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TMI Blog2018 (1) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... estate and developer under a proprietary concern, 'M/s. Charu Developers.' 3.1 There was a search operation in the case of Somashekar P Patil and Others on 18.6.2010. In the case of the assessee [Shantilal J Shah] also, a search was conducted u/s 132 of the Act on the same day i.e. 18.06.2010. In compliance to the notices u/s 153A of the Act dated 2.8.2011, the assessee had furnished copies of returns (filed u/s 139 on 30.9.2008, 30.9.2009, 30.9.2010 and 28.9.2011 with CPC, Bangalore] on 30.08.2011 admitting taxable incomes of Rs. 84,17,320/-, Rs. 13,68,490/-; Rs. 45,40,330/- and Rs. 41.70.340/- for the AYs. 2008-09 to 2011-12 respectively and requested the AO to treat the same as returns furnished in response to the above notices. 3.2 It was found by the AO during the course of assessment proceedings u/s 143(3) r.w.s. 153A of the Act that the assessee had purchased a land ad-measuring 11,000 sft in Leoneard Lane, Bangalore and commenced construction of residential flats by developing projects, namely, Jasmine, Amythest and KRSNA, the details of which are as follows: Name of the Project Date of commencement Date of completion Total flats Flats sold Flats unsold Jasm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be added for AY 2013-14 [because the flat Nos. CJ 003 & 103 were registered on 25.2.2012] on protective basis. However, the assessee had offered additional income of Rs. 40,59,000/- for the AY 2010-11 which he had declared at the time of search operation on 18.6.2010 which had been reflected in the return of income filed by the assessee. Hence, the difference of Rs. 5,41,000/- (Rs.46,00,000 - 40,59,000) was added to the returned income [Refer: Pages 7 & 8 of the asst. order for AY 2010-11] On money received in F.Y.2010-11/ AY 2011-12: (1) Receipt of Rs. 16 lakhs by cash on 10.02.2010 [Flat No.CJ003] (2) Receipt of Rs. 16 lakhs by cash on 24.05.2010 [Flat No.CJ003] (3) Receipt of Rs. 16.06 lakhs by cash on 13.03.2010 [Flat No.CA202] (4) Receipt of Rs. 08.71 lakhs by cash [Flat No.CA002] 3.6 In substance, the AO had concluded the assessments for all the assessment years under dispute on the premise that the assessee was in receipt of 'on money' or additional amounts in cash in respect of certain flats which were part of the assessee's ongoing projects. For the elaborate findings recorded in the relevant impugned assessment orders, the AO made the additions of Rs. 43,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestioned vide questionnaire dated 27.02.2012 was put across to the assessee, same is reproduced below: 'Page Nos.39 to 43 of annexure -A2/CPH/10- 11 which is material seized in the form of sale agreement seized from factory premes (sic) premises of charu perfumery which is a sale agreement with Dr.Dhanu for flat No.CA-002 for consideration of Rs. 39,71,000/-. But as per sale deed, the amount recorded in the books was only Rs. 31,10,000/-. This shows that the balance was received by the assessee as on money.' The document enclosed. The assessee in his reply vide letter dated 05.03.2013 stated, 'the initial agreement executed for flat No.CA 002 had not reached its finality instead of flat No.002 the client purchased flat No.001. During the course of assessment procedure the assessee failed to furnish any cancellation agreement or any documentary evidence to prove that the earlier agreement was cancelled. Therefore, the difference between the sale agreement and the sale deed that is Rs. 39,71,000/- and Rs. 31,00,000/- that Rs. 8,71,000/- stands added in asst. year 2011- 12 as the flat was registered in financial year 2010-11.' 8. The assessing officer has brought on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs. 15,47,500/- alleged to have been received by me on 10.9.2005 from Shetty was incorrect as by then the land was not purchased. The assessee had not received any other cash payment as it was mentioned in the letter nor was there such proof in any material. Probably the proposal had come by looking at a tentative time schedule in which it was written as received 10=00 - 15.1.08. Received 10=00 - 26.1.08; received 15=00 - 5.2.08 and so on. These figures do not in any way give any idea that they were receipt of money. Further from the above noting it cannot be inferred that 10 means 10 lakhs and 15 means 15 lakhs. There was no basis for such ad-hoc assumptions. In fact, without admitting but only for the purpose of argument, if it is taken to be so and considering that the proposal by the department is correct, even then it would be seen that by 16.2.2008, Mr Shetty is said to have paid 43 lakhs whereas per the department interpretation of the tentative schedule the amount due by 28.2.2008 would be only 32 lakhs and no person would pay such high amount in advance. This very clearly shows that the noting do not represent amount and certainly not in lakhs. - however, conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, he paid Rs. 66 lakhs and entered into sale deed on 25.5.2012; - The AO had, in the impugned order, stated that the seized materials clearly shown that the assessee was in receipt of advance of Rs. 23 lakhs on 10.2.2010 against the flat CJ 003. Those documents were duly signed by both the parties and, therefore, considered the same as 'on money' receipts. Likewise, the 'on money of Rs. 23 lakhs' was also added with respect of Flat No.CJ 103 to the income returned for the AY 2010-11 on substantive basis and for the AY 2013-14 on protective basis [Flat Nos.CJ 003 & CJ 103]; - It was the case of the assessee that the signatures in the loose papers based on which additions made were not that of the buyers. The signatures in the loose sheets do not match with the signatures of the buyers. This fact could be verified from the registered sale deeds; - That the AO had treated a sum of Rs. 46,00,000/- as 'on money' received and added a sum of Rs. 5.41 lakhs as extra income of the assessee after setting off income declared at the time of search amounting to Rs. 40.59 lakhs. A.Y 2011-12: Addition of Rs. 56,77,000/-: - that the assessee had sold the following flats from Jasmine and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seized materials clearly shown that the assessee was in receipt of advance of Rs. 23 lakhs on 10.2.2010 against the flat CJ 003. Those documents were duly signed by both the parties and, therefore, considered the same as 'on money' receipts. Likewise, the 'on money of Rs. 23 lakhs' was also added with respect of Flat No.CJ 103 to the income returned for the AY 2010-11 on substantive basis and for the AY 2013-14 on protective basis [Flat Nos.CJ 003 & CJ 103]; - It was the case of the assessee that the signatures in the loose papers based on which additions made were not that of the buyers. The signatures in the loose sheets do not match with the signatures of the buyers. This fact could be verified from the registered sale deeds; and thus, the AO was wrong in treating the sum of Rs. 32 lakhs as 'on money' received and added to the income of the assesse; - That in regard to flat No.202 sold to C Sandeep, the first sale agreement was entered into on 20.3.2010, but, subsequently another sale agreement was entered into on 20.4.2010, as per which the sale consideration was agreed to Rs. 40 lakhs. However, the AO had not considered this agreement at all. As per the latest sale agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng at the conclusion by the authorities below. It was, further, stressed that on proper appreciation of facts and explanation offered, it was explicitly clear that the assessee had not received any 'on money' as alleged and, therefore, the question of addition(s) in any of the years under dispute does not arise. 8.1 On the other hand, the case of the assessing officer was based on materials seized/found during the course of search in the form of agreements of sale showing a higher rate for the flats over and above than what has been accounted for. Further, signed receipts from both the parties [the assessee as well as the clients] were found during the course of search. In addition, flat-wise noting showing the actual amounts received in respect of each flat - as detailed in the assessment orders - were found and seized. The claim of the assessee was, however, that the additional amounts were never received in cash and that the amounts actually received were accounted for, i.e., the value at which the flats were subsequently registered. It was, further, claimed by the assessee that lesser amounts as against what were earlier agreed upon were settled on account of delay in complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment by adding only the difference of Rs. 5,41,000/- [Rs.4600000 - 4059000] to the assessee's income. Thus, we are of the view that the assessee should not have any grievance with the stand of the AO in respect of the AY 2010- 11. 8.5 It is most appropriate to refer to the sworn statement of the assessee u/s 132(4) of the Act on 01.07.2010 wherein the assessee had specifically admitted to question No.7 that "Ans:....These receipts have not been recorded in the books of accounts of M/s. Charu Developers." For appreciation of facts, the relevant portion of the Sworn Statement is reproduced as under: "II (On page 5) The evidences found during the search were confronted to the assessee during the search proceedings and the assessee in his reply clearly admitted that he is resorting unaccounted transactions in sale of flats. The details are as below: During the course of search, page Nos.01 to 38 of Annexure A/S/CPH/10-11 seized at the officecum- factory of M/s. Charu Perfumery House on 18.06.2010 certain evidences for receipts of 'on money' on sale of flats in 'Charu Jasmine and 'Charu Amythest', the projects undertaken by M/s. Charu Developers. Mr Shantilal was examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings or before the first appellate authority. 8.7 The assessee had explicitly conceded and confessed in the sworn statement(supra) that those receipts in cash have not been recorded in the books of account or accounted for, Such being the case, the Assessing Officer and CIT(A) is justified in treating the same as 'on money' for sale of flats. 9. The learned AR has also contended that the only net profit element in undisclosed sale is to be taxed. This contention of the learned Counsel is devoid of any merit since the assessee is unable to prove any expenditure is incurred for the receipt of on money for the sale of the flats. Therefore, this ground raised by the assessee is rejected. 10. The learned AR further contended that the first appellate authority has exceeded jurisdiction in directing to bring to tax the on money received by the assessee in the assessment years 2012-2013 and 2013-2014 of flat No.CH304, Flat No.CJ-003, respectively. According to the learned Counsel for the assessee, the CIT(A) was concerned with the assessment years 2008-2009 to 2011-2012 and since the assessment years 2012-2013 and 2013-2014 was not considered / dealt by her, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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