9911796707
TMI Blog2005 (10) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Punjab High Court in the case of CIT v. Kartar Singh [1970] 77 ITR 338 , books of account may include memorandum books. For the purposes of Explanation 5 to section 27(1)( c ), books of account would mean these books of account whose main object is to provide credible data and information to file tax returns. Section 68 is a deeming provision and it is to be strictly interpreted. Applicability of section 68 cannot be enlarged. Hence, section 68 is not applicable in respect of any entry in document. The Assessing Officer at page 18 of the order has mentioned that he is adding Rs. 38,12,790 as these are credits in the documents maintained by the assessee and hence, treated as unexplained credits under section 68 of the I.T. Act. Such document cannot be treated as book and section 68 is applicable in respect of entry in book. Therefore, the Assessing Officer was not justified in including it under section 68 of I.T. Act. Keeping in view the discussion on the issue of addition, it is held that the Assessing Officer was not justified in including the same u/s 68 of I.T. Act as that section has no application for an entry credited in document particularly when the amount received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 132 was conducted at the business premises of M/s. Raja Housing Ltd., a concern belonging to Raja Housing Group. Assessees are partners of some firms of this group and also Director in some companies of the group. Total undisclosed income of Rs. 1,24,49,677 has been disclosed by all the four assessees by disclosing 1/4th of the above. Sri Raja Jayashankar is father and other three assessees are his sons. 5. The Assessing Officer in his order has determined undisclosed income from the seized documents and such income has been equally apportioned amongst all the four assessees. The assessees through various firms and companies are engaged in the construction of housing projects and their sales. Up to the date of search, three housing projects were completed and, therefore, profit as evident from undisclosed receipts and expenses have been taxed as the assessee is showing profit on project completion method. There is no dispute on this issue. 6. The following three projects were not completed till the date of search and unaccounted receipts against each such project is as under : Eshwar Hills Rs. 13,31,395 Palm Spring Rs. 5,31,395 Raja Heaven Rs. 19,50,000 Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs. 38,12,790 was apportioned equally amongst all the four persons. 8. The learned CIT(A) deleted the above additions of Rs. 38,12,790 made by the Assessing Officer by observing as under: "Both before the Assessing Officer (page 15 of the assessment order) and during the appellate proceedings a claim has been made in respect of net loss of Rs. 25,07,960 in respect of the incomplete projects, particularly because the assessees after purchasing the land have made certain expenses for development such as levelling and plotting etc. These land are lying unsold. Further since the Assessing Officer has already taken the unaccounted receipts i.e., Rs. 38,12,790 separately as undisclosed income, set off of the loss should be allowed. This ground however looses its significance because I have already directed the Assessing Officer to exclude the unaccounted receipts of Rs. 38,12,790 in the preceding para. The Assessing Officer has followed the correct method of computing profit from the completed projects and adding the net of unaccounted expense over and above the total receipts. These three projects are still not completed. No deduction in respect of any loss arising out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as cash credits within the meaning of section 68 of the Act, since no books of account are maintained for unaccounted transactions. There is, therefore, no attempt to bring in cash credits i.e., Liabilities in the Balance Sheet, which actually should have gone into computing profit in Trading Account. The Assessing Officer's view only amounts to taxing the unaccounted sales figures and not the profit. This profit has not arisen as the three projects are not yet complete. The above amounts are taken out from seized material namely Raja 4 which is only a loose sheet of paper and the same cannot be constituted as 'Books of Account'. To substantiate this contention we have relied upon the decisions of Supreme Court, in the case of C.B.I. v. V.C. Shukla [1998] 3 SCC 410. It is further submitted that provisions of section 68 of the Act are not applicable to the advances received for the sale of goods or property and it is applicable only to the borrowed funds-loans or deposits. The Assessing Officer has also admitted these as Trading Receipts [refer to page 16 para 3(b)]. The unaccounted receipts of Rs. 38,12,790 received in cash by the above four assessees as advances for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent entity and it is following project completion method for accounting its profits. Respondents are not following project completed method. Under such circumstances, cash method of accounting should have been accepted and the excess of expenditure over receipts should have been allowed as deduction as excess of income over expenditure in respect of completed project has been assessed as undisclosed income. 15. The learned DR in his counter reply submitted : (a) Excess of aggregated unaccounted expenses over the aggregate unaccounted receipts has been subjected to tax. (b) Sum of Rs. 38,12,790 pertaining to 3 incomplete projects has been treated as unexplained cash credit. (c) The above referred sum has not been subjected to tax under item (a) above. (d) The Assessing Officer has not accepted that the sum of Rs. 38,12,790 was received from prospective customers. (e) Since these receipts are also the source of unaccounted expenses incurred, hence these represented cash credits in the documents maintained by the assessee. (f) The case laws relied on by learned AR on the issue of supporting order on the ground decided against the assessee are not relevant. 16. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court had an occasion to consider the meaning of the word 'book' in the case of CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 at page 681, the learned High Court observed : "Now, the word 'book' has not been defined in the Act and it is not a term of act. It is an ordinary English word of everyday use and it must, therefore, be assigned its natural meaning as understood in common parlance subject, of course, to the context in which it is used here. In popular sense, book means a collection of a number of leaves or sheets of paper or of other substance, blank, written or printed, of any size, shape and value, held together along with one of the edges so to form a material whole and protected on the front and back with a cover of more or less durable material. That this is how the word 'book' is understood in ordinary usage is evident from the third meaning of the word given in the Shorter Oxford English Dictionary." 19. Now the question before us is as to whether section 68 is applicable to any entry in document or whether document can be called as book. Section 68 is a deeming provision and it is to be strictly interpreted. Applicability of section 68 cannot be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of incomplete projects. The direction of the learned CIT(A) to Assessing Officer that he should identify the persons from whom such amounts has been received and to tax the same in their hands cannot be upheld as it shifts onus from the assessee to the revenue in respect of fact which is in the exclusive knowledge of the assessee. When credit of such sum is taken by the assessee to explain the expenses for incomplete projects then the Assessing Officer can ask the assessee to lead evidence and in case assessee fails then necessary inference, as per law, can be taken. 23. Keeping in view the above discussion on the issue of addition of Rs. 38,12,790 it is held that the Assessing Officer was not justified in including the same under section 68 of I.T. Act as that section has no application for an entry credited in document particularly when the amount received has been considered as available for explaining the unaccounted expenses. The action of the learned CIT(A) in deleting the addition is confirmed. 24. Ground of Appeal Nos. 9 and 10 are against the relief of Rs. 1,38,500 given by learned CIT(A) in respect of bribe payments. 25. In respect of completed projects, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be but it was given to some person who rendered assistance in getting the amount released. In the instant case, the seized material indicate that payments are bribe. Such payments are in contravention of provisions of prevention of Corruption Act. Shri Raja Datta vide question No. 54 was asked as to why such bribe payment be not disallowed. Shri Raja Datta has not rebutted in his answer that these payments were not bribe. He stated on 20-2-2002 in answer to question No. 54 that if I.T. Act does not permit allowance of such expenditure then he has no objection for adding the same to his undisclosed income. In view of such factual position that payments represented bribe and considering the Explanation to section 37(1), it is held that learned CIT(A) was not justified in allowing the expenses of Rs. 1,38,500. On this issue, the order of CIT(A) is reversed and that of Assessing Officer is restored. 31. Ground of Appeal Nos. 11 to 13 are against the relief given by directing the Assessing Officer not to include the regular income of assessment year 1999-2000 in the undisclosed income of the block period. 32. Due date for filing the return for assessment year 1999-2000 was 31-8-1999 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Sri Raja Udaya Shankar are reflected in the regular books. The AR, therefore, contends that regular books are maintained. The fact that the assessees have taxable income has not been discovered during the course of search. In two cases where there were major income, taxes have also been paid. So on the basis of the various ITAT's decisions such as 78 ITD page 51 (Mum.), 67 ITD page 151 (Ind.), 80 ITD page 503 (Pat.) and the Bangalore Bench, ITAT's decision in the case of Commercial Corporation IT (SS)A No. 24/1998, it should be held that in such a situation merely on the basis of delay in filing of regular returns by the assessees, regular income cannot be included in computation of undisclosed income. I entirely agree with the AR. The Assessing Officer is directed to exclude the regular income in respect of assessment year 1999-2000 in respect of the four assessees from undisclosed income computed under Chapter XIV-B." 35. During the course of proceedings before us, the learned DR submitted that provisions of section 158BB(1)(c) are unambiguous and hence, the returned income could not have been reduced to ascertain the undisclosed income as return was not filed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 230A of the Income-tax Act. Applications were made on 10-6-1998. In these applications the following informations were disclosed : R. Udayshankar R. Jayashankar Sale consideration 14 lakhs 13.5 lakhs Cost of acquisition 6.5 lakhs 6.25 lakhs 40. R. Udayshankar while filing return has adopted 14 lakhs as sale consideration and cost of acquisition plus cost of improvement has been adopted at Rs. 6,79,600. Shri R. Jayashankar has adopted sale consideration at Rs. 13.5 lakhs and cost of acquisition plus cost of improvement has been taken at Rs. 6,54,600. 41. It is clear from the computation of income in the regular return that none of items of income included it have been found as a result of search. Undisclosed income is defined in section 158B(b). 42. Section 158BB(ca ) refers to the income to be reduced from total income for computing the undisclosed income. This section is as under : "(ca) where the due date for filing a return of income has expired but no return of income has been filed as nil, in cases not falling under clause (c)." 43. Block assessment has been completed on 28-2-2002 and before that return of income for assessment year 1999-2000 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (Delhi), the income was included as undisclosed income as return was filed late. The ITAT deleted the addition. The learned High Court said that no substantial question of law arises as the income is not covered by definition of undisclosed income as given in section 158B. Moreover advance tax was also paid before the date of search. 52. In the instant case, the returned income is reflected from the books of account and sale of property stands disclosed by virtue of filing application under section 230A. Such income as shown in return is not undisclosed income as defined in section 158B(b) and income also stands disclosed by way of filing return under section 139(4) of the Income-tax Act. Section 158BB(ca) mentions that no return of income is filed. While in the instant case return of income has been filed under section 139(4) of the Income-tax Act. Hence, on this issue order of CIT(A) is confirmed and grounds of Appeal Nos. 11 and 13 are dismissed. 53. Grounds of Appeal Nos. 14 to 17 are against the finding of learned CIT(A) that surcharge should be levied in respect for assessment year 2000-01. 54. The order of learned CIT(A) on this issue is as under : "Surcharge : I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 1.25 per cent from 2 per cent. The interest under section 158BFA, therefore, should be levied only at the rate of 1.25 per cent and not 2 per cent. I fully agree with this agreement. The Assessing Officer is, therefore, directed to charge interest at the rate of 1.25 per cent and not at the rate of 2 per cent under section 158BFA." 58. The worthy Supreme Court in the case of Smt. Maya Rani Punj v. CIT [1986] 157 ITR 330 held that non-filing of return is a continuing default. Bombay High Court in the case of CWT v. P.M. Ganger [1991] 189 ITR 579 held in that case that penalty under section 18(1)(a) for the return for assessment years 1967-68 & 1968-69 filed after 1-4-1969 will be impossible under unamended section prior to 1-4-1969 and under amended section after 1-4-1969. The learned High Court followed Supreme Court judgment in Smt. Maya Rani Punj's case (supra). Interest is either compensatory or penal or combination of both. Under all the circumstances, interest is to be levied at the rate prevailing during the period of default. Hence, the learned CIT(A) was not justified in reducing the interest. On this issue order of learned CIT(A) is received and that of Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
