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TMI Blog2020 (9) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... the said banakhat. As per the banakhat the total consideration of the land. AO has added the differential in the case of assessee firm on protective basis u/s. 69 - As finding of CIT(A) it is undisputed fact that the said document was belonged to Shri Sureshbhai Patel which he had executed in individual capacity. There was no mention of making of any payment by the assessee firm. We consider that Id. CIT(A) has correctly deleted this protective addition holding that assessee firm was not a party and completely stranger to the document. Therefore, this ground of appeal of the revenue is also dismissed. Addition u/s 40A(3) - HELD THAT:- CIT(A) in his finding the whole of the purchase price for the land at serial no. 210/2 has been shown in the balance sheet under the head deposits and advances and the amount has not been debited to the P L account. Therefore, the provision of section 40A(3) has been wrongly applied by the assessing officer. Considering the above facts that land was not stock in trade as the same was shown in the balance sheet therefore we do not find any infirmity in the decision of Id. CIT(A). Therefore this ground of appeal of the revenue is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... are based on similar facts and issue therefore these three grounds of appeal are adjudicated together. The fact in brief is that a search action u/s. 132 of the Income Tax Act was carried out in the group cases of Shayona Group on 15th October, 2013. The assessing officer has issued notice u/s. 153A of the act on 26th October, 2014. In response, the assessee has submitted vide letter dated 17th Nov, 2014 that its original return of income filed on 29th Sep, 2008 be considered as filed u/s. 153A of the act. During the course of assessment, the assessing officer noticed that assessee as developer has developed Shayona City and Shayona Estate. The assessee firm has completed "Shayona Tilk-2" and its possession was handed over to the member during the year under consideration as follows:- Sr. No. Name of the scheme Type No. of units Sale consideration 1 ShayonaTilak - 2 Block - A 16 2,56,39,000/- Block - B 18 2,21,80,001/- Total 34 4,78,19,001/- The assessing officer was of the view that assessee had adopted the similar modus operandi of not disclosing on money receipt on sale of units of project Shayona Tilak-2 as adopted in the other scheme of the group. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 40% of sale was treated as remained to be taxed. According, the same was added to the total income of the assessee. 5. Aggrieved assessee has filed appeal before the Id. CIT(A). The Id. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of Id. CIT(A) is as under:- "9. I have carefully gone through the assessment orders, submissions filed by the appellant as also through the report submitted by the AO. Having done so, at the outset, I have no hesitation in unconditionally and unambiguously observing that the action of the Ld. AO in making the onmoney addition in the hands of the appellant is based on absolutely no credible evidence. As such, in the face of the appellant's submission before the AO as recorded by her on page no. 7 of the assessment order, it is wholly inconceivable as to how and why the Assessing Officer could proceed to make the addition of on-money receipt in the hands of the appellant. The method adopted by the AO for arriving at the estimate of "on-money receipts" is equally unusual and curious. The AO baselessly and without giving even a semblance of window to her mind, has arbitrarily come to a wholly ill-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to bv the AO in the assessment orders, are not only irrelevant and therefore unusable against the appellant, they, even if held to be credible against I he appellant, also cannot justify or validate the addition made by the AO on presumptions and surmises at 66.66% of recorded receipts for each vear There is no valid or meaningful explanation as to on what basis the AO has held firstly thai receipt shown in the books by the appellant is only 60 % of the actual receipts. Similarly, there is no legally sanctified or factually supported basis with the AO to further hold that appellant has earned such unaccounted receipts for each of the years under appeal including those which remained unabated as on the date of the search. There is no presumption in law that all "group members" are following "modus operand! of one of the group members". Similarly, there is no presumption in law that an assessee would continue, from year to year, to engage in and earn unaccounted income even if categorical evidences of such unaccounted earning by the very appellant for one year are also in AO's possession. The AO's extrapolation of "adverse inference" from year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt by the appellant for any of the years. I may conclude by observing that the addition of on money receipts made by the AO for each year is conspicuously, patently and evidently founded on "no evidence" and is thus wholly without merit. Therefore I have no hesitation in deleting the same for each year under reference. Before parting with the issue, I would quote from the following Jurisdictional Tribunal and from Delhi High Court judgments relied upon by the AR, which instructively also refer to a scriesoj other Authorities and lay down a proposition oj law that while the AO is not fettered by the strict rules of evidence, he has, at the same time, no authority to act without any relevant material, and further, that even the "best judgment assessment" cannot also be based on mere suspicion or on pure guess work of the AO. As noted in the Delhi High Court judgement, the reliance on "notorious practices in the industry" of charging "on-money" has also been disapproved by the Apex Court. (Emphasis mine): Discovery Estates (P.) Ltd. {2013) 31 taxmann.com ISO (Del) "17. It only remains for us to refer to the observations of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. v. CIT (1995] 80 Taxman 184 observed that a lower rate of gross profit declared by the assessee as compared to the previous year, would not in- itself be sufficient to justify any addition. The mere fact that the percentage of loss or gross profit is high or low in a particular year does not necessarily lead to inference that there has been suppression. Low profit is neither a circumstance nor material to justify addition of profits. The ratio of the judgments in Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SO; RaghubarMandalHariharMandalv. State ofBihar [195'] 8 STC 770 (SO: State of Keralav. C. Vetukutty [19661 60 ITR 239 (SO; State of Orissav. Maharaja Shr/B.P. Singh Deo [197Q] 76 ITR 690 (SC); BrijBhusanLalPardimian Kumar \: CIT [197$; 7/5 //« 524 (SC): ChouthmalAganvallav. CIT [1962] 46 ITR 262 (Assam): R.V.S. & Sons Dairy Farmv. CIT[20O2} 257 ITR 764/[2003] 130 Taxman 615 I Mad.): International Forest Co. v. CIT [1975! 101 ITR 721 (J. & K.): M. Durai Raj r. CIT [1V2] 83 ITR 484 (Ker); RamchandraRamnivas v. State of Orissa [1970] 25 STC 501 (Orissa): Action Electricals v. Dy. CIT [2002] 258 ITR 188/[2003] 132 Taxman 640 X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings of the Id. CIT(A).
Consequently, grounds No. I and 2 are dismissed.
10. Thus, the following additions .of on-money receipts are deleted. Ground 5 (or equivalent) is allowed for all the four appeals:
A.Y.
Amount of relief (Rs.)
2011-12
3,38,79.344
2012-13
6,15,13,181
2013-14
4,67,05,284
2014-15
3,44,70,103
6. During the course of appellate proceedings before us, the Id. D.R. has contended that search action u/s. 132 of the act was carried out in the group cases of Shayona Group on 15th October, 2013. The main project developed by the assessee during the year were Shayona Estate and Shayona City. The Id. D.R. has submitted modus operandi in respect of fixation of sale price as well as for on sale consideration was similar for entire Shayona group as well as connected group to the assessee, therefore, the assessee firm was also in receipt of on money in 60/40 ratio and Id. CIT(A) has incorrectly deleted the addition. On the other hand, Id. authorized representative has supported the order of Id. C1T(A) and referred the various paras of finding given by the Id. CIT(A) and submitted that the issue in the appeal of the assessee is fully covered by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either in cash or in any kind in the form of on money. On the basis of incriminating document seized in the case of the group cases the assessing officer was of the view that entire Shayona Group as well as connected group to the assessee firm was indulged in receipt of on money in 60/40. Therefore, the assessing officer has computed ₹ 3,18,79,334/- being on money received in cash and added to the total income of the assessee. The assessee challenged the impugned addition before the Id. CIT(A) that assessing officer has made said addition in the absence of incriminating document seized from the assessee. The Id. CIT(A) has categorically stated regarding diary seized from Sureshbhai R. Patel and the assessing officer has herself stated that recording in the diary was pertained to receipt from sale of flats pertaining to Aryamaan scheme of Gajanand Corporation. Obviously these documents did not belong to the assessee firm. The other document which was referred by the assessing officer was pertained to M/s. Narayan Developer not seized from the assessee. On the basis of other group cases, the assessing officer has stated that modus operand! of the assessee was also the same tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has not agreed with the aforesaid explanation. The A.O. was of the view that actual sale consideration of land cannot be less than ₹ 4.57 crores as mentioned in the banakhat as against the sale consideration reported in the sale deed ₹ 1.12 crores. Therefore, the assessing officer was of the view that difference in the two documents to the amount of ₹ 3,45,01,388/- was paid by the assesseee firm in cash to the seller of the land. Therefore, an amount of ₹ 3,45,01,388/- was added to the total income of the assessee.
9. Aggrieved assessee filed appeal before the Id. CIT(A). The Id. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of Id. CIT(A) is as under:-
"12. I have perused the relevant material on record. I have also gone through the impounded document A-l page 72-79 available on page no.39-45 of the paper book. My perusal of the document has indicated that the Ld. AR is absolutely right that there is no mention or reference of the appellant in the said document and therefore, the Ld. AR is also right that the document has no express or implied relevance or incriminality vis-a-vis the appellant. Moreover, and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri. Suresh R. Patel and not executed by the partnership firm and the same was not connected to the assessee firm.
11. We have heard both the sides and perused the material on record.
During the course of survey u/s. 133 A carried out along with action u/s. 132 of the act a document as banakhat between a seller Shri R. N. Desai and purchaser Shri Suresh R. Patel was impounded from the shop no. 22/23 of Shayona Complex. It is stated that in the banakhat that an amount of ₹ 1.8 crores in cash has been paid by Shri Suresh Patel to Shri R.N. Desai at the time of execution of the said banakhat. As per the banakhat the total consideration of the land was at ₹ 4,57,41,388/-. Therefore, the assessing officer has added the differential amount of ₹ 3,45,01,388/- in the case of assessee firm on protective basis u/s. 69 of the Act. In the light of the above facts and finding of Id. CIT(A) it is undisputed fact that the said document was belonged to ShriSureshbhai Patel which he had executed in individual capacity. There was no mention of making of any payment by the assessee firm. Therefore, we consider that Id. CIT(A) has correctly deleted this protective addition holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch. Second, the AO is wrong in her conclusion that the "land is stock in trade", and the AR is right that the amount of payment has not been debited to the P&L account but is standing as advance against land as per schedule 6 to balance-sheet as on 31/3/2013 at ₹ 1,82,56,45(l/-. Section 40A(3) enables disallowance from the expenses claimed, and thus has no applicability to "advances towards land not debited to P&L account". Addition of ₹ 6,00,000/-being without merit is deleted. Ground 7 succeeds. "
14. We have considered rival contention on this issue and perused the material on record. In the light of the facts elaborated by the Id. CIT(A) in his finding the whole of the purchase price for the land at serial no. 210/2 has been shown in the balance sheet under the head deposits and advances and the amount has not been debited to the P & L account. Therefore, the provision of section 40A(3) has been wrongly applied by the assessing officer. Considering the above facts that land was not stock in trade as the same was shown in the balance sheet therefore we do not find any infirmity in the decision of Id. CIT(A). Therefore this ground of appeal o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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