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TMI Blog2017 (12) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has considered the revised return declared by the assessee at ₹ 13,45,71,200/- Therefore, the addition of ₹ 72,50,000/- has to be confirmed and, accordingly, we confirm the said addition of ₹ 72,50,000/-.The assessee has also included the said amount in its revised computation and paid taxes thereon on 27.12.2016. Addition made on the basis of estimating the sale consideration in respect of the flats - Held that:- From the documents in the booking, it is evident that different flats and different shops have been booked at different rates by the assessee. From page 443 of the paper-book, as found during the course of search, the assessee has given discount on the bookings at different rates to different customers. We noted that in respect of two shops although the base rate has been mentioned @21,000 per sq. ft, the assessee has given discount around ₹ 4150 per sq. ft. and booked the shops @17500 per sq. ft including the club charges of ₹ 750/-. Similarly, in respect of flat also we noted that the base rate has been mentioned @12,000/- per sq. ft and after adding floor rise, club charges, infra charges etc., total rate came to ₹ 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as estimated during the course of the search. No cogent material or evidence was brought to our knowledge by the learned DR. We, therefore, set aside the order of the CIT(A) on this issue and delete the addition made by the Assessing Officer to the extent of ₹ 12,04,18,428/- - ITA No.5621/Mum/2017 - - - Dated:- 20-12-2017 - Shri P K Bansal, Vice President And Shri Amarjit Singh, Judicial Member For The Appellant : Shri Rakesh Joshi For The Respondent : Shri R P Meena ORDER Per P K Bansal, Vice-President: This appeal has been filed by the assessee against the order of the CIT(A)-52, Mumbai, dated 09.06.2017, for A.Y.2015-16, by taking the following effective grounds of appeal: 1) On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of ₹ 63,39,52,372/-- as alleged on money received on sale of flats, without considering the facts and circumstances of the case. 2) On the facts and circumstances of the case as well as in Law, Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in not appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing ground nos. 1 2 in respect of the first addition and ground nos. 3 4 for the second addition. 3. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities below. We noted that there had been a search in the case group concern of the assessee on 17.11.2014. The assessee is engaged in the development and sale of flats. During the course of search, certain documents were found on the basis of which it was noted that the sale transactions reported in ERP system of the assessee were to be comparably lower that the consideration value of similar kind of flats reflected in the manual booking form. On the basis of the documents seized and the statements of Shri Anand Modi, Head of the Sales Runwal Group, Shri Ravi Raichura, Sales Manager, Ms Sujata Rao, Sales and Customer Relation Management, Shri Kishore P Jain, Head of taxation and Shri Shamsher Dutt, Senior Vice President, recorded during the course of search, the Assessing Officer noted that data entered in the ERP system and the manual booking there was price variation. In their respective statements, they have accepted that the assessee has received on-money in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked (in crore) 1 T7 702 07/02/2014 2.74 2.59 2 T4 3501 20/08/2014 2.83 2.68 3 T8 3501 22/08/2014 2,47 1,9 4 Olive 1402 19/07/2014 1.46 1.11 5 T3 3506 07/12/2014 2.47 1.98 6 T3 3504 06/05/2014 2.4? 186 7 T1 3501 25/06/2014 1.66 1.32 8 Galleria 4(Shop) 07/07/2014 1,92 1.34 9 Galleria 5(Shop) 07/07/2014 1,92 1.34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.8 1.51 2 T1 3104 10/08/2014 2.22 1.72 3 F9 F9 10/12/2014 1.07 1.21 4 Olive 1101 06/08/2014 1.46 1.23 5 T2 1802 06/08/2014 1.72 1.63 6 Olive 702 15/07/2014 1.42 1.39 7 Galleria 40 03/09/2014 2.13 1.31 8 Galleria 41 09/03/2014 2.13 1.31 9 Galleria 18 09/11/2014 2.85 1.75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09/04/2014 3,17 3 29 T8 3S01 22/08/2014 2.47 1.9 30 T3 801 15/06/2014 1.99 1.45 31 Olive 1402 19/07/2014 1.43 1.11 32 Chestnut 504 07/02/2014 1.46 1.46 33 T3 3506 07/12/2014 2.47 1.98 34 T3 3SG4 06/05/2014 2.47 1.86 35 T1 3501 25/06/2014 1.66 1.32 36 Galleria 4 05/02/2014 1.92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,30,52,372/- (which as per Annexure-1), as the on money accepted in the projects Runwal Green (M/s. Runwal Homes Private Limited), and the same has been offered as additional income over and above the income declared in the M/s. Runwal Homes Private Limited, Here I want to state that Olive project is under the proprietorship of Mr. Subhash Runwal. Since Shri Subodh Runwal has agreed to declare a sum of ₹ 63,39,52,372/- as detailed below, the Assessing Officer added the sum to the income of the assessee, which was confirmed by the CIT(A). Offered during the year in revised return 1 Project namely Chestnut (Single Building) Rs.72,50,000/- 2- Project namely Runwal Greens Towers -1,2 3 and Commercial Rs.31, 14,02,412/- 3 Project namely Runwal Greens Towers - 4, 5, 6, 7 8 Rs.31,52,99,960/- Rs.63,39,52,372/- TOTAL: Rs.63,39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he units booked are accounted for as advances received appearing on the liability side of the balance sheet and all the project expenses are appearing as project Work-in-progress on the asset side of the balance sheet. Only at the time of completion of the project, both these items are recognized as Incomes and Expenses respectively and project profits are offered for taxation. Our attention was drawn towards the decision of Hon ble Supreme Court in the case of CIT vs. Bilahari Investments (P) Ltd. 299 ITR 1 (SC)., wherein it was held that recognition/identification of income under the Act, is attainable by several methods of accounting and that project completion method is one such acceptable method. Thus, the assessee cannot follow mixed method of accounting, it has to strictly adhere to the method it has adopted and is consistently following. 5. So far as project Runwal Green Towers 1, 2, 3 and Commercial are concerned, they were completed in A.Y. 2017-18 and, therefore, no question of assessing income during the impugned assessment year arise. Our attention was drawn towards the occupation certificates of this project, which was received during the A.Y. 2017-18. In respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, it was vehemently contended that so far as the sum of ₹ 33,47,33,101/- was concerned, it was just estimated by taking the rate at ₹ 15,750/- per sq. sq and the sum of ₹ 9,97,40,450/- was estimated by taking the rate at ₹ 26,000/- per sq. feet for which also there was no incriminating document found. Details of each income on the basis of the documents seized as well as on the basis of estimation worked out by the Assessing Officer are given at pages 438 to 441 of the paper-book. Our attention was also drawn to page 443, which clearly shows that the assessee has given discount on various flats booked and, therefore, it was contended that the addition confirmed by the CIT(A) must not be sustained. Our attention was drawn towards the details of booking done from the period March 2014 to November 2014, found during the search evidencing some cases of accepting cash recorded in the seized documents and when the same was confronted to the Director of the Assessee, he submitted that generally the group, as a policy matter, did not accept cash but in few cases, they accommodated the customer due to market situation. The Revenue later on estimated the cash por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the details of sale thereof are recorded in the seized material where no on money was taken. Details of such units were brought to our knowledge, which are as under: Unit No. Paper book page showing entry in seize material Total Revenue as per seized material Value recorded in the books Value estimated by dept. taking highest sale rate T2-3206 Page 451 167,77,000 168,10,005 183,48,750 T7-801 Page 463 155,18,500 156,92,851 274,00,000 T7-1202 Page 443 280,00,000 289,77,000 307,12,500 T8-3401 Page 460 2,57,60,000 259,11,821 274,05,000 Tl-3402 Page 460 1,68,35,250 169,84,755 1,83,48,750 Thus, it was contended that the action of the Assessing Officer is totally arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper-book. Further, it was contended that the receipt, if any on money has to be assessed, it is only the net income embedded therein that has to be added as on money representing the sale consideration and sale consideration cannot be equated with the net income of the assessee. In fact, during the search certain documents were found wherein the initial investor was paid compensation on surrender of their right and the Director of the assessee company has stated in the statement recorded u/s. 132(4) that due to increase in price, they compensated some of the parties on cancellation of their booking. Not only this, there as some payments to employees in cash which also reflected in the statement of the Director. Therefore, whatever cash was collected on the sale of few units were utilized towards expenses of the project. Thus, the entire cash receipt cannot be treated as income of the assessee and only a part of it can be considered as income. In this regard, reliance was placed on the decision of - Hon ble Gujarat High Court in the case of Income Tax Officer Vs. Anand Builders, wherein the Hon ble High Court held that the order of the Tribunal on the question as to whether in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Therefore, the said money has to be added in the impugned assessment year and the Assessing Officer, therefore, for not unfair and unjustifiable n adding the said on money. 7. We have heard the rival submissions and carefully considered the same along with the orders of tax authorities below. The first issue involved in this ground before us is whether the Assessing Officer was correct in law in adding a sum of ₹ 63,39,52,372/- as alleged on money received on sale of the flats and the second issue involved is if any addition has to be made during the impugned assessment year, whether the addition of the on money has to be made on the basis when the on money has been received or on the basis of the method of accounting followed by the assessee. It is not disputed that the assessee is following project completion method. The undisputed facts before us are that search and seizure action u/s. 132 of the IT Act took place on 17.11.2014 on the assessee as well as its group company. The assessee submitted return of income on 31.10.2015 declaring total income of ₹ 13,48,82,480/-, which was subsequently revised to ₹ 13,45,71,200/- on 7.07.2016 and finally revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 72,50,000/- has already been confirmed by us in the preceding paragraph, therefore, on-money on flats as per seized material remains at ₹ 19,22,28,821/-. We noted that the Assessing Officer on the basis of seized material found during the course of search relating to the period of March 2014 to November 2014 took the view that the assessee might have received on-money in all the bookings and therefore, he estimated cash portion on other units sold by taking the highest rate of sale of other units although no on-money evidence were found during the course of search. The Assessing Officer while confirming the addition relied on the statements of the staff of the assessee as well as the statement of the Director Shri Subodh Runwal, mainly in reply to question nos. 16, 17 and 18, which are reproduced as under: Ans to Q.16 Sir as I have answered in earlier question I again reiterate that this project was a joint venture with HDFC Limited right from the inception till they exited. Subsequently to that the market has become very competitive and due to opening of a forest land we had to sell aggressively to achieve the numbers from the calendar year 2014, I accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndar year 2014 and, therefore, in order to accommodate few customers who wanted to pay part consideration in cash, they accepted cash for few units. He has categorically stated that prior to that date they have never accepted any cash. In reply to question no.17, he has categorically stated that he did not agree that in all cases cash bas been accepted over and above the agreement value but he agreed to surrender the difference as its additional income over and above the regular income for the respective years as on-money to avoid protracted litigations with the department and buy peace. On that basis the total on-money received was worked out at ₹ 63,39,52,372/- and added to the income of the assessee. It is undisputed fact that on the basis of the documents and evidence produced before us, the copy of which are available at pages 436 to 441 of the paper-book, the on money received, on the basis of the seized documents, by the assessee in respect of flats comes to ₹ 13,44,68,725/-and in respect of shops comes to ₹ 6,50,10,096/-. For the rest of the addition in respect of which no incriminating material was found, we noted from pages 439 to 441 of the paper book, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade the presumption as if the assessee has sold all the flats @15750/- per sq. ft and the shops @26000/- per sq. ft. From the documents in the booking, it is evident that different flats and different shops have been booked at different rates by the assessee. From page 443 of the paper-book, as found during the course of search, the assessee has given discount on the bookings at different rates to different customers. We noted that in respect of two shops although the base rate has been mentioned @21,000 per sq. ft, the assessee has given discount around ₹ 4150 per sq. ft. and booked the shops @17500 per sq. ft including the club charges of ₹ 750/-. Similarly, in respect of flat also we noted that the base rate has been mentioned @12,000/- per sq. ft and after adding floor rise, club charges, infra charges etc., total rate came to ₹ 14375 per sq. ft. and the assessee has also given discount of ₹ 1000/- and ultimately booked the flat @13,350 per sq. ft. Even on the same very page had the details of the flats which had been booked @ 14550/-, 14300/- and ₹ 13225/- per sq. ft. Therefore, the conclusion drawn by the Assessing Officer while making the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Total Revenue as per seize material Total revenue as recorded in the books Difference (A-B) On-money worked out by AO Excess on-money worked out by AO (D-C) A B C D E For 36 flats 8254,10,000 7201,25,562 1052,84,438 1344,68,725 291,84,287 For 10 Shops 2058,92,500 1449,43,854 609,48,646 650,10,096 40,61,450 Total 10313,02,500 8650,69,416 1662,33,084 1994,78,821 332,45,737 The assessee has filed copies of agreement also before us from pages 128 to 378 of the paper book. In the agreement, we noted that these charges have specifically been mentioned. The assessee therefore before us submitted that the Assessing Officer has calculated excess on-money of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and he could not bring to our knowledge any cogent material or evidence, which may prove that the assessee incurred any expenditure for earning on-money. We are of the view that the expenditure incurred for the project has already been debited to the books of account and, therefore, no question arises of charging the net income. We have also gone through various other decisions i.e. CIT vs. Gurubachhan Singh J Juneja 302 ITR 63, DCIT vs. Panna Corporation 74 DTR 89 and CIT vs. President Industries 258 ITR 654, on which the learned AR has vehemently relied. In our opinion, these decisions will not assist the assessee. These decisions, in fact, relate to unaccounted sales and not onmoney received by the assessee. The learned AR must be aware that there is always a difference in suppression of consideration and undisclosed sales made outside the books of account. It is not a case where the assessee has booked the project outside the books of account so that expenses incurred could be allowed. There is evidence on record that the assessee has received on-money consideration for the booking of shops as well as flats. Therefore, to that extent, subject to our aforesaid direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2014, estimated the profit of the project viz. Runwal Chestnut which has been completed during the impugned assessment year at ₹ 25.46 crores in the following manner: Project Name- Runwal Chestnut (M/s. Runwal Homes Pvt. Ltd.) Estimated P L A/c for FINANCIAL YEAR 2014-15 Particulars Amount (Rs., in Crores) Sales Sold Unsold - Stock Value 97 1.83 Total Sales 98.83 Cost Land Related Construction Cost 24.01 33.26 Other cost (Development, Selling and Admin cost) Finance Cost 10.64 5.46 Total Cost 73.37 Estimated Profits 25.46 The assessee offered the same for taxation. During the course of assessment, the Assessing Officer confronted the assessee but the assessee submitted that the estimated profits were firstly just estimates for the impugned project. It was submitted that the said project is actually a very large one comprising of nine buildings of which Chestnut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted projects. As the assessee had already offered income of ₹ 13,41,81,572/-, the balance amount of ₹ 12,04,18,428/- was brought to tax. I have considered the facts and arguments of the assessee and found that there is nothing new in the same and the same already stand considered by the AO .The assesse has argued that the construction costs increased from ₹ 33 cr to ₹ 57 cr which has not been sufficiently substantiated by it. Moreover it looks highly unlikely that the construction costs will increase so astronomically and it may be a ploy at the end of the assessee simply to reduce taxable profits. The assessee also contended that certain flats were not sold during the year and were sold subsequently. However the fact remains that almost entire sale consideration of all these flats had been received by the assessee and therefore even if the registration or sale deed happens later, for all practical purposes the flats were sold and registration may have been done by the assessee with a viw to defer the tax liability. The important point remains that once the assessee had admitted certain income during the course of search, it should have honoured the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Land Related 24.01 24.16 0.15 Development Cost 9.59 8.34 (1.25) Construction Cost 33.26 57.54 24.28 Admin Other Costs 0.86 2.67 1.81 Selling Marketing Exps. 0.19 1.36 1.17 Finance Costs 5.46 0 (5.46) TOTAL COSTS 73.37 94.07 20.70 PROFIT 25.46 13.49 (11.98) This is a case where it is apparent that the declaration of ₹ 25.46 crore as profit from the completed project was merely on the basis of estimate. Reliance was placed before us on the Circular of CBDT dated 10.03.2003, in which the Board has clearly laid down that no attempt should be made to obtain confession as to the undisclosed income and the addition should be made only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d while awarding the works was based on preliminary drawings as per schematic stage. However as per further evaluation in design stage and after incorporation of design requirements the area for tower increased from 1,42,776 sq. ft. to 1,73,109 sq. ft. (Diff. 30,333 sq. ft.) and area/of podium was increased from 51,262 sq. ft. to 65,980 sq. ft. (Diff. 14,717 sq.ft). This had a cost impact of ₹ 4.97 cr. (Rs.3. 79 cr. +Rs.1.18 cr.) Relevant documentary supporting enclosed. 30, 333 X 1,250/- 14,717 X800/- 4.97 A B 3 After carrying out excavation works it was found that the strata of the excavated pit is not stable. It was mandatory to stabilize the strata by shore piling. Accordingly the work was awarded to Shivam Pile Foundation. The cost impact was ₹ 1.25 cr. considering cost Contract, Cost of Concrete Cost of Steel (Rs.0.99 cr. + ₹ 0.20 cr. + ₹ 0.06 cr.) for the said piling work. Relevant documentary supporting enclose 1.25 I 4 Apart from the increase in built up area after the design stage, additional items were required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 0.19 cr (for kitchen, lobby etc.) 1.40 G J Finishing cost IB Additional cost of Veneer Melamine Polish to main door increase in basic material rate and quantity was also corrected the net cost impact is ₹ 34 lakhs details attached 0.34 G J Finishing cost IF 11 Similar increase in area rate was there for painting works. The budgeted rate was ₹ 129/- for internal paint which was increased to ₹ 196/- and for external paint it was increased to ₹ 450/- from ₹ 220/-. The overall cost impact is ₹ 81 lakhs. Itemized details are available in budget sheet. 0.81 G J Finishing cost 1 C 11 Cost of brickwork plaster was not considered separately now added as per order 0.77 J, WO Cost, 2C3 12 Cost of infra plumbing works was considered approximately after completion of schematic design increased to ₹ 1 . 34 cr. from originally budgeted amount of ₹ 0.60 cr., impac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o increased from 98.83 crore to ₹ 107.56 crore. Simultaneously, there is also increase in the cost from 73.37 crore to 94.07 crore and, ultimately, the profit derived by the assessee came to 13.49 crore. We noted from the estimation of the profit at the time of search at ₹ 25.46 crores, the figures have been taken in rounded off while the real profit cannot be round off even from the working at the time of the search. It is apparent that the nomenclature is to estimate profit worked out in the estimated Profit and loss account for the F.Y 2014-15. We have also perused pages 25 to 127 of the paper-book, which contains the evidence and the details of each and every expenditure incurred by the assessee as well as the consideration received by the assessee on which the learned AR has heavily relied. Income tax has to imposed on the real income and not on the income which have estimated by the assessee. 14. The learned DR even though vehemently relied on the order of the Assessing Officer as well as that of the CIT(A), he could not adduce any cogent evidence or material except the estimated profit computed during the course of the search that the actual profit from the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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