THE DY CIT CEN CIR-1, MUMBAI v. M/S. VASTUSHREE ESTATE PVT. LTD, PUNE

ITA 1632/MUM/2007 | 1998-1999
Pronouncement Date: 30-04-2010 | Result: Dismissed

Appeal Details

RSA Number 163219914 RSA 2007
Assessee PAN AAACV6126D
Bench Mumbai
Appeal Number ITA 1632/MUM/2007
Duration Of Justice 3 year(s) 2 month(s) 7 day(s)
Appellant THE DY CIT CEN CIR-1, MUMBAI
Respondent M/S. VASTUSHREE ESTATE PVT. LTD, PUNE
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 30-04-2010
Date Of Final Hearing 10-02-2010
Next Hearing Date 10-02-2010
Assessment Year 1998-1999
Appeal Filed On 21-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI R.K. GUPTA (JM) & SHRI B. RAMAKOTAIAH (AM) I.T.A.NO. 1632 TO 1637/MUM/2007 (A.YS. 1998-99 TO 2003-04) DY.COMMR. OF INCOME-TAX CENT.CIRCLE-1 THANE PAWAR INDL.ESTATE EDULJI RD. CHARAI THANE(W)-400 601. VS. M/S. VASTUSHREE ESTATE P.LTD. LOTUS COURT PUNE SATARA ROAD PUNE. PAN: AAACV6126D APPELLANT RESPONDENT C.O.NOS.124 TO 129/MUM/2009 (ARISING OUT OF ITA NOS.1632 TO 1637/MU M/2007) (A.YS. 1998-99 TO 2003-04) M/S. VASTUSHREE ESTATE P.LTD. LOTUS COURT PUNE SATARA ROAD PUNE. PAN: AAACV6126D VS. DY.COMMR. OF INCOME-TAX CENT.CIRCLE-1 THANE PAWAR INDL.ESTATE EDULJI RD. CHARAI THANE(W)-400 601. APPELLANT RESPONDENT ASSESSEE BY S/SH RI SUNIL PATHAK/SUBODH RATNAPARKHI. DEPARTMEMT BY SHRI A .P. SINGH. O R D E R PER BENCH : THESE ARE SIX APPEALS AND SIX CROSS OBJECTIONS FILE D BY THE DEPARTMENT AND ASSESSEE AGAINST THE ORDERS OF THE LD. CIT(A)-I TH ANE RELATING TO ASSTT. YEARS 1998-99 TO 2003-04. SINCE COMMON ISSUES ARE INVOLVE D IN THE APPEALS OF THE DEPARTMENT AS WELL AS IN THE CROSS OBJECTION OF THE ASSESSEE THEY ARE DISPOSED OF TOGETHER. 2. THE LD. D.R. HAS STATED THAT THE CIT(A) HAS PASS ED A CONSOLIDATED ORDER AND THE GROUNDS OF THE DEPARTMENT ARE COMMON. IT W AS FURTHER SUBMITTED THAT THE APPEALS OF THE DEPARTMENT MAY BE TAKEN UP FOR H EARING FOR AY 1998-99 AND THE OUTCOME OF THE SAME MAY GOVERN ALL OTHER YEARS OF APPEAL. THE CONTENTION OF ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 2 THE LD. D.R. APPEARS TO BE CORRECT. THEREFORE THE APPEALS OF THE DEPARTMENT AND CROSS OBJECTIONS OF THE ASSESSEE ARE DISPOSED OF IN THE FOLLOWING MANNER. 3. COMMON/SIMILAR GROUNDS TAKEN IN ALL THE APPEALS ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ON MONEY C OMPONENT IN RESPECT OF OFFICES/SHOPS IN RESPECT OF 1 ST FLOOR 2 ND FLOOR AND FLATS BE CALCULATED AT 30% 20% & 10% RESPECTIVELY WHEN SPE CIFIC INSTANCES/EVIDENCES WERE AVAILABLE IN SEIZED MATERI AL AND THE SAME WERE QUOTED IN ASSESSMENT ORDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT 12.5% OF ON MO NEY COMPONENT SHOULD ONLY BE ADDED TO THE TOTAL INCOME DECLARED B Y THE ASSESSEE EVEN WHEN ALL ALLOWABLE DIRECT & INDIRECT EXPENSES WERE ALLOWED AND ONLY LIASONING EXPENSES SUCH AS MSEB FIRE NOC PMC STAMP DUTY AND PLAN PASSING WERE NOT ALLOWED BECAUSE NO BILLS WERE FOUND DURING THE COURSE OF SEARCH AND SUCH EXPENSES ARE N OT ALLOWABLE AS PER EXPLANATION TO SUB-SECTION (1) OF SECTION 37 OF THE I.T.ACT. BRIEFLY STATED THE FACTS OF THE CASE AS NOTED BY THE AO AND CIT(A) ARE AS UNDER. 4. IN THE ASSESSMENT ORDERS THE AO STATED THAT THE ASSESSEE COMPANY M/S. VASTUSHREE ESTATE PVT.LTD. DERIVES INCOME FROM BUI LDERS & PROMOTERS AND CONSTRUCTION ACTIVITY. THE ASSESSEES RESIDENTIAL A S WELL AS BUSINESS PREMISES WERE SEARCHED U/S.132 OF THE ACT ON 30-10-2003. SIM ILAR ACTION U/S.132 WAS ALSO CARRIED OUT IN THE GROUP CASES OF KARNAVAT FAM ILY. IN THE COURSE OF SEARCH ACTION A NUMBER OF INCRIMINATING DOCUMENTS WERE FO UND AND SEIZED SHOWING EVIDENCE OF SUPPRESSION OF PROFESSION RECEIPTS INV ESTMENT IN IMMOVEABLE AND MOVEABLE PROPERTY IN THE NAME OF THE ASSESSEE AND M EMBERS OF THE GROUP AND INFLATION OF EXPENSES ETC. 5. IN RESPONSE TO NOTICES ISSUED U/S.153A(1) THE A SSESSEE HAS FILED RETURN FOR THE ASST. YEAR 1998-99 DECLARING NET LOSS OF RS.28 97 207/- ON 24-11-2004. THE RETURN OF INCOME WAS ACCOMPANIED BY COMPUTATION OF TOTAL INCOME WITH STATEMENT OF LOSSES AUDIT REPORT TAX AUDIT REPORT P & L A/C. BALANCE SHEET WITH SCHEDULES ETC. THEREAFTER NOTICES U/S.143(2) AND 142(1) OF THE ACT ALONG WITH ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 3 QUESTIONNAIRES WERE ISSUED TO THE ASSESSEE. DETAILE D REPLY IN RESPECT OF QUESTIONNAIRES ISSUED WAS ALSO FILED BEFORE THE AO. THE AO DISCUSSED THE REPLY OF THE ASSESSEE AND WORKED OUT THE PROFIT OF THE ASSES SEE YEARWISE. THE AO BASED HIS FINDING ON THE BASIS OF MATERIAL FOUND DURING T HE COURSE OF SEARCH. THE CONTENTION OF THE ASSESSEE THAT IN FACT THERE WAS NO ON MONEY RECEIVED BY THE ASSESSEE WAS NOT ACCEPTED . ACCORDINGLY HE WORKED OUT THE PROFIT AS STATED ABOVE. THE WORKING OF THE PROFIT AFTER TAKING INTO CONSIDERATION THE VARIOUS REPLIES FILED ON BEHALF OF THE ASSESSEE IS DISCUSS ED BY THE CIT(A) IN HIS ORDER FROM PAGES 4 TO 15 IN THE FOLLOWING MANNER : 'FIRST OBJECTION RAISED BY THE ASSESSEE IS REGARDIN G LIMITED TIME ALLOWED TO HIM. FAULT FOR THIS LIES WITH THE ASSESSEE ITSELF. THE A SSESSEE WAS ASKED TO SUBMIT DETAILS OF SALES BOOKED IN THE EACH YEAR WITH FLAT/ SHOP NO. AREA AND AGREEMENT VALUE. HOWEVER DETAILS WERE NOT SUBMITTED BY THE ASSESSEE TILL THE LAST MOVEMENT. ULTIMATELY SHOW CAUSE LETTER HAD TO BE I SSUED TO THE ASSESSEE WITHOUT CONSIDERING ACTUAL SALES BY THE ASSESSEE. EVEN THOUGH BOOKS WERE PRODUCED BY THE ASSESSEE BUT RELEVANT EXTRACTS WERE NOT SUPPLIED TO THE UNDERSIGNED. SO FAR AS DIARY CONTAINING SALES TRANSACTIONS IS CONCERNED IT DOES NOT MENTION THE Y EAR IN WHICH THE SALES HAS ACTUALLY BEEN BOOKED. THE ASSESSEE IN ITS REPLY HAS MAINTAINED EARLIER ST AND THAT NOTINGS ON PAGE NO. 9 AND 10 OF BUNDLE NO. 1 ARE AGREEMENT VALUES ONLY. HOWEVER IT HAS FAILED TO EXPLAIN AS TO HOW THE SO CALLED FUTURE AMOUNT RECEI VABLE FROM THE PARTIES WAS BIFURCATED BETWEEN SHRI KANTILAL JAIN AND SHRI SUMA TILAL KARNAVAT AND HOW THE UNREALIZED AMOUNTS WERE ACTUALLY ADJUSTED AGAINST A CTUAL CASH EXPENSES. ON PAGE NO. 10 OF BUNDLE NO. 1 AMOUNT OF RS. 8 60 0 00/- RECEIVED FROM SHRI N MENKAR IN RESPECT OF SHOP NO.20 WAS BIFURCATED BETW EEN KANTILAL JAIN AND SUMATILAL KARNAVAT AS RS. 8 09 000/- AND RS. 51 000 /-. HOW CAN SIMILARLY AMOUNT OF RS.8 60 000/- RECEIVED FROM SHRI. SONI FO R SHOP NO. 18 WAS BIFURCATED AS RS. 8 39 000/- AND RS.21 000/-. HOW CAN SUCH DISTRIBUTION BE MADE IN NOTIONAL WORKING. THERE ARE MANY MORE INSTA NCES WHICH PROVES THESE CANNOT BE NOTIONAL WORKING. CHEQUES RECEIVED FROM S HRI MENKAR IN RESPECT OF SHOP NO. 20 AS RECORDED IN BUNDLE NO. 4 (DIARY) SEI ZED FROM THE OFFICE OF THE ASSESSEE ON 30.10.2003 ARE AS UNDER: - ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 4 AMOUNT DATE RS. 1 27 500/- 22.08.96 RS. 85 000/- 31.1.97 RS. 85 000/- 10.6.97 RS. 85 000/- 15.8.97 RS. 59 500/- 19.9.97 RS. 59 500/- 31.12.97 RS. 1 44 500/- 02.05.98 RS. 2 34 260/- 11.9.98 TOTAL RS. 8 80 260/- THERE IS NO RECEIPT OF RS. 51 000/-IN THE ENTIRE RE CEIPTS MOREOVER ENTRIES ON PAGE NO.5 BUNDLE NO. 1 HAVE BEEN RECORDED SOMETIME AROUN D MARCH 98. IN THIS CASE TOTAL AMOUNT RECEIVED UPTO MARCH 98 IS ONLY RS.5 01 500/. WHEREAS ON PAGE NO.10 RS.8 50 000/- HAVE BEEN DISTRIBUTED BETWEEN SHRI. K ANTILAL JAIN AND SUMATILAL KARNAVAT. SIMILAR IS THE CASE WITH ALL SHOPS RECO RDS OF WHICH HAVE BEEN MAINTAINED IN BUNDLE NO. 4. IN ALL CASES CHEQUE AMOUNTS RECEIV ED UPTO 31.3.98 HAVE BEEN LESS THAN THE AMOUNT DISTRIBUTED ON PAGE NO. 9 & 10. IF THE FACTS ALREADY DISCUSSED IN THE SHOW CAUSE NO TICE ARE READ WITH ENTRIES IN THE DIARY (BUNDLE NO. 4) IT IS CLEAR WITHOUT ANY SHADO W OF DOUBT AMOUNTS RECORDED ON PAGE NO. 9 & 10 REPRESENT CASH CONSIDERATION RECEIV ED OVER AND ABOVE THE VALUE RECORDED IN THE RESPECTIVE AGREEMENTS. THIS FACT IS ALSO SUPPORTED BY SALE OF OFFICES 37 38 39 & 211 WHICH HAVE BEEN SUBSEQUENTLY RESO LD BY THE ASSESSEE AT MORE THAN 150% OF THE VALUE RECORDED IN PAGE NO.9 & 10. IN VIEW OF THE ABOVE FACTS IT IS HELD THAT TRANSACT IONS RECORDED ON PAGE NO. 9 & 10 OF BUNDLE NO. 1 REPRESENT CASH COMPONENT OF SALE PRICE. IN THE SHOW CAUSE NOTICE SALES CONSIDERATION WAS DOUBLED IN RESPECT O F ALL SALES BECAUSE NO SEPARATE DETAILS WERE AVAILABLE FOR SALES OF OFFICE S AND SHOPS. IN ITS REPLY DATED 29.3.2006 THE ASSESSEE HAS SUPPLIED THE REQU ISITE DETAILS THEREFORE ESTIMATION OF TOTAL SALES IS BEING MADE ON THE BASI S OF FOLLOWING PARAMETERS- 1. AVERAGE SALE PRICE OF SHOPS ON THE GROUND FLOOR IS TAKEN AT RS.5 000/- PER SQ FT.AS IS EVIDENT FROM VARIOUS IN STANCES GIVEN IN THE SHOW CAUSE NOTICE. 2. SALE PRICE OF FLATS IS TAKEN AT RS. 2000/- PER S Q FT ON THE BASIS OF THE FACT THAT FLAT TO SHRI. KANTILAL JAIN WAS OFFERED AT RS.2 000/- PER S Q FT. 3. ACTUAL SALE PRICE OF OFFICES AT 1ST FLOOR IS TAK EN AT RS. 3100/- ON THE BASIS OF FOLLOWING INSTANCE:- AGREEMENT IN THE NAME OF LATA CHORDIA OFFICE NO. 37 RS. 16 50 000/- CASH PAYMENT AS PER PAGE NO.9 OF BUNDLE NO.1 RS. 21 26 250/- ------------------ RS. 37 76 250/- ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 5 AREA OF THE OFFICE 1215/- SQ FT. SALE PRICE RS. 3108/- PER SQ FT. THUS AVERAGE SALE PRICE IS TAKEN @ RS. 31 00/- PER SQ FT. 4. ACTUAL SALE PRICE OF OFFICES ON THE 2ND FLOOR IS TAKEN @ R S. 2400/- PER SQ FT ON THE BASIS OF SALE INSTANCE IN THE CASE OF SHRI. ZAG ADE OFFICE NO. 211(AS RECORDED ON PAGE NO.9 BUNDLE NO.1). (THE ASSESSEE IN ITS REPLY CLAIMED THAT DEAL WITH S HRI. ZAGADE WAS CANCELLED HOWEVER IT IS SEEN FROM THE BUNDLE NO.4 THAT HE HAS BEEN ALLOTTED OFFICE NO. 210 INSTEAD OF OFFICE NO.211) 5. SALE PRICE OF STILT AREA SOLD TO BHATKHANDE DURING A.Y.00-01 IS INCREASED BY 5 LAKHS. 6 SINCE NO OTHER SALE INSTANCES HAVE BEEN FO UND IN THE SEIZED MATERIAL SALE OFFICES ON OTHER FLOORS IS TAKEN AT TH E RATE RECORDED BY THE ASSESSEE. SO FAR AS ASSESSEE'S CLAIM IN PARA 7 OF THE REPLY I S CONCERNED THE SAME IS DEALT AS UNDER:- AFTER ADOPTION OF NEW RATES ASSESSEE CLAIM IN PARA7 (I) IS TAKEN CARE OF. AS REGARDS ARGUMENT IN PARA7 (II) EVEN THOUGH TRANS ACTIONS NOTED ARE OF PRIOR PERIOD THEY HAVE BEEN DEALT WITH IN ACCORDANCE WITH ASSESSEE'S METHOD OF ACCOUNTING. THOUGH AMOUNTS HAVE BEEN RECEIVED IN TH E EARLIER YEAR THEIR ENTIRE SALE HAS BEEN OFFERED IN THE RESPECTIVE YEAR. AS REGARDS ARGUMENT IN PARA 7(III) THE EXTRAPOLATIO N OF RATES ON THE BASIS OF TRANSACTIONS RECORDED HAS BEEN PERMITTED IN VARIOUS JUDGMENTS OF HIGH COURTS AND SUPREME COURT. AS REGARDS ARGUMENT IN PARA7 (IV) THE TRANSACTIONS CLAIMED BY THE ASSESSEE DO NOT GIVE FULL PICTURE OF THE AFFAIRS. THOSE CASH AM OUNTS ARE RECORDED ON PAGES ON WHICH ACCOUNTS OF ONLY A LIMITED PERIOD HAVE BEE N RECORDED. THE ASSESSEE MIGHT HAVE RECEIVED MORE AMOUNT FROM THE SAME PARTI ES IN THE EARLIER OR LATER PERIOD. RATES ADOPTED BY THE UNDERSIGNED ARE NOT UNREALISTI C. THEY ARE SUPPORTED BY SEIZED DOCUMENTS. MOREOVER THE ASSESSEE ITSELF CL AIMS THAT IT HAS CONSTRUCTED A VERY HIGH QUALITY SHOPPING COMPLEX. ITS COST OF CONSTRUCTION AS PER BOOKS ONLY WORKS OUT TO RS. 1038/-. THE PRESEN T DIRECTORS/SHAREHOLDER HAD PAID AT LEAST RS.2 CRORES OVER AND ABOVE BOOK VALUE FOR ACQUIRING SHARES OF THE ASSESSEE COMPANY. THIS AMOUNT WAS PAID DUE TO THE M ARKET VALUE OF LAND IN THE BOOKS OF THE COMPANY. THIS WILL ADD TO THE COST BY ANOTHER RS.250. THIS COSTING DOES NOT INCLUDE THE INTEREST ON FUNDS TO B E INVESTED IN THE PROJECT. IN SUCH A SITUATION HOW COULD ASSESSEE AFFORD TO SELL ITS FLATS AT RS. 1300/- PER SQ FT AND COMMERCIAL AREA AT 1500/- PER SQ FT. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 6 VARIOUS CASE LAWS CITED BY THE ASSESSEE ARE NOT APP LICABLE TO THE FACT OF THE CASE WHERE INCOME IS BEING ASSESSED ON THE BASIS O F CONCRETE EVIDENCE AND VERY FEW DETAILS UNACCOUNTED EXPENDITURE ARE AVAILA BLE. THEREFORE ACTUAL SALES FOR DIFFERENT A.Y'S WORK OUT AS UNDER: - A Y 97-98 GR FLOOR SHOPS 3540 SQ FT X RS. 5000/- RS. 1 77 00 000/- FLATS 3400 SQ FT X RS. 2000/- RS. 68.00.000/- -------------------- TOTAL RS. 2 45 00 000/- A Y 98-99 GR FLOOR SHOPS 2336 SQ FT X RS. 5000/- RS. 1 16 8 0 000/- 1ST FLOOR OFFICE 590 SQ FT X RS. 3100/- RS. 18 2 9 000/- 2ND FLOOR OFFICE 1005 SQ FT X RS. 2400/- RS. 24 12 000/- FLATS NIL -------------------- TOTAL RS. 1 59 21 000/- A Y 99-00 1ST FLOOR OFFICE 3918 SQ FT X RS. 3100/- RS. 1 21 45 800/- 2ND FLOOR OFFICE 2549 SQ FT X RS. 2400/- RS. 61 17 600/- FLATS NIL -------------------- TOTAL RS. 1 82 63 400/- A Y 00-01 GR FLOOR SHOPS 4437 SQ FT X RS. 5000/- RS. 2 21 85 000/- STILT AREA (RS.34 92 000 + RS.5 50 000) RS. 40 42 000/- 1ST FLOOR OFFICE 1545 SQ FT X RS. 3100/- RS. 47 89 500/- 2ND FLOOR OFFICE NIL FLATS 2400 SQ FT RS.2000/- RS. 48 00 000/- OTHERS RS. 2 86 130/- -------------------- TOTAL RS. 3 61 02 630/- A Y 01-02 STILT AREA AS PER BOOKS RS. 6 52 500/- 1ST FLOOR OFFICE 1600 SQ FT X RS. 3100/- RS.49 60 000/- 2ND FLOOR OFFICE 1770 SQ FT X RS. 2400/- RS.42 48 000/- FLATS 2400 SQ FT X RS. 2000/- RS.48.00.000/- -------------------- TOTAL RS. 1 46 60 500/- ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 7 A Y 02-03 1ST FLOOR OFFICE 1278 SQ FT X RS. 3100/- RS. 39 61 800/- FLATS 2400 SQ FT X RS. 2000/- RS.48.00.000/- ------------------- TOTAL RS. 87 61 800/- A Y 03-04 STILT AREA AS PER BOOKS RS. 4 65 000/- 1ST FLOOR OFFICE 3550 SQ FT X RS. 3100/- RS. 1 1 0 05 000/- FLATS 2400 SQ FT X RS. 2000/- RS. 48 00 00 0/- OTHERS RS. 1 06 208/- -------------------- TOTAL RS. 1 59 11 208/- A Y 04-05 STILT AREA AS PER BOOKS RS. 25 49 400/- OTHERS RS. 9 44 660/- -------------------- TOTAL RS. 34 94 060/- DIRECT & EXPENSES FOR VARIOUS YEARS ARE ALLOWED AS PER SHOW CAUSE NOTICE SUBJECT TO THE FOLLOWING:- EXPENSES IN RESPECT OF MSEB FIRE NOC PMC STAMP D UTY AND PLAN PASSING ARE NOT ALLOWED BECAUSE NO BILLS HAVE BEEN FOUND DU RING THE COURSE OF SEARCH AND THESE MAY BE IN NATURE OF LIASONING EXPENSES WH ICH ARE NOT ALLOWABLE. THUS FOLLOWING DIRECT AND INDIRECT EXPENSES ARE AL LOWED FOR VARIOUS A.Y'S:- A Y 97-98 DIRECT EXPENSES INDIRECT EXPENSES RS.6 56 800/- NIL A Y 98-99 DIRECT EXPENSES INDIRECT EXPENSES NIL RS. 13 37 680/- A Y 99-00 DIRECT EXPENSES INDIRECT EXPENSES RS.22 000/- RS.22 40 963/- A Y 00-01 DIRECT EXPENSES INDIRECT EXPENSES RS.3 13 900/- RS. 97 00 077/- ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 8 THUS ADDITIONAL INCOME TO BE TAXED IN VARIOUS A.Y' S IS BEING WORKED OUT AS UNDER:- A Y 1997-98 NET SALEABLE AREA 63 024 SQ FT BOOKED AREA 8 940 SQ FT UNSOLD AREA 54 084 SQ FT TOTAL ESTIMATED CONSTRUCTION AND LAND COST RS. 6 0 8 98 287/- (966.27 PER SQ FT) EXPENDITURE ON CONSTRUCTION UPTO 31.3.97 RS. 2 79 22 273/- % OF COMPLETION UPTO 31.3.97 45.85% SALE PRICE OF BOOKED AREA RS. 1 32 70 000/- VALUE OF BOOKED AREA ON 45.85% OF COMPLETION RS. 60 84 295/- VALUE OF UNSOLD AREA ON % COMPLETION BASIS RS. 2 39 61 094/- (54084 X 966.27 X 45.85) TOTAL VALUE OF WIP RS. 3 00 45 38 9/- AFTER THIS WORKING AMOUNT OF RS. 3 00 45 389/- HAS BEEN CREDITED TO P & L A/C AND EXPENDITURE ON CONSTRUCTION UPTO 31.3.97 HAS BE EN DEBITED TO THE P & L A/C. IN VIEW OF THE DISCUSSION IN PRECEDING PARAGRAPHS Y OUR SALE PRICE OF BOOKED AREA BECOMES R S.2 45 00 000/-. YOUR EXPENDITURE ON CONSTRUCTION UPTO 31.3.97 BECOM ES RS. 6 56 800/- + RS. 2 79 22 27 = RS.2 85 79 073/-. THUS REVISED WORKING FOR A Y 97-98 SHOULD BE AS FOL LOWS: - NET SALEABLE AREA 63 024 SQ FT BOOKED AREA 8 940 SQ FT UNSOLD AREA 54 084 SQ FT TOTAL ESTIMATED CONSTRUCTION AND LAND COST RS. 6 0 8 98 287/- (966.27 PER SQ FT) EXPENDITURE ON CONSTRUCTION UPTO 31.3.97 RS. 2 85 79 073/- % OF COMPLETION UPTO 31.3.97 46.93% SALE PRICE OF BOOKED AREA RS. 2 45 00 000/- VALUE OF BOOKED AREA ON 46.93% OF COMPLETION RS. 1 14 97 850/- VALUE OF UNSOLD AREA ON % COMPLETION BASIS RS. 2 4 5 25 499/- (54084 X 966.27 X 46.93) TOTAL VALUE OF WIP RS. 3 60 23 349/- A.Y. 1998_99 IN THIS A.Y YOU HAVE WORKED OUT YOUR TAXABLE INCOME ON THE BASIS OF FOLLOWING CALCULATION. NET SALEABLE AREA 62 705 SQ FT BOOKED AREA 12 871 SQ FT ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 9 UNSOLD AREA 49 834 SQ FT TOTAL ESTIMATED CONSTRUCTION AND LAND COST RS. 6 0 8 98 287/- (971.19 PER SQ FT) EXPENDITURE ON CONSTRUCTION UPTO 31.3.98 RS. 5 26 08 212/- % OF COMPLETION UPTO 31.3.98 86.39% SALE PRICE OF BOOKED AREA RS. 2 17 32 220/- VALUE OF BOOKED AREA ON 86.39% OF COMPLETION RS. 1 87 74 465/- VALUE OF UNSOLD AREA ON % COMPLETION BASIS RS. 4 1 8 11 276/- (49834 X 971.19 X 86.39) TOTAL VALUE OF WIP RS. 6 05 85 741/- LESS : DECLARED IN A.Y. 97-98 RS. 3 00 45 389/- --------------------- TO BE DECLARED IN A.Y. 98-99 RS. 3 05 40 352/- AFTER THIS WORKING AMOUNT OF RS. 3 05 40 352/- HAS BEEN CREDITED TO P & L A/C AND EXPENDITURE ON CONSTRUCTION UPTO 31.3.98 HAS BE EN DEBITED TO THE P & L A/C. IN VIEW OF THE DISCUSSION IN PRECEDING PARAGRAPHS Y OUR SALE PRICE OF BOOKED AREA BECOMES RS. 4 04 21 000/-. YOUR EXPENDITURE ON CONSTRUCTION UPTO 31.3.98 BECOM ES RS. 6 56 800/- + RS.5 26 08 212/- = RS .5 32 65 012/-. THUS REVISED WORKING FOR A Y 98-99 SHOULD BE AS FOL LOWS: - NET SALEABLE AREA 62 705 SQ FT BOOKED AREA 12 871 SQ FT UNSOLD AREA 49 834 SQ FT TOTAL ESTIMATED CONSTRUCTION AND LAND COST RS. 6 0 8 98 287/- (971.19 PER SQ FT) EXPENDITURE ON CONSTRUCTION UPTO 31.3.98 RS. 5 32 65 012/- % OF COMPLETION UPTO 31.3.98 87.47% SALE PRICE OF BOOKED AREA RS. 4 04 21 000/- VALUE OF BOOKED AREA ON 87.47% OF COMPLETION RS. 3 53 56 249/- VALUE OF UNSOLD AREA ON % COMPLETION BASIS RS. 4 23 33 978/- (49834 X 971.19 X 87.47) TOTAL VALUE OF WIP RS 7 7 6 90 227/- LESS : DECLARED IN A.Y. 97-98 (REVISED CALCULATION) RS. 3 60 23 349/- --------------------- TO BE DECLARED IN A.Y. 98-99 RS. 4 16 6 6 878/- AMOUNT OF WIP OFFERED IN THE RETURN FOR A Y. 98-99 IS RS. 3 05 40 352/-. THUS ADDITIONAL INCOME BROUGHT TO TAX FOR A Y 98-99 IS R S. 4 16 66 878/- - RS. 3 05 40 352/- = RS. 1 11 26 526/-. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 10 UNRECORDED INDIRECT EXPENSES ALLOWED IN THE WORKING ABOVE FOR A.Y 98- 99 ARE RS. 13 37 680/-. THEREFORE NET ADDITION T O THE RETURNED INCOME IS WORKED OUT AS UNDER:- ADDITIONAL WIP BROUGHT TO TAX RS. 1 11 26 526/- UNRECORDED INDIRECT EXPENSES ALLOWED RS. 13 37 680/- NET ADDITIONAL INCOME BROUGHT TO TAX RS. 97 8 8 846/- THUS THE A.O ASSESSED THE INCOME OF THE APPELLANT FOR VARIOUS YEARS. THE ASSESSEE COMPANY BEING NOT SATISFIED FILED A PPEAL BEFORE THE CIT(A) AND ITEMWISE ADDITIONS MADE BY THE AO WERE EXPLAINED B EFORE THE CIT(A) BY FILING REPLY IN DETAIL. RELIANCE WAS PLACED ON VARIOUS CAS E LAWS. DETAILED REPLY ALONG WITH CASE LAWS ON WHICH RELIANCE WAS PLACED HAS B EEN INCORPORATED BY THE CIT(A) IN HIS ORDER AT PAGES 15 TO 31 AS UNDER : BEFORE ME THE APPELLANT HAS SUBMITTED AS UNDER: 1. THE APPELLANT IS PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT OF A REAL ESTATE PROJECT NA MED LOTUS COURT AT PUNE SATARA ROAD PUNE. 2. THE PREMISES OF THE APPELLANT AND ITS DIRECTORS WERE SEARCHED U/S 132 OF THE I.T. ACT ON 30.10.03. DURING THE CO URSE OF SEARCH ON THE APPELLANT CASH OF RS. 20 200/- WAS FOUND AT THE BU SINESS PREMISES AND THE SAME WAS NOT SEIZED. NO OTHER ASSETS WERE FOUN D OR SEIZED IN RESPECT OF THE SEARCH IN THE CASE OF THE APPELLANT. 3. THE APPELLANT IS REGULARLY ASSESSED TO TAX. PUR SUANT TO SEARCH ACTION NOTICES U/S 153A(A) OF THE I.T. ACT WERE I SSUED TO THE APPELLANT IN RESPECT OF ASST. YRS 1998-99 TO 2003-04 AND IN RESPONSE TO THE SAME THE APPELLANT HAS FILED RETURN OF INCOME FOR THE RE SPECTIVE ASST. YEARS ON 24.11.04. THE LD A.O. HAS COMPLETED THE ASSESSMENT S FOR SEVEN ASST. YEARS FROM A.Y. 1998-99 TO 2004-05 BY MAKING CERTAI N HUGE ADDITIONS ON A COMMON ISSUE. THE APPELLANT IS AGGRIEVED BY T HE ADDITIONS MADE AND ACCORDINGLY IS IN APPEAL BEFORE YOUR HONOUR FOR SUITABLE RELIEF IN RESPECT OF ALL THE ASST. YEARS COMMENCING FROM ASST . YR. 1998-99 TO 2004-05. 4. BREACH OF NATURAL JUSTICE THE LD. A.O. HAS CONDUCTED ENTIRE ASSESSMENT PROCEE DINGS ONLY BY WAY OF ISSUING LETTERS/QUESTIONNAIRES FROM TIME TO TIME AND SEEKING ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 11 REPLIES ALSO IN THE FORM OF LETTERS. NO PERSONAL H EARING WAS EVER GRANTED TO THE APPELLANT OR HIS COUNSEL DURING THE COURSE OF ENTIRE ASSESSMENT PROCEEDINGS. THE APPELLANT SUBMITS THAT DUE TO SUCH PECULIAR PROCEDURE FOLLOWED BY THE LD A.O. MANY OF THE APPELLANTS GENUINE EXPLANATIONS HAVE NOT BEEN CORRECTLY APPREC IATED. THIS HAS LED TO THE LD A.O. PRESUMING MANY THINGS ADVERSE TO THE INTEREST OF THE APPELLANT WITHOUT THE APPELLANT BEING AFFORDED A RE ASONABLE AND A FAIR OPPORTUNITY TO LEAD EVIDENCE IN SUPPORT OF HIS CASE . THE APPELLANT SUBMITS THAT THE CARDINAL PRINCIPLES OF EQUITY FAI RPLAY AND NATURAL JUSTICE HAVE BEEN BREACHED IN THE PROCESS. NEEDLESS TO AD D ANY ASSESSMENT FRAMED IN BREACH OF THE PRINCIPLES OF EQUITY FAIRP LAY AND NATURAL JUSTICE IS BAD IN LAW BEING VOID AB INITIO AND REQUIRES TO BE QUASHED ON THAT GROUND ALONE. 5. BOOK RESULTS NOT REJECTED THE LD A.O. HAS DETERMINED THE PROFIT OF THE APPELL ANT FOR THE YEAR UNDER APPEAL BY ESTIMATING THE SALES CONSIDERATION FOR SA LE OF PREMISES AT THE LOTUS COURT PROJECT DISREGARDING THE BOOK RESULTS BUT WITHOUT REJECTING THE SAME AS PROVIDED U/S 145(3) OF THE I.T. ACT 196 1. THE ADDITION MADE IN THE ABOVE MANNER BEING INCORRECT BY LAW MAY PLEASE BE DELETED. 6. ADDITION MADE UNWARRANTED BY FACTS & IN LAW THE LD A.O. HAS MADE ADDITION OF RS.9 12 853/- TO THE RETURNED INCOME OF THE APPELLANT FOR THE YEAR UNDER APPEAL B Y FIRST ESTIMATING THE ALLEGED ON-MONEY COMPONENT ON SALE OF VARIOUS TYP ES OF PREMISES THEREBY LEADING TO DETERMINATION OF ALLEGED TOTAL S ALES CONSIDERATION IN RESPECT OF SALE OF PREMISES AT LOTUS COURT PROJECT PUNE. THE LD A.O. HAS THEREAFTER REWORKED THE INCOME OF THE APPELLANT FOR THE YEAR UNDER APPEAL ON THE BASIS OF SUCH ASSUMED SALES CONSIDERA TION. THE ADDITION MADE IS UNWARRANTED BY FACTS AND IN LAW AND THE SAM E IS BROUGHT OUT AS UNDER:- (I) ADDITION BASED ON UN-CORROBORATED INFERENCES IT IS AN UNDISPUTED FACT THAT THE LD. A.O. HAS NO C ONCRETE EVIDENCE IN SUPPORT OF THE INFERENCE DRAWN IN THE ASST. ORDE R THAT THE APPELLANT HAS TAKEN ANY AMOUNT OVER AND ABOVE THE AGREEMENT P RICE AS ON- MONEY. THE ENTIRE ADDITION IS BASED UPON SELECTIV E READING OF CERTAIN SEIZED PAPERS FOUND AT THE RESIDENCE OF ONE OF THE DIRECTORS OF THE APPELLANT AND INFERENCES DRAWN THEREFROM. THE LD A .O. IS CANDID ENOUGH TO ADMIT THAT THE ADDITIONS ARE BASED UPON I NFERENCES DRAWN BY HIM. THE INFERENCES ARE DEVOID OF ANY CORROBORATIV E SUPPORTING EVIDENCE TO JUSTIFY THE ADDITION OF SUCH LARGE MAGN ITUDE SPREAD OVER ALL THE SEVEN ASST. YEARS IN QUESTION. ON THIS ISSUE THE APPELLANT RELIES UPON THE DECISI ON IN THE CASE OF ATUL KUMAR JAIN VS DCIT 64 TTJ 786 (DELHI) WHEREIN IT WAS HELD ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 12 A.O. WAS NOT JUSTIFIED IN DECIPHERING THE FIGURES ON A SEIZED PAPER AT HIS WHIMS AND CAPRICE BASED ON UNFOUNDED PRESUMPTIO NS AND CONJECTURES WITHOUT BRINGING ANY CORROBORATIVE MATE RIAL EVIDENCE IN SUPPORT THEREOF AND SAME CANNOT FORM THE BASIS OF A SSESSING UNDISCLOSED INCOME BY WAY OF SALE PROCEEDS OF A PRO PERTY. IT HAS BEEN SIMILARLY HELD IN THE FOLLOWING CASES T HAT ADDITION ONLY ON THE BASIS OF SEIZED DOCUMENTS NOT SUPPORTED BY A NY POSITIVE CORROBORATING EVIDENCE WAS UNCALLED FOR AND NOT WAR RANTED (A) RAKESH GOYAL VS ACIT 87 TTJ 151 (DELHI) (B) ACIT VS SHAILESH SHAH 63 ITD 153 (MUMBAI) (C) N.K. MARHAN VS - DCIT 91 TTJ 938 (DELHI) (D) AMARJIT SINGH BAKSHI (HUF) VS - ACIT 86 ITD 13 (DELHI) (TM) THE APPELLANT ACCORDINGLY REITERATES THAT THE LD A .O. HAVING FAILED TO SUPPORT THE ADDITION BY ANY POSITIVE INDE PENDENT CORROBORATIVE PIECE OF EVIDENCE THE SAID ADDITION MADE ONLY ON T HE BASIS OF SUSPICION AND SURMISES MAY PLEASE NOT BE SUSTAINED. (II) SEIZED PAPER DOES NOT REFLECT ON-MONEY TRANSACTIO NS THE ADDITION MADE IS BASED UPON ENTRIES ON SEIZED P APER NO. 9 AND 10 OF BUNDLE NO. 1/PARTY NO. M1 & M2 SEIZED FROM THE R ESIDENCE OF THE DIRECTOR OF THE APPELLANT COMPANY. THE SAID SEIZED PAPERS COPIES OF WHICH ARE ANNEXED TO THE ASST. ORDER AS ANNEXURE A IN REALITY REFLECT THE ACTUAL TRANSACTION OF SALE OF PREMISES AT LOTUS COURT PROJECT PUNE. THE LD A.O. HAS WRONGLY ASSUMED THE NOTINGS ON THE SAID PAPERS TO BE TRANSACTIONS OF ON-MONEY OR CASH CONSIDERATION ALLEGEDLY RECEIVED BY THE APPELLANT OVER AND ABOVE THE AGREEMENT PRICE . THE LD. A.O ON THE BASIS OF SUCH ASSUMPTION HAS PROCEEDED TO ESTIM ATE THE SALES CONSIDERATION FOR THE ENTIRE AREA OF THE REAL ESTAT E PROJECT DEVELOPED BY THE APPELLANT BY EXTRAPOLATING THE SAID ASSUMPTION WITH SUITABLE MODIFICATIONS AS STATED IN THE ASST. ORDER. THE AP PELLANT HAS DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE HIS LETTER DT . 6.1.06 AND AGAIN VIDE ANOTHER LETTER DT. 29.3.06 (COPY OF WHICH IS A LSO ANNEXED TO THE ASST. ORDER) SUBMITTED A COMPARATIVE CHART WHEREUND ER THE TRANSACTIONS NOTED ON SEIZED PAPER NO. 9 AND 10/BUNDLE NO. 1 ARE COMPARED WITH THE ACTUAL TRANSACTIONS TO SUBSTANTIATE ITS CLAIM THAT THE TRANSACTIONS NOTED ON SEIZED PAPER NO. 9 AND 10 ARE THE ROUGH NOTATION S PERTAINING TO THE ACTUAL TRANSACTIONS OF SALE AND THAT THE SAID NOTIN GS DO NOT REPRESENT ANY RECEIPT OF CONSIDERATION OVER AND ABOVE THE AGR EEMENT PRICE. IT WAS EXPLAINED TO THE LD A.O. VIDE LETTER DT. 29.3.0 6 THAT ON THE RIGHT HAND SIDE OF THE SAID SEIZED PAPERS THE PROPOSED AMOUNTS TO BE WITHDRAWN BY THE TWO PROMOTER GROUPS ON RECEIPT OF THE SALE C ONSIDERATION IS ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 13 RECORDED. IT IS FOR THIS REASON THAT THE SALES CON SIDERATION AMOUNT HAS BEEN BIFURCATED BETWEEN THE TWO PROMOTER GROUPS. TH E PROMOTER GROUPS HAD BROUGHT IN HUGE FUNDS IN THE FORM OF LOA NS FROM FAMILY MEMBERS/RELATIVES AND ASSOCIATE CONCERNS. THESE LO ANS WERE INTEREST BEARING AND WERE ORIGINALLY BORROWED FOR SHORT TERM . THE AMOUNT OF SUCH LOANS OUTSTANDING AS ON 31.03.97 WERE TO THE T UNE OF RS. 2 88 87 390/-. IT WAS ALSO EXPLAINED TO THE LD A.O. THAT THE SEIZED PAPERS WERE PREPARED SOME TIME PRIOR TO 01.04.97. THE EXPECTED INFLOW OF FUNDS FROM SALE OF SHOP PREMISES AND ITS SUBSEQUENT WITHDRAWALS BY THE PROMOTERS IS NOTED ON THE SEIZED PAPERS. SUBSEQUENTLY DUE TO THE APPELLANTS PRECARIOUS FIN ANCIAL POSITION ARISING FROM THE SLUMP IN THE REAL ESTATE MARKET AT PUNE THE SALES DRIED UP AND THE PROMOTERS WERE NOT ABLE TO WITHDRAW FUND S AS ORIGINALLY PROPOSED AND NOTED ON THESE SEIZED PAPERS. THIS PRO POSED REPAYMENTS OF LOAN OF THE PROMOTER GROUPS OUT OF THE SALES CON SIDERATION RECEIVABLE BY THE APPELLANT HAS BEEN WRONGLY INFERRED TO BE DI VISION OF CASH CONSIDERATION BY THE LD. A.O. THE ENTIRE ADDITI ON IS BASED UPON THE PREMISE THAT THE NOTINGS OF PROPOSED WITHDRAWAL OF ACTUAL SALES CONSIDERATION BY THE PROMOTER GROUPS TOWARDS THEIR LOANS DEPOSITED WITH THE APPELLANT COMPANY WAS SHARING OF ON-MONEY BY THE PROMOTERS. THIS FLAWED INFERENCE WHICH IS NOT SUPPORTED BY ANY CONCRETE EVIDENCE HAS RESULTED IN THIS HUGE ADDITION. WE ONCE AGAIN TAKE THIS OPPORTUNITY TO SUBMIT FOR Y OUR HONOURS KIND CONSIDERATION THE COMPARISON OF ENTRIES MENTIONED O N SEIZED PAPER NO. 9 & 10 OF BUNDLE NO. 1 WITH THE ACTUAL TRANSACTIONS OF SALE OF RELEVANT PREMISES AS EVIDENCED BY REGISTERED AGREEMENTS FOR SALE WHICH BRING OUT WITH SUFFICIENT FORCE THE MERIT OF THE APPELLAN TS EXPLANATION THAT THESE ENTRIES ARE NOTHING BUT ACTUAL TRANSACTIONS O F SALE OF PREMISES AND THE PROPOSED WITHDRAWALS OF SUCH AMOUNTS BY THE PRO MOTER GROUPS TOWARDS THEIR EARLIER CONTRIBUTED UNSECURED LOANS. THE COMPARATIVE CHART OF THE TWO SET OF TRANSACTION S IS AS UNDER:- AS RECORDED ON THE SEIZED PAPER NO. 9 & 10/BUNDLE NO. 1 ACTUAL TRANSACTIONS A. SHOPS SR. NO. SHOP NO. PURCHASER VALUE AGREEMENT VALUE DATE OF RECEIPT OF FIRST CHEQUE 01 26 27 28 & 29 SHREYAS 2 5109720/- 09.07.97 02 25 JOSHI 950000 700000/- 18.11.96 03 24 AJIT AGENCIES -- 850000/- 23.10.98 04 23 PRAKASH WACHAL 860000 850000/- 19.09.96 05 22 JYOTI GADWE 1285000 1305000/- 22.08.96 06 21 ANIL GADWE 860000 850000/- 22.08.96 07 20 N. MENKAR 860000 850000/- 22.08.96 08 19 M. MENKAR 860000 850000/- 22.08.96 09 18 SONI 860000 850000/- 03.09.96 10 17 SHINDE 325000 387500/- 26.08.96 11 16 SHAH SANJAY 2 325000/- 11.07.97 ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 14 (MISTAKE IN NAME- IT SHOULD BE S. SHINDE 12 15 CHANDAN 325000 365000/- 16.08.96 13 14 SHINDE (MISTAKE IN NAME-IT SHOULD BE SANJAY SHAH) 2 320000/- 28.08.97 14 13 RUNWAL (LATER SOLD TO FOTOFAST) 860000 850000/- 21.08.96 15 12 AMAN 860000 850000/- 07.09.96 16 11 GADHIYA 850000 850000/- 28.08.96 17 10 9 8 CHORDIYA 3017500 2987500/- 27.08.96 05.09.96 & 06.09.96 18 7 GHULE/MEMON 600000 ACTUALLY UNSOLD- MISTAKE IN STATEMENT 19 6 5 4 3 2 UNSOLD -- -- -- 20 1 VYAS 450000 450000/- 31.01.98 B. OFFICES -- 54 (SHOULD BE 44) GANDHI 660000 650000/- 24.4.97 -- 37 38 39 CHORDIYA (SUBSEQUENTLY RESOLD PARTLY) 2126250 3469000/- -- -- 211 ZAGADE 300000 510000/- -- -- 212 KURLE (SUBSEQUENTLY RESOLD) -- 510000/- -- C. FLATS -- 9 10 KANTILALJI 4800000/- PROPOSED TRANSACTION. DID NOT MATERIALIZE. D. MISCELLANEOUS -- -- SANJAY SHAH 96000/- FOR UNIT NO. 14 -- -- SALE OF SCARP 2600/- -- (III) NO CUSTOMERS EXAMINED THE LD A.O. HAS FURTHER NOT THOUGHT IT FIT TO EXAMI NE ANY OF THE PURCHASERS OF PREMISES AT THE LOTUS COURT PROJECT W HO HAVE ALLEGED TO HAVE GIVEN THE APPELLANT CASH CONSIDERATION/ON-MONEY INS PITE OF THE APPELLANT FURNISHING ALL THE DETAILS IN RESPECT OF ITS CUSTOM ERS AND PRODUCING COPIES OF AGREEMENTS FOR SALE DURING ASST. PROCEEDINGS. ACCO RDINGLY THE ENTIRE EXERCISE RESULTING IN THE ADDITION UNDER APPEAL IS BASED UPO N THE INFERENCES MADE BY THE LD. A.O WHICH ARE NOT SUPPORTED BY ANY INDEPEN DENT CORROBORATIVE EVIDENCE. (IV) SALE RATES DETERMINED BY THE LD A.O. WAY ABOVE MARKET VALUE AS PER SUB-REGISTRAR PUNE ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 15 THE LD A.O. HAS IN THE ASST. ORDER DETERMINED THE R ATES FOR SALE OF VARIOUS TYPES OF PREMISES ON THE BASIS OF CERTAIN S URMISES/ASSUMPTIONS. THE BELOW MENTIONED COMPARATIVE CHART INDICATES THE RAT ES CONSIDERED BY THE LD A.O. MARKET VALUES AS PER THE STAMP DUTY AUTHORIT IES AND THE ACTUAL SALE RATE OF THE APPELLANT COMPANY. TYPE OF PREMISES SALE RATE AS PER LD A.O. (PER SQ.FEET) MARKET VALUE AS PER READY RECKONER MAINTAINED BY SUB-REGISTRAR PUNE (PER SQ. FEET) ACTUAL SALE RATE AS PER BOOKS OF ACCOUNTS (APPROXIMATE) (PER SQ. FEET) SHOP PREMISES 5000/- 2907/- 2500/- RESIDENTIAL FLATS 2000/- 1291/- 1300/- OFFICE PREMISES 1 ST FLOOR 3100/- 1718/- 1500/- OFFICE PREMISES 2 ND FLOOR 2400/- 1718/- 1500/- STATEMENT GIVING VALUE OF PREMISES AS PER STAMP DUT Y AUTHORITIES PUNE IS ANNEXED TO THE ASST. ORDER BY THE LD A.O. BEING PART OF APPELLANTS SUBMISSION DURING ASST. PROCEEDINGS. THE ASSUMPTIONS IN RESPECT OF SALE RATES MADE BY TH E LD. A.O. IN RESPECT OF DIFFERENT TYPES OF PREMISES DEVELOPED BY THE APPELLANT WHEREUNDER THE CONSIDERATION ALLEGEDLY RECEIVED BY THE APPELLA NT IN CASH OVER AND ABOVE THE AGREEMENT PRICE IS ESTIMATED AT ABOUT 100% AND THEREABOUTS RESULTS IN SALE RATES WHICH ARE WAY ABOVE THE ACTUAL MARKET PR ICES PREVALENT IN THE RELEVANT ASST. YEARS AND ACCORDINGLY ARE HIGHLY INF LATED AND FAR REMOVED FROM REALITY. THE APPELLANT AS IS EVIDENCED BY HIS RECO RDS HAS NOT BEEN VERY SUCCESSFUL IN SALE OF PREMISES AT THE PROJECT DEVEL OPED AT PUNE AND EVEN ON THE DATE OF SEARCH A SUBSTANTIAL PORTION OF THE PRE MISES WERE FOUND BY THE SEARCH PARTY TO BE UNSOLD DUE TO LACK OF DEMAND. F URTHER THE SALES OVER THE PERIOD HAVE BEEN SPORADIC WHICH GOES ON TO REFLECT A LUKE WARM MARKET SCENARIO. DUE TO LACK OF ADEQUATE FUNDS THE APPELL ANT HAS RAISED SECURED AS WELL AS UNSECURED LOANS TO FUND ITS COSTS AND HAS B ORNE HUGE AMOUNTS AS INTEREST. ALL THIS GOES TO SHOW THAT THE PREMISES DEVELOPED BY THE APPELLANT WERE NOT EASILY MARKETABLE AND HARDLY ACCORDING TO THE ROSY PICTURE PAINTED BY THE LD. A.O. THAT HUGE CASH CONSIDERATION EQUIVALEN T TO AROUND 100% OF THE AGREEMENT PRICE WAS AVAILABLE TO THE APPELLANT FOR SALE OF THESE PREMISES. THE ASSUMPTIONS MADE BY THE LD. A.O ARE FAR REMOVED FRO M GROUND REALITY PREVALENT IN THE MARKET. DURING ASSESSMENT PROCEEDINGS THE APPELLANT HAS ALS O COMPARED THE SALES RATE ASSUMED BY THE LD. A.O. WITH THE MARKET VALUES OF THESE PREMISES FOR THE RELEVANT ASST. YEARS AS PER READY RECKONER MAINTAINED BY THE SUB- REGISTRAR PUNE FOR THE RELEVANT AREA AND IT WAS BR OUGHT TO THE ATTENTION OF THE A.O. THAT THE RATES ASSUMED BY HIM ARE NEARLY DOUBL E THE RATES FOR THESE ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 16 PREMISES AS PRESCRIBED BY THE SUB-REGISTRAR IN THE READY RECKONER MAINTAINED BY HIM THEREBY INDICATING THAT THE RATES ASSUMED BY THE LD A.O. ARE HIGHLY EXCESSIVE UNREASONABLE AND FAR REMOVED FROM REALI TY. THE LD A.O. HAS STRANGELY REMAINED SILENT ON THESE ISSUE WHILE DISC USSING THE APPELLANTS OBJECTIONS IN THE ASST. ORDER. (V) SALES RATES DETERMINED BY LD. A.O SUBSTANTIALLY HIGHER THAN PREVALING MARKET RATES AS PER COMPARABLE SALE INSTANCES THE APPELLANT FURTHER SUBMITS THAT THE SALES RATES ARRIVED AT BY THE LD. A.O ON THE BASIS OF CERTAIN INFERENCES PERTAINING T O ON-MONEY TRANSACTIONS RESULTS IN RATES OF PREMISES IN RESPECT OF LOTUS CO URT PROJECT WHICH ARE SUBSTANTIALLY HIGHER THAN THE PREVAILING MARKET RAT ES IN THE VICINITY OF THE APPELLANTS PROJECT AT PUNE. THE LD. A.O HAS NOT GIVEN IN THE ASST. ORDER ANY CO MPARABLE INSTANCE TO SUPPORT THE SUBSTANTIALLY HIGHER SALE RATES DETERMI NED BY HIM AGAINST THE APPELLANTS LOWER AGREEMENT PRICE. THE APPELLANT H OWEVER SUBMITS HEREWITH THE UNDER MENTIONED INSTANCES OF SALES OF PREMISES IN THE AREAS SURROUNDING THE LOTUS COURT BUILDING AT PUNE TO SUPPORT HIS CLA IM THAT THE SALE RATES AS PER THE APPELLANT ARE IN TUNE WITH THE PREVAILING MARKE T RATES. THE INSTANCES RELIED UPON ARE: - SR. NO. DATE OF SALE PARTICULARS OF PREMISES AREA SALE RATE PER SQ. FT. EVIDENCES ENCLOSED AT PG. NOS A. RESIDENTIAL FLATS 1. 22.01.98 FLAT NO.7 IN BUILDING CONSTRUCTED ON S.NO.60/1 B PLOT NO.4 PUNE SOLD TO NILIMA E. WANI FOR RS.4 70 000/- BY M/S.PARANJAPE CONSTRUCTIONS. 535 SQ. FT. RS.878/- 27 2. 11.06.98 FLAT NO.16/BLDG. A-3 4 TH FLOOR AT VISHNU VIHAR S.NO.571 572 B.P. NO.B-9 BIBVEWADI PUNE SOLD TO MR. NARAYAN T. JAGTAP FOR RS.3 91 182/- BY M/S.VISHNU DEVELOPERS. 455 SQ. FT. BUILT UP. RS.860/- 28 3. 28.09.98 FLAT NO.B-208 AT POONAM GARDENS S.NO.666 BIBVEWADI NR. JAIPUR GARDEN PUNE 411037 SOLD TO MR. PARESH B. PAREKH FOR RS.5 10 000/- BY M/S.SURANA DASANAM. 525 SQ. FT BUILT UP. RS.971/- 29 4. 24.12.98 FLAT NO.16 BUILDING KUMAR PANORAMA 4 TH FLOOR S.NO.45/1 1300 SQ. FT. RS.1 200/- 30 ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 17 GULTEKDI PUNE SOLD TO MR.CHARLES DAVID FOR RS.15 59 000/- BY KUMAR CO. 5. 23.09.99 FLAT NO.304/BLDG. A-2 BUILDING GANGADHAM S.NO.614 PUNE SOLD TO D.K. SINGH FOR RS.11 55 000/- BY NIRMITEE DEVELOPERS PVT. LTD. 1448 SQ. FT. RS.798/- 31 6. 05.03.03 FLAT NO.504 5 TH FLOOR AT S.NO43/1-A PARVATI PUNE SOLD TO MR. MILIND B. BHALERAO FOR RS.8 74 000/- BY M/S. NAIK CONSTRUCTION CO. PVT. LTD. 645 SQ. FT. RS.1 355/- 31 TO 34 7. 10.11.03 FLAT NO.701/C RUTURANG BUILDING S.NO.49/1 C.T.S NO.3701 PUNE SATARA ROAD PUNE SOLD TO PRATAP S. GAJKAS FOR RS.15 05 000/- BY A.G. JOSHI & CO. 909 SQ. FT. RS.1 656/- 35 B. OFFICES 1. 26.03.03 OFFICE NO.421 4 TH FLOOR IN THE BUILDING PENTAGON S.NO.42- A/3/1 FP NO.477-A J.P SCHEME NO.III PARVATI PUNE SOLD TO MR. SHAILESH KAREKAR FOR RS.5 50 000/- BY M/S.STAR CONSTRUCTIONS. 455 SQ . FT. RS.1 209/- 36 TO 40 2. 03.10.03 OFFICE PREMISES NO.201 1 ST FLOOR IN THE BUILDING TIMES SQUARE S.NO.699 FP NO.416/1 C.T.S NO.416/1 GULTEKDI PUNE SOLD TO MRS.SNEHAPRABHA SHINDE FOR RS.9 36 000/- BY SURANA DASNAM. 624 SQ. FT. RS.1 500/- 41 3. 31.08.04 OFFICE PREMISES NO.101 1 ST FLOOR IN THE BUILDING PENTAGON S.NO.42-A/3/1 FP NO.477-A J.P SCHEME NO.III PARVATI PUNE SOLD TO M/S. NEW INDIA INSURANCE CO. LTD. FOR RS.80 89 600/- BY M/S.STAR CONSTRUCTIONS. 3034 SQ. FT. RS.2 666/- 42 THE ABOVE INSTANCES ALSO GLARINGLY BRING OUT THE HI GHLY EXCESSIVE SALE RATES ADOPTED BY THE LD A.O. TO DETERMINE THE PROFIT OF THE APPELLANT COMPANY. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 18 (VI) SAME SEIZED PAPER DECIPHERED DIFFERENTLY FOR DIFFERENT TYPE OF PREMISES THE RATES IN RESPECT OF RESIDENTIAL FLATS HAVE BEEN ASSUMED BY THE LD A.O. ON THE BASIS OF INSTANCE RECORDED ON PG. NO.9 & 10/BUNDLE NO.1 IN RESPECT OF TWO FLATS WHICH WERE TO BE RETAINED BY ONE OF TH E PROMOTER GROUPS. THE TRANSACTION AS NOTED ON THE SEIZED PAPERS HARDLY ME RITS ASSUMPTION THAT ANY AMOUNT IN CASH HAS PASSED FROM THE SAID PURCHASERS TO THE APPELLANT. IN THE SEIZED PAPERS THE SAID FLATS HAVE BEEN RECORDED AT A VALUE OF RS. 2 000/- PER SQ.FT. BECAUSE AT THE RELEVANT MOMENT OF TIME THE S AID FLATS WERE TO BE SOLD WITH SPECIAL AMENITIES/INTERIOR DECORATION WORK AND WERE ACCORDINGLY SO VALUED. SUBSEQUENTLY THE IDEA OF EXTRA AMENITIES AND INTERIOR DECORATION WORK WAS CANCELLED AND THE FLATS WERE ACTUALLY SOLD AT REGULAR VALUES AT A MUCH LATER DATE. THE LD A.O. HAS NOT BOTHERED TO A PPRECIATE THE EXPLANATION OF THE APPELLANT OR TO EXAMINE THE PREMISES OF THE CON CERNED PARTY AND HAS PROCEEDED TO ASSUME THAT THE SALE RATE FOR ALL RESI DENTIAL FLATS WAS RS. 2 000/- PER SQ.FT. THE INFERENCE DRAWN BY THE LD A.O. SUFF ERS FROM A CRUCIAL DEFECT IN THE SENSE THAT THE LD A.O. HAS STATED AT PARA NO. 1 4 OF THE ASST. ORDER THAT ALL THE ENTRIES RECORDED ON SEIZED PAPER NO. 9 AND 10 O F BUNDLE NO. 1 REPRESENT THE CASH COMPONENT OF SALE PRICE. ON THE SAID PAPE R THE PROPOSED SALE OF TWO FLATS BEARING NOS 9 & 10 TO K.H. JAIN GROUP IS REC ORDED @ RS. 2 000/- PER SQ.FT. PL. REFER TO ENTRY ON THE SEIZED PAPER UNDER THE HE ADING. FLAT 9 & 10 KANTILALJI 48 00 000/- AREA 2400 NOW IF THIS IS THE ON-MONEY COMPONENT THEN THEY AC TUAL RATE WOULD TURN OUT TO BE RS. 3 300/- PER SQ.FT. (RS. 2 000/- + RS. 1 300/- AGREEMENT PRICE) IN THE F.Y. 1996-97. THIS RATE IS FAR HIGHER THAN THE RATE PREVALENT EVEN TODAY AFTER PASSAGE OF NEARLY 10 YEARS TIME. IT IS FOR T HIS REASON THAT THE LD A.O. HAS INSTEAD ASSUMED THE TOTAL SALE RATE OF FLAT TO BE R S. 2000/- PER SQ. FT. WITH RS. 1300/- PER SQ. FT. BEING THE AGREEMENT PRICE AND RS . 700/- PER SQ. FT. BEING THE ON-MONEY COMPONENT. THUS IF RS. 2 000/- PER SQ.FT . THE RATE MENTIONED IN RESPECT OF K.H. JAIN FLATS IS ASSUMED TO BE THE SAL E RATE INCLUSIVE OF THE ALLEGED ON-MONEY COMPONENT THEN SUCH ASSUMPTION HAS TO BE D RAWN IN RESPECT OF THE OTHER TRANSACTIONS NOTED ON THE SAID SEIZED PAPERS AS WELL. THE LD A.O. HAS TAKEN CONTRADICTORY STANDS IN RESPE CTS OF TWO SET OF FACTS NOTED ON THE SAME SEIZED PAPER. IN RESPECT O F SHOP PREMISES HE HAS CONSIDERED THE FIGURES NOTED ON THE SEIZED PAPERS T O BE ON-MONEY COMPONENT OF SALE I.E. AMOUNT EXCLUSIVE OF AGREEMENT PRICE. HOWEVER IN RESPECT OF RESIDENTIAL FLATS HE HAS CONSIDERED THE FIGURES NOTED ON THE SEIZED PAPERS TO BE TOTAL OF BOTH AGREEMENT PRICE AS WELL AS ON-MONEY COMPONENT. THIS THE LD A.O. MUST HAVE DONE TO PROVIDE SOME SEM BLANCE OF REALITY TO THE SALE PRICES DETERMINED BY HIM AS OTHERWISE THE RATE S WERE IMPROBABLY HIGH FOR A PLACE LIKE PUNE IN 1986-87. HOWEVER IN THE PROC ESS THE LD A.O. HAS ENDED UP WITH DECIPHERING THE SAME SEIZED PAPER IN DIFFER ENT MANNER IN RESPECT OF TWO SET OF TRANSACTIONS. THIS ACTION OF THE LD A.O . EXPOSES THE FACT THAT THE ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 19 INFERENCES DRAWN BY HIM CANNOT STAND THE TEST OF LO GIC OR DEEPER VERIFICATION BEING BASELESS BY VERY NATURE. (VI) INCORRECT CONSIDERATION OF FACTS PERTAINING TO SALE OF OFFICES (A) SECOND FLOOR OFFICES THE LD A.O. HAS ON THE BASIS OF ONE ENTRY PERTAININ G TO SALE OF SECOND FLOOR OFFICE PREMISES TO ONE DILIP K. ZAGADE APPEAR ING ON PG NO. 2 OF ANNEXURE A OF THE ASST. ORDER ASSUMED THE RATE OF SALE OF 2 ND FLOOR OFFICE PREMISES TO BE RS. 2400/- PER SQ. FT. THE ENTRY APPEARING ON THE RELEVANT SEIZED PAPER IS AS UNDER:- OFFICES 211 ZAGADE 300000/- AREA 275 IT WAS EXPLAINED TO THE LD A.O. VIDE LETTER DT. 6.0 1.06 THAT THE SUM OF RS.3 00 000/- MENTIONED ON THE SEIZED PAPER WAS AMO UNT RECEIVED BY CHEQUES FROM SHRI. DILIP K. ZAGADE TOWARDS THE SALE OF OFFICE NO. 211. THE DETAILS OF RS. 3 00 000/- RECEIVED FROM SHRI. DILIP K. ZAGADE BY THE APPELLANT WERE AS UNDER:- DATE OF CHEQUE CHEQUE NO. AMOUNT CHEQUE DRAWN ON 03.03.98 260879 75 000/- RAJASHRI SHAHU SAHAKARI BANK LTD. PUNE 06.03.98 260880 75 000/ RAJASHRI SHAHU SAHAKARI BANK LTD. PUNE 20.04.98 260844 75 000/ RAJASHRI SHAHU SAHAKARI BANK LTD. PUNE 19.06.98 270000 75 000/ RAJASHRI SHAHU SAHAKARI BANK LTD. PUNE TOTAL 3 00 000/- THE ABOVE DETAILS WERE PLACED ON THE RECORDS OF THE ASSESSING OFFICER DURING ASST. PROCEEDINGS. THE BOOKS OF ACCOUNTS AS WELL AS BANK RECORDS OF THE APPELLANT WERE ALSO PRODUCED DURING THE COURSE OF HEARING. A FURTHER SUM OF RS. 1 00 000/- WAS ALSO RECEIVED F ROM SHRI. DILIP K. ZAGADE AND THE OFFICE PREMISES HAVING AREA 275 SQ. FT. WAS SOLD TO HIM FOR THE LUMPSUM CONSIDERATION OF RS. 4 00 000/-. THE SALE RATE PER SQ. FT. WORKS OUT TO RS. 1455/-. THE APPELLANT HUMBLY SUBMITS THAT AS THERE DOES NOT EXIST ANY BASIS FOR ASSUMING THAT ANY ON-MONEY WAS TAKEN IN RESPECT OF SALE OF PREMISES TO SHRI. DILIP K. ZAGADE THE ENTIRE ASSUMPTION OF RECEIPT O F ON-MONEY BY THE APPELLANT IN RESPECT OF 2 ND FLOOR OFFICE PREMISES IS WITHOUT ANY MERIT. NEEDL ESS TO ADD ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 20 THE LD A.O. NEVER DEEMED IT FIT TO EXAMINE SHRI. DI LIP K. ZAGADE OR ANY OTHER CUSTOMER. (B) FIRST FLOOR OFFICES THE LD. A.O. HAS SIMILARLY ERRED IN UNDERSTANDING T HE TRANSACTION OF SALE OF PREMISES TO SMT. LATA CHORDIA AND ON THIS OWN AC COUNT MADE CERTAIN ASSUMPTIONS WHICH ARE PATENTLY INCORRECT. AGAIN N O ATTEMPT TO EXAMINE THE PURCHASERS WAS EVER MADE BY THE LD. A.O. THIS ISSU E WAS ALSO NEVER RAISED DURING ASST. PROCEEDINGS AND ALL ASSUMPTIONS ON THE PART OF THE LD. A.O ARE HIS OWN WITHOUT THE APPELLANT EVER BEING AFFORDED ANY O PPORTUNITY TO SUBMIT HIS EXPLANATION IN THE MATTER. THE APPELLANT SUBMITS THAT THE ENTRIES IN THE NAME OF SMT. LATA CHORDIA ON SEIZED PAPER NO. 9 & 10 ARE AS UNDER :- OFFICES 37 38 & 39 CHORDIA RS. 21 26 250/- NOW THE AREA OF THESE 3 UNITS I.E. 37 38 & 39 IS 800 +496+1100 = 2096 SQ. FT. THE LD A.O. HAS INCORRECTLY CONSIDERE D THE AREA TO BE 1215 RESULTING IN EXCESSIVE WORKING OF ON-MONEY AND TH E TOTAL SALE CONSIDERATION AMOUNT. INSPITE OF THE LD A.OS SAY TO THE CONTRAR Y THE APPELLANT STATES THAT THE DETAILS OF SALE OF FLATS IN RESPECT OF LOTUS CO URT PROJECT AT PUNE WERE FIRST ASKED FOR BY THE LD A.O. VIDE HIS LETTER DT. 2.2.06 . THE SAME WERE SUBMITTED BY THE APPELLANT VIDE HIS LETTER DT. 2.3.06 FILED ON 3 .3.06. THE SAY OF THE A.O. THAT THE APPELLANT NEVER SUBMITTED THESE DETAILS PRIOR T O ISSUE OF SHOW CAUSE NOTICE DT. 24.3.06 IS CONTRARY TO FACTS. COPY OF THE SAID APPELLANTS LETTER DT. 2.3.06 WITH RELEVANT ANNEXURE ABOUT SALE OF UNITS OF LOTUS COURT PROJECT IS ENCLOSED AT PG NOS 18 TO 23 OF THIS LETTER. NOW IT CAN BE SE EN FROM THESE DETAILS THAT THE LD A.O. HAS INCORRECTLY CONSIDERED THE AREA OF THE UNITS SOLD TO CHORDIA AT 1215 WHEN IN REALITY THE AREA IS 2096. THE DETERMINATION OF ALLEGED ON-MONEY COMPONENT IN RESPECT OF SALE OF OFFICES ON THE FIRST FLOOR FROM THE LATA CHORDIA TR ANSACTION IS THUS FLAWED. THE APPELLANT HUMBLY SUBMITS THAT IN VIEW OF THE IN CORRECT SURMISES OF THE LD A.O. AS BROUGHT OUT ABOVE THE CLAIM OF THE LD A.O. THAT ANY ON-MONEY HAS BEEN TAKEN IN RESPECT OF OFFICE PREMISES EITHER ON THE FIRST OR SECOND FLOOR MERITS TO BE DISCARDED. (VIII) EXTRAPOLATION OF ON-MONEY THE LD A.O. ON THE BASIS OF INFERENCES DRAWN FROM C ERTAIN TRANSACTION NOTED IN THE SEIZED OF PAPERS HAS PROCEEDED TO EXTR APOLATE THE SAID INFERENCES OVER THE ENTIRE PROJECT AREA OF THE APPELLANT WITHO UT ANY CORROBORATING EVIDENCE. SUCH EXTRAPOLATION IS NOT WARRANTED CONS IDERING THE FACTS OF THE MATTER PARTICULARLY TAKING INTO ACCOUNT THE FACT T HAT THE BASIS INFERENCE IN RESPECT OF RECEIPT OF ON-MONEY IS NOT VALID. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 21 (IX) ERRORS IN WORKING THE LD. A.O HAS ALSO COMMITTED ERRORS IN DETERMININ G THE ESTIMATED ADDITIONAL INCOME FOR THE YEAR UNDER APPEAL. THE A DDITION MADE IS ERRONEOUS ON THAT ACCOUNT ALSO. THE APPELLANT ACCORDINGLY SUBMITS THAT LD. A.O. HAS GROSSLY ERRED IN ESTIMATING THE ON-MONEY RECEIPT ON THE BASIS OF C ERTAIN ASSUMPTIONS AND PRESUMPTIONS WITHOUT MAKING ANY INDEPENDENT ENQUIR ES IN THAT REGARD. THE EXPLANATIONS OF THE APPELLANT AND THE EVIDENCES FUR NISHED HAVE NOT BEEN ADEQUATELY APPRECIATED. THE RESULTANT ESTIMATION OF ON-MONEY AND DETERMINATION OF TOTAL SALES CONSIDERATION FOR THE YEAR UNDER APPEAL RESULTING IN A HUGE ADDITION TO THE RETURNED INCOME OF THE APPEL LANT IS NOT WARRANTED BY FACTS AND IN LAW. 7. WITHOUT PREJUDICE TO ITS CLAIM THAT NO ON-MONEY IN RESPECT OF SALE OF PREMISES AT LOTUS COURT PROJECT AT PUNE HAS BEEN TAKEN THE APPELLANT SUBMITS THAT THE LD A.O. HAS ADOPTED A VERY SELECTI VE APPROACH IN HIS CONSIDERATION OF SEIZED PAPERS. ON ONE HAND THE L D A.O. HAS PROCEEDED TO ESTIMATE ON-MONEY FOR THE ENTIRE PROJECT INSPITE OF THE FACT THAT ADMITTEDLY ONLY A FEW INSTANCES APPEAR IN THE SEIZED PAPERS REGARDI NG TRANSACTIONS INFERRED BY THE LD A.O. TO BE ON-MONEY TRANSACTIONS. ON THIS I SSUE TO JUSTIFY THE ESTIMATION MADE ACROSS THE BOARD FOR THE ENTIRE PROJECT AREA THE LD A.O. HAS COMMENTED THAT THERE MIGHT BE INSTANCES OF RECEIPT OF ON-MONE Y EARLIER OR LATER THEN THE TRANSACTIONS FOR WHICH EVIDENCES ARE FOUND. HOWEVE R IN RESPECT OF EXPENSES TO BE ALLOWED AS DEDUCTION AGAINST SUCH ON-MONEY RE CEIPTS THE LD A.O. HAS TAKEN A LIMITED VIEW THAT ONLY THE EXPENSES RECORDE D ON THE SEIZED PAPERS WOULD BE AVAILABLE AS A DEDUCTION AND NOTHING MORE. SUCH A STAND ON THE PART OF THE LD A.O. IS NEITHER FAIR NOR EQUITABLE. 8. ONLY A FAIR PERCENTAGE OF ON-MONEY CAN BE PROFIT WITHOUT PREJUDICE TO ITS CLAIM THAT THEY HAVE NOT TAKEN ANY ON-MONEY IN RESPECT OF SALE OF PREMISES DEVELOPED BY THEIR COMP ANY THE APPELLANT SUBMITS THAT EVEN IF FOR A MOMENT IT IS ASSUMED THAT ANY ON -MONEY OR CASH CONSIDERATION OVER AND ABOVE THE AGREEMENT PRICE HA S BEEN TAKEN THEN IN SUCH A SCENARIO THE ENTIRE ON-MONEY OR THE UNACCOUN TED SALE CONSIDERATION CANNOT BE THE INCOME OF THE APPELLANT BUT ONLY A REASONABLY FAIR PERCENTAGE OF SUCH RECEIPTS WILL HAVE TO BE CONSIDERED AS THE INCOME LIABLE TO TAX. THE LD A.O. HAS ERRED IN CONSIDERING THE ENTIRE ON-MONEY T O BE THE INCOME OF THE APPELLANT SAVE AND EXCEPT CERTAIN EXPENSES NOTED O N THE SEIZED PAPERS WHICH HAVE BEEN ALLOWED AS DEDUCTION. IN THIS RESPECT THE APPELLANT RELIES UPON THE FOLLO WING DECISIONS WHEREIN IT HAS BEEN HELD THAT THE ENTIRE ON-MONEY RECEIPT CANNOT B E CONSIDERED AS THE APPELLANTS INCOME AND ONLY A FAIR AND REASONABLE PE RCENTAGE OF SUCH RECEIPTS WOULD CONSTITUTE INCOME LIABLE TO TAX. THE LD. A.O HAS ERRED IN NOT APPRECIATING ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 22 THE SAID JUDICIAL PRONOUNCEMENTS WHILE DETERMINING THE INCOME OF THE APPELLANT. THE DECISION ON WHICH THE APPELLANT RELIES UPON ARE : - (I) WALL STREET CONST. LTD. - VS DCIT : DOCUMENTS SEIZED DURING SEARCH 87 ITD 47 (MUMBAI) (THIRD MEMBER) REVEALED ASSESSEE HAD RECEIVED LARGE AMOUNTS OF ON-MONEY FROM PURCHASERS OF FLATS. THE CIT (A) APPLIED PROFIT RATE OF 12% ON ON-MONEY AS THE INCOME. THE MUMBAI TRIBUNAL BY A THIRD MEMBER DECISION HAS CONFIRMED THE ORDER OF THE CIT (A). (COPY OF ORDER ENCLOSED AT PG NO. 43 TO 52) (II) ABHISHEK CORPORATION VS DCIT : EVEN THOUGH IT IS ESTABLISHED FROM 63 TTJ 651 (AHD) SEIZED DOCUMENTS THAT ASSESSEE WAS RECEIVING PREMIUM/ON-MONEY ON BOOKING OF FLATS BELONGING TO THIRD PARTIES ENTIRE RECEIPTS OF ON-MONEY PREMIUM CANNOT BE TREATED AS UNDISCLOSED INCOME OF ASSESSEE ONLY NET PROFIT RATE CAN BE APPLIED ON UNACCOUNTED SALES/RECEIPTS FOR MAKING ADDITION. (COPY OF ORDER ENCLOSED AT PG NO. 53 TO 55) (III) ITO VS GURUBACHAN SINGH J. JUNEJA : DURING THE COURSE OF SEARCH CERTAIN 54 TTJ 1 (AHD) LOOSE SHEETS WERE FOUND DEP ICTING SALES OUTSIDE BOOKS. THE ENTIRE SALES AMOUNT WAS ADDED AS INCOME BY THE A.O. IT WAS HELD THAT THE SAME WAS NOT JUSTIFIED AND ADDITION SHOULD BE OF GROSS PROFIT RATE ONLY. (COPY OF ORDER ENCLOSED AT PG NO. 56 TO 64) (IV) CIT VS - PRESIDENT INDUSTRIES : IT WAS HELD THAT ENTIRE UNDISCLOSED 258 ITR 654 (GUJRAT) SALES COULD NOT BE A DDED AS INCOME OF ASSESSEE BUT ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMATED PROFITS EMBEDDED IN SALES. (COPY OF ORDER ENCLOSED AT PG NO. 65 TO 66) (V) DCIT VS NAVRANG ENTERPRISES : THIS IS A CASE OF A BUILDER DEVELOPING ITA NOS 4388 4389 & 4390 A COMMERCI AL COMPLEX NEAR THANE MUMBAI ITAT STATION. EVIDENCE S OF ON-MONEY ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 23 RECEIPT WERE FOUND DURING SEARCH. THE TRIBUNAL ACCEPTED THE DECISION OF CIT (A) THANE THAT 12% OF SALES WOULD BE JUSTIFIED INCOME FOR LEVY OF TAX. (COPY OF ORDER ENCLOSED AT PG NO. 67 TO 69) (VI) CIT VS BALCHAND AJIT KUMAR : ONCE NET PROFIT RATE IS ADOPTED TO 263 ITR 610 (MP) DETERMINE INCOME IT CANNOT BE SAI D THAT THERE IS PERVERSITY OF APPROACH WHETHER THE RATE IS LOW OR HIGH WOULD DEPEND UPON THE FACTS OF EACH CASE. (COPY OF ORDER ENCLOSED AT PG NO. 70 TO 71) THE APPELLANT PRAYS THAT IF IT IS INFERRED THAT ANY ON-MONEY HAS BEEN TAKEN IN RESPECT OF SALE OF PREMISES AT THE LOTUS COURT PROJ ECT THEN ONLY A REASONABLE PERCENTAGE OF SUCH RECEIPTS SHOULD BE CONSIDERED AS INCOME PARTICULARLY WHEN IT IS ACCEPTED BY THE LD A.O. THAT SUBSTANTIAL EXPENDITURE OUT SIDE THE BOOKS WAS ALSO INCURRED BY THE APPELLANT. 9. INCORRECT STATEMENTS ON THE PART OF LD. A.O. THE LD A.O. TO JUSTIFY THE UNSUPPORTED INFERENCES DRAWN BY HIM HAS MADE TWO ALLEGATIONS AGAINST THE APPELLANT. (I) THAT THE APPELLANT INSPITE OF BEING ASKED TO S UBMIT DETAILS OF SALE OF FLATS/SHOPS ETC DID NOT DO SO TILL THE LAST MOMENT AND ULTIMATELY A SHOW CAUSE LETTER (I.E. LETTER DT. 24.3.06) WAS REQUIRED TO BE ISSUED. APPELLANTS REPLY THE SAY OF THE LD A.O. IS NOT CORRECT. THE FIRST T IME LD A.O. REQUESTED FOR DETAILS WAS VIDE HIS LETTER DT. 2.2.0 6 RECEIVED BY THE APPELLANT ON 8.2.06. THE APPELLANT SUBMITTED THE N ECESSARY DETAILS CALLED FOR VIDE HIS LETTER DT. 2.3.06. COPIES OF R ELEVANT SHOW CAUSE NOTICE AND LETTER ENCLOSED AT PG NOS 17A TO 23. (II) THAT EVEN THOUGH BOOKS OF ACCOUNTS WERE PRODU CED BY THE ASSESSEE RELEVANT EXTRACTS WERE NOT SUBMITTED. APPELLANTS REPLY THE APPELLANT PRODUCED BOOKS OF ACCOUNTS BEFORE THE LD A.O. FROM TIME TO TIME. AT NO TIME ANY SPECIFIC EXTRACT S RELATING TO SALES WERE ASKED FOR BY THE LD A.O. THE EXTRACTS CALLED FOR B Y THE LD A.O. VIDE HIS LETTER DT. 2.2.06 WERE SUBMITTED BY THE APPELLANT O N 9.3.06. (PL. REFER TO ENCLOSED PG NO. 24 TO 26). THE APPELLANT THEREFORE HUMBLY SUBMITS THAT ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 24 THE SAY OF THE LD A.O IN THIS RESPECT IS NOT SUPPOR TED BY FACTS. ALL THE RECORDS/EXPLANATIONS/DETAILS WERE SUBMITTED AS AND WHEN CALLED FOR AT THE EARLIEST POSSIBLE TIME. THE VOLUMINOUS INFORMA TION CALLED FOR WHICH TOTALLY RUNS INTO 3 BOX FILES WAS SUBMITTED DURING THE COURSE OF ASST. PROCEEDINGS BEFORE THE LD A.O. AS SOON AS THE SAME WAS COMPILED. 10. THE APPELLANT PRAYS THAT THE ADDITION MADE FOR THE YEAR UNDER APPEAL MAY PLEASE BE DELETED AS THE SAME IS NOT WARRANTED BY FACTS AND IN LAW. THEREAFTER THE LD. CIT(A) AFTER DISCUSSING THE IS SUE IN DETAIL ALLOWED THE APPEALS OF THE ASSESSEE IN PART. NOW THE DEPARTMENT AND THE ASSESSEE ARE IN APPEAL HERE BEFORE THE TRIBUNAL. 6. THE LD. D.R. INVITED THE ATTENTION OF THE BENCH TO THE ORDERS AND OBSERVATIONS OF THE AO. THE RELEVANT PORTION WAS RE AD ALSO. IT WAS FURTHER SUBMITTED THAT THE AO HAS MADE ADDITIONS ON THE BAS IS OF SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH. ATTENTION OF THE BENCH WAS DRAWN ON PAGE 57 OF THE PAPER BOOK WHERE A COPY OF DETAILS OF SEIZED MATE RIAL ON WHICH BASIS THE ADDITIONS HAVE BEEN MADE BY THE AO IS PLACED. IT W AS FURTHER SUBMITTED THAT THE CIT HAS ALLOWED THE APPEALS OF THE ASSESSEE BY IGNO RING THE FACTUAL POSITION OF THE CASE. WHEREAS THE AO HAS BASED HIS FINDING ON T HE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH THE LD. CIT(A) HAS GIV EN HIS FINDING THAT THE ESTIMATE OF INCOME MADE BY THE AO IS NOT CORRECT. FIRSTLY T HE ESTIMATE OF INCOME ON ACCOUNT OF ON MONEY HAS BEEN REDUCED BY THE CIT(A) IN PROPORTIONATELY. THEREAFER THE LD. CIT(A) HAS DIRECTED THE AO TO AD OPT THE PROFIT RATE AT 12.3% ON THE REDUCED RECEIPTS ON ACCOUNT OF ON MONEY. IT WAS FURTHER SUBMITTED THAT IN VIEW OF THE AMENDED PROVISIONS OF SEC. 69C THE ONL Y EXPENSES WHICH INCURRED IN CONNECTION WITH THE BUSINESS ACTIVITY CAN BE ALLOWE D. THE AO HAS ALREADY ALLOWED THE EXPENSES WHICH WERE FOUND RECORDED IN THE SEIZE D PAPERS. THEREFORE THERE IS NO SCOPE FOR ALLOWING FURTHER EXPENSES THAT TOO WITHOUT ANY MATERIAL. IT WAS FURTHER EXPLAINED THAT THE LD. CIT(A) HAS PLACED RE LIANCE ON VARIOUS DECISIONS OF ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 25 THE TRIBUNAL WHILE DIRECTING TO ADOPT THE PROFIT RA TE AT 12.3%. THESE CASE LAWS HAVE DIFFERENT FACTS AS FROM THE FACTS OF THE ASSES SEES CASE. ALTERNATIVELY THE LD. D.R. STATED THAT IF THE PROFIT RATE HAS TO BE APPLI ED THEN THE PROFIT RATE APPLIED BY THE LD. CIT(A) IS ON VERY LOW SIDE. IN SUPPORT OF THIS CONTENTION THE LD. D.R. HAS PLACED RELIANCE ON VARIOUS DECISIONS OF THE TRIBUNA L REPORTED IN 119 ITD 41 (AHD.) 59 ITD 29(BOM.) AND 112 ITD 51 (AMRITSAR). COPIES OF THESE DECISIONS ARE ALSO FILED. 7. THE LD. COUNSEL OF THE ASSESSEE ON THE OTHER HA ND FIRSTLY SUPPORTED THE ORDER OF CIT(A). IT WAS FURTHER SUBMITTED THAT THE AO HAD ADOPTED A DIFFERENT YARDSTICK WHILE COMPUTING THE UNDISCLOSED INCOME OF THE ASSESSEE ON ACCOUNT OF ON MONEY. ATTENTION OF THE BENCH WAS DRAWN ON PAGE 57 OF THE PAPER BOOK WHERE A COPY OF SEIZED DOCUMENT IS PLACED. IT WAS F URTHER SUBMITTED THAT AS PER THE SEIZED PAPERS REGARDING FLAT NO.9 & 10 WHICH IS IN RESPECT OF SALE OF FLAT TO ONE SHRI KANTILALJI FOR A CONSIDERATION OF RS.48 L AKHS. IT WAS SUBMITTED THAT THIS FIGURE OF RS.48 LAKHS INCLUDES THE FIGURE AS PER AG REEMENT AND FIGURE OF ON MONEY. THE AO HAS ADOPTED THE FIGURE OF ON MONEY AF TER REDUCING THE AMOUNT AS RECORDED IN THE AGREEMENT OF PURCHASE. IT WAS FURTH ER SUBMITTED THAT IN RESPECT OF OTHER SALES FOUND RECORDED IN THE SAME SEIZED PA PER THE AO HAS TREATED THE ENTIRE AMOUNT AS ON MONEY WHEREAS THESE AMOUNTS AR E ALSO INCLUSIVE OF PRICE OF FLAT WHICH IS NOTED IN THE AGREEMENT. IT WAS FURTHE R SUBMITTED THAT THIS FACT IS VERY MUCH VERIFIABLE AND THE LD. CIT(A) AFTER VERI FYING THIS FACT ONLY HAS REDUCED THE ESTIMATE OF THE INCOME MADE BY AO. IN RESPECT O F THE CONTENTION OF THE LD. D.R. THAT THE CIT(A) HAS ACCEPTED THE RATE ADOPTED BY THE AO IN RESPECT OF FIRST FLOOR BUT IN RESPECT OF OTHER FLOOR AND SHOPS THE CIT(A) HAS DIRECTED TO ADOPT 30% 20% AND 10% RECEIPTS AS ON MONEY AND THEN HAS DIRECTED TO APPLY 12.3% PROFIT RATE THE LD. COUNSEL OF THE ASSESSEE STATED THAT THIS REDUCTION OF PROFIT BY ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 26 CIT(A) IS GIVEN AFTER TAKING INTO CONSIDERATION THE ASPECT THAT THE PRICE OF UPPER FLOOR IS LESS IN VALUE AND LESS ON MONEY HAS BEEN RECEIVED. IT WAS ALSO ADDED THAT THE CIT(A) HAS DISCUSSED THIS ISSUE IN DETAIL IN HIS ORDER. 8. REGARDING THE NET PROFIT ADOPTED BY THE CIT(A) IT WAS SUBMITTED THAT THE VIEW OF THE CIT(A) IS VERY MUCH CORRECT BECAUSE THE SAME IS SUPPORTED BY VARIOUS ORDERS OF THE TRIBUNAL INCLUDING THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT M.P. HIGH COURT AND DELHI HIGH COURT. THEREF ORE THE ORDERS OF THE CIT(A) ARE LIABLE TO BE CONFIRMED. IT WAS FURTHER SUBMITTE D BY THE LD. COUNSEL OF THE ASSESSEE THAT IF THE ORDERS OF THE LD. CIT(A) ARE C ONFIRMED THEN THE CROSS OBJECTIONS FILED BY THE ASSESSEE MAY BE TREATED AS NOT PRESSED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THEM CAREFULLY. AFTER CONSIDERING THE RELEVANT MATERIAL ALONG WITH THE OR DERS OF THE AUTHORITIES BELOW AND THE ARGUMENTS OF BOTH THE PARTIES WE FIND THAT THE CIT(A) HAS GIVEN A REASONABLE RELIEF TO THE ASSESSEE BY ALLOWING THE A PPEALS OF THE ASSESSEE IN PART FOR ALL THE YEARS INVOLVED HERE BEFORE US. THE FIND ING OF THE LD. CIT(A) HAS BEEN RECORDED IN PAGE 31 TO 45 ARE AS UNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE THE ARGU MENTS OF THE A.O. AS WELL AS THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THI S CASE ON 30.10.2003. THE APPELLANT HAS STATED THAT IT IS ADO PTING THE WORK-IN- PROGRESS METHOD OF ACCOUNTING AND IS COMPUTING THE PROFIT FROM THE PROJECT ON THE BASIS OF ESTIMATION ON YEAR TO YEAR BASIS. THE APPELLANT HAD FILED ITS RETURN OF LOSS OF RS. 28 97 207/- ON 24.11.2004 FOR THE A.Y.98-99. THE SAME WAS ACCOMPAN IED WITH THE AUDIT REPORT ETC. AS PER THE APPELLANT THE A.O. HA S NOW ASSESSED THE INCOME AFTER ADDING AN AMOUNT OF RS. 97 88 846/ - ON THE BASIS OF SEIZED PAPERS CONCLUDING THAT ON MONEY WAS RECEI VED BY THE APPELLANT IN RESPECT OF SALE OF RESIDENTIAL FLATS OFFICES AND SHOPS. THE DETAILS HAVE ALREADY BEEN BROUGHT OUT IN THE AS SESSMENT ORDER WHICH HAS BEEN REPRODUCED IN PRE PAGES. THE APPELLANT'S FIRST GROUND OF APPEAL IS REGARDING THE ISSUE OF NOT BEING GRANTED SUFFICIENT OPPORTUNITY BY WAY OF PERS ONAL HEARINGS ETC. I DO NOT FIND THIS AS TENABLE AS FROM THE RECO RDS I FIND THAT THE APPELLANT WAS GIVEN ENOUGH OPPORTUNITY TO EXPLAIN H IS CASE. IT IS NOT ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 27 OF MATERIAL IMPORTANT WHETHER THESE OPPORTUNITIES A RE BY WAY OF WRITTEN SUBMISSIONS OR PERSONAL HEARINGS. THE A.O. HAS ALSO ADDRESSED THIS ISSUE IN THE ASSESSMENT ORDER. EVEN THE APPELLANT IN ITS SUBMISSION BEFORE ME HAS AT SEVERAL PLACES REFE RRED TO THE VARIOUS QUERIES RAISED BY THE A.O. AND ITS REPLIES THERETO. IN ANY CASE DURING THE COURSE OF APPELLATE PROCEEDINGS T HE APPELLANT WAS GIVEN SUFFICIENT OPPORTUNITY TO EXPLAIN ITS CASE BY WAY OF WRITTEN SUBMISSION AS WELL AS PERSONAL HEARINGS AND IT SHOU LD NOT HAVE ANY GRIEVANCE ON THIS ISSUE NOW. IN THE SECOND GROUND OF APPEAL THE APPELLANT HAS CO NTENTED THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE NOT PROPERL Y REJECTED AS PER THE PROVISIONS OF SEC.145 OF THE L.T. ACT BEFORE P ROCEEDING TO ESTIMATE THE PROFIT AND THEREFORE CONSEQUENT ADDI TION MADE IS NOT ACCORDING TO THE PROVISIONS OF LAW. I DO NOT FIND M UCH MERIT IN THE ARGUMENT OF THE APPELLANT AS ALTHOUGH THE A.O. HAS NOT MADE AN EXPRESS ORDER REJECTING THE BOOKS OF ACCOUNTS BUT HE HAS BROUGHT SUFFICIENT MATERIAL ON RECORD ON THE BASIS OF SEIZE D DOCUMENTS TO SHOW THAT THE APPELLANT'S BOOK RESULTS CANNOT BE F ULLY RELIED ON FOR THE PURPOSE OF DETERMINING THE TAXABLE INCOME. THE APPELLANT'S THIRD GROUND OF APPEAL IS REGARDING THE ADDITION OF RS. 97 88 846/- ON THE BASIS OF ESTIMATION OF SALES CONSIDERATION RECEIVED IN RESPECT OF LOTUS COURT PROJECT AT PUNE. FROM A PERUSAL OF THE ASSESSMENT ORDER I FIND THAT THE A.O HAS MA INLY RELIED ON THE NOTINGS AT PAGES 9 AND 10 OF THE BUNDLE NO. 1 SEIZE D FROM THE RESIDENCE OF ONE OF THE DIRECTORS OF THIS COMPANY. IT IS IMPORTANT TO RE-ITERATE HERE THAT THIS COMPAN Y WAS PROMOTED BY TWO PERSONS WHO BROUGHT IN THEIR RESPECTIVE CAPITAL S AND DIVIDED THE RECEIPTS IN A CERTAIN PROPORTION. THE A.O HAS ATTAC HED COPIES OF THE RELEVANT SEIZED DOCUMENTS RELIED UPON BY HIM FOR TH E PURPOSE OF MAKING THE SAID ADDITION. ON GOING THROUGH THE DOCU MENTS ANNEXED AT ANNEXURE 'A ' TO THE ASSESSMENT ORDER I FIND TH AT IN THE FIRST COLUMN SERIAL NUMBERS HAVE BEEN MENTIONED. THEREAF TER THE ASSIGNED NUMBER OF SHOPS/OFFICES/FLATS IS MENTIONED ALONGWITH THE NAME VALUE AND BIFURCATION OF THE AMOUNT BETWEEN M R. KARNAWAT AND MR. KANITLAL JAIN THE TWO MAIN PERSONS WHO ARE PROMOTERS OF THIS CONCERN. THE APPELLANT HAS ALSO REPRODUCED THE CONTENTS OF THIS CHART IN ITS SUBMISSION. THE CONTENTION HOWEVER I S REGARDING THE INTERPRETATION OF THE ENTRIES MADE IN THE SEIZED DO CUMENT. THE APPELLANT HAS ARGUED THAT THE NOTINGS IN THESE PAPE RS ARE PRIOR TO 31.03.97 AND THE FIGURES REPRESENT THE EXPECTED AMO UNTS BY WAY OF SALES AND THAT THERE IS SOME VARIATION WHEN SALES W ERE ACTUALLY AFFECTED BUT THE AMOUNTS RECORDED ARE OF ACTUAL SAL E AND NOT ON MONEY ON SALES. IN SUPPORT OF THIS ARGUMENT THE AP PELLANT HAS GIVEN THE TABLE EVIDENCING THE VALUE OF SUCH SHOPS/ OFFICES AND FLATS AS PER READY RECKONER MAINTAINED BY THE SUB-REGISTR AR. THE APPELLANT HAS ALSO GIVEN SEVERAL INSTANCES OF SALES OF SIMILAR PROPERTIES AND THEIR RATES. THE OTHER ARGUMENTS OF THE APPELLANT ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 28 HAVE ALREADY BEEN REPRODUCED ON PRE PAGES AND NEED NOT BE RE- ITERATED HERE. ON GOING THROUGH THE ENTIRELY OF THE MATTER I FIND THAT THE A'O HAS NOT BROUGHT ON RECORD ANY CORROBORATIVE EVIDENCE TO SUPPORT THE FINDING OF ON MONEY RECEIVED IN RESPECT OF THE SHOP /OFFICES AND FLATS. ALTHOUGH THE A.O. HAD INFORMATION OF THE BUY ERS OF THE PREMISES ON RECORD NOT EVEN A SINGLE BUYER WAS EXA MINED BY THE A.O. REGARDING THE EXTRAPOLATION OF THE RATES ACROS S THE BOARD AGAINST THE APPELLANT'S ARGUMENT THAT THERE ARE SEV ERAL JUDGMENTS AGAINST SUCH AN EXERCISE THE A.O. HAS MERELY STATE D THAT THERE ARE MANY SUCH JUDGMENTS PERMITTING EXTRAPOLATIONS BUT H E HAS NOT REFERRED TO A SINGLE SUCH JUDGMENT. HOWEVER I DO NOT AGREE WITH THE APPELLANT THAT THE A.O HAS BASED HIS CONCLUSIONS ONLY ON WHIMS AND SURMISES. THE A.O HAD SUFFICIENT EVIDENCE BY WAY OF SEIZED MATERIAL FROM WHICH HE CO ULD DECIPHER THE METHODOLOGY OF THE APPELLANT IN BIFURCATING THE RECEIPTS FROM SALES. FROM THE ASSESSMENT ORDER I FIND THAT THE A .O. HAS ALSO EXAMINED THE RATE OF THE PROPERTIES FROM THE ANGLE OF COSTING AS HE HAS TAKEN INTO CONSIDERATION THE VALUE OF THE LAND COST OF CONSTRUCTION ETC. THE A.O HAS ALSO MENTIONED A VERY RELEVANT FACT THAT THE TWO PROMOTER GROUPS OF THE APPELLANT COMPA NY HAVE BROUGHT IN HUGE FUNDS. AS PER THE APPELLANT ITSELF SHORT TERM LOANS WERE TAKEN AND OUTSTANDING LOAN AMOUNT AS ON 31.3. 97 WAS TO THE TUNE OF RS.2 86 87 390/-. IT IS NOT REASONABLY CORR ECT FOR THE APPELLANT THEN TO ARGUE THAT SALES WERE MADE AT A RATE BELOW THE COST VALUE. THE MARKET VALUE GIVEN BY THE APPELLANT FROM THE RE ADY RECKONER MAINTAINED BY THE SUB REGISTRAR PUNE CANNOT REFLE CT ON THE AMOUNT OF ON-MONEYS SINCE BY ITS VERY NATURE ON M ONEY CANNOT FIND ITS WAY TO THE REGISTRAR'S BOOKS. FURTHER AS PER THE RATE CHART PRODUCED BY THE APPELLANT IT HAS SOLD SHOPS AND OF FICES ON BOTH THE FIRST AND SECOND FLOORS AT LESS THAN THE VALUE OCCU RRING EVEN IN THE REGISTRAR'S READY RECKONER. THIS CERTAINLY DOES NO T APPEAR TO BE REASONABLE BEHAVIOR OF A PRUDENT BUSINESSMAN. FROM A PERUSAL OF THE ASSESSMENT ORDER I FIND THAT THE A.O HAS NOT A NY COMMENTS ON THE VALUES OCCURRING IN THE SUB-REGISTRAR'S READY R ECKONER ALTHOUGH THE SAME WERE BEFORE HIM. FROM THE COMPUTATION IN THE ASSESSMENT ORDER I FIN D THAT THE A.O HAS TAKEN THE ON-MONEY COMPONENT AT 50% IN RESPECT OF ALL THE PREMISES SOLD I .E. SHOPS OFFICES AT FIRST FLOOR OFFICES AT 2ND FLOOR AS WELL AS RESIDENTIAL FLATS. HOWEVER I FIND THAT TO BE A LITTLE UNREASONABLE SINCE THE COMPONENT OF ON-MONEY CANNO T BE THE SAME FOR DIFFERENT COMMERCIAL AND RESIDENTIAL PREMI SES. AS PER THE SEIZED DOCUMENTS AT PAGE NO. 10 OF BUNDLE NO. 1 SH OP NO.20 HAS BEEN SOLD TO SHRI N. MENKAR . THE AMOUNT OF RS. 8 60 000/- HAS BEEN BIFURCATED BETWEEN THE TWO PROMOTERS AT RS. 8 09 000/- AND ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 29 RS. 51 000/- RESPECTIVELY. THE A.O HAS MENTIONED T HAT SIMILARLY IN RESPECT OF SHOP NO. 18 THE AMOUNT OF RS.8 60 000/- RECEIVED FROM SHRI SONI HAS BEEN BIFURCATED AT RS. 8 39 000/- AND RS. 21 000/- RESPECTIVELY. THE A.O'S ARGUMENT IS THAT THIS IS B IFURCATION OF ON- MONEY RECEIVED IN RESPECT OF SHOPS. THE APPELLANT' S ARGUMENT THAT CHEQUES WERE RECEIVED FROM SHRI N. MENKAR IN RESPEC T OF SHOP NO. 20 AND THE AMOUNTS RECEIVED BY WAY OF CHEQUES IS SI MILAR TO THE AMOUNT ON THE SEIZED DOCUMENT IS ILLOGICAL AND I AGREE WITH THE A.O THAT THERE IS NO RECEIPT OF RS.51 000/- BY WAY OF CHEQUE. THE A.O HAS FURTHER SUPPORTED HIS ARGUMENT BY STATING THAT ENTRIES ON PAGE 19 OF BUNDLE NO. 1 HAVE BEEN RECORDED SOMETIM E IN MARCH 98 WHEREAS THE TOTAL AMOUNT RECEIVED UPTO MARCH 98 BY CHEQUES IS ONLY RS.5 01 500/-. THE A.O HAS ARGUED THAT ON THE SEIZED PAGE NO. 10 OF BUNDLE NO' 1 THE AMOUNT OF RS. 8 50 000/- HA S ALREADY BEEN DISTRIBUTE BETWEEN THE TWO PARTNERS. THE A.O. THUS CLEARLY STATES THAT THIS IS THE CASE IN RESPECT OF SALE OF ALL THE SHOPS AS PER THE ENTRIES IN THE SEIZED BUNDLE NO. 4 AND THAT IN ALL CASES CHEQUE AMOUNTS RECEIVED UPTO 31.03.98 HAVE BEEN LESS THAN THE AMOUNT DISTRIBUTED ON PAGE NO.9 AND 10 OF BUNDLE NO.1. TH US THE A .O HAS CLEARLY PROVED THAT THE ENTRIES ON PAGE NO.9 AND 10 OF SEIZED BUNDLE NO. 1 REPRESENT CASH CONSIDERATION RECEIVE D OVER AND ABOVE THE IN THE RESPECTIVE AGREEMENTS AND IN THE B OOKS. THUS THE A.O ADOPTED THE RATE OF RS. 5000/- PER SQ FT IN RESPECT OF GROUND FLOOR SHOPS WHICH INCLUDED THE ON-MONEY COMPONENT. I FIND THAT THE A.O'S CONCLUSIONS ARE CORRECTLY BASED ON THE ENTRIE S IN THE SEIZED MATERIAL. HENCE THE RATE OF RS.5 000/- PER S Q F T IN RESPECT OF GROUND FLOOR SHOPS ADOPTED BY THE A.O IS UPHELD IMP LYING THAT THE ON-MONEY RECEIVED IN RESPECT OF GROUND FLOOR SHOPS IS @ 50%. THE A .O HAS REFERRED TO THE SALE OF OFFICES 37 38 39 & 211 MENTIONED IN THE SEIZED PAGES 9 & 10 OF BUNDLE NO. 1. FROM THE PERUSAL OF THE ENTRIES THEREIN I FIND THAT IN RESP ECT OF OFFICE PREMISES THE A.O HAS CONSIDERED SEPARATELY THE SALE OF OFFIC ES ON FIRST FLOOR AND SECOND FLOOR AND ADOPTED DIFFERENT RATES FOR TH EM. THE APPELLANT HAS DECLARED THE SAME RATE AT RS. 1500/- PER SQ FT IN RESPECT OF OFFICE PREMISES FOR BOTH THE FLOORS. IN RESPECT OF OFFICE PREMISES ON THE FIRST FLOOR THE A.O HAS PROBABLY T AKEN SALE OF THREE SHOPS AS JUST ONE SHOP SOLD TO MR. CHODIYAR. ACCORD INGLY TO THE APPELLANT THE AREA WORKED OUT BY THE A.O IN RESPEC T OF THIS OFFICE IS 1215 SQ FT BUT ACTUALLY IT SHOULD BE 2096 SQ FT. HO WEVER I FIND THAT THE ENTRY IN THE SEIZED DOCUMENT MENTIONS '1215'. THE A.O HAS ADOPTED THE RATE OF RS. 3100/- PER SQ FT WHEREAS I F IT IS CORRECTED THE RATE WILL WORK OUT TO RS. 1801/- PER SQ FT AGAI NST THE APPELLANT'S OFFER OF RS. 1500/- PER SQ FT. THEN THE ON-MONEY C OMPONENT COMES TO LESS THAN 30%. HOWEVER GOING BY THE GENERAL MARKET CONDITIONS I DEEM IT REASONABLE TO TAKE 30% AS THE ON MONEY COMPONENT IN RESPECT OF SALE OF OFFICES ON THE FIRST FLOOR. THE A.O' IS TH US DIRECTED TO RE- COMPUTE THE SALES VALUE OF THE FIRST FLOOR OFFICE P REMISES. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 30 IN RESPECT OF THE OFFICE PREMISES ON THE SECOND FLO OR THE A.O HAS MENTIONED ONLY ONE INSTANCE IN RESPECT OF OFFICE NO . 211 SOLD ON THE SECOND FLOOR TO MR. ZAGADE EVIDENCING THE DIVISION OF ON-MONEY BETWEEN THE PROMOTERS AS PER ENTRIES IN THE SEIZED BUNDLE NO. 1. THE A.O HAS ADOPTED THE RATE OF RS. 2400/- SQ FT AG AINST THE APPELLANT'S DECLARATION @ RS. 1500/-. ON REVIEWING THE MATTER IN ENTIRETY I FIND THAT THE APPELLANT'S DECLARATION A T RS. 1500/- PER SQ FT IN RESPECT OF ALL THE OFFICE PREMISES IS NOT REASON ABLE AND I AGREE WITH THE A.O THAT OFFICES ON THE FIRST FLOOR WOULD FETCH A HIGHER RATE THAN THE OFFICES ON THE SECOND FLOOR. I HAVE ALREAD Y HELD THAT IN RESPECT OF OFFICES ON THE FIRST FLOOR ON THE BASIS OF EXISTING MARKET CONDITIONS AS WELL AS THE A.O'S ARGUMENTS ON-MONEY @ 30% IS TO BE TAKEN. ON THE SAME REASONING IN RESPECT OF OFFIC ES PREMISES ON THE SECOND FLOOR I FIND THAT ON-MONEY @ 20% IS REA SONABLE. HENCE THE A.O IS DIRECTED TO RE-COMPUTE THE SALE V ALUE IN RESPECT OF OFFICES ON THE SECOND FLOOR TAKING THE ON-MONEY COMPONENT @ 20%. THE A.O HAS CLEARLY MENTIONED THAT NO OTHER S ALES INSTANCE HAVE BEEN FOUND IN THE SEIZED MATERIAL AND THEREFO RE THE SALE OF OFFICES ON OTHER FLOORS IS BEING TAKEN AT RATES REC ORDED BY THE ASSESSEE. THE A .O HAS ALSO ADDED RS.5 .5 LAKHS ON MONEY IN RESPECT OF STILT AREA SOLD TO ONE MR. BHATKANDE DURING THE A.Y.2 0 00-01. I FIND NO REASON TO INTERFERE WITH THIS FINDING OF THE A .O. IN RESPECT OF THE SALE OF FLATS IT APPEARS THAT TH ERE WAS GENERALLY NO ON-MONEY COMPONENT IN THIS REGION AND EVEN IF IT WA S THERE AT ALL IT WAS NOT MORE THAN 10% IN MOST CASES. THE A.O HAS NO T BROUGHT SUFFICIENT MATERIAL ON RECORD TO JUSTIFY THE ON MON EY COMPONENT IN RESPECT OF THE FLATS. THE A.O'S BASIS OF THE ADDITI ON ON THIS COUNT IS ONLY ONE SINGLE ENTRY IN THE SEIZED DOCUMENT WHEREI N 2400 SQ FT OF TWO ALL FLATS HAVE APPARENTLY BEEN GIVEN TO ONE OF THE PROMOTERS MR. JAIN FOR RS. 48 LAKHS. THE APPELLANT HAS ARGUE D THAT THIS WAS A MUCH HIGHER RATE BECAUSE THE PROMOTER WANTED SPECIF IC TYPE OF INTERIOR DESIGN IN THIS FLAT HENCE THIS VALUE CAN NOT BE CONSIDERED AS THE MARKET VALUE. THE APPELLANT HAS ALTERNATIVELY A RGUED THAT IN ANY CASE THE PROMOTER WILL NOT GIVE ANY ON-MONEY IN RE SPECT OF PURCHASES MADE BY HIM. AS PER THE A.O THE ON MONEY IN RESPECT OF THE FLAT S WAS @ RS. 700/- PER SQ FT WHEREAS THE DECLARED VALUE WAS RS. 1300/- PER SQ FT. THIS WORKS OUT TO 35% OF THE TOTAL SALE CONSIDERATI ON. AS PERT HE CHART FURNISHED BY THE APPELLANT THE VALUE OF THE FLAT DECLARED BY THE APPELLANT IS ALMOST THE SAME AS THAT OCCURRING IN T HE SUB-REGISTRAR'S READY RECKONER. AS PER THE COMPARATIVE INSTANCES OF SIMILAR PROPERT IES GIVEN BY THE APPELLANT I FIND THAT THE HIGHEST RATE IN RESPECT OF FLATS IS SHOWN AT RS. 1656/- PER SQ FT. IT IS NOT CORRECT FOR THE APP ELLANT TO ARGUE THAT ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 31 ALL THE ENTRIES IN THE SEIZED DOCUMENT SHOULD BE GI VEN ONE SINGLE INTERPRETATION. THE A.O IS ONLY TRYING TO DECIPHER THE ENTRIES IN THE SEIZED MATERIAL SENSIBLY AND IF ANY SUCH INTERPRETA TION NEEDS TO AN ABSURD INTERPRETATION THEN IT IS NECESSARY FOR THE A.O TO PROBE THE POSSIBILITY OF GIVING IT A DIFFERENT INTERPRETATION WHICH MIGHT APPEAR MORE LOGICAL. IN THIS CASE THERE IS ONLY ONE NOTIN G IN RESPECT OF FLAT EVIDENCING SALE OF FLAT TO ONE OF THE PROMOTERS. IF THE A.O GIVES IT THE SAME INTERPRETATION AS THAT IN RESPECT OF SHOPS TH EN IT LEADS TO AN ABNORMALLY HIGH RATE IN RESPECT OF FLATS. THEREFORE THE A.O HAS DECIPHERED THE SAME AS ACTUAL RATE OF SALE AND NOT JUST THE ON MONEY CONTENT AND THIS IN FACT GOES IN FAVOUR OF TH E APPELLANT. THEREFORE THE APPELLANTS ARGUMENT THAT THE A.O'S S TAND IS CONTRADICTORY IS NOT RELEVANT YEAR. THUS KEEPING IN VIEW ALL OF THE ABOVE FACTS I THI NK IT REASONABLE TO AGREE WITH THE A.O. THAT ON THE SALE OF FLATS AS WE LL THE APPELLANT HAD TAKEN ON-MONEY BUT THE A.O HAS NOT ALSO BRING ANY CORROBORATIVE EVIDENCE ON RECORD TO SUBSTANTIATE TH E EXTENT OF ON- MONEY TAKEN ON FLATS. KEEPING IN VIEW THE GENERAL M ARKET CONDITIONS IT WOULD BE UNREASONABLE TO ACCEPT THE APPELLANT'S' CLAIM THAT NO ON-MONEY WAS TAKEN AT ALL. THEREFORE TAKI NG A REASONABLE VIEW IN THE MATTER I HOLD THAT THE APPELLANT HAD T AKEN 10% AS ON- MONEY ON THE SALE OF RESIDENTIAL FLAT IN THE PROJEC T. THE A.O IS THUS DIRECTED TO COMPUTE THE SALES VALUE OF THE FLATS IN THE RESPECTIVE ASSESSMENT YEARS FROM 98-99 TO 2004-05. FURTHER I FIND THAT THE A.O HAS ADDED THE ENTIRE O N MONEY COMPONENT AS THE INCOME OF THE APPELLANT EVEN THOUG H THE ON MONEY ONLY GOES TOWARDS INCREASING THE SALES CONSID ERATION OF THE PROPERTY. THE APPELLANT HAS BROUGHT TO NOTICE SEVER AL JUDGMENTS WHEREIN IT HAS BEEN HELD THAT ONLY A CERT AIN PERCENTAGE OF THE SALES CONSIDERATION INCLUDING THE ON-MONEY CAN BE TAKEN AS TAXABLE PROFITS OF THE ASSESSEE AND NOT THE ENTIRE ON MONEY. I HAVE GONE THROUGH THE VARIOUS DECISIONS RE FERRED BY THE APPELLANT ON THIS ISSUE. I FIND THAT THIS VIEW HAS BEEN HELD BY THE HIGH COURT OF GUJARAT THE HIGH COURT OF MADHYA PRA DESH AND ALSO BY THE ITAT MUMBAI AND ITAT AHMEDABAD CONSISTENT LY. THE RELEVANT EXTRACTS OF THESE JUDGMENTS ARE RE-PRODUCE D HEREUNDER: 1. DECISION OF THE ITAT MUMBAI IN THE CASE OF WAL L STREET CONST. LTD. - VS DCIT ITA NO.9 269/BOM/1995 DATED 6TH MA Y 1999 FOR THE A .Y.1992-93 READS AS UNDER: 'THERE IS NO UNIVERSAL LAW THAT EXPENSES HAVE TO BE ALLOWED OUT OF 'ON MONEY' IN SUCH TYPE OF CASES. IN THIS TYPE O F CASE EXPENSES CAN BE ALLOWED WHERE THERE IS EVIDENCE OF EXPENSES HAVING BEEN INCURRED WITH RELATION TO THE 'ON MONEY' RECEIVED B Y THE ASSESSEE. IN THIS CASE THE ITAT IN ITA NO. 1759/BOM./95 DATED 7-8-1995 HAVE OPINED THAT THE ENTIRE AMOUNT OF 'ON MONEY' RECEIVE D BY THE ASSESSEE COULD NOT BE TAXED IN ITS HANDS AND THEY H AVE DIRECTED THE ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 32 AO TO TAKE ONLY L2% OF GROSS RECEIPTS AS INCOME OF THE APPELLANT OUT OF 'ON MONEY' AND THIS ORDER OF THE HON'BLE ITAT HA S BEEN FOLLOWED BY THE CIT(A) FOR THE ASSESSMENT YEAR1 992-93 UNDER APPEAL. ACCORDINGLY THERE SEEMS TO BE NO MISTAKE ON THE PAR T OF THE CIT(A) IN FOLLOWING ORDER OF THE SUPERIOR APPELLATE AUTHOR ITY FOR AN EARLIER ASSESSMENT YEAR NO INTERFERENCE IN HIS ORDER IS CA LLED FOR. CONCLUSION CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFF ICER TO APPLY A PROFIT RATE OF 12 PER CENT ON UNACCOUNTED 'ON MON EY' RECEIVED BY THE ASSESSEE BUILDER ON THE FACTS OF THE CASE. IN MY CONSIDERED VIEW THERE IS NO UNIVERSAL LAW TH AT EXPENSES HAVE TO BE ALLOWED OUT OF 'ON MONEY' IN SUCH TYPE O F CASES. IN THIS TYPE OF CASE EXPENSES CAN BE ALLOWED WHERE THERE I S EVIDENCE OF EXPENSES HAVING BEEN INCURRED WITH RELATION TO THE 'ON MONEY' RECEIVED BY THE ASSESSEE. IN THIS CASE THE ITAT IN ITA NO. 1759/BOM./95 DATED7 -8-1995 HAVE OPINED THAT THE EN TIRE AMOUNT OF 'ON MONEY' RECEIVED BY THE ASSESSEE COULD NOT BE TAXED IN ITS HANDS AND THEY HAVE DIRECTED THE AO TO TAKE ONLY 12 % OF GROSS RECEIPTS AS INCOME OF THE APPELLANT OUT OF 'ON MONE Y' AND THIS ORDER OF THE HON'BLE ITAT HAS BEEN FOLLOWED BY THE CIT(A) FOR THE ASSESSMENT YEAR 1992-93 UNDER APPEAL. ACCORDINGLY THERE SEEMS TO BE NO MISTAKE ON THE PART OF THE CIT(A) IN FOLLO WING ORDER OF THE SUPERIOR APPELLATE AUTHORITY FOR AN EARLIER ASSESSM ENT YEAR NO INTERFERENCE IN HIS ORDER IS CALLED FOR AND ACCORDI NGLY THE GROUND OF THE REVENUE IS DISMISSED. THE QUESTION DOES NOT PER MIT ME TO EXAMINE WHETHER THE RATE OF L2% IS FAIR AND REASONA BLE. EITHER I HOLD THAT THE RATE OF 12% SHOULD BE APPLIED BOTH ON ACCO UNTED AND UNACCOUNTED TURNOVER OF THE ASSESSEE. FURTHER NO AR GUMENT APPEAR TO HAVE BEEN ADVANCED BEFORE THE LD MEMBERS AS TO W HAT WOULD BE THE REASONABLE PERCENTAGE OF PROFITS ASSUMING THAT THE BOOK RESULTS CANNOT BE ACCEPTED. THE CASE WOULD APPEAR TO HAVE PROCEEDED ON THE BASIS THAT EITHER THE BOOK RESULTS ARE ACCEPTED OR A RATE OF 12% IS ADOPTED AS THE PROFITS FROM THE AC COUNTED BUSINESS. THEREFORE I AM AFRAID THAT I AM PRECLUDE D FROM EXAMINING THE QUESTION AS TO WHAT WOULD BE THE REASONABLE PER CENTAGE OF PROFIT IN RESPECT OF THE ACCOUNTED BUSINESS'' 2. THE RELEVANT EXTRACTS OF THE DECISION OF THE ITA T AHMEDABAD IN THE CASE OF ABHISHEK CORPORATION VS DCIT IT(SS ) A NO. 153/AHD/1997 DATED 4TH AUGUST 1998 FOR THE A .Y.19 87-88 TO 1997- 98 ARE AS UNDER: 'SEARCH AND SEIZURE- BLOCK ASSESSMENT UNDISCLOSED INCOME SEIZED DOCUMENTS INDICATING THAT ASSESSEE WAS RECEI VING PREMIUM/'ON MONEY' ON BOOKING OF FLATS BELONGING TO OTHER PARTIES A .O JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS- HOWEVER ENTIRE PREMIUM CHARGED BY ASSESSEE CANNOT BE TREATED AS UN DISCLOSED ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 33 INCOME FOR BLOCK PERIOD BECAUSE A.O HAD NOT PROVED BY BRINGING MATERIAL ON RECORD THAT ASSESSEE DID MAKE ANY INVES TMENT TO MAKE THE ALLEGED UNACCOUNTED RECEIPTS/SALES- ONLY NET PR OFIT RATE CAN BE APPLIED ON UNACCOUNTED SALES/RECEIPTS- A.O NOT JUST IFIED IN MAKING FURTHER ADDITION AS THE UNDISCLOSED INCOME OFFERED BY ASSESSEE COVERS SUCH AMOUNT.' 3. THE RELEVANT EXTRACTS OF THE DECISION OF THE ITA T AHMEDABAD IN THE CASE OF ITO VS GURUBACHAN SINGH J. JUNEJA ITA NO. 3032/AHD /1987 DATED 18TH JUNE 1995 FOR THE A.Y.1 984-85 READ AS UNDER: 'INCOME FROM UNDISCLOSED SOURCE- UNACCOUNTED SALE- LOOSE SHEETS DEPICTING SALES FOUND DURING THE COURSE OF S EARCH- SALES AMOUNTING TO RS. 10 85 003 APPEARING IN THE L OOSE SHEETS COULD NOT BE TALLIED WITH THE BOOKS OF ACCOU NT - WHOLE OF THE AMOUNT OF RS. 10 85 003 ADDED BY ITO AS INCO ME- NOT JUSTIFIED- SALES CANNOT CONSTITUTE INCOME MORESO WHEN ITO ACCEPTED THE GENUINENESS OF PURCHASES- ADDITION BY APPLICATION OF GROSS PROFIT RATE' ON SUCH SALES CA N ONLY BE MADE- HOWEVER CIT(A) NOT JUSTIFIED IN HOLDING THA T ADDITION SHOULD BE MADE BY APPLYING G'P RATE TO RS. 2 43 339 THE AMOUNT OF UNACCOUNTED SALES ADMITTED BY THE ASSESSE E AND NOT ON THE ENTIRE UNACCOUNTED SALES OF RS.1 0 85 00 3. 4. THE RELEVANT EXTRACTS OF THE DECISION OF THE HIG H COURT OF GUJARAT IN THE CASE OF CIT VS - PRESIDENT INDUSTRIES (200 00 158 CTR 372; (2002) 258 ITR 654 DATED 20TH APRIL 1999 READ AS U NDER: 'REFERENCE- QUESTION OF LAW- INCOME FROM UNACCOUNTE D SALES- TRIBUNAL HELD THAT ENTIRE SALES COULD NOT BE ADDED AS INCOME OF ASSESSEE BUT ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMATED PROFITS EMBEDDED IN SALES FOR WHICH NET P ROFIT RATE WAS ADOPTED. THERE IS NO FINDING OR MATERIAL ABOUT SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WH ICH ARE SUBJECT OF UNDISCLOSED SALES -NO REFERABLE QUESTION OF LAW ARISES.' 5. THE RELEVANT EXTRACTS OF THE DECISION OF THE ITA T MUMBAI IN THE CASE OF DCIT VS NAVRANG ENTERPRISES ITA NO. 4388 4389 AND 4390/MUM/2001 DATED 18TH MARCH 2005 FOR THE A.Y. 1 989-90 1990-91 AND 1991-92 ARE AS UNDER: 'IN ALL THE APPEALS THE DEPARTMENT IS OBJECTING THE ORDER OF THE CIT (A) IN HOLDING THAT THE ADDITION ON ACCOUNT OF INCOME COMPONENT OF 'ON MONEY' RECEIPTS BE DETERMINED AT 1 2% OF THE 'ON MONEY' AMOUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 34 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G OTHER MATERIALS ON RECORD WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE CLT(A) ON THE ISSUE. AS ALREADY STATED EARLIER THE CIT(A) HAS DETERMINED THE INCOME AT 12% OF THE 'ON MONEY R ECEIPT' PLACING RELIANCE ON THE DECISIONS OF THE ITAT REFER RED TO IN HIS ORDER. WE FURTHER NOTED THAT IN SIMILAR CIRCUMSTANC ES THE ITAT A -BENCH MUMBAI IN VARIOUS CASES DECIDED IN THE CASE OF RASESH B. KANAKIA & OTHERS V. ACIT IN IT(SS)A NO S.14 TO 31/MUM/1996 DT . 21.11. 1997 HAVE TAKEN A SIMILAR V IEW. CONSISTENCY WITH THE VIEW TAKEN THEREIN WE CONFIRM THE ORDER OF THE CIT(A) WHICH IS IN CONSONANCE OF THE ORDERS OF THE REFERRED TO ABOVE. 6. THE RELEVANT EXTRACTS OF THE DECISION OF THE HIG H COURT OF MADHYA PRADESH IN THE CASE OF COMMISSIONER OF INCO ME TAX VS BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP) DATED 14TH APRIL 2003 READ AS UNDER: 'INCOME FROM UNDISCLOSED SOURCE- ADDITION - CREDIT SALES NOT REFLECTED IN BOOKS OF ACCOUNT- TOTAL UNRECORDED SAL ES CANNOT BE REGARDED AS THE PROFIT OF THE ASSESSEE NET PROFI T RATE HAS TO BE ADOPTED- ONCE A NET PROFIT RATE IS ADOPTED IT C ANNOT BE SAID THAT THERE IS PERVERSITY OF APPROACH WHETHER THE RATE IS LOW OR HIGH WOULD DEPEND UPON THE FACTS OF EACH CASE.' THUS FROM A PERUSAL OF THE RATIO OF THE DECISIONS IN THE ABOVE-CITED CASES I FIND THAT THERE IS UNIFORMITY OF JUDICIAL OPINION ON THE ISSUE THAT THE ENTIRE ON MONEY CANNOT BE BROUGHT TO TAX A ND THAT ONLY A CERTAIN PROFIT PERCENTAGE OF THE SAID AMOUNT CAN BE TAXED. IN THE CASE UNDER CONSIDERATION THE A.O HAS ALSO GIVEN DED UCTION OF SOME ADDITIONAL EXPENSES AS COULD BE DECIPHERED FROM THE SEIZED MATERIAL OVER AND ABOVE THOSE RECORDED IN THE BOOKS OF ACCOUNTS. THE APPELLANT WAS ASKED TO FURNISH A CHART COMPARIN G THE RETURNED INCOME WITH THE ASSESSED INCOME AND ALSO COMPARING THE RATE OF NET PROFIT AS PER THE RETURN OF INCOME AS AGAINST T HAT ADOPTED IN THE ASSESSMENT ORDER. FROM THE DETAILS FILED I FIND TH AT FOR THE A.Y UNDER CONSIDERATION THE APPELLANT HAD RETURNED NET LOSS AT -9.47%. HOWEVER AFTER THE ADDITION MADE BY THE A.O. THE N ET PROFIT PERCENTAGE HAS BEEN ARRIVED AT 24.27%. IT IS FURTH ER NOTICED THAT THE APPELLANT RETURNED NET LOSS ALSO FOR THE SUBSEQ UENT A .Y. 99- 2000 AT A NET LOSS PERCENTAGE OF 50.05% WHEREAS AF TER THE A.O.'S ASSESSMENT THE RATE OF NET PROFIT WORKS OUT TO 31. 9%. FROM THE A.Y 2000-01 ONWARDS THE APPELLANT HAS DECLARED POSITIV E NET PROFIT AND PERCENTAGE VARIES FROM 16.92% (LOWEST) TO 51. 40% ( HIGHEST) WHEREAS AFTER THE A .O'S WORKING NET PROFIT PERCE NTAGE VARIES FROM 24.27% TO 50.55%. IT HAS ALREADY BEEN MENTIONED EAR LIER THAT THE APPELLANT IS FOLLOWING THE WORK IN PROGRESS METHOD OF ACCOUNTING AND HAS BEEN COMPUTING THE PROFITS FROM YEAR TO YEA R ON ESTIMATE BASIS. AS PER THE APPELLANT BY A.Y. 2004-05 MAJORIT Y OF THE PREMISES IN THE PROJECT UNDER CONSIDERATION HAD BEE N SOLD. THUS ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 35 THE AVERAGE RATE OF NET PROFIT AS DECLARED BY THE A PPELLANT IN RESPECT OF THE PROJECT UNDER CONSIDERATION WORKS OUT TO 12. 3% WHEREAS AFTER TAKING INTO CONSIDERATION THE ADDITIONS MADE BY THE A.O. SUCH NET PROFIT PERCENTAGE ON AN AVERAGE WORKS OUT TO 36 .430%. THE APPELLANT HAS ARGUED THAT EVEN AT THE TIME OF SEARC H A SUBSTANTIAL PORTION OF THE PREMISES WERE FOUND TO BE UNSOLD DUE TO LACK OF DEMAND. THEREFORE THERE IS A HUGE INTEREST BURDEN WHICH THE APPELLANT HAS TO BEAR' FOLLOWING THE BINDING DECISIONS OF THE ITAT MUMBAI ' IN THE CASE OF WALL STREET CONST. LTD AS WELL AS IN THE C ASE OF NAVRANG ENTERPRISES THE RELEVANT EXTRACTS OF WHICH HAVE AL READY BEEN REPRODUCED AT PRE-PAGES AND ALSO CONSIDERING OTHER SIMILAR CASES ON THIS ISSUE I DEEM IT REASONABLE TO ADOPT THE RA TE OF 12.3% OF THE ON MONEY COMPONENT ON SALE OF SHOPS/OFFICES AND FLA TS ETC. IN THE LOTUS COURT PROJECT AFTER ALL COSTS INCLUDING INTE REST AS THE AMOUNT TO BE ADDED ON THIS ACCOUNT TO THE INCOME DECLARED BY THE ASSESSEE. THE A.O IS THUS DIRECTED TO RE-COMPUTE THE TAXABLE INCOME OF THE ASSESSEE. 9.1 THESE FINDINGS OF THE LD CIT(A) IN OUR CONSIDE RED VIEW DESERVES TO BE UPHELD. THOUGH THE LD.CIT(A) HAS RELIED UPON VARIOU S CASE LAWS EACH CASE HAS ITS OWN FACTS. THE LD. CIT(A) HAS DISCUSSED VARIOUS CASE LAWS AND THEN ARRIVED AT A CONCLUSION THAT THE PROFIT RATE OF 12.3% IS REASO NABLE. THERE ARE CERTAIN DECISIONS WHERE THE TRIBUNAL HAS HELD THAT EVEN 10% OF PROFIT RATE ON ACCOUNT OF ON MONEY IS JUSTIFIED. IN SOME OF THE CASES EVEN 8 % PROFIT RATE HAS BEEN APPLIED BY THE TRIBUNAL. THERE ARE SOME OTHER CASES ALSO WH ERE THE PROFIT RATE APPLIED RANGED BETWEEN 15% TO 30%. HOWEVER LOOKING TO TH E FACTS OF THE PRESENT CASE AND VARIOUS CASE LAWS RELIED UPON BY THE LD. CIT(A) WE ARE OF THE CONSIDERED VIEW THAT 12.3% PROFIT RATE ADOPTED BY THE CIT(A) I S REASONABLE. ACCORDINGLY WE CONFIRM THE PROFIT RATE ADOPTED BY THE CIT(A). 10. REGARDING THE REDUCTION OF GROSS RECEIPTS ON AC COUNT OF ON MONEY WE HAVE ALREADY NOTED THAT THE CIT(A) HAS DISCUSSED TH IS ISSUE IN DETAIL AND AFTER TAKING THE FACTUAL ASPECTS INTO CONSIDERATION AND V ARIOUS SUBMISSIONS OF THE ASSESSEE AND THEN ONLY HE HAS ARRIVED AT A CONCLUSI ON THAT THE RATE OF ON MONEY ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 36 AT 30% 20% AND 10% AS THE CASE MAY SHOULD BE AD OPTED. THEREFORE WE ARE NOT INCLINED TO REPEAT THE DISCUSSIONS OF THE LD. C IT(A) AS THE DISCUSSIONS HAVE BEEN REPRODUCED SOMEWHERE ABOVE IN THIS ORDER. IN V IEW OF THE FACTS AND CIRCUMSTANCES WE CONFIRM THE ORDERS OF LD. CIT(A) FOR ALL THE YEARS UNDER CONSIDERATION. 11. SINCE WE HAVE CONFIRMED THE ORDERS OF CIT(A) WHO ALLOWED THE APPEALS OF THE ASSESSEE IN PART THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 12. IN THE RESULT THE APPEALS OF THE DEPARTMENT AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 30TH DAY OF APRIL 2010. SD/- SD/- (B. RAMAKOTAIAH) ( R.K. GUPTA) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI:30TH APRIL 2010. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-I THANE. 4 CIT-II THANE. 5.DR F BENCH MUMBAI. 6. MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 37 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 25-4-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 26-4-2010 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER ITA NOS.1632 TO 1637/M/07 & COS. 124 TO 129/M/09 VASTUSHREE ESTATE P.LTD. 38