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Mr Anil Bansilal Lodha Versus Asstt. Commissioner of Income-tax, Cen. Cir. 2, Nashik

2012 (2) TMI 637 - ITAT PUNE

ITA No. 132/PN/07 - Dated:- 29-2-2012 - SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER For The Appellant : S/Shri Sunil Pathak & Nikhil Pathak For The Respondent : Shri S K Singh, CIT ORDER PER G.S. PANNU, A.M: This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-I, Nashik dated 29.11.2006 which, in turn, has arisen from order dated 28.10.2004 passed by the Assessing Officer, under section 158BC read with section 143(3 .....

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2(1) of the Act was carried out at the residence-cum-office premises of the assessee on 9.10.2002. In the course of search, incriminating documents, books of account, etc., were found and seized and statements under section 132(4) of the Act of the assessee and some of his employees were also recorded. 3. In the above background, the Assessing Officer issued notice under section 158BC of the Act requiring the assessee to file a return of undisclosed income for the above-stated block period. In r .....

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peal before the Commissioner of Income-tax (Appeals) who has since dismissed the appeal of the assessee. Not being satisfied with the order of the Commissioner of Income-tax (Appeals), the assessee is in further appeal before us on various Grounds of appeal as under: 1. On the basis of facts and in the circumstances of the case, the ld CIT(A) 1 Nashik is not justified in confirming the addition of ₹ 32,57,322/- on account of n money instead of profit. He is further not justified in rejecti .....

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tra work by the appellant is not proved by the appellant when the statement of the persons from whom the extra amounts were received were recorded by the AO during the course of assessment proceedings for the block period and the said persons have categorically confirmed that the extra money was paid towards extra work done. 3. On the basis of facts and in the circumstances of the case, the ld CIT(A) 1 Nashik is not justified in confirming the addition of ₹ 11,64,015/- on account of on mon .....

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h action. He is further not justified in considering the said seized registers in part favour to him. 5. On the basis of facts and in the circumstances of the case, the ld CIT(A) 1 Nashik is not justified in confirming the addition of ₹ 16,47,873/- on account of undisclosed machinery hire charges without appreciating the actual fact of the case that the statement of machinery hire chares was prepared by machinery division as were the terms or practice of said division whereas the accountin .....

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is of facts and in the circumstances of the case, the ld CIT(A) 1 Nashik is not justified in confirming the stand of the AO of ignoring the information collected by the AO under the independent inquiries u/s 131 of the Act from the parties from whom the undisclosed on money as well as machinery hire charges are allegedly shown to be received by the appellant. He is further not justified in alleging that the impugned transactions are also kept outside by the said parties and no businessman shall .....

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er authorities were not justified in holding that the entire amounts are liable to be taxed as income. With regard to the aforesaid issue, an Additional Ground of appeal has also been raised, which reads as under: The ld CIT(A) ought to have allowed deduction of unaccounted expenditure incurred by the assessee out of the on money/extra work charges received by the assessee. 5. By way of the Additional Ground of appeal, the claim of the assessee is that it is entitled to some deduction on account .....

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he gross amount of on-money receipts found at the time of search cannot be assessed as undisclosed income, without allowing benefit of the expenses incurred against such receipts. 6. The learned CIT-Departmental Representative, appearing for the Revenue, has not disputed the aforesaid factual matrix asserted by the appellant, while submitting the case of the Revenue on the issue of admission of such Additional Ground of appeal. 7. Having heard the rival Counsels and considering the nature of dis .....

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the course of search, 3 diaries were found which related to booking and sale of flats and shops by the assessee with regard to Gopal Nagar Project and Swastik Niwas Projects. The Gopal Nagar Project consisted of 5 buildings and Swastik Niwas Project consisted of 2 buildings. The diaries found indicated receipt of on-money for sale of flats and shops undertaken by the assessee with regard to the aforesaid 2 projects. The diaries found revealed that assessee had received monies from customers, whi .....

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ops in respect of the 2 projects. Simultaneously the claim of the assessee was that the said receipts, which were over and above the consideration stated in the sale deeds, were on account of some extra work carried out for the respective customers and in doing so, assessee had incurred some expenditure, which was required to be deducted while computing undisclosed income on account of on-money receipts. The aforesaid plea was rejected by the Assessing Officer. Firstly, the Assessing Officer com .....

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asis of the diaries at ₹ 44,21,337/-. 9. In appeal, the assessee challenged the aforesaid addition on twin grounds. Firstly, it was asserted that the correct amount of on-money receipts was only ₹ 32,57,322/- and not ₹ 44,21,337/- as computed by the Assessing Officer. Secondly, it was agitated that the entire amount of onmoney receipt could not be assessed as undisclosed income as the assessee had incurred certain expenditure against such receipts and it is only the net amount .....

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search material and, therefore, it did not need any interference. In this manner, both the pleas of the assessee were dismissed against which assessee is in further appeal before us. 10. Before us, the sum and substance of the plea set-up by the assessee is that the addition of ₹ 44,21,337/- on account of on-money receipts is not at all justified, since the entire receipt cannot be considered as assessable income. With regard to the expenditure having been incurred on such unaccounted on- .....

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ngs assessee brought to the notice of the Assessing Officer that even the search material contained details of certain expenditure incurred against the unaccounted onmoney receipts and, therefore, for both the above reasons, assessee pointed out that the incurrence of expenditure against unaccounted on-money receipts is apparent from record. In this connection, reference was also made to page 194 of the Paper Book wherein is placed copy of a letter dated 15.10.2004 addressed to the Assessing Off .....

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out that the on-money receipts have been found to be unaccounted and, therefore, the amounts have been justifiably assessed as undisclosed income. Even with regard to the claim of deduction of certain expenses incurred against such on-money receipts, the leaned Departmental Representative opposed the plea of the assessee by pointing out that said amounts are unverifiable and indeterminate. 12. We have carefully considered the rival submissions. Before we proceed tyo adjudicate the substantive pl .....

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y of detailed discussion in paras 11.6 and 11.7 of the assessment order, the determination of on-money receipts have been made at ₹ 44,21,337/-. In the course of the hearing before us, the learned Counsel referred to various pages of the diary seized to point out the discrepancies in adoption of figures by the Assessing Officer in this regard. Having considered the submissions on this point, we are not inclined to deviate from the amount determined by the Assessing Officer which is based o .....

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e very beginning at the time of recording of statement under section 132(4) of the Act, assessee has sought to put across that the entire amount of on-money receipts cannot be considered as income for certain expenses have also been incurred against same. Assessee had explained even during the assessment proceedings that in some cases, assessee had received onmoney against extra work to be performed for the customers; that in carrying out such extra work, assessee was required to incur certain e .....

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much as it was also spent on respective projects and in fact it was stated that the same was not lying with him. Further-more, even during the assessment proceedings, as has been pointed out by the Counsel for the appellant, it was asserted that the search material itself shows certain unaccounted expenditure having been incurred. In this connection, our attention was invited to page 197 of the Paper Book wherein is placed a copy of paper seized which shows details of expenditure incurred on con .....

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d by the assessee against the on-money receipts. We are only evaluating the justifiability of assessee s claim that seized material not only showed receipt of unaccounted on-money against sale of flats/shops, but also reflected unaccounted expenditure incurred for the projects. On the basis of assertions made by the assessee consistently since the beginning and also assessee s pointing out of instances from the seized material, we find that the claim of the assessee cannot be brushed aside. In-f .....

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s of the project. 14. In so-far-as the quantum of such expenditure incurred is concerned, it is correct that the same does involve an element of estimation since exact determination is not feasible. The learned Counsel for the assessee pointed out that the Pune Bench of the Tribunal in somewhat similar situation in the case of DCIT v M/s Bakre Construction, Pune, vide order 23.11.2007 in ITA No 869/PN/02, etc., has held that undisclosed income can be estimated at 25% of the receipts. Further rel .....

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e applied in the present case, inasmuch as the business in the case of M/s Bakre Construction (supra) was similar to that of the assessee. 15. The learned CIT-Departmental Representative has contended on this aspect that the extent of undisclosed expenses is an estimate required to be done which would tantamount to element of guess-work while assessing the undisclosed income, which is not feasible. 16. Having considered the rival submissions on this issue, we find that no doubt there is no evide .....

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precedent, the Tribunal confirmed the order of the Commissioner of Incometax (Appeals) whereby undisclosed income was estimated at 25% of the gross on-money receipts. Considering the entirety of the circumstances of the present case, and the quality of evidence available, we find that estimation of income assessable on account of on-money receipts in the present case be adopted at 30%, which would meet the ends of reasonableness and justice. Thus, on this aspect, assessee partly succeeds. Accor .....

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part of this order, the diaries seized pertained to two projects, namely, Gopal Nagar Project and Swastik Niwas Project consisting of 5 buildings and 2 buildings respectively. The diaries found contained details of the flats/shops sold in the 7 buildings of the aforesaid two projects. It is discernible from the record that in respect of a building Jeevan Deep of Gopal Nagar Project, there were total 18 flats as can be seen from page 106 of the Paper Book. The said seized material showed the deta .....

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of other flats in the projects, similarly even in the case of those flats/shops wherein no such onmoney was recorded, the assessee must have received on-money for such cases also. The Assessing Officer has calculated the percentage of on-money collected by the assessee for flats/shops as per the seized diary and applied the said percentage to the declared consideration of other flats/shops and, in this manner, arrived at a sum of ₹ 37,80,290/- which, according to him, reflected on-money r .....

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arned Counsel for the assessee submitted that the lower authorities were not justified in estimating further on-money receipts in respect of flats and shops for which there was no evidence found during the course of search. In fact, according to the learned Counsel, the seized diaries contained detail of all the flats/shops sold indicating therein not only the declared consideration, but also the unaccounted consideration and, therefore, in cases where no unaccounted consideration was found reco .....

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he seized material was incomplete so as to justify estimation, or it was a case where the estimation was otherwise justified. In the present case, there was no justification to assume that the assessee would have received on-money even in cases where NIL on-money has been recorded in the seized material. 19. On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below in support of the case of the Revenue. According to him, the assessee was found .....

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he flats/shops sold by the assessee in the 2 projects. The respective entries of each sale contain the consideration received by the assessee under various heads, including cases where unaccounted consideration has been received. In the said detail itself in some of the flats/shops sold there is no mention of any unaccounted consideration. The seized material contains details for individual sales thereby showing the name of the customer, title, sale consideration, agreement cost, amounts receive .....

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nsideration. Quite clearly, it is a case where the facts justify the inference that on-money has not been received in sale of all the flats/shops. In fact, in cases where the amount has been assessed as on-money receipts, same corresponds to amounts found to have been written in such seized material. Therefore, in cases where there are no entries of unaccounted consideration in the very same material there cannot be a presumption to the contrary. Thus, in our view, the Assessing Officer was not .....

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of sales was found for a period of 19 days and on that basis, it was presumed that suppression of sale would have occurred in the balance period also. Therefore, the estimation for the balance period was upheld In fact, in the present case there is no such fact-situation, inasmuch as the same seized material reflects receipt of on-money in the sale of certain flats/shops and in the sale of other flats/shops same seized material reflects no receipt of onmoney Therefore, in the face of complete r .....

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the factual position in the present case stands on an entirely different footing and, therefore, in our view, the ratio of judgments of aforesaid cases does not apply to the present case. Therefore, in the end, we conclude by holing that the lower authorities were not justified in making the impugned addition of ₹ 37,80,290/- on account of estimation of on-money receipts. In the result, we set-aside the order of the Commissioner of Incometax (Appeals) and direct the Assessing Officer to de .....

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