2019 (2) TMI 1010 - AT - Income Tax

Assessment u/s 153A - proof of incriminating material found during the course of search at the assessee s premises - Held that - As during the course of search various documents were seized/impounded which contained various transactions which were not reflected in the regular books of accounts. It also included LPS-6 showing various unaccounted transactions, LPS-28 contained the names of the persons with the amount in which such amount were not reflected in the ledger accounts of the persons mentioned therein, LPS 25 Page-7 showing various hand written amounts. Thus it is crystal clear that various incriminating material were found during the course of search which related to all the seven assessment years from 2007-08 to 2013-14. We therefore in the facts and circumstances of the case found no merit in common Ground No.2 raised by the assessee and the same deserves to be dismissed as there were incriminating material found during the course of search for all the seven assessment years. Suppression of gross receipts - Held that - The very basis adopted by Ld. A.O for making the addition for suppressed receipts is fatal, incorrect and has no justification because the document i.e. page-7 of LPS-25 relied on by the Ld. A.O for completing the suppressed receipts has not been examined properly and thus gravely erred in rejecting books of accounts by invoking provision of Section 145(3) of the Act. On our perusal and examination of this document we find that the figures mentioned in the seized document i.e. Page7 of LPS 25 were almost tallying to the figures mentioned in regular books of accounts with a minor difference of the gross receipts which itself cannot lead to be a basis for the additions on account of suppression of receipts @49%. We therefore set aside the findings of both the lower authorities and delete the addition Addition made on undue benefit to Directors - assessee company has constructed commercial complex at city centre and sold some shops to Directors of the company and their family members - assessee company has transferred the said properties at below collector rates prevailing in that area, in order to (a) Provide benefit to directors (b) Suppress the income of Assessee Company - no evidence of on money was received thus difference between the stamp duty value and registered sale value was added as income of Assessee Company - Held that - The undisputed facts emerging out of the record are that the alleged transactions were duly recorded in the books. There was no iota of evidence in the form of incriminating documents to show that any on money or underhand dealing took place in the case of the impugned transactions. The properties sold in question were commercial properties which apart from the Directors were also sold to the other unrelated parties. There is no observation of both the lower authorities which could show that the assessee had a different set of rule for the unrelated parties and another for the related parties which means that properties sold to the Directors/relatives/family members were at the fair market price. Neither the provision of Section 43CA of the Act nor the provisions of Section 50C of the Act are applicable on the impugned transactions of sale of commercial shops held by the assessee as stock in trade to its Directors/family members and further as the sale considerations received by the assessee company are at fair market value, therefore no such addition was called for providing undue benefits to the Directors. We accordingly set aside the finding of both the lower authorities and delete the addition and accordingly allow this common issue raised by the assessee. Unaccounted transactions with Fortune Group - incriminating material found during the course of search at the assessee s premises - not providing cross examination by AO - Held that - The transactions mentioned in one of the page of the diary shows the name of the assessee but those transactions have been denied by the assessee to have taken place with M/s. Fortune Group - the other transactions of cash/cheque with Patidar family and other documents for purchase of land have no bearing with the assessee as the name of the assessee is not mentioned therein. No incriminating material relating to Fortune Group was found during the course of search at the assessee s premises. Both the lower authorities were unable to bring any material on record which could prove that the alleged transactions appearing in the diary found at the business premises of Fortune Group has any connection with the business as well as books of accounts regularly maintained by the assessee. A.O has not granted the opportunity of cross examination to the assessee with the author of the alleged diary as well as concerned person of M/s. Fortune Group and thus the action of the Ld. A.O of not providing cross examination turns out to be a clear violation of principle of natural justice and therefore the additions made by the Ld. A.O for the unaccounted transactions with M/s. Fortune Group has no foundation to stand for and same needs to be deleted. Addition of unaccounted transactions - Held that - addition of ₹ 46,86,348/- needs to be set aside to the file of Ld. A.O so as to verify the documents in the shape of confirmation filed by the assessee to his/her satisfaction and decide accordingly as to whether the amount appearing in the seized document are merely estimates or prospective amount to be received or On-money . In case Ld. A.O concludes that the alleged amount is On-money then the addition for the net profit element embedded therein should be added to the income of the assessee which is consistently declared. Needless to mention that proper opportunity is to be provided to the assessee For addition of ₹ 10,00,000/- is concerned which is based on seized document The copy of ledger account and purchase deed are available at paper book at page 567 to 573. Revenue is unable to controvert this document. Moreover on the alleged document seized by the department there is mention of the date or the name or the purpose for which the amount of ₹ 10,00,000/- is mentioned and therefore in these given facts and circumstances of the case explanation given by Ld. Counsel for the assessee needs to be accepted that the impugned amount was paid to Shri Hira Choudhary for purchase of land. We therefore set aside the findings of both the lower authorities and delete the addition Addition of sum allegedly paid to CREDAI - Held that - CREDAI being association of builders at Bhopal having details of amount collected from various builders the onus was on the assessee to prove whether he had made any payment by cheque or cash of ₹ 2 lacs to CREDAI. No such details have been filed before both the lower authorities and before us. It seems that assessee has no explanation to give for such expenditure and the same has been rightly added to the income of the assessee as an unexplained expenditure. We accordingly confirm the addition and dismiss Ground of the assessee for Assessment Year 2012- 13. Addition in respect of unaccounted transaction and unaccounted expenditure - Held that - We find that cash payment of ₹ 3,00,000/- was given to M/s Ganga Bricks on 17.08.2012. The contention of the assessee is that this deal pertains to Fortune Soumya Housing has no basis to stand for because the document at page-179 of BS-1 seized from FS- 4 was found at the business premises of the assessee and the assessee being in the business of builder and developer, there is a direct connection of the business with this cash payment to Ganga Bricks which also bears the date of payment. Therefore we find no merit in the contention of Ld. Counsel for the assessee and are inclined to confirm the finding of Ld. CIT(A). Deduction u/s 80IB(10) - Held that - The assessee is eligible for deduction u/s 80IB for Soumya Estate Project as held by the Tribunal that all the pre conditions have been fulfilled by the assessee which inter-alia includes the approval from the local bodies on 26.3.2007 for the housing project in the name of Soumya Estate and the completion certificate obtained on 29.10.2005 from the Municipal Corporation, Bhopal. We therefore find no reason to interfere in the finding of Ld. CIT(A) allowing the deduction u/s 80IB(10) of the Act for Assessment Year 2009-10, 2010-11 and 2011-12

Summary

Issues Involved:
1. Validity of assessment orders and additions based on incriminating material found during the search.
2. Suppression of gross receipts and estimation of profits.
3. Undue benefits given to directors.
4. Unaccounted transactions with Fortune Group.
5. Unaccounted transactions and expenditures based on seized documents.
6. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.

Detailed Analysis:

1. Validity of Assessment Orders and Additions Based on Incriminating Material:
- The assessee argued that the additions made were not based on any incriminating material found during the search. The Tribunal found that various documents seized during the search contained unaccounted transactions not reflected in the regular books of accounts. Hence, the Tribunal dismissed the assessee's contention, confirming that the additions were based on incriminating material.

2. Suppression of Gross Receipts and Estimation of Profits:
- The Assessing Officer (AO) extrapolated 49% of the receipts for all years based on documents seized, resulting in substantial additions. The CIT(A) applied a gross profit rate of 34.20% on the alleged unaccounted receipts.
- The Tribunal found that the AO's estimation was based on incorrect figures and assumptions, and there was no evidence of suppressed receipts for the other years. The Tribunal deleted the additions, stating that the AO's approach was unreasonable and based on surmises and conjectures.

3. Undue Benefits Given to Directors:
- The AO made additions based on the difference between the sale consideration shown in the sale deeds and the stamp duty valuation. The Tribunal found that the properties were sold at fair market value and that the provisions of Section 50C and 43CA were not applicable as the properties were stock-in-trade, not capital assets.
- The Tribunal deleted the additions, stating that there was no evidence of 'on-money' or underhand dealings and that the sales were at market rates.

4. Unaccounted Transactions with Fortune Group:
- The AO made additions based on a diary found at the premises of Fortune Builders, which allegedly contained transactions with the assessee. The Tribunal found that the diary was not found during the search at the assessee's premises and that the assessee was not given an opportunity for cross-examination.
- The Tribunal deleted the additions, stating that the diary entries alone could not be the basis for additions without corroborative evidence and cross-examination.

5. Unaccounted Transactions and Expenditures Based on Seized Documents:
- For various years, the AO made additions based on seized documents showing unaccounted transactions and expenditures. The Tribunal found that some of the documents were rough estimates or projections and that the assessee provided confirmations and ledger accounts showing the transactions were recorded in the books.
- The Tribunal set aside some additions for verification by the AO and deleted others where the assessee provided satisfactory explanations and evidence.

6. Eligibility for Deduction Under Section 80IB(10):
- The AO disallowed the deduction under Section 80IB(10) for the project "Soumya Estate," claiming the assessee was not the owner of the land and had not obtained the necessary approvals. The CIT(A) allowed the deduction, finding that the project met all the conditions of Section 80IB(10).
- The Tribunal upheld the CIT(A)'s decision, referencing a previous Tribunal decision in the assessee's favor, confirming that the project fulfilled the necessary conditions for the deduction.

Conclusion:
The Tribunal provided a detailed analysis of each issue, finding that many of the AO's additions were based on incorrect assumptions, lack of evidence, and procedural violations. The Tribunal deleted or set aside several additions for verification, confirming the assessee's eligibility for deductions and rejecting the AO's high-pitched assessments.