Commissioner Of Income Tax-Central, Jaipur v. M/S. Trimurti Colonizers & Builders Pvt.ltd

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR. D.B. Income Tax Appeal No.201/2011 Commissioner of Income Tax-Central, JaipurVs.M/s. Trimurti Colonizers & Builders Pvt.Ltd. DATE OF JUDGMENT ::: 9[th] September, 2016HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE BANWARI LAL SHARMA Mr. Anil Mehta, for the appellant. ***** (1)By way of this appeal, the Department haschallenged the judgment & order of the Income TaxAppellate Tribunal whereby Tribunal has dismissed theappeal preferred by the Department and allowing the appealof the assessee, modifying the order of the CIT (Appeals). (2) Counsel for the appellant-Department has framedfollowing substantial questions of law:- “(i) Whether the Tribunal was justified indeleting the trading addition made by theAssessing Officer of Rs. 66,83,980/- made withrespect to suppressed sales on sale of flatsignoring the fact that the assessee's books ofaccounts were rejected by the Assessing Officerand confirmed by the CIT(A)? (ii) Whether the Tribunal has erred in not onlydeleting the addition of Rs. 5,52,577/- confirmedby CIT(A), but in deleting the entire addition ofRs. 66,83,980/-, ignoring the defects, pointedout by Assessing Officer and confirmed by CIT(A)in the books of accounts of assessee? (iii) Whether the Tribunal was justified in ignoringthat in case of rejection of books of accounts the Assessing Officer has all the powers to pass theassessment order to best of the judgment and toestimate the income according to the facts andmaterial on record? (iv) Whether on the facts and circumstances ofthe case, the finding of the Tribunal is perverse,contrary to the record and untenable in the eyeof law?” 3.0The facts in brief are that the assessee is engaged in the business of construction, purchase and saleof immovable property. During the course of assessmentproceeding, it was found that assessee has sold flats, officeprojects, in Trimurti Apartment, Jaipur. Further, it was foundthat the assessee has suppressed the sale receipts, whichthe assessee was asked to explain. However, the assesseefailed to explain the different in sale prices and otherdiscrepancies and accordingly its books of accounts havingfailed to depict true picture of assessee's account, wererejected under Section 145(3) of the Act. Thus, theassessing officer proceeded to estimated the asssessee'sincome and resultantly estimated the suppressed sales ofRs.66,83,980/-. 3.1The assessing officer after considering the evidence by reasoned order has added income to the tune ofRs.66,83,980/- which was challenged by the appellant andCIT (Appeals) has partly allowed in favour of the assessee.3.2Both the department and the assessee preferredthe appeals before the tribunal. Following question of law framed by the department in the Income Tax AppealNo.897/JP/07 (Revenue)- A.Y.2004-05 which reads asunder:- Solitary Ground: The learned CIT(A) has erredin allowing relief of Rs.61,31,403/- out of thetrading addition made by the AO without anyproper justification whereas the AO hasgathered sufficient evidences to make additionon the basis of pre-ponderence of probability.” 4.0We have heard the counsel for the appellant aswell counsel for the respondent. 4.1Taking into account the observations made by thetribunal and more particularly para no.4,5, 6 and 7 reads asunder:- framed by the department in the Income Tax AppealNo.897/JP/07 (Revenue)- A.Y.2004-05 which reads asunder:- Solitary Ground: The learned CIT(A) has erredin allowing relief of Rs.61,31,403/- out of thetrading addition made by the AO without anyproper justification whereas the AO hasgathered sufficient evidences to make additionon the basis of pre-ponderence of probability.” 4.0We have heard the counsel for the appellant aswell counsel for the respondent. 4.1Taking into account the observations made by thetribunal and more particularly para no.4,5, 6 and 7 reads asunder:- “4.We have heard the rival contentions andperused the facts of the case. The issuebefore us is as to the suppression ofsales/receipts by the assessee on the sale ofthe flats in Trimurti Aprtments, Malviya Nagarand Trimurti Dave Apartments in Banipark atJaipur. In the present case, the AO does nothave a direct evidence that the assessee hasreceived the payments over and above thecheque payments declared in the books ofaccount on the sale of various flats mentionedby the AO in his order. Though the EvidenceAct does not strictly apply in the income taxproceedings yet the circumstances and factshas been taken into consideration by the AOwhile making the assessment. As regards thesale in Trimurti Apartments, Malviya Nagar,Jaipur, the rates at which flats were sold forRs.805/- per sq. ft except two flats sold to Dr.R.C. Andley declared to have been sold atRs.520/- per sq. ft and Shri Ashok Narooka atRs.550/- per sq. ft. Show cause notice wasgiven to the assessee. The explanation of theassessee with regard to flat sold to Dr. R.C.Andley was that:- i) The Flat No.D-503 is located at the top floor of the complex. ii) A lot of cracks due to thermal movementhad developed in the top floor of the building(It is normal feature in the multi-storiedbuilding). iii) The Flat was located on the rear side ofthe building which never enjoyed the frontview and therefore had a locationaldisadvantage. iv) Other finishing related problems werethere. V) Earlier commitment of making payment ininstallments by a client failed which wasfulfilled by the present buyer Dr. R.C. Andleyby making a single payment. The AO did not point out any defect in theexplanation given by the assessee. Thefinding of the AO that the assessee has notgiven any evidence in support of hisexplanation can not be accepted because thesaid explanation was a matter of factavailable in the flat itself sold to Dr. R.C.Andley and other facts could be verified fromDr. R.C. Andley. The AO has not proceeded toverify the explanation given by the assesseebut has rejected the same by giving hisopinion in the assessment order. Thisapproach of the AO is not acceptable and isnot justified. 5. As regards the sale of Flat No.404 to Dr.Roongta, the AO has rejected the explanationof the assessee without bringing any materialor cogent reasoning on record except theopinion which is without any basis and cannotbe accepted. 6. As regards the sales of the Flats in TrimurtiDave Apartments, the assessee has submittedthe explanation for charging different rates fordifferent flats and nothing has been broughton record to disprove the explanation of theassessee. 7. In the circumstances and facts of the case,The AO is not justified to doubt the salesdeclared by the assessee and in the absenceof any material on record or cogent reasoningby the AO, the books of the account cannotbe rejected. The AO is therefore not justified 5. As regards the sale of Flat No.404 to Dr.Roongta, the AO has rejected the explanationof the assessee without bringing any materialor cogent reasoning on record except theopinion which is without any basis and cannotbe accepted. 6. As regards the sales of the Flats in TrimurtiDave Apartments, the assessee has submittedthe explanation for charging different rates fordifferent flats and nothing has been broughton record to disprove the explanation of theassessee. 7. In the circumstances and facts of the case,The AO is not justified to doubt the salesdeclared by the assessee and in the absenceof any material on record or cogent reasoningby the AO, the books of the account cannotbe rejected. The AO is therefore not justified to make estimation of different amount ofsales as declared by the assessee and noaddition on account of suppressed sale can bemade. The Ld. CIT (Appeal) is also notjustified in confirming the rejection of booksof account and estimation of suppressed salesand addition of income. The AO is thereforedirected to delete the addition ofRs.66,83,980/- made by him. Thus GroundNo.1 & 4 of the assessee in ITA No.903/JP/07and Ground No.1 to 5 of the C.O. Of theassessee are allowed and the solitary groundof the Revenue is dismissed.” 5.0We are of the opinion that the question which israised moreover is of fact and explanation of the assessee isaccepted by the tribunal. Therefore, we answer the questionraised in the present appeal in favour of the assessee andagainst the Department. (Banwari Lal Sharma), J. (K.S. Jhaveri), J. Brijesh8.