TMI Blog2018 (2) TMI 2021X X X X Extracts X X X X X X X X Extracts X X X X ..... fit on total receipts - The assessee has pleaded for 10% net profit on total receipts. There is no uniform yardstick for estimation of net profit. The estimation of net profit depends upon facts of each case and nature of business activity carried on by the assessee. The assessee is in the business of construction and development of flats. Normally, the net profit percentage in unaccounted transactions is quite more than the net profit in normally accounted transactions. In the case of construction business, the statute itself has provided for 8% net profit in cases of certain class of assesses where the turnover does not exceed specified limit. Though the provisions of section 44AD cannot be strictly applied to the facts of assessee s case, a clue from the said provision can be drawn to estimate net profit as the assessee s nature of business squarely fit into the class of assessee where the provisions of section 44AD applies. Therefore, keeping in view the facts and circumstances of this case and also drawing a clue from the provisions of section 44AD, further, considering the fact that these are unaccounted transactions, a reasonable net profit of 15% would meet the ends of jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the claim. In the result, the ground raised by the assessee insofar as deduction u/s 80IB(10) for the assessment year 2009-10 has been rejected and in respect of AYS 2010-11 to 2012-13 is allowed. Reduction in the value of closing stock - addition of income towards suppressed stock on the ground that the said claim was not supported by the letter from M/s Bombay Infrastructure Ltd. the assessee submitted before the AO that due to strained relations with the buyer, it could not able to get confirmation from the party - HELD THAT:- Facts are not clear. The assessee claims that it has furnished necessary evidences to justify reduction in value of closing work-inprogress in respect of loss incurred on sale of City Centre Mall to M/s Bombay Infrastructure Ltd. The CIT(A), on the other hand, observed that the assessee has not filed any evidences. The assessee has filed various details to explain the loss. Therefore, we are of the considered view that the issue need re-examination from the AO in the light of evidence filed by the assessee; hence, we set aside the issue to the file of the AO and direct him to consider the evidence filed by the assessee and to decide the issue afre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in response to notice u/s 153A, the position remains same. The facts are contradictory to each other. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of contradictory facts and if the AO finds that the partnership firm has claimed interest on capital against from profits then certainly, the assessee cannot excluded interest on capital in its return of income. If the firm has not claimed interest on capital against its profits and reversed interest on capital by reducing it from work-in-progress, then certainly, exclusion made by the partners in their individual hands in revised return is in accordance with law. Therefore, we direct the AO to verify these facts and take an appropriate decision in the light of our observation above. Hence, the ground raised by the assessee for the AYs 2010-11 to 2-12-13 in both the assessee s case are set aside to the file of the AO. Short term capital gain and long term capital gain on the basis of original return of income filed u/s 139(1) - AO rejected the claim of the assessee on the ground that the assessee has failed to file any evidence in respect of recomputation of capital gain b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 21-08-2007 by filing necessary evidence, then the AO is directed to treat gain from sale of property under the head long term capital gain instead of short term capital gain. If the assessee has considered the date of acquisition on the basis of allotment letter without there being any agreement, then the holding period of the asset should be considered from the date of agreement but not from the date of allotment letter. Similarly, the assessee has claimed various expenditure to justify improvement to the asset. If the assessee is able to establish expenditure incurred with necessary evidences and also source, then the AO is required to examine the evidences before taking any decision to allow cost of improvement. If the assessee is able to justify the cost of improvement with necessary evidence, then the AO is directed to allow cost of improvement as claimed by the assessee. - I.T.A No.6242/Mum/2016 and I.T.A No.2676 to 2678/Mum/2017, I.T.A Nos.6245 & 6246/Mum/2016 and I.T.A No.2675/Mum/2017, I.T.A Nos.6243 &6244/Mum/2016 and I.T.A. Nos. 2672 & 2673/Mum/2017 - - - Dated:- 28-2-2018 - Shri Mahavir Singh (Judicial Member) And Shri G Manjunatha (Accountant Member) For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee also challenged the action of the Ld.CIT(A) in rejecting the claim of deduction u/s 80IB(10) of the Act in respect of eligible housing project on the ground that no new claim could be made in return filed u/s 153A of the Act. 4. The brief facts of the case extracted from the assessment order for AY 2010-11 are that the assessee is a partnership firm engaged in the business of builder and developer. The assessee has filed its return of income for the AY 2010-11 on 30-11-2011 declaring total income at ₹ 2,18,00,520. A search and seizure action u/s 132(1) of the Act was conducted on 28-11-2011 at the business premises of the assessee and its partners. During the course of search, certain incriminating materials in the form of note books found and seized from the residential premises of Shri Hari Bachubhai Mujat (Bharat Patel), one of the main persons and partner in the assessee firm. The rough cash books containing record of receipt and payments of unaccounted cash transactions were found and seized. Bundle No.1 contained written pages 1 to 46 and Bundle No.2 contained written pages 1 to 22. The entries recorded contained date-wise details of cash brought to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings the AO observed from the return of income filed by the assessee that though the assessee has admitted undisclosed income of ₹ 12,19,50,872 in respect of unaccounted cash transactions recorded in rough cash book, failed to admit such undisclosed income in the return of income u/s 153A of the Act. Therefore, called upon the assessee to explain as to why the undisclosed income admitted during the course of search in the statement recorded u/s 132(4) cannot be added. In response to the showcause notice, assessee has filed a reply in the form of a booklet explaining the reasons for not admitting the undisclosed income admitted during the course of search. According to the assessee, there was a mistake in disclosure of ₹ 14,19,10,000 made during the course of search on account of unaccounted cash receipts found in rough cash books No.1 No.2. The assessee also suggested two methods of determining undisclosed income, according to which the assessee has worked out peak cash theory for determining undisclosed income in respect of unaccounted cash receipts and cash payments as per rough cash book. Alternatively, the assessee pleaded for a reasonable rate of profit on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents is also recorded in RCB and, therefore, the RCB is the best document which contained total transactions of the group as well including the assessee firm. Therefore, it is very difficult to ascertain true nature of these entries and accordingly, a reasonable income may be determined either by going on the basis of peak cash theory or by estimation of income. 6. The AO, after considering submissions of the assessee and also on analyzing the seized materials and statement recorded from the partner Hari Bachubhai Mujat observed that the assessee has categorically admitted during the course of search that the entries contained in rough cash book are on-money received from its real estate business and also payment to unaccounted expenditure in respect of its business and accordingly, worked out an undisclosed income of ₹ 16,04,84,872/- and offered for 3 years vide its letter dated 17-10-2011. These transactions were not recorded in the regular books of account. This fact has been confirmed in the statement recorded u/s 132(4) on 29/9/2011and 17-10- 2011. The amount of unexplained cash credit though disclosed by the assessee firm during the search operation, neither was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee submitted that it is in the business of development of housing project and its housing project has fulfilled the terms and conditions specified u/s 80IB(10), therefore, it has claimed deduction from profits and gains of business from eligible business project. The assessee further submitted that it has derived profit from the project named, Sreeji Heights which is eligible for deduction u/s 80IB(10). Originally said claim was not made in the return of income since the assessee was under mistaken understanding of law that since they have constructed commercial units, they cannot claim benefit u/s 80IB(10). However, the Hon ble Bombay High Court has, in the case of Brahma Associates reported in (2011 51 DTR 298 (Bom) held that the claim is fully allowable in case the project was approved prior to amendment made in law w.e.f. 01-04-2005. Since its housing project was approved on 16-04-2004, the project is eligible for benefit u/s 80IB(10) of the Act. The AO, after considering relevant submissions of the assessee and also on analysis of the provisions of section 80IB(10) held that the assessee is not eligible for deduction u/s 80IB(10), as the assessee did not claim such deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account in the form of cash withdrawal from bank and cash deposits. Therefore, the assessee has suggested for a peak credit theory to determine the undisclosed income in respect of on-money received from construction business as the RCB contains total cash receipts and cash payments of the group as a whole which is operating more than 5-6 firms and all are involved in the business of real estate development. The assessee further submitted that though it has admitted undisclosed income in the statement recorded u/s 132(4), such admission is not based on any evidence. Therefore, there is no reason for the AO to make addition only on the basis of admission of the assessee that the RCB is a cash book recording inflow and outflow of cash including cash recorded in regular cash book and the said RCB contains entry of cash of the group as a whole not specific to any single entity in the group. The assessee further submitted that even on analysis of the cash book prepared by the department in tally software clearly reveals that the AO is not able to ascertain the true nature of transactions recorded in respect of receipts as well as payments. Therefore, he erred in not considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of search is voluntary and also on the basis of incriminating materials found as a result of search. The above statements given during the course of search have not been retracted so far. There is no allegation that the statements were recorded under duress or coercion. Therefore, there is no reason for the assessee to go back from the admission of undisclosed income while filing return of income. The CIT(A), further observed that even going by the facts of the case it was abundantly clear that entries contained in RCBs 1 2 were mainly related to assessee s construction business where it is common to receive on-money in respect of sale and purchase of properties. Accordingly, the assessee has recorded all cash transactions relating to receipt of on-money and payment of unaccounted expenditures. Even on going by the entries in the RCBs which have been analysed in tally software by the department, the trial balance extracted from the tally software clearly establishes the fact that the receipt of cash predominately relates to amounts received from investors and the payments are related to amounts paid for investments, expenses, department payments and the remaining amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to one individual, the CIT(A) observed that clauses (e) and (f) have been inserted with effect from 01-04-2010, whereas the occupancy certificate in respect of the said project was received on 22-09-2008. Therefore, the provisions of clauses (e) and (f) cannot be applied to the assessee s project. Insofar as proportionate deduction towards project which fulfils the conditions prescribed u/s 80IB(10), CIT(A) observed that merely because one building, i.e. B-Wing does not satisfy the requirement of section 80IB(10) would not result in nullifying the claim of the assessee for the entire project. Similarly, the CIT(A) has discussed the applicability of jurisdictional High Court decision in the case of Brahma Associates (supra) and observed that the AO was wrong in not following the decision on the ground that SLP was filed against the decision does not stop the applicability of the ratio laid down by the courts. The CIT(A) further observed that though the assessee has fulfilled the above conditions could not able to counter, the AOs finding with regard to the project Sreeji Heights that the project was situated within a distance of 25 kms from Mumbai Metropolitan limits. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any explanations for not admitting undisclosed income in the return of income filed u/s 153A, though it has been admitted in the statement recorded u/s 132(4). The AO also rejected assessee s plea for determination of undisclosed income on the basis of peak credit theory and also estimation of reasonable net profit on total receipts. 14. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in not accepting the peak theory adopted by the assessee and offered as income by the partners of the assessee firm without appreciating the fact that it is very difficult to ascertain true nature of transactions recorded in rough cash books No.1 2 as the said seized RCBs 1 2 contained total cash receipts and payment of Akshar group as a whole, but not confined to the assessee firm alone. The Ld.AR further referring to the paper book filed during the course of hearing submitted that the assessee firm has worked out peak credit theory on the basis of RCBs 1 2 and analysed total transactions recorded in receipts as well as payments in respect of all the payments and determined peak cash as on 02-06-2010 which worked out to ₹ 2,73,83,071 which has been distributed equally b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing any letter. The Ld.DR further submitted that admission is best piece of evidence which can be relied upon by the authorities when such admission is corroborated by sufficient evidence in the form of incriminating materials. In this case, admittedly, the search party found and seized rough cash book wherein various unaccounted transactions have been recorded and when these have been confronted to the assessee, the assessee has admitted undisclosed income, therefore, there is no reason for the assessee to go back from its admission. The Ld.DR further submitted that even going by the analysis of rough cash book made by the AO by entering into transactions recorded in RCBs 1 2 in tally software, it was abundantly clear that most of the transactions relate to on-money received from sale of flats which is accounted for under the head receipts from investors and payments are related to expenses and amount shown as advance to employees. Taking into account the admission of the assessee and analysis of rough cash book, the AO has rightly come to the conclusion that the assessee s admission in respect of undisclosed income is supported by incriminating material and hence, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jat account already stood accounted for in RCB. Therefore, no separate addition for the aforesaid amount is required. The sum and substance of the arguments of the assessee is that admission of additional income during the course of search in the statement recorded u/s 132(4) is not correct and which is not supported by any materials and hence, determination of income should be on the basis of peak credit theory or estimation of reasonable net profit from total receipts. 17. The AO has made addition on the basis of admission of the assessee during the course of search. According to the AO, admission is the best piece of evidence and hence, the assessee cannot go back from its admissions without any valid retraction with supporting evidence. The AO further was of the opinion that even going by the analysis of RCB 1 on the basis of trial balance prepared in tally software, though the receipts and payments are almost equal, the receipt side comprise of major amount received from investors which is nothing but on-money received from sales and payment side consists of expenses incurred for projects and amount given to employees. Therefore, he opined that admissions made by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 02-06-2010 at ₹ 2,73,87,071 which was distributed equally between two partners. The assessee also worked out gross receipts recorded in RCB and after reducing cash with for employees and cash drawn from bank, determined total receipts of ₹ 27.59 crores. Peak cash credit theory advocated by the assessee cannot be accepted as it applies only in a case where the cash has been rotated several times by depositing and withdrawing from banks or used in the business. The basic idea behind the peak credit theory is to avoid double addition and to bring only the actual income of the assessee where there are large number of unexplained credit and debit entries. In the assessee s case, it is not the case. According to the assessee s admission, the transactions recorded in RCB 1 2 are transactions pertaining to its business activity and hence, the peak credit theory advocated by the assessee has been rejected. 18. Coming to the second method suggested by the assessee to determine undisclosed income on the basis of estimation of reasonable profit on total receipts. It is an admitted fact that even the assessee is not able to ascertain true nature of transactions recorded in R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A. The assessee has explained the reasons for not claiming deduction u/s 80IB(10) in the original return filed u/s 139(1) and also explained the reasons for making such claim in revised return filed u/s 153A. According to the assessee, when original return of income was filed, it was under a mistaken understanding of law that if the housing project consists commercial portion which exceeds certain specified limit, then the assessee is not eligible for deduction u/s 80IB(10) and accordingly did not make any claim in the return of income. When the revised return was filed u/s 153A, the law has been changed in view of the decision of Hon ble jurisdictional High Court in the case of CIT vs Brahma Associates (supra), wherein the Hon ble Court held that the claim is fully allowable in case the project was approved prior to amendment brought in law wef 01-04-2005. Since the assessee s project has been approved prior to the amendment, i.e. on 16-10-2004, the assessee has made a claim for deduction u/s 80IB(10). 20. The AO disallowed deduction u/s 80IB(10) of the Act, on the ground that the assessee has not made any claim in original return filed u/s 139(1) and the fresh claim made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 153A, if the assessments are abated as on the date of search, then the assessee can make a fresh claim which is evident from the fact that the Hon ble jurisdictional High Court in the case of CITvs Continental Warehousing Corporation (Nava Sheva) Ltd 2015) 374 ITR 645 (Bom) and in CIT vs Gurinder Singh Bawa (2016) 386 ITR 483 (Bom) it was held that the assessments / re-assessment proceedings that are pending on the date of conducting search u/s 132 shall stand abated and not the assessments / re-assessments already finalised for those assessment years covered u/s 153A. In this case, the assessment for the assessment year 2009-10 onwards are abated as the time limit for completion of assessment u/s 143(3) in respect of assessment year 2009-10 was due to expire on 31-03-2012 which is after the date of search i.e. on 29-09-2011 and the time limit for issue of notice u/s 143(2) for the assessment year 2010-11 due to expire on 30-09-2011, therefore, the claim made by the assessee u/s 80IB(10) of the Act is in accordance with the provisions of law and further supported by various decisions of jurisdictional High Court. The assessee further contended that where the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not satisfy any of the conditions specified therein which is evident from the fact that the assessee has sold more than one flat to a single individual which is contrary to the clauses (e) and (f). The assessee has constructed commercial portion in the building in excess of specified limit provided u/s 80IB(10). The assessee has constructed certain flats which are having super built up area of more than the specified limit. The project Sreeji Heights has been developed on a land having more than 1 acre and also the project was within a distance of 25 kms from the Mumbai Metropolitan limits. The Ld.CIT(A) has concurred with the findings of the AO insofar as fresh claim made by the assessee in return filed u/s 153A and observed that the assessee cannot make a fresh claim which was not made in the original return filed u/s 139(1) where the assessment has been concluded or reached finality as on the date of search. However, differed with the findings of the AO insofar as merits is concerned and observed that the deduction cannot be denied merely for the reason that the assessee has sold 2 units to one buyer, through one agreement on the ground that clauses (e) and (f) inserted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as merits of the deduction claimed u/s 80IB(10) and hence, the findings of the CIT(A) has become final. As regards observations of the CIT(A) with regard to the distance of the project, Sreeji Heights , the assessee has submitted that its project, Sreeji Heights is within 25 kms from the metropolitan limits of Mumbai for which he has furnished Google map and also extract from MCGM website as per which the project is 25 kms away from metropolitan limits of Mumbai. The Ld.AR also filed certain case laws to support her arguments that the distance from the municipal limits should be measured by road, but not as crow flies. Accordingly, the Hon ble Bombay High Court in the case of Nitish Ramchandra Choradia ITA Nos 18 to 23 of 2015; 121 to 129 of 2013; 131 of 2013; 140 of 2013 and 151 of 2015 dated 30-03-2015 has taken a view that the distance between the municipal limits of the assessee s property is to be measured having regard to the shortest road distance and not as the crow flies, i.e. a straightline distance as canvassed by the revenue. However, these facts were not before the AO. Therefore, we are of the view that the AO may examine the claim of the assessee in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is eligible for deduction u/s 80IB(10) as per the claim made in the return filed u/s 153A of the Act and hence, we direct the AO to admit the claim of the assessee and make a limited verification insofar as the observation of the CIT(A) with regard to the distance of the project before allowing the claim. In the result, the ground raised by the assessee insofar as deduction u/s 80IB(10) for the assessment year 2009-10 has been rejected and in respect of AYS 2010-11 to 2012-13 is allowed. 26 . The next issue that came up for our consideration for AY 2011-12 is reduction in the value of closing stock. The assessee firm had disclosed closing stock of city center project at ₹ 145,01,67,054 in the return of income filed u/s 139(1). However, while filing the return u/s 153A of the Act, the closing stock was valued at ₹ 143,28,67,054. The said difference was ₹ 1, 73,00,000 on account of reduction of loss on sale amounting to ₹ 1,73,00,000 made to M/s Bombay Infrastructure Ltd which were included in closing work-in progress. The loss was supposed to be recovered from M/s Bombay Infrastructure Ltd. Since M/s Bombay Infrastructure Ltd did not reimburse the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gone through the orders of the authorities below. The AO made addition of ₹ 173 lakhs towards suppression of closing stock on the ground that the assessee has failed to furnish any evidence including confirmation from M/s Bombay Infrastructure Ltd towards loss incurred on sale of 2 shops at City Centre Mall. The Ld.CIT(A), while approving the findings of the AO has held that even going by the details submitted by the assessee it is very clear that the assessee has failed to explain how it has incurred loss of ₹ 173 lakhs in respect of sale of City Centre Mall to M/s Bombay Infrastructure Ltd. The relevant portion of the order of the CIT(A) is extracted below: 54. It appears from the letter that the appellant had sold the city mall in three years. The sales made in the year ending on 31/03/2009 relevant to asst.year 2009-10 allegedly resulted in loss of ₹ 31,84,564/- The sales made in the year ending on 31/03/2010 relevant to asst year 2010-11 resulted in loss of t 2,76,53,618/~. The sales made in the year ending on 31/03/2011 relevant to asst year 2011-12 resulted in profit of ? 1,35,38,1827-. The appellant claims that thus there has been overall loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the learned CIT(A) Pune-11 u/s 250 of the Income-tax Act, 1961 and is in appeal :- 1. Because, the Id. C1T(A) has erred in holding that the issuance of notice \ u/s 143(2) of the Act is not mandatory for carrying out assessment I proceedings u/s 153A of the Act and that the impugned assessment / ^J order is valid. 2(i) Because, the Id. CIT(A) has erred in holding the add back of interest income of ₹ 133,84,004/- by the AO on account of income accrued but not due. (ii) Because, the Id. CIT(A) has erred in holding that the deed of addendum dated 31/3/2009 to the partnership deed was an after thought although the same was validly executed and formed part of auditor's report in all years. (iii) Because, the Id. CIT(A) has erred in failing to consider that the partnership firm M/s Akshar Developers had capitalized the interest accrued to the partners in the work-in-progress of the on going project Decorium in their return of income filed u/s 153A. 3(i) Because, the Id. CIT(A) has erred in upholding AO's action of considering the impact of seized material in the hands of M/s Akshar Developers even though the material pertained to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to notice u/s 153A. The assessee also filed elaborate written submissions in respect of addition made by the AO towards interest on capital from partnership firm and also exclusion of disclosure made during the course of search. 35. The CIT(A), after considering relevant submissions of the assessee, rejected the ground taken insofar as validity of assessment for non issue of notice u/s 143(2) by holding that the provisions of section 153A are quite different and notice u/s 143(2) is not a must for making assessment u/s 153A of the Act. Insofar as addition made by the AO towards interest on partners capital account received from partnership firms, the whole argument and the scheme of the so-called amendment deed appear to be an afterthought. It is seen from the records that though the amendment deed is claimed to be dated 31-03-2009, the assessee has disclosed the interest income in his return of income filed u/s 139(1) right upto AY 2012-13. The original return for the assessment year 2011-12 was filed as late as 11-01-2013 in which the interest income was included. Thus, the fact of the amendment deed and as a consequence of non due of interest income came to assessee s min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the original return of income filed, the assessee had included interest accrued but not due from the partnership firm M/s Akshar Developers. However, in the return filed in response to 153A notice, the assessee excluded this amount on the ground that interest had not been accrued during the previous year. According to the assessee, the firm has made provision for interest on capital account on the basis of partnership deed and credited interest on capital to a separate account and debited to work-inprogress account without treating it as revenue expenditure. The assessee further submitted that the partners have mutually decided to alter the partnership deed insofar as interest on capital clause is concerned and accordingly as per the addendum to partnership deed dated 31-03-2009, interest on capital shall be payable to partners only after the project is complete and profit is determined as the market condition had worsened. Thus, in view of the amendment to partnership deed, interest on capital account is accrued but not due from the said partnership firm and hence, the same has not been offered to tax in the return filed u/s 153A of the Act. Though, the assessee has included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure, but only capitalized to work-in-progress. The Ld.AR further submitted that taxability of any receipt including interest depends upon accrual of income which is, in this case, not accrued to the assessee because the partnership firm has deferred payments of interest on partners capital account due to adverse market conditions by amending the partnership deed, interest on capital clause. The assessee also amended partnership deed once again to reverse interest credited to partners capital account and accordingly reversed interest on capital account to partners by reducing it from work-inprogress. To this effect furnished copies of financial statements of partnership firm for the year ending 31-03-2016 along with auditors report wherein reversal of interest has been confirmed by the auditors by way of notes to tax audit report. The Ld.AR further submitted that once interest has been reversed in the partnership firm account and not claimed as deduction against profits, taxing the same in the hands of the partners amounts to double taxation of same amount which is not permissible in law. 39. The Ld.DR, on the other hand, strongly supported the order of the CIT(A). 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice u/s 143(2) was due to expire on 30-09-2011, therefore, the assessment for AY 2010-11 and subsequent years are certainly abated, therefore, in view of the decision of jurisdictional High Court in the case of Continental Warehousing (Nava Sheva) Ltd (supra) and CIT vs Gurinder Singh Bawa (supra) wherein the law has been explained with reference to 153A assessment and accordingly, there is no scope of any addition in respect of concluded / unabated assessments without there being any seized materials. In other words, the assessments which are pending as on the date of search shall abate and accordingly, the AO shall assess or re-assess the total income on the basis of regular books of account and other seized material found during the course of search. The sum and substance of the ratio of judgments of jurisdictional High Court is that in case of abated assessments, the scope of assessment is not limited to seized materials, but on the basis of regular books of accounts and return filed by the assessee. Going by the same analogy, when the AO is permitted to assess or re-assess total income on the basis of regular books of account and seized materials, the assessee also can m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue of taxability of interest on capital has to be seen in the light of whether such interest has been really accrued to the assessee in the light of real income theory. The question whether real income has materialised has to be examined in the context of commercial and business realities in the circumstances in which the assessee is placed and not with reference to system of accounting. The accrual of income does not depend upon the accounts of the assessee. Whatever position of accounts, income would have to be referred back to the chargeable accounting period during which such profits or gains are actually arisen / accrued and the assessee would be liable to be taxed in respect of the same. In this case, it is an admitted fact that the assessee has included interest on capital in original returns, whereas the same has been excluded in revised return for which the assessee has filed necessary evidence and also explanations. No doubt, the taxability of interest on partners capital u/s 28 of the Incometax Act, 1961 depends upon the method of accounting followed by the partnership firm, further supported by clauses in partnership deed for payment of interest subject to ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the impugned dispute are that the assessee has shown income of ₹ 2,30,17,500 under the head short term capital gain on sale of asset while filing return of income u/s 139(1) on 31-03-2013. However, while filing the return of income on 02-03- 2013 in compliance to notice u/s 142(1) of the Act, the assessee has calculated long term capital gain on the said property after claiming deduction u/s 54F of ₹ 1,36,90,055. According to the assessee, in the original return filed u/s 139(1) gain on sale of asset was erroneously considered as short term capital gain on the basis of holding period of asset taken from date of acquisition as per registration of agreement instead of booking date on 21-08-2007. In the revised return, the said mistake has been corrected by taking booking date and accordingly, asset has been held for a period of more than 36 months, therefore, gain has been considered as long term capital gain. The assessee further claimed that even in respect of sale consideration and cost of acquisition, there is an error in considering sale consideration and cost of acquisition, therefore, the mistakes have been rectified by adopting correct figure of sale consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition of property, cost of improvement and exemption claimed in respect of 54F towards reinvestment in purchase of property. On the other hand, the assessee has filed various details including copies of agreement, sale deeds and letter of allotment for booking the flat. The assessee also filed a chart explaining various expenditure incurred in the assessment year 2009-10 for improvement of property. We do not know whether these documents have been furnished before the AO at the time of assessment proceedings or not. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of additional evidence filed by the assessee. Therefore, we set aside the issue to the file of the AO and direct him to examine the claim of the assessee in the light of additional evidence and if the assessee is able to justify the date of acquisition of the property on 21-08-2007 by filing necessary evidence, then the AO is directed to treat gain from sale of property under the head long term capital gain instead of short term capital gain. If the assessee has considered the date of acquisition on the basis of allotment letter without there being any agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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