention that "F&F"i.e. for furniture and fixture, there will be separate charge of Rs. 70lakh. If assessee's contention regarding SH i.e special house and charging of Rs. 5000 psf is accepted, then, on each page, it must be separately mentioned as mentioned on page no. 10. This fact was also reconfirmed by Mr. Deepak Jain. Director or Sankhla builders Pvt. ltd. that Flat on 10th floor was fully completed with Furniture an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand by the facts and figures which I am submitting to you. Q.8 On this page No.8 itself it is mentioned that on 27.11.2003 cheque of Rs. 100 Lakhs has been received and on 1.12.2003 cheque of Rs. 100 lakhs has been received, which is also evident from the details submitted by you regarding cheque payment. Do you confirm this? Ans. Yes I do confirm. Statement of Ashok siroya u/s on 12.10.2009:- Q.6 I am showing you page no.7 loose paper file containing pages 1 to 19 seized from Mr. Bharat Shah's premises. From this page it can be inferred that you have purchased flat on 14th floor in Legend project for which you have been charged at the rate or Rs. 14,111/- for saleable area i.e. super built up area of 2550 sq. ft, which comes to Rs. 3,59,83,060/-. Further, it has been written that no parking has been given to you. It is also been written that total cheque consideration of Rs. 19892949/- is to be received by Layer Exports. Pvt. Ltd from you regarding 14th floor flat out of which Rs. 100 lakhs has been received. This also tallied from the details submitted by Layer Exports that 4 cheques amounting to Rs. 25 lakhs, Rs. 26 lakhs, Rs. 25 lakhs and Rs. 24 lakhs has been paid by yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that total 5 car parking were purchases? Ans. I have not given any cash and the garages were including with the purchase of each flats as explained above i.e. 3 and 2 with all flats. Regarding cheque payment total payment paid by my family is Rs. 3,35,00,000/- and Rs. 1,18,00,000/- by me and my mother respectively. Q.9 Do you confirm that first three cheques given by you to Layer Exports vide cheque No. 910755, 910760, 633881 being Rs. 3500000, 20000000, and 5000000 total up to Rs. 2,85,00,000/- as mentioned in question No.8, has been paid by you? Ans. Yes I confirm. From all these statements, it is ample clear that none of the buyer was aware of the noting on these loose papers, and particularly of words SH and Recd. From this it is clear that Assessee Company's contention that these notings on loose paper are recordings discussion with buyers is not correct. 3. Regarding sale of sample flat on 10th floor to Naresh Shah as mentioned on Page no. 10, assessee objected that this flat was sold to Sankhla Builders and not to Naresh Shah. However this contention of the assessee can'nt be accepted, as assesee has firstly sold this sample flat to Naresh Shah only, as it is also evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng plan to BMC, it was expected that 2550 sq ft saleable area will be allowed, but finally approved plan dt 13.9.2005, 2550 sq. ft area was not approved. This contention of the assessee can't be accepted at all, as it is evident from the loose paper no. 1 to 12 of Annexure A-1, containing pages 1 to 25 that assessee company has offered flats in Legend Project as security for credit facility in favour of B. Vijay Kumar & Co. and B. Vijay Kumar Jwellers. For security purposes, saleable area of flat is mentioned as 2550 sq. ft for 2nd to 8th floor and 6000 sq. ft on 31 and 32 floor. These saleable areas of flats are mentioned in letter dt 15.2.2006, 15.1.1.2007 of Layer Exports pvt. ltd. These letters are written in response to sanction letter of Oriental Bank of Commerce no. OBC.OHB/1014/2005 dt. 2.1.2006. Further there are also sanction letters by Oriental bank of Commerce, in which above mentioned are of flats are clearly mentioned. These loose papers no.1 to 12, thus clearly indicate to the fact that assessee company sold flats for super built up area only and make agreements for carpet area or built-up area. As per claims of the assessee company itself, final approval from BMC ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been received in cash and part in cheque? Ans. I do not know the meaning of "Q" and "SH" as mentioned in the pages 1 to 19 of Annexure A-l. I once again reiterate that these are certain rough workings and nowhere cash is mentioned on these pages." This statement was given by Mr. Bharat Shah. chief' promoter of Layer Exports Pvt. ltd. in spite of the fact that in Question no. 5 of same statement, he mentioned about furnished flats. i.e Special House. Under oath. 22. On the basis of above mentioned events, it clearly seems, that in order to suit his own needs, and to take benefit of accidental mention of special house in his statement, assessee created this theory for his own benefit and to evade taxes, that SH represent Special House and Recd. represents recording. But at the same time assessee failed to explain that what does "0/ ch/chq" and "SH to Receive" represents. 23. Assesses company has also failed to produce the person, who has written all these notings, although it keeps on claiming what SH means, what Reed. means. They also failed to explain as what all the figures, written on these 19 pages signifies and for what purpose they are written. 24. Assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2003 1,98,92,600 2,01,32,051 6 2004-05 Ashok Siroya Lalita Siroya Sea 14/1878.16 4/11/2003 2,37,52,200 1,60,90,101 7 2004-05 Ashok Mehta Sea 15,16/3466.44 29/08/2003 3,85,67,640 6,84,60,000 15 2004-05 Kiran Kothari Sea 23,24/3011.29 22/05/2004 4,87,00,000 4,42,82,3324 16 2004-05 Vipul Shah Necklace 6,7,8/5634 14/12/2003 5,85,06,710 4,17,71,153 4 2004-05 Kranti Impex Necklace 9/1878.16 22/1/2004 1,98,92,600 2,06,32,051 11 2004-05 Naresh Shah Necklace 10/1878.16 16/1/2006 2,63,04,320 2,76,32,051 10 2004-05 Mangalam Gems Necklace 11/1878.16 16/1/2006 2,63,04,320 2,76,32,051 10 2004-05 Maya Mehta Necklace 13/1878/.16 17/01/2004 2,03,50,200 1,93,57,051 3 2004-05 Ramesh Mehta Necklace 14/1878.16 1/9/2003 2,03,50,200 1,93,57,051 3 2004-05 Chandravad an Desai Necklace 19,20/3466.44 2/12/2003 4,19,80,608 8,01,39,192 8 2004-05 Shrikant Mehta Necklace 21,22/3466.44 22/12/2005 4,82,09,400 10,02,10,600 14 2006-07 Pankaj Mehta Sea 29,30/3864.92 10.10.2003 4,23,71,880 106750000 12 2004-05 Sujit M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. and rate per sq. feet is charged differently from different purchasers. But floor space mentioned was same in the respective floors. 10.4 It is also seen that the cheque payments were made on various times and the cheque payments tallies with the amount recorded in the books of accounts. 10.5 The cash payments were also received on various dates and in many cases how much balance money to be received is also mentioned. 10.6 The AO has elaborately discussed the contents in the seized papers from page 3 to 14 of the assessment order. The inference drawn by the AO is very correct and I am convinced that the appellant has collected "On Money" on sale of flats and it is not accounted. 10.7 The appellant's contention that „SH' means Special House is not at all correct and the seized material clearly brings out the fact of receipt of cash and it is clear that the cash receipts are mentioned as "sh" i.e. last two words of cash. The AO has clearly brought out the reasons why the appellant's contention that SH cannot be considered as special house (as contended by the appellant) in pages 42 to 47 of the assessment order. 10.8 Further the words "Recd" is very clear that it is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchasers, No. of flats purchased, in which wing the flats are located, saleable area, built up area, Total amount, How much in cheque, how much in cash, How much amount in cheque received so far, how much cash received so far, how much cash is yet to be received. As mentioned in page 1, 8 and 13 dates are mentioned. 10.12 In view of all the above, I hold that the appellant has received unaccounted cash towards the sale of flats in the project "Legend". 10.13 Since the seized documents contains full details about the purchaser of flats in the project „Legend' and the cheque payments and cash payments are recorded over a period and since the documents were seized from the site office of the construction projects carried out by the group, the appellant's contentions that these are loose, dumb papers and written by some third party cannot be accepted. Since the seized documents were seized from the site office of the project carried out by the appellant's group, presumption u/s. 292 C has to be drawn and AO has correctly drawn the presumption and the AO's action is upheld The appellant's contentions are rejected. 10.14 The appellant tires to explain with the help of page n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has charged from the customers on more area than the built up area mentioned in the sale agreement and more price per sq. feet than the price mentioned in the sale agreement. 10.19 Pages 1 to 19 of Annexure A1 clearly proves the "on money" received and there is nothing in page no.12 of Annexure A2 to show "no on money was received". There is also no evidence to show that any "on money" was returned back to the customers. 10.20 In view of this, the contents in page no.12 of Annexure 2 will not come to the rescue of the appellant. I am fully convinced that the evidences in pages 1 to 19 of Annexure A1 is more than sufficient to prove that the appellant has collected "on money" for the flats which are mentioned in these seized documents. 10.21 Further, the affidavit filed by the buyers of the flats and the statements made by the purchasers before the A. O. cannot be relied upon since these statements were made after lot of time from the date of search. The truth contained in the seized documents is so clear and obvious that the appellant has collected "on money" from the buyers of the flat. There is no additional evidence required to prove this truth other than the sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loose papers marked as Annexure A-1 seized from the premises of PDTEPL. 7. Learned Counsel for the assessee narrated the facts that while making aforesaid additions, the AO completely brushed aside the consistent statements of the Directors of the assessee company denying any nexus with the impugned seized papers and also the statements and affidavits of the purchasers of the flats in 'Legend' project categorically denying any payment of on-money to the assessee. It was explained by Learned Counsel that the impugned loose papers were found lying in a room at the site office for construction project of PDTEPL at 55, Gamdevi Road, Gamdevi. The cleaning staff of the said office premises swore in his statement recorded in course of search on 13.03.2008 that Sri Ravi Nair, who was absent on the date of search, was in-charge of the said room. Copy of the aforesaid statement of Sri Prakash Vasant Mandovkar, cleaning staff is enclosed at pages 145-146 of the Assessee's Paper Book-I. In the said statement, Sri Mandovkar swore on oath that he was seeing the impugned papers for the first time and did not recognize the handwriting on the said papers. But, he argued that the AO interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining flats in the project as under:- Assessment Year Area sold as per BMC Addition on account of alleged on-money @ Rs. 16,230/- per sq. ft. 2004-05 3466.44 5,62,60,321 2005-06 10766.24 17,47,36,075 2007-08 7013.59 11,38,30,565 In view of this, the AO made the following additions on account of onmoney receipts in cash by assessee:- (i) Addition on account of on-money in respect of flats sold described in aforesaid 19 loose papers - Rs. 57,14,15,087/-. (ii) Further an addition of Rs. 10,02,10,600/- was made in AY 2006-07 in the hands of the assessee on the ground of representative assessee of Mr. Srikant Chandulal Mehta, one of the non-resident purchaser of the flats. The addition of Rs. 10.02 crores has been deleted by the CIT (A) and not challenged by the Revenue in appeal before the Tribunal. (iii) Addition in respect of other flats sold during the impugned years by extrapolating in results of 19 loose sheets of papers - Rs. 34,48,26,961/-. 9. Now before us Learned Counsel argued that on account of multiple reasons discussed supra, the impugned dumb loose sheets of papers seized from the premises of PDTEPL could not be used against assessee and were comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanations filed by the assessee on the basis that the names of the buyers written on the said pages of Annexure A1 were matching with the actual buyers of the flats and their payment schedules. The AO issued show-cause notice dated 25-05-2009, which is reproduced at pages 3-16 of the assessment order for AY 2007-08, to the assessee analyzing the noting on the said pages. Extract of the same, AO's interpretation of page 4 of the loose papers at pages 6 to 7 of assessment order u/s 153A of the Act for AY 2007-08, is reproduced hereunder for the sake of clarity (Copy of the said loose paper is enclosed at page 97 of the Assessee's Paper Book-I):- Actual notings A O‟s inference Page 4 6.7.8 th FloorVipul 2550 x 3 x 13,000 =9,94, Terrace 350 x 1/3=15,17,000 4 x 5 = 20,00,000 ............ 1029.67 ............ 1014,50 50,000 13000 x As the details contained in this page, purchaser is one Vipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts correspond with the regular books except for cash portion, for obvious reasons. The said 6th, 7th and 8th floor as per books and records have been purchased in t he necklace view portion of the building by Sri Vipul V. Shah. Further, part of the proceeds seems to have been received in dollars. 5 x 46.75 = 233.75 means 500000 dollars at the rate of Rs. 46.75 per dollar equal to Rs. 23375000 has been received. This is clear because 233.75 has been deducted from 432.72 which is the cash consideration. The balance amount is Rs. 43272000 which has later been changed to 43288153. The assessee has received cheque of 13.50 lacs and 200 lacs. This corresponds with payment of Rs. 13.50 lakhs received by the assessee as per his books vide cheque numbers 18173, 18176, 18170, 18172, 18171, 18178, 18177, 18175 and 18174. Further, it is also seen that the next few cheques add to 200 lakhs. 10,14,50,000 Q 59678847 SH 4,17,71,153 Recd 23375 1,83,96,153 The consideration is 101450000 of cheque is 59678847 and cash is 41771153. Of this cash, the assessee has received 23375000. 23375 is actually 23375000 because 41771153 minus 23375000 is 1936153. The overall inference is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 498 22/12/2005 4,82,09,400 10,02,10,600 14 33146 40,62,92,027 49,80,52,727 The learned Counsel for the assessee explained that further, from page no. 13 it was inferred by the AO that Rs. 3,50,00,000 has been received from Baka Mehta i.e. Suresh Chand Mehta, who is father and father-in-law of Sujit Mehta and Ashok Mehta respectively, who bought 21, 22, 15, 16 floors respectively. Similarly, from page no. 14, the AO inferred that total 7 flats are sold to one party by name "L.D." for total consideration of Rs. 35, 86, 25, 000/-. From pg. 12, the AO inferred that flat no. 31 & 32 in "Legend" have been sold to Diamexon, which is famous diamond company owned by Pankaj Mehta, who as per records submitted by the assessee, purchased 29 & 30 floor and 31 & 32 floor are reserved for Rashesh Shah, son of Bharat Shah, promoter of the assessee company which must have been done to accommodate Rashesh Shah later on, as both Bharat Shah and Pankaj Mehta are from diamond trading company. From this page, AO further inferred that Rs. 10, 67, 25, 000/- have been received in cash i.e. over and above cheque payment. From notings on various pages, according to AO the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in one of the pages i.e. page 4 of the loose papers was drawn our attention. Assessee's explanations (also reproduced at page 22 of assessment order for A.Y. 2007-08) as under:- Actual notings Assessee‟s explanations Page 4 (*2) 6, 7th , 8th Floor Vipul 2550 x 3 x 13,000 = 9,94,50,000 As per explanation on page 12 as aforesaid the purchaser was shown working of amount to be charges as follows:- 1. Amount to be received as per saleable built-up area at the time of negotiation 1989.29 sq. ft. x 10000 = 19892949/- 2. A working it appears was prepared on the same page as the company was trying for built-up area of 2550 sq. ft. based on 2.5 FSI and had put up plan to BMC accordingly. The working it appears from page 12 aforesaid, was based on total consideration of Rs. 13,000/- per sq. ft. for 2550 sq. ft. of built up area having Rs. 3000/- as component representing consideration to be received upon providing Special House (SH). It appears that recording has been done after discussion with the purchaser and cost of Special House (SH) with Italian marble / granite and other interior work including furniture & fixtures ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; ............. 1014.50 (*1) (*3) CHQ 19898200 x 3 = 59694600 19892949 59678847 (*4) 1029.67 Total 5,96,78,847 596.95 CH 4,32,88,153 432.72 SH 432.72 4,32,88,153 -233.75 5 x 46.75 .......... SH to receive 198.97 1,99,13,153 Q received 13.50 200.00 (*5) (*6) 10,14,50,000 Q 59678847 SH &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany at a different premise. The assessee before us claimed that the said page 12 of Annexure A-2 clearly supports the interpretation of noting in Annexure A-1 as made by the assessee. The said page 12 also proves conclusively that 'SH' referred to in Annexure A-1 means Special House and not Cash as erroneously interpreted by the AO. But, the AO rejected the explanation of the assessee and reliance was placed on page 12 of Annexure A-2 on the following alleged grounds:- "1. Contents of this page no. 12 of loose paper file containing pages 1 to 133 are not clearly understandable. 2. This page is written without any context and without any signature. 3. As you are relying on this page, rate mentioned in this page is 1959.29 @ 1000, which you want to assume as Rs. 10000 per sq. ft. which is not acceptable. 4. Further, there is no mention of any date on this paper as it is written on which date and as you are completely relying on this paper, you are required to produce the person who has written this, as onus u/s 132(4A) of the Act is on you to prove all these things. 5. In this page there is mention that "subject to increase in area of flat to 2550 sq. ft. upon approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, it has been sufficiently elaborated in the preceding paragraphs that since none of the papers were found from the possession or control of the assessee, the assessee was not bound by the presumption u/s 132(4A) in respect of any of them. Reliance on page 12 of Annexure A-2 has been placed by the assessee with the sole object of explaining the entries in Annexure A- 1. 5. The relevant documents relating to proposal for extra FSI were duly filed with the AO vide letter dated 28.10.2009. Copy of the covering letter for filing the said details before the AO is enclosed at page 226 of the Paper Book-11 respectively. On a perusal of the same, Your Honour will appreciate that the assessee filed the following details with the AO: Copy of plan submitted for built up are of 2550 sq ft. (ii) Copy of IOD (iii) Copy of commencement certificate (iv) Various permissions of BMC etc. Copies of the aforesaid documents are enclosed at pages 243-259 of the assessee's Paper Book-11. The learned Counsel explained on a combined reading of page 12 of Annexure A-2 and pages 1 to 19 of Annexure A- 1, that it is amply clear that the noting on the impugned pages of Annexure A-1 are in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able showing the actual agreement value vis-à-vis the purported agreement value as per seized papers as filed by the assessee before lower authorities:- Name of Purchaser Flat No. and area sold Actual agreement value So-called agreement value as per seized papers Seized AnnexureA-1 Page No. Yogesh Mehta 13/1989 1,98,92,600 1,98,92,949 6 Ashok Siroya Lalita Siroya 14/1879 2,37,52,200 1,98,92,949 7 Vimla Mehta* 15, 16/3212 3,85,67,640 2,85,00,000 15 Kiran Kothari 23,24/3212 5,20,34,300 3,04,27,676 16 Vipul Shah 6,7,8/5088 5,85,06,710 5,96,78,847 4 Kranti Impex 9/1990 1,98,92,600 1,98,98,949 11 Sankhla Builders Pvt. Ltd. 10/1696 2,63,04,320 1,98,92,949 10 Mangalam Gems 11/1990 1,98,92,600 1,98,98,949 11 Maya Mehta 13/1685 2,03,50,200 1,93,57,051 3 Ramesh Mehta 14/1695 2,03,50,200 1,98,98,200 3 Chandravadan Desai 19,20/3498 4,19,80,608 Not mentioned 8 Shrikant Mehta 21,22/3498 4,82,09,400 Not mentioned 14 33146 40,62,92,027 We have gone through all the impugned seized papers recording details of concluded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned assessee i.e. Smt. Lalita Siroya stated that the AO had not pointed out any material for his conclusion of the aforesaid practice amongst builders. Further the area at which total sale consideration had been calculated in the loose sheet was 62% higher than the carpet area and therefore it was much beyond the 35-40% difference inferred by the AO. The CIT (A), in this case, observed and pointed out the following glaring mismatches between the recordings made on page 7 of Annexure A-1 and the actual state of affairs (at paras 4.8 to 4.10 of the order of CIT (A)), which are surmised as under:- (iii) "Mismatch in the area of flat as per the sheet and as per the agreement is evident. The submission of the AO that sales of flat are made on the basis of super built up area which is about 35-40% higher than the carpet area also do not lead to the conclusion that said document relates to the assessee because carpet area of the flat is 1565.75 sq. ft. and therefore, super built up area being 40% higher than the carpet area would be 2192.05 sq. ft. whereas the area mentioned in the paper is 2550 sq. ft. If it is considered that super built up area is about 40% higher than the built ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld the decision of the ITAT that "noting on the loose pieces of paper on the basis of which the initial suspicion with regard to the undervaluation had been raised were vague and could not be relied upon as it appeared that the total area with respect to the sale deed and that reflected in the loose sheet was discrepant. It was also observed that as per the guidelines for registration the fair value for registration on the relevant date was Rs. 244 to Rs. 400 per sq. ft. and the sale consideration for Rs, 850 per sq. ft. claimed by the Revenue was unrealistic and ignored the ground situation." 17. As regards to other allegations of the AO in the aforesaid show-cause notice dated 25.09.2009, regarding charge from the customers on the basis of payment of Rs. 3.5crores to Baka Mehta, for supposed sale of 7 flats to L.D. alleged sale of flat nos. 31 & 32 to Diamexon, we find that the assessee explained before the lower authorities as under: "As regards your remark on page no 23 & 24 wherein you have listed alleged unaccounted payments & common practice among builders to charge super built up area, it is once again reiterated that inferences sought to be drawn by you out of seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hta died on 06.07.2003, and first installment was paid only on 30.08.2003, the allegation of the AO regarding receipt of Rs. 3.50 crores from Baka Mehta is without any basis and moreover no further investigation was done on the son of Sh Baka Mehta. Further, in respect of market rates of flats in similar buildings in the vicinity, the assessee vide letter dated 07-12-2009 filed before the AO, submitted as under (also reproduced at pages 47-51 of assessment order for AY.2007-08):- "You may kindly appreciate the following facts:- Rates offered in our building are very much comparable with surrounding buildings under construction and ready buildings available at the time and also the rates at which transaction have concluded and registered. This can be compared with the information available with the Income-tax Department itself. Our building we are only giving the basic structure without any fittings and furnishings or any further amenities compared to other buildings where amenities like Gymnasium, swimming pool, health clubs etc. are provided. These buildings also provide excellent bathroom fittings, flooring, furnishings etc. as against our building where no such facilities are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch could not be made by ignoring the specific denial by assessee in his statement u/s 132(4) and by the seller u/s 131 more so when comparable cases furnished by the assessee stood uncontroverted." 19. We further find that the lower authorities has further alleged, particularly on page 53 of the assessment order for AY 200708, that the assessee's contention that SH means Special House for which Rs. 5000 per square feet (PSF) was charged for special amenities was incorrect in view of noting on page 10 of the seized papers which contained details of sample flats sold on 10th Floor to Mr. Naresh Shah. On the said page, it was mentioned that Rs. 70 lakhs was chargeable in respect of "F&F" i.e. furniture and fixture. He therefore alleged that if the assessee's contention regarding SH i.e. Special House and charging of Rs. 5000 PSF is accepted then on each page it must be separately mentioned as on page no. 10. We find from the records and noted that under the SH scheme, the assessee was offering several options and levels of luxuries in the form of amenities, interiors and facilities. Since the flat on the 10th floor was a sample flat, i.e. furnished flat with basic furnitur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded guidelines for 2.5 FSI. Further, it may be noted that the assessee was in receipt of the rejection letter from BMC for higher FSI of 2.5 only on 07-05-2010. Thus, till the date of search, there was hope for higher FSI and accordingly, the said areas would have been mentioned on the seized papers. Thus, the said letters do not by any stretch of imagination prove that the assessee company was engaged in selling flats on the basis of super built up area. The assessee file copy of the aforesaid letter dated 11-01-2007 given to Oriental Bank of Commerce is reproduced hereunder (also enclosed at page 260 of assessee's Paper Book -II):- "To Oriental Bank of Commerce, Shrijee Chambers, Tata Road No.2, Opera House Branch, Mumbai 400 004 SUB - Plans sanctioned by Development Authorities REF- Legend Building, Walkeshwar, Layer Exports Put. Ltd. Dear Sir, As you know we had put up proposed building plans for sanction with building planning department of M. C. G. M. for 3 size flats, based on 2.5 F. S. I. in our building "Legend", being of 2550sq.ft., 4550 sq.ft. and 5675 sq.ft., however we have received sanctions from the planning authorities for flats of sizes 1900 sq. ft., 3200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that they were seeing the impugned papers for the first time and did not have any knowledge about the contents thereof. They emphatically denied making any payment by way of on-money in cash to the assessee company. Copies of the following statements recorded u/s 131 are enclosed in the assessee's Paper Book:- (a) Copy of statement of Sri Ashok R. Mehta - pages 150-152 of the Paper Book-1. (b) Copy of statement of Sri Sujit S. Mehta - pages 153-155 of the Paper Book-1. (c) Copy of statement of Sri Pranay Desai- pages 156-158 of the Paper Book-1. (d) Copy of statement of Sri Ashok Siroya - pages 159-160 of the Paper Book-1. Relevant extracts of few of the aforesaid statements are reproduced hereunder:- Statement of Sri Ashok Siroya u/s 131 on 12. 10.2009 "Q. 6. 1 am showing you page no. 7 of loose paper file containing pages 1 to 19 seized from Mr. Bharat Shah's premises. From this page it can be inferred that you have purchased flat on 141h floor in legend Project for which you have been charged at the rate of Rs. 14,111/-for saleable area i.e. super built up area of 2550 sq. ft. which comes to Rs. 3,59,83,0601-. Further, it has been written that no parking has been gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been received by cheque. Further, on this page "5 x 5 = 25" is written which can be clearly inferred as that total 5 car parking for a consideration of Rs. 25 lakhs has been purchased. These details also tallies with your previous answers that total 5 car parking were purchased? Ans. I have not given any cash and the garages were including with the purchase of each flats as explained above i.e. 3 and 2 with all flats. Regarding cheque payment total payment by my family is Rs. 33500000 and Rs. 11800000 by me and my mother respectively." Statement of Su.jit S. Mehta recorded u/s 131 on 23.09.2009 "Q 13. Do you want to say anything else? Ans. Whatever is mentioned in my agreement dated 12.6.2006 is correct. I have paid only Rs. 3,85,67,0401- for the purchase of the flats No. 2101C, 2102F, 2103B, 2202E and 2203B on 21s' and 22nd floor in Sea View Wing in "Legend" along with my wife Mrs. Shreepa S Mehta and it also includes three car parking. There is no cash payment made at all." 23. Thus, all the purchasers' summoned u/s 131 of the Act by the AO categorically denied making any payment in cash to the assessee. Further, Shri Bharat Shah, director, consistently denied any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench of the Mumbai Tribunal in the case of Harakchand N. Jain Vs. ACIT (1998) 61 TTJ (Mum) 223 wherein it was held as under (Copy enclosed at pages 505-536 of assessee's Paper Book): "Since the agreements of some purchasers are on the record, the AO could very well verify from the purchasers, the rates and the area from the purchases. The AO has made the addition merely on presumption and assumption without any definite evidence which should form the basis of making the addition. In fact, the seized papers have already been explained by the assessee. However, no assets have been found during the search which could show that the assessee had received on money or he has shown the suppressed value of sale of fiats. In fact, it is the duty of Revenue to show that the assessee had received more than what has been declared or disclosed by him and there was an understatement or concealment of the consideration. In the present case, the agreement between the parties are basic evidence to show that the sale consideration and the built up areas on which the shops and flats have been sold by the assessee and the Revenue could not bring out any evidence to show that the assessee has suppres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of uncertainty regarding area of each flat and the BMC plans not being sanctioned, the details of furniture that could be accommodated could not be determined and the area of the flats in the proposed scheme were required to be reworked. 5. In view of uncertainty, finally, I along with Mrs. Shreepa Mehta had purchased bare flat without amenities baring no. 21st & 22nd floor of sea view at agreed price of Rs. 385670401- paid by cheque and which is borne out from the Books of Accounts maintained by us and no cash payment was made for the transaction. 6. We hereby repeat and reiterate that the entire transaction was completed on the basis of cheque payment made by us and that no cash payment whatsoever has been made by us for the said transaction" Similarly affidavits of Director of Shankhala Builders and Amar Kishore Kothari who had purchased flats with amenities were also filed before the AO. The aforesaid affidavits also fortify the assertion of the assessee that - (i) 'SH' noted on the impugned loose papers stood for Special House Scheme and not 'cash' as alleged by the AO, (ii) that such scheme had actually been offered by the assessee to the buyers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in premises of one of the purchasers disclosing that part of the cost had not been disclosed by vendor--Presumption that similar payments must have been received from other purchasers was not sufficient--No proof in spite of enquiry during proceedings for block assessment that unaccounted money had been received from the other fifteen purchasers--Block assessment on estimate on basis of unaccounted money received in respect of one of flats--Not valid-- Addition made on account of unaccounted money received in respect of one of the flats was valid--Income-tax Act, 1961, s. 158BD. And also on Ms. Pooja Bhatt Vs. ACIT (2000) 73 lTD 205 (Mumbai) (Copy enclosed at pages 563- 569 of Paper Book): "The addition made by the A0 is unwarranted as having been made merely on the basis of suspicion. The transaction of purchase of flats is effected by means of an agreement and the amount of consideration is also indicated in the agreement. There may be a strong suspicion of payment of on-money in respect of the property deals but no addition can be made on the basis of mere suspicion. It is established principle of law that suspicion however strong it may be does not take the place of proof. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,63,04,320 2,76,32,051 10 2004-05 Mangalam Gems -do- 11/1878.16 2/1/2004 1,98,92,600 2,06,32,051 11 2004-05 Maya Mehta -do- 13/1878.16 17/01/2004 2,03,50,200 1,93,57,051 3 2004-05 Ramesh Mehta -do- 14/1695 1/9/1695 2,03,50,200 1,93,57,051 3 2004-05 Chandravadan Desai -do- 19,20/ 3466.44 2/12/2003 4,19,80,608 8,01,39,192 8 2004-05 Shrikant Mehta -do- 21,22/ 3466.4 22/12/2005 4,82,09,400 1002,10,600 14 2006-07 Pankaj Mehta Sea 29,30/ 3846.9 20/10/2003 4,23,71,880 1067,50,000 12 2004-05 Sujit Mehta Sea 21,22/ 3466.4 02/09/2003 3,85,67,040 3,10,47,960 and 3,50,00,000 15 & 13 2004-05 Total 23/ 41383.25 4872,30,947 6716,25,687 On the basis of the above, the AO made an addition of Rs. 57,14,15,087/- for A.Y. 2004-05 and Rs. 10,02,10,600/- for A.Y. 2006-07 on account of alleged on-money receipts of the assessee allegedly recorded on the impugned 19 loose sheets of papers. 29. We also find that the CIT (A) upheld the AO's interpretation of the seized papers and on the grounds similar to those taken by the latter. The CIT (A) reproduced s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the said papers were seized in course of search of another person and from the premises of such other person and were not proved to belong to the assessee, the same did not have any evidentiary value insofar as the assessee was concerned. Further, since the notings in the said papers were more in the form of rough scribbling, in coded form with several abbreviations, no definite interpretation could be given to the same. These uncorroborated, rough loose sheets of papers could not form the sole basis of making such enormous additions in the hands of the assessee. The Revenue thus erred in relying upon such feeble evidence in the form of scribbling on uncorroborated rough loose sheets of papers to justify additions running in more than 111 crores of rupees in the hands of the assessee, which is clearly not justifiable. Further, even the Revenue's interpretation of the notings made on the said papers is based on surmises, conjectures, assumptions and presumptions. 30. Without prejudice, the learned Counsel argued that so-called reasoning advanced by the CIT (A) (as summarized in para 11.1 supra) are countered in seriatim one by one hereunder:- (i) The seized papers c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies without Special House - Rs. 59678847/-. Total additional consideration for Special House - Rs. 41771153/-, recordings made for few items of Special House on the basis of on-going discussions with prospective buyers - Rs. 23375000, Balance items to be explained and approved by buyers in SH scheme 18396153. (viii) As regards noting on page 9, as already stated earlier "SH Recd" may be an abbreviation for Special House recorded i.e. recordings for few items of Special House. Further noting read by CIT (A) as "SH to Receive" is actually "SH to Recd" which may stand for recordings for items of Special House pending discussion with client. Lastly noting "All Q/SH Full Recd" at the bottom of page 9 appears to have been made at a later point of time and may mean recordings for basic facilities (if approved to be received in cheque) and special house scheme fully discussed with clients (although pending approval). (ix) Further, in respect of noting on page 10 of the seized papers containing details of sample flat, the Learned CIT (A) has alleged that since the said flat was already constructed at the time of sale, there was no scope of increase in FSI in the said flat even if addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of flats in Legend affirming the initial offer of 'Special House' made by the assessee and denying payment of any cash consideration over and above the accounted cheque amount to the assessee. (iv) Noting on seized page no. 12 of Annexure A-2 explaining the notings on Annexure A-1 and fortifying the assessee's stand regarding Special House. (v) Documents supporting application for 2.5 FSJ by the assessee and rejection of the same by BMC and thus explaining the noting made in the impugned papers in respect of initial negotiation for expected sale of higher area on the basis of expected approval of plan by BMC. (vi) Agreements for sale of similar flats in vicinity of the Legend Project at comparable rates. (vii) Newspaper article regarding difficulty in sale of flats in Legend and thus reducing chances of sale of flats at exorbitant rates as suggested by the AO. (viii) Non-discovery of any circumstantial evidence in the form of any unaccounted investment, unaccounted cash or unaccounted expenditure corroborating the earning of substantial amount by way of on-money by the assessee as alleged by the AO. 33. In entirety of the matter, we are of the view that an addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enclosed at pages 94-112 of the assessee's Paper Book-I. 34. The case law relied on by assessee of co-ordinate bench of Delhi Tribunal in the case of Atul Kumar Jain Vs. DCIT reported in (1999) 64 TTJ (Del) 786 (Copy enclosed at pages 334-357 of assessee's Paper Book) had an occasion to examine the meaning word "document" and its evidentiary value for the purposes of sections 132, 132A and 132(4A) of the Act. At Para 6.4 to 6.6 of the order, the Delhi Tribunal observed as under:- "6.4 We find that the AO has made out the case for making such addition based exclusively on the said piece of paper found and seized during the course of search. It is, therefore, to be examined whether the said paper found and seized is a document having evidentiary value to prove the fact of the transaction. The word "document" has been defined in s. 32 of the Indian Evidence Act to mean - any matter expressed or described upon any substance by means of letters, figures, or marks or more than one of those means, intended to be used or which may be used for the purpose of recording that matter. The word "document" has also been similarly defined in the General Clauses Act. The meaning of the word "desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income of the assessee. Admittedly, the said loose papers are not in the form of pronotes or duly executed documents or books of account or certificates or money receipts which can prove conclusively the factum of any undisclosed income earned by the assessee or any unaccounted investments or expenditure made by him. Additions cannot be made simply on the basis of rough scribbling made by some unidentified person on few loose sheets of papers. 35. Our attention was further drawn to the decision of the Kolkata Tribunal in the case of ACIT Vs. Sri Radheshyam Poddar reported in (1992) 41 lTD (Cal) 449 (Copy enclosed at pages 368-372 of assessee's Paper Book) wherein it was held that no addition can be made simply on the basis of an unsigned piece of paper. Held as under (at para 5 of the order):- "After hearing the rival submissions we are of the opinion that the assessee should succeed in this regard. It is no doubt true that as per the provisions of section 132 (4A)(ii), when any document is seized pursuant to search it may be presumed that the contents of such documents are true. We have examined a copy of MOU filed before us in this appeal and we find that the same, is not si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y so on the basis of judgment of Hon'ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 at p. 575." 36. Further in the case of Pioneer Publicity Corporation & Others Vs. DCIT reported in 67 TTJ 471, (Copy enclosed at pages 373-437 of Paper Book) the Delhi Tribunal held that "no addition could be made simply on the basis of a noting on a visiting card found during search directing certain payment to bearer of card when there was nothing to establish that the assessee paid the amount to the said person. The Department had not made any enquiry from the person named. In the card about the amount given and as such, no addition could be made in the hands of the assessee." 37. Again in the case of Ashwani Kumar Vs. ITO (1992) 42 TTJ (Del) 644, the Delhi Tribunal observed as under (Copy enclosed at pages 303-315 of assessee's Paper Book):- "Then for presuming that the contents of the books of account or document are true the document must be a speaking one. In this case the slip, said to have been recovered by the revenue, does not contain any narration in respect of the various figures noted therein. The slip does not indicate whether the figures refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grossly inadequate material or rather no material at all and as such, deserves to be deleted. Hence, we are of the view that an assessment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged on-money receipts made simply on the basis of uncorroborated noting and scribbling on loose sheets of papers made by some unidentified person and having no evidentiary value, is unsustainable and bad-in-law. As such, the same is deleted. This issue of the assessee's appeal is allowed and that of the Revenue is dismissed. 39. The next common issue in these appeals, of the assessee in ITA No.1927/Mum/2011 for assessment year 2004-05, in ITA No.1928/Mum/2011 for assessment year 2006-07 and in ITA No.1929/Mum/2011 for assessment year 2007-08 and that of Revenue's appeals in ITA No.3019/Mum/2011 for assessment year 200405, in ITA No.2985/Mum/2011 for assessment year 2006-07 and in ITA No.2986/Mum/2011 for assessment year 2007-08, is as regards to extrapolation of 'onmoney' receipts noted in seized loose papers for other flats. For this the assessee has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit). Comparative chart showing details of the BMC Carpet Area, BMC Built-up Area, Carpet area and built up area as per agreement, date of agreement, and the causes of differences in BMC built-up-area and Built-up area as per agreements for various flats in project 'Legend' was filed before us (Copy enclosed at pages 338- 349 of assessee's Paper Book-II). On a perusal of the same, we find that the differences are on account of valid reasons and the assessee has not made any contradictory claims in respect of saleable area of flats. But, we are of the view that, since, we have given a find that the impugned papers do not contain recordings of any on-money receipt by the assessee, the question of extrapolating on-money receipts on the basis thereof does not arise. Even otherwise, we are in agreement with the argument of assessee that additions in search assessments are required to be made on the basis of tangible evidence and not solely on the basis of estimations and extrapolation theory. Thus, we delete the addition made on account of extrapolation of alleged on-money receipts purportedly recorded in loose sheets of papers. Accordingly, this issue of extrapolation in all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the Learned CIT(A) erred in not appreciating the fact that 95% of the project was completed as per assessee's own statement and due to pendency of issue of bogus tenancy, possession was not given. e. On the facts and in the circumstances of the case and in law the Learned CIT(A) erred in not appreciating the fact that the project cannot be allowed to be stretched at the whims of the assessee, even if the assessee is following project completion method when the other circumstances clearly indicate that the project had been completed. The ratio laid down b the Hon'ble Mumbai Tribunal in the case of Unique Enterprises Vs. ITO (2010- TIOL-737-ITAT-MUM dated 20.08.2010) and Champion Construction Company Vs. ITO (1983) 5 ITD 495 has not been appreciated by the Learned CIT(A)." 43. Brief facts relating to this issue are that the assessee follows project completion method of accounting whereby the profit/ loss on sale of constructed units is recognized only on completion/ substantial completion of work and handing over the possession of flats/ units to substantial number of customers. But, according to the AO, in accordance with AS-7 (revised 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was 90% complete by 31.03.2008. Thus, on an average, the external work of the building was completed to the extent of about 95% by 31.03.2008, which corresponds with the statement of Shri Bharat Shah. However, on account of completion of internal finishing work only to the extent of 65%, internal walls to the extent of 70%, plumbing work to the extent of 80%, water-proofing work to the extent of 85%, the overall building was completed only to the extent of 85% as certified by the Architect. Thus, the assessee claimed that the profit from the impugned project was not chargeable to tax in AY 2008-09 in accordance with the method of accounting followed by the assessee i.e. project completion method of accounting. As per the Profit & Loss Account for the year ended 31.03.2009 a further cost of Rs. 2,89,24,276/- has been incurred in respect of the project at Walkeshwar during Financial Year 2008- 09. 44. The assessee explained that Shri Bharat Shah in his statement recorded u/s 132(4) of the Act on 08.05.2008 declared profit of Rs. 5 crores on an estimated/ adhoc basis for AY 2008-09 in order to buy peace since the search party was insisting on some disclosure on the basis of percenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s carried out on ownership basis and not in pursuance of any contract with a contractee. Thus, AS-7 is not applicable to the case of the present assessee which is engaged in development and construction of buildings on ownership basis and sale thereof to customers. The buyers purchase ready flats from the assessee. The agreement is for sale of completed flats as opposed to a contract for construction of flats/ buildings. As such, the entire discussion of the AO in respect of applicability of AS-7 and percentage completion method of accounting in the case of the assessee is without any basis. We also find that the assessee has been consistently following project completion method of accounting since the very inception of its business. The said method of accounting has been consistently accepted as such by the AO in assessments framed u/s 143(3) of the Act over the past years. As such, the same method should have also been accepted for AY 2008-09, there being no change in facts and circumstances vis-à-vis the past years. We are placing reliance on the Judgment of Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT, 193 ITR 321 (S.C) wherein it is held that in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtifying that till 31.08.2008, Legend project was approximately 85% complete. (Copy enclosed at page 402 of Paper Book-Ill). 2. The Appellant had planned to construct 36 storey building in addition to basement and ground floor from the beginning. The Appellant had furnished the plan before the BMC and Fire Department for the same. The construction of 36 storey required FSI of 2.5 and in this respect copies of 3 letters addressed to the Executive Engineer MCGM Byculla, Mumbai- 400008 dated 15.06.06, 06.09.2007 and 10. 12.2008 were submitted (Copy enclosed at pages 516- 518 of Paper Book-Ill). The request of the appellant, however, was not acceded to and vide its letter dated 07.05.2010 the claim of the appellant for higher FSI of 2.5 was rejected (Copy enclosed at page 519 of Paper Book-III) and the appellant was informed that in its case the applicable FSI will remain at 2. Since the rejection of the request of the Appellant for higher FSI was communicated only in May 2010, the Appellant could not have completed the project in 2008 as alleged by the Department. 3. The certificate of Mr. Ashfaq Shaikh, Consulting Civil Engineer & Engineering Solution indicating the stage of constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sale agreement the flat buyers were required to make balance full payment only on issue of completion certificate by the BMC on the flats being ready for occupation (Copy enclosed at page 431 of Paper Book-Ill). Till date the Appellant had not received the full stipulated sale consideration for the flats and occupation was not allowed to any of the flat owners. The relevant clause 2.1 of sale agreement is reproduced below:- "Being balance consideration on the promoter notifying to the Purchaser that the said flat is ready for occupation and the Promoter furnishing to the Purchaser the Occupation Certificate from the Corporation or at the request of the Purchaser, the Promoter giving to the Purchaser earlier possession, whichever is earlier." 8. It is also worthwhile to note that the amount received by the appellant at the time of sale agreement was in the nature of advance. In the eventuality of the appellant failing to meet the stipulated condition the purchaser were entitled to receipt the refund of the payment made. This clearly proves that the nature of payment was advance and not a sale consideration. The relevant clause 3.2 is reproduced below: "Subject only to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king Spaces No--------under stilts of the said building (hereinafter called "the said car parking spaces") at or for the price of Rs. -------/- and on certain terms condition mutually agreed upon by and between them. The said flat and the said parking spaces together with the benefit of the common areas, facilities and open spaces as presently stipulated are hereinafter referred to as "the said Premises"." 10. It may further be noticed that the agreed sale consideration for all the flats for which sale agreements were entered into comes to Rs. 175.03 crores. The agreed sale consideration for the flats for which the agreement were executed before 31.3.08 is Rs. 66.49 crores out of this agreed transfer consideration the amount received up to 31.3.08 by way of advance is Rs. 47.27 crores. Thus the amount received upto 31.3. 08 by way of advance in regard to the flats for which sale agreements had been entered into is less than 25% of the expected sale consideration for all the flats. 11. The Assessing Officer has not placed any material on record to the contrary. He has only given a finding as regards completion based on conjectures and surmises. 48. Before us reliance was placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from business in the year under consideration. It is therefore apparent that he was himself unsure as to in which year the income was to be assessed. Now, since the assessee is following project completion method of accounting and the impugned project was not complete during the years under consideration. 49. We find that in the instant case, as far as the receipts of regular nature i.e. advances received in cheque from the buyers are concerned, the AO has not challenged taxability of the same in the year of completion of the project in accordance with the project completion method of accounting followed by the assessee. The AO has not challenged the disclosure of the receipts in cheques as 'advances' on the liabilities side of the Balance Sheet. He has not proposed to tax the same in the year of receipt as in the case of alleged on-money. Thus, in respect of receipts in cheques, the AO has accepted the project completion method of accounting. Accordingly, the AO erred in whimsically deviating from the said method of accounting and taxing the alleged on-money receipt in the year of purported receipt. Accordingly, we are of the view that the purported on-money receipts co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities of the type dealt with in this Statement not as contractors but on their own account as a venture of a commercial nature where the enterprise has entered into agreements for sale'. The revised AS-7 (2002) does not contain this provision. As a result of this, revised AS-7 is not applicable to certain enterprises, e.g., real estate developers or assessees carrying on construction business as opposed to construction contractors. As such, since the assessee is engaged in development and construction of buildings on ownership basis, AS-7 (revised) is not applicable to it. As argued by Learned Counsel the Accounting Standard - 7 has not been notified by the Central Government u/s 145(2) of the Act. As such, the AO cannot reject the accounts of the assessee company u/s 145(3) of the Act on the ground that that the assessee has not followed the accounting standard prescribed u/s 145(2) of the Act. For this reliance is being placed on the decision of the Bangalore Tribunal in the case of Prestige Estate Projects (P) Ltd. Vs. DCIT (2010) 33 DTR 514(Bang), wherein it was held that the assessee developer having regularly employed project completion method which is an accepted meth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate has been duly given by the local authority." (ii) Further section 5 of the aforesaid Act reads as under:- "Promoter to maintain separate account of sums taken as advance or deposit and to be trustee therefore and disburse them for the purpose for which are given: - The promoter shall maintain a separate account in any bank of sums taken by him, from persons intending to take or who have taken, flats, as advance or deposit, including any sums so taken towards the share capital for the formation of a co-operative society or a company, or towards the outgoings (including ground rent if and he shall hold the said moneys for the purposes for which they were given and shall disburse the moneys for those purposes and shall on demand in writing by a Competent Authority, make full and true disclosure of all transactions in respect of that account." (iii) Section 8 of the Act reads as under:- "Refund of amount paid with interest for failure to give possession within specified time or further time allowed if:- (a) the promoter fails to give possession in accordance with the terms of his agreement of a flat duly completed by the dates specified, or any further date or dates agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of this, It can be inferred that the risks and rewards are not transferred to the purchaser by the promoter until possession of Pat is given. 7.27 In the case of flat purchases, normally the purchasers book the flats by paying advances and later enter into agreement for sale and pays the monies as per the agreement for sale. Subsequently, the promoter completes the project and hands over the possession of the flats to the purchasers. The monies paid by the purchasers are returnable to the purchasers if the promoter is not completing the project successfully to the satisfaction of the purchasers. That stage will be achieved only when the Municipal authorities issue Occupancy Certificate. Until then, the money paid by the customers will only partake the character of 'advance money paid' by the flat purchasers. Until the possession is given! Occupancy Certificate is obtained, there is uncertainty and the advances paid will never partake the character of income. As soon as the possession is given occupancy certificate is issue, the flats are ready for occupation and it is in a fit position to be handed over to the purchaser. So, I am of the view that the date of issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g followed by the assessee and that the said method could not be applied to undisclosed receipts, which were to be taxed in the hand of the assessee on receipt basis. On further appeal by the said assessee, the Mumbai ITAT reversed the order of the CIT (A) and held as under:- "We have considered the rival submissions. It is not in dispute that the receipts in question have direct nexus with the business of the assessee and represent cash receipts against sale of shops and flats. It is also not in dispute that the assessee follows project completion method of revenue recognition and that project was complete only in A. Y. 2008-09. Since, cash receipts have a direct nexus with the project of Jalaram Park, they have to be taxed only as income from the said project. The assessee has already recognized these receipts in its books of account while passing the necessary entries on 5.5.2005 in its books of accounts. In such circumstances, we are of the view that receipts in question cannot be brought to tax in A. Y. 2003-04 to 2005-06. These receipts have already been accounted for in the books of account can be taxed only in the year in which project is complete and income from the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the flats for which sale agreements were entered into after 31-03-08, Para 30 of the agreement mentioned that state of property as under 'construction'. This also clearly shows that the project had not been completed till the date of search. Further it also shows that up to 31-03-2008 the sale agreements entered into were approximately in respect of 60% of the flats only. It further shows that the agreed sale consideration for all the flats for which sale agreements were entered into comes to Rs. 175.03 crores. The agreed sale consideration for the flats for which the agreement were executed before 31.03.08 is Rs. 66.49 crores out of this agreed transfer consideration the amount received 31.03.08 by way of advance is Rs. 47.27 crores. Thus the amount received up to 31.03.08 by way of advance in regard to the flats for which sale agreements had been entered into is less than 25% of the expected sale consideration for all the flats. Further, the fact that the construction of the project was not completed up to 31.03.2008 has also been discussed with corroborating evidences in the preceding paragraphs. Thus, in light of the aforesaid discussion we are of the view that no incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee company offered to repay them the principal amount of Rs. 11.50 crores. However, Videocon Group did not agree and filed a case against the assessee before the Hon'ble Bombay High Court. The said case was settled by filing Consent Terms wherein it was mutually decided amongst the parties that in lieu of the aforesaid payment, Bharat Shah Group would transfer their unit in the ground floor at Prabhadevi being constructed by Trambak Home Pvt. Ltd. for which necessary permission would be obtained within 90 days or in the alternate pay them Rs. 18 crores, including interest. In support of these facts, the assessee filed copies of orders dated 17.12.2004 & 12.09.2005 of the Hon'ble Bombay High Court (Copy enclosed at pages 350-3 79 of assessee's Paper Book-II). Finally, vide order dated 08.12.2005 of the Hon'ble Bombay High Court decided that the assessee company would pay the aforesaid amount of Rs. 18 crores plus interest in cash. Copy of the aforesaid order dated 08-12-2005 of the Hon'ble Bombay High Court was filed before us (Copy enclosed at pages 382386 of assessee's Paper Book-II). Accordingly, Rs. 6,50,00,000/- (total payment of Rs. 18 crores mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discovery of any such evidence with regard to the impugned expenses. As such, items of regular assessment could not be added back in the assessment framed u/s 153A of the Act when no incriminating documents were found with respect to disallowed items in the search proceedings. Since assessment had originally been framed u/s 143(3) of the Act after taking into consideration the said expenses, the same could not be abruptly disallowed in assessments framed u/s 153A of the Act merely on the basis of change of opinion, there being no change in facts and circumstances as compared to the past. Judgment of Hon.ble Bombay High Court in the case of CIT V. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (BOM), wherein Hon'ble Bombay High Court has laid down that if there is no incriminating material found during the course of search then the power under section 153 A of the Act, being not expected to be exercised routinely and should be exercised if the search revealed any incriminating material. 58. In view of the aforesaid case of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), we are of the view that com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) erred in directing the AO to make disallowance of expenditure relating to cost of construction of the space meant for tenants in the assessment of the assessee in the assessment year when the income from the project is offered on its completion even though such direction was beyond the jurisdiction of LearnedCIT(A) as the claim relating to deduction of such expenses for that assessment year were not before her and the direction has been issued without consideration of the relevant facts and circumstances of the case as also the contentions of the appellant on the issue. 2. That the Learned CIT(A) erred in not taking into consideration the fact that the area meant for tenants was legally sanctioned by MHADA and accordingly, the expenses incurred in connection with the construction of the same was fully allowable u/s 37(1) of the Act." The Revenue has raised the following grounds:- a. On the facts and in the circumstances of the case and in law, the Learned CIT (A) failed to appreciate that the amount of Rs. 18.69 crores paid by the assessee to MHADA was in the nature of penalty paid by the assessee for infraction of law, which would not be allowable under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q. ft. considered by AO. The AO had, however, not considered the part relief provided by the CIT (A) in its order giving effect. However, he later on rectified the assessment order u/s 154 and provided part relief and made a disallowance of Rs. 5,56,39,387/-, which is now under dispute before us. 61. The assessee had then filed an appeal before CIT(A) against the order passed u/s 154 of the Act raising a ground that the said addition cannot be made in AY 2008-09 as the assessee is following project completion method of accounting and has accordingly not booked any income in AY 2008-09. It was claimed that when no income is offered from the said project in AY 2008-09, there is no question of disallowing the said amount in AY 2008-09. The CIT (A) had given relief and held that the proportionate cost of construction is to be disallowed in the year when the project is complete. Aggrieved by the order of the CIT (A), the assessee is before Tribunal. The assessee claimed that the disallowance of the proportionate cost of construction, on the argument that the same, pertains to bogus tenants is incorrect considering the facts of the case. 62. The facts narrated by the assessee in brief, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of proportionate cost of Rs. 6,67,67,532/- made by the AO has resulted in double addition on the same count. It was further argued that the AO has rejected the book profits shown by the assessee for AY 2008-09 and estimated the profits of the on the basis of percentage completion method of accounting. While doing so, at Para 13 of assessment order u/s 153A of the Act for AY 2008-09, the AO has deducted impugned proportionate expenses for alleged bogus tenements of Rs. 6,67,67,532/- from the total construction cost of Rs. 103,48,95,070/- (i.e. 103,48,95,070 - 6,67,67,532 = 96,81,27,538) and considered only the balance cost of Rs. 96,81,27,538/- for the purpose of determining the proportionate construction cost for total area sold of 66451 sq. ft. sold up to 31-032008 (i.e. 66451*96,81,27,538/99601 = 64,59,06,499)). The said proportionate construction cost for 66451 sq. ft. has been deducted from the total agreement value of flats sold till 31-03-2008 to determine the total income on percentage completion method of accounting in respect of 66451 sq. ft. of area sold (i.e. 95,01,16,716 minus 64,59,06,499 = 30,42,10,217). Since Mr. Bharat Shah had already offered Rs. 5 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the amount spent for constructing the said area could not be allowed as deduction u/s 37(1) of the Act, since according to him the said expenditure had been made in violation of law. He therefore directed the A.O to disallow the proportionate expenditure for 771.44 sq. mt. in the place of disallowance made by the AO for 925.39 sq. mt. (corresponding to 9960.83 sq. ft.). Aggrieved by the said order of the CIT(A), the assessee is in second appeal before the Tribunal. 66. We find from the order of the CIT (A) he himself admitted that the assessee is following project completion method of accounting and since the impugned project was not completed by AY 2008-09, no profit could be assessed for the said year. As such, the question of making any disallowance on account of the impugned expenditure (which was never claimed as deduction for the said year in the P/L Account) and corresponding addition did not arise for AY 2008-09. Further, we find from records that the CIT (A) also failed to address the grievance of the assessee regarding double addition of Rs. 6,67,67,532/- made by the AO. 67. Further, we are of the view that the assessee is engaged in development of disputed/ occupied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible, the surplus area has been transferred to the assessee for a consideration. Subsequently, the surplus area has been dealt with by the assessee in a commercial manner and the sale consideration for the same has been duly accounted for as and when so required. It is therefore, perfectly clear that the entire amount incurred on the construction of the property is legal, genuine and in accordance with law and therefore admissible as business expenditure. Since the entire sale consideration for the impugned surplus area (which was later on transferred to the assessee for a consideration) has been duly accounted for as and when sold by the assessee, the corresponding construction cost is also perfectly allowable as business expenditure. Further, the amount paid to MHADA is also in the nature of cost of construction and admissible as business expenditure. The provisions of MHADA Act do not, in any manner, provide for its treatment as anything in the nature of penal payment. The payment is neither in the nature of fine nor in the nature of penalty. It is not attributable to any irregularity or infringement of law. The claim is therefore properly admissible for deduction as business ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of other person at the premises of another person. 70. At the outset, we have already decided the issues on merits i.e. in the appeals of the assessee and the appeals of the Revenue; hence, we need not to adjudicate the issues on jurisdiction i.e. the legal issues. 71. Coming to assessee's appeal in ITA No.3378/Mum/2016 for the assessment year 2011-12, the assessee has challenged the addition made by the AO and confirmed by the CIT (A) of alleged on-money receipts on the basis of certain loose papers found and seized by the search party u/s 132 (1) of the Act and marked as Annexure A-1, pages 1 to 19 amounting to Rs. 57,14,15,087/- relating to assessment year 2004-05 and Rs. 10,02,10,600/- relating to assessment year 2006-07. The next issue added by the AO and confirmed by the CIT (A) in respect to the above seized papers in respect to on-money extrapolated and added in assessment year 2004-05 Rs. 05,62,60,321/-, in assessment year 2006-07 Rs. 17,47,36,075/- and in assessment year 2007-08 Rs. 11,38,30,565/-. The next issue regarding disallowance of proportionate expenses incurred in relation to construction of saleable area to bogus tenants for the area of 771.44 sq. m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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