2020 (1) TMI 855 - AT - Income Tax

Estimation of net income from total on money receipts - assessee had disclosed net profit of over 30% of total unaccounted on money receipts - Assessment u/s 153C -AO while making the additions had basically relied upon the some loose documents seized during the survey AND small diary impounded at the office of the assessee and noting therein - HELD THAT - It is an undisputed fact that survey action u/s.133A was carried out at the office premises of Anupam Group wherein during the course seven small pocket diaries were recovered from the premises. And the same were confronted by recording statement of u/s.132(4) wherein it was admitted that these represents net profit from on money receipts or different purchases of the group which were not recorded in the regular books of accounts and was net earnings after all expenses. The unaccounted income accepted by the assessee was duly disclosed in the returns filed subsequently in all the cases, except in the case of assessee firm, the income as disclosed for the firms/projects has been accepted in-toto by the AO. There is sufficient evidence in the case of Shri Jayantilal Mulchand Patel in the form of documents and statement u/s.132(4) of the I.T.Act which confirm that the transactions in the property as true for determining his total income. Even the presumption of correctness is attached with the statement so recorded u/s.132(1)(a) of the I.T.Act which has not been rebutted or uprooted by the assessee. Revenue/Department has also failed to prove that the said Shri Jayantilal Mulchand Patel acted as a broker by leading any independent evidence, and failed to recover any documents depicting the transactions as such. The statement and affidavit on Shri Jayantilal Mulchand Patel has been used by the Revenue without affording an opportunity of cross-examination to the assessee. CIT(A) had rightly concluded that without deciding the evidentry value of the documents seized from the said Shri Jayantilal Mulchand Patel and statement or affidavit for examining the case from a different angle. CIT(A) rightly concluded that in the totality of all the facts and circumstances, the amounts depicted in the diary even if taken to be true, the net amount of income from on money receipts, earned out of books of accounts. Even then, no further additions are justified and thus rightly deleted the additions. We are also in agreement with the decision of PANNA CORPORATION 2014 (11) TMI 797 - GUJARAT HIGH COURT wherein it was held that the estimation of net income from total on money receipt is justified and profits of the assessee's business as a builder should be estimated by applying net profit rate of 15 percent of the total consideration as per the sale agreements and also on the on money received by the assessee. Considering all we are of the view that although the AO has determined the total income at ₹ 9,02,77,106/-, thus taking into account that in the Return of Income a fair amount of income (net profit of over 30%) from such total receipts has already been shown by the assessee i.e. amount of ₹ 3 crores. Thus, no further additions are justified. We see no reason to interfere into or divert from the findings so recorded by the ld.CIT(A), accordingly ground no.1 of Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of 'on money' received out of books of account.
2. Whether the order of the Assessing Officer (AO) should be upheld.
3. Legality of the assessment made under section 143(3) read with section 153C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of 'On Money' Received Out of Books of Account:

The Revenue challenged the deletion of the addition of ?6,02,77,106/- made by the AO based on documents seized from the premises of a third party, Mr. Jayantilal Mulchand Patel, who was alleged to be a broker for the assessee. The AO had determined the total income at ?9,02,77,106/- after making an addition for 'on money' received out of books of account. The CIT(A) deleted the addition, holding that the AO wrongly took 100% of the purported 'on money' as income without considering expenses and that the net income from 'on money' receipts was already disclosed by the assessee.

The Tribunal noted that the AO relied on the statement and affidavit of Mr. Jayantilal Mulchand Patel without giving the assessee an opportunity for cross-examination. The CIT(A) observed that the department failed to prove that Mr. Patel acted as a broker for the assessee through independent evidence. The CIT(A) also noted that in similar cases, the department accepted the net income from 'on money' receipts as disclosed in the diaries found during the survey.

The Tribunal agreed with the CIT(A) that the net income from 'on money' receipts, as depicted in the diary found at the assessee's premises, was the true net amount of income. The Tribunal cited judgments, including the Gujarat High Court's decision in Panna Corporation, which held that only the profit embedded in 'on money' receipts should be taxed, not the entire receipts. The Tribunal upheld the CIT(A)'s decision to delete the addition, as the net profit of over 30% from 'on money' receipts was already disclosed by the assessee.

2. Whether the Order of the Assessing Officer Should Be Upheld:

The Revenue argued that the CIT(A) erred in deleting the addition and that the AO's order should be upheld. The Tribunal, however, found that the AO's reliance on documents and statements from a third party without corroborative evidence and without giving the assessee an opportunity for cross-examination was not justified. The Tribunal supported the CIT(A)'s decision, which was based on the acceptance of net income from 'on money' receipts as depicted in the diary found at the assessee's premises and corroborated by similar cases.

3. Legality of the Assessment Made Under Section 143(3) Read with Section 153C of the Income Tax Act:

The assessee argued that the assessment under section 143(3) read with section 153C was illegal due to the lack of proper notice and satisfaction recorded by the AO. The Tribunal did not specifically address the legality of the assessment under section 153C but focused on the merits of the addition made by the AO. The Tribunal upheld the CIT(A)'s decision to delete the addition based on the substantive evidence presented and the legal principles established in similar cases.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of ?6,02,77,106/- on account of 'on money' received out of books of account. The Tribunal agreed with the CIT(A) that the net income from 'on money' receipts, as disclosed by the assessee, was justified and that no further additions were warranted. The Tribunal also dismissed the general grounds raised by the Revenue, affirming the CIT(A)'s findings and conclusions.