9911796707
TMI Blog2021 (3) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the instant case. 2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a builder cum developer and had filed his return of income for the Asst Year 2010-11 on 15.10.2010 declaring total income of Rs. 11,96,630/-. During the course of assessment proceedings, the assessee had revised his total income by filing revised computation of total income of Rs. 13,45,280/-. We find that the ld. AO called for details of Legal & Professional fees, Consultancy Charges, Testing & Surveying fees, Sub-contractor (Labour) Charges and Brokerage Charges during the course of assessment proceedings which were duly furnished by the assessee. From the perusal of the details submitted by the assessee, the ld AO observed that certain expenses were not subjected to deduction of tax at source as under:- Pravin V Satra Asst Year 2010-11 Nature of Expenses Total Expenses for Expenses for which tax Expenditure which tax was was not deducted and Deducted hence disallowed under section 40(a)(ia) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uber Trading Co. to the tune of Rs. 10,00,000/- in respect of interior work. We find that the ld AO in the remand proceedings verified the fact that assessee had purchased material from Kuber Trading Co. for Rs. 14,36,045/- plus MVAT of Rs. 57,442/- thereon, which is not liable for deduction of tax at source u/s 194C of the Act. It was proved before the ld AO that only a sum of Rs. 1,17,476/-was debited to interior work labour charges for which due TDS compliance was made by the assessee. We find that this was duly appreciated by the ld CITA by rightly directing the ld AO to delete the disallowance of Rs. 10,00,000/- u/s 40(a)(ia) of the Act. 2.7. With regard to Consultancy Charges, we find that the ld AO had observed that tax was not deducted at source on payment of Rs. 9,69,573/- out of total expenditure of Rs. 29,64,463/-. We find that in the remand proceedings, the assessee proved that tax was duly deducted at source on the total expenditure of Rs. 23,97,633/-. In respect of Rs. 5,66,800/-, it was explained that tax is not deductible at source for Rs. 5,61,800/-, being the payment made to National Institute of Oceanography (Government Company) and similarly, tax is not deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto development agreement. As per the agreement, the buyer is liable to pay all the BMC charges for the property purchased. This explanation was practically accepted by the ld AO in the remand proceedings by not making any adverse comments on the evidences submitted by the assessee. Hence when the ld CITA grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon'ble Madras High Court in the case of B Jayalakshmi vs ACIT reported in 407 ITR 212 (Mad). Accordingly, the Ground No. 2 raised by the revenue is dismissed. 4. The last issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance of Rs. 1,26,37,560/- made on account of SRA Project expenses in the facts and circumstances of the case. 4.1. We have heard the rival submissions and perused the materials available on record. We find that the ld AO observed that the assessee had debited the following expenses towards SRA projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as well as the revenue are in appeal before us. 9. The only issue to be decided in these cross appeals is challenging the levy of penalty u/s 271(1)(c ) of the Act. These cross appeals are taken up together and disposed of by this common order for the sake of convenience. 9.1. We have heard the rival submissions and perused the materials available on record. We find that the ld AO had levied penalty of Rs. 82,41,963/- u/s 271(1)(c ) of the Act on total additions / disallowances made in the assessment to the tune of Rs. 2,66,73,019/-. We find that the ld CITA deleted the penalty u/s 271(1)(c ) of the Act to the tune of Rs. 79,12,106/- on the ground that corresponding quantum additions for which penalty was levied were deleted by him. We have already dismissed the revenue's appeal against the quantum proceedings for Asst Year 2010-11 hereinabove in ITA No. 5505/Mum/2018. Once the quantum additions are deleted, then the penalty on those additions would have no legs to stand, which has been rightly deleted by the ld CITA. Accordingly, the appeal of the revenue challenging the deletion of penalty of Rs. 79,12,106/- in ITA No. 6708/Mum/2018 is hereby dismissed. 9.2. With regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of disallowance of expenses of Rs. 6,36,800/- ( 5,61,800 + 75,000) u/s 40(a)(ia) of the Act. 9.4. We find that the ld AO had made an addition towards personal expenses of Rs. 50,000/- on an estimated basis. It is well settled that there cannot be any levy of penalty on an estimated addition. Moreover, from the perusal of the quantum assessment order, we find that the ld AO had chosen not to initiate any penalty proceedings u/s 271(1)(c ) of the Act in respect of this addition, whereas while passing the penalty order, he has directly levied the penalty. On this ground also, the penalty levied deserves to be deleted and is hereby deleted. 9.5. With regard to shifting of head of income from house property to income from business, we find that the assessee had derived rental income which was duly offered to tax by the assessee under the head income from house property after claiming deduction at a flat rate of 30% for repairs. This income was sought to be shifted by the ld AO to 'income from business' in the quantum proceedings. We find that this action of the ld AO was upheld by the ld CITA in quantum proceedings. Against this quantum order, the assessee did not prefer any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the additions made by the A.O. for the year under consideration as the same were made were made after verification of the information available in the impounded material impounded under the provision of section 133{3)(2)(vii) of the I.T. Act,1961 and also the material on the record and in light of chronic non co-operation by the assessee." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the fact that the additions of Rs. 14,58,14,389/- & Rs. 49,38,84,500/- on account of income from Jogeshwari project & Vile parle Project respectively, were made after verification of the impounded loose papers that shows the Net profit of the projects which is noted to have been Completed in the previous year relevant to A.Y.2013-14. " 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that addition of Rs. 75,00,000/- on account of cash payments to retiring partners was made on the basis of a retirement deed which was impounded during survey proceedings. The assessee was show caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised and impounded under the provisions of section 133(3)(2)(viii) of the Act. As on the date of survey, the assessee had not filed his return of income for the Asst Year 2013-14 and accordingly a notice u/s 148 of the Act was issued to the assessee calling for return of income. The assessee filed his return of income on 10.5.2016 in response to notice u/s 148 of the Act declaring total income of Rs. 20,54,850/-. The assessment proceedings were completed u/s 144 rws 147 of the Act on 30.12.2016 determining total income at Rs. 65,67,74,110/- due to continuous non co-operation from the side of the assessee by furnishing the requisite details. However the requisite details were filed by the assessee during the course of first appellate proceedings. The ld CITA admitted those evidences in the form of additional evidences and rightly sought for a remand report from the ld AO. The ld AO furnished the remand report dated 13.4.2018 after elaborately addressing each of the issues in dispute by specific reference to the documents impounded during survey. The relevant operative portion of the remand report in respect of these two issues are reproduced herein for the sake of convenience:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5), a statement u/s 131 of The Income Tax_ Act, 1961 of Mr. Ketan Vaidya, Architect was recorded on 20.03.2018 On oath before me. The relevant extracts of the statement recorded is reproduced below: "Q.1 Please Identify yourself ? Ans: Ketan Vaidya, aged years, residing at 203/8, Rajkamal Co-op. Housing society, Paranjape Scheme 8, Subhash Road, Vile Parle-East, Mumbai - 400 057, contact is 9867336930. Q.2. Can you read & write English ? Ans: Yes, I/we can read & write English. Q.3. Are you filling your return of Income regularly, if yes what is your PAN ? Yes, I am filling-my return of Income regularly and my PAN is AAFPV0408E. Q.4. What is your profession? Ans: I am Professional Architect. Q.5 How do you know Shri Pravin Satra ? Ans. I know him since 2010 through one of my friend and provide him 'professional service for his projects in Mumbai. Q.6. Have you received any fees from Shri Prawn V Satra ? Ans. Yes I received fees approx. Rs. 5 Lakhs in the year 2011 & 2012 as consultation him for his Borivali and Andheri property. Q.7. I am showing you a page marked as page number 15 which was impounded during survey action conducted on Shri Prawn V Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d project. Moreover, when the ld CITA grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grievance for the revenue. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon'ble Madras High Court in the case of B Jayalakshmi vs ACIT reported in 407 ITR 212 (Mad). 14.3. Similarly with regard to the addition made in the sum of Rs. 49,38,84,500/-, the addition made on account of profit pertaining to Vile parle Project. We find that this addition was made based on impounded document page No.192 of Annexure A-1, comprising of project Haridarshan Vile parle which was completed during the year under consideration and due to non-furnishing of any explanation by the assessee during the course of assessment proceedings, the ld. AO by placing reliance on the provisions of Section 292C of the Act proceeded to make an addition of Rs. 49,38,84,500/- representing the alleged profit pertaining to Vile parle Project. Before the ld. CIT(A), the assessee submitted that impounded loose paper in page No.192 of Annexure A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsigned and does not contain any details about the address of site being CTS No. to establish that the said paper pertains to the project at Hari Darshan, Vile Parle. This impounded paper is a dumb document. b. The Assessee has shown in the Profit & Loss Account for the year ended 31.03.2013 of Darshan Developers (Proprietor Pravin Sarra), sale from sale of flat at Rs. 5,63,58,000/-. This includes sale of flat from Haridarshan Society of Rs. 554,06,000/-. A copy of ledger account of sale of flat (Haridarshan) from April, 2009 till 31st March,2014. (Page No.49 of Paper Book No.II), a copy of Trading and Profit and Loss Account for the year ended 31st March/2013 of Darshan Developer also filed by way of additional evidence to substantiate the same. (Page No.16 of Paper Book No.II). c. The Learned Assessing Officer has not brought on record any documentary evidence to substantiate that the Haridarshan project belongs to the Assessee and has not given any documentary evidence to substantiate the last sale of the flat in 2013. d. The addition is made on the basis of estimation and not supported by any concrete evidences. In order to substantiate the above that the development o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e undersigned. However, you have appeared on his behalf. Please explain ? Ans. Arun Jaitely was my friend. He was also an estate agent. He used to share land, redevelopment opportunities, with me for looking new claients and vice versa. He passed away one month back. I received a call from Shri Pravin Satra that there was a survey action carried out by the Income-tax department where a redevelopment project proposal shared by you and Arun Jaitely for a building in Dadar(W) was impounded by the Income-tax department. He told me that a summon has been served to Arun regarding that matter. He then requested to appear on his behalf as I knew the details of the proposal and Arun had expired. Since, Arun Jaitely was my close friend and I knew about the proposal, therefore, I am appearing on his behalf. Q.8 I am showing you a page marked as page number 192 which was impounded during Survey action conducted on Shri Pravin V Satra, what do you have to say about it ? Ans. Yes,. I am aware about the details in this page. This page contains details of a redevelopment project situated near Kabaturkhana, Dadar(W). The proposal was bought by Arun Jaitely to me. Thereafter,! arranged a mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground of appeal of the assessee may be decided on merits. 14.3.1. We find that the ld. CIT(A) had taken due cognizance of the aforesaid remand report where no adverse inference was drawn by the ld. AO in any manner whatsoever. The ld. CIT(A) also took note of the fact that the ld. AO had indeed recorded a statement on oath u/s.131 of the Act from Mr. Sunil Gopal Pawar, associate of Mr. Arun Jaitly, during remand proceedings, who had categorically stated that the project mentioned in the loose paper never took off and which was never executed. Since, this addition was made by the ld. AO based on the loose paper marked as page 192 of Annexure A-1 in the assessment order, the same loose document was indeed shown to Mr. Sunil Gopal Pawar at the time of recording the statement and Mr. Sunil Gopal Pawar had explained the said loose documents as the paper containing the estimated projections and the estimated profitability thereof and that the said project never took off. We also find that in the said statement, Mr. Sunil had also stated that the related documents that were called for by the assessee were never provided by Mr. Arun to the assessee and hence, the project never took off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. Shri Ajay H Gosalia, Shri Shantanoo V Rane & Shri Prabhakar Shetty out of his unaccounted income. During the course of appellate proceedings, the assessee stated that these papers i.e. pages 89-91 of Annexure-A-2 which were impounded during survey were unsigned and undated and no payments were made to any of the so called retiring partners by the assessee. It was also pointed out that the project of Saidarshan Co-operative Society as stated in those impounded papers was not carried out by the assessee. The ld. CIT(A) duly called for a remand report from the ld. AO in respect of these submissions made by the assessee. The relevant portion of the remand report given by the ld. AO with regard to this addition is reproduced hereunder:- Addition of Cash Payment of Rs. 75,00,000/-to the retiring partner: 8.1. Background: The impounded loose papers are acknowledgement for cash paid to the three retiring partners of M/s. Kenstro Island as per the deed of retirement (undated) of Rs. 25 lakhs each and the assessee has paid Rs. 25,00,000/-each to the three partners, aggregating to Rs. 75,00,000/-. (Annexure A2, Page 89 to 91). The name of the partners are Shri Ajay H Gosalia, Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Developers & I had planned a construction business with him, under partnership, wherein we added Shri Pravin Satra & anotherShri Girish Gada also as the Partner w.e.f. dated 04.07.2009. Q. 7 How. many projects have been developed by M/s. Kenstro Island ? Ans. NONE. Till this date, we had tried to negotiate with the societies mentioned in loose papers but it did not materialized. Q.8 What was the capital introduced by you in the firm stated above. Ans I have not introduced any capital in the firm.. Q.9 How can a firm operate without introducing capital by the partners? Ans The partnership was made for the proposed SRA project at Kandivali(E) and since no activity was carried out in respect of the said project the capital was not required. There was very preliminary talk involving no financial commitments. Even no bank account is opened in the name of the firm. Q.10. Please provide the copy of partnership deed/ amendments/dissolution deed. Ans A copy of deed of partnership dated 29th March, 2006 and a copy of admission cum partnership dated 04(tm) July, 2009 are submitted herewith. Q.11 Please provide the copy of all the returns filed by M/s. Kenstro Island since it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terialized. Q.8 I am showing you a page marked as page number 90 which was impounded during Survey action conducted on Shri Pravin V Satra, what do you have to say about it ? Ans. I am not at all aware of this paper, nor have I retired from the partnership firm as mentioned in this loose unsigned paper and I have not received any amount from Shri Pravin V Satra. Q.9 Please give the complete details about the project of Kandivali mention in the given page ? Ans The Kandivali project was under SRA scheme we have tried to acquire and develop the same but it did not materialized. Q.10 Do you want to say anything else ? Ans. No. Statement of Prabhakar M Shettv Q.I Please Identify yourself? Ans. I am Shri Prabhakar M. Shetty, aged 55 years, residing at A/304, Saileeia, Anand Nagar, Dahisar East, Mumbai-400068, My contact is 7715000744. Q.2 Can you read & write English ? Ans. Yes, I/We can read & write English. Q.3 Are you filing your return of Income regularly, if yes what is your PAN ? Ans. Yes, I am filling my return of Income regularly and my PAN is AIWPS3270 Q. Q.4 Describe about M/s. Kenstro Island ? Ans. It is a Registered Partnership firm, since 29.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Shri Prabhakar Shetty to whom the very same impounded documents i.e. pages 89-91 of Annexure A-2 were confronted as is evident from the aforesaid statements and all those three parties had categorically denied that they had not retired from the partnership firm M/s. Kenstro Island and they had not received any payment in cash from the assessee. Hence, the contention of the assessee that these three documents namely pages 89-91 of Annexure A-2 are totally unsigned and undated papers and were not at all acted upon, gets strengthened and corroborated by the statements given on oath by the three partners i.e. Shri Ajay H Gosalia, Shri Shantanoo V Rane & Shri Prabhakar Shetty. We find that the ld. CIT(A) had given a categorical finding based on the remand report of the Assessing Officer that the loose papers comprising of pages 89-91 of Annexure A-2 are not in the form of executed documents or books of accounts or certificates which can prove conclusively that assessee had earned undisclosed or unaccounted income. Further this impounded paper does not have any acceptable narration and do not bear the certificate of the assessee or any authorised person and that they are in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loose paper was just a discussion point of instructions given to broker to give 25 cheques of Rs. 1 lakh in advance out of total amount of Rs. 65 lakhs and the commission will be 2% on the sale amount. The assessee pleaded that no such transaction took place in his bank account. The assessee further stated that the said paper is not signed, the details of cheques issued are not given and date of payments are not written on the papers and therefore, the said paper becomes a dumb document which cannot be relied upon for the purpose of making any addition in his hands. The ld. CIT(A) duly called for remand report from the ld. AO with regard to these submissions of the assessee. We find that the ld. AO gave his remand report with regard to this addition and the operative portion of the said report is reproduced hereunder:- f 10. Addition of Brokerage Expenses of Rs. 25,00,000/-: 10.1. Background: The impounded loose paper shows the handwriting noting of modus operand! of creation of cash by booking bogus expenses / loans, etc wherein 25 cheques of Rs. 1,00,000/- to be issued on Wednesday and cash to be received on Friday after deducting commission @ 2%. (Annexure Al - Page 43) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not bear the certificate of the assessee or any authorised person and they are merely in the nature of dumb documents having no evidentiary value and hence, cannot be taken as the sole basis for making the addition in the hands of the assessee. He has also recorded a finding that the ld. AO had neither in the assessment proceedings nor in the remand proceedings corroborated noting in the loose paper by bringing some cogent material on record and conclusively prove that the noting in the impounded paper reveal the unaccounted transaction of the assessee. We also find on perusal of the remand report of the ld. AO that the ld. AO had indeed accepted to the contentions of the assessee and that is the reason he had not drawn any adverse inference on the explanation furnished by the assessee in the remand proceedings. Hence, it could be safely concluded that the ld. AO had indeed accepted to the contentions of the assessee in the remand report. Moreover, when the ld CIT(A) grants relief on the ground that in remand report, the ld AO had accepted to the contentions of the assessee, the revenue ought not to have preferred further appeal before us as there could not be any logical grie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, the profit was Rs. 28,90,721/-. The Assessee failed to reconcile and explain the said difference of Rs. 8,35,871/- and therefore, the same was added to the Total Income of the assessee by the Assessing Officer. 11.2. Contention of the Assessee: During the Remand proceedings, the Assessee stated the following as detailed below: a. The Learned Assessing Officer made comparison between Total Income of ITR (Rs. 20,54,850/-) and Profit shown in provisional Profit and Loss Account ( Rs. 28,90,721/-) as per impounded paper of M/s. Darshan Developers. - b. The Net Profit for the year ended 31st March, 2013 of M/s. Darshan Developers as per audited accounts is Rs. 59,63,620/-. (Refer Page No. 16 of the Paperbook No. II) Even in the Computation of Total Income, the business income from M/s. Darshan Developers is shown by taking the Net Profit as per Profit and Loss Account of Rs. 59,63,619/- for the year ended 31st March, 2013. (Refer Page No. 1 - 3 of the Paperbook No. II). The same is prepared from the regular books of accounts maintained in computerized accounting software. c. The Profit and Loss Account for the period up to 7th and 8th March, 2013 as per the impounded pap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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