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TMI Blog2018 (12) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnish the details to the Commissioner, though not within the stipulated time but atleast before the completion of assessment of the assessee. In the instant case, no details were furnished to indicate that the assessee has forwarded Form 15G to the CIT. Under these circumstances, we are of the view that the assessee committed an error in making the payment without deducting the tax at source and consequently the provisions of section 40(a)(ia) are applicable. The case of the assessee is that in the case of estimate of income after rejecting the book results, there cannot be any independent disallowance u/s 40(a)(ia). This issue was discussed in K VENKATARAJU VERSUS ADDL COMMISSIONER OF INCOME TAX [2013 (11) TMI 409 - ITAT VISAKHAPATNAM] observed that a disallowance is a technical disallowance and more precisely deferment of allowance, which is linked with the compliance of TDS provisions and hence even if the business income is estimated disallowance can be made u/s 40(a)(ia) independently. A.O. has correctly applied the provisions of section 40(a)(ia). However, if the assessee is able to prove that the declaration in Form 15G was submitted before the CIT before completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- are not found in the accounts available in your system. What is your explanation? Ans. The note book shown by you relates to the receipts of advances made from the buyers of the plots during the FY 2011-12 2012-13. I admit that the amounts referred above are not recorded in our books. In view of these omissions and also in the case of B. Mohan Reddy, N. Vinodh Kumar Reddy and other buyers and any other discrepancies, I offer a sum of ₹ 50,00,000/- as our firms undisclosed income for the FY 2011-12 relevant to ATY 2012-13 and above the income already declared in the return of income filed and another sum of ₹ 1,00,00,000/- as our firms undisclosed income for the FY 2012-13 relevant to A.Y. 2013-14. I promise to pay the taxes on these income declared now and to file revised return for the A.Y. 2012-13 and regular income for the A.Y. 2013-14. 3. During the course of assessment, the Assessing Officer noticed that certain receipts have not passed through bill books and hence not shown in the ledger accounts. As per the Development Agreement, entered into with the land owners, the builder is entitled to 17 flats. However, as per the information available from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he full consideration received in that year was only to the tune of ₹ 2,60,83,000/- and in the subsequent year ie., A.Y. 2014-15 the total sale consideration was ₹ 86,63,893/-. Thus, the total receipts for the project are ₹ 5,34,02,893/-. It was contended that against such total receipts, the assessee could not have earned additional income of ₹ 1.50 Crs since the assessee is merely a developer. To arrive at the cost of construction assessee placed before the Assessing Officer a valuation report of the registered valuer. It was thus contended that the estimated profit declared by the assessee is reasonable. 7. In respect of the previous year relevant to the A.Y. 2012-2013, the gross receipts of the assessee from three ventures were as under: 1. Sai Kamalakar Residency - ₹ 1,22,00,000/- 2. Sai Durga Residency - ₹ 93,10,000/- 3. Sai Soudha Towers - ₹ 1,86,56,000/- Total - ₹ 4,01,66,000/- 08. The main contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence there is no suppression in admission of gross bills. The A.O. on the other hand observed that the consideration from the buyers was received by the assessee and all the expenditure was incurred by the said date and the assessee could not produce any cash receipt book in support of its claim that the cash was received during the period 1.12.2012 to 31.03.2013 for additional work done. A.O. observed that the assessee-firm did not produce any evidence for expenditure. He therefore determined an amount of ₹ 1,32,33,000/- as unexplained receipts, received before the registration of the flats. 12. The A.O also disallowed a sum of ₹ 21,33,022/- referable to cash expenditure exceeding ₹ 20,000/-, by invoking the provisions of section 40A(3) of the Act. 13. Aggrieved, assessee preferred appeals before the CIT (A) wherein it was contended that actual undisclosed turnover is ₹ 34,84,000/- only referable to Sai Soudha Towers in respect of the previous year relevantto the A.Y. 2012-13. It was also contended that the impounded material itself indicate that a sum of ₹ 26,75,000/- is the amount received in the subsequent years. Since the total flat cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord wherein the cost of construction was estimated and on this the A.O. has not made any comments and there was also no reference to DVO. It was also stated that the profit made from this venture works out to 3.72% of the turnover whereas the assessee had taken into consideration additional turnover and admitted income at 8% and filed the return of income which is reasonable. 15. With regard to the disallowance made u/s 40(a)(ia) of the Act, Learned Counsel for the Assessee submitted that in order to make the payment to the parties without deduction of tax at source, the assessee has to mandatorily obtain a declaration in Form 15G but it is notnecessary for the assessee to show that Form 15G is submitted to the Commissioner within the stipulated time. In this regard, he relied upon the decision of the ITAT Delhi Bench in the case of Vijaya Bank vs. ITO (31 ITR (Trib.) 427). It was thus contended that both the disallowances made by the A.O. are bad in law. 16. Ld. CIT(A) observed that the Assessing Officer ought to have taken into consideration the original return of income and further observed that the notings found in the impounded material are rough calculations made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013-14, the contention of the Revenue is that the assessee having admitted unaccounted gross receipts there cannot be any estimate of income and the A.O. wasjustified in treating the same as additional income, which was not passed through the books of account and in the absence of proof that some additional expenditure was incurred, Ld. CIT(A) erred in deleting the addition. It was further contended that the Ld. CIT(A) estimated the income on one hand and sustained the addition u/s 40A(3) of the Act, which is not in accordance with law. 20. Learned Counsel appearing on behalf of the assessee made detailed submissions challenging the addition made towards excess sale proceeds received by the assessee for the years under consideration. By submitting that in the case of estimation of income even if there is any receipt which is not recorded in the books of account the same has to be taken as forming part of the total turnover for the purpose of estimating the income and it cannot be separately added. 21. Learned Departmental Representative strongly relied upon the orders passed by the Assessing Officer and contended that the CIT (A) was not justified in holding that separate add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat though the variance in turnover, as indicated in the impounded material, is with regard to one venture only i.e., Sai Soudha Towers but the appellant had made higher estimate of 8% in respect of the turnover related to other ventures also and hence separate addition cannot be made in the absence of any allegation of overall suppression of turnover. It was also contended that in the remand report, the Assessing Officer has not disputed the total sale value of the flats and hence separate addition is not maintainable. 24. With regard to the issue u/s 40(a)(ia) of the Act, it was contended that though the assessee has not deducted tax at source on the interest payments, provisions of section 40(a)(ia) of the Act cannot be applied since the assessee obtained Form 15G and there is no obligation on the part of the assessee to file the same before the CIT within the stipulated time. With regard to addition made in the A.Y. 2013-14, the assessee advanced the same argument by contending that in the remand report the A.O. having not disputed the total turnover and in fact the assessee having declared the total turnover, which is spread over three years, separate addition cannot be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisationof excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. (Emphasis Supplied) We are, therefore, of the opinion that no question of law which requires to be referred to this court arises out of the Tribunal's appellate order. The order of the Tribunal under section 256(1) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which read as under: 10. So far as merit of addition is concerned, we found that the assessing officer has added the entire amount of sale proceeds of plots received in cash in the income of the assessee. Honble jurisdictional High Court in case of CIT v. Balchand Ajit Kumar (2003) 263 ITR 610 (MP), held that entire amount of sale proceeds cannot be regarded as profit of the assessee, the net profit rate had to be adopted for the purpose of addition. Accordingly, Honble Madhya Pradesh High Court confirmed the action of the Tribunal for conclusion that entire sale proceeds could not be included in the total income of the assessee and only the amount of net profit should be added. Similarly, Honble Gujarat High Court in the case of CIT v. Saint Synthetics Mill (2010) 3261TR 410 (Guj), held that addition was to be made not in respect of sale consideration but only in respect of the profits. In case of CIT v. President Industries (2002) 258 ITR 654 (Guj), Honble Gujarat High Court held that where unaccounted sales were revealed during course of survey, entire sale proceeds cannot be added as undisclosed income of the assessee, but addition could only be to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is not satisfied about the correctness and completeness of the accounts of assessee, the same are liable to be rejected. Under these circumstances estimation of profit is to be made in respect of sale proceeds not accounted for. Accordingly, profit element in the unaccounted sale proceeds received in cash is to be brought to tax net. Keeping in view the proposition laid down by the jurisdictional High Court as well as other High Courts as discussed hereinabove and totality of facts and circumstances of the case, more particularly, keeping in view the nature of the assessees business of purchase and sale of real estate and flats, we direct the assessing officerto take 25 per cent of sale proceeds received in cash as assessees income rather than making addition of entire amount of sale proceeds received in cash. We direct accordingly. DCII Vs M/s. Hyderabad House Pvt. Ltd. - I.T.A No. 727/Hyd/2010 - Date of Pronouncement 29.02.2012: Thus, from the decisions of Hon'ble ITA T, Hyderabad W Bench, as above, it is evident that the undisclosed income on suppressed turnover cannot be based on the gross profit rate adopted for the year concerned. In the appeal under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only the profit element embedded in such transaction and not the entire turnover. Therefore, this Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed. DCIT Vs Havc Systems (P) Ltd. - 006 ITR (Trib) 0346- (Bangalore-Trib): In such circumstances, the Commissioner (Appeals) is justified in accepting the alternate contention advanced before him that if at all there could be a case of turnover suppression, the profit element alone could be taxed. In the given facts and circumstances of the case, the Commissioner (Appeals) has rightly estimated the profit element and limited the quantum addition. We do not find much force in the arguments advanced by the revenue. (Para. 11) Jaiprakash H.Pande, Pune Vs DC IT -ITA No. 759/PN/10-0TAT-Pune)-Date of pronouncement 15.12.2011: Nevertheless, in so far as action of the Commissioner of Income-tax (Appeals) in restricting the addition to the amount of gross profit earned on understated sales is concerned, herein also, we find no infirmity in the same. The Commissioner of Income-tax (Appeals) has fairly analysed that if the Assessing Officer's proposition of adding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real income of the assessee. We are of the view, that in the facts and circumstances of the case as laid out above, the learned CIT(A) has followed the correct and reasonable approach in estimating the profit on the suppressed turnover worked out by the AO which has not been questioned by the assessee. (Para. 5.3.3) (Emphasis Supplied). 27. It was also contended that profit declared by the assessee originally was much less whereas in the revised return the assessee declared gross profit @ 8% on the gross receipts and in fact the Ld. CIT(A) has rightly accepted the revised return since even the Assessing Officer has admitted that the assessee has offered income on estimated basis but added additional amount merely on the ground that such amount did not pass through the books of account. 28. With regard to the provisions of section 40(a)(ia) also he advanced independent arguments based on the decision of the Hon ble A.P. High Court in the case of Indwell Constructions vs. CIT (232 ITR 776) to submit that once income is estimated the embargo placed in section 40(a)(ia) is also deemed to have been taken into account and hence separate disallowance is not warranted. 29. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its wisdom thought it fit to enforce deduction of tax at source by the payer who is an income tax assessee and in exceptional circumstances, where the recipients are not income tax assessees, a procedure is prescribed whereby the parties have to state in Form 15G that the income earned by them does not exceed maximum limit which is not chargeable to income tax. The declarant has to furnish PAN, complete address and other details. As a matter of abundant caution it also prescribed the procedure to be followed by the assessee who has to give the unique identification number and other details and the same has to be forwarded to the Commissioner. This is to ensure that the Departmental Authorities can cross verify as to whether the payees are income tax assessee or not. In otherwords, it is mandatory on the part of the assessee to furnish the details to the Commissioner, though not within the stipulated time but atleast before the completion of assessment of the assessee. In the instant case, no details were furnished to indicate that the assessee has forwarded Form 15G to the CIT. Under these circumstances, we are of the view that the assessee committed an error in making the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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