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TMI Blog2020 (1) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. There is sufficient evidence in the case of Shri Jayantilal Mulchand Patel in the form of documents and statement u/s.132(4) of the I.T.Act which confirm that the transactions in the property as true for determining his total income. Even the presumption of correctness is attached with the statement so recorded u/s.132(1)(a) of the I.T.Act which has not been rebutted or uprooted by the assessee. Revenue/Department has also failed to prove that the said Shri Jayantilal Mulchand Patel acted as a broker by leading any independent evidence, and failed to recover any documents depicting the transactions as such. The statement and affidavit on Shri Jayantilal Mulchand Patel has been used by the Revenue without affording an opportunity of cross-examination to the assessee. CIT(A) had rightly concluded that without deciding the evidentry value of the documents seized from the said Shri Jayantilal Mulchand Patel and statement or affidavit for examining the case from a different angle. CIT(A) rightly concluded that in the totality of all the facts and circumstances, the amounts depicted in the diary even if taken to be true, the net amount of income from on money receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [2] On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. [3] It is, therefore, prayed that the order of the CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. 3. Brief facts of the case are that the assessee a partnership firm is engaged in the construction business. A search action u/s.132 of the Act was carried out in the case of partners of Anupam Group. The assessee s business office premises and site office were also covered under survey action u/s.133A of the I.T.Act, therefore, assessment u/s.143(3) was completed by the AO in this case, thereby determining the total income at ₹ 9,02,77,106/- after making addition of ₹ 6,02,77,106/- on account of business income receipt of on money . 4. Being aggrieved by the order of the AO, the assessee preferred appeal before the ld.CIT(A), and ld.CIT(A) deleted the entire additions made by the AO by holding that AO made additions taking 100% purported on-money whereas while relying upon the higher judicial authorities including the Hon'ble Gujarat High Court wherein it was held the estimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s statement has stated that coding of numerical is done by removing certain signs which have been details in his statement and assessee himself has admitted the total amount found during the survey was ₹ 3 crores in the diary as on money from sale of shops at Anupam Square and without deduction. 6. On the other hand, the ld.AR relied upon by the orders passed by the ld.CIT(A) and reiterated the same arguments as was raised by him before the ld.CIT(A). The ld.AR also relied upon the written submissions filed before ld.CIT(A) which are contained in para no.6 of its order and the same is reproduced below: 6. During the appellate proceedings, the assessee submitted the following written submission and facts of the case according to it: 1. Brief facts of the case:: The appellant is a partnership firm has carried out project for Anupatn Square at Althan, Surat. As stated by The Au a survey action was carried out at business premises of the firm on 27.12.2013. In the case of Shri Ashok S. Rai a search u/s 132 was conducted by investigation wing of IT Department. The appellant firm has disclosed on money Profit of ₹ 3,00,00,000/- in survey u/s 133A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle question was asked or any evidence shown to the partners of the firm in survey proceedings. Ld. ACIT has also not recorded his satisfaction w.r.t. evidences found from Shri Jayanti Mulchand Patel. A disclosure made in survey was shown by the appellant firm in it's Return of Income-for A.Y.2013-14. The same is also accepted by the ACIT after making deep scrutiny of the case. He stated, in para 1 of assessment order that a notice u/s 143(2) was issued on 05.09.2013. In the said para he has also stated that ROI was filed on 13.09.2013. There is no notice u/s 143(2), after filing of return by the appellant. If is a departmental practice based on CBDT circular No. 06/2014 dated 02.09.2014 that when disclosure is fully shown in the return and payment of taxes are made, such cases should not be taken for scrutiny assessment. Considering all these facts assessment made by the AO u/s 143(3) r.w.s. 153C) is illegal and needs to be quashed. 3. Ground No. 2:: Violation of principal of natural justice:: The appellant has submitted, in assessment proceedings that Mr. Jayanti Mulchand Patel is not their broker but was only one of the customers in respect of office No.5 in Anupam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al facts regarding the case 2 to 7 4 to 4.3 Fact regarding survey at residence of Jayanti Mulchand Patel on 28.12.2012, his statement u/s 132(4), ann. BS- 12, BS-1, BS-6, code No. in dairy found from him etc. were made basis for addition in appellant's case without offering cross examination. 7 8 5 Affidavit of J.M. Patel is self serving cannot be relied upon without offering adequate opportunity. The appellant has rebutted contention of J.M. Patel through reply dated 16.02.2015 to the ACIT in assessment proceedings. Shri J.M. Patel himself-has retracted his version made in affidavit. 8 6 A small dairy impounded in survey from business premises of appellant. Total amount, as per dairy is offered in return for A.Y.2013-14 and ACIT has accepted the same. 9 to 11 7(a) to (e) These are the details of sales submitted by the appellant along-with Name, address, PAN, and Copy of sale deed. The AO has also issued summons to all buyers. None ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anupam Organizer. He has also stated that Shri Jayanti id Patel has received 1% commission from Anupam Squere. 4.3. The ACIT has relied on several loose papers namely page no. -73-, back of page no. -73- and -74- of Annexure BS-12 seized from the residence of Jayanti Mulchand Patel. He stated that these pages are related to the appellant. He has reproduced scan copy of these loose papers on page -3- of assessment order. In fact, the said documents cannot relied due to following reasons- (i) It has neither found from the business premises of the appellant firm in survey nor found from the residential premises of the partners of the appellant's firm during search. (ii) There is no indication of name, address, receipts, payment etc. on the said loose papers. (iii) It has not been prepared by the appellant firm or any of his partners. It has not been written by the partners of the firm or his employee. (iv) Shri Jayanti Mulchand Patel is not a broker for the appellant firm, but, only one of the customers who purchased show room No. 6 on 4th floor of Anupam Square building. The appellant has not paid any brokerage to him. Lr. ACIT has not assessed any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than what is fixed to pay and i.e. also towards cash. f) In calculation of 2nd-8, brokerage 30,000/- is there. The same is also nowhere appearing in given table. If if is a brokerage figure than version of Jayanti Mulchand Patel that he is getting I % brokerage is false. g) In the given table at item no. 3, as per AO amount receivable is 45,118=98 and amount received is 75460=00, which is not possible because no buyer would make more payment than what is fixed to pay and i.e. also towards cash. h) In the given table, at item no. 4, details of show room no. 6,7 8 is appearing. If AO's finding are considered than cost of it should be 54,56,000, 54,87,800 25,41,600 respectively. The same is nowhere matched with the numeric figures mentioned in the table. Further, total amount receivable and received are also mismatched. j) In the given table, at item no. 5th, two numeric figures 7000=00 and 18000=00 are mentioned. And alphabetic words OK is also appearing. As per AO, the sale consideration of the said show room should be 25,00,000/- including On-money. k) In calculation of 2nd-8, 25,41,600/- and 2,04,900/- are not found in the table. There a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also hard to believe that no prudent man can carry out risk and liability of huge cash amount on his own solders for merger income of 1%. In fact, the appellant firm has not received any cash or chaque payment from Mr. Jayanti Mulchand Patel.; The partners of the appellant firm are well experienced in the line of business and had sold all units in their project of Anupam Square to the respective buyers. The ACIT himself has given list of such buyers, list no. 7, Page 9,10 11 of his assessment order. None of the buyer has admitted the fact that they purchased their shop or office or show room through shri Jayanti Mulchand Patel. 4.7 (i)As stated by AO Mr. Jayanti Mulchand Patel was summonsed u/s. 131 of the I.T Act during the course of assessment proceedings. It is not stated that in whose case, he has been summonsed. I am filing herewith a copy of AC's show cause notice dated 06.02.2015. In para 3, page 6, he has stated that Mr. Jayanti Mulchand Patel was directed to give details regarding (a) his role in transaction with party,, (b) details of owner and sales value, (c) receipt of cash by Anupam Organizer i.e. name and address of the person from whom cash is received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r found from the premises of Mr. J. M. Patel. It is pertain note here that the assessment was made u/s 143(3) of the Act and not u/s. 153BC r.w.s. 153A of the I.T Act. Therefore, arithmetic calculation made by him is not binding upon the appellant firm. There is no corroborative evidence record that the appellant firm and/or its partner have received ₹ 3,44,19,004/- including cash payment of ₹ 1,98,03,894/-. Secondly, in the given table it appears that the AO has presumed rate per sq. ft. at ₹ 3,932/- and 4,124/- on 2nd floor and ₹ 4,401/- on 4th floor. Likewise on 3rd floor, he took different rates of 3,328 and 3,708/-, which is not and never possible. In actual practice also the rates on higher floors are lower than the rates on lower floor. On the basis of numeric figures, he has tried, to work out cash and chaque portion in para 6 on Page 12 of his assessment order. He himself has presumed chaque and cash portion in the ration of 20:80 for ground floor shops for which there is no evidence on record. Likewise, for 1st floor, he presumed chaque and cash proportion in 35:65 ratio for which also there is no evidence with him. Likewise, on other floor, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets belonging to the firm were found from the premises of the firm. Merely because, there were certain interpolations on a piece of paper/s, being part of the ceased diary, the same could not be held to be the unexplained investment or income earned by the assessee firm or its partners or the concern in which they held interest. Thus, invocation of Section: 69A is arbitrary and illegal. 6. Addition made by the AO for ₹ 6,02,77,106/- is also not justifiable due to following reasons :: In para 8 9, from page no. 17 to 20, the AO has discussed the fact of survey at the business premises of the appellant firm in which the firm has declared On-Money profit, in order to co-operate with the department. Though the AO was not agreement in such disclosure on film-icy ground, but ultimately, he has accepted the same, that can be seen from para 11 of his assessment order. In this para, he has given computation of income under the head Business. While computing such income, he has deducted ₹ 3 crores being net profit earned on receipt of On-Money declared in survey. Thus, the stand of the AO'is contradictory. On one hand, he is disputing and doubting disclosure made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and I have also consulted my partners who are in-charge for the respective projects and they have also confirmed the same. 19. As per the above diaries the total profit on on-money receipts indicated by you comes to ₹ 12 croresin seven projects executed by you and your group concerns . As you have already clarified vide your answer to question no. 17 that these receipts were not entered in to the regular books of accounts nor you paid any advance tax on these receipts as on date why the same should not be considered as your unaccounted profit on the above mentioned projects, please clarify? Ans. As J already agreed in my answer to questing no. 17, these amounts were not entered in my books of accounts nor I paid any tax on these amounts . Hence, I voluntarily offer the amounts totaling to ₹ 12 crores (twelve crores rupees only) along with my partners in respective firms as our unaccounted net income and on the same I and my partners would not claim any expenses thereof and we agree to pay the due taxes to the government in the financial year 2012-13 relevant to A.Y. 2013-14. In confirmation to this myself and my partners will abide this statement and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Bench I.T(SS).A.Nos. I l l , 112 189/lnd/2012 A.Ys. : 2006-07, 2007-08 2008-09 k. Jay Builders VS. ACIT Tax Appeal No. 255 of 2012 [Guj-HC]: In this case, the honorable jurisdictional HC has held that where Tribunal accepted the contentions of the assessee that not the entire ON-MONEY received but only the profit element could be taxed in its hands limited the addition to 15% of the on - money receipts, no further examination at the end of the assessee is called for. Very recent judgments of Hon'ble Ahmedabad ITAT (full judgment) is attached for your perusal and reference. Considering above submission and settled legal position, your judicial honor is : prayed to allow appellant's appeal and oblige. 7. We have heard Counsels of both the parties and we have perused the material placed on record as well as the judgment cited by respective parties. Before we decide the merits of this ground, it is necessary to evaluate the order passed by the ld.CIT(A). The ld.CIT(A) has dealt with this ground in para no.5 to 8. The operative portion is contained in para no.8.3 to 8.3.1 and the same is reproduced below: 8.3 Before, I venture into deciding the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were duly disclosed in the returns filed subsequently in all the cases. Except in the case of the appellant firm, the incomes as disclosed for the firms/projects have been accepted in toto by the Assessing Officer (who without making any addition to the returned income has only changed the head of income to income from other sources, citing lack of substantive evidence in support of receipt of such 'on-money') without a rupee O of addition on account of on-money . 8.3.1 Having discussed the background, and after considering all the material facts, the following pertinent observations are made: a) I agree that there is sufficient evidence in the case of Shri Jayanatilal Mulchand Patel, in the form of documents and his statement u/s. 132(4), confirmed again by way of an affidavit; to hold the transactions in the property as true, for determining his total income. This is so because the documents were seized from him, presumption u/s. 132(4A) is also available in his case and his statement also goes against him. b) However, I also agree .with the appellant that in its case the onus on the department is much more, and clinching corroborative evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for each project/firm. The appellant and all the other six assesses have been consistent in their submission that these diaries represented income from 'on-money' of these-projects net of all expense. In such circumstances, It is hard to believe that the seventh diary (Bl- 6) would contain only part of the actual net income from 'on-money'. I would like to make the following pertinent observations in this regard: 1) The receipt of incomes depicted in the diary (BI-6) are from 22.07.2012 to 10.12.2012; 2) Page 73 of annexure BS-12, seized from residence of Shri Jayanatilal, which contain summary of all the purported transactions; has clearly been made between 26.08.2012 and 30.10.2012. This can be seen from the dates of cheques recorded. Looking to all these, even if the documents seized from Shri Jayantilal along with his statement, were taken to be evidence against the appellant (without prejudice to my not deciding this aspect) for argument sake; the net income must have come into the transactions of net income as accepted from the first statement itself during the course of survey and as depicted in diary BI-6. The AO has taken 100% of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the point, matter remanded for determination of year of taxability keeping in view the method of accounting followed by assesse It has been further held that The receipt of 'onmoney' is an objective fact. However, the income is a legal concept, which has to be arrived at after considering various other aspects such as: expenditure and the year of taxability. A businessman cannot be expected to know about all these matters. Such matters cannot be ignored in making assessment even if a confessionary statement is made. Therefore, after having fixed the quantum of 'on-money' the questions of computation of income and the year of taxability of such income remain open even in spite of the confessionary statement. On application of correct principles of law, only a sum of ₹ 14.74 lakhs is taxable against the confessed amount of ₹ 48.95 lakhs. (Para 6.3) If the ratio were applied, than even by the AO's working of total 'on-money income of ₹ 3,00,00,000/- as disclosed by the appellant during the course of his statement u/s. 132(4) and in the income tax return is held to be a fair amount of income (net profit of over 30%) from such tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic stand that Shri Jayantilal Mulchand Patel was never its broker and was rather a purchaser of only one property. 9. After appreciating the entire facts and circumstances of the case, we also find that it is an undisputed fact that survey action u/s.133A of the Act was carried out at the office premises of Anupam Group wherein during the course seven small pocket diaries were recovered from the premises. And the same were confronted by recording statement of u/s.132(4) of the I.T.Act wherein it was admitted that these represents net profit from on money receipts or different purchases of the group which were not recorded in the regular books of accounts and was net earnings after all expenses. The unaccounted income accepted by the assessee was duly disclosed in the returns filed subsequently in all the cases, except in the case of assessee firm, the income as disclosed for the firms/projects has been accepted in-toto by the AO. 10. From the material on record, we also find that there is sufficient evidence in the case of Shri Jayantilal Mulchand Patel in the form of documents and statement u/s.132(4) of the I.T.Act which confirm that the transactions in the property as tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not permit the revenue to collect the tax on the entire receipt believing it was only the income embedded in such receipt which can be subjected to tax-Held, consistently, this Court and some other Courts have been following the principle that even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves- If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation . Even in the case of ITO vs. Saikrupa Construction Co. 13 SOT 45 (Mum) the Mumbai Bench of the Hon'ble ITAT has held that this is a case, where regular books of account are not maintained. The AO proceeded on the basis of papers found during the course of survey. Such papers apparently are not complete record of the income or expenditure of the assesse. Therefore, the total income cannot be properly calculated on the basis of such papers. In our view, the Id. CIT(A) has y directed that the profits of the assessee's business as a builder should be estimated by applying net profit rate of 15 percent of the total considera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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