Acit Central Circle, Jaipur v. Order

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 169 / 2017 1. Commissioner of Income Tax, NCR Building Statue Circle, Jaipur 2. ACIT Central Circle, Jaipur ----Appellants Versus Smt. Renu Agarwal, 25, Dayal Nagar, Gopalpura Byepass, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anil Mehta with Mr. Sameer SharmaFor Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 08/08/2017 By way of this appeal, the appellant has assailed thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal preferred by the department. Counsel for the appellant has framed the following questionof law:- i) Whether on the facts and in the circumstancesof the case and in law the ITAT is justified thedeleting the penalty of Rs. 10680000/- imposed bythe AO under section 271AAA of the income Tax,Act, 1961.” Counsel for the appellant has raised the contention that though the AO found the certificate taken from the Panchayat was fraud and the penalty was imposed but no such contention has been raised or any ground was taken before the Tribunal. We have gone through the judgment of the Tribunal. In para 2.1 & 2.4 the Tribunal observed as under: “2.1 The facts of the issue as emerges from theorder of the ld. CIT(A) is as under:- 3.1.3 I have duly considered assessee’ssubmission and carefully gone through penaltyorder passed by the AO. I have also perused thefacts of the case. On perusal of submission madeand assessment order passed by the AO,following things have been noticed. (i) No incriminating document whatsoeverindicating cash received from “Guru Pragya”onaccount of Land transaction. Whatever amountreceived from “Guru Pragya” was found recordedin the books found during the course of search.Accordingly, there is no allegation of receipt of onmoney by the assessee found during the searchoperation. Cost of land was duly disclosed in theregular books of accounts found by search party.(ii) Cheques as consideration received from GuruPragya shown in the regular books of accounts.(iii) Seized document identified as AS-1 pg 4 isplaced at page 7 of the paper book.Notings/Transactions recorded are therein whichis mentioned at page 22 of ld. CIT(A)’s order. This seized document shows total receipt ofRs.6.01 Cr. upto 15th Sep 2010. Assessee hassubmitted a ledger account (PB Pg 48-50) whichshows receipt of Rs.6.01 Cr. upto 12/04/2010.Accordingly, there cannot be undisclosedreceipts. On plain reading of the aforementioneddocument, it is also seen that transactionpertains to JV with Guru Pragya. Totalconsiderations estimated was Rs.9.86 Cr.(approximate) against which the assessee hasshown sales on percentage completion method ofRs.4,72,96,492/= in AY 2011-12andRs.3,83,95,882/= in AY 2012-13, totalling toRs.8,56,92,374/=. Since, the sale of the projectwas not completed upto 31/03/2012, therefore,the assessee has also not booked entire cost ofthe land against the project and closing stock ofthe land amounting to Rs.7,40,180/= shown inBalance Sheet as on 31/03/2012. This fact wasalso disclosed before the AO vide letter(para Dinternal page 4 of the letter) dt. 09/9/2013 (Reference: PB Pg 184-191). This indicate thatthere is no documentary evidence of undisclosedincome found during the search operation andtransactions recorded in the said seizeddocument identified as AS-1 pg 4 are dulymatching with the regular books of account forthe year. The only dispute in this case is ofaccounting treatment of the transaction of the JVVs sale of land. The AO treated the transaction assale of land whereas the assessee treated thesame as development agreement/JV. Assesseetreated this transaction as a JV/Developmentagreement on the basis of registereddevelopment agreement which was duly acceptedby the Stamp Duty Authorities / JDA and otherGovt. Dept. AO’s observation is purely based oncertain terms and conditions mentioned in thedevelopment agreement such as advance moneyreceived, rate @ Rs.1000/- per Sq Ft, fixed timelimit for completion of the project, profitshareable in the ratio of 21:79 with Guru Pragyaetc. In this regard, AO has merely raised hisdoubt without any basis or documentaryevidences found ruing the search operation. It ispertinent to mention here that AR has explainedall the objections raised by the AO on the termsand conditions mentioned in the developmentagreement vide letter dt. 9th Sep 2013 [Para (e)internal pg 5 to 7] (Ref PB Pg 184 to 191). Onperusal of the penalty order, it is also seen thatAO has not controverted all these facts. It is alsoseen that advance money received was towardsrefundable security against the developmentagreement. It is a normal practice adopted byany prudent business man to protect his/herinterest. It is also a fact that assessee has givenpossession to Guru Pragya for construction only,not for sale of land as it is. AR has also submittedbefore the AO and appellate proceeding thateven the sale deed with allotee/flat owner will bejointly executed by the developer and the landowner i.e., the assessee. All these prove thecontention of the assessee with regard to JV /Development agreement with Guru Pragya arebonafide. (iv) It is also a fact that issue of 80 IB claim incase of Guru Pragya in AY 2010-11 has beenallowed by CIT(Appeals)-1 Jaipur vide orderdated 24/02/2015 (ITA No.25/13-14). (v) AO has referred the statement of Sh. AshokAgrawal at pg 23 to 24 in the impugned penaltyorder. On plain reading of the sworn statementrecorded on oath of Sh. Ashok Agrawal, it is seen that Sh. Ashok Agrawal has admitted undisclosedsale on the ground that the amount receivedfrom developer has shown advance in books ofaccounts and sale has not been recorded in thebooks found at the time of search. In this regard,AR explained that the assessee is followingpercentage completion method, therefore, salecould be recroded only at closure of accountingyear after receipt of certificate from thedeveloper. Assessee has submitted copies ofcertificates of share in sale made in housingproject issued by Guru Pragya which is placed atPB Pg 95-96. The certificate for FY 2010-11 isdated 24/9/2011, therefore, the assessee couldnot know what will be sale figure as on the dateof search. Whether a particular transaction isdisclosed or undisclosed this should be analyzedwith reference to date of search. As on the dateof search, the fact is that amount receivedagainst sale as well as cost was duly recorded inthe books found by the search team. Theaccounting treatment of the land as JV was givenafter the search i.e. at the time of filing of thereturn and on the basis of expert’s advice(Auditors), the said transactions have not beentreated as sale of land and auditors have notqualified the tax audit report. Therefore,assessee acted on expert’s advice and given theaccounting treatment of the land accordingly. (vi) AO has mentioned that assessee has notpreferred any appeal against the impugnedassessment order which clearly shows thatassessee has accepted the contention of the AOin respect of the additions made. In this regard,AR has mentioned that not filing of the appealcannot be a ground for levy of penalty, by relyingon the decision of Hon’ble Jurisdictional HighCourt in case of Jawahar Kala (Supra). (vii) Even otherwise also, the assessee is coveredby sub clause 2 of sec 271AAA of the Act. In thestatement recorded u/s 132(4) of the Act,assessee has admitted the income and stated themanner in which income derived and declaredthe same in her ROI filed after search and paidtaxes thereof. In view of facts and circumstances of the case asmentioned above, levy of penalty ofRs.1,06,08,000/= u/s 271AAA of the Act cannotbe sustained, hence deleted.’’ 2.4 We have heard the rival contentions andperused the materials available on record. Asearch was conducted on 22-09-2010 in the caseof Shree Ram Group, Jaipur to which the assessee belongs . The assessee is an individualand she derives income from real estatebusiness, and capital gain. The assesseepurchased agricultural land and got it convertedinto residential and commercial plot after gettingthe same approved from JDA (i.e. JaipurDevelopment Authority). The assessee filedreturn of income declaring total income at Rs.7,11,74,000/-/- on 27- 09-2011 u/s 139(1)(Copy at PB Page 8-12). In original return filedu/s 139(1), she claimed deduction of Rs.4,58,25,167/- u/s 80IB(10) against the jointventure housing project with Guru PragyaInfrastructure Pvt Ltd. In support of this claim,the assessee filed Certificate of CA in Form No10CCB (Copy at PB Page 36-42). However, whenit came to the knowledge of the assessee thatthe claim of deduction u/s 80IB(10) would attractthe prolonged litigation with department, shechoose the path of peace and in order to avoidthe litigation, she withdrew the claim ofdeduction u/s 80IB by filing revised return u/s139(5) of Income Tax Act within the time allowedby the law. The Revised return of income wasfiled on 26-03-2013 declaring total income at Rs.11,69,99,170/- (Copy at PB Page 43-47) and duetaxes were paid thereon along with the revisedreturn. The basic dispute is over a housingproject in joint venture with M/s Guru PragyaInfrastructure Pvt Ltd. The issue is whether thetransaction is a joint venture housing project orpure sale of the land in the hands of assessee.During the course of search a document Page 4Exhibit 1 of Annexure AS-01 (Copy at PB Page 7)was found which is aide memoire – a roughnoting of joint venture transaction with M/sGurupragya Real Mart Pvt Ltd (Now M/s GuruPragya Infrastructure Pvt Ltd) (in short M/sGurupragya) showing estimated amount ofconsideration of Rs. 9.86 crores out of which anamount of Rs. 6.01 crore was received till15.09.2010 and the remaining amount of Rs.3.85 crores was outstanding. In the regularbooks of account seized by the department, theamount received from M/s Gurupragya wasshown as “Advance Received” (Copy of ledger a/cat PB Page 48-50). It is undisputed fact that theassessee has not received any “unaccountedmoney” or “Cash” from M/s Gurupragya whateverthe amount was paid by M/s Gurupragya wasfound recorded in the books of account of theassessee which were found as the result ofsearch. During the course of search thestatement of Shri Ashok Agarwal dated 12.10.2010, (husband of assessee) and assesseewere recorded u/s 132(4) (Copy at PB Page 51-61). The statement of Shri Ashok Agarwal,husband of the assessee admitted the incomefrom Joint Venture Transaction with Gurupragya.In his statement he said that the land was soldthrough JV to M/s. Guru Real Pragya Mart Pvt.Ltd. for total sale consideration of Rs.9.86 croreand out of which Rs.6.01 crore was received andthe remaining amount of Rs.3.85 crore wasoutstanding. Smt Renu Agarwal also signed thisstatement. The manner in which the undisclosedincome derived was also explained. The assesseehad spelled out in detail the nature of thetransaction. The assessee had stated that theamount is shown as advance in the books ofaccount. The said income was fully recorded inthe books of account found at the time of search.The assessee was acting on the basis of terms ofdevelopment agreement (Copy at PB Page 62-94) and following the “Percentage CompletionMethod” for this project. The sale was recordedon the basis of the figures of sales intimated bythe developer. The developer M/s GurupragyaReal Mart Pvt Ltd (Gurupragya Infra Ltd)intimated the assessee’s share in sales i.e.3,35,762 Sq ft area amounting to Rs.4,72,96,492/- on 31.03.2011(Certificate of GuruPragya at PB Page 95-96), therefore,corresponding journal entry was passed at theend of the year debiting the a/c of Developer andcrediting the account of “Sales Guru Shikhar A-GProject”. In the return of income, the assesseeshowed profit of Rs.4,58,25,167/- of AY 2011-12and profit of Rs. 3,72,01,442/- of AY 2012-13from this transaction and also claimed deductionu/s 80IB. The assessee vide letter dated23.01.2013 (Copy at PB Page 119-125A) clarifiedthat the transaction has been treated in books asunder:- (i) A.Y. 2011-12: On the basis of percentagecompletion method of accounting followed for thepurpose of joint venture, a sum ofRs.4,72,96,492/- on a/c of sale and interest ofRs.67,55,287/- was credited. Cost of land wastaken at Rs.14,71,325/- and thus a profit ofRs.4,58,25,167/- was declared from jointventure. (ii) In A.Y. 2012-13, the sale booked as perpercentagecompletionmethodwasRs.3,83,95,882/- and after considering the costof land of Rs.11,94,440/-, a profit ofRs.3,72,01,442/- was shown. In original return filed u/s 139(1) the deductionu/s 80IB(10) was claimed (Copy at PB Page 8-12), which was withdrawn by filing revised returnu/s 139 (5) of Income Tax Act (Copy at PB Page43-47) within the stipulated time. The due taxtogether with interest in respect of such incomehas been paid. In the assessment proceedingsthe AO held that the transaction of assessee withM/s Gurupragya is not of joint venture housingproject transaction but pure sale of land andassessed the profit from land at Rs.10,06,80,000/- of AY 2011-12 (Copy of order atPB Page 156-182) as against the profit of Rs.4,72,96,492/- and Rs. 3,83,95,882/- declared bythe assessee in the returns for the year ended on31.03.2011 and 31.03.2012 respectively. The AOin the assessment order relied on the statementon oath of Sh. Ashok Agarwal (Copy at PB Page51-61) and also referring to various clauses injoint agreement dated 19.03.2008 (Copy at PBPage 62-94) concluded that joint ventureagreement is nothing but sale of land for a fixedconsideration. Total salable area is 5,21,361sq.feet and considering the sale consideration ofRs.@210 per sq.feet relatable to assessee, thetotal consideration is Rs.10,94,85,810/- cost ofland is Rs.26,65,765 and thus profit on sale ofland came to Rs.10,60,80,000. The assessee hasshown profit of Rs.4,58,25,167 of AY 2011-12and profit of Rs. 3,72,01,442/- of AY 2012-13and unsold portion shown as stock . The AOrejected the submission of the assessee becauseof mainly following reasons: - (a) Consideration for sale of land was stated atRs.9.86 Crores while undisclosed income isdetermined at is Rs.10,60,80,000/-. (a) Consideration for sale of land was stated atRs.9.86 Crores while undisclosed income isdetermined at is Rs.10,60,80,000/-. (b) In statement, it is stated that land was soldwhile in return, the profit shown from sale ofproject through joint Venture. (c) Undisclosed income was not recorded in thebooks of account found during search. (d) The assessee has not paid tax together withinterest in respect of undisclosed income ofRs.10,60,80,000. (e) Since the assessee has not filed appeal andhence the issue is not debatable. The AO treated the amount of Rs. 10,06,80,000/-as undisclosed income of the assessee andinitiated penalty proceedings u/s 271AAA ofIncome Tax Act. The assessee filed detailedexplanation objecting the levy of penalty (Copyat PB Page 184-191) which was rejected by the AO in summary manner. The AO levied thepenaltyofRs.1,06.08,000/-onRs.10,60,80,000/- u/s 271AAA treating the amountof Rs.10,06,80,000/- as undisclosed by passingan order on 30/09/2013. The AO also leviedpenalty u/s 271(1)(c) of Income Tax Act on Rs.4,58,25,167/- by passing an separate order onaccount of deduction claimed under 80IB for theJV project. Thus the penalty on amount ofRs.4,58,25,167/- was imposed u/s 271AAA ofIncome Tax Act, 1961 as well as u/s 271(1)(c) ofIncome Tax Act, 1961. The assessee carried thematter before the ld. CIT(A) who had deleted thepenalty of Rs.1,06,80,000/- levied by the AO u/s271AAA of the I.T. Act, 1961. It is noted that theld. CIT(A) that there was no incriminatingdocuments as to cash received from ‘’GuruPragya’’ on account of land transaction and theamount so received during search was foundrecorded in the books of account of the assessee.The only dispute in this case is accountingtreatment of the transaction of the JV vs sale ofland whereas the assessee treated the same asdevelopment agreement / JV. The assesseetreated this transaction as a JV/ Developmentagreement on the basis of registereddevelopment agreement which was duly acceptedby the Stamp Duty Authorities/ JDA and otherGovt. Deptt. The AO treated it sales of the landby interpreting the certain clauses ofDevelopment Agreement. During the assessmentstage, no show cause notice was given to theassessee. However, at the penalty proceedingstage, the assessee submitted point to pointexplanation over the clauses of the DevelopmentAgreement which had not been controverted bythe AO in penalty order. Therefore, the assessee’streatment as to land transaction as jointventure / development agreement was bona fide.The Development Agreement is dated 19-03-2008. Therefore, it is not understandable onwhat basis it can be treated as sales forA.Y.2011-12. Looking into all the facts andcircumstances of the case, we concur with thefindings of the ld. CIT(A) on the issue inquestion. Thus the appeal filed by the Revenue isdismissed. In that view of the matter, no substantial question of law Hence, the appeal stands dismissed. (INDERJEET SINGH),J. A.Sharma/34 (K.S. JHAVERI),J.