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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 ..... ments receipts in respect of Anupam Square project. Moreover, there is no evidence of expenses incurred to support the claim of expenditure. The Ld.CIT(A) further erred in holding that amount depicted in diary is true net income despite the fact that there were no evidence of expenses. [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 Rs. 9,02,77,106/- after making addition of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anupam Organiser. The ld.DR further submitted that calculations in respect of sale of shops/show rooms was also done in coded formats on the seized papers. In this regard, the coded writing on the seized papers, the said broker Shri Jayantilal Mulchand Patel in his 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 Rs. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey was conducted by a team of investigation wing of IT Department, Surat. A search, at residential premises of Jayati Mulchand Patel was completed on 28.12.2012 i.e. prior to start survey at appellant's business premises. Not a single 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. Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d evidences pertains to the case of Jayanti Mulchand Patel. Pg- No. Para Contents 7 1 to 3 General 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 of them have accepted the fact stated by Jayanti Mulchand Patel. Sale deeds are as per the rates fixed by the govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 income u/s. 69C in respect of brokerage expenses paid to the said Jr-MtsSotel 4n Assessment for A.Y. 2013-14, which- was completed u/s. 143(3). Meaning thereby, Shri Jayanti Mulchand Patel is not a broker of the appellant firm. He has also admitted the said fact on oath. Copy enclosed. The AO has issued notices u/s. 131 of the Act to almost all buyers of the show room in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 are also more facts coming out from these papers, but, only few are mentioned hereinabove. 4.4 Lr. ACIT has further tried to establish nexus of loose paper found and seized from Shri Jayanti Mulchand Patel and his statement u/s. 132(4) recorded during search af his premises. These papers are elaborately mentioned as Annexure BS-1, Page -1-, Annexure BS - 6, Page -5-, Annexure BS - 6, Page -1- and Annexure BS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and to whom it was paid, and (d) details of commission income earned by him for the sale of show room at Anupam Square Project. (ii) On going through the said affidavit, if is respectfully stated that he has filled for Page -1- of Annexure BS - 1, which may be item no. 1 and item no. 6. Scan copy of page 1 is available on page 4 of assessment order, however, item 6 is nowhere available either in assessment order or in show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the AO has presumed rate per sq. ft. at Rs. 3,932/- and 4,124/- on 2nd floor and Rs. 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 calculated such ratio which has no nexus with the actual business of the appellant firm. In light of above factual aspects there is no merits on imaginary additions made by the AO. 5. The AO has made proposal to invoke section 69A in respect of Rs. 7,41,19,985/- being unexplained money/ concealed business income, on the basis of material seized from third party i.e. shri jayanti Mulchand Patel. Here also Ld. AC is legally not correct, looking to following statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 Rs. 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 the appellant firm and on other hand, he is accepting such disclosure, while finalizing assessment u/s. 143(3). The search party has recorded a statement of partners of firms of Anupam Group, during survey on 29.12.2013. The relevant question and answer of the said statement are reproduced hereinunder: "16. I am showing you the diaries Bl/l to BI/7, where entries were shown in different pages as 20000=00 with dates. Please indicate what these entries indicates? Ans. There is no meaning of = sign in these entries an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 they will confirm the same through their respective signature in this statement." 6.1 In light of above submission, arithmetical working made by the AO in para 10 on page 20 and 21 of assessment order is not acceptable and it is strongly objected. If is very humbly stated that On-Money receipt of Rs. 9,02,77,106/- is based on a statement and loose paper found from Jayanti Mulchand Patel. The same could not be binding upon the appellant firm being a third person. Secondly, the assessment was made u/s. 143(3) and not u/s. 143(3) r.w.s. 153C of the Act. There is no evidence that any cash amount was passed upon the appellant firm. Thirdly, the same AO has accepted net On- Money profit in case of 6 firms of Anupam Group, however, in the case of appellant firm i.e. Anupam OrganizerfAnupam Square Project), he is not ready to accept additional income declared in survey being p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 issue; I would like to discuss some background of the case. A survey action u/s. 133A of the IT Act was carried out in the main office premise of Anupam Sub-group at U-12, 13, 14, 15, - Navmangalam Complex, City Light Road, Surat. During the course of it, 7 (seven) small pocket diaries were recovered from the premise, from the cabin ~of~SPirr Ashok kumar Sadanand Rai. These were confronted to him in statement taken u/s. 132(4); and he admitted that these represent net profit on from 'on-money' receipts of different projects of the group, not recorded in the regular books of account and was net earnings after all expenses. The relevant portion of the statement is part of the submissions of the appellant; reproduced earlier in this order. The undisclosed/unaccounted net income accepted for different firms and projects, duly confirmed by other partners and based on different seized diaries is as under: Sr. No. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d proof that the appellant was indulging in taking 'on- money' outside books of account and also sort of circumstantial evidence in the form of cheque payments as per-documents seized from Jayanatilal matching exactly Shop/Office number wise with the payments appearing In the books of account of the assessed However, without deciding the evidentiary value of the documents seized from Jayanatilal and his statement/affidavit; in light of the observations above; I have mined the case from a different angle. Clearly, the assessee and the department have accepted that the diary (BI-6) found and impounded from appellant's premises; depict income from 'on- money' receipts and the AO has deducted the amount disclosed from the total addition of Rs. 9,02,77,106/-. As discussed in para 8.3 earlier, 7 (seven) small pocket diaries were recovered from the premise, it was admitted that these represent net profit on from 'onmoney' receipts of different projects of the group, not recorded in the regular books of account and were net earnings after all expenses. The unaccounted incomes accepted were duly disclosed in the returns filed subsequently in all the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od for sale of the flats, which the Assessing Officer brought to tax-Tribunal 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." In the case of ITO vs. Saikrupa Construction Co. 13 SOT 459 (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 shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded u/s.132(4) of the Act and affidavit dated 04.02.2015 for coming to the conclusion that said person acted as broker for assessee and entries represented in the said seized documents are actual transactions. Apart from above, the AO also relied upon small diary impounded at the office of the assessee and noting therein, wherein acceptance of income of Rs. 3 crore over and above declared in the books of accounts to hold that assessee had accepted taking 'on money' on sales. The ld.AO treated the cash portion mentioned on the very documents as true figures of 'on money' receipts of the shops/offices of the assessee and treated the entire 'on money' receipts so worked out as the net undisclosed income of the assessee and thus while giving credit of Rs. 3 crores already accepted as unaccounted income, had made the additions whereas on the contrary the assessee contested the additions by submitting that the documents seized during the survey at the residence of Shri Jayantilal Mulchand Patel cannot be relied upon as he is a third party and no addition can be made on the submission of the third party without corroborative evidence. It was further submitted that the statement of third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the facts, the ld.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. The ld.CIT(A) rightly relied upon the judgments as mentioned in his order which has already been reproduced above and held that even if the ratio were applied, even then the AO's working of total 'on money', the net income of Rs. 3 crore as disclosed by the assessee during the course of his statement u/s.132(4) of the Act. And, thus, in this way Income Tax Return already filed by the assessee was rightly held to be a fair amount of income as taking the net profit of Rs. 30% from such total receipts, therefore the ld.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' receipts, earned out of books of accounts. Even then, no further additions are justified and thus rightly deleted the additions. We are also in agreement with the decision of the higher judicial authorities including that of jurisdictional Hon'ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n further held that "The receipt of 'on- money' 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 Rs. 14.74 lakhs is taxable against the confessed amount of Rs. 48.95 lakhs. 13. Considering the above judgments, we are of the view that although the AO has determined the total income at Rs. 9,02,77,106/-, thus taking into account that in the Return of Income a fair amount of income (net profit of over 30%) from such total receipts has already been shown by the assessee i.e. amount of Rs. 3 crores. Thus, no further additions are justified. We see no reason to interfere into or divert from the findings so recorded by the ld.CIT(A), acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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