TMI Blog2019 (3) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 17 crores. However, the A.O. has rejected this notings by observing that loss of ₹ 4 crores is not actually a loss, since unsold stock has not been included in this calculation which has been done on the front page where the figure arrived is ₹ 4.62 crores. Submissions of the assessee that loose sheet scribbling are merely estimates and de hors any corroborative evidence, the additions solely based on these loose sheets scribbling cannot be made has considerable cogency. The said loose sheet was found from the residence of one of the partners. It does not mention the name of the assessee firm directly or indirectly. Moreover, the said notings are also not claimed to be recorded in the handwriting of Shri Shankarlal Virji Thakkar or any other partners of the assessee firm. In this regard, we place reliance upon the Hon'ble Apex Court decision in the case of CIT vs. P. V. Kalyanasundaram [2007 (9) TMI 25 - SUPREME COURT OF INDIA], wherein it was held that the addition solely based upon loose sheets scribbling de hors any corroborative findings, is not justified. We hold that the additions based upon selective scribbling in rough note de hors any corroborati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)-11, Pune erred in reducing the addition from ₹ 9,54,00,000/- to ₹ 4,26,00,000/- on account of unexplained and unaccounted receipts as reflected in seized papers by not appreciating the facts that if there is any transaction on the seized papers it is the duty of the assessee to explain the same along with supporting documents. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A)-11, Pune erred in deleting the addition to the extent of ₹ 5,28,00,000/- on the basis of profit being reflected in the seized papers without appreciating the facts that the assessee has not submitted any supporting evidence of expenses and without the same set-off for expenses could not be given. 3. The appellant prays the order of the Ld. CIT(A)-11, Pune, may be vacated on the above mentioned issues and that of the assessing officer be restored. 4. Brief facts of the case are that the assessee is engaged in the business of construction and development of Real Estate. The assessee firm is part of Thakkar Group on which search action u/s. 132 was conducted on 22.2.2012. The assessee is a partnership firm engaged in the business of builder, developer cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the above notings. Vide ordersheet dated 18.3.2015, it was specifically proposed to add undisclosed sales of ₹ 5.22 crores 85 cash component of ₹ 4.32 crores being undisclosed sales 85 undisclosed cash component received by the assessee. In response the assessee attended on 20.3.2015 and requested for adjournment to submit his reply as his close relative was suffering from blood cancer. Following the principle of natural justice, the hearing was adjourned to 24.3.2015. During the course of hearing on 24.3.2015, the assessee was also asked to submit the following details in respect of project Prime Mall - a) Copy of all sale agreements entered till date b) Commencement occupation certificate c) Details of sold unsold units d) Details of parking allotted sold However, on the date of hearing, i.e. on 24.3.2015, none attended nor any details were received from the assessee. The assessee has also not submitted any reasons for non-attendance non-submission of required details. In view of the above circumstances, the assessment is completed on the basis of the above discussion observations made in the preceding paras. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to possess or own property. This is the only way presumption provided u/s 132(4A) can be understood in the context of a partnership firm, The appellant's objection is therefore rejected and it is held that the AO was right in law in holding that in the absence of any satisfactory explanation by the appellant or Shri Thakkar to the contrary, the said seized papers can be presumed to be belonging to the appellant and their contents may be accepted as genuine and true. 8. The presumption u/s 132(4A) is rebuttable one. It can be examined whether the appellant has -satisfactorily explained away the contents of the seized papers to rebut the presumption. The records show that in his first statement recorded during the search shri Thakkar practically refused to give any cogent explanation regarding the contents of the seized papers as can be seen from answer no 15 and 16 of his statement u/s 132(4) dated 22/2/2012. Shri Thakkar disowned the papers by stating that as he is a social worker many persons visit him and he can not say what the seized papers are about. It is exactly to deal with this type of stonewalling by the persons searched that the presumption u/s 132(4A) has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mated figures. Hence, it can be presumed that this documents may pertain to some of the project proposal received by my aforesaid client wherein the sales have occurred in two stages 1 2, the unsold stock of the said project and the cost incurred on the said project along with the expected profit. 10. It is not surprising that the AO was not satisfied with this explanation. Instead of telling the AO what the paper was about, the appellant tried to explain what it was not. This is not a way to rebut the presumption cast u/s 132(4A). 11. In the course of appeal proceedings the appellant has filed an affidavit from shri Thakkar in which he has denied any connection with the seized papers. The affidavit is merely a self serving document cannot be relied upon.his again is not a way to rebut the presumption u/s 132(4 A). 12. Contrary to what the appellant has stated in the above letter, :~e seized paper does contain details of the Prime Mail project. The area mentioned in the seized papers ie 14026 sq ft roughly corresponds to the saleable area of the Prime Mail. The mall is indeed a structure having ground plus four floors. As regards the expenditure and income recorded on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant is that the profit if any arising from the project cannot be taxed in the year under appeal as the project was completed in the following asst year. The appellant claims to be following project completion method and as there were no sales during the year, no profit can be taxed. I cannot agree with this contention of the appellant. It is seen that though the appellant had filed nil return for the asst year under appeal, it had worked out profit from the project in its books of accounts. As per the profit and loss account submitted with the Return, the appellant had shown profit of ₹ 11,06,066/- before depreciation and interest. The net profit after depreciation and interest was nil and hence the return was filed at Nil. If we substitute the figures of income as shown in the audited accounts with the actua figures as recorded in the seized papers, the disclosed profit would be ₹ 4.26 cr as per the method of accounting followed by the appellant. Thus the profit from the project could be worked out in the asst year under appeal even as per the appellant's audited accounts. 19. Even if we accept that the appellant was following project completion method, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers record undisclosed income of the assessee firm more so when the said notings are not recorded in the handwritings of Mr. Shankarlal Thakkar or any other partners of the assessee firm. It was further stated that the AO had copies of all financial statements for the earlier assessment years and he could not identify even one transaction recorded in the seized papers to match with the entries in the books of account of the assessee firm. 4. Without prejudice to the aforesaid and without admitting, it was further submitted that the addition of undisclosed income could not be made in the A.Y. 2012-13 as the project of constructing commercial buildings called 'Prime Mall' at Kharghar, Navi Mumbai, was completed on 25th March, 2013 when the firm had received the Occupation Certification from CIDCO. Therefore, the project income would be liable to tax only in the previous year relevant to A.Y. 2013-14 as the assessee firm is following the Completed Contract Method . In the assessment order u/s. 143(3) of the Act for A.Y. 2014-15 the A. O. has accepted the completed contract method followed by the assessee firm (see page 76). It was further submitted that as the project wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid addition of ₹ 4.26 crores, the assessee firm is in appeal before the Hon'ble Appellate Tribunal. In this respect, it is submitted that it cannot be disputed that the seized paper page No.9 contains estimated figures and secondly, it refers to the project which on completion and on complete sale might generate profit of ₹ 4.26 crores. . Therefore, the estimated figures in the loose papers cannot be the basis for determining the income of the assessee firm more so when it is not in dispute that the project of the assessee was completed on 251 March, 2013 and not in the year ended 31st March, 2012. Secondly, the assessee firm has not been able to sale all the premises in the building constructed by it and about 45% of the premises are unsold as on 31st March, 2018. It is, therefore, submitted that the final profit on completion of the project is not determinable as of date. It is, therefore, submitted that the profit of ₹ 4.26 crores, as per the seized paper, can be taxed in the hands of the assessee only if it can be proved that the project referred to in the seized paper is completed and completely sold in the year under consideration. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art giving details for the A.Ys. 2012-13 to 2018-19 which is at page 133 of the paper book (Vol.-II). It is, therefore, submitted that the addition confirmed by the Commissioner (Appeals) of ₹ 4.26 crores being the profit on completion of project is incorrect and contrary to the facts on the record of the A.O, and the same may be deleted. 7. At this juncture it is also required to be noted that the figure of 4.26 cr. because the said figure is arrived at by adding payment balance of ₹ 1 cr. as the gross sale figure of ₹ 9.54 cr. is inclusive of the from purchasers. 13. Thereafter, the ld. Counsel of the assessee referred to several case laws: 1. Asst. CIT vs. Shailesh S. Shah (63 ITD 153 Mum) 2. Rajpal Singh Ram Autar vs. ITO (39 TTJ 544, Del) 3. ACIT vs. Dr. Kamla Prasad Singh (2010) 3 ITR (Trib.) 533 (Patna) 4. Nem Chand Daga vs. ACIT (2005) 1 SOT 515 (Delhi) 5. CIT vs. Praveen Juneja (ITA No. 56 of 2017 dated 14th July, 2017) 6. ACIT vs. Satyapal Wassan (295 ITR 352 (Jabalpur-Trib) 7. DCIT vs. M/s. Raj Homes S. V. Group (in ITA No. 2408/Mum/2017) 14. As regards the Revenue s appeal, the ld. Counsel of the assessee s submissions r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing over of the possession of the premises sold in the building constructed by the assessee firm. 16. It appears that when the seized papers were prepared sometime in the year 2011 or 2012, the assessee firm had entered into various agreements with various purchasers for sale of the premises in the project. However, some of the agreements were not registered. Therefore, those agreements which were registered were included in the list known as 1 , the details of which are at page-6 of the paper book. On perusal of page 6, it will be seen that as on 31st March, 2012, the assessee firm had executed and registered various agreements for which aggregate agreement value was ₹ 4,96,25,3007-. Similarly, on 31st March, 2012, there were agreements executed but not registered, the details of which are at page-7, and the aggregate agreement value of such agreements (not registered) was ₹ 4,85,05,5387-. These agreements appear to have been shown in the list known as 2 in the seized paper. 17. It is, therefore, submitted that the presumptions and allegations of the AO that the assessee firm had received cash of ₹ 4.32 crores are neither borne out by the record of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of on money were added to the total income of the assessee. 16. Upon careful consideration we find that the addition in this case is a result of search conducted wherein loose sheet being page no. 9 and scribbling in front of the said page is the sole basis. While analyzing the scribbling as mentioned in the order of the A.O. reproduced in para 5 above, the A.O. has considered that it reveals undisclosed sales of ₹ 5.22 crores and cash component of ₹ 4.32 crores which has been added to the income of the assessee. The ld. CIT(A) while considering the issue has noted that the scribbling in the said front side of page no. 9 show that the disclosed profit would be ₹ 4.62 crores. Hence, he was of the opinion that only ₹ 4.62 crores can be added and no further addition is justified. In this regard, we note that the A.O. in his order has noted that on the reverse side of page no. 9, the assessee has noted sales of ₹ 5.82 crores. That the assessee has recorded sales of ₹ 4 crores based on total expenses of ₹ 17 crores. However, the A.O. has rejected this notings by observing that loss of ₹ 4 crores is not actually a loss, since un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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