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TMI Blog2013 (5) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... per sq. yard. Facts brought on record show that the assessee is not keeping books of account to show correct income. In such circumstances, the lower authorities have no alternative to stick to the income declared by the assessee. The Supreme Court in the case of Pooranmal vs. DIT(E) (1973 (12) TMI 2 - SUPREME Court) held that material obtained in search made in contravention of the provisions can be used for assessment. Being so, the Assessing Officer can use the material collected during the course of survey for making assessment. Also as decided in Dr. Pratap Singh vs. Director of Investigation (1985 (4) TMI 1 - SUPREME Court) illegality of search does not vitiate the evidence collected during such illegal search. In view of this the material collected during the course of survey can be used for the purpose of assessment - assessee appeal is dismissed. - ITA No. 1018/Hyd/2012 - - - Dated:- 5-4-2013 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Sri C. Subrahmanyam For the Respondent : Smt. Amisha S. Gupt ORDER Per Chandra Poojari, AM:- This appeal by the assessee is directed against the order of the CIT(A)-IV, Hyderabad dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the course of survey, Sri Mahindra Vadineni, Managing Director of the assessee company admitted to offer income at Rs. 1853 per sq. yard from the sale of plots and pay taxes thereon. Subsequently, the assessee filed its return of income for the Assessment year 2008-09 declaring a total income of Rs. 1,54,85,185/- and not honoured its offer made in the course of survey. 5. On a verification of the information filed during the assessment proceedings, the Assessing Officer noticed that as on the date of survey, i.e., 28.8.2008, the assessee had sold plots aggregating 600 sq. yards during the financial year relevant to A.Y. 2007-08 in the venture 'Fable County". In addition, 19,574 sq. yards were sold during the financial year relevant to the A.Y. 2008-09. He observed that during the survey, the profit margin had been arrived at Rs 1,853/ - per sq. yard, after considering the cost of acquisition, expenditure incurred in connection with the development of land, cost of settlement (compensation), marketing costs and administrative costs. The assessee admitted to offer the same as income and paid due taxes. 6. The Assessing Officer noted that for the A.Y. 2008-09, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of land sold during the year at Rs. 3,79,03,115/- After giving deduction towards depreciation of Rs. 43,128/-, the net profit was worked out at Rs. 3,78,59,987/- by the Assessing Officer. The CIT(A) confirmed the same. Against this, the assessee is in appeal before us. 10. The AR submitted that during the course of appellate proceedings, the representative of the assessee submitted since the books of accounts had not been finalised on the date of survey, the assessee company had given a rough estimation of profit of Rs. 1853/ - per sq. yard. It was submitted that such rough profit margin had been arrived at after charging of the major expenses, such as the cost of acquisition, expenditure incurred in connection with the development of land, cost of settlement (compensation), marketing costs and administrative costs. He averred that due to non availability of updated information immediately, the assessee admitted to offer income based on this rough profit margin. He, however, argued that this was only a rough estimate of profit margin and a tentative number. The representative of the assessee stated that the books of accounts of the assessee were later finalised and got audited. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an agreement for sale of land with AMR Constructions Ltd. Subsequently, due to the boom in real estate sector, the land rates increased tremendously. Therefore, the assessee thought of selling the plots to individual customers itself, rather than selling whole of the land to a single customer, M/s. AMR Constructions. In order to terminate the sale, the assessee had to pay a compensation of Rs. 1,50,00,000/-. The AR submitted that a copy of confirmation from the said concern had also been filed before the Assessing Officer. It was stated that this cost was also spread across the area of 60,742 sq. yards @ Rs. 247/- per sq. yard. Besides, based on actual costs, an estimated cost of Rs. 1,21,48,400/- had been incurred as marketing cost, which was spread over 60,742 sq. yards @ Rs. 200/- per sq. yard. 14. The AR submitted that in addition to the above, based on actual costs, a rough estimated cost of Rs. 85 lakhs was submitted to be the administrative costs. However, while arriving at such estimates no provisions was created for expenses like salaries, administrative expenses, general expenses, commission on sale etc., to be inured up to the end of the financial year. Such cost wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avoid blockage of funds. Accordingly, the compensation payments of Rs. 1 crore had been charged to the P L account. The assessee also furnished copies of affidavits from the above 16 parties. It was explained that the entire cost was apportioned to the entire land of 60,742 sq. yard and proportionately, Rs. 1.5 crore were charged off to the P L account. 17. With regard to Marketing and Administration costs shown in the table, the AR submitted that the same had been reported at Rs. 2,06,48,400/- during the survey only on a rough basis, whereas the actual costs incurred came to Rs. 1,85,01,784/-. The AR submitted that there was no major change in the numbers and the whole confusion arose, as such costs which arc incurred for a period and not for each sq. yard, should have been charged off in full even initially while arriving at the profit per sq. yard during the survey. He averred that the variation also has been around 10%, which is normal in such cases. The AR further contended that the Assessing Officer did not raise any question regarding allowability of any expenditure or genuineness thereof. He contended that the assessee also complied with TDS provisions, wherever applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the CBDT instruction in F. No. 286/2/ 2003/IT (Inv.)P dated 11th March, 2003 for the proposition that while recording statement during search and seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. He submitted that as held by the Supreme Court in 237 ITR 889 and 252 ITR 1, it is mandatory on the part of the authorities to follow the Board Circular as the same is binding in nature on the revenue. The Revenue authorities, therefore, ought not to have recorded statement by taking admission of the income from the assessee. 22. The AR relied on the judgements in 300 ITR 157 (Mad), 236 CTR (Del) 621 and 263 ITR 103 (Ker.) for the proposition that legally section 133A does not empower the IT authorities to examine any person on oath. In view of this, such statement has no evidentiary value. He submitted that, even otherwise also, the CBDT has issued instruction prohibiting the AO in using the so called confessional statement for making addition unless and otherwise the same is supported by credible evidence. This is apparent from the Board Circular dated 10th March, 2003. He submitted that as per Allahabad High Court judgement in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled for cancellation of the original agreement for purchase of land from them by adjusting such advances. However, it is clear that no such claim was made by the assessee during the course of survey. Besides, all these payments were made only in cash and, therefore, the genuineness of the payments and source thereof is not verifiable. Accordingly, no credence can be given to the claim of the additional compensation of Rs. 1 crore. 26. The DR submitted that marketing cost and administrative cost, the assessee claimed that the same could not be considered for each square yard sold The AR averred that since such expenses were incurred for a period, all of such expenses should be charged in full even initially while arriving at profit for sq. yard during the survey. However, it is clear that the assessee itself had apportioned all such expenses in terms of each sq. yard sold for admitting the profit @ Rs. 1853/ - per sq. yard during the survey action. Such apportionment was indeed done considering the nature of the expenses, which was in the personal knowledge of the assessee. Besides by admitting the profit @ Rs. 1853/ - then, the assessee prevented the Assessing Officer from l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us factors such as place of development of land, marketing conditions, availability of labour and availability of capital with the assessee. While estimating income one has to consider all these factors and there cannot be any 100% perfect system in estimating income. One has to keep the factual situation in mind while estimating the income of the assessee. 29. Now coming to the factual matrix in the present case, the assessee voluntarily offered during the course of survey income at Rs. 1853 per sq. yard which was reduced to Rs. 757 per sq. yard later. The reasons explained by the assessee as narrated in the earlier paragraphs are not satisfactory. Merely because certain expenditures were not booked on earlier occasion and have to accounted on accrual basis, there cannot be fluctuation of profit from Rs. 1853 to Rs. 757 per sq. yard. The gap between Rs. 1853 and Rs. 757 per sq. yard is Rs. 1096 which is very abnormal. This abnormality could not be explained by the assessee properly. The assessee has taken a plea that claim of expenditure by the assessee in the books of account is less than the expenditure that was estimated during the course of survey at Rs. 25.50 lakhs. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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