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TMI Blog2016 (10) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... ce between the rate stated in the letter of intent and the sale agreement is the undisclosed income which has to be added in the income returned by the assessee. In so far as contention of the assessee that addition to the extent of net profit should be made, as the entire on-money received cannot be the profit of the assessee, we do not intent to agree with this contention. The assessee has disclosed the entire expenditure in its books of account. The assessee has not been able to show the additional expenditure which has been incurred but not disclosed in the books. The on-money received by the assessee in respect of Shop No. 129 is the pure profit of the assessee with no corresponding expenditure. Therefore, we reject the contention of the assessee to consider only the profit element as the undisclosed income of the assessee. The addition in respect of on-money received in respect of Shop No. 129 i.e. the shop in respect of which the document was seize during survey is upheld. Whereas, in the absence of any material to show that on-money was received in respect of other shops sold or booked during the financial year 2006-07, the addition on account of on-money is not susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relatives of promoters computed the on-money received in the respect of the remaining 11 shops by extrapolating the rate as mentioned in the letter of intent seized during the survey. The Assessing Officer thus, made addition of ₹ 1,35,16,000/- in the income returned by the assessee. Aggrieved by the assessment order dated 31-12-2009, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals) the assessee made three alternate submissions : i. To restrict the addition to 65% of the total addition in the hands of assessee as the remaining 35% share in joint venture is held by M/s. Sanand Properties (P.) Ltd. ii. To restrict the addition to the extent of evidence found during survey without extrapolating the difference in cost to other shops sold/booked during the year. iii. That even if extrapolation has to be made the same should be restricted to the net profit from sale of shops. The Commissioner of Income Tax (Appeals) accepted the first prayer of the assessee and rejected the other submissions. Against the findings of Commissioner of Income Tax (Appeals), the assessee is in second appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (TM). The assessee had admitted the receipt of on-money amount and the admission of assessee was supported by cogent evidence found during the course of survey. Similarly, in the case of Rajnik Co. Vs. ACIT reported as 251 ITR 561 (AP) there was an admission by the partner with respect to suppression of turnover. However, in the present case there is neither admission by the assessee in respect of receipt of on-money nor there is evidence to show that the assessee has received on-money on the shops booked/sold during the year. Therefore, the reliance placed by the Commissioner of Income Tax (Appeals) on the aforesaid decisions is misplaced. 4. On the contrary the ld. AR of the assessee contended that the case of the assessee is covered by the following decisions : i. D N Kamani HUF Vs. DCIT, 70 ITD 77 (Pat.) (TM); ii. Elite Developers Vs. DCIT, 73 ITD 379 (Nag.); iii. Abhishek Corporation Vs. DCIT, 63 TTJ 651 (Ahd. Trib.); iv. Kishor Mohanlal Telwala Vs. ACIT, 107 taxman 86 (Ahd. Trib.); v. Shri V. Subramani Vs. ACIT in ITA Nos. 1047 1046/Mds/2011 (ITAT Chennai) decided on 27-07-2012. 5. Per contra Shri Hitendra Ninawe representing the Department vehement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additions has been made in the case of assessee on the basis of a document (letter of intent) seized during survey action in the case of Raviraj Group. The assessee in joint venture with Sanand Properties Pvt. Ltd. has developed a commercial complex Fortaleza at Kalyaninagar, Pune. The document that was impounded during course of survey is a letter of intent issued in favour of Mrs. Usha Manummdar and Ms. Punam Majummdar in respect of Shop No. 129, Vitoria-II Building in the aforesaid Fortaleza commercial complex. The total saleable area of shop is 360 sq. ft. As per the letter of intent the sale price of shop is at the rate of ₹ 6500/- per sq. ft. Whereas, as per sale agreement the consideration was fixed at ₹ 2500/- per sq. ft. The Assessing Officer treated the difference between the consideration mentioned in the sale agreement and the cost mentioned in the letter of intent as on-money . The Assessing Officer extrapolated the alleged on-money received by assessee in respect of Shop No. 129 to the other shops which were booked/sold during the financial year 2006-07 and thus, made addition of ₹ 1,35,16,000/-. The details of various shops in respect of which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax (Appeals) in the impugned order has placed reliance on the decision of Hon'ble Supreme Court of India in the case of Commissioner of Sales Tax Vs. H.M. Esufali H.M. Abdulali reported as 90 ITR 271 (SC) to support the principle of estimating the undisclosed income in respect of transaction which are not recorded in the diaries. The Commissioner of Income Tax (Appeals) has further placed reliance on the decision rendered by the Hon'ble Andhra Pradesh High Court in the case of Rajnik Co. Vs. ACIT (supra) and the decision of Pune Bench of the Tribunal in the case of Khopade Kisanrao Manikrao Vs. ACIT (supra). In the case of Rajnik Co. Vs. ACIT (supra), the Hon'ble High Court held that there was abundant material on record showing that the assessee has suppressed turnover and there was admission in the sworn statement of a partner of the assessee firm admitting that there was day-to-day suppressions throughout the assessment years for the entire Block period. Similarly, in the case of Khopade Kisanrao Manikrao Vs. ACIT (supra), where onmoney in respect of land deal was established, the assessee also admitted to have received on-money. In the aforesaid c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference between the rate stated in the letter of intent and the sale agreement is the undisclosed income which has to be added in the income returned by the assessee. In so far as contention of the assessee that addition to the extent of net profit should be made, as the entire on-money received cannot be the profit of the assessee, we do not intent to agree with this contention. The assessee has disclosed the entire expenditure in its books of account. The assessee has not been able to show the additional expenditure which has been incurred but not disclosed in the books. The on-money received by the assessee in respect of Shop No. 129 is the pure profit of the assessee with no corresponding expenditure. Therefore, we reject the contention of the assessee to consider only the profit element as the undisclosed income of the assessee. 12. The Tribunal in the case of D.N. Kamani (HUF) Vs. DCIT (supra) under similar circumstances where the assessee had sold different type of flats at different cost. During the search on the premises of one G certain documents were seized which showed that G had purchased a flat and made payments in cheques as well in cash. However, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of payment of black money in real estate transaction in metropolitan city of Bombay was discussed, was deleted by the Tribunal treating the addition being on hear say evidence. 7.11 Another question that needs consideration is whether the undisclosed income could be estimated on account of on money from fifteen flats buyers based on the said document recovered from Shri H.S. Grewal invoking the provisions of section 145 of the Income Tax Act.Section 145 provides the method of accounting. According to this section income chargeable under the head Profits and gains of business or profession or 1ncome from other sources is to be computed in accordance with the method of accounting regularly employed by the assessee. When accounts are correct and complete but method employed is such that income cannot properly be deducted therefrom, computation is to be made on such basis, and in such manner as the assessing officer may determine. Where the assessing officer is not satisfied about correctness or completeness of accounts, or where no method of accounting has been regularly employed, the assessing officer is empowered to make assessment in the manner provided in section 144 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the loss or the depreciation allowance or any other allowance, as the case may be for the assessment year concerned. Thus, for assessing an escaped income under section 147 the assessing officer must have reason to believe that any income chargeable to tax has escaped assessment. So far as the flat sold to Shri H.S. Grewal it is established from the seized document that cash of ₹ 3.35 lacs was paid to the assessee HUF over and above the apparent consideration and based on such evidence action under section 147could validly be taken. However, there is no such material evidence found during the course of search about the on money paid by the remaining fifteen flat buyers to the assessee HUF or the assessee HUF receiving any on money from therein. The assessing officer during the course of regular assessment proceedings for the assessment year 1992-93 examined the flat buyers under the provisions of section 131 of the Income Tax Act but no incriminating material came on record from their cross-examination. Further, during the course of block assessment proceedings also the assessing officer again made an effort to ascertain from the remaining fifteen flat buyers the on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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