The Principal Commissioner Of Income Tax (Central), Surat v. M/S Shree Hari Corporation

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 126 of 2022 =============================================THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT VersusM/S SHREE HARI CORPORATION ============================================= Appearance: M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MS. JUSTICE NISHA M. THAKOREDate : 17/01/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.This Tax Appeal under Section 260A of the Income TaxAct, 1961 (for short ‘the Act,1961’) is at the instance of theRevenue and is directed against the order passed by theIncome Tax Appellate Tribunal, Surat Bench, Surat dated17.03.2021 in the ITA No.1553/AHD/2017 for the A.Y. 2014-15whereby the appeal preferred by the Revenue against theorder passed by the CIT(A) came to be dismissed. 2.The Revenue has proposed the following two questions oflaw for the consideration of this Court: “[A]Whether on the facts and in the circumstances of the caseand in law, the Appellate Tribunal is justified in confirming thefindings of the CIT(A) in deleting the addition of Rs.5,20,95,322/-made by the Assessing Officer on account of estimation of profitembedded in the total unaccounted on money receipts from realestate business of the assessee ignoring the fact that theestimation of profit was made on the basis of evidences foundduring the course of search/survey proceedings and admissionsmade by two buyers of flats in their sworn in statementsrecorded under Section 131 of the Act as also on the basis of the statement recorded from the partners of the firm under Section132(4) of the Act wherein they have admitted receipts of moneyby the group from other real estate projects undertaken by thegroup? [B]Whether on the facts and in the circumstances of the caseand in law, the Hon’ble is justified in not appreciating the factthat the estimation of profit and addition made by the AssessingOfficer was on the basis of the evidences found during thecourse of search/survey proceedings and statements recordedunder Section 131 and 132(4) of the Act and hence, the decisionof the Appellate Tribunal was contrary to the facts of the caseand, therefore, there is perversity in the order of the AppellateTribunal?” 3.We have heard Mr. M.R. Bhatt, the learned SeniorCounsel appearing for the Revenue. 4.It appears from the materials on record that the AO madeaddition based on an assumption that during the survey, thepartner of the Firm in his statement stated that the project wasof 288 flats and out of 30 shops, 18 shops were booked at therate of Rs.2000/- per sq. ft. on the upper ground floor of thecomplex. The AO on the basis of such statement of the twobuyers of the flats calculated the ‘on money’ to the tune ofRs.20.81 crore with respect to 288 flats. On the basis of theworking shown in the table, which has been incorporated in theimpugned order passed by the Tribunal, the AO worked out thetotal ‘on money’ on the project to the tune ofRs.22,83,81,290/-. 5.The assessee carried the matter in appeal before theCommissioner of Appeals. The assessee succeeded before theCIT(A). The CIT(A) took the view that there was nodocumentary evidence to substantiate the receipt of ‘onmoney’. The CIT(A) also noticed that no documents wererecovered from the Firm during the search and surveyproceedings. The CIT(A) did not approve the AO’s estimate of the figure of ‘on money’ based merely on the two statementsof the buyers. The Revenue thought fit to carry the matter tothe Income Tax Appellate Tribunal. The Tribunal while affirmingthe order passed by the CIT(A) observed in paragraphs 7, 8, 9& 10 as under: 5.The assessee carried the matter in appeal before theCommissioner of Appeals. The assessee succeeded before theCIT(A). The CIT(A) took the view that there was nodocumentary evidence to substantiate the receipt of ‘onmoney’. The CIT(A) also noticed that no documents wererecovered from the Firm during the search and surveyproceedings. The CIT(A) did not approve the AO’s estimate of the figure of ‘on money’ based merely on the two statementsof the buyers. The Revenue thought fit to carry the matter tothe Income Tax Appellate Tribunal. The Tribunal while affirmingthe order passed by the CIT(A) observed in paragraphs 7, 8, 9& 10 as under: “7.We have considered the rival submission of parties andhave gone through the order of Lower Authorities carefully. Wehave also deliberated on various case laws relied by the LowerAuthorities as well as by ld. AR for the assessee, during thecourse of his submission. The AO made addition by assuming thatduring the survey, the partner of the firm stated that the projectconsists of 288 flats and 30 shops and boked 18 shops at 2000per sq ft upper ground floor in Vaishnodevi Heights. The partnerexplained the difference in the sale price was due to extra work.The AO on the basis of statement of two flats buyers comparingto booking of the project calculated 'on money' of Rs. 20.81 crorein respect of 288 flats on his following observation: "Shri Manish Katargamwala has further stated that thisproject has 288 flats consisting of saleable area of 338114Sq. Ft. and 30shops admeasuring saleable area of 14480 Sq.Fts.It was also stated by him that 18 shops have beenbooked so far by the customers @ Rs. 2,000/- per Sq. Ft. atground floor and Rs.1,800/ per Sq. Ft. at upper ground floor.However, he finally stated that difference in document priceand booking amount is on account of certain extra work inflats and he shall submit details thereof within 2-3 days.However no such details have been submitted by theassessee. On the basis of above mentioned details andstatements of customers of the assessee as well as ManishKatargamwala, one of the partner of the firm the total onmoney involved in this project with respect to the flats isworked as under: TotalPercentage ofRateTotal AmountSaleableBokingArea(338114Sq.15215145% (as stated by179027,23,50,290the assessee in his18596355%220040,91,18,600Total Sale Consideration68,14,68,890/-Less: Document Price (338114X1400)47,33,59,600/-Total on money involved20,81,09,290/- 8.Further with regards to thirty shops the A.O. madefollowing estimations; C/TAXAP/126/2022 ORDER DATED: 17/01/2022 9.Thus, on the basis of the working shown in the aforesaidtable the A.O. worked out the total ‘on money’ on the project ofRs.22,83,81,290/- (20,81,09,290 +2,02,72,000). TotalPercentage ofRateTotal AmountSaleableBokingArea(338114Sq.15215145% (as stated by179027,23,50,290the assessee in his18596355%220040,91,18,600Total Sale Consideration68,14,68,890/-Less: Document Price (338114X1400)47,33,59,600/-Total on money involved20,81,09,290/- 8.Further with regards to thirty shops the A.O. madefollowing estimations; C/TAXAP/126/2022 ORDER DATED: 17/01/2022 9.Thus, on the basis of the working shown in the aforesaidtable the A.O. worked out the total ‘on money’ on the project ofRs.22,83,81,290/- (20,81,09,290 +2,02,72,000). 10.The Ld. CIT(A) after considering the submission ofassessee, working of AO and the statement of parties held thatthere is no documentary evidence to substantiate, the receipt of'on money’. No documents were recovered from the position offirm during the search or survey proceedings. The AO estimatedthe figure of on-money on the basis of statements of two buyersnamely Shri Anand Gaur and Sudhirbhai Parikh, recorded duringthe survey. We have further noted that Id.CIT(A) independentlyexamined the statement of both these two flat buyers, theld.CIT(A) on examination of their statement held that both theparties stated about the rate of flat booking, payment terms,money paid from time to time both the buyers nowhere asked inthe statement that they have made 'on money' payment. Thestatement of purchaser cannot alone prove that they were havingany agreement with the assessee regarding any payment madeoutside books of accounts. The contention of assessee that boththe buyers paid extra money for extra work agreement is alsoproved by proof of disbursal of bank loans as well as by extrawork agreements. The ld.CIT(A) further noted that if the extrawork doubted by search or survey party, no further investigationwas made against those flats owners. The adoption of huge ‘onmoney’ without iota of evidence is not justified and deleted theentire addition.” 6.We are of the view having regard to what has beenstated about that we should not disturb the order passed bythe Appellate Tribunal dismissing the Appeal filed by theRevenue thereby affirming the findings recorded by the CIT(A). 7.In view of the aforesaid, this appeal fails and is herebydismissed. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J)