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TMI Blog2022 (7) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... ived its share in the project which has duly been mentioned by the Assessing Officer in para 6 of his order, wherein it was mentioned that M/s. Sri Nilaya Constructions developed a venture at Badangapet in an area of 24 acres and in the return of income on pages 62, 66, the assessee had duly mentioned the profit from Sampada homes which was calculated by the assessee based on estimating the profit at 8% of the turnover. In our view, though the co-ordinate Bench of the Tribunal had applied the rate of 10% as against 40% applied by CIT(A) on the suppressed turnover, however considering the totality of the peculiar facts of the present case, when the assessee had Admitted the total turnover in the return of income filled under section 153A and had shown profit at the rate of 8%, whereas Assessing Officer held total turnover as income of the assessee and CIT(A), we are of the opinion that rate of 15% is required to be applied as against 40% as applied by CIT(A) on the suppressed turn over of the assessee shown in the return of incomes filed u/s 153A of the Act for estimating the profit of assessee for both the years. In light of the above, grounds partly allowed. Cash payments to Landl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both the appeals are common and therefore, the appeal in ITA No.1630/Hyd/2018 will be taken as the lead case, in which the ld.DR has raised no objection. 2.1. The grounds raised by the assessee in ITA No.1630/Hyd/2018 reads as under : "1. The order of the Learned First Appellate Authority is not correct either on facts or in law and in both. 2. The Learned First Appellate Authority is not justified in confirming the addition of Rs. 3,18,24,000 is unsubstantiated cash payment to landlords ignoring the claims of the appellant that the said payments were duly accounted in the books of M/S. Square Mill Projects assessed to tax separately. 3. The Learned First Appellate Authority failed to appreciate the fact that the sources for the payments to the landlords were the advances from prospective buyers received by M/s. Square Mill Projects duly reflected in the balance sheets of the said firm filed much before the date of search. 4. The Learned First Appellate Authority is not justified in ignoring the fact that the plots were registered finally by the firm M/S. Square Mill Projects to the persons from whom the advances were received and recorded in the balance sheet filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Rs.4,24,840/-. Assessment was completed by the AO u/s.143(3) rws 153A, making the following additions/disallowances: 1. Unsubstantiated agricultural income of Rs.6,05,000/-. 2. Cash payments to Landlords of Rs.3,18,24,000/- 3. Unexplained Interest Expenditure of Rs.1,27,00,000/-. 4. Unaccounted sale of independent houses and plots of Rs.1,45,00,000/-. 5. Long Term Capital Gain of Rs.38,27,559/-. 6. Undisclosed Income of Rs.2,73,440/-. 7. Unsubstantiated claim for exemption of Rs.2,65,310/-. Finally, assessed the total income of the assessee at Rs.6,44,20,150/-. 4. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who partly allowed the appeal of the assessee. 5. Feeling aggrieved with the order of ld.CIT(A), the assessee is now in appeal before us. 6. Before us, at the outset, ld.AR for the assessee has submitted that grounds 6 to 9 can be heard together as these pertain to a common issue. Similarly, grounds 2 to 5 also form part of the same species and hence, the same can also be considered together for the purposes of adjudication. 6.1. In respect of ground No.2 to 6, ld.AR has drawn our attention to para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld.AR that the details were provided to the Assessing Officer and the Assessing Officer has wrongly made the addition in the hands of the assessee. The ld.AR has also drawn our attention to paras 9.3 to 9.6 of the order passed by ld.CIT(A) to the following effect. 9.3. The AO was asked to comment on the submissions of the assessee. In the report furnished on 22.03.2018, the Assessing Officer has stated as under: "Unaccounted sale of independent houses and plots: The details of sale of open plots/house sales along with copy of sale deeds furnished at the appellate proceedings were perused. On perusal of the various sale deeds forwarded to this office, it is noticed that the total sale consideration for House sales(11 plots) is arrived by the assessee at .Rs.1,94,36,250/- do the basis of income declared u/s 44AD covering period of AY 2011-12 to AY 2014-15. For 7 open plots, the assessee has declared sale consideration 'of Rs.51,00,000/- in AY. 2013-14 & AY 2015-16. The details are given as under: On analysis of the above, it is noticed that the assessee has claimed sale consideration of Rs 51,00,000 in respect of LTCG (AY 2013-14 & AY 2015-16) as against actual cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be allowed to the assessee u/s 44AD, the sale value needs to be restricted to Rs 82,59,600/- a's per actual available evidentiary value and net income computed accordingly keeping in mind the returned income u/s 153A and the differential amount of Rs 1,11,76,750/- needs to be taxed fully in the absence of any evidences in favour of the assessee keeping in view the statement given by the assessee during search proceedings as under: Sr AY Plot No. Declared in ROI under-which Head Sale Consideration Amount as claimed by the assessee before Appellate Authorities Sale Consideration as per Sale Agreements produced by the assessee at Remand proceedings AY wise Difference amount 1 2011-12 438 Business income u/s 44AD 15,00,000 12,00,000 3,00,000 82 Business income u/s 44AD 27,86,250 12,51,000 15,35,250 2 2012-13 354A Business income u/s 44AD 20,50,000 12,50,000 8,00,000 354 Business income u/s 44AD 20,50,000 12,50,000 8,00,000 3 2013-14 83NP Business income u/s 44AD 19,00,000 11,00,000 8,00,000 4 2014-15 23NP Business income u/s u/s 44AD 12,50,000 7,86,000 4,64,000 23SP 15,00 000 2,77,500 12,22,500 44 16,00,000 3,32,500 12,67,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 11 individual houses on 11 plots and the balance 7 plots were sold as pieces of land. It was found during the course of search that the total receipts of Rs.2,45,00,000/- on account of sale of 11 independent houses and 7 plots were non offered to tax. Vide the statement recorded during the course of search, the assessee offered Rs.1.45 crores in AY 2013-14 and Rs.1.00 crore in AY 201415 on account of the said sales. Since in the Return of Income filed u/s.153A the assessee declared business income of Rs.1,52,000/- u/s. 44AD, and Rs.3,22,441/- under the head Long Term Capital Gains, the Assessing Officer, treating these incomes as distinct from the Income of Rs.1.45 crores declared during the course of search, added the entire amount of Rs.1.45 crores to the assessee's Returned Income on account of the undisclosed income from the sale of independent houses and plots, as discussed above. During the course of appellate proceedings, the contention of the assessee's AR is that the assessee has shown the profits and capital gains from the sale of the said 11 independent houses and 7 plots in the respective AYs from AY 2011-12 to AY 2015-16, in the Returns filed u/s,153A. The det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the suppressed turnover should be taxed, the estimation of that profit element would depend on the facts of the particular case. In the case of the appellant at hand, the AO is of the view that the undisclosed receipt's are outright income, and therefore, the AO has taxed 100% of the amount as suppressed income. The appellant on the other hand contends that the Net Profit Rate of 8% returned by it should be accepted. The contention of the appellant to apply 8% NP rate is obviously baseless. The huge unaccounted sales and suppressed turnover uncovered during search is sufficient evidence that the Net Profit being returned was grossly suppressed. In similar circumstances, in the case of DOT Vs.Panna Corporation (2012)/74 DTR (Guj) 89, where the assessee was engaged in the business of construction of flats, and loose papers evidencing collection of unaccounted cash were found during course of search, the Gujarat High Court upheld determination of income at Rs.26 lacs out of total undisclosed receipts of Rs.62 lacs (i.e., 42%). In the decision of Sharda Real Estate reproduced above, the MP High Court upheld the determination of income @25% of unaccounted receipts. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee, whereas, ld. CIT(A) has estimated the suppressed income @ 40%. We notice that assessee has declared the income @ 5.12% whereas ld. CIT(A) has estimated the income @ 40%. We are in agreement with the CIT(A) that only income should be estimated and not the whole supressed turnover as income. However, the income estimation should be realistic and based on the trend in the industry. In the case of Sri Narendar Reddy Maddi Vs. ITO in ITA No. 871/Hyd/2016 for AY 2011-12, on similar issue, the coordinate bench has held as under: "6. We have considered the rival contentions and perused the statements placed on record and the case law relied upon. As seen from the order of the AO, the order was an ex-parte order, therefore assessee was not in a position to explain the nature of receipt. Before the Ld.CIT(A), necessary explanation was given. CIT(A) in his order has partly accepted the turnovers to the extent they are accounted for and the balance was treated as unexplained cash credit. Since the nature of receipts are pertaining to the contract works, it is not correct on the part of the authorities to bring to tax the entire receipt as income. As seen from the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered view, 10% is reasonable and in line with the Villa Projects in the real estate industry. Accordingly, we direct the AO to estimate income @ 10% of the undisclosed turnover. Accordingly, ground raised by the assessee is partly allowed." 7. Per contra, the ld.DR relied upon the order passed by the lower authorities. It was further submitted that the decision in the case of Sampada Homes pertains to Villa and not pertains to the plots/housing and therefore, the said decision whereby the estimation of profit @ 10% was restricted by the Tribunal is not applicable. 8. We have heard the rival submissions and perused the material on record. During the argument, the ld.AR has drawn attention to the summary sheet prepared by the assessee, whereby the break-up of each year was mentioned. He has drawn our attention to Page 114 of the Paper Book, wherein the following break-up was given. Income admitted u/s 153A for sale of plots / houses. Asst. Year Paper Book Reference Gross Receipts Business Income @ 8% Capital Gains 2011-12 62 42,86,250 3,42,900 -- 2012-13 66 49,20,000 3,93,600 -- 2013-14 71 19,00,000 1,52,000 -- 2014-15 70 41,50,000 -- 3,22,441 2015-16 75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year wise sales with regard to the 11 independent houses and 7 plots, AY wise, was furnished, along with supporting evidences, which were forwarded to the Assessing Officer, for examination and report thereon. The Assessing Officer, vide his Remand Report dated 22-03-2018, which is reproduced in para 9.3 above, has verified the statement and the evidences furnished by the appellant, and has confirmed that the total consideration of Rs.2.45 crores has been reflected in the Returns filed u/s.153A for the respective AYs" 8.4. In our view, once it was agreed by the Assessing Officer based on the evidence that the entire sale consideration pertaining to 11 independent houses and 7 plots in the respective AYs from A.Y 2011-12 to A.Y. 2015-16 were duly shown by the assessee then the correct course would be to tax the turnover for these two years which pertain to AYs.2013-14 and 2014-15 only. At this stage, it is useful to mention that the co-ordinate Bench of the Tribunal in the case of Sampada Homes had revised the rate of 40% on the total turnover and had reduced it to 10%. However, the said decision was contested by the ld.DR for Revenue showing that it pertains to Villas issues hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been issued during the current F. Y.2014-15. This clearly shows that the sales were booked and the sale considerations were received during F. Y. 2014-15 from 35 customers. However, you have shown to have received advance from the same customers for Rs.2.32 crores during F. Y.2012-13 and Rs. 2.80 Crores during F.Y.2013-14 in your balance sheet. Please explain the discrepancy? Ans : I submit that the above discrepancy is due to the incorrect entries deliberately entered by me in my books Of accounts of F. Ys.2012-13 and 2013-14. As stated above, in Feb, 2013 our firm has purchased in Tukkuüuda for 4.23 crones for which consideration of Rs.3.18 crores was required to be paid in Cash. I had taken cash loans from known persons for this amount and made the payments to landlords at the time of registration. However, in the absence of any explainable Sources of this cash payment, had utilized the names of these various customers and I have entered the same in the balance sheet for F. Y.s 2013-14 and 2014-15, as if they have given advances for plots. Pan Of the source was also adjusted by increasing the capita/ amount which is in my name i.e., in the name Of Damodar Reddy. ln ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We also received an amount of Rs.12,00,000 from Squaremile Developments. These amounts were given for advance for purchase of property to the tune of Rs.4,59,62,200 and for others which were clearly mentioned in the Balance Sheet submitted for the Financial Year 2013-14. Thus, the entire investments are accounted for during the Asst. Year 2013-14 relevant to the accounting year ended on 31.03.2013. 3.5.4 Copy of the further submissions of squaremile projects on similar lines is at pages 10 & 11 of Paper Book. 3.6 Copies of the balance sheet of the Squaremile Projects for the Asst. Year.2013-14, 2014-15 and 2015-16 indicating the advances from the customers and the amounts paid for the purchase of the land are placed at pages 13 to 18 of the Paper Book. The said firm had also explained the reasons for the inappropriate statement made by the appellant in the course of proceedings u/s 132. It is pertinent to submit that the assessment u/s. 143(3) was completed in the case of the said firm Squaremile Projects by the very same Assessing Officer accepting the contentions of the firm. Copy of the order u/s 143(3) dt.30.12.2016 is placed at pages 247 & 248 of the paper book. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fats and in a state of confusion. The actual position appearing in the balance sheets and other details cannot be over looked. The undisputed facts remain that the acquisition of land and sources thereon were fully disclosed by the firm much before the date of search. The Assessing Officer states that the assessment of the firm for Asst.Year 201415 was not u/s 143(3). The Assessing Officer in his report dt.05.01.2018 is totally silent on the reference to notices u/s 274 r.w.s.271(1)(b) dt.06.05.2016 for Asst.Year 2014-15 in the case of Firm M/s. Square Mile Projects. it shows that the return of the firm for Asst.Year 2014-15 was before the Assessing Officer. As already stated in the letter filed on 22.12.2017, the firm in its letter filed before the Assessing Officer categorically (pages 10 to 12 of paper book) stated that the sources for land purchase were advances from customers. Hence no addition whatsoever can be made in the hands of the appellant towards the land acquired by M/s. Square Mile Projects since the sources were self explained in the balance sheets of the said firm filed much before the date of search. The Assessing Officer in his remand report could not disprove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. The said firm Sampada Homes is assessed to tax separately by the very same Assessing Officer and the assessments were completed u/s.143(3) r.w.s 153C by the very same Assessing Officer almost simultaneously and hence the addition of Rs.2,65,310 as unsubstantiated is highly unjustified. In fact in the computation filed with the return of income (page 233 of Paper book) the amount was shown as share of profit from M/s. Sampada Homes". 12.3 When asked to comment on the submissions of the assessee, in the report furnished on 22.03.2018, the Assessing Officer has stated as under: "7. Unsubstantiated claim of exemption of Rs.2,65,310/-: In view of the submissions. made by the AR at the appellate proceedings & forwarded to this office, the assessee's contention in this regard i.e. it being share of profit from the firm Sampada Homes, is acceptable". 12.4 As explained by the appellant's AR, the addition of Rs.2,65,310/- made by the Assessing Officer represents the appellant's share of profit as partner from M/s.Sampada Homes. This fact has been verified and confirmed by the Assessing Officer also, in his Remand Report dated 22-03-2018, which is reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, ld.CIT(A) had made additions solely on the basis of the statement, which cannot be countenanced. We disapprove of it. As various documents are specifically filed in the form of additional evidence before us hence ground no 2 to 5 are remanded back to the file of AO for the limited purpose to verify additional evidence now filled before us and find out whether the undisclosed cash payment of Rs.3,18,00,000/- made towards the purchase of land was examined and deleted by the Assessing Officer in the case of M/s. Squaremile Projects or not and if the answer to the above question is yes then no addition should be made in the hands of the assessee. Thus, grounds 2 to 5 are allowed for statistical purposes. 17. In the result, the appeal of the assessee in ITA No.1630/Hyd/2018 for A.Y. 2013-14 is partly allowed for statistical purposes. 18. Now coming to ITA No.1631/Hyd/2018 for A.Y. 2014-15, we respectfully, following our decision for A.Y. 2013-14 decided above, partly allow the same i.e. ITA No.1631/Hyd/2018 for A.Y. 2014-15. Accordingly, the appeal of the assessee in ITA No.1631/Hyd/2018 is also partly allowed. 19. In the result, both the appeals of the assessee are partly allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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