9911796707
TMI Blog1998 (1) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... iled his regular returns of income and assessment was made upto assessment year 1995-96. On 8th Feb., 1996, a search and seizure action under section 132 of the Act was conducted at the residential and business premises of the assessee. During the course of search, cash, jewellery and documents with regard to the certain assets were found and seized. A notice under section 158BC was issued requiring the assessee to file return of income for the block period. However, the assessee did not file any fresh return. At the assessment stage, the assessee was directed to submit details of his assets and liabilities as the Assessing Officer was of the view that the assessee had not reflected the true facts in his balance sheet. The assessee furnished the details and explanation, but the same were not accepted by the Assessing Officer and the Assessing Officer assessed the assessee's income at ₹ 1,59,59,342 for the block period. With regard to cash, assessee's explanation was found satisfactory and, therefore, no addition on this account was made. Since aggrieved, the assessee filed the present appeal. 3. We have heard Shri Shivram, the learned counsel for the assessee and Shri S.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the assessee are clearly distinguishable on the facts from the present case. Ekbal & Co.'s case does not help the assessee in any manner. In Ekbal & Co.'s case (supra), the issue involved was with regard to the serving of the notice requiring the assessee to furnish return of his income within such period not being less than 30 days. In these circumstances, the hon'ble High Court held that the notice was not issued within clear 30 days' period and, therefore, the notice was held to be invalid. The observation of the hon'ble High Court are worth mentioning wherein the Court had held that "the word "within 30 days" is within two points of time, one at which the period begins and the other at which it expires". As per section 158BE, the time-limit begins on 1-3-1996, and expires on 28-2-1997. It is well established under the common law that the complete one year has to be taken as a calendar year which would expire at the midnight of 365th day. Accordingly, we hold that the impugned order passsed by the AO was within time-limit. 6. The next legal issue raised by the learned counsel is that the AO did not pass speaking order on 28th Feb., 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in case, he desired to have another copy of the order, he could apply after paying the copying charges. The learned Departmental Representative pointed out that even from the affidavit of the assessee which is at pp. 1 to 7 of the paper-book, it becomes abundantly clear that the assessee was very much present in the office of the Assessing Officer on 28-2-1997. The assessee has also admitted that he was served with one page order for the block assessment on the same date along with the assessment order of assessee's wife Mrs. Badamibai at his residence at 12.05 midnight. The learned Departmental Representative submitted that from the affidavit of the assessee itself it is clear that the order was served on the assessee at the midnight i.e. night between 28-2-1997, and 1-3-1997. The assessee's contention that the speaking order was served upon him on 30-5-1997 in the Tribunal at the time of the hearing of the stay application is falsified as there is no such mention of these facts in the order sheet of the Tribunal dated 30-5-1997. 8. As regards the difference in typography of the impugned order, the learned Departmental Representative submitted that as per the assessee's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in the computer printer. The next circumstance pointed out by the learned counsel is that there are discrepancies in the additions made in the body of the order and the computation sheet. The substantial difference pointed out by the learned counsel are given at p. 828 of the paper-book. The difference as seen from the paper-book is reproduced below : Asst. yr. Income as per order Income as per computation sheet Difference 1986-87 1,38,282 1,38,282 - 1987-88 2,66,519 2,66,519 - 1988-89 2,73,651 2,64,651 (-) 9,000 1989-90 3,18,108 3,19,005 897 1990-91 5,51,873 5,51,873 - 1991-92 8,36,302 8,36,307 5 1992-93 21,93,198 22,93,198 1,00,000 1993-94 5,39,800 1,89,625 (-) 3,50,000 1994-95 3,76,800 3,76,800 - 1995-96 41,22,030 48,59,880 7,37,850 1996-97 64,51,054 58,63,204 (-) 5,87,850 Difference 1,08,098 A perusal of the entire order and the computation sheets it seems that there are arithmetical and typographical mistake according to which the computation sheet shows lesser addition to the extent of ₹ 1,08,103 in the income of the assessee. However, this fact does not raise any suspicion or doubt that the speaking order was not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the hon'ble High Court has held that expression "income" which has not been or would not be, disclosed for the purposes of the IT Act" means that income which is liable to tax but which the assessee has not returned in its IT return or made known to the IT Department. The learned counsel also invited our attention to the budget speech of the Finance Minister for the year 1995-96 reported in [1995] 212 ITR (St.) 87 and argued that as per the said speech, the new provision were incorporated for assessment of undisclosed income detected as a result of search initiated after 30th June, 1995. The learned counsel emphasised that the AO had proceeded on wrong presumption that he was at liberty to make rowing enquiries and examine the records of all the years during which the assessee has income and assessment were completed. The learned counsel further brought to our notice the CBDT Circular No. 707 dated 14th Aug., 1995 [1995] 126 CTR (St.) 85 : [1995] 215 ITR 33 (St.), at p. 37. The learned counsel further submitted that as per the said circular, the AO has been directed not to make any addition where undisclosed income had not been detected as a result of search. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC). 14. On careful consideration of the rival submissions, we feel that in order to adjudicate this legal issue it is pertinent to understand the object, implications, of provisions of Chapter XIVB of the Act. Chapter XIVB provides for a special procedure for assessment in search cases, where search action has been initiated after 30th June, 1995. The definition of 'undisclosed income' as provided in section 158B(b) of the IT Act reads as under : "158B. (b)-"undisclosed income" includes any money bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act." Section 158B provides the manner in which the assessment of undisclosed income as a result of search is to be made. Section 158BA sub-cls. (1), (2) and (3) are reproduced below : "158BA-(1) Notwithstanding anything contained in any other provisions of this Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search or of the requisition. (3) The burden of proving to the satisfaction of the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments." 15. On consideration of provisions of section 158B(b) and 158BB(1) we find that undisclosed income as defined in the Act has wide connotation. By bare reading of the provisions it is clear that undisclosed income means income which is liable to tax but the assessee has not disclosed the same in his IT return or made known to Revenue authorities. It would inter alia include any income based on any entry made in the books of account or other documents or transaction which has not been or would not have been disclosed for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partly which has not been or would not have been disclosed for the purpose of this section by the assessee. For example, if entry representing income has been shown as liability or loan and not as income in the seized material, it would certainly come within the ambit of definition of undisclosed income provided such material has been found or has come to the knowledge of the AO from the books of accounts or the seized material during the search. As per sub-clause (3) of section 158BB(3), the burden to prove that any undisclosed income has already been disclosed in any return of income filed by the assessee before the search is certainly on the assessee. Accordingly, we may agree with the finding of the Tribunal, Mumbai Benches in the case of Sunder Agency v. Dy. CIT (supra ) and Shankar Mahadev v. Dy. CIT (supra ) that Chapter XIVB does not give unfettered powers to AO to review the assessment already completed until and unless there is any direct evidence that assessee had withheld or had not disclosed any income for the purpose of Act. The hon'ble Delhi High Court in the case of L.R. Gupta v. Union of India (supra) while considering the provisions of section 132 of the IT Act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 gms were seized. The assessee's contention before the AO was that the jewellery belonged to his various family members which includes his wife, sons, daughters and grand daughter including the HUF. The assessee further claimed that the jewellery had been acquired by his family members out of their own sources over a long period of time. The AO after taking into consideration the explanation submitted by the assessee made addition only with regard to 926 gms of gold jewellery, the value of which was adopted at ₹ 4,63,000 and added under section 69A of the Act. The learned counsel for the assessee submitted that the AO has not accepted the assessee's explanation that the jewellery belongs to his sons Kamlesh Jain, Nilesh Jain and Vikas Jain and daughters, Jayshree H Jain, Pushpa Sanklecha and grand daughter Anketa Jain and his wife Badamibai H Jain. The AO has given rebate of only 300 gms in respect of his wife and only 180 gms with regard to his daughters. The learned counsel brought to our notice the instructions issued by the CBDT vide circular (sic-instruction) No. 1916 dated 11th May, 1994 vide which guidelines in respect of seizure of jewellery and ornaments in course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar occasions. On the other hand, the learned Departmental Representative argued that the assessee has not provided any evidence to explain the source of the investment in the jewellery. (iii)On careful consideration of the rival submission we find that the assessee has not placed on record any evidence to prove that the jewellery has been received as gift by him by producing the GT return or any other evidence. However, we are conscious of the fact that in Indian society everyone receives gifts at the time of marriage and other occasions. Therefore, keeping in view the number of family members we are of the view that further rebate of 500 gms out of the entire jewellery may be treated as explained. The balance 426 gms of jewellery may be treated as addition under section 69A of the IT Act. 2. Personal withdrawals (i)During the entire block assessment period of 10 years, the AO has made an addition of ₹ 4,15,173 on account of low withdrawals for personal expenses. The AO estimated the withdrawal of the assessee for the current previous year ending on 8-2-1996 i.e., asst. yr. 1996-97 at ₹ 65,000 and thereafter gave reduction of ₹ 5,000 per year on account of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 997 to the effect that as to why the family expenditure should not be estimated at ₹ 75,000 for the asst. yr. 1996-97 and proportionate figure for the earlier years. The assessee opted for not replying the said notice nor submitted any explanation. The AO, however, seams to have made a reasonable estimate keeping in view the status, life style and the size of the family. In the asst. yr. 1988-89, the AO has mentioned that the assessee's daughter's marriage took place and the addition of ₹ 1 lakh in the said asst. yr. 1988-89 seems to be reasonable and, therefore, no interference is called for, with regard to the addition on account of low withdrawals for personal expenses. 3. Addition on account of unexplained cash credits The AO has made various additions on account of unexplained cash credit for the block period from 1-4-1985 to 8-2-1996. We shall discuss the yearwise additions : (i) Asst. yr. 1986-87 (a) During this assessment year, the following loans were received by the assessee from his near relations : Rs. (1) Smt. Pankubai Jain-sister-in-law 50,000 (2) Shri Vikas H. Jain-son 20,900 (3) Shri Nilesh H. Jain-son 20,900 (4) Shri Kamlesh H. Jain-son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, no additions could have been made in the block assessment and, accordingly, the addition made by the AO was not justified. The AO has also made addition of ₹ 11,440 on account of interest on the above said loans. In view of our finding that the assessee had proved the genuineness of the loan,we delete the addition made on account of interest also. (ii) Asst. yr. 1987-88 (a)The AO made the following additions during this assessment year : Rs. (1) Vikas H. Jain-son 60,000 (2) Nilesh H. Jain-son 60,000 (3) Kamlesh H. Jain-son 60,000 (4) Smt. Badami Jain-wife 10,000 (5) Smt. Sangita Jain-daughter 8,000 According to the AO, though the confirmation letter in respect of the above creditors have been filed, the assessee was not able to be establish the creditworthiness and the genuineness of the transaction. The assessee had also paid interest of ₹ 51,590 as interest on the above loans. The AO did not accept the contention of the assessee that his sons had advanced the loan out of the benefits received by them from Shirodiya Trust. In respect of Badamibai Jain and Sangita Jain, the AO observed that the assessee had failed to provide the bank details f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors in spite of opportunity given to him. He also made addition on account of disallowance of interest on those loans amounting to ₹ 54,651. (b)The learned counsel for the assessee argued that the assessment for the asst. yr. 1988-89 had been completed under section 143(3), copy of which is placed at pp. 907 to 908 of the paper-book. The assessee had disclosed all the cash credits in his assessment which was accepted by the AO in the regular assessment. He further argued that the AO has not brought any evidence or information or document to show that the cash credits are not genuine. He further argued that Pannalal and Mahavir Traders are assessed to tax. Their capital account, balance sheet and confirmations have been submitted which are placed at pp. 71 to 77 and 904 of the paper-book. The learned counsel argued that the AO could very well make verification as all the documents had been filed by the assessee. As regards Saroj v Gautam the learned counsel submitted that she had booked a flat for purchase vide agreement dated 23-1-1987, with Vikas Builders, (copy of the said agreement is placed at pp. 796 to 804 of the paper-book) and the payment had been made with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aders, the learned counsel submitted that the confirmation in respect of this party was submitted before the AO which is also placed at pp. 75-77 of the paper-book. It was further submitted that the said creditor is assessed to tax and their books were lying with the Revenue authorities at Kalyan as there was survey/search in case of the said party. He further argued that all details with regard to the cash credits referred to above were reflected in the balance sheet, and along with the returns of income. The AO has accepted the same in the regular assessment. However, the AO has failed to bring any fresh evidence or documents or information to prove that the loans are not genuine. The learned Departmental Representative relied on the order of the AO and argued that the assessee failed to produce the creditworthiness of the creditors. (c)On careful consideration of the real submission and the documents on record, we find that the AO was not justified in making the additions as the assessee has discharged the burden of proving the identity, creditworthiness and genuineness of the transaction. The assessee had disclosed all the transactions during regular assessment and the same we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel submitted that Madhu Jain is the daughter of the assessee and is assessed to tax at Kalyan Income-tax Office and the computation of income, confirmation, capital account, balance sheet and the IT return's acknowledgment have been placed on record at pp. 108 to 113 of the paper-book. With regard Bhikabhai Patel, Jyotsana N. Patel and Tulsibai Patel, the assessee had submitted the confirmation letters which are placed at pp. 114, 115, 120 to 128. It is further submitted that since these parties were not co-operating, the assessee had requested the Assessing Officer to issue summons vide his letter dated 6-2-1997, which is placed at pp. 116 to 118. However, the Assessing Officer did not issue any summons. As regards Champalal, the learned counsel stated that the Assessing Officer has wrongly observed that no confirmation letter in respect of Champalal has been submitted whereas Champalal had submitted letter dated 26-2-1997, before the Asstt. CIT (Inv.) explaining the source of fund with regard to loan of ₹ 1,25,000 wherein it is stated that the said loan was given by cheque on 29-2-1990, and the details of the funds raised for the said loan were also given in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanklecha 60,000 (5) Mayur F. Sanklecha 35,000 (6) Monica F. Sanklecha 35,000 (7) Sapana F. Sanklecha 40,000 (8) Kamlabai R. Choka (and not Kamlabai H. Sanklecha) 50,000 (9) Sunderdevi Ranka and G.P. Ranka (and not Sunderdevi H. Sanklecha) 1,00,000 4,30,000 The Assessing Officer made the addition on the ground that the assessee failed to produce the creditors and that all the creditors had deposited money in cash immediately prior to advancing the loan to the assessee. The Assessing Officer, therefore, observed that the accounts seems to have been opened by the creditors merely for advancing the loans which may be a play used by the assessee to introduce his unaccounted money through different means. The Assessing Officer further observed that the assessee failed to prove the identity and creditworthiness of the creditors. (b)The learned counsel for the assessee submitted that loans from the above parties were duly entered in the assessee's books of accounts. He further submitted that their confirmation, computation of income, income-tax acknowledgment, capital account and balance sheet were filed before the Assessing Officer which are placed at pp. 204 to 286 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental Representative argued that there is nothing on the record to prove that the assessee reflected loan of ₹ 80,000 advanced by Shri P.R. Davis. Even the letters at pp. 833 and 871 show that the assessee had requested the Assessing Officer to give him the copy of the agreement of one Shri T.R. Davis and not Shri P.R. Davis. However, the assessee has failed to prove that Shri P.R. Davis had advanced sum of ₹ 80,000 for purchasing the flat as no agreement has been placed on the record. In this view of the matter, we find that the Assessing Officer was justified in making the addition as the assessee failed to discharge the burden of proving the said advance. (viii) Assessment year 1993-94 (a)During the assessment year 1993-94, the Assessing Officer has made the following additions : Rs. Shobha Rajput 1,00,000 Raju Singh 1,00,000 Rikabchand Jain 1,50,000 Kamla R. Dhoka 50,000 The assesse filed the confirmation letters, Income-tax acknowledgment, computation of income, capital account and balance sheet in respect of the above persons which were submitted before the Assessing Officer and placed on record at pp. 422 to 451, pp. 258 to 266 of the paper-book. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swal finds mention at p. 966 of the paper-book. The Assessing Officer has accepted the same in the regular assessment. In these circumstances, the Assessing Officer cannot, at this stage make the addition. The computation and assessment order is placed at pp. 961 to 965. Accordingly, we hold that the Assessing Officer was not justified in making the additions. (x) Assessment year 1995-96 (a)During the assessment year 1995-96, the Assessing Officer made the addition of ₹ 24,45,000 as unexplained cash credits received from Vignahar Builders and Developers and ₹ 14,95,000 from Vikas Developers. With regard to the loan from Vignahar Builders and Developers, the Assessing Officer observed that the assessee filed confirmation letter on behalf of Vignahar Builders and Developers. Five of the seven partners of Vignahar Builders and Developers were examined on oath by the Assessing Officer on 19-2-1997. The gist of the statement of those partners is reproduced by the Assessing Officer and for ready reference, the same is reproduced below : "(a)that the assessee maintains books of accounts in respect of Vignahar Builders and Developers and barring another partner Shri Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque. The statements of the partners of Vignahar Builders & Developers are at pp. 789 to 793. The learned Department Representative, on the other hand, argued that from the statements of the partners, it is evident that the firms are benami of the assessee and other partners have nothing to do with the firm as they have no knowledge about any transaction or activity of the firm. He further argued that mere confirmation does not prove the genuineness of the transaction. (b)On careful consideration of the rival submission and the documents on record, we find that all the partners have categorically stated that they are the partners of the firm. The firm Vignahar Builders & Developers as well as Vikas Builders are assessed to tax. In our opinion, the mere fact that the partners have stated that all the accounts have been maintained by the assessee would not prove that the assessee is the benamidar. Admittedly, the firm is assessed to tax wherein the names of the partners are there and their share of income has also been mentioned. The Revenue has failed to bring anything on record to prove that the firm Vignahar Builders & Developers is benami or the loan advanced to Vikas Builder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in making the addition of ₹ 14,95,000. The assessee in his capital account and the balance sheet for the assessment year which is placed at p. 715 of the paper-book has clearly shown amount of ₹ 14,95,000 from Vikas Developers. We, therefore, delete the addition made by the AO on this account. (xi) Assessment year 1996-97 (a)During this assessment year, the AO has made the following additions : Rs. (a) Shantilal Rikabchand 2,80,000 (b) Rikabchand N. Jain 1,00,000 (c) Jivaraj Prajapati 2,00,000 (d) Mahavir Kumar 1,00,000 (e) Prakash Bafna 1,00,000 The AO made the addition in all the above cases on the ground that the assessee failed to produce the creditors for verification of loan. With regard to Shantilal Rikabchand the AO observed that from his bank statement which was submitted by the assessee, the creditor had deposited substantial amount in cash just prior to advancing the loan to the assessee. Some amount is said to have been borrowed by the creditor from his wife. Her bank statement also show that cash was deposited just prior to advancing the loan. The AO further observed that both Shantilal and his wife had meagre source of income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prior to the year of search would also include the assessment year 1996-97 and that has to be determined under the block period. In fact, the pending assessment of the block period would merge in the collective assessment under section 158BC(c). The special procedure has been introduced by Chapters XIVB for framing of assessment of search cases. Once the assessment is framed for a particular year failing within the block period of 10 years, then no other assessment under any other provisions of the Act can be framed as two assessments cannot be framed for the same assessment year. However, on merit, we find that the assessee has filed the confirmation letter and all the creditors are assessed to tax. Their bank statements and the income-tax acknowledgments have been placed on the record. The AO has not been able to co-relate any evidence from the record that the transactions are not genuine. As regards the creditworthiness, the mere fact that certain amount was deposited before advancing the loan would not cause any shadow of doubt with regard to the genuineness of the transaction. Shri Shantilal R. Jain has fully explained the sources of the fund for advancing the loan. Similarl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment years 1994-95 and 1995-96 by Vikas Builders. The land for the said project was purchased from three persons, i.e., Parvati Rane, Yashwant Rane and Shilpa Rane, the details of which are given as under : S. No. Name Area sq. mtr. Value Rate per Sq. mtr. Date 1. Parvati Mahadeo Rane & Ors. 1,782.22 85 lacs 4,770 1-8-1991 2. Yashwant Rane 504,20 2.5 lacs 496 1-8-1991 3. Shilpa Rane 222.57 1.9 lacs 856 24-2-1997 The AO made an addition of ₹ 18,53,564 under section 69A of the Act on account of purchase of land from Parvati Rane, Yashwant Rane and Shilpa Rane and treated the same as unaccounted investment in the land by the assessee. The AO has observed that there is a glaring difference in the rates of the land purchased from Parvati Rane on one hand and Yashwant Rane and Shilpa Rane on the other hand and, therefore, the assessee was asked to submit his explanation vide letter dated 21-2-1997. The proposal to adopt the rates at par with that of the land purchased from Parvati Rane was communicated to the assessee. The assessee in reply to the said letter objected by stating that the parts of the two plots of land purchased from Yashwant Rane a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition merely on conjectures and surmises and there is no documentary or any other evidence or information with the AO to assess the rate of Yashwant Rane's and Shilpa Rane's land at par with the rate of Parvati Rane's land. He further argued that the cost of the land had been duly reflected in the books of accounts of the assessee and had been accepted as such by the AO in the regular assessment and, therefore, without any fresh evidence, no addition could be made in the block assessment. On the other hand, the learned Departmental Representative argued that the AO has made the addition keeping in view the glaring difference in the rates of land stated at the same place. He heavily relied on the order of the AO. (c)On careful consideration of the rival submission and the documents on record, we find that all the three vendors, viz., Parvati Rane, Yashwant Rane and Shilpa Rane appeared before the AO and their statements were recorded. They categorically admitted the consideration mentioned in the agreements. The AO has not brought any evidence on record to show that the consideration mentioned in the agreements and admitted by the vendors is not correct or there is any other evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DVO vide his report determined the expenditure incurred on construction at ₹ 1,07,00,000 whereas the assessee has brought to our notice that he expenditure as submitted by the assessee to the DVO upto 22-11-1996, was 1,01,94,012. However, the AO in his order has mentioned that the corresponding expenses incurred by the assessee as per books and submitted to the DVO is ₹ 94,76,00,000 and accordingly the AO added the difference of ₹ 12,04,000. From the record, we are unable to find as to what extent the expenditure has actually been incurred by the assessee and entered in his books of accounts. Accordingly, we are of the view that the matter may be restored to the AO to verify the record and the books of account of the assessee as to what was the actual expenditure incurred by the assessee on the construction upto 22-11-1996, and then to arrive at the conclusion. Accordingly, the matter with regard to the cost of construction is set aside. (iv) Addition on account of understatement of saleable area. (a)The project at Kalyan consists of 35 flats, 22 shops and 8 office accommodation. As per the agreements on record, the assessee sold flats @Rs. 700 per sq. ft. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that in all its projects he has sold the flats and the shops on the basis of the carpet area. He further pointed out that the estimated area was noted down in the seized note book for the purpose of stamp duty where the valuation is done on the basis of built-up area and not on carpet area. The learned counsel further contended that there cannot be any comparison with builders like Godrej Lok Udyan and Gaganpuri Builders referred by the AO as those builders are developing townships with various high-class facilities like swimming pool, health club, etc. With regard to the on-money received by Joginder Construction Co. whose statement was recorded by the AO, the learned counsel submitted that the mere statement of another construction company cannot be taken as the basis for addition or assuming that the assessee-company had also charged the on-money is not proper. The learned counsel submitted that addition cannot be made merely on the basis of suspicion. He further pointed out that the assessee has been maintaining the accounts regularly and, therefore, no addition could be made on presumption. In support, the learned counsel placed reliance on the following decisions : (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the rates of comparable instances are given showing that the rates are on the basis of built-up area. The assessee has explained the seized note that the said calculations were made with regard to the stamp duty purposes. He has pointed out that as per the letter of the sub-Registrar, stamp duty is required to be paid on the basis of the built-up area of the flat. The said letter of the Registrar is at pp. 590 to 595 of the paper-book. The explanation submitted by the assessee was that the calculations were kept ready for the stamp duty purposes so that it would be possible to inform a prospective buyer the stamp duty payable by them. The learned counsel further pointed out that all the agreements with the buyers are entered into on the basis of carpet area and not on the basis of built-up area. In case, the assessee had sold the area on the built-up area basis the agreement would have been on the same basis. As regards the rates as per the assessee he has charged the rate at ₹ 700 per sq. ft. or the flats and ₹ 1,142 for the shops on carpet area basis. As per the assessee, the rates in similar locality available with the sub-registrar has been submitted before the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a)The assessee in the name of Vikas Builders has undertaken a project at Ambernath on the land belonging to one Mr. C.S. Pandit. The said project was started in the previous year ending 31-3-1989, and completed in the previous year ending 31-3-1991. The assessee has shown a profit of ₹ 61,331. He showed closing work-in-progress at ₹ 2,38,706. The AO found that the land had been divided into two pieces. The project was constructed on one part of the land. However, the assessee included the entire cost of the land in the cost of the project. The AO observed that the total sale consideration comes to ₹ 12,13,696 as the assessee had given 1,060 sq. ft. of built-up area to the landlord in exchange for the land in addition to the purchase consideration of ₹ 1,75,000. He further observed that the assessee has sold the flat at the rate varying 128 to 375 sq. ft. However, in the course of search, agreement on stamp paper dated 19-4-1991 was found having executed between the assessee and C.S. Pandit at bundle No. C-1/6 wherein at p. 3 it is stated that the assessee, developer is entitled to deduct the compensation for the additional area over and above the 1,050 sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme Court in the case of Kalwa Dewo Dettam v. CIT (supra) and in the case of KP Varghese & Co. v. CIT (supra). He further argued that suspicion, however, strong cannot take place of the proof. On the other hand, the learned Departmental Representative argued that the AO has justified in making the addition as the assessee has offerred ₹ 300 per sq. ft. to the other buyer and on lesser rate to the land owner. The AO came to know about the price offered to the landlords from the seized documents in bundle No. C-1/16 found during the search. (c)We have considered the rival submission and the documents on record. From the facts it is apparent that the assessee had agreed to give an equivalent area to the tenants at a concessional rate as per the agreements between the assessee and the tenants S/Shri V.J. Sathe and Y.V. Jape. The Revenue authorities have not questioned the genuineness of the agreements with the tenants and, therefore, impliedly accepted the same. Having done so, we find no reason as to why the said agreements were not considered by the AO while computing the profits. For the sake of arguments we may assume that the assessee may have to pay compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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