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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 ..... r." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs. 1.34 crores being on-money received by the company from the sale of 2 bungalows as admitted by the director in his statement recorded u/s.133A on 27.04.2011." 3. Briefly stated, the assessee is engaged in construction business i.e. construction and development of residential projects. A survey under s.133A of the Act was conducted at the business premise of the assessee company on 27.04.2011. As noted by the AO during the course of survey, certain loose papers were found and impounded. It was found that assessee company earned substantial unaccounted income from sale of residential units in two schemes implemented by the group namely 'Earth 12' and 'Earth Errita'. The AO observed that the Director of the assessee Shri Ketan Patel who is also main person of the group conceded before the Income Tax Authorities an unaccounted income of Rs. 12.84 crores by way of on-money received against sale of residential units in two projects of the group as noted above for the FYs 2010-11 & 2011-12 by way of statement under s.133A of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plea raised by the assessee for under-reporting of unaccounted income arising from 'Earth 12'. The AO firstly noted that the admission of the key Director Mr. Ketan Patel (in consultation with other two Directors) was express and categorical whereby it was admitted that on-money of Rs. 42 Lakhs per flat represents 'average rate' of on-money received. At this juncture, for the sake of convenience it will be apt to reproduce the text of the admission made by the Director in this regard: "Previously we were taking on money in cash to the tune of Rs. 35 lakhs, while last flats were sold at a much higher receipt of on money, thus we have earned on money in cash to the extent of 42 lacs per flats at the average rate, which comes down to the total of Rs. 5 crores and Rs. 4 lacs. We have sold flats in Earth-12 Scheme at around 1.75 lacs, recently, while the same was sold at Rs. 1.6 crores in the initial stage, while we have shown receipt of only 1.25 crores to Rs. 1.3 crores in our books." 3.4 The AO thus did not find merit in the plea of the assessee that unaccounted income of Rs. 35 Lakhs only per flat was earned towards eight flats. The AO thus resorted to addition of Rs. 42 Lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) observed that rate of on-money adopted by the AO at Rs. 42 Lakhs per flat was not correct in the light of the fact that the flats were booked and sold after the date of survey where the statement of Director was recorded. The CIT(A) observed that the on money of Rs. 42 Lakhs was not relevant as the event of booking of flat did not exist at all at the time of recording of statement. The CIT(A) further assailed the action of the AO on the ground that the addition is based solely on the statement of the Director without any other independent evidence on record. The CIT(A) inter alia observed that statement of the Director was incoherent and thus cannot form the basis for addition. The CIT(A) accordingly deleted the addition of Rs. 70 Lakhs attributable to scheme 'Earth 12'. The relevant para dealing with the issue by the CIT(A) reads as under: "4. The first ground of appeal was related to addition on account of difference between the total on money worked out by the AO and the appellant. The facts, in brief, are that survey was conducted 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 declarin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 25.7.2011 the assessee submitted before the DDIT that there was no disclosure on account of Earth Errita for the A.Y. 2011-12. Thus, there was no need to include the same as income for the A.Y. 2011-12. Booking of Flat No.201 was cancelled on 7.3.2011 and final booking was made on 30.7.2013 for Rs. 1,66,10,0007- including receipt of on money of Rs. 35,000/- to Shri Ramesh and Suchita Deora. Similarly, flat No.203, 204 and 303 were booked first time in the month of September and October 2011 each for Rs. 1,60,00,000/-, Rs. 1,58,00,000/- and Rs. 1,65,00,000/- respectively. On money was received of Rs. 35 lacs on each flat. Therefore, the rate of on money adopted by the AO of Rs. 42 lacs per flat was not correct in the light of the fact that the flats were booked and sold after the date of survey wherein the statement of the director was recorded. The presumption of receipt of on money of Rs. 42 lacs per flat was not relevant as the 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 inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion income for the F.Y. 2013-14. He further clarified that the element of on money was not involved in this transaction. A perusal of sale consideration of flats in the scheme of 'Earth-12' revealed that the sale consideration of most of the flats including the element of on money was varied between the range of 1,48,00,000/- to Rs. 1,65,00,000/-. The AO did not give any factual finding to justify his presumption that even in a case wherein the consideration shown as construction income of Rs. 1,55,00,000/- was comparable to the sale consideration of other flats wherein the maximum income from construction was shown between the range of Rs. 1,10,00,000/- to Rs. 1,35,00,000/-. As a matter of fact, the total consideration including the element of on money for the flats which were considered by the AO as comparable cases varied from Rs. 1,35,00,000/- to Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of the six bungalows. The on money of Rs. 65 lacs is received an cash. Thus, after discussing the issue with Shital and Darshan 1 hereby disclose Rs. 3.90 crores for current F.Y. 1 further disclose Rs. 3.90 crores for the remaining 6 bungalows. I undertake to offer full sale consideration in the books. Thus in all I disclose Rs. 12.84 crores. The taxes will be paid in the year in which the sale is executed. The above disclosure is over and above my regular income. The above disclosure is made with our consent." For other two bungalows, on money of Rs. 1.30 crores was shown in the books of accounts as well as in the audited balancesheet and income from on money on these two bungalows was offered as income in the A.Y. 2013-H.Relevent evidences was also submitted to the A O, 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 Rs. 4 lakhs in respect of two b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... average rate of Rs. 42 Lakhs has been admitted per flat towards on-money. The assessee is wrongly attempting to twist the facts and seeks claim of Rs. 35 Lakhs towards on-money in respect of 8 flats as against self-admission of average amount of Rs. 42 Lakhs in clear terms. It was pointed out that the action of the assessee has resulted in under-reporting of Rs. 28 Lakhs towards 4 flats in the AY 2011-12 and another Rs. 28 Lakhs towards other 4 flats in the AY 2012-13 in question. The learned DR thereafter submitted that the CIT(A) was not justified in accepting the plea advanced on behalf of the assessee towards cancellation of Flat No. 101 and re-booking of the flat at full price in FY 2013-14 at Rs. 1,55,00,000/-. The learned 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 Rs. 1.77 crore. Therefore, the CIT(A) was not justified in deleting on money component of Rs. 42 Lakhs towards alleged cancellation of Flat No. 101. The learned DR thus submitted that the action of the AO towards addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded Rs. 2.66 crores towards undisclosed income from 'Earth 12'. The AO disputed the correctness of the disclosure and added an amount to Rs. 70 Lakhs for which facts have been elaborately dealt with in preceding paras. The short question that arises for determination is whether average rate of Rs. 42 Lakhs is required to be adopted in place of Rs. 35 Lakhs adopted by the assessee in respect of certain flats. It is the case of the assessee that as per the details of disclosure provided before the DDIT (Inv.) on 25th July, 2011, it was clearly pointed out in the narration that Rs. 35 Lakhs have been received towards on-money in cash for some flats and Rs. 42 Lakhs per flat 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 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dilute at a later stage unilaterally without corroboration. We do not find any good reason in such action. The statement made is categorical based on a personal knowledge of the assessee. A departure therefrom for the purpose of quantification cannot be deciphered cursorily. Therefore, addition of Rs. 28 Lakhs (towards understatement of on-money of 4 flats) out of Rs. 70 Lakhs on this score requires to be confirmed and the order of the CIT(A) requires to be set aside to this extent. The action of the CIT(A) however appears justified with respect to deletion of addition to the extent of Rs. 42 Lakhs for the reasons given by the 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 Rs. 28 Lakhs out of Rs. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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