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TMI Blog2015 (9) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... is noted that the Assessing Officer even at the assessment stage accepted the total receipt of the plot at ₹ 2,71,16,000/-. However, the Assessing Officer was not ready to compute the income on the basis of investment method instead he adopted the income on the estimation basis. In our opinion, when the material brought on record suggests the correct state of affairs of the assessee, it is not appropriate to estimate the income of the assessee on the basis of irrelevant consideration. Hence, the Assessing Officer cannot substitute his own view to the results show in the books of accounts. - Decided against revenue. Payment of scrap sales to Mrs. Vijayalakshmi - CIT(a) deleted the addition - Held that:- In this case, the Commissioner of Income Tax (Appeals) deleted the addition on the reason that it was paid out of unaccounted income generated and such income was confirmed by the Commissioner of Income Tax (Appeals) for the assessment year 2008-2009 at ₹ 87,24,139/-. Thus, the Commissioner of Income Tax (Appeals) gave a telescopic benefit out of the addition made in the earlier assessment year towards unexplained investment of ₹ 57,00,000/-. Being so, we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Appeals) has failed to note that the assessee purchased 156816 sq.feet of land at Thattanchavady in his sister-in-law name for a consideration of ₹ 1,93,49,398/- which comes to ₹ 123/- per sq. feet as cost. 03. The Commissioner of Income Tax (Appeals) has failed to note that the cost per sq.feet after development of site works out to ₹ 139/- per sq.feet, whereas the assessee has shown sale price @Rs.140/- per sq.feet as per guideline value, however original selling price was ₹ 400/- to ₹ 600/-initially. 04. The Commissioner of Income Tax (Appeals) has failed to note the main issue of suppression of real sale price in the plot size. 05. The Commissioner of Income Tax (Appeals) has failed to appreciate that there was huge difference in sale price shown by assessee as per guideline value and real market price of plot. 06. The Commissioner of Income Tax (Appeals) has failed to consider that the Assessing Officer has summoned 53 buyers of the plots and recorded statement on oath from 23 persons who were appeared and created concrete evidence that sale value of the plots at market price is much higher than the guideline value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 persons, appeared before the Assessing Officer and have given a statement under oath regarding the purchase price paid by them, the mode of payments and the person to whom they have paid the money. It was stated by the Assessing Officer that the sale price of the plots per sq ft varied from ₹ 400 in Apr 2007 to ₹ 600 in June 2007. The A.O has estimated the sales consideration at ₹ 5,68,02,885/- for the sale of 124697 sq ft area of the plot on the basis of the statements given by few purchasers of the plots. Accordingly, the Assessing Officer estimated the profit from sale of plots at ₹ 3,72,36,760/- as per income method as under:- Sale consideration as per calculation sheet : ₹ 5,68,02,885/- Less: Purchase price, including registration Charges : ₹ 1,93,49,308/- Balance : ₹ 3,74,53,577/- Less: Value of unsold plots : Rs. 2,16,817/- Profit from sale of plots : ₹ 3,72,36,760/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Authorised Representative for assessee that the purchasers have clarified before Assessing Officer that the additional amount paid in some cases included for construction of the compound wall and charges for obtaining approval for converting the industrial land as for residential use. During the course of appellate proceedings, the Commissioner of Income Tax called for a remand report after giving opportunity of being heard to the assessee. In response to the query, the Assessing Officer has given his interim remand report vide letter dt. 31.10.2012 along with the copies of the sworn statements recorded from the purchasers, copy of the valuation report dt. 06.09.2012 furnished by District Valuation Officer for valuing the three storey building at Pondicherry registered in the name of Smt.M.Jeyanthi w/o of V.Mohene, valuing the construction cost of the property for the period FY 2004-05 at ₹ 35,55,000/- and for the period FY 2011-12 (3rd floor) at ₹ 13,25,000/- totaling to ₹ 45,80,000/-and also final remand report dt. 15.01.2013. 4.4 The Commissioner of Income Tax (Appeals) further observed that he had considered the findings of the Assessing Officer given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledged by the Assessing Officer in the order of assessment as well as in the remand proceedings. 4.5 The Commissioner of Income Tax (Appeals) further observed that the purchase price of the land at ₹ 1,93,49,398/- was also acknowledged by the Assessing Officer in the remand report. The sale price received as per the document value was only ₹ 1,73,01,780/- as per the figure mentioned in the assessment order. That means, the entire on money received by the assessee was deposited in the bank account by the assessee. Therefore, the exact quantum of sale consideration of ₹ 5,68,02,885/- estimated by the A.O has no basis. The determination/estimation of the sale consideration of ₹ 5,68,02,885/- was not based on any valid evidence. However the sale consideration at ₹ 2,71,16,000/- computed by the assessee in the course of assessment proceedings was based on investment method i.e. the total credit entries made in the bank accounts. However, while working the profit as per investment method, the Assessing Officer proceeded to take the sale proceeds as per bank accounts at ₹ 3,36,26,000/- without giving credit to the re-deposits made in the bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for the purpose of computing the gross receipts received from the sale of plots by the assessee. Further the Assessing Officer had again added the investments made by the assessee of ₹ 47,22,880/- to the total sale proceeds without any legal basis as the assessee had acquired the properties worth of ₹ 44,22,880/- through cash or cheque out of the income generated in the real estate business. The source of the purchase consideration paid in the name of the assessee s wife Smt. Jayanthi was out of her own income. Smt. Jayanthi also sated to have sold the property for a consideration of ₹ 1,90,000/-. Hence, the source of the purchase consideration paid by Smt. Jayanthi should not be again included in the computation of income of the assessee. Therefore, the entire investment of ₹ 47,22,880/- made by the assessee in his name also in the name of his wife should not be again included in the computation of the profit for tax purposes. Further, the Assessing Officer had included registration charges of ₹ 13,69,672/- and cash in hand of ₹ 9,64,835/- in the computation of the profit out of real estate business without any legal basis as the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductions in respect of all the business expenses is also not given while computing the real income earned by the assessee during the year under consideration. The reduction in respect of the payment made to RVP Associates is given for the purpose of computation of net profit as the assessee paid the money to RVP Associates out of the deposits made in the bank accounts maintained by the assessee in his name and in the name of Mrs.Gandhimathi. Therefore, the net profit earned by the assessee in the real estate business and other activities during the year under consideration was computed as under:- Gross income from sale of properties : ₹ 2,71,16,000/- Less: Payments made to RVP Associates Including stamp duty (as per Cash flow statement) ₹ 1,93,49,308/- Less: Stamp duty charges in earlier years (as per cash flow statement To be reduced from payment made To RVP association ) Rs. 6,42,447/- ₹ 1,87,06,861/- Net Profit Rs. 84,09,139/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deposits with Gandhi mathi account : 1,49,79,000/- Total receipts in bank accounts : 4,44,31,000/- Out of this, the following receipts are from the land sales and the assessee had furnished the details of receipts as under: Loan : _44,50,000/- Vidyachand : 10,00,000/- Sekar : 7,50,000/- Muthuraj : 5,00,000/- Sun pharmacy : 14,00,000/- Poongavanam : 3,00,000/- Eswaramurthy : 5,00,000/- Transfer form assessee account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d credit only. Further, it is noted that the Assessing Officer even at the assessment stage accepted the total receipt of the plot at ₹ 2,71,16,000/-. However, the Assessing Officer was not ready to compute the income on the basis of investment method instead he adopted the income on the estimation basis. In our opinion, when the material brought on record suggests the correct state of affairs of the assessee, it is not appropriate to estimate the income of the assessee on the basis of irrelevant consideration. The Assessing Officer could estimate the income of the assessee only when the following condition fulfilled. (1) Failure to make return of income u/s.139(1) or 139(4) of the Act. (2) Failure to produce the books of accounts in terms of notice issued u/s.142(1) of the Act. (3) Failure to follow the direction of the Assessing Officer u/s.142(2) of the Act. (4) Failure to comply to the terms in notice issued u/s.143(2) of the Act. In the present case, there is no allegation by the Assessing Officer that the assessee failed to comply with the above requirements. Hence, the Assessing Officer cannot substitute his own view to the results show in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unaccounted income generated and such income was confirmed by the Commissioner of Income Tax (Appeals) for the assessment year 2008-2009 at ₹ 87,24,139/-. Thus, the Commissioner of Income Tax (Appeals) gave a telescopic benefit out of the addition made in the earlier assessment year towards unexplained investment of ₹ 57,00,000/-. Being so, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) on this issue and the ground of the Revenue is dismissed. 11. The next ground raised by the Revenue in this appeal is that the Commissioner of Income Tax (Appeals) order is erroneous where in the cash flow statement filed before Commissioner of Income Tax (Appeals) the assessee has admitted receiving of ₹ 67,25,000/- towards sale proceeds of scrap from Sri Mahendran to build up source. However, in the order, the Commissioner of Income Tax (Appeals) confirmed only ₹ 1,27,000/- as commission from scrap sales . 12. The facts of the case are that during the course of survey u/s.133A, copy of documents impounded. An agreement between Mr. Mahendran and the assessee was also impounded, wherein scarps of standard rolling mills was sold f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of the 36.842% as per the sale agreement dated 03.05.2008 signed between assessee and Mrs. Vijayalakshmi. The ld. Authorised Representative for assessee further contended that the agreement dated 03.05.2008 containing the purchase of shares of 36.842% in the share of Vijayalakshmi in which she was a partner in Standard Steel Rolling Mills was already made available before the Assessing Officer in the course of survey proceedings. The assessee also produced the copy of cash receipt given by Smt. Vijayalakshmi authorizing the assessee as power of agent for the purpose of selling scrap and other accessories of Standard Steel Rolling Mills and also giving the details of the sale price of the scrap at ₹ 67,25,000/- to Shri. T. Mahendran. The cash receipt produced by the assessee gives the details of commission of ₹ 1,27,000/- paid to assessee for selling the scrap. The Commissioner of Income Tax (Appeals) agreed with the contention of the ld. Authorised Representative for assessee that the assessee has carried out transaction for sale of the scrap on behalf of Mrs. Vijayalakshmi. The nature of the scarp was the material belonging to M/s. Steel Rolling Mills wherein Mrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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