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2019 (11) TMI 412

..... ent out of sale of property is depended upon the issue, whether the profit from sale of property is to be assessed as a business income or under the head “capital gain” from investments. In two years, this issue is subject matter of appeal before the Hon’ble High Court. Therefore, there is no justification for dealing them specifically in this assessment year. The Assessing Officer has to first determine, whether profit from sale of property is to be assessed as income from business/profession or under the head income from capital gains. In case it is determined that income from such activity is to be assessed under the head business income/profession, then the rate of profit be determined afresh. Accordingly, both these grounds of appeal are allowed for statistical purpose. Unexplained cash found at the time of search - HELD THAT:- Assessing Officer ought to have appraised himself status of cash flow in the books of these persons, and how they have owned up the cash in their accounts. He ought to have not disbelieved the version of the assessee without any analysis. We have already set aside two issues to the file of the Assessing Officer for re-adjudication. We .....

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..... se grounds be rejected. 5. We have duly considered rival submissions and gone through the record. We find that except variation in quantum, identical issues have been considered by the Tribunal. The discussion made by the Tribunal in these two assessment years read as under: 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 circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the estimating the profit on sale of flats @ 30% of the sales value of ₹ 9,00,000/- and thereby upholding an addition of ₹ 2,70,000/-." 9. The Assessing Officer made the addition of ₹ 2,70,000/- on account of profit on sale of immovable properties. The Assessing Officer noted that the transactions made in land and building, amount spent on construction have not been ro .....

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..... ld 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 to time. According to the learned counsel for the assessee, the authorities below have not cited any comparable case while applying the GP rate of 30%, which is arbitrary and without any basis. The learned counsel for the assessee pointed out that the reputed builder of Shimla M/s Rajdeep Builders had returned a profit of 18.22%, which is evident from the copy of Balance Sheet of the said concern as on 31.3.2005. A copy of the same is avail .....

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..... l 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 result is that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to .....

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..... f 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. Vs. Assistant Commissioner of Income Tax, decided on 06.12.2010. The second question of law is answered accordingly." 13. In the above case, there was a dispute regarding application of net profit rate. However, in this case, dispute is regarding the gross profit rate. In both the cases, the question is regarding the estimation of profit and, therefore, the ratio laid down by the Hon'ble Punjab & Ha .....

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..... he above finding has been stated to be admitted by the Hon ble Himachal Pradesh High Court, therefore, in the fitness of things, we deem it appropriate that, let this issue be remitted back to the file of the Assessing Officer for adjudication in accordance with ultimate outcome of the issue after the decision of the Hon ble Himachal Pradesh High Court. It is pertinent to observe that the alleged rate of profit for computation of income for assessment out of sale of property is depended upon the issue, whether the profit from sale of property is to be assessed as a business income or under the head capital gain from investments. In two years, this issue is subject matter of appeal before the Hon ble High Court. Therefore, there is no justification for dealing them specifically in this assessment year. The Assessing Officer has to first determine, whether profit from sale of property is to be assessed as income from business/profession or under the head income from capital gains. In case it is determined that income from such activity is to be assessed under the head business income/profession, then the rate of profit be determined afresh. Accordingly, both these grounds of appeal a .....

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..... the course of survey conducted at the business premises, and ultimately held that out of ₹ 21,46,150/-, a sum of ₹ 8,00,503/- was added in the case of Shri Rajesh Popli and balance amount of ₹ 13,45,647/- remained unexplained which required to be added in the hands of the assessee. Appeal to the CIT(A) did not bring any relief to the assessee. 10. The ld.counsel for the assessee while impugning the addition submitted that case of Shri Rajesh Popli travelled upto the Tribunal vide appeal no.94 & 95/Chd/2014 for the Asstt.Year 2010-1 and 2011-12. The Tribunal has discussed this issue on page no.16,para 41. Out of addition of ₹ 8,00,000/-, the Tribunal has deleted addition to the extent of ₹ 2,20,000/- and rest was confirmed. He pointed out that during the course of assessment proceedings, the assessee has explained the position of cash. He submitted that out of ₹ 13,45,647/- a sum of ₹ 31,71,084/- was owned up by Shri Rajesh Popli and it is reflected in his books of accounts. Similarly, his sister and brother in law owned up ₹ 3,00,000/- each and was appearing in their books of accounts. ₹ 1,50,000/- was belonged to father-in- .....

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