TMI Blog2019 (3) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... OMPANY [2014 (11) TMI 806 - GUJARAT HIGH COURT] and thus in the given facts and circumstances of the case, we are of the considered view that there was no justification in making addition for unaccounted payment of ₹ 1,30,53,000/- paid to the Thakur Family towards ‘On- Money’ for land development project when ‘On-Money’ received from sale of plots have been subjected to tax at net profit rate of 25%. Disallowance u/s 40A(3) - assessee has incurred cash expenses over and above ₹ 20,000/- - HELD THAT:- Looking to the request of Ld. counsel for the assessee for setting aside the issue which goes opposed by the revenue authorities. We direct the Ld. AO to examine this issue of disallowance u/s 40A(3) of the Act for various expenses incurred in cash afresh after providing necessary opportunity to the assessee for filing documents and evidence in support of its claim that no disallowance is called for. Accordingly this issue for disallowance u/s 40A(3) of the Act is allowed for statistical purposes. - ITA(SS) No.175 to 177/Ind/2017 - - - Dated:- 12-2-2019 - MR KUL BHARAT, JUDICIAL MEMBER AND MR MANISH BORAD, ACCOUNTANT MEMBER For the Revenue : Smt. Ashima Gupta, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y received by the assessee. The determination of the said amount of ₹ 3,09,80,760/- is arbitrary and presumptuous. 3. That in any event the Ld. CIT(A) was not justified in sustaining the entire addition of ₹ 3,09,80,760/- without computing the element of actual profit and deduction of expenses therein and without considering the relevant judicial matrix cited before the CIT(A) in the matter of CIT v. Balchand Ajit Kumar 263 ITR 610 (MP). 4. That the Ld. CIT(A) was not justified either in law or on facts in sustaining the addition of ₹ 1,30,53,000/- made by the Ld. AO as alleged unaccounted cash payment made to the Thakur family without considering that the facts and documents on record clearly showed that the said amount was paid out of the on-money receipts as share of the Thakur Family . 5. That without prejudice to the aforesaid grounds, cumulative effect of Income offered in the return of income filed u/s 153A of the Act by the group plus the offered for tax before the settlement commission by the group plus the income added in the hands of group entities and finally sustained should have been considered to arrive at a holistic is done then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved upon the assessee on 30.6.2014. Questionnaire along with notice u/s 142(1) was duly served upon the assessee on 4.8.2014. Assessment were completed adding various additions on account of suppression, unexplained expenditure, unexplained investment and disallowance u/s 40A(3) of the Act at ₹ 1,08,40,970/-, ₹ 5,18,15,540/- and ₹ 1,31,01,170/- for the Assessment Years 2009-10 to 2011-12 respectively. Aggrieved assessee preferred appeal before Ld.CIT(A) and partly succeeded. 4. Now the assessee is in appeal before the Tribunal for A.Ys. 2009-10 to 2011-12 5. Common issue raised in ground No.1 in all three appeals is general in nature and Ld. counsel for the assessee has requested for not pressing the same, therefore, this ground no.1 is dismissed as not pressed. 6. Next common issue raised in ground no.2 3 of respective three appeals related to addition for On Money of ₹ 96,76,800/-, ₹ 3,09,80,760/- and ₹ 50,96,575/- for Assessment Year 2009-10 to 2011-12 respectively. 7. Brief facts relating to this issue are that during the course of search at Apollo Group on 21.09.2012 various incriminating material found were seized which als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I.T.A.T. Ahmedabad Bench. (vi) CIT bs. President .(2002) 258 ITR 654 (Gujarat HC) 12. Per contra Learned Departmental Representative vehemently argued and supported the orders of lower authorities. 13. We have heard rival contentions and perused the records placed before us. For all three assessment years i.e 2009-10 to 2011-12 common issue raised by the assessee, in Ground No. 2 3 is for the additions confirmed by Ld. CIT(A) of On-Money of ₹ 96,76,800/-, ₹ 3,09,80,760/- ₹ 50,96,575/- received from buyers for plots/row houses in the project undertaken by the assessee in the name of Pumarth Park Pumarth Meadows . Both the lower authorities have confirmed addition for gross amount of On-Money received from the projects run by the assessee. 14. Ld. counsel for the assessee has filed extract of the statement given before Income Tax Settlement Commission (in short ITSC) for the other group concerns as well as the submissions made for the assessee company which was later on rejected by the Income Tax Settlement Commission. In this submission, the assessee has disclosed gross receipts and has also claimed the expenses incurred on the project w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment. These facts were pointed out to the AR of the applicant during the hearings before the Commission, during the hearing on 26.4.2016, the applicant after considering the above factors came forward in a spirit of settlement to offer the corresponding unaccounted portion of the receipts on its 540% share of sale to which it was entitled under the Agreement with Garha Group. The disclosure made by the applicant on account of unaccounted receipt from the Gold-Green project amounts to ₹ 25,00,000/- on which taxable income has been worked out after applying a net profit rate of 25% which amounts to ₹ 6,25,00,000/-. A letter dated 26.4.2016 to this effect filed by the applicant is placed on record. The year-wise working made by the applicant gives the details of additional income in the project Golf-Greens by estimating profit at the rate of 25% on estimated unaccounted (difference in deal rate of plots sold by Applicant and Garha Group )as under: A.Y. Area sold (Sq. Feet Difference in sales rate (per sq feet Estimated unaccounted receipts (rounded off) Estimated net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent-assessee is engaged in the business of construction. During the subject assessment year the respondent-assessee undertook construction of a project called Prime Mall. However in its return of income filed for the subject assessment year the respondentassessee did not disclose any profit on its above project as it was following the Project Completion Method. ( b) On 20th April, 2006 there was a search on the respondent assessee under section 132 of the Act. During the course of the search it was found that during the previous year relevant to assessment year under consideration it was found that the respondent-assessee had sold 14 units in its prime Mall project and received 65% of the total sale consideration as On-Money . Consequent to the search, the respondent-assessee contended that in the subject assessment year no income is chargeable to tax as it is following the Project Completion Method of Accounting. Therefore the profit, if any, would be subject to tax on completion of the project which takes place only for the A. Y. 2006-07(90%) and A. Y. 2007-08. The Assessing Officer by an order dated 30 th December, 2008 did not accept the respondent's conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit arrived at by the authorities is a question of fact and if the material on record does support the estimate arrived at by the Tribunal then it does not give rise to any substantial question of law (see CIT vis. Piramal Spinning and Weaving Mills Ltd. 124 ITR 408). In this case, we find that the net profit estimated at 17.08% is a very possible view on the facts found. ( c) Hon'ble Supreme Court in Income Tax Officer v. Annand Builders SLP (C) No. 14166 of 2003 The Gujarat High Court dismissed to Department's appeal on the ground that no substantial question of law arose from the order of the Tribunal directing the AD to tax only 8 per cent of the unaccounted 'on money' receipt instead of fully taxing it. The Hon'ble Gujarat High Court in the case of CIT v. President Industries [2002] 258 ITR 654 : 124 Taxman 654 held dismissing the application for reference, that the amount of sales could not represent the income of the assessee who had not disclosed the sales. The sales only represented the price received by the seller of the goods; only the realisation of the excess over the cost incurred could form part of the profit included in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search in one of the excel sheet in the name of Pumarth Parth /Thakur Family details of cash payment made to Thakur family as on 05.12.2009 was found, as per which cash payment of ₹ 1,30,53,000/- was given as unaccounted money towards purchase of land. In the very same sheet details of payment by cheque totalling to ₹ 3.75 crores was also found. Addition for this unaccounted payment of ₹ 1,30,53,000/- was made and the assessee could not succeed in getting relief from the ld. CIT(A). As she Ld. CIT(A) only referred to the application given by the assessee before Income Tax Settlement Commission. 22. Now the assessee is in appeal before the Tribunal. 23. We have heard rival contentions and perused the records placed before us and also gone through the judgments relied by the ld. counsel for the assessee in the written submissions. The issue relates to addition for unaccounted payment of On-Money of ₹ 1,30,53,000/- to Thakur family. We observe that the assessee started a project in the name of Pumarth Park. In this project land was owned by Thakur Family and the agreement was entered with the assessee company to develop the property with the Thakur Fami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons on the part of the Respondent-assessee, she not only failed to examine it properly but also failed in assessing the income as per law. Further, though, the AO, herself, had prepared the account of profit and loss in respect of accounted and unaccounted entries, she did not assign any reason, as to why the profit and loss account of unaccounted transactions of the Respondent-assessee cannot be believed to be true. Moreover, the AO also did not take into consideration the explanations tendered by the Respondent-assessee vide letters dated 10. 12.2008 and 29. 12.2008. Even, the working of the peak based on the seized diary given by the Respondent-assessee for the concerned assessment years was also overlooked by the A 0 and, here again, no reason was assigned for the same. We are, therefore, of the opinion that the CIT(A) rightly held that it would be just and proper, if, the income from the transactions recorded in the seized diary are determined on the basis of highest peak, as increased by the net profit of 5% on the receipts and taxed accordingly, for the relevant assessment years. We do not find that the CIT(A) and I.T.A.T. has committed any jurisdictional error in passing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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