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TMI Blog2011 (9) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... f addition of ₹ 3,46,61,718/- made by AO on account of receipt of on money and excess sale of 65 plots. The facts of the case are that assessee filed its return of income on 19.03.2004 declaring NIL income. The same was processed u/s 143(1) of the Act. The return of income for the year under consideration was selected for scrutiny as per the guidelines of the CBDT. Accordingly, notice u/s 143(2) dated 08.10.2004 was issued and served upon the assessee on 16.10.2004. Subsequently, questionnaires dated 02.06.2005 and 15.07.2005 were issued and duly served upon the assessee along with notice u/s 142(1) of the Act. In this case, a survey u/s 133A of the Act was conducted on 11.09.2002 at the business premises of the assessee situated at Hazira Road, village Pal, Tal. Choryasi, Dist. Surat. During the course of survey proceedings, some incriminating documents were found and impounded, as per Annexure-B dated 11.09.2002. On verification of these documents and diaries impounded during the course of survey proceedings, the AO observed that as per the copy of the site plan which was impounded (page nos.8 and 19 of Annexure-B-19), there were 90 plots in the project called Sanskruti To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts were maintained, the clear marking of the unsold plots on the Site Plan by the partner of the firm had to be accepted as correct. The AO, therefore, held that the assessee had sold the 65 plots up to the date of survey as against 6 plots sold as stated by the assessee upto the date of survey and total of 16 plots sold during the accounting year. 4. In appeal before the first appellate authority, the ld. AR of the assessee submitted that the AO s conclusion was based only on one loose paper which was a pamphlet containing description about plots for sale and was only in the nature of advertisement. The present era was of advertisement, one would be out of market if one did not show to people that the product was selling like hot cake in the market. One had to apply different kinds of strategy to entice people to come and buy the product. They had to be given illusion that there was limited stock and if they don t decide well within time that they might lose it and it was a general practice of the business to expose before the prospective customers in a fashion that you buy the plots immediately or you will never get a plot . Accordingly a printed pamphlet which has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to entertain the conveyance deeds in respect of other plots which the assessee claimed to have sold during the subsequent years. It appears that these documents were not taken on record simply to strengthen the AO s view for making the said addition. The said documents were filed before me and although the same were not additional evidence, the AO was confronted with this and requested to explain as to why these documents were not examined by him which would substantiate the appellant s claim that only 16 plots were sold during the year under consideration. No comments were offered by the AO on this aspect. After going through the conveyance deeds in respect of 65 plots mentioned to have sold by the AO during the year, I find that the appellant s contention is correct. It is seen that plots at Sl. Nos.2,5,6,7,8,10,25,26,27,28,29,38,39,45,46,47,48,50,51,52,53,54,59,63, 66,67,68,69,70,73,74,75,78,79,84 were all sold during the financial year 2003-04 and rest of the plots were sold during financial years 2004-05 and 2005-06 only. Since there is documentary evidence in the form of conveyance deeds in respect of the contentions of the appellant, I am of the considered view that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- per sq. yd. on the basis of page No.69 of Annexure B-11 of the impounded material, the appellant stated as under : The upper portion of page No.69 contains the details of work to be done by the unknown contractor which is incorporated by him. The first three items of lower portion indicates the estimate of additional development charges of certain plots which are adjoining to more margin land. The 4 th and 5 th item was incorporated by the contractor. He was informed that he will obtain 25% of payment from the booker in respect of the development charges and he will be given full amount within 6 to 7 months. 6 th and 7 th item is the suggestion made by the contractor to collect ₹ 20,000/- per plot and he will collect nearly 15% i.e. ₹ 3,000/- per plot, irrespective of whether booking is made or not. The said contractor was interested in buying certain plots as against the payment to be obtained by him for the proposed contract and he inquired in respect of the consideration of the plot per sq.metre which he has incorporated at last. The AO did not accept the explanation of the assessee on the ground that the partner of the firm Shri Nilesh Patel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR further relied on various judgment in support of his contentions that no addition could be sustained merely on the basis of loose papers. 7.1 The ld. AR of the assessee further submitted that the AO also tried to strengthen his findings regarding on money by observing in his order on page No.9 and 10 that the rate of plot was ₹ 3,650/- per sq. yard as per document at page No.69 of Annexure B-11 and in addition to such sale consideration the assessee was also collecting development charges of ₹ 20,000/- per plot. It was stated by the AO that the sale consideration received in respect of 664 sq. yards of land at the rate of ₹ 3,650/- per sq.yard would work out to ₹ 24,23,600/- and the development charges for six plots would be ₹ 1,20,000/- which would add up to ₹ 25,43,600/- out of which the amounts spent for development upto the date of survey as per cash book was ₹ 8,321/- and as such unaccounted profit on sale of six plots available for settlement amongst 14 partners would be ₹ 17,29,279/-. The AO further observed that as per the partnership deed one of the partner Shri Jhaverbhai was having 6.67% share and his son Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence of what transpired between the papers of the firm Shri Nilesh Patel and the survey party prior to start of the actual survey operations. I have also examined the statements of the various partners recorded during the course of survey operations and find that nowhere in the statements as it has been admitted by any of the partners that on money was being charged on sale of the plots. It is also seen that no cash or any other incriminating material to prove the charging of on money was found during the course of survey operations. The AO s conclusion based on the notings on these papers is not sustainable since the appellant s explanation is also convincing and cannot be rejected out right specially in view of the fact that there was no disclosure made by the appellant nor was any cash found at the time of survey and as held by the various courts, no adverse inference can be drawn from notings on loose papers or diaries unless corroborative evidence is also available. In the instant case, the registration of sale deed has been done at the rate of ₹ 400/- per sq.yard which was the rate fixed by the Government. It is also seen that the AO has not brought any other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) the Revenue has come in appeal before the Tribunal. 9. Before us the ld. DR supported the order of AO and submitted that during the course of survey proceedings, some incriminating documents were found and impounded, as per Annexure-B dated 11.09.2002. On verification of these documents and diaries impounded during the course of survey proceedings, the AO observed that as per the copy of the site plan which was impounded (page nos.8 and 19 of Annexure-B-19), there were 90 plots in the project called Sanskruti Township. In the site plan certain plots were tick marked by black ball pen and these plots were actually the remaining unsold plots numbering 25. During the course of survey the statements of the partners of the firm Shri Nilesh J. Patel and others was also recorded. The assessee was not recording full sale consideration in its books since the documented price was less than the actual sale price. The AO had held that the assessee s explanation regarding the notings being made by the unknown contractor was also an after thought since he was not able to furnish the name or the address of the said contractor and since the impounded document was a diary where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re B-11 and in addition to such sale consideration the assessee was also collecting development charges of ₹ 20,000/- per plot. It was stated by the AO that the sale consideration received in respect of 664 sq. yards of land at the rate of ₹ 3,650/- per sq.yard would work out to ₹ 24,23,600/- and the development charges for six plots would be ₹ 1,20,000/- which would add up to ₹ 25,43,600/- out of which the amounts spent for development upto the date of survey as per cash book was ₹ 8,321/- and as such unaccounted profit on sale of six plots available for settlement amongst 14 partners would be ₹ 17,29,279/-. The AO further observed that as per the partnership deed one of the partner Shri Jhaverbhai was having 6.67% share and his son Shri Prakashbhai 6.66% share and the two together held 13.33% share. The proportionate share on this profit would work out to ₹ 2,30,000/- and on verification of page No.26 of Annexure B-11 it was found that Shri Jhaverbhai had withdrawn a total of ₹ 2,30,000/- on various dates i.e. ₹ 1 lakh on 22/4/2002, ₹ 50,000/- on 1/5/2002 and ₹ 80,000/- on 8/5/2002 which proved that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record simply to strengthen the AO s view for making the said addition. The said documents were filed before him and although the same were not additional evidence, the AO was confronted with this and requested to explain as to why these documents were not examined by him which would substantiate the assessee s claim that only 16 plots were sold during the year under appeal. No comments were offered by the AO on this aspect. After going through the conveyance deeds in respect of 65 plots mentioned by the AO to have been sold by the assessee during the year, he found that the assessee s contention is correct. It was seen that plots at Sl. Nos.2, 5, 6, 7, 8, 10, 25, 26,27,28,29,38,39,45,46,47,48,50,51,52,53,54,59,63,66,67,68,69,70,73,7 4,75,78,79,84 were all sold during the financial year 2003-04 and rest of the plots were sold during financial years 2004-05 and 2005-06 only. Since there was documentary evidence in the form of conveyance deeds in respect of the contentions of the assessee, he was of the considered view that the assessee s claim of having sold only 16 plots during the year was in order and no adverse inference could be drawn on this ground and the claim of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n money and excess sale of plots. No interference is called for. We uphold the same. The first and second grounds raised by the Revenue are dismissed. 12. The next ground relates to restriction of disallowance of ₹ 6,51,470/- out of total addition of ₹ 14,65,772/-. During the assessment proceedings the AO observed that as per page No.1 to 61 of the documents impounded as per Annexure B-11, the assessee had incurred various expenditures of ₹ 14,65,772/-. When required to explain the assessee submitted that these were only estimation of plot development expenses and were not actually spent. The AO did not accept the said explanation on the ground that one of the partners of the firm Shri Dinesh Patel had in his statement accepted that he had spent an amount of ₹ 5 lakhs and ₹ 2 lakhs for developmental expenses and construction of office compound wall etc. On the basis of such information received and admission of the assessee the AO concluded that the expenditure recorded in the impounded material was out of unexplained sources and made an addition of ₹ 14,65,772/-. On this account. 13. Before ld. CIT(A) it was submitted that the said noting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 14,65,772/-. When required to explain the assessee submitted that these were only estimation of plot development expenses and were not actually spent. The AO did not accept the said explanation on the ground that one of the partners of the firm Shri Dinesh Patel had in his statement accepted that he had spent an amount of ₹ 5 lakhs and ₹ 2 lakhs for developmental expenses and construction of office compound wall etc. On the basis of such information received and admission of the assessee the AO concluded that the expenditure recorded in the impounded material was out of unexplained sources and made an addition of ₹ 14,65,772/-. On this account. The AO has rightly made the addition and the ld. CIT(A) was not justified in restricting the addition to ₹ 6,51,470/-. His order may kindly be set aside and that of the AO be restored. 15. On the other hand the ld. counsel of the assessee relying on the order of ld. CIT(A) submitted that the appellant has shown a sum of ₹ 8,14,302/- as work in progress in his account as on the date of survey, in view of which expenditure to this extent cannot be treated as unexplained. However, the balance amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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