TMI Blog2021 (6) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh cheque is taxed. Addition on account of 22 unsold units have been offered in the year of sale in subsequent years hence addition of the same cannot be made considering that the assessee has made any unaccounted sale of such units during A.Y. 2014-15. And further stated that similar units sold by other group cases being M/s. autocare Services, M/s. Sumangal Enterprise etc. which have filed Settlement Petition before Hon ble Income Tax Settlement Commission, Mumbai has estimated net profit @ 17.5% being profit estimated on on-money as well as turnover shown in books of account. And further stated that it is settled legal law and entire on-money cannot be taxed but only profit embedded on alleged on-money can be taxed. Additions made for 51 units in AY 2014-15, the amount worked (subject to verification by the AO) out above for 30 units only remains for A.Y. 2014-15, the amount to be worked out for 18 units and 2 units as discussed before are to be taxed in A.Y. 2015-16 and A.Y. 2016-17 respectively and the amount to be worked out for remaining/unsold 1 unit is to be taxed in the year when it may be sold. - IT(SS)A. Nos: 336 to 338 & ITA No. 2244/Ahd/2018, ITA. No: 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct at Para No.4.8 or Para No.5 in the Assessment Order. Therefore, self admission of the Director u/s 132(4) of the I. T. Act, which is never retracted later on is strong piece of incriminating document found during search proceedings. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in relying on various decisions of the Hon'ble Court including the decision of Hon'ble High Court of Gujarat in the case of Pr. CIT Vs Saumya Construction Pvt. Ltd., when the facts involved in this case are distinguishable for the reason that all the referred decisions cover the situation where assessment for a particular year was completed. However, in the instant case no assessment for A.Y,2011-12 was completed and merely processing of return of income u/s 143(1) of the I.T. Act is not considered as assessment completed. Hence the decisions referred by the Ld. CIT(A) is not applicable in this case, 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the undisclosed sales receipt of ₹ 60,92,500/- in the form of 'On-money' holding that the same will be taxed in the year in which sales are recognized in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Undisclosed sale receipts (Rs.) 60,92,500 1,36,56,500 2,48,64,000 4,57,14,000 Assessed Total Income (Rs.) 9,37,05,700 3,12,82,640 2,54,59,530 5,46,85,800 4. As per Ld. A.O., the Company M/s. Safal Nirman Pvt. Ltd. does not have any physical presence on its given address at Howrah and it is found that it never existed physically and it had no employees and that it was not doing any real business. Earlier the company had issued shares at a premium of ₹ 172.60 per share against fact value of ₹ 10/- per share which was subsequently sold to third party for ₹ 10 per share and such shares were purchased by Shri Rajesh Bafna, Shri Mihir Panchal, Shri Om Prakash Bengani, Shri Mahendra Kankaria and Shri Vijay patel of the Bafna Panchal group who came to acquire the assessee company. 5. On verification of Return of Income of the assessee company for A.Y. 2010-11, the Assessing Officer observed that the company was showing share premium of ₹ 9,42,40,000/- in its balance sheet against whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst sale of investment made 12.06.2010 When last sale of investment made 03.11.2011 * Prior to acquisition of the appellant company by the Bafna Panchal Group of persons On the basis of above tabular chart the Ld. ARs of the Appellant have argued that sale consideration received on sale of investments (in shares) by the Appellant Company cannot be held as non-genuine on following grounds: (i) Statements of buyers of shares have not been recorded by Assessing Officer to prove that they are exit providers and sale of shares is non genuine. (ii) The Assessing Officer has neither established that cash deposited in the account of third parties (which are sources of funds in the hands of the buyers/exit providers) belong to the appellant nor disproved the capacity of buyers to hold/ arrange so much fund. (iii) Alleged investments were purchased before FY 2006 and are appearing in books of accounts of appellant from that year. The AO has not disputed the fact that investments appearing in books of account were transferred to other parties in two years. (iv) The genuineness of purchase h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Appellant has obtained them as accommodative entries. With this background, it is pertinent to note that search was carried out in the Bafna Panchal Group of cases on 7th January, 2014 and Appellant had already filed their original returns of income for A.Yrs. 2011-12 to 2013-14. The time limit for issuance of notice under Section 143(2) of the Act had already expired on the date of search. On careful consideration of entire Assessment Order (for A.Yrs. 2011-12 ad 2012-13), it is found that while making above additions, the A.O. has not referred to any loose paper/documents found during the search to prove that the appellant has obtained accommodative entries by way of sale of investments. The sale realizations were already recorded in books of account prior to search and such fact is not disputed by the AO. The Assessing Officer has not referred to any incriminating material to prove that these entries were obtained as accommodative or cash has been paid against sale of such investments. The Assessing Officer at para 4.5 of his order has referred to loose papers found from the premises of M/s. Sumangal Enterprises which has no relation with above referred transactions. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vejalpur land as a test case. CTTfAppeals) has also recorded that for such land, the assessees had paid through cheques a total sum of ₹ 22,02,100/to one Sherin Co. Op. Hsg. Sac. Ltd. during the period between 28.7.2003 to 31.1.2005. CIT(Appeals) also noted that entire amount was repaid by Sherin Co. Op. Hsg. Soc. Ltd. in different cheques during the period between 2.6.2005 to 5.12.2005. The Revenue did not have any further material to suggest that though the assessee might have exited from the land deal, Sherin Co. Op. Hsg. Soc. Ltd. had eventually sold the land to third party and in the process, the assessee had extracted its share of profit. The Tribunal therefore, accepted the assessees' contention that the loose documents did not refer to the actual receipt of on money since the documents itself carried a title PROJECTIONS and further that the Assessing Officer had nothing to discard the assessees' theory that these land deals did not eventually materialize. 13. Essentially the Tribunal having referred to the materials on record and come to factual conclusion, in our opinion, no question of law arises. It is also observed that decisions relied upon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s 153A of the Act and has held that- 42. As mentioned earlier, the addition of ₹ 11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. 43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not known in the course of original assessment. Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these additions are beyond the scope of Assessment Order passed u/s 153A of the Act, grounds raised by Appellant challenging merits of the addition have become infructuous hence same are not being adjudicated. In nutshell, the additions made u/s 68 and unexplained expenditure for both the Assessment Years (A.Y. 2011-12 and A.Y. 2012-13) are deleted. 10. Thereafter ld. CIT(A) considering the several case laws and facts in details it is held that addition made u/s 68 of the Act for ₹ 8,33,10,000/- in A.Y. 2011-12 and ₹ 1,62,40,000/- in A.Y. 2012-13 cannot be upheld and are required to be deleted. And further additions made by Ld. A.O. by estimating unexplained expenditure for ₹ 41,65,500/- and ₹ 8,12,000/- in both the Assessment Years are also required to be deleted and held that these additions are beyond the scope of Assessment Order passed u/s 153A of the Act and finally addition made u/s 68 and unexplained expenditure for both the Assessment Years were deleted. 11. We have heard both the parties and given thoughtful consideration. Ld. A.R. heavily relied on the order of the ld. CIT(A). 12. On the other hand, Ld. D.R. relied on the Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bafna (22 units @15 lacs per unit) 0 0 0 3,30,00,000 Total (Rs.) 60,92,500 1,36,56,500 2,48,64,000 4,57,14,000 18. On the other hand, assessee contention was that Site Supervisor statement cannot be relied upon as he was not responsible for handling sales. And alternatively contended that even if rate as per statement is applied, the same should be applied to sale made in the year in which statement is recorded and should not be applied to the preceding years. And assessee contended before the Ld. CIT(A) that Assessing Officer did not provide an opportunity to cross examine of Shri Sudhir Brahmbhatt site supervisor which is against the principle of natural justice. And assessee contended before the ld. CIT(A) that sale of all units cannot be estimated at a flat rate since there are various factors which affect the rarte, some of them being the location of the unit being sold, urgency of funds required at a particular point of time, time of booking, duration of payment, references/ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooked at ₹ 2,100/- per sq. ft. in project developed by the Appellant. It is found that the Appellant in many ca.ses has shown sale value below such amount as admitted by director hence such onmoney is required to be taxed in the case of Appellant. So far as reliance placed on the statement of site supervisor is concerned, such statement cannot be made applicable when the Director of the Appellant Company himself has admitted sale rate at ₹ 2,100/- per sq. ft. which is more reliable. Even the above site supervisor has joined the Appellant Company in March, 2013 and even he has left it in July 2014 which suggests that he was not a permanent employee of the Company. He was not an authorised person looking after the affairs of the company or bookings made by it. Hence the AO was incorrect in adopting sale rate of ₹ 2,500/- per sq. ft. while arriving at on-money receipts. The Director of Appellant, has admitted sale value at ₹ 2,100/- per sq. ft. and such statement has not been retracted later on and in Assessment Proceedings hence on-money in the case of Appellant is required to be re- computed based upon actual admitted sale value at ₹ 2,100/- per sq. ft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income filed prior to date of search clearly state that the Appellant has shown entire construction expenditure as part of closing stock and booking amounts received in cheque have been shown as liability. While passing the Assessment Order the AO has not disputed such fact nor taxed collection received in cheque in the year in which it is received. It is a settled law that onmoney would be taxed in the year in which regular income is taxed. Reliance is placed on decision of Hon'ble Ahmedabad ITAT in the case of PR Construction V/s ITO (ITA No. 2735/Ahd/2010, dated 8th April, 2011) wherein it is held that accrual of cheque/cash against sale of flat will not arise on receipt but will arise when flats are transferred to buyers. The Hon'ble Pune ITAT in the case of Ranade Dighe V/s ITO (466/Pn/2010, dated 26th August, 2011 has held that on-rnoney cannot be taxed_on_cash basis.as cash receipts do not partake different character from cheque receipt merely because it was received in cash and possibly because there is intention to evade its disclosure to the Department. It is pertinent to note that similar contention has been accepted by undersigned in group case being Lupin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1915 33 51 000 2014-15 8 2012-13 B 402 1750 1800 31 50 000 2014-15 9 2012-13 B 403 1750 2257 39 50 000 2014-15 10 2012-13 B 404 1750 1829 32 00 000 2014-15 11 2012-13 B 503 1750 1063 18 61 000 2014-15 12 2013-14 A 202 1270 2421 30 75 000 2014-15 13 2013-14 A 401 1270 2421 30 75 000 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any case AO is not justified in taxing ₹ 3,30,00,000/- being estimated on-money receipts in AY 2014-15. Thus, to that extent addition made by AO is required to be deleted from AY 2014-15. 5.4 It is pertinent to note that while making the addition of on-money, the AO has stated that modus operandi for collection of money towards sale of units is similar to that of M/s. Dharnidhar Realty, M/s. Sumangal Enterprise, M/s. Autocare Services etc. It is observed that these three group companies of the Appellant have preferred settlement applications wherein they had made disclosure considering average Net Profit @ 16% for projects and while applying such net profit, they had considered both disclosed sales and undisclosed sales found during the course of search. It is observed that disclosure was arrived at after reducing net profit before interest remuneration as shown in the audited annual accounts. The above method was also accepted by the Hon'ble Settlement Commission in its order referred supra wherein in majority of the cases it was held that average net profit would be 17.5% as against 16% offered by the applicants. It is observed that the order u/s 245D(4) was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16 and A.Y. 2016-17 respectively and the amount to be worked out for remaining/unsold 1 unit is to be taxed in the year when it may be sold. 7, Considering the above facts and discussion, additions made u/3 68 of the Act for ₹ 8,33,10,000/- in A.Y. 2011-12 and ₹ 1,62,40,000/- in A.Y. 2012-13 are deleted. Consequently additions made by AO by estimating unexplained expenditure for ₹ 41.65,500/- and ₹ 8,12,000/- in both the Assessment Years are also deleted. Further, additions of undisclosed sale receipts for ₹ 60,92,500/- in A.Y. 2011-12, ₹ 1,36,56,500/- in A.Y. 2012-13 and ₹ 2,48,64,000/- in A.Y. 2013-14 are also deleted. The addition made in A.Y.2014-15 for ₹ 4,57,14,000/- is restricted to ₹ 1,19,19,528 subject to verification of the calculations by the AO as stated herein above. The additions of the amount to be worked out for 18 units and 2 units are to be taxed in A.Y. 2015-16 and A.Y. 2016-17 respectively and the amount to be worked out for the remaining 1 unit will taxed in the year when it may be sold. The AO is directed to take appropriate action in A.Y.2015-16 and A.Y.2016-17 and any other assessment year(s). 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is dismissed. 26. In the result, all four appeals of the Revenue are dismissed. 27. Now we come to Asessee s appeal in ITA No. 2013/Ahd/2018 for A.Y. 2014-15, the assessee has taken following grounds of appeal: 1. In law and in the facts and circumstances of Appellant's case, the Learned CIT (Appeals) has erred in upholding action of AO for making addition to the extent of ₹ 1,84,97,000 in current Assessment Year without appreciating the fact that during the course of search no details regarding receipt of such on-money were found and seized by the Department. 2. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in estimating net profit @ 17.5% and directing AO to tax ₹ 1,19,19,528 being net profit on sales recorded in Books of Account as well as onmoney as against addition made by AO for ₹ 4,57,14,000 without appreciating that actual rate of profit reflected in books of account is very low and considering the market trend, earning such high rate of profit is not practicable. The addition confirmed by Ld. CIT(A) shall be deleted. 3. In law and in the facts and circumstances of Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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