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2018 (4) TMI 787

allegedly for the five specific properties which had not been reflected and recorded in the regular books of accounts of the assessee. The consistent stand of the assessee is that records have been destroyed after the deals were done as would be evident from the specific question No.6 put by the Investigation Wing to the assessee. The transaction as per reply to question No. 5 was also through irregular market brokers whose addresses had not been retained and records were also not retained. The surrender, admittedly was on account of the property transactions. In the face of the material available on record where the surrender is made on account of seized documents and the stated business of the assessee being only real estate business we find no good reason to vary the conclusion arrived at by the Ld. CIT-A. Being satisfied with the consistent explanation offered on behalf of the assessee which stands unrebutted and considering the legal position thereon the departmental ground is dismissed. - Acting on the apprehension that there may be certain other documents which may demonstrate that surrender amount was not adequate in the peculiar facts and circumstances of the present .....

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ome u/s 69 of the I. T. Act, 1961 assessed by the AO. 4. The ld. CIT-DR relying upon the assessment order submitted that the order of the CIT(A) on facts qua the sole issue of the Revenue may be reversed upholding the finding arrived at in the assessment order. Reliance was placed upon the decision of the jurisdictional High Court in the case of Kim Pharma relied upon by the AO. 5. The Ld. AR, on the other hand, submitted that search and seizure operation under section 132 of the Act was carried out on 04/10/2012 on the business and residential premises of M/s Steel Strip s group of cases. In the said background the assessment order dated 27/03/2015 was passed under section 153B (1) (b) read with section 143 (3) of the Income Tax Act, 1961 (in short Act ) pursuant to the return of income filed under section 139 on 23/09/2013 declaring a net income of ₹ 15,77,16,367/-. 5.1 Inviting attention to para-4 of the assessment order, it was submitted that the assessee participated fully in the proceedings and made all the relevant information available supported by bills and vouchers. Referring to para-5.1 of the order it was submitted that the assessing officer takes note of the fact .....

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he total of the figures it was noted by the assessing officer is ₹ 11 Crores. The assessee was confronted with this document and his statement was recorded on 05/10/2012. The relevant extract reproduced from the assessment order was read out. For ready reference the same is reproduced hereunder… A perusal of the document reveals that it has the heading SAB Industries and contains certain entries of names with figures written in front of them. The total of the figures in front of these names is ₹ 11 crores. The assesses, Sh. R.K. Garg was confronted with this document in his statement recorded on 5/10/2012, the extract of which is being reproduced as follows: Q.4 I am showing you P.No. 8 of Annexure A-35, seized from the corporate office. Please explain? Ans.4 Sir, on behalf of SAB Industries, certain property transactions were undertaken whereby purchase and sale of property on bianas were made, and the company is to receive the profits on these transactions. These are the naem of five property deals, and the total receivable amounts is ₹ 11 crores. Q.5 Who are these parties. Are these transactions recorded in the books of accounts of the company? Ans. 5 Si .....

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owever, with respect to the other disclosure of ₹ 11,00,00,000/- made on account of real estate transactions, assessee s contention is not found to be acceptable. The contention of the assessee that the recoverable income of ₹ 11.00 crores is from real estate true but the fact remains that on the date of search, assessee had not recorded the same in its books of accounts and also admitted u/s 132(4) statement (through its promoter Sh. R.K Garg) that he had already destroyed the bianas, hence it was not possible for him to substantiate the manner of earning the same with documentary evidence. Hence, the assessee did not substantiate the same with documentary evidence even at the stage of assessment proceedings. Further, the assessee has taken it as part of it profit and loss account by treating the same as business income. However, this accounting treatment is not correct as the same being unaccounted, should be treated as deemed income of the assessee and be brought to tax in entirety without allowing any set off against the normal business losses. In other words, since, the surrendered income is over and above the normal business income, the same shall not be allowed t .....

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tiate the same with documentary evidence. (ii) The appellant has taken this income as part of its profit and loss account by treating the same as business income, which is not the correct accounting treatment and should be treated as deemed income of the appellant (iii) This surrendered income cannot be classified under any of the heads of income under section 14 of the act. (iv) Reliance was placed on Hon ble Punjab & Haryana High Court in the case of M/s Kim Pharma Pvt Ltd vs CIT Panchkula. (v) The surrendered income of ₹ 11 crores shall be considered separately and brought to tax in entirely as deemed income. Before deciding this issue, the judgment of Hon'ble High Court in Kim Pharma Pvt Ltd. needs to be discussed. It was held by the Hon'ble Court that the amount surrendered during the survey which was not reflected in books of accounts and no source from where it was derived was declared by the assessee and therefore it was deemed income of the assessee u/s 69 of the Act and corresponding deductions which are applicable to the income under any of these various heads will not be attracted in the case of deemed income which are covered u/s 69,69A,69B and 69C of .....

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ee was in the business of real estate which has been accepted by the assessing officer. On the specific aspect a specific query was raised by the Bench from the department also as admittedly search & seizure operation has been carried out, whether there was any other business of the assessee disclosed or undisclosed as to the nature of the assessee s business. In response thereto ld. CIT-DR submitted that the assessee is in the real estate business. The ld. AR reiterating this stated position submitted that once it is accepted that the assessee is engaged in the real Estate business which fact is accepted by the CIT-DR also in the said background it was his submission that whatever has been surrendered, has been surrendered from the activities of real Estate business only. Consequently, the insistence of the Revenue qua the ground raised by them that it is not the business income of the assessee cannot be accepted. It was also his vehement stand that the insistence that necessarily the manner is also required to be disclosed, it was submitted, is not what the Statute mandates. It was his submission that the same was from property business and on account of the fact the assessee .....

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g attention to Section 69A of the Act, it was submitted that the assessing officer has applied section 69 which talks of unexplained investment but even if Section 69A is considered it talks of unexplained money, bullion or jewellery etc. found not recorded in the books of account of the assessee, however in the facts of the present case, no money bullion etc. have been found or discovered. The addition, it was submitted, is purely on account of the surrender of the assessee. It was his submission that it is an admitted fact which has been admitted even by the CIT-DR also that the assessee is in the business of real estate and the assessee admits the fact and the manner of earning is evident that it is from real estate. No document relatable to it , it was submitted, has been found it has been accepted as business income by the assessee. As nothing has been found linking it to any article or thing inviting attention to the decision of the ITAT in the case of Gaurish Steel 43 ITR TRIB 414 it was submitted that Kim Pharma s decision has been distinguished by the ITAT in the said decision on which heavy reliance was being placed. 8. We have heard the rival submissions and perused the .....

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10. The sole issue agitated by the assessee in the present appeal by ground No. 1 in its appeal is the action of the assessing officer who has added the surrendered income as deemed income instead of business income of the assessee which action has been upheld by the CIT(A) who has also treated the surrendered income of ₹ 1,21,85,000/- as deemed income. The relevant facts qua the said issue have been addressed in paragraph 5.1 of the assessment order. Since it has already been extracted in the earlier portion of this order repetition is avoided. The specific reasoning of the assessing officer it is noticed has been addressed in paragraph 5.7 of his order. For the sake of completeness the same easy produced hereunder : 5.7 Also the assessee has surrendered an additional amount of ₹ 1,21,85,0007- to cover any other discrepancies found during the course of search and not recorded in the books of accounts. Since the assessee has not claimed this income against any specific document, and himself admitted the same, no adverse view is taken and this income is accepted as such. However, since it was surrendered other than the normal income so it shall also be treated as deemed .....

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the present case is contrary to facts and law. 13. The Ld. CIT-DR heavily relying upon the consistent orders of the tax authorities submitted that the addition as deemed income in the peculiar facts and circumstances of the present case deserves to be sustained. 14. We have heard the rival submissions and perused the material available on record it is seen that the assessee was subjected to search on 04.10.2012 and by the surrender letter dated 08/11/2012 as per facts extracted in the assessment order itself in para 5.1 the assessee made the surrender of the specific amount with the narration offered as business income to cover any discrepancies in all the seized documents is found and seized during the course of search, if any The said narration has been extracted in the assessment order itself. We find that in the peculiar facts and circumstances of the present case the occasion to treat the same as deemed income does not arise. The admitted facts on record are that the assessee had indulged in unrecorded sale transactions; the assessee had not retained the documents and the transactions were claimed to be through irregular brokers. Acting on the apprehension that there may be ce .....

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