TMI Blog2020 (4) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... - GUJARAT HIGH COURT] as well as Koshor Mohanlal Telwala [ 1998 (9) TMI 106 - ITAT AHMEDABAD-A] we are of the view that only element of income embedded in the on-money received by the assessee for booking of flats/shops in Vesu Project is required to be assessed in its hand in all these years. Element of income involved in this on-money - assessee is showing income at 8%, AND CIT(A) is estimating it at 20% - HELD THAT:- CIT(A) has also not mentioned any attending circumstances for harbouring a belief that 20% could have been earned from this activity. Thus after taking guidance from the judgment of Kishor Mohanlal Telwala [ 1998 (9) TMI 106 - ITAT AHMEDABAD-A] we deem it proper that the assessee has rightly disclosed the profit element embedded in the gross profit at 8%. Accordingly, we allow the ground of appeal raised by the assessee, and hold that profit which has been directed to be adopted by the ld.CIT(A) at 20% of the alleged turnover should be taken at 8%. The income of the assessee is to be computed thereafter. Unexplained expenditure - HELD THAT:- No dispute that during the course of search certain material/loose papers were found exhibiting the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt orders as well as orders of the ld.CIT(A) are verbatim same. Therefore, for the facility of reference we are referring facts from the assessment year 2012-13 as well as assessment year 2015- 16, because Asstt.Year 2012-13 is the first assessment year in this group, and Asstt.Year 2015-16 is the last assessment year. 3. The assessee has filed an application for permission to admit additional grounds. This application was allowed vide order dated 8.1.2020. The grounds were taken up on record for adjudication. Order dated 8.1.2020 reads as under: 08.01.2020 Present : Shri S.N. Soparkar, AR Shri Subhash Bains, CIT-DR Present six cross appeals for the Asstt.Years 2012-13 to 2015-16 came up for hearing. In the Asstt.Year 2012-13, the assessee has filed an application in IT(SS)A.no.289/Ahd./2018 for permission to raise additional grounds of appeal. It has sought to raise the following two grounds: 1. Both the lower authorities erred in law and on facts in framing assessment under section 143(3) r.w.s. 153A ignoring fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RJY 4. However, at the time of hearing, the ld.counsel for the assessee did not press these additional grounds in all these assessment years. Therefore, they are rejected. 5. First common issue involved in all these eight appeals relates to determination of income required to be added out of on-money received by the assessee on its real-estate projects qua which incriminating materials were found and seized during search proceedings. 6. Before adverting to the controversy, we find that before the ld.first Appellate Authority, the assessee has filed written submissions pleading therein the background of the assessee-company, and how search has been conducted upon its business premises as well as residential premises of the directors. It has also highlighted material found during the course of search which was seized by the department, and brief description of inference from these materials drawn by the AO as well as reply by the assessee. Therefore, in order to understand the background in more scientific way, we deem it appropriate to take note of these facts from the submissions of the assessee filed before the ld.CIT(A) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. AnkitSureshbhai Shah 4 Mr. DarshitJayeshbhai Shah 5 Mr.BhaveshbhaiLaljibhaiPansuriya 6 Mr. NitinbhaiKalubhai Desai 7 Mr. Karan Pankajbhai Shah The shareholders and directors of Anushthan Buildcon Pvt. Ltd. is as under:- List of directors of Anushthan Buildcon Pvt. Ltd. is as under:- Sr. No. Name of Director 1 Mr. AshitHaribhaiVora '2 Mr. SanketJitendrabhai Shah 3 Mr. AnkitSureshbhai Shah 4 Mr. DarshitJayeshbhai Shah List of shareholders of Anushthan Buildcon Pvt. Ltd. is as under:- Sr. No. Name of Shareholder No. of shares Shareholding (in %) 1 AtuI Hiralal Shah 5000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in another project undertaken by other group entity i.e. Shah Hiralal Buildcon LLP. The appellant company submits that the project in this entity is also residential cum commercial project and this project was also launched simultaneously along with the project launched in the case of the appellant company. Further, the booking receipt and other project related expenses in respect of this project were also done simultaneously as in the case of the appellant company. The loose papers found and seized in the course of search action relate to both the projects. 3. Detailed discussion on the Seize Material / Explanation for seized papers The appellant company submits that in the course of search action, loose papers pages no. 1 to 5 of Annexure A-3 page no. 36, 37, 38, 39, 43, 44, 46, 47 of Annexure A-l and pages 10 to 12 of Annexure A-10 were seized from the residence of Shri Ashit Hirabhai Vora, one of the Directors of the appellant company. The appellant company submits that as per pages 2 5 of Annexure A-3, the purchase cost of the land is noted at ₹ 42,68,00,000/- (total land 8220 sq. yards). Further, on page no. 5 of seized annexure A3, the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the uaccounted booking receipts there were unaccounted expenses which have been clearly mentioned in the seize material which also have to be considered by the A.O. Page No.38 Details of booking receipt in cash and expenses from the same for building and developing for Shiv Kartik Enclave scheme at Vesu till 31/03/2013 have been mentioned. On verification of the page the appellant company would like to state that the details of the amount received against the bookings as well as the details of the expenses have been mentioned which clearly reflect the fact that the A.O. has arbitrarily only considered the unaccounted receipt for framing the Assessment orders which is unjustified and bad in law. Page No.43 Details of booking receipts in cash and various expenses incurred on building and developing Shiv Kartik Enclave scheme at Vesu till 18/04/2012. The appellant would like to state the expenses regarding the registration, salary , legal, commission etc have been clearly mentioned and the same justifies that against the uaccounted booking receipts there were unaccounted expenses which have been clearly mentioned in the seize material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unaccounted receipt. It stated that out of this on-money, cash expenses had been incurred of ₹ 22 Crores to purchase the shares by existing share-holders ₹ 5.97 Crores incurred after purchase of land (as in preceding paras) that it has offered 8% of profit on total receipts including cash receipts. It has been established in preceding paras that cash of ₹ 22 Crores on purchase of shares was not out of on-money received from customers but contributions from various persons. Further, it has also been established in preceding paras that cash expenses of ₹ 5.97 Crores (subsequent to purchase of land) also were not explained supported by any evidences. Also, the assessee failed to provide proper evidence to convey the basis for estimating profit at 8% on total receipt of Vesu project. In any case, until unless assessee provides details (PAN, Name, address etc.) with confirmations from parties to whom payments/expenses have been made out of this unaccounted money, no benefit of deductions can be allowed to assessee. The assessee failed to produce cash book of the project in support of its claim. Without prejudice to above, even if the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,76,700 Proportionate cash receipt by ^assessee from Shiv Kartik project Nil 24,23,93,8187- 42,16,06,1827- In fact, following para shows that assessee has been changing its stance frequently in so far as details of on-money are concerned. 9.2 As shown above, in October 2016, assessee submitted that it had received cash onmoney of ₹ 66.4 crores. In submissions filed on 27/02/2017, assessee stated that year-wise cash receipt is totaling ₹ 58,76,00,000/-from AY 2012-13 to 2015-16 as under: AY 2012-13 2013-14 2014-15 2015-16 2016-17 Amount of On-money 15,25,00,000 2,50,07,000 11,55,00,000 7,02,75,000 22,43,18,000 Assessee stated that difference between earlier figure of ₹ 66.4 Crores new figure of ₹ 58.76 crores arise since the earlier figure included cheque receipts also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. Sd/- (Dr. K. K. RUPAVATIYA) Asst. Commissioner of Income-tax Central Circle-1 (2), Ahmedabad 8. On appeal, the ld.CIT(A) has in principle confirmed that total amount of ₹ 58.76 crores was received by the assessee in the shape of on-money for sale of flats and shops in Vesu Project . Element of income embedded in these receipts deserves to be assessed in the hands of the assessee in respect of gross amount worked out by the AO. The ld.CIT(A) further observed that the assessee has offered profit element in these receipts at 8% whereas the AO has assessed the gross receipts. The ld.CIT(A) directed the AO to adopt 20% of these gross on-money received by the assessee towards booking of the flats/shops in Vesu Project . The finding recorded by the ld.CIT(A) in the Asstt.Year 2012- 13 reads as under: DECISION 5. Submission of the appellant and the assessment order has been carefully considered. Facts of the case in brief are that the appellant filed return of income for AY 2012-13 on 29.09.2012 declaring total income of Rs. Nil. On 4.12.2014, the appellant's business premises was covered under search action u/s. 132 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. The AO verified from the ITD data, that none of the supplier is registered with (except one out of 29) Sales Tax Department or Income-tax Department. With these reasons, the AO made the additions of ₹ 2,92,76,625/- pertaining to this year. The appellant contended that figures of ₹ 5,97,76,625/- taken by the AO from page No.5 of Annexure-3 and considering the same as unexplained expenditure is factually incorrect. This figure is balance figure, which has been obtained after reducing from the total receipts figures of ₹ 48,65,76,625/- by land amount of ₹ 42,68,00,000/-. Difference of these two figures ₹ 5,97,76,625/-. It is nowhere mentioned that it is expenditure incurred in cash. Thus, AO's conclusion that it is unexplained cash is not factually correct. The appellant further contended that the AOs finding about not registering the supplier with Sales Tax is also partly incorrect. As these expenditure were incurred out of books, thus, all the supplier may not be having TIN etc. On going through the submission of the appellant, it is found that it is contradictory. One side the appellant contended that this figure of ₹ 5,97,76,62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le till the appellant submit details of name, PAN, address etc of the persons to whom such payments are made is not justified as these are unaccounted receipts as written on the seized documents and admitted by the appellant on higher side than the amount written on seized documents. Therefore, the appellant requested that protective addition of ₹ 15.25 crore may be deleted. The appellant also contended that payment were totally out of books. The appellant cited several case laws in support of this contention. 7.2 Facts of the case, assessment order and submissions of the appellant thoroughly considered. The additions made by the AO on protective basis considering the total receipts in the year is not found justified as these receipts are in cash and out of regular books of accounts. Additions should be made on substantive basis in the hands of the appellant during the year under consideration. The appellant has shown on money receipt of ₹ 15.25 crore for the year under consideration, which is partly supported by the seized documents. The AO has considered expenditure incurred for the project under consideration in the above para during the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived by it in each assessment year. Such bifurcation has been reproduced by the AO while taking cognizance of the assessee s submission in para-9.2 of the assessment order. He pointed out that the assessee has shown cash receipt totaling to ₹ 58.76 crores as under: AY 2012-13 2013-14 2014-15 2015-16 2016-17 Amount of Onmoney 15,25,00,000 2,50,07,000 11,55,00,000 7,02,75,000 22,43,18,000 10. According to him, there is a difference between ₹ 66.40 crores and ₹ 58.76 crores shown by the assessee. In the earlier figure, the assessee has included cheque receipts also. The exact figure is ₹ 58.76 crores. He submitted that assessee has offered income at 8% of the alleged on-money received by it in cash in these different assessment years. The short question for adjudication before the Tribunal is, whether profit element embedded in this receipt is to be added in the hands of the assessee or gross o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come has to be taxed in the block assessment was justified in admitting the claim of expenditure on the basis of oral evidences though the department had clearly discharged its onus to prove the undisclosed receipt in the form of onmoney on the basis of material found and seized during the course of search? 12. Hon ble High Court has upheld finding of the Tribunal. The ld.counsel for the assessee took us through the finding of the Hon ble High Court recorded in para-10 of the judgment, which reads as under: 10. Even so far as the second question is concerned, we are of the view that the said question also does not involve any question of law especially in view of fact that the Tribunal has rightly considered that in absence of any financial record or accounts being maintained by the respondent assessee, the profit earned by the respondent assessee for the block assessment was presumed to be more than 8% as per the provisions of sec. 44AD of the Act. We do not agree with learned advocate, Shri Naik that as no accounts have been maintained or nothing to substantiate the amount of expenditure incurred by the respondent assessee had been shown, the entire amount received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit embedded in such receipts and not the entire receipts themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation. 16. 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 lakhs, would not give rise to any question of law. 14. On the strength of these decisions, he submitted that the income offered by the assessee at 8% of the alleged gross receipts ought to have been assessed as income of the assessee in all these assessment years. 15. On the other hand, the ld.CIT-DR relied upon the assessment orders. He took us through the assessment order and appraised with the various documents found during the course of search. He pointed out that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deem it appropriate to take note the relevant part of this section. It reads as under: 18. For exercising the best judgment, section 144 of the Income Tax Act provide the guidance to the ld.AO. This section reads as under: 144. [(1)] If any person- (a) fails to make the return required [under sub-section (1) of section 139] and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 [or fails to comply with a direction issued under sub-section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the [Assessing] Officer, after taking into account all relevant material which the [Assessing] Officer has gathered, [shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee [* * *] on the basis of such assessment : [Provided that such opportunity shall be given by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has kept the details of receipts received through account payee cheque as well as received cash in the booking of flats as well as shops. In the case of Koshor Mohanlal Telwala (supra) the Tribunal has observed that 8% profit offered by the assessee on the alleged gross receipts of on-money received in cash is fair and reasonable. This figure was construed as fair and reasonable by taking guidance from section 44AD of the Act, wherein it was provided by the Legislature that in case an assessee is engaged in civil construction, and if gross receipts remains under a particular slab, then such assessee needs not to maintain books of accounts, and its profit can be assumed at 8%. Though this special provision is not applicable in the present case, because gross receipts exceeded the turnover provided under section 44AD, but again we are required to find out a reasonable percentage of income which could have been alleged as earned by the assessee out of such gross receipts. This formation of opinion at the end of the Tribunal met the approval of Hon ble Gujarat High Court in the case of Koshor Mohanlal Telwala (supra). As against this, the AO has not collected any dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded any categorical finding as to how such expenditure should be deleted. He took us through orders of the ld.CIT(A) and contended that observation of the CIT(A) is contradictory and without any coherence. On other hand, the ld.counsel for the assessee relied on the orders of the ld.CIT(A). 24. We have considered rival submissions and gone through the record carefully. There is no dispute that during the course of search certain material/loose papers were found exhibiting the fact that the assessee has received cash, over and above, the amounts stated in the booking register. This cash was not accounted for in the books. It has been treated as on-money for sale of flats/shops. Simultaneously certain loose papers were found disclosing the fact that the expenditure were incurred in cash and accounted in the books. The ld.CIT(A) made an analysis of this, and then held that the moment assessees income is being assessed at 8% of the gross on-money, then the remaining amount 92% could take care of unexplained expenditure. It can be explained by a simple, viz. an assessee has received ₹ 100/- in cash for sale of flat. Out of that, element of income embedded in this S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine. Therefore, made the additions. The appellant contended that this amount is not loan parties the amount has been received towards booking collection. During the course of assessment proceedings, confirmations, with details of name,- PAN, address, were submitted before the AO in the submission dated 22.10.2017 filed on 24.10.2017. On going through the facts of the case, it is found that for the year under consideration, the AO in respect of the unsecured loans of ₹ 26,49,500/- from various parties which according to the appellant is booking collection from the members on the basis of the regular trade practice prevailing in the market there are investors those who invest in the new real estate property but they are not the ultimate buyers, however, they invest in the property at the initial stage i.e. at the time of launching of the scheme to get the benefits of low rate and when the property is fully marketed and is in full swing and the property is developed they sell them in the market to the real buyers and earn the difference. Further the appellant has also submitted the confirmations, with details of name, PAN, address before the AO in the submission dated 22.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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