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TMI Blog2012 (12) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... ce - assessee had received Rs. 71 lakhs out of which Rs. 41 lakhs had been accounted for and the balance of Rs. 30 lakhs received in cash was not recorded in the books of account, which was also offered as income from undisclosed sources. Since the alleged cancellation deed was found during course of search accompanied by the statement recorded u/s 132(4) clearly indicate that there was no cancellation of plot. Accordingly, the Assessing Officer was justified in treating the difference in sale consideration actually disclosed in the return as compared to the sale consideration found recorded on the sale agreement, which was found during course of search - addition upheld - I.T.(SS).A.Nos. 62 to 66/Ind/2010 and 74 & 75/Ind/2010, I.T.(SS). A.Nos. 67 to 73/Ind/2010 - - - Dated:- 31-1-2012 - SHRI JOGINDER SINGH AND SHRI R.C.SHARMA, JJ. Assessee by : Shri H.P.Verma and Shri Girish Agarwal, Advocates Department by : Shri Arun Dewan, Sr. DR ORDER PER R. C. SHARMA, A.M. These are cross appeals filed by the assessee and Revenue against the order of CIT(A) for the assessment year 2000-01 to 2006-07. 2. Common grievance of the assessee and Revenue in al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Ld. AO had not pointed out any defects in the books of account. The AR of the appellant also submitted (i) that there is no evidence found even during the search, which may indicate that the appellant received any 'on money' in any transaction of sale or purchase or that the appellant entered into any transactions, which were not accounted for in the books of account, (ii) that the G.P. shown by the appellant was the actual GP earned by the appellant, which was between 10 % to I5 % in the different assessment years and that it was not low and that the assessing officer had not cited any comparable case, where any builder had shown the GP as high as 25 % ; and (iii) that declaration made by one of the directors of unaccounted income of Rs.1.83 crores could not have any adverse effect on the genuineness of account books of the assessee. He submitted that on the contrary since the additional income had been declared by the director of the company and assessed in the hands of the directors of the company, the book results of the company should not be disturbed. Thus, it was argued that there was no justification for the AO to invoke provisions of section 145(3) of the Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss receipts in all the years were more than forty lakhs rupees and, hence, the rate of 8 % of net profit of gross receipts cannot be applied. Therefore, considering the facts and circumstance of the case and that the appellant company itself had shown net profit rate in A.Y. 2005-06 at 6.15 % on the sales, I am of the opinion that it would be fair and reasonable if NP rate of 6.5 % on the sales is applied. After applying net profit at 6.5 % on the sales, the estimation of NP in different A.Ys were worked out. 6. Aggrieved by the above order of the CIT(A), both assessee and Revenue are in appeal before us. 7. Contention of the ld. Authorized Representative was that considering section 153C, it can be said that the provision of section 153C is harsh with respect to the person who has not been searched as also echoed by Supreme Court in the context of section 158BD in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341. A person against whom no search warrant has been authorized should not be equated with the person against whom search is authorized so as to make assessment in his case also in the same manner as in the case of person searched as per provision of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No action was called for u/s 153C in this case. 9. It was further contended by the ld. Authorized Representative that In the instant case, no incriminating material belonging to the appellant satisfying ~he assessing officer about any escaped income of the appellant for the above said six assessment years has been found and the Id. assessing officer has simply disturbed the old assessment and has re-assessed the income u/s 153C by applying the higher G.P. rate of 25% without pointing out any defects in the ale books as against the G.P. shown by the appellant between 8.48% to 15.66% in the different assessment years on the basis of duly audited accounts books. On these facts, when there is no incriminating material seized and no satisfaction is recorded, the notice issued u/s 153C and consequent assessment is illegal. Reghubar MandaI Harihar MandaI vs State of Bihar 7 STC 770 SC : "When the returns and the books of accounts are rejected, the AO must make an estimate and to that extent he must make an estimate and to that extent he must make a guess but the estimate must be related to some evidence or material , and it must be something more than mere suspicion." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account by applying gross profit rate of 25 % as against gross profit rate of 10.3 % to 15.66 % shown by the assessee in different years, without any basis and without referring to any seized material, documents/evidence. However, the ld. CIT(A) has given partial relief to the assessee by applying net profit rate of 6.5 % as against different net profit rates shown by the assessee. Thus, the net addition was retained by the ld.CIT(A) on the basis of estimated net profit rate applied by him. From the record, we found that gross profit rate of assessee has increased after every year as the Directors gained experience in this line of business. The turnover of the assessee company also kept on increasing year after year. From assessment year 2000-01, the sales of Rs. 69.73 lakhs were jumped to Rs. 1.32 crores in assessment year 2005-06 with increase for gross profit from 10.3 % to 14.99 % showing that the direct expenses decreased from year to year. No major discrepancy was noted by the Assessing Officer in the books of account, which was maintained in regular course of course business and duly audited accounts were furnished before the Assessing Officer for verification. The lower au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est 46,433 78,350 9,414 16,200 6,747 1,473 15,126 5. Directors Remuneration 2,50,000 1,50,000 3,75,000 3,75,000 3,75,000 3,75,000 3,75,000 6. Legal Professional expo 5,000 42,244 52,356 45,700 12,600 2,65,026 13,555 7. Office Rent - - - 12,000 12,000 12,000 12,000 8. Total Rs. 5,11,517 4,34,322 6,64,070 7,24,116 6,89,927 10,47,346 8,22,761 9. Total Administrative Exp 6,51,228 5,41,968 8,54,283 7,83.891 7,71,626 11,78,776 10,49,743 10. Percentage 78.55% 80.1% 77.73% 92.37% 89.4% 88.85% 73.38% 12. The verifiable expenses which are to the extent of fixed in nature, also for element of variability as is clear from above table row no.10. Against these, the ld. CIT(A) has considered net profit rate of 6.5 % at constant and fixed rate for all the years, which is not correct. As per our considered view, the disallowance if at all has to be made, had to be made after considering the verifiability of these expenses year on year basis. After verifying the complete detail filed before the lower authorities, as per our considered view, the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had received Rs. 20,00,000/- in cash as advance against the said agreement from Shri Paramjeet Singh Chandak. However, later on the said agreement was cancelled and the assessee had returned the advance amount to the vendee. But the AO did not accept the contention of the assessee. The A.O. noticed that the possession of land had been given and the other party was constructing residential houses on the said land. The AO concluded that the assessee actually transferred the said land for a consideration of Rs. 1,42,00,000/- and, therefore, liable to pay tax on the profits gains arising in respect of this deed. It was noted by the AO that appellant had shown total cost of the entire land at Rs.32,00,000/- and, accordingly, the profit worked out at Rs. l,08,00,000/-. However, the AO further noticed that Rs.30,00,000/- had already been considered in the income surrendered by the directors totaling to Rs.1.83 crores at the time of search and, therefore, he made an addition of the balance amount of Rs. 78,00,000/- as unaccounted sale of the year. 18. By the impugned order, the ld. CIT(A) upheld the addition to the extent of Rs. 75,02,692/- as against addition of Rs. 78 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequently registered on 25.10.2005 also shows that the property was sold to the same persons and only one more person was added which is evident from the deed wherein the purchasers are (i) Smt.Harpal Kaur w/o Shri Paramjeet Singh Chandok (ii) Smt. Badamidevi Jain w/o late Shri B.LJain and (iii) Smt.Babita w/o Shri Naresh Kumar. It is highly improbable that a property for which the agreement to sell was entered in April, 2005 for a consideration of Rs.1.42 crores approximately would be sold to the same purchasers after about six months period in October, 2005 for a sale consideration of Rs.40,00,000/- only. This is against the test of the principle of human probability. It may not be out of place to mention here that it is a normal practice that agreement to sell is entered at the actual sale consideration to enforce the payments whereas subsequently the sale deed is registered at a lower price. Therefore, considering the totality of facts and circumstances of the case and the test of human probability, I am of the considered opinion that the appellant and the co-owner, Shri Shyamnath Sharma, had sold the property for a total consideration of Rs. l,42,70,256/- as shown in the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in treating the transaction as sale, in so far as agreement found during the course of search was cancelled and fresh sale deed was registered, wherein value of plot was determined by Collector at Rs. 63 lakhs for the purpose of stamp duty and stamp duty was also charged accordingly. 21. On the other hand the, ld. Senior DR relied on the finding recorded by the lower authorities with regard to the agreement found during course of search and the statement recorded u/s 132(4) of the Income-tax Act, 1961,. 22. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that the agreement to sale was found during search indicating sale consideration at Rs. 1,42,70,256/-. In the statement recorded u/s 132(4) one of the directors of the company Shri Ramnath Sharma has given a statement that property was sold for this much of consideration and Rs. 20 lakhs was also paid in advance. It was also stated that up to the date of search i.e. on 16.9.2005, the assessee had received Rs. 71 lakhs out of which Rs. 41 lakhs had been accounted for and the balance of Rs. 30 lakhs received in cash was not recorded in the books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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