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TMI Blog2018 (7) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the AO concerning project ‘Earth 12’ deserves to be sustained and for remaining amount the deletion made by the CIT(A) is confirmed. Addition towards on-money of project‘Earth Errita’ - Held that:- Assessee not explained as to what prompted him to make alleged wrong assertions before the survey team and repeated again before the DDIT (Inv.) after a gap of nearly three months on the factual aspect that six bungalows have already been booked at the time of survey as referred to in reply dated 25.07.2011 before the DDIT (Inv.) reproduced at page no.4 of the assessment order. The facts regarding disclosure of on-money, if any, concerning remaining 6 bungalows has not been examined by the CIT(A) to enable it to exclude the addition of ₹ 1.30 crores in respect of 2 bungalows. Issue regarding addition of ₹ 1.30 crores towards 2 bungalows requires to be remitted back to the file of the CIT(A) for de novo examination and for passing fresh order in accordance with law after giving reasonable opportunity to the assessee. We do not find any good reason to interfere with the order of the CIT(A) for accepting lower declaration by ₹ 4 Lakhs on sale of 4 bungalows for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed income was endorsed by the other two Directors of the assessee company namely Shri Darshan Manubhai Patel and Shital Patel. The admission of unaccounted money earned from two schemes comprised of ₹ 5.04 crore being on-money in cash from 12 flats of Earth 12 and ₹ 78 crore representing on-money arising towards 12 bungalows at scheme namely Earth Errita . Thus, an aggregate disclosure of ₹ 12.84 crore was made concerning AYs 2011-12 and 2012-13. Subsequent to the aforesaid admission of unaccounted income, the assessee submitted break up of disclosure vide letter dated 25.07.2011 before DDIT (Inv.) as reproduced in page nos. 3 4 of the assessment order. 3.1 The return filed by the assessee for AY 2012-13 (after survey) on 30.09.2012 was subjected to scrutiny assessment. The AO observed that the assessee offered additional income of ₹ 5.22 crore only against the admission of ₹ 12.84 crore in the survey proceedings. The AO accordingly sought explanation from the assessee for the variance in the admission made at the time of survey and post survey vis- -vis unaccounted income include in the return of income. After taking cognizance of the reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O thus resorted to addition of ₹ 42 Lakhs per flat in place of ₹ 35 Lakhs offered towards 8 flats. The difference @ ₹ 7 Lakhs per flat which worked out to ₹ 56 Lakhs per flat was considered for addition. The AO granted allowance of ₹ 28 Lakhs out of the aforesaid addition on the ground that ₹ 28 Lakhs have already been included as unaccounted income of the assessee in the previous AY 2011-12 where four flats have been shown to be sold by the assessee. Thus, remaining ₹ 28 Lakhs towards four flats shown to be sold during the year was added to the unaccounted income already disclosed by the assessee. The AO further did not accept plea of the assessee that no unaccounted income was involved on sale of Flat No.101 in Earth 12 , the AO thus added another ₹ 42 Lakhs towards on-money received but not disclosed in the return. Thus, an aggregate addition of ₹ 70 Lakhs was made by the AO on account of under-reporting of undisclosed income from scheme Earth 12 . 3.5 Adverting to the other scheme namely Earth Errita , it was observed by the AO that the assessee at the first instance in the course of survey, readily admitted involvemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted in the case on 27.4.2011 wherein some loose papers were found and impounded. The assessee filed return of income on 30.09.2012 declaring total income of ₹ 4,88,96,870/-. During the course of survey Shri Ketan Patel, Director of the assessee company, in his statement recorded u/s.133A disclosed unaccounted income of ₹ 12.84 crores on account of on-money received against sale of residential units in two schemes of the group i.e. 'Earth Errita and 'Earth 12' for the financial year 2010-11 and 2011-12. After going through the submission of the assessee, the AO made addition of ₹ 70 lakhs on the ground of on money on 'Earth-12 scheme' and ₹ 1.34,00,0007- on 'Earth Errita'. The AO mentioned that in his statement u/s. 131(1) of the Act, Shri Ketan R. Patel, Director of the assessee company, disclosed ₹ 5.04 crores towards on-money received at the average rate of ₹ 42 lacs per flat against booking of 12 flats at 'Earth-12'. The AO further held that the statement of the assessee was a cogent evidence wherein it was admitted that the assessee received on money of ₹ 42 lakhs on an average, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e event of booking of flats did not exist at all at the time of recording the statement. Thus, addition made by the AO was wholly unjustified and bad in law. The AO mechanically placed reliance on the statement of Director without having any other independent evidence on record. The AO did not conduct any investigation and addition was made on the basis of presumption only. The contents of the assessment order, relevant extract of the statement of the Director of the assessee company and submission of the appellant have been examined. It was an undisputed fact that the statement recorded during the course of survey on 27.4.2011 was rectified and clarified on the issue of sale of number of flats and the amount of on-money received for each of the flats in the proceedings before the DDIT(Inv.) and the AO during the assessment proceedings. The AO did not gather any material on record to controvert the submission of the assessee. The statement of Shri K.R. Patel recorded during the course of survey was apparently incoherent and contains contradictory information regarding the element of receipt of on money on sale of flats on different dates. The AO extracted meaning of the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,66,00,000/-. Thus, the facts and figures established that the consideration received through cheque for the sale of flat No.101 was within the range as in the case of other flats. Therefore, after taking into consideration all the facts and circumstances of the case, it is my considered opinion that the addition was made purely on the basis of presumptions. He did not give any material finding in the assessment order to rebut the explanation of the assessee. Therefore, the addition of ₹ 42 lacs is not sustainable. 4.2 Adverting to the action of the AO towards addition of ₹ 1,34,00,000/- attributable scheme Earth Errita , the CIT(A) concluded the issue in favour of the assessee. The CIT(A) firstly accepted the appeal of the assessee towards concession of ₹ 2 Lakhs each claimed to have been given in respect of two bungalows and therefore accepted the short declaration of ₹ 4 Lakhs in respect of 4 bungalows claimed to have been actually sold during AY 2012-13. As regards, remaining addition of ₹ 1.30 Crore, the CIT(A) accepted the plea that the aforesaid amount has been reflected in AY 2013-14 and therefore, does not warrant any add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the form of I T return for A.Y. 2013-14. It was also submitted before the AO that as on 31.3.2012, the work of the bungalows was in progress / stock and none of the bungalows was sold. However, income on account of on money which was received for booking of four bungalows was disclosed on receipt basis. He further submitted the reason for less receipt of on money of ₹ 4 lakhs in respect of two bungalows out of the 4 bungalows booked during the year. He explained that concession of ₹ 3 lakhs was given to Shri Vikram Vinit Sood for bungalow No.2 for the reason that his family also purchased one more bungalow No.3 simultaneously. Similarly, short payment of on money was received to the extent of ₹ 1 lakh for bungalow No,4 because there were some minor construction related problems in the bungalow and the amount was highly reasonable. The contents of the assessment order, relevant extract of the statement of the Director of the assessee company and submission of the appellant have been perused. It was an undisputed fact that the statement recorded during the course of survey on 27.4.2011 was rectified and clarified on the issue of sale of number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR submitted that the cash component was bound to be involved in 2013 booking as admittedly built up area of Flat No. 101 was higher than the built up area or Flat No. 304, which was booked for sale in January 2011 at an aggregate price of ₹ 1.77 crore. Therefore, the CIT(A) was not justified in deleting on money component of ₹ 42 Lakhs towards alleged cancellation of Flat No. 101. The learned DR thus submitted that the action of the AO towards addition of ₹ 70 Lakhs, which was based on the statement of the Director after due application of mind and its subsequent confirmation before the DDIT(Inv.) after a gap of three months cannot be faulted. 5.2 As regard addition of ₹ 1.34 crores towards scheme Earth Errita , the learned DR submitted that the CIT(A) has summarily relied upon the pleadings of the assessee without any reasonable basis. The learned DR contended that the assessee himself conceded before the DDIT (Inv.) after a gap of three months from the date of survey that out of 12 bungalows, 6 bungalows have been booked in FY 2011 12. The assessee has not offered any undisclosed income attributable to Earth Errita project in preceding AY 2011-12 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for other flats and therefore, the quantum of disclosure made in the statement under s. 133A is not sacrosanct. In this background, the probative value of the statement and re-statement thereof before DDIT(Inv.) is thus undeniable. Only matter for consideration is the extent of quantification of understatement of income. The Revenue, on the other hand, contends that the assessee is precluded from taking such plea in view of the admission made at the first instance as well as its subsequent reiteration before the DDIT(Inv.). The Revenue also challenges the non-inclusion of on-money of ₹ 42 Lakhs in respect of one flat (Flat No.101) for which the booking is claimed to have been cancelled and subsequent booking did not fetch any on-money. 7. A perusal of the facts and the circumstances of the case clearly suggests that what is in question is the quantum of clandestine income and not the existence of clandestine income itself. Thus, the presence of on-money involved on sale of residential units remains undisputed. What is disputed is quantum thereof. In this backdrop, a perusal of the statement given by the key Director in consultation with other two Directors at para 3.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A). It is a matter of record that flat sold earlier at a lower price was cancelled which was re-booked in the subsequent financial year at a price which is close to the price of the other flats. Thus, the preponderance of probabilities weigh in favour of the assessee and thus, action of the CIT(A) in this regard does not call for interference. In conclusion, the addition of ₹ 28 Lakhs out of ₹ 70 Lakhs by the AO concerning project Earth 12 deserves to be sustained and for remaining amount the deletion made by the CIT(A) is confirmed. 7.1 We shall now advert to the addition of ₹ 1.34 crores towards on-money of project Earth Errita . The assessee has included on money of ₹ 2.56 crore for 4 bungalows only as against initial admission before DDIT (Inv.) for booking of 6 bungalows. In this regard, the assessee has sought to explain that on-money towards remaining two bungalows have been offered in AY 2013-14. If this is so, we do not see any infirmity in the order of CIT(A) granting relief. However, in the same vain, we observe that the CIT(A) has lost sight of the pertinent aspect that the assessee was also expected to account for on-money towards re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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