9911796707
TMI Blog2022 (1) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... to the proposition that whenever unaccounted receipts unearthed during any investigation, then the gross receipts are not to be taxed. But this situation is applicable only when simultaneously some evidences are being found exhibiting unaccounted expenditure. AO has specifically asked the assessee to give details of expenditure which were not incorporated in the books. He asked for flat-wise details of work done along with relevant measurement sheets/bills. In other words, the assessee must have maintained details for controlling overall expenditure. Those details might not be part of regular books of accounts, but they may goad the AO to estimate what is the nature of work; how much expenditure probably would have been incurred by the assessee; even under estimation. No such things were submitted by the assessee. To be more specific, there should be corresponding details of unaccounted expenditure. CIT(A) proceeded on altogether different analogy and estimated that unaccounted expenditure might not have been incurred by the assessee against this unaccounted receipts, and therefore, only profit element ought to be worked out. To this effect, there is no evidence produced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey u/s. 133A of the IT. Act. 2) The CIT(A) has erred in law and on facts by holding that the profits can only be taxed on unaccounted receipts in place of entire unaccounted receipts, in absence of any claim of unaccounted expenses by the assessee and also having deposited the majority of the unaccounted receipts in its bank account. 4. A perusal of the above two grounds would reveal that both are inter-connected. The common issue in both the grounds is, whether gross unaccounted receipts found during the course of survey is to be taxed or only profit element embedded in those receipts is to be taxed. Let us consider both these grounds together. 5. The facts giving rise to filing of the present appeal is that, as emerging out from relevant records are that the assessee is engaged in the business as builder and developer. It has filed return of income on 30.9.2012 declaring total income at ₹ 6,02,34,870/-. The case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2) of the Income Tax Act, 1961, which was duly served on the assessee. Prior to this, a survey under section 133A of the Act was conducted at various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the proposition of law that entire admitted undisclosed income could not be taxed, and only profit embedded therein should be brought to tax, and that the statement made under section 133A has no evidentiary value, and should be accompanied by corroborative evidence. 6. The ld.AO considered submissions of the assessee. The explanations of the assessee were not found to be acceptable to the AO. He noted that facts of unaccounted receipt of ₹ 20,01,00,000/- was admitted by the Director time and again, i.e. during the survey proceedings and subsequently during assessment proceedings. Further, during the survey proceedings, no evidences pertaining to expenditure in cash/unaccounted expenditure were found, and even no claim of expenditure putforth against the admitted impugned receipts. The ld.AO further observed that though the statement made under section 133A has no evidentiary value, but documents seized during the coruse of survey demonstrate unaccounted receipts, which were not controverted by the assessee. The addition was not merely on the basis of statement of Director of the company, but the same were supported by the papers/documents seized during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company has transferred advance collection from members as shown in liabilities in balance sheet to P L A/c on flat sale as per documents executed as sales. Following the same method, portion of the unrecorded receipts from members as admitted at the time of survey is also offered in P L A/c for which sale deeds are executed. Thus, the company has offered portion of such admitted unaccounted receipts in profit loss account in AY 2012-13 amounting to ₹ 4.00crore, inAY2013~ 14 amounting to ₹ 1.20 crore and in AY 2014-15 will offer ₹ 7.23 crore in proportion to the sale deed executed in each year. 3.6 The assessee was specifically asked to furnish flat wise details of extra work done and evidences in support of claim of expenditure in respect of said receipts of ₹ 20,01,00, 000/-. However, the assessee has not furnished any such details. In the absence of any such details, the entire income of ₹ 20,01,00, 000/- is liable to be taxed as income ofF.Y. 2011-12 only. The unrecorded receipts as admitted by the appellant company are advance received from customers for extra wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of flats. According to method of accounting followed by company, accounted and unaccounted collection from members is to be recorded in Profit Loss Account in the year when sale deeds are executed. Therefore, portion of unaccounted members collection offered in Profit Loss A/c in AY 2012- 13 amounting to ₹ 4 crore, in AY2013-14 amounting to ₹ 1.20 crore, will offer in AY 2014-15 amounting to ₹ 7.23 crore and remaining collection on the basis of execution of sale deeds in next years'. Thus, the appellant company has offered members collection (accounted and unaccounted) on the basis of method of accounting / accounting policy of the company, which is followed by company prior to survey. The amount received as advance money against booking of flats (cheque and cash) is not assessable as income for the year, the same will be taxed in the year when the flats are sold, as the company is offering income in P L A/c on estimation basis on cost of construction, even though there is negligible Therefore, as per the provisions of Rule 46A, the additional evidences submitted by the assessee should not be admitted. Therefore, in view of the facts brought out i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no evidence to suggest that the assessee has been following percentage completion method. Hence, the contention cannot be accepted. Also, it is pertinent to mention that the assessee in its statement recorded during the course of survey has categorically disclosed the same as unaccounted income pertaining to the F.Y.2011-12 relevant to A, Y, 2012-13 and further admitted to pay the tax in the same year itself. Even after the survey, the assessee has not made any petition before the department of having made disclosure under pressure/coercive but has simply filed the return of income without taking into account the disclosure of unaccounted income made during the course of assessment proceedings. In view of this, this is nothing but an afterthought by assessee to defer this income in the subsequent years so as to avoid payment of taxes. Therefore, as per the provisions of Rule 46A, the additional evidences submitted by the assessee should not be admitted. Therefore, in view of the facts brought out in the assessment order and the facts stated above, the additions made by the AO deserve to be upheld even if the additional evidences submitted by the assessee are considered. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). 2. Copy of ITR Ackn aid Computation of total income for A. Y. 2012- 13. 3. Copy of WIP Working submitted CIT(A) for A.Y. 2012-13. 4. Copy of ITR Ackn and Computation of Total income for A. Y. 5. Copy of Audited Balance and Profit and Loss Account for F.Y. 2012-13 On perusal of the details, it is seen that there is no evidence to suggest that the assesse has been following percentage completion method. Hence, the contention cannot be accepted. Also, it is pertinent to mention that the assessee in its statement recorded during the course of survey has categorically disclosed the same as unaccounted income pertaining to the F.Y. 2011-12 relevant to A.Y. 2012-13 and further admitted to pay the tax in the same year itself. Even after the survey, the assessee has not made any petition before the department of having made disclosure under pressure/coercive but has simply filed the return of income without taking into account the disclosure of unaccounted income made during the course of assessment proceedings. In view of this, this is nothing but an afterthought by assessee to defer this income in the subsequent years so as to avoid payment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for flats as well as for extra work. 4. Collection for flats is fully recorded in the regular books, whereas extra work collection is not recorded, as the same is to be incurred at the time of completion of flats or the same is to be carried out by some other agencies, where the company is having middleman profit only. Estimated net profits on such collection are appx of₹ 400 lacs (Pg- 25). Thus, the appellant categorically mentioned that the amount declared / admitted at the time of survey is receipt and estimated net profits on such collections are approximately of ₹ 400 lac i.e. ₹ 4 corre, offered in the return of income filed. (iv) The accounts were finalized for the year 2011-12, the Auditors in Notes of Accounts stated that During the year proceedings u/s. 133A of the Income tax Act, was carried out by IT Dept. During the course of said proceedings, additional receipt of ₹ 20.01 crores was admitted by the company. The management estimated profit of ₹ 4.00 crores on such additional receipts and shown the same as income in Profit Loss account in the current year (Pg. 46). Thus, the appellant categorically mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going on. Whereas, contrary to this, the appellant company has offered income on Percentage Completion Method, even though construction is in progress, profit is estimated and taxes are paid. Thus, if your honour rely on the Remand Report, your appellant is not liable to pay tax on single rupee in the year under consideration. (ii) Issue: it is pertinent to mention that the assessee in its statement recorded during the course of survey has categorically disclosed the same as unaccounted income pertaining to the F.Y. 2011- 12 relevant to A.Y. 2012-13 and further admitted to pay the tax in the same year itself. Reply- The appellant admitted the members collection of ₹ 20.01 crore as income of AY 2012-13 and shown -willingness to pay taxes. Accordingly, following judicial decisions off Hon'ble Courts and Tribunals, to meet with the both ends of inflow / outflow, the firm has offered profit of ₹ 4 crore on such extra collection in the tax returns filed for A.Y. 2012-13 and paid taxes thereon. (iii) Issue: Even after the survey, the assessee has not made any petition before the department of having made disclosure under pressure/coercive but has sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidences submitted by the assessee should not be admitted. Therefore, in view of the facts brought out in the assessment order and the facts stated above, the additions made by the A.O. deserve to be upheld. Reply: The appellant has not submitted any additional evidence. Legal submission on offering of profits embedded in receipts on the basis of relevant decisions of Hon'ble Courts and Tribunals furnished, legal submission on offering of income admitted u/s. 133A on the basis of relevant decisions of Hon'ble Courts and Tribunals furnished and legal submission on unrecorded members collection admitted in survey as advance from members as per method of accounting followed and portion of such unaccounted collection is offered on year-to-year basis as per sale deed executed and the profit is offered on cost of project on the basis of relevant decisions of Hon ble Courts and Tribunals furnished. These legal submissions cannot be said as additional evidence, as the appellant has not filed any additional evidences. Whatsoever furnished in the Appellate Proceedings is part of material already with IT Dept in AY 2011-12, in AY 2012-13, in AY 2013-14 and in AY 2014-15, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered in next years' as per method of accounting followed by company, the addition made for remaining amount of ₹ 16.01 crores (admission in survey ₹ 20.01 crores less: amount offered in AY-2012-13 ₹ 4 crore) may kindly be deleted as the same is double taxation in the hands of company, being the same is offered in the later years. 8. In view of the above facts of the case, fundamentals of various decisions of Hon'ble Courts and Tribunals, to meet with the both ends of inflow / outflow, the appellant company though the net profit ratio is 5.80%, has offered profits @ 20% on extra collection, as there are always higher profits in the extra work items and accordingly offered R$. 4 crore in Income tax return filed for A.Y, 2012-13, It is therefore prayed that the addition of entire extra receipts may kindly be restricted to the offer made by the appellant in Income tax returns. 10. After examining submissions of the assessee, remand report of the AO and rejoinder thereto by the assessee, the ld.CIT(A) allowed the claim of the assessee by observing that the assessee company has accounted for unaccounted collection in the books of accounts and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is submitted by the ld.DR that admissions made by the assessee were voluntary and without any whisper of retraction, and thereafter agreed to pay tax thereon. In such circumstances, order of the ld.CIT(A) devoid of any merit for upholding the same. 12. We have heard submissions of the ld.DR and gone through the record. We have also gone through orders of both the authorities below. The issue before us, whether voluntary admission of unaccounted receipts from the members is to be assessed to tax on gross basis, or as held by the ld.CIT(A), only the profit element embedded in the total receipts is required to be taxed. Admitted facts are that survey was conducted at 501, 502, Safal Preclude, Prahaladnagar, Ahmedabad under section 133A of the Act on 24.10.2011. During the course of survey certain papers inventorised as Annexure A/1 to A/4 were impounded. Unaccounted receipts of ₹ 20.01 crores in respect of Stavan Alteza, Stavan Paradise and Stavan Arise schemes of the assessee company are reflected in these projects. Statement of Shri Mihir P. Desai, director of the assessee-company was recorded and he was confronted with these pages, who admitted receipt of ₹ 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted income for the F.Y. 2011-12. I further assure that on the disclosed income of ₹ 2001 lacs, the tax liability comes to ₹ 600 lacs (Approx). Out of which, my company has already paid advance tax of ₹ 1.53 crores. Further, I propose to make the remaining payment of tax on disclosed income as under: Balance taxes will be paid as under SN Date Amount (Rs. In lacs 1 15-05-2012 50 2 30-06-2012 50 3 16-07-2012 50 4 30-07-2012 50 5 15-08-2012 50 6 30-08-2012 50 7 15-09-2012 50 8 30-09-2012 100 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case. Simple reason is that documentary evidence exhibiting acceptance of unaccounted receipts was found. This was admitted by the director of the assessee-company, therefore, cumulative setting of these two aspects, it suggests that there was unaccounted receipts. The AO is not harping upon statement of the Director only, which otherwise without oath. The assessee never disputed the discovery of unaccounted receipts. It disputed quantum of income embedded in those receipt. Therefore, these case laws do not help the assessee. This fact has been recognized by two letters written by the assessee-company and as referred by the AO. As far as the proposition that entire extra-collection should not be termed as profit of the assessee-company, rather profit embedded in such receipts is required to be assessed as income is concerned, we are of the view that there is no dispute with regard to the proposition that whenever unaccounted receipts unearthed during any investigation, then the gross receipts are not to be taxed. But this situation is applicable only when simultaneously some evidences are being found exhibiting unaccounted expenditure. The AO has specifically asked ..... X X X X Extracts X X X X X X X X Extracts X X X X
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