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TMI Blog2016 (3) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... the ends of justice in this case. It is relevant to observe here that the assessee failed to give his past tax history. The assessee has also not shown any profit on sale of immovable properties. It is evident from the record that the assessee is executing contract work and is also engaged in the construction of building and selling the same regularly. We may also observe there that the gross profit rate cannot be uniform in all the years and the profit rate depends on many factors. Therefore, the gross profit rate of 21% for the year under consideration should not be guiding factor in other years. Accordingly, we direct the Assessing Officer to apply a profit rate of 21% as against 30% applied by the revenue authorities. The Assessing Officer should give a relief to the assessee accordingly. Addition under section 69C - Held that:- The entire expenditure has been routed through the books of account of the assessee and the copy of the building account and copies of the cash book on various dates, on which the expenditure was booked were placed on record as a proof of the source of expenditure in question. The Assessing Officer has accepted the books of account. It is true that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and are being disposed off by this common order for the sake of convenience. 3. Firstly, we will take up ITA No.1163/Chd/2013 relating to assessment year 2008-09. ITA No.1163/Chd/2013 : 4. Ground No.1 of appeal raised by the assessee reads as under : 1. That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the disallowance of ₹ 64719/- on account the depreciation claimed by the assessee appeallant on building. 5. Briefly stated, the facts of the case are that search seizure operation under section 132(1) of the Income Tax Act, 1961 (in short the Act ), was conducted on 8.10.2010 in Popli Group of cases. The assessee filed his original return of income under section 139(1) of the Act, on 25.9.2008 declaring total income at ₹ 16,42,204/-. After the search, a notice dated 15.2.2012 under section 153A(1) of the Act, was issued to the assessee requiring him to submit his return of income for six immediately preceding assessment years relating to previous year, in which search took place. In response to the said notice, the assessee submitted his return of income on 14.6.2012 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny documentary evidence in support of his claim. 7. We have heard the rival submissions. It is observed that the assessee made similar claim in assessment year 2006-07 and the Assessing Officer held that the claim made by the assessee was wrong because the plea on which depreciation was claimed was a residential house. At the time of hearing of the appeal, Shri Vishal Mohan, learned counsel for the assessee could not controvert the above findings of the lower authorities. During the course of assessment proceedings for the year 2007-08, the assessee admitted in his letter dated 27.11.2009 that the building in question is a residential house and one floor of which was sold during the year and the proceeds from the sale were invested in construction of other floors of the building. The Assessing Officer disallowed a sum of ₹ 1,09,873/- on account of depreciation claimed on the building in question. There is no evidence on record to show that there was a change in the user of building. It is also clear that the assessee has accepted the order passed by the Income Tax Authorities for the assessment year 2007-08. Considering the entire facts and circumstances of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further submitted that the entire investment in the properties have been routed through the books of account and have been shown as a fixed asset under the head income from business and profession . But the same was assessable under the head income from capital gains . The Assessing Officer did not find any force in the above contention of the assessee. The Assessing Officer concluded that in the case of the assessee he is a contractor and engaged in the business of civil construction. He further noted that apart from executing contract work, he is also engaged in construction of building and selling the same regularly. The Assessing Officer rejected the contention of the assessee that the construction and sale of building by him should not be treated as his business income. The Assessing Officer also rejected the other contention of the assessee regarding estimation of profit @ 30%. The Assessing Officer noted that the said estimation was based on the profit earned in similar kind of construction business. Therefore, the profit on sale of property has been worked out at ₹ 2,70,000/- by the Assessing Officer and the same was treated as undisclosed income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haustive nor a final word on relevant factors that may be considered while determining the net profit rate. A few significant factors are the past tax history of the assessee, if available, assessment orders that may have been passed and accepted by the department, the nature of the assessees' business, an appraisal of the value of the contract, prevailing economic conditions vis-a-vis the assessee's business, the price of raw material, labour etc. the rise in price index as notified by the Central Government from time to time if applicable and if the Assessing Officer proceeds to rely upon assessments of other assessees engaged in similar business to do so only after determining points of similarity etc. At this stage, it would be appropriate to clarify that the word similar is not synonymous with the word 'identical'. Factors referred to above are merely illustrative and not exhaustive of the circumstances that may or may not be taken into consideration. At this stage, it would be appropriate to reproduce a few words from Dhakeswari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775 (SC) so as to place our conclusions in their correct perspective:- .....The Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries. 11. A relevant extract from CIT Central United Provineer Vs. Laxmi Narain Badre Dass (1937) 5 ITR 170 the Privy Council (Page 180) reads as follows :- .....The officer is to make an.assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordship thinks, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; though there must necessarily be guess work in the matter, it must be honest guess work. In that sense, too, the assessment must be to some extent arbitrary. Their Lordships think that the section places the officer in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed upon a rational analysis of facts. The authorities below have also not given any reason as to why the case cited by the assessee of a reputed builder of Shimla M/s Rajdeep Builders was not comparable with the case of the assessee. Thus, considering the entire facts and circumstances of present case, we are of the view that a profit rate of 21% will meet the ends of justice in this case. It is relevant to observe here that the assessee failed to give his past tax history. The assessee has also not shown any profit on sale of immovable properties. It is evident from the record that the assessee is executing contract work and is also engaged in the construction of building and selling the same regularly. We may also observe there that the gross profit rate cannot be uniform in all the years and the profit rate depends on many factors. Therefore, the gross profit rate of 21% for the year under consideration should not be guiding factor in other years. Accordingly, we direct the Assessing Officer to apply a profit rate of 21% as against 30% applied by the revenue authorities. The Assessing Officer should give a relief to the assessee accordingly. Thus, ground Nos.2 and 3 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Paper Book. In our opinion, the entire expenditure has been booked through the books of account and, therefore, there was no question arises for assessing the same under section 69C of the Act. It appears that the addition has been made just for the sake of making addition and the same is not sustainable in law. Accordingly, we delete the addition of ₹ 5,01,860/- made under section 69C of the Act by the Assessing Officer and confirmed by the learned CIT (Appeals). Accordingly, we allow ground No.4 of the appeal. 18. The ground No.5 of the appeal raised by the assessee reads as under : 5. That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding an addition of ₹ 102102/- made under section 68 of the Income Tax Act, 1961 as un unexplained cash credit. 19. The Assessing Officer made the addition of ₹ 1,02,102/- under section 68 of the Act. The Assessing Officer noted that during the course of assessment proceedings, it was found that the assessee had made deposits in bank account No.4500000100019347 with PNB, New Shimla to the extent of ₹ 1,02,102/-, the source of which has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,50,000/- as income from undisclosed sources. 23. During the course of search, a document marked A-2 was found and seized. This document is an agreement to sell dated 11.5.2007 entered into between the assessee and Dr.K.S Larzoo for sale of plot No.138, Type-B, Lane-2, Sector 1, Below BCS, New Shimla. The total consideration of the plot was mentioned at ₹ 25,50,000/-. During the course of assessment proceedings, the Assessing Officer asked the assessee to explain the nature of the document. In response of the said query, the assessee submitted that a portion of the building B-38 was sold to Dr.Larzoo for a consideration of ₹ 25,50,000/-. However, the deal did not materialize and the same was eventually sold unfinished for a consideration of ₹ 9 lacs. In order to substantiate his claim the assessee submitted a copy of the registered sale deed before the Assessing Officer. The Assessing Officer observed that no documentary evidence was furnished by the assessee in support of his submission. He, therefore, issued a notice to the assessee to show cause as to why the difference of ₹ 16,50,000/- (Rs.25,50,000/- - ₹ 9,00,000/-) should not be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein after called the first party/seller ) which expression shall include his legal heirs, executors, administrators, representatives and assigns). And Sh.K.S.Larzoo s/O l.r.Larzoo r/o VPO Bonda Tehsil Rampur, Shimla hereinafter called the second/purchaser which expression shall and as contrary appears include his legal heirs, executors, administrators, legal representatives and assigns). And whereas the first party /Seller is the absolute owner and allottee and in possession of Plot No, 138, Type B Lane-It Sec. I below BCS New Shimla(H.P) which is free from all encumbrances, i.e. sale, transfer, mortgage, gift, exchange, demand, charges, and litigations etc. till date. And whereas the first party/seller being the absolute owner has constructed RCC frame structure along with Comprising of ground floor, parking floor, first floor, second floor, and attic along with other mandatory requirements as such as rain water harvesting structure as per the approved plan sanctioned by the Member Secretary SADA, Kasumpti, ShimIa-9 on the above said plot. Contd...2 Whereas the First party/seller/transferor has agreed to sell the ground floor of the said building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment authority. However the second party shall bear the cost of the stamps and registration fee etc, for the registration of sale deed in his own name. 7. That till the time the final payment is made, the physical possession of the said property, along with parking of one car shall remain with the first party/seller and the peaceful and vacant possession of the entire property shall be handed over to the Second party by the first party only at the time of making the Final Payment qua the said transaction. 8. That the second party/purchaser shall make the balance payment within a period of 65 days from the date of this agreement i.e. on or before 15th July 2007 and if the second party/purchaser fails to make the balance payment in stipulated period as specified above, the first party/seller has right to forfeit the earnest money. In case first / seller backs out from the deal second party/purchaser had right to get the property registered in his name through the court of law or specific performance of law. 9. That the First Party/ Seller has assured second party that the above property in question is free from all sort of liens encumbrances litigation dispute of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen with under-shelf Cupboards. 6. Moduler Electrical switches of Anchor or Aroma make with Havells wire. 7. Door windows of bullock wood with pant on outside and polish inside. 8. Hindware sanitary fixtures in the Bathrooms and CP fittings of Benson make. 9. Cornishes mouldings of POP in the ceiling. 10. Aluminium oxidized Handles and towerbolts. 11. Kitec GI pipes and sanitary pipes of Finolex make. Sd/- Sd/- (Assessee) (Dr.K.S.Larzoo) 28. The learned counsel for the assessee vehemently argued that as per the agreement to sell dated 11.5.2007, the flat had to be completely finished in all respects. However, as the deal did not materialize, the matter was renegotiated and instead of finished flat, only structure was sold and renegotiated price of ₹ 9 lacs was agreed upon, as is evident from the copy of the conveyance deed and the relevant portion of which reads as under : And whereas the seller has agreed to sell and the purchaser has also agreed to purchase the entire ground floor RCC framed structure having an area 76 sq meters alongwith one car parking slot in the parking floor of the building built on the plot no. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to assessment year 2008-09. We have discussed this issue at length and directed the Assessing Officer to apply profit rate on sales of immovable property @ 21% instead of 30% applied by the Assessing Officer. For the detailed reasoning given in ITA No.1163/Chd/2013, we direct the Assessing Officer to give relief to the assessee accordingly. The ground Nos.1 and 2 are allowed partly. 34. The ground No.3 of appeal raised by the assessee reads as under : 3. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in upholding the adding back a sum of 7,50,400/-under section 69C of the Income Tax Act, 1961 treating the same as unexplained expenditure. 35. This ground of appeal is similar to ground No.4 of the appeal raised in ITA No.1163/Chd/2013 relating to assessment year 2008-09. The facts are similar and, therefore, the findings given in ITA No.1163/Chd/2013 shall also apply to this ground of appeal with equal force. Consequently, this ground of appeal is allowed. 36. The ground No.4 of appeal raised by the assessee reads as under : 4. That in the facts and circumstances of the case the Ld Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t justified in upholding the addition of ₹ 1271/- under section 68 of the Income Tax Act, 1961. 41. At the time of hearing of the appeal, the learned counsel for the assessee did not press for this ground of appeal and accordingly, we dismiss the same as not pressed. 42. The ground No.6 of appeal reads as under : 6. That in the facts and circumstances of the case he Ld Commissioner of Income Tax (Appeals) is not justified in upholding the addition of ₹ 126788/- under section 68 of the Income Tax Act, 1961 as un explained cash credit. 43. The Assessing Officer noted that the assessee had bank Account No.09250110004692 with UCO bank, Ram Bazar, Shimla in the name of his minor child Sanchit. The break-up of credit entries in the said account is as under : Financial year Total amount credited 2009-10 Rs.2,45,784/- 44. The Assessing Officer asked the assessee to show cause as to why a sum of ₹ 2,45,784/- should not be treated as unexplained cash credit under section 68 of the Act. In response to the said query, the assessee submitted reply on 27.2.20013, which rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt No. 09250110004692 of Sanchit, U/G Minakshi. According to the learned counsel for the assessee, the amount of ₹ 1,45,784/- represented the amount received on account of maturity of FDRs and as such, the same cannot be taxed as unexplained credits under section 68 of the Act. He further pointed out that ULY account No.68/36 was opened on 5.6.2003 in the name of Master Sanchit, which was matured on 5.7.2006 with the total amount of ₹ 1,18,996/-. It is also stated that ₹ 1,18,996/- was put in the FDR in the name of Sanchit U/G Minakshi Popli, which was paid on 4.8.2009. According to the learned counsel for the assessee, this amount was available for depositing in Account No. 09250110004692 with UCO bank, Ram Bazar, Shimla in the name of assessee s minor child Sanchit. There is no evidence on record to controvert the above contention of the learned counsel for the assessee. The amount received on the maturity of FDR was available for making deposits. This is not a case of the Revenue that the amount received on maturity of FDR was invested somewhere else. In the absence of such evidence, there is no reason to disbelieve the version of the assessee. Accordingly, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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