9911796707
TMI Blog2016 (3) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... ding." 5. Briefly stated, the facts of the case are that search & seizure operation under section 132(1) of the Income Tax Act, 1961 (in short 'the Act'), was conducted on 8.10.2010 in Popli Group of cases. The assessee filed his original return of income under section 139(1) of the Act, on 25.9.2008 declaring total income at Rs. 16,42,204/-. After the search, a notice dated 15.2.2012 under section 153A(1) of the Act, was issued to the assessee requiring him to submit his return of income for six immediately preceding assessment years relating to previous year, in which search took place. In response to the said notice, the assessee submitted his return of income on 14.6.2012 declaring total income at Rs. 16,42,204/-. Thereafter, statutory notices under section 143(2) and 142(1) of the Act, were issued to the assessee. In the return of income, the assessee claimed depreciation on building. In this regard, the assessee had submitted that from financial years 2004-05 to 2010-11, he was engaged in the business of execution of work contracts. The Assessing Officer noticed that the assessee was also engaged in the business of construction and sale of immovable property. But in his ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the year 2007-08, the assessee admitted in his letter dated 27.11.2009 that the building in question is a residential house and one floor of which was sold during the year and the proceeds from the sale were invested in construction of other floors of the building. The Assessing Officer disallowed a sum of Rs. 1,09,873/- on account of depreciation claimed on the building in question. There is no evidence on record to show that there was a change in the user of building. It is also clear that the assessee has accepted the order passed by the Income Tax Authorities for the assessment year 2007-08. Considering the entire facts and circumstances of the present case, we do not find any merit in this ground of appeal and accordingly, the same is dismissed. 8. Ground Nos.2 and 3 of appeal raised by the assessee read as under : "2. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) in not justified in upholding the treating of income from the sale of property as income from business and profession. The fact of the matter is that the same should have been assessed as capital gains as returned by the assessee. 3. That in the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding estimation of profit @ 30%. The Assessing Officer noted that the said estimation was based on the profit earned in similar kind of construction business. Therefore, the profit on sale of property has been worked out at Rs. 2,70,000/- by the Assessing Officer and the same was treated as undisclosed income of the assessee. This amount of Rs. 2,70,000/- was added to the total income of the assessee. 11. On appeal, the learned CIT (Appeals) upheld the addition for the reasons stated in para 6.1 of the impugned order and, hence the assessee is in appeal before the Tribunal. 12. We have heard the rival submissions and perused the materials available on record. Shri Vishal Mohan, learned counsel for the assessee vehemently argued that the discretion to determine the gross profit rate must necessarily be exercised on the basis of relevant factors. According to him, the Assessing Officer has not considered the past history of the assessee, the nature of assessee's business, prevailing economic conditions vis-à vis the assessee's business. He has also pointed out that the Assessing Officer should have considered the price of raw material, labour, rise in price index from time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e merely illustrative and not exhaustive of the circumstances that may or may not be taken into consideration. At this stage, it would be appropriate to reproduce a few words from Dhakeswari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775 (SC) so as to place our conclusions in their correct perspective:- ".....The Income Tax Officer is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under subs. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under S. 23(3). In this case the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the Departmental Representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other matters which he thinks will assist him in arriving at a fair and proper estimate; though there must necessarily be guess work in the matter, it must be honest guess work. In that sense, too, the assessment must be to some extent arbitrary. Their Lordships think that the section places the officer in the position of a person whose decision as to amount is final and subject to no appeal, bust whose decision if it can be shown to have been arrived at without an honest exercise of judgment, may be revised or reviewed by the Commissioner under the powers conferred upon that official by section 33." 12. It would also be necessary to refer to another judgment in State of Kerala Vs. C. Velukutty, 1966 ITR Vol. (LX) 239, wherein while dealing with the expression 'best of his judgment', it has been held that the discretion to determine net profit rate vests in the authorities but discretion shall not be arbitrary and should have a reasonable nexus to the available material and the circumstances of the case, followed by reasons that appear to be legal and valid. A reference may also be made to judgment of this Court in ITA No. 478 of 2006 titled as Aggarwal Engineering Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21% for the year under consideration should not be guiding factor in other years. Accordingly, we direct the Assessing Officer to apply a profit rate of 21% as against 30% applied by the revenue authorities. The Assessing Officer should give a relief to the assessee accordingly. Thus, ground Nos.2 and 3 of the appeal are allowed partly. 14. The ground Nos.4 of appeal raised by the assessee reads as under : "4. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in upholding the adding back a sum of 5,01,860/-made under section 69C of the Income Tax Act.1961 treating the same as unexplained expenditure." 15. The Assessing Officer noted that the assessee had spent an amount of Rs. 5,01,860/- on construction of immovable property during the year under consideration. According to the Assessing Officer, no documentary evidence regarding the source of such expenses incurred on construction of building was furnished by the assessee. When the assessee was confronted, the assessee submitted that the aforesaid expenditure has been routed through books of account and reflected in the Balance Sheet for the year under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 68 of the Act. The Assessing Officer noted that during the course of assessment proceedings, it was found that the assessee had made deposits in bank account No.4500000100019347 with PNB, New Shimla to the extent of Rs. 1,02,102/-, the source of which has not been explained. Consequently, the Assessing Officer made the addition under section 68 of the Act. On appeal, the learned CIT (Appeals) confirmed the order of the Assessing Officer. 20. After hearing the learned representatives of both the parties, we do not find any merit in this ground of appeal. The learned CIT (Appeals) while confirming the addition, has observed as under : "8.1 I have considered the submission of the assessee and impugned assessment order. The AO has prepared a chart, at para 7, depicting the credit entries/deposits in the bank account of the assessee from AY 2005-06 to AY 2010 11, which totals Rs. 8,15,371/-. The amount involved for the instant year is Rs. 1,02,102/-. It is seen that the AO resorted to section 68 as the sources of these credit entries as emanating from the contractual payments were not found acceptable in the absence of linking the debit and credit entries. Before me it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished by the assessee in support of his submission. He, therefore, issued a notice to the assessee to show cause as to why the difference of Rs. 16,50,000/- (Rs.25,50,000/- - Rs. 9,00,000/-) should not be treated as undisclosed sales proceeds in respect of plot No.138 referred to above. The assessee vide his reply dated 27.12.2013 submitted as under : "That initially the property being a flat I building B-38 was agreed to be sold to Dr.K.S. Larzoo for a total consideration of Rs. 25,50,000/ - the said flat was to be sold fully furnished with modern amenities. That eventually it was agreed interse the parties to amend the said agreement to the extent that the property shall be sold in a raw manner and so the said consideration was reduced to Rs. 9 lacs the payment of which stands received by the assessee through account payee cheques which were duly deposited by him in Vijay Bank the copy of which has already been placed on record. As the consideration of Rs. 9,00,000/- was only received and the same has been subjected for taxation no question of the same being treated as unexplained arises at all. Copy of the registry in respect of the same is being placed on record perusal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i, ShimIa-9 on the above said plot. Contd...2 "Whereas the First party/seller/transferor has agreed to sell the ground floor of the said building, finished in all respect, as per the specifications attached in annexure-A with this agreement, signed by the parties of the above said flat built on plot no.38 Type-B, Lane-II, Sector-I, NEW Shimla,-9, H.P., plot area of about 118 sq.mts. having each slab area of about 825 sq, fts, and second party/purchaser is interested to purchase the said floor complete in al respect on the following terms and conditions. 1. That the first party/seller has agreed to sell and second party/purchaser has agreed to purchase the said property for a total consideration of Rs. 2550000 only (Rupees twenty five lakhs fifty thousand only). 2. That this agreement to sell has been entered into by the second party/purchaser on the first party/seller holding on that he, the seller is the absolute owner of the plot allotted by HIMUDA and is in possession of the aforesaid property with a subsist ting right to make the transfer/sale in the name of the second party/purchaser and the above plot is not in any manner encumbered, mortgaged or charge with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the above property in question is free from all sort of liens encumbrances litigation dispute of every nature and any of these are found to be incorrect the First party will indemnify the second party against all loses claims and damages arising on this account. 10. That the First Party/ seller ere by under takes an agree to sign all relevant documents for the transfer of ownership of the said property in favor of the second party purchaser, here by agree to sell in all other authorities and all records. 11. That the second party/ Purchaser will get his own water, electricity connections and the First Party/ Seller will provide NOC from the concerned authorities, along with completion certificate for the same. 12. That First party shall deposit all the previous and outstanding dues if any and get the permission to sell the said second floor from the H.P Housing and UDA Nigam Bihar, Shimla-2. The copy of the convenience deed as registered with sub registrar Shimla, Permission to sell from the H.P Housing and UDA and copy of possession letter or other relevant papers shall be delivered to the second party by the First party at least 7 days before the full and final payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the building built on the plot no. B-38 Type B measuring 118.3 sq meters...." 29. Further, para 10 of the sale deed reads as under: "That the purchaser has right to construct the said floor according to the approved map and also have the right to make addition/ alteration inside the said property hereby sold without causing any damage to the basic structure of the building and the seller will not change the outlook of the said building." 30. From the above, it is clear that the property agreed to be sold and the property actually sold were not the same. According to the learned counsel for the assessee, the property agreed to be purchased and the property sold are entirely different in nature, which is the sole reason for decrease in the sale consideration amount. The copy of the sale deed is available at pages 49 to 59 of assessee's Paper Book. After perusing the agreement to sell and the sale deed, we are of the view that there is a merit in the submissions made by the learned counsel for the assessee. There is no material on record to controvert the above contention of the learned counsel for the assessee. The Revenue has also not proved that the assessee had received more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( Appeals) is not justified in upholding the addition of Rs. 6,65,000/- as income from undisclosed sales proceeds on account of sales of flat to on Dr Harjinder Singh." 37. The Assessing Officer noted that two agreements to sell in respect of property, dated 6.6.2007 for Rs. 24,65,000/- and dated 1.8.2009 for Rs. 18 lacs between the assessee and Dr.Harjinder Singh were found during the course of search. The explanation of the assessee was that the property was eventually sold at Rs. 17,70,000/- and commission of Rs. 30,000/- was also paid. The conveyance deed dated 16.10.2009 was filed before the Assessing Officer. The Assessing Officer was not convinced with the explanation of the assessee and, therefore, the difference of Rs. 6,65,000/- (Rs.24,65,000/- - Rs. 18,00,000/-) was treated as undisclosed sale proceeds for the year under consideration and the same was added to the total income of the assessee. 38. On appeal, the learned CIT (Appeals) confirmed the addition and, hence the assessee is in appeal before the Tribunal. 39. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has not given any plausible explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the deposits made in the said account is being narrated as under- Date Amount Narrations 04/08/2009 Rs.145784 The same represents the depositing of the closure proceeds of RD and the copy of certificates issued in respect of the same is being placed on record for your kind perusal. 29/12/2009 Rs.49000/- The same was deposited out of the money withdrawn on 19/12/2009 which was not spent. 02/02/2010 Rs.30000/- The same was deposited out of the money withdrawn on 19/12/2009 which was not spent. 06/07/2010 Rs.3333/- Interest credited by the bank 05/01/2011 Rs.1969/- Interest credited by the bank 45. The Assessing Officer allowed a relief of Rs. 1,18,996/- and treated the balance amount of Rs. 1,26,788/- as unexplained cash credits under section 68 of the Act. 46. On appeal, learned CIT (Appeals) confirmed the addition. 47. We have heard the rival submissions. The learned counsel for the assessee invited our attention to copy of bank certificate dated 22.2.2013 which is placed at page 93 of assessee's Paper Book. The certificate reads as under : TO WHOM IT MAY CONCERN It is certified that a ULY account No. 68/36 was opened on 5.6.2003 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
