TMI Blog2012 (8) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... seized during the search from the residence of Shri Ramesh Kumar Agrawal, proceeding u/s 153C r.w.s. 153A was initiated in the case of assessee company. Consequently, notices u/s 153A was issued to the assessee for assessment year 2002-03 to 2007-08. Since the company was incorporated on 16.06.2003, the proceedings for the assessment year 2002-03 and 2003-04 were dropped. For assessment year 2004-05 and 2005-06, returned income were accepted. However, for assessment year 2006-07, 2007-08 and 2008-09 additions have been made based on a documents (in the form of excel sheet) impounded from the premises of assessee company. The said document contained the particulars of sale of plot such as plot numbers, money received through cheque and on money received in cash. The assessee company was incorporated on 16.06.2003 and is engaged in the business of developing of housing project and colonies for residential houses and sale thereof. In making the aforesaid addition, the Assessing Officer observed that on papers so impounded certain amounts received by way of cheque on various dates alongwith the amount received in cash is noted. The amounts received by way of cheques only were recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany (being seller) and the plot owners (being purchaser). Thus, it cannot be said that the document did not belong to the assessee company. The documents were very well of the assessee company and it is immaterial whether those were incriminating in nature or not, proceedings u/s. 153C can be initiated. It is noted that in the said provision of section 153C, nowhere the word incriminating has been mentioned. The only requirement is of the seized documents which belonged to such other person. This is fulfilled. Thus, notices were validly issued to the assessee company. It is noteworthy that the documents which was impounded from the assessee's premises during the survey together with those which were seized from the premises of its Director did indicate that assessee company had been suppressing this sales by recording in its books only that amount which was received through cheque only; and that the on money received in cash was not disclosed. This means that the documents such as allotment papers and registries were indeed of incriminating nature as the entire sale consideration was not mentioned therein. 5. The ld. CIT(A) also confirmed the addition in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such an addition could be made in the assessment (P-17 to 31). The Ld. CIT(A) did not follow the decision of the IT AT Indore Bench in the case of S.K Jain, 14 ITJ 434 and in the case of CI Auto Motors 8 ITJ 146. The Ld. CIT(A) on merits discussed the matters in details and held that the cash shown on the papers are the actual receipts, being the unaccounted sale proceeds from the land. And as such they are all taxable in the hands of the assessee. He however allowed the deduction of the expenditure shown on these papers. Accordingly he allowed the appeals in part. He bifurcated these expenditures on the basis of proportionate cash receipts for two years. The Ld. CIT(A) confirmed the Addition to the extent of ₹ 43,77,609/- in AY 2006-07, ₹ 77,43,946/- in AY 2007-08 ₹ 2,10,39,000/- in A Y 2008-09. While confirming the additions he did not consider the fact that assessee has filed affidavit of each plot holder that no on money was paid by them. He further did not considered the fact that AO recorded statement of few parties wherein they have explained that no on money was paid to the assessee company. While considering the loose papers and preparing the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire receipt, but only the profit embedded in such receipt which can be taxed. On departmental appeal, Hon'ble HC held as under : - it can, thus, be seen that constantly, this court and some other courts have been following the principle that even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts, themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipt, must bear an element of estimation. In view of the legal position that not the entire receipts, but the profit element embedded in such receipts can be brought to tax, in our view, no interference is called for in the decision of the Tribunal accepting such element of profit at ₹ 26 lakhs out of total undisclosed receipt of ₹ 62 lakhs. In other words, we accept the legal proposition, the Tribunal accepting ₹ 26 lakhs disclosed by the assessee as profit out of total undisclosed receipt of ₹ 62 lakh, would not give rise to any question of law. CIT vs. Balchand Ajit Kumar [MP HC] 263 ITR 610. The facts of this case were that in a sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee. AO made addition of entire sale proceeds thereof. CIT(A) affirmed the addition but Tribunal held that the entire sale proceeds could not have been added as undisclosed income of the assessee but the addition could be only of the profits embedded in the sales. Hon'ble HC held 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 realization of the excess over the cost incurred could form part of the profit included in the consideration for the sales. Since there was no finding to the effect that investment by way of incurring the cost in acquiring the goods which were sold had been made by the assessee and that investment was also not disclosed; only the excess over the cost incurred could be treated as profit. In view of the above, the AO be directed to apply a reasonable profit rate on the 'on money' receipt determined by the CIT(A). Mohan Sadhani Vs. CIT 304 ITR 52 (MP) Held that entire sale proceeds cannot be added to income, only NP rate to be adopted. Janta Tiles vs. ACIT 66 TTJ (Pune) 695: While ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents impounded at the business premises as well as loose papers seized from residence of the Directors and found that against the sale of plots the assessee was in receipt of cheque and cash and since only cheque amounts were recorded in the regular books of account, he made an addition in respect of the cash amount mentioned in these documents while framing assessment u/s 153C of the Income-tax Act, 1961. 9. By the impugned order, the ld. CIT(A) upheld the issue of legality of notice u/s 153C and framing of assessment, he also confirmed the additions made in respect of sale proceeds alleged to be received in cash. Contention of ld. Authorized Representative was that at the place of search, which was onducted at the residence of the Directors only allotment paper of the plot and certain registered documents were found, which were duly entered into the regular books of the assessee company and no incriminating papers were found at the residence of Directors, he, therefore, submitted that initiation of proceedings u/s 153C against the assessee company was not justified. From the record, we found that in addition to the search at residence of Director, there was simu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled before the High Court, the Hon'ble High Court observed that - It can, thus, be seen that constantly, this Court and some other Courts have been following the principle that even upon detection of ON money receipts or unaccounted cash receipts, what can be brought to tax if the profits embedded in such receipts, themselves. If that be the legal position, what should be estimated as reasonable profit out of such receipt must bear the element of estimation. In view of the legal position that not the entire receipts, but the profit element embedded in such receipts can be brought to tax, in our view, no interference is called for in the decision of the Tribunal accepting such element of profit at ₹ 26 lakhs out of total undisclosed receipt of ₹ 62 lakhs. In the instant case before us, the assessee was engaged in the business of real estate, wherein part of the amount of sale consideration was received through cheque and balance in cash only cheque amount was entered in the regular books. The Assessing Officer added entire amount of sales received in cash in assessee's income. It was submitted by the ld. Authorized Representative tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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