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TMI Blog2023 (11) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of facts, the appeal for the A.Y. 2014-15 in IT(SS)A No. 93/Srt/2022 is treated as a "lead case". In this appeal, the revenue has raised following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.5,48,19,600/- made by the Assessing Officer on account of "On-Money" received during the year despite the fact that the assessee had booked 31 flats admeasuring 41520 SF during the year and evidences were found during the course of search that the assessee was selling the flats at much higher rate in comparison to the eventual sales booked in the books of accounts. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the incriminating material available with the Assessing Officer in the absence of corroborative evidence were not sufficient to conclude that the appellant had indulged in such transactions of accepting on money despite the fact that CIT(A) in Para 6.4 of his order has held that it is an undisputed fact that the whatsapp chat relating to the rate which is treated as incriminating material were found during the Search relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a discloser of same amount. Consequent upon such search action, notice under Section 153A of the Act was issued to assessee on 25/06/2015 for filing return of income for various assessment years. In response to such notice, the assessee furnished return of income for A.Y. 2014-15 on 09/12/2015 stating that the original return filed under Section 139 on 07/09/2014 should be treated in response to such notice. In the said return, the assessee has declared NIL income. The case was selected for scrutiny. During assessment, the Assessing Officer recorded that in course of search, a backup of HTC mobile set of Shri Fenil J Jasoliya, partner of the firm was taken and impounded which contained the messages received from other partner Mr. Dharmesh M Koshiya communicated to Mr. Fenil J Jasoliya with regard to sale of flats. Such messages were downloaded and print out was taken. On perusal of SMS, it was revealed that selling price of flats in the said projects were between Rs. 2800/- to Rs. 2900/- per square feet, thus the Assessing Officer took average working of such rate at Rs. 2850/- per square feet. The Assessing Officer found that documented price of sale value on the registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m customers against booking of flat to be sold to the customers. The contention in the show cause notice that rate mentioned in the mobile communication were resulted in generation of unaccounted income by way of on-money, is nowhere mentioned or corroborate from the communication or other papers or evidence found during the search action. With regard to cash found during the course of search at Rs. 19.50 lacs and reference of C-603, the assessee explained that flat No. C-603 was not booked at the time of search, which can be verified from the books of assessee. On the cheque of Rs. 1.00 lacs drawn by Shri Sandeep R. Iwala found during the search and on back side regarding noting by hand, the assessee explained that cheque was having writing of word "Void" on the left hand side of the cheque. Thus, the said cheque, though found on the date of search was not mean to be deposited in the bank account and the same was not confirmed by the drawer of the cheque. The write up on the cheque quoting the name of drawer, date and number of flat was not made by partner of firm or its employee. Such fact was corroborated in the statement of partner recorded during the course of search, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer summarized the contention of assessee in para 6 of assessment order. The Assessing Officer recorded that he asked the assessee to furnish break up of disclosure made in the form, details of transaction which leads to generation of undisclosed income, evidence of transaction leading to generation of undisclosed income and name and address of the persons from whom undisclosed income is received. The assessee has not filed reply of such queries. If the assessee has owned on money found in the premises, the burden was upon the assessee to furnish complete details regarding source of cash and any receipt issued thereon. The partner of assessee during the course of statement, stated that the amount of Rs. 19.50 lacs so disclosed, relates to cash received from customer for some external work to be carried out in the flats, which is not substantiated by supporting evidence. Almost identical amount was mentioned in the messages, print out of which was taken from the partner's mobile phone. The Assessing Officer scanned the question No. 8 and 9 of statement of partner and their answers. The Assessing Officer also scanned the question Nos. 36 to 46 and their answers on page No. 13 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for external work to be carried out in their flats. However, to avoid the litigation and peace of mind, the assessee disclosed the aforesaid cash for taxation in their disclosure. The Assessing Officer made extrapolation for calculation of 'on money' only on the basis of SMS recovered from the WhatsApp of one of partners of assessee. The assessee in its submission categorically negated the acceptance of cash from sale of flats. The assessee explained each and every SMS. During the search proceedings, no evidence was found about the receipt of on money on sale of flats. During post search proceedings, the department recorded statement of witnesses under Section 131A and none of them admitted for payment of a single penny on account of on money. The Assessing Officer treated super built up area instead of built up area for calculation of extrapolation of receipt of alleged on money. Once it is proved that the assessee has not received any on money, then working of super built up area vis a vis built up area become infructuous. The working of super built up area only for satisfaction of customer in some of the cases mainly for the calculation of difference in FSI (Floor Surface Index ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at was treated as incriminating material found during the search, is related to only seven flats namely C-902, C-503, C-803, C-701, A-904, A-1004 and C-203. In these seven chats only flats number and rates are mentioned. There is no reference of area of flats, names of buyers, address of buyers, date of receipt or information are missing. There is no clarity as to whether these flats were sold at Rs. 2850/- per square feet as held by Assessing Officer. There is no clarity of Rs. 2850/- per square feet is on built up area or for carpet area as no area is mentioned in the WhatsApp chat. The ld. CIT(A) by relying on decision in the case of CIT Vs Maulik Kumar K Shah 307 ITR 137 (Guj) wherein it was held that corroborative material has to be brought on record apart from the incriminating material to prove that such sales were actually made and on money was received outside the books of account. The ld. CIT(A) noted that the Assessing Officer needs to examine the purchaser who have bought these flats to confirm the payment of on money. The onus for collecting corroborative evidence from incriminating material was on the Assessing Officer, mere entries in the seized material was not suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer authorities carefully. The ld. CIT-DR for the revenue submits that the assessee is engaged in the business of development of residential complex. A survey was carried out on 04/12/2014 at the business premises of assessee. During the survey, a cash of Rs. 19.50 lac was found. Source of cash was not explained. Survey was converted into search on 06/12/2014. During the search, statement of one of the partner Shri Fenil J Jasoliya was recorded who voluntarily disclosed unaccounted income of Rs. 19.50 lacs in his disclosure. Further from the WhatsApp chat of partners, the search party found that one of the partner has quoted rate of Rs. 2850/- per square feet in respect of various flats. The assessee has executed sale deeds of various units at the rate of Rs. 1530/- per square feet. On the basis of such differences, the Assessing Officer worked out a difference at the rate of Rs. 1320/- per square feet. The assessee has made booking of 31 flats having total area of 41530 square feet. The Assessing Officer on the basis of difference worked out the figure of on money of Rs. 5.48 crores in respect of 31 flats for the assessment year under consideration. The ld. CIT(A) deleted the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. The ld. AR of the assessee submits that no investigation was carried out by the Investigating Officer to collect the corroborative evidence to substantiate his stand. The ld. AR of the assessee submits that the assessee has learnt that purchaser of flat No. C-603 was called and his statement recorded and he has denied the theory of department. The Assessing Officer has not recorded in the assessment order about the statement of purchaser of flat No. C-603. So far as disclosure of Rs. 19.50 lacs is concerned, the ld. AR of the assessee submits that the assessee has declared such amount as additional amount and has not retracted from their statement. The ld. AR of the assessee submits that no extrapolation is permissible as has been held by the Hon'ble Jurisdictional High Court in CIT Vs Standard Tea Processing Co. Ltd. (2013) 34 taxmann.com 31 (Guj), Karnataka High Court in CIT Vs B. Nagendra Baliga (2014) 47 taxmann.com 331 (Kar) and Ahmedabad Tribunal in ACIT Vs M/s Amar Corporation in ITA No. 2036/Ahd/2007 and in Sayan Textiles Park Ltd. Vs ACIT in ITA No. 360/Ahd/2014. The ld. AR of the assessee further submits that he fully supports the finding of ld. CIT(A) that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference of name of buyers, area, date of receipt or no clarity whether all seven flats were sold at Rs. 2850 per square feet. There is no clarity if area was super built up area or carpet area. No corroborative material was brought on record to prove the incriminating material that sales were actually made and on money was actually received out of books of account. The Assessing Officer was required to examine the purchaser who have purchased the flats to confirm on money. The ld. CIT(A) by referring the decisions of Hon'ble Superior Courts and Tribunal has held that there is no scope of extrapolation in absence of any cogent evidence and not approved the addition. The ld. CIT(A) further held that the assessee is following project completion method and as per the decision of Hon'ble Jurisdictional High Court in CIT Vs Happy Home Corporation (Supra), income would be offered when final sale deed is registered on the basis of projection completion. The income accrues only when sale is materialized and not on the date of booking. The ld. CIT(A) thus also deleted the addition on this aspect as well. 12. We find that neither the search party examined the purchasers nor the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult, the appeal of the revenue for AY 2014-15 is dismissed. IT(SS)A No.94/Srt/2022 for AY 2015-16 by revenue. 15. As noted earlier the revenue as raised identical grounds of appeal as raised in AY 2014-15, which we have dismissed. Considering the facts that the facts leading to the addition in the assessment order in this assessment year are similar with preceding assessment year. The ld CIT(A) deleted the addition with similar direction as held in AY 2014- 15, therefore, considering the principles of consistency the appeal for AY 2015-16 is also dismissed with similar observation. ITA No. 357/Srt/2022 by revenue and CO No. 01/Srt/2023 for AY 2016-17 by assessee. 16. The assessee in is its Cross Objections (C.O.) has raised following grounds of appeal; (1) On the facts and circumstances of the case was well as law on the subject, the ld CIT(A) erred in confirming the addition of Rs. 25,93,800/- out of total addition of Rs. 8,12,19,600/- made on account of unexplained money receipt from the project Crystal Heights. (2) It is therefore prayed that the additions made by assessing officer and partially confirmed by CIT(A) may kindly be deleted. 17. We find that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his order. The ld. CIT(A) held that as per the order of Hon'ble Jurisdictional High Court in CIT Vs President Industries reported vide 258 ITR 654 and CIT Vs Gurbachan Singh Juneja 302 ITR 63 (Guj) and Neo Formulation Pvt. Ltd. 363 ITR 322 that only profit element to be taxed and not the entire gross receipt of alleged on money. The ld. CIT(A) recorded that profit element in the activities of builders are ranging 8% to 20%. Therefore, by taking the maximum figure at 20%, the ld. CIT(A) confirmed the addition to the extent of 20% of Rs. 1,29,69,000/- which is Rs. 25,93,800/- and deleted the remaining addition. 21. The revenue has challenged the deleting of addition to the extent of Rs. 7.86 crores and the assessee has raised its cross objection against restricting the addition to the extent of 20% of alleged on money. 22. The ld. AR of the assessee submits that 20% of addition of on money is on the higher side, the assessee has already declared net profit @ 6.91%. The assessee has made declaration of Rs.19.50 lacs and has paid tax thereon. By adding 20% of addition in the profit, it will raise the abnormal figure of profit. The ld. AR of the assessee submits that he prayed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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