2018 (6) TMI 1692 - AT - Income Tax

Assessment u/s 153A - addition as the profit earned by the assessee based on the documents found during the course of search - HELD THAT - In this case the documents were found from the assessee, wherein, the name of the assessee is also mentioned in short form, assessee failed to explain the contents of the documents including the paper showing the transaction as well as the contents of the MOU. In view of this, we reject the contention of the ld AR, uphold the orders of the lower authorities confirming the addition as undisclosed income of the assessee, and dismiss ground of the appeal of the assessee. Unaccounted Profit on Sale of Industrial plots at Village Jharsentli, Faridabad - first contention of the assessee is that above transaction has not happened and these are tentative or estimates - HELD THAT - Argument of the assessee is that out of the 16 plots, four plots have not been sold and therefore they cannot be considered as the final sale price. This argument does not merit any consideration for the reason that AO has divided the profit based on the date of sale of the plots when they are registered. AO himself has stated that up to 31st October 2001 only 12 plots was sold and balance 4 plots were sold later on. Further the assessee has also borrowed jointly sum from somebody on interest and interest cost thereon as been reduced from the profit. With respect to the sale of 12 plots, the assessee has complete details about the name who bought the plot of land, the documented sale price etc. These facts are not disputed. Therefore based on all these facts, it cannot be said that the papers are merely an estimate or projection. Assessee is merely a broker and whatever profit arises would squarely falls on the shoulders of the owner of the property and not on the broker - On the similar facts and circumstances in the case of the assessee for different years, we have already dealt with this argument. For the similar reasons we also reject this contention of the assessee. Furthermore we are of the opinion that documents shows emphatically and clearly that in the whole project the assessee was also partner along with the managing director of the company sold plot. These facts were not denied by the assessee further assessee did not produce on its own the managing director of the seller company before AO to show that the profit belongs to him. It was also not denied that the plot originally to be sold was subdivided into 16 plots and therefore there is bound to be expenditure for roads, electricity etc, no evidences were furnished that who incurred this expenditure. Contrary to this, the document shows that the assessee has maintained a detailed account where cash has been received and expenditure have been defrayed. It cannot be said that that assessee was merely a broker and has not earned profit on sale of the 16 plots. Determination of profit - Assessing officer reduced the amount of lesser sale consideration received by cheque and added the same as a cash has been received of that amount by the assessee. We are not in agreement with the Ld. assessing officer on this issue. If there is a reduction in the sale price with respect to the 4 plots from the amount mentioned in the seized document, then the Ld. AO should have granted deduction of the same amount in the consideration paid by them by cheque however same should not have been added the cash receipt. In fact, he granted a sum of ₹ 1985000/- as deduction from the gross profit. To this extent the Ld. assessing officer is directed to reduce the overall profit of ₹ 2, 18, 46, 799/ and proportionate profit of the assessee. Deduction of certain expenditure out of the profit of the profit - documents found during the course of search are required to be believed completely. When some additions are made based on those papers, there is no reason that information contained in those papers should not be believed. The amount of compensation is precisely mentioned in the seized papers. Therefore, such figure cannot be an estimate or projections. If the above amount of compensation is not included in to the total expenditure computed by the ld AO for working out the overall profit then, such sum must be granted to the assessee as deduction and then overall profit needs to be worked out - AO is directed to verify the computation of profit, if the amount of compensation is not included in the expenditure, then the profit amount deserves to be adjusted accordingly. Further, the amount of charges paid for EDC, the assessee has not given any evidence of payment of such charges - assessee does not have any evidence that assessee has incurred these expenditure. Therefore, there is no information available that assessee incurred this expenditure. Therefore, we do not find any infirmity in the order of the Ld. assessing officer in not granting deduction of this amount from the gross profit shown by the assessee. We do not find any infirmity in the order of the lower authority in taxing the 50 % of the profit based on information contained in the loose papers found during the course of search. However, with respect to the determination of overall profit we direct the ld AO to reduce the sales consideration by ₹ 1985000/- because of difference in sale price and further adjustment because of compensation paid of ₹ 5.50 lakhs. Accordingly ground no three of the appeal is partly allowed with above direction.

Summary

Issues Involved:
1. Jurisdiction of the AO under section 153A/143(3).
2. Recording of requisite satisfaction and obtaining requisite approval.
3. Addition of undisclosed income based on seized documents.
4. Violation of principles of natural justice.
5. Benefit of telescoping.
6. Charging of interest under sections 234A, 234B, and 234C.

Detailed Analysis:

1. Jurisdiction of the AO under section 153A/143(3):
The assessee challenged the jurisdiction of the AO in framing the assessment order under section 153A/143(3) without assuming jurisdiction as per law. The Tribunal upheld the AO's jurisdiction, noting that the search and seizure operation conducted at the assessee's premises justified the invocation of section 153A.

2. Recording of requisite satisfaction and obtaining requisite approval:
The assessee contended that the AO did not record the requisite satisfaction or obtain the necessary approval as per law. The Tribunal found that the AO had followed the due process, and the assessment orders were validly framed under section 153A/143(3).

3. Addition of undisclosed income based on seized documents:
The primary issue was the addition of undisclosed income based on documents seized during the search. The AO made additions for various assessment years based on these documents, which showed unaccounted profit from real estate transactions. The Tribunal upheld the additions, emphasizing that the documents found during the search were sufficient evidence of undisclosed income. The Tribunal noted:
- The seized documents contained detailed calculations of profits from the sale of plots.
- The assessee failed to provide a satisfactory explanation or evidence to counter the contents of the seized documents.
- The presumption under section 292C applied, and the contents of the seized documents were deemed true.

4. Violation of principles of natural justice:
The assessee argued that the assessment was framed in violation of the principles of natural justice, as the AO did not provide an opportunity for cross-examination or confront the adverse material. The Tribunal found that the AO had provided adequate opportunities for the assessee to explain the seized documents, and the assessee's failure to provide satisfactory explanations justified the additions.

5. Benefit of telescoping:
The assessee contended that the benefit of telescoping should have been granted. The Tribunal rejected this argument, noting that the assessee did not provide any evidence to support the claim for telescoping. The additions were based on specific documents showing unaccounted income, and there was no basis for telescoping.

6. Charging of interest under sections 234A, 234B, and 234C:
The assessee challenged the charging of interest under sections 234A, 234B, and 234C. The Tribunal held that the charging of interest was consequential and upheld the AO's action.

Conclusion:
The Tribunal dismissed the appeals for the assessment years 2000-01, 2002-03, 2003-04, and 2006-07, upholding the additions made by the AO based on the seized documents. The Tribunal found that the AO had validly assumed jurisdiction under section 153A, followed due process, and provided adequate opportunities to the assessee. The additions were justified based on the detailed calculations and evidence found in the seized documents, and the assessee's failure to provide satisfactory explanations or evidence to counter the contents of these documents.