2018 (12) TMI 599 - AT - Income Tax

Addition in the assessment order framed u/s. 153A - absence of any incriminating material found in search - Held that - We are inclined to hold that there was no incriminating material found during the course of search and seizure operation in the hands of assessee for AY 2004-05. As relying on case of Soumya Construction 2016 (7) TMI 911 - GUJARAT HIGH COURT to hold hat the AO is not entitled and empowered to make any addition in the assessment order framed u/s. 153A r/w s. 143(3) of the Act for AY 2004-05 in absence of any incriminating material therefore, the addition made by the AO and reduced by the ld. CIT(A) is not sustainable and thus, we direct the AO to delete the entire addition made in absence of incriminating material for AY 2004-05. Rejection of books of accounts u/s. 145 - estimation of sales price of shops - estimating the unaccounted receipts of the project Cosmo Complex - Held that - Referring to the general principle and guidance for valuation of rate of multi-story building from ground to top floor, rate adopted by the AO and ld. CIT(A) and weighted average rate submitted by the appellant, we are of the considered opinion that the assessee has not disputed the rate adopted by the ld. CIT(A) for ground and first floor of ₹ 30,042/-, which is must less than the weighted price of first floor as of ₹ 50,251.77 and little higher than the weighted price of first floor of ₹ 29,288.33 as submitted by the assessee and which has not been seriously objected or opposed by the ld. DR. Therefore, the adoption of rate by ld. CIT(A) for ground and first floor of ₹ 30,042/- per sq. mt. is confirmed. For rate of second floor CIT(A) has adopted rate of ₹ 30,042/- for second floor and as per assesee the weighted rate for this floor is ₹ 17,703.97. Keeping in view these facts and figures submitted by both the parties and by taking a balancing and reasonable approach and view, we find it appropriate to take average rate of these two which is approximately ₹ 24,000/- per sq. mt. and AO is directed to recalculate the addition for second and third floors sale of shops and offices accordingly. For fourth and fifth floor, CIT(A) has adopted similar rate of ₹ 22,000/- per sq. mt. for both these floors, whereas weighted average as per assessee for these two floor are ₹ 11,056.58 and ₹ 11,545.41 respectively. Keeping in view these facts and figures submitted by both the parties and by taking a balancing and reasonable approach and view, we find it appropriate to take average rate of these two which is approximately ₹ 16,500/- per sq. mt. and AO is directed to recalculate the addition for fourth and fifth floors sale of shops and offices accordingly. Consequently, grounds of assessee for AY 2008-09 are partly allowed with the directions to the AO to recalculate the on money earned by the assessee from sale of shops and floors from first floor to top floor during the relevant financial period of FY 2007-08.- Decided partly in favour ofassessee

Summary

Issues Involved:
1. Rejection of books of accounts under Section 145 of the Income Tax Act, 1961.
2. Allegation of receiving on-money based on loose papers found during search proceedings.
3. Estimation of sales price for shops and offices for calculating unaccounted receipts.

Detailed Analysis:

Issue 1: Rejection of Books of Accounts under Section 145
The Assessee contested the rejection of its books of accounts by the Assessing Officer (AO) under Section 145 of the Income Tax Act, 1961. The CIT(A) upheld this rejection, which was challenged by the Assessee. The Tribunal noted that the books of accounts were rejected based on loose papers found during the search and seizure operation on 15.09.2010. However, for the assessment years 2004-05, 2005-06, and 2007-08, the Tribunal found that no incriminating material was discovered during the search. Therefore, the Tribunal concluded that the AO was not justified in rejecting the books of accounts for these years and directed the AO to delete the additions made.

Issue 2: Allegation of Receiving On-Money
The AO alleged that the Assessee received on-money for the sale of shops and offices based on loose papers found during the search. The CIT(A) upheld this contention. The Tribunal examined the facts and noted that for the years 2004-05, 2005-06, and 2007-08, no incriminating material was found during the search. Consequently, the Tribunal held that the AO could not make any additions under Section 153A in the absence of incriminating material. For the years 2008-09, 2009-10, and 2010-11, where the assessments were not completed and were abated due to the search, the Tribunal accepted the principle that the AO could make additions based on the incriminating material found.

Issue 3: Estimation of Sales Price
The AO estimated the sales price of shops and offices to calculate unaccounted receipts, which was upheld by the CIT(A) with some modifications. The Tribunal noted the Assessee's argument that the rates adopted by the CIT(A) were excessive and unreasonable. The Tribunal considered the weighted average rates submitted by the Assessee and the general principle that the price per square meter decreases as one moves from the ground floor to higher floors. Consequently, the Tribunal directed the AO to recalculate the additions based on a reasonable and balanced approach, adopting specific rates for each floor as follows:
- Ground and First Floor: ?30,042 per sq. meter (confirmed).
- Second Floor: ?24,000 per sq. meter (average of the rates submitted).
- Fourth and Fifth Floors: ?16,500 per sq. meter (average of the rates submitted).

Conclusion:
The Tribunal allowed the appeals for the assessment years 2004-05, 2005-06, and 2007-08, directing the AO to delete the additions made in the absence of incriminating material. For the assessment years 2008-09, 2009-10, and 2010-11, the Tribunal partly allowed the appeals, directing the AO to recalculate the additions based on the revised rates for different floors. The final order was pronounced on 30th November 2018.