M/s. Fort Projects (P) Ltd., Kolkata v. DCIT, Central Circle - VI, Kolkata, Kolkata

ITSSA 11/KOL/2011 | 2006-2007
Pronouncement Date: 29-07-2011

Appeal Details

RSA Number 1123516 RSA 2011
Assessee PAN AAACF3620N
Bench Kolkata
Appeal Number ITSSA 11/KOL/2011
Duration Of Justice 5 month(s) 11 day(s)
Appellant M/s. Fort Projects (P) Ltd., Kolkata
Respondent DCIT, Central Circle - VI, Kolkata, Kolkata
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 29-07-2011
Date Of Final Hearing 26-05-2011
Next Hearing Date 26-05-2011
Assessment Year 2006-2007
Appeal Filed On 17-02-2011
Judgment Text
A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . . . . . . . ! ! ! ! /AND ' #!' $% ) [BEFORE HONBLE SHRI G. D. AGRAWAL V.P. & HONBLE SHRI MAHAVIR SINGH JM] ( & ' ( ) !) / I.T(SS).A NOS. 11 TO 13/KOL/2011 #*+ -/ ASSESSMENT YEARS: 2006-07 TO 2008-09 M/S. FORT PROJECTS (P) LTD. VS. DEPUTY COMMISSI ONER OF INCOME-TAX (PAN-AAACF 3620 N) CENTRAL CIRCLE-VI KOLKATA. (/0 /APPELLANT ) (12/0/ RESPONDENT ) & ( & ' ( ) !) / I.T(SS).A NOS. 15 TO 21/KOL/2011 #*+ -/ ASSESSMENT YEARS: 2002-03 TO 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. FORT P ROJECTS (P) LTD. CENTRAL CIRCLE-VI KOLKATA (/0 /APPELLANT ) (12/0/ RESPONDENT ) FOR THE ASSESSEE: SHRI S. K. TULSIYAN FOR THE DEPARTMENT: SHRI D. R. SINDHAL $34 / ORDER PER MAHAVIR SINGH JM ( ' #!' ' #!' ' #!' ' #!' $% $% $% $% ) THE CROSS APPEALS IT(SS)A NOS. 11 TO 13/KOL/2011 B Y ASSESSEE AND IT(SS)A NOS. 19 20 AND 21/KOL/2011 BY REVENUE ARE ARISING OUT OF OR DERS OF CIT(A) CENTRAL-1 KOLKATA IN APPEAL NOS.117 TO 119/CC-VI/CIT(A)-C-I/09-10 DATED 25.11.2010 AND 30.11.2010. IT(SS)A NOS. 15 TO 21/KOL/2011 BY REVENUE ARE ARISING OUT O F THE ORDERS OF CIT(A) CENTRAL-1 KOLKATA IN APPEAL NOS.113 TO 119/CC-VI/CIT(A) C-1/09-10 VID E DATED 19.11.2010 25.11.2010 AND 30.11.2010. ASSESSMENTS WERE FRAMED BY DCIT CC-VI KOLKATA U/S.144/153C OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEARS 2006-07 TO 2008-09 AND ASSESSMENT YEARS 02-03 TO 2008-09 VIDE HIS ORDE RS DATED 31.12.2009. 2. THE FIRST COMMON ISSUE IN REVENUES APPEAL IN IT (SS)A NOS. 19 20 AND 21 OF KOLKATA 2011 IS AS REGARDS TO ORDERS OF CIT(A) DELETING ADD ITIONS MADE ON ACCOUNT OF ALLEGED ON MONEY RECEIPTS FOR ON-GOING PROJECTS AMOUNTING TO RS.2 58 64 762/- RS.1 73 16 880/- AND RS.64 83 07 492/- FOR THE AY 2006-07 2007-08 AND 2 008-09 RESPECTIVELY RELYING ON PROJECT COMPLETION METHOD OF ACCOUNTING FOLLOWED BY ASSESSE E COMPANY. FOR THIS REVENUE HAS RAISED COMMON AND IDENTICALLY WORDED GROUNDS EXCEPT AMOUN T. FOLLOWING THREE GROUNDS RAISED IN 2 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 AY 2008-09 ARE BEING REPRODUCED AS IT IS AND WILL TAKE FACTS AND FIGURES FROM THIS YEAR ONLY AND WILL BE DECIDED ALL THREE YEARS ON THAT BASIS. 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. CIT(A) HAS ERRED IN BOTH LAW AND FACTS IN DELETING THE ADDITION OF RS.64 83 07 4 92/- ON ACCOUNT OF UNDISCLOSED INCOME ARISING OUT OF RECEIPT OF ON-MONEY FROM VARIOUS PRO JECTS. 2. THAT IN DOING SO LD. CIT(A) ERRED IN PUTTING E MPHASIS ON THE PROJECT COMPLETION METHOD OF ACCOUNTING IGNORING THE FACT THAT BOOKS O F A/CS. OF THE ASSESSEE COMPANY WERE REJECTED. 3. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT ON-MONEY RECEIVED IN RESPECT OF VARIOUS PROJECT HAWS TO BE ADDED IN THE YEAR OF RECEIPT. SIMILARLY ASSESSEE HAS ALSO RAISED COMMON ISSUES I N IT(SS)A NOS. 11 12 AND 13/KOL/2011 IN REGARD TO OBSERVATIONS OF CIT(A) THAT ON MONEY RECE IVED BY ASSESSEE COMPANY IN RESPECT OF ITS PROJECT THAT THE SAME IS TO BE CONSIDERED ON COMPLE TION OF PROJECTS AS PER METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE. IN ASSESSMENT YEAR 2008-09 T HE ASSESSEE HAS ALSO CHALLENGED THE ACTION OF CIT(A) CONFIRMING ADDITION IN RESPECT TO TRANSACTIO NS OF SEIZED DOCUMENT RM/5. FOR THIS THE ASSESSEE HAS RAISED COMMON GROUNDS AND GROUNDS RAIS ED IN AY 2008-09 I.E. IT(SS)A NO.13/K/2011 READS AS UNDER: 1. THAT THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE ARBITRARY ERRONEOUS INVALID AND BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED SOLELY ON THE BASIS OF A SPECIFIC DOCUMENT SHOWING CERTAIN SP ECIFIC TRANSACTIONS VIZ. RM-5 AND AS ACCEPTED BY THE APPELLANT SIMPLY FOR BUYING PEACE WITH THE DEPARTMENT IN OBSERVING THAT THERE IS NO DISPUTE THAT ON MONEY WAS RECEIVED BY THE ASSESSEE IN RESPECT OF FLATS BEING SOLD BY IT AND IN HOLDING THAT THE ASSESSING OFFIC ER WAS LEGALLY JUSTIFIED IN ASSUMING THAT ASSESSEE MUST HAVE BEEN ALSO RECEIVED THE ON-MONEY FROM THE PROSPECTIVE BUYERS IN RESPECT OF THE BALANCE FLATS OF THESE THREE PROJECT S. 3. THAT THE LD. CIT(A) ERRED IN HAVING OBSERVED THA T ON-MONEY WAS RECEIVED BY THE APPELLANT COMPANY IN RESPECT OF ITS PROJECTS WHICH IS TO BE CONSIDERED ON COMPLETION OF PROJECT AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. 4. THAT THE UNSUBSTANTIATED ALLEGATION INCLUDING TH E BOGUS NOTE FORCIBLY CREATED BY THE DEPARTMENT IN COURSE OF SEARCH HAVING BEEN ESTABLIS HED BEYOND DOUBT BEING BOGUS THE CIT(A) ERRED IN HAVING STILL NOT DECLARED THE NOTIN GS THEREIN AS HAVING NO EVIDENTIARY VALUE. 3. BRIEF FACTS ARE THAT ASSESSEE IS A PRIVATE LIMIT ED COMPANY ENGAGED IN HOUSING REAL ESTATE DEVELOPMENT OF COMMERCIAL MALLS ETC. SEARCH AND SEI ZURE OPERATIONS WERE CONDUCTED ON 28.02.2008 AND ON SUBSEQUENT DATES IN FORT GROUP OF CASES ALONG WITH SRI VIVEK KUMAR KATHOTIA DIRECTOR OF ASSESSEE-COMPANY AT FLAT NO. A-2 29 BALLYGUNGE PARK ROAD KOLKATA-19. 3 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 FURTHER SURVEY ACTION U/S 133A WAS CONDUCTED IN TH E OFFICE PREMISES OF ASSESSEE AND IN COURSE OF WHICH THE FOLLOWING BOOKS/ DOCUMENTS WERE IMPOUN DED: PREMISES BOOKS/DOCUMENTS FOUND AND IMPOUNDED OFFICE PREMISES OF M/S. FORT PROJECTS P LTD AT 7/1A HAZRA ROAD KOL-26 PC/1 TO PC/3 OFFICE PREMISES OF M/S. FORT PROJECTS P. LTD AND M /S. FORT BUILDERS AT 38/1 PANDITYA ROAD KOL-29 FP/1 TO FP/11 FP/CD- 1 FP/CPU/1 OFFICE PREMISES OF M/S. FORT PROJECTS P. LTD AT 59C CHOWRINGHEE ROAD KOL-297/1A HAZRA ROAD KOL-26 GB/1 TO GB/17 GB/CPU/1 DURING SEARCH AT THE RESIDENTIAL PREMISES OF SRI VI VEK KUMAR KATHOTIA DIRECTOR OF COMPANY DOCUMENTS COMPUTER PRINTOUTS ETC. MARKED RM/1 TO R M/4 WERE FOUND AND SEIZED AND PAPERS MARKED RM 5 CONTAINING DETAILS OF ON-MONEY RECEIPTS OF ASSESSEE COMPANY IN RESPECT OF FLATS IN THREE PROJECTS NAMELY (I) 20 LEE ROAD KOLKATA ( II) 22 LEE ROAD KOLKATA AND (III) 68 HINDUSTAN PARK KOLKATA WERE ALSO FOUND AND SEIZED. ON THE BASIS OF SEIZED DOCUMENT RM-5 A DISCLOSURE OF RS.9.02 CR. WAS MADE BY ASSESSEE WHE REAS THE ALLEGATION OF ASSESSEE WAS THAT SAID SEIZED DOCUMENTS WERE FORCIBLY MANUFACTURED BY DEPA RTMENT AT THE TIME OF SEARCH AND SEIZURE ACTION IN CASE OF SRI VIVEK KUMAR KATHOTIA AND HE W AS FORCED BY SEARCH PARTY TO WRITE THE SAID SEIZED DOCUMENTS AND MAKE AN EXORBITANT DISCLOSURE OF RS 9.02 CRORES ON THE BASIS OF THE SAME. IN VIEW OF SEARCH PROCEEDINGS U/S. 132 OF THE ACT AND DOCUMENTS FOUND FROM THE DIRECTOR SHRI VIVEK KUMAR KATHOTIA NOTICES U/S 1 53C OF THE ACT WERE ISSUED TO ASSESSEE ON THE BASIS OF NOTING IN RM/5 FOR THE ASSESSMENT YEARS 2002-03 TO 2008-09. THE ASSESSEE CLAIMED THAT TO BUY PEACE AND AVOID PROTRACTED LITIGATION AND UNNECESSA RY DISPUTE IN THE MATTER IT OFFERED ENTIRE ALLEGED RECEIPTS OF ON-MONEY OF RS. 9.02 CRORES AS INDICATED IN RM/5 AS INCOME IN ITS RETURN OF INCOME FILED U/S 153C FOR A.Y. 2008-09. DUE TAXES T HEREON WERE ALSO PAID. ASSESSMENTS U/S 144/153C FOR A.YS 2002-03 TO 2008-09 WERE COMPLETED BY AO ON 31.12.2009 ASSESSING TOTAL INCOME FOR SAID YEARS AT A TOTAL UNDISCLOSED INCOME OF RS. 81 15 33 889/- AS AGAINST RETURNED INCOME OF RS. 9 72 47 117/-. THE YEAR WISE DETAILS ARE AS UNDER: A.Y ________ INCOME RETURNED U/S.153C _____________ TOTAL INCOME ASSESSED BY AO U/S.144/153C ____________ TOTAL INCOME ORIGINALLY ASSESSED U/S.143(3) _______________ TOTAL INCOME DETERMINED U/S. ___________ 2002-03 (202 206) 1 604 525 (202 206) N/A 2003-04 93 510 \1 844 805 258 750 98 158 2004-05 300 250 4 361 731 300 250 NA 2005-06 523 100 5 030 415 523 100 NA 2006-07 948 922 28 166 232 NA NA 2007-08 4 023 311 27 321 716 NA NA 2008-09 91 560 230 743 204 465 NA NA 97 247 117 811 533 889 4 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 FOR AY 2008-09 AO MADE AN ADDITION OF RS. 64 83 07 492/- ON ACCOUNT OF ALLEGED ON-MONEY RECEIPTS OVER AND ABOVE NOTING OF RS. 9.02 CRORES I N RM/5. THE AO EXTRAPOLATED RECEIPTS OF ON- MONEY AT THE HIGHEST PER SQUARE FOOT RATE AS NOTED IN RM/5 TO ALL THE FLATS IN THE FOLLOWING THREE PROJECTS (INCLUDING REMAINING FLATS IN PROJEC TS NOT MENTIONED IN RM/5) AND TAXED RESULTANT FIGURE OF RS. 64.83 CRORES AS ON-MONEY RECEIPTS FOR A.Y. 2008-09 ON THE FOLLOWING PROJECTS: (I) 68 HINDUSTAN PARK KOLKATA (II) 20 LEE ROAD KOLKATA (III) 24 LEE ROAD KOLKATA. THE A.O. WHILE MAKING THIS ADDITION HAS HELD AS UND ER: 68 HINDUSTHAN PARK: WHEN BOTH THE RELEVANT DOCUME NTS VIZ. IMPOUNDED DOCUMENT GB/17 (PAGES-56 TO 57) AND THE PAGES-1 TO 3 OF THE SEIZED DOCUMENT RM/5 ARE SEEN TOGETHER IT IS FOUND THAT THE ASSESSEE RECEIVED TH E HIGHEST RATE PER S.F.T. FOR THE FLAT NO. 4D SRI/SMT. A. DAS- THE TOTAL AMOUNT IS RS.1 18 87 000/- FOR 1798 S.FT. OF FLAT. THE RATE WORKS OUT TO RS.6 611/- PER S.FT.. WHEN THE ASSESSE E ADMITTEDLY RECEIVED SUCH RATE FROM THIS FLAT INCLUDING ON-MONEY IN THE PROJECT THER E IS NO REASON WHY THE SAME RATE WAS NOT RECEIVED IN RESPECT OF THE OTHER FLATS IN THE S AME PROJECT. THE ASSESSEE HAS NOT DISCLOSED ANY ON-MONEY IN RESPECT OF MOST OF THE FL ATS. THE RATES ACCOUNTED FOR ARE DIFFERENT IN MOST OF THE CASES. THERE IS NO REASON FOR VARIATION OF S.FI. RATE IN THE SAME PROJECT. AS PER THE DETAILS IN PAGES-56 & 57 THE TOTAL AREA OF FLATS NO. 2A 2B 3A 3B 3C 3D 4C 4D 5A 5B 5C 5D WHICH WERE ALL OCATED TO THE BUYERS AS WELL AS FROM WHICH ON-MONEY RECEIPTS ARE EVIDENCED BY RM /5 IS RS.284. 18 LAKH. . THE TOTAL AMOUNT @ 6 611/- PER SIT WORKS OUT TO RS.14 41 99 L 32/-. THE ASSESSEE HAS ACCOUNTED FOR RS.6 20 16 500/- ON ACCOUNT OF THOSE FLATS. BES IDES THE ASSESSEE HAS DISCLOSED ON- MONEY RECEIPT TOTALLING RS.2 87 18 000/- FROM SOME FLATS AS PER RM/5. THE BALANCE AMOUNT THEREFORE WORKS OUT TO RS.14 41 99 132/- M INUS RS.6 20 16 500/- MINUS RS.2 87 18 000/- = RS.5 34 64 632/-. IN VIEW OF THE SEIZED DOCUMENTS AND THE FACTS AS STATED ABOVE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT CORRECT AND COMPLETE AND AS SUCH THE SAME ARE REJECTED AND THE BALANCE AMOUNT O F RS.5 34 64 632/- WHICH HAS NOT BEEN ACCOUNTED FOR OR DISCLOSED IS ADDED TO THE IN COME OF THE ASSESSEE AS UNDISCLOSED ON-MONEY RECEIPTS IN A.Y. 2008-09. 20 LEE ROAD PROJECT: WHEN BOTH THE RELEVANT DOCUME NTS VIZ. IMPOUNDED DOCUMENT GB/17 (PAGES-53 TO 55) AND THE PAGES-4 TO 6 & 8 OF THE SEIZED DOCUMENT RM/5 ARE SEEN TOGETHER IT IS FOUND THAT THE ASSESSEE RECEIVED TH E HIGHEST RATE PER S.F.T. FOR THE FLATS NO. 401 AND 301 FROM MR. JALAN- THE TOTAL AMOUNT IS RS. 2 51 56 000/- FOR TOTAL 5036 S.FT. OF FLAT. THE RATE WORKS OUT TO RS.4 995/- PER S.FT.. W HEN THE ASSESSEE ADMITTEDLY RECEIVED SUCH RATE FROM THE TWO FLATS INCLUDING ON-MONEY I N THE PROJECT THERE IS NO REASON WHY THE SAME RATE WAS NOT RECEIVED IN RESPECT OF THE OT HER FLATS IN THE SAME PROJECT. THE ASSESSEE HAS NOT DISCLOSED ANY ON-MONEY IN RESPECT OF MOST OF THE FLATS. THE RATES ACCOUNTED FOR ARE DIFFERENT IN MOST OF THE CASES. T HERE IS NO REASON FOR VARIATION OF S.FT. RATE IN THE SAME PROJECT. AS PER THE DETAILS IN PAGES-53 TO 55 THE TOTAL ARE A OF FLATS IS 78 920 S.FT. THE AREA ALLOCATED TO LANDLORD IS 24 282 S.FT. THEREFORE TH E ASSESSEES SHARE IS 54 008 S.FT. THE TOTAL AMOUNT @ 4 995/- PER S.FT. WORKS OUT TO RS.1 3 30 40 200/-. HOWEVER THE ASSESSEE HAS NOT ACCOUNTED FOR THE CONSIDERATION OF RS.2 51 80 000/- IN RESPECT OF THE FLAT IN THE NAME OF VIVEK AGARWAL WHICH IS EVIDENT FROM THE FA CT THAT THE FIGURES PRINTED AGAINST 5 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 HIS NAME HAS BEEN PENNED THROUGH IN THE SEIZED DOCU MENT. THUS THE ASSESSEE HAS ACCOUNTED FOR RS. 13 30 40 200/- MINUS RS.2 51 80 0 00/- = RS. 10 78 60 200/-. THE ASSESSEE HAS DISCLOSED ON-MONEY RECEIPT TOTALLING RS. 2 58 40 000/- FROM SIX FLATS AS PER RM/5. THE BALANCE AMOUNT THEREFORE WORKS OUT TO RS. 26 97 69 960/- MINUS ( RS.10 78 60 200/- PLUS RS.2 58 40 000-) = RS.13 60 69 760/-. IN VIEW OF THE SEIZED DOCUMENTS AND THE FACTS AS STATED ABOVE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT CORRECT AND COMPLETE AND AS SUCH THE SAME ARE REJEC TED AND THE BALANCE AMOUNT OF RS.13 60 69 760/- WHICH HAS NOT BEEN ACCOUNTED FOR OR DISCLOSED IS ADDED TO THE INCOME OF THE ASSESSEE AS UNDISCLOSED ON ON-MONEY R ECEIPTS IN A.Y.2008-09. 24 LEE ROAD PROJECT: WHEN BOTH THE RELEVANT DOCUME NTS VIZ. IMPOUNDED DOCUMENT GB/17 (PAGES-51 & 52) AND THE PAGES-7 9 & 10 OF TH E SEIZED DOCUMENT RMJ/ ARE SEEN TOGETHER IT IS FOUND THAT THE ASSESSEE RECEIVED TH E HIGHEST RATE PER S.F.T. FOR THE FLAT NO.6B- THE TOTAL AMOUNT IS RS.2 18 32 000/- FOR TOT AL 2729.FT. OF FLAT. THE RATE WORKS OUT TO RS.8 000/- PER S.FT.. WHEN THE ASSESSEE ADMITTED LY RECEIVED SUCH RATE FROM THE FLAT INCLUDING ON-MONEY IN THE PROJECT THERE IS NO REA SON WHY THE SAME RATE WAS NOT RECEIVED IN RESPECT OF THE OTHER FLATS IN THE SAME PROJECT. THE ASSESSEE HAS NOT DISCLOSED ANY ON- MONEY IN RESPECT OF MOST OF THE FLATS. THE RATES ACCOUNTED FOR ARE DIFFERENT IN MOST OF THE CASES. THERE IS NO REASON FOR VARIATION OF S.FT. RATE IN THE SAME PROJECT. AS PER THE DETAILS IN PAGES-51 & 52 THE TOTAL AREA OF FLATS IS 86 987 S.FT. THE TOTAL AREA ALLOCATED TO LANDLORD IS 19 684 S.FT. THEREFORE TH E ASSESSEES SHARE IS 67 303 S.FT. THE TOTAL AMOUNT @ 8 000/-- PER S.FT. WORKS OUT TO RS.5 3 84 24 000/-. THE ASSESSEE HAS ACCOUNTED FOR RS 4 39 84 900/- AS EVIDENT FROM PAGE -52 OF GB/17. THE ASSESSEE HAS DISCLOSED ON-MONEY RECEIPT TOTALLING RS.3 56 66 00 0/- FROM THREE FLATS AS PER RM/5. THE BALANCE AMOUNT THEREFORE WORKS OUT TO RS.4 5 87 73 100/- [RS.53 84 24 000/- MINUS ( RS.4 39 84 900/- PLUS RS.3 56 66 000/-)]. I N VIEW OF THE SEIZED DOCUMENTS AND THE FACTS AS STATED ABOVE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT CORRECT AND COMPLETE AND AS SUCH THE SAME ARE REJECTED AND THE BALANCE AMOUNT OF RS.45 87 73 100/- WHICH HAS NOT BEEN ACCOUNTED FOR OR DISCLOSED IS ADDED TO THE INCOME OF THE ASSESSEE AS UNDISCLOSED ON-MONEY RECE IPTS IN A.Y.2008-09. THUS THE TOTAL ADDITION MADE ON THIS ACCOUNT FROM T HE THREE PROJECTS IS RS 5 34 64 632/- + RS 13 60 69 760/- + RS 45 87 73 100/- = RS 64 83 07 492/- ALL IN A Y 2008-09. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. THE CIT(A) HELD THAT AFORESAID THREE PROJECTS WE RE INCOMPLETE DURING A.Y. 2008-09 AND HENCE WHOLE ISSUE REGARDING RECEIPTS OF ON-MON EY WAS TO BE CONSIDERED BY AO IN THE YEAR IN WHICH PROJECTS WILL COMPLETE. ACCORDINGLY HE DE LETED THE ADDITION OF RS. 64.83 CRORES MADE WITH THE OBSERVATION THAT THE QUANTUM OF UNDISCLOSE D INCOME OF ON-MONEY AND THE MISTAKES POINTED OUT BY ASSESSEE WERE IRRELEVANT FOR THE YEA R UNDER CONSIDERATION. CIT(A) FURTHER CLARIFIED THAT ONLY PROFIT ELEMENT EMBEDDED IN THE TRADING RECEIPTS COULD BE TAXED WHICH COULD BE DETERMINED ONLY ON COMPLETION OF PROJECT. HE OBS ERVED THAT CONDUCTING SEARCH AND SEIZURE OPERATION IN A PARTICULAR YEAR DID NOT LEAD TO AN I NFERENCE THAT UNDISCLOSED INCOME DETECTED AS A CONSEQUENCE THEREOF WAS TO BE TAXED IN THE ASSESSME NT YEAR RELEVANT TO PREVIOUS YEARS IN WHICH SEARCH WAS CONDUCTED. THE ACCOUNTING PROFITS WERE Y ET TO BE MADE ON THE BASIS OF METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE. THE CIT(A) DESPITE DELETING ADDITION FOR A.Y. 2008-09 ON THE 6 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 BASIS OF PROJECT COMPLETION METHOD OBSERVED THAT AO WAS LEGALLY JUSTIFIED IN EXTRAPOLATING ON- MONEY RECEIPTS MENTIONED IN RM/5 TO OTHER FLATS IN OTHER PROJECTS. REVENUE IS IN APPEAL BEFORE TRIBUNAL AGAINST DELETION OF ADDITION ON THE BASIS OF PROJECT COMPLETION METHOD OF ACCOUNTING FOR REASONS THAT ON-MONEY RECEIPTS FROM VARIOUS PRO JECTS HAVE TO BE ADDED IN THE YEAR OF RECEIPT SINCE BOOKS OF ACCOUNT WERE REJECTED BY AO . AS AGAINST THE ORDER OF CIT(A) ASSESSEE CONTENDED THAT DISPUTED SEIZED DOCUMENT RM/5 WAS FO RCIBLY MANUFACTURED BY THE SEARCH PARTY AT THE TIME OF SEARCH AND ENTIRE ALLEGED ON-MONEY R ECEIPTS OF RS. 9.02 CRORES MENTIONED IN RM/5 IN RESPECT OF FEW FLATS IN THESE THREE PROJECT S WAS HOWEVER OFFERED IN ENTIRETY BY ASSESSEE AS ITS INCOME FOR A.Y. 2008-09 SOLELY TO BUY PEACE AND AVOID UNNECESSARY DISPUTE. ACCORDING TO ASSESSEE NO OTHER EVIDENCE WHETHER DOCUMENTARY OR CIRCUMSTANTIAL PERTAINING TO RECEIPT OF ON-MONEY FOR OTHER FLATS IN THESE THREE PROJECTS OR OTHER PROJECTS WERE FOUND IN COURSE OF SEARCH OR SURVEY OPERATION AND AO WAS THUS COMPLETELY UNJU STIFIED IN EXTRAPOLATING ON-MONEY TO THE BALANCE FLATS IN THESE THREE PROJECTS MERELY ON THE BASIS OF DISPUTED SEIZED LOOSE PAPERS AND MAKING AN EXORBITANT ADDITION OF RS. 64.83 CRORES O N THE BASIS OF SURMISES AND CONJECTURES. HOWEVER ASSESSEE CONTENDED THAT CIT(A) WAS CORRECT TO THE EXTENT OF HOLDING THAT ASSESSEE WAS REGULARLY FOLLOWING PROJECT COMPLETION METHOD O F ACCOUNTING AND THESE THREE PROJECTS WERE INCOMPLETE TILL A.Y. 2008-09 NO RECEIPT WHETHER I N CHEQUE OR CASH WAS TAXABLE FOR A.Y. 2008- 09. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF ALL WE HAVE GONE THROUGH THE SEIZED DOCUME NT RM/1 WHICH IS REPRODUCED ON PAGE 2 OF THE ASSESSMENT ORDER WHICH IS AGAIN BEING REPRODUC ED FOR THE SAKE OF CLARITY AS UNDER: PAGE NO. OF RM/5 NAME OF PROJECT FLAT NO. AREA NAME OF BUYER ON MONEY RECEIVED IN CASH 01 68 HINDUSTAN PARK 3493 S.FT SMT A.DAS 91.32 LAKH 02 -DO- 1778 S.FT SMT N.KUNDU 55.94 LAKH 03 -DO- 2AB/3AB 6986 S.FT A.GHOSH & ORS 139.92 LAKH 04. 20 LEE ROAD 506 2514 S.FT H.TATED RS.25.14 LAKH 05. -DO- 403 2514 S.FT S.BACHWAT RS.26.14 LAKH 06. -DO- 404/504 5028 S.FT R.BACHWAT RS.56.28 LAKH 07 -DO- 3B 5029 S.FT OM JALAN RS.150.84 LAKH 08. 24 LEE ROAD 401 &301 2729 S.FT DILIP LAHOTI RS. 83.76 LAKH 09. -DO- 6C 2729 S.FT DILIP DUGAR RS.136.45 LAKH 10 -DO- 6B 2729 S.FT ASHOK SURANA RS.136.45 LAKH 7 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 WE FIND THAT AO HAS SUMMARIZED ON-MONEY RECEIPTS OF SEIZED DOCUMENT RM-1 AND EVEN THIS DOCUMENT IS ENCLOSED IN ASSESSEES PAPER BOOK AT PA GE 101 TO 111. WE FIND THAT THE ASSESSEE VIDE LETTER DATED 28.12.2009 FILED BEFORE AO POINT ED OUT FOLLOWING DEFECTS/ INCONSISTENCIES IN SEIZED DOCUMENTS RM/5 AND ACCORDING TO ASSESSEE WHI CH PROVED THAT SAME WERE MANUFACTURED BY SEARCH PARTY AT THE TIME OF SEARCH AND DID NOT R EPRESENT ACTUAL STATE OF AFFAIRS. THE RELEVANT DETAILS FROM LETTER DATED 28.12.2009 IS BEING REPRO DUCED AS IT IS: NAME AS PER RM/5 WHETHER ACTUAL SALES MADE AREA AS PER RM/5 ACTUAL AREA ON FLATS SMT A. DAS NO SUCH SALE. AGREEMENT CANCELLED IN APRIL 2006. SO THE QUESTION OF RECEIVING ANY ON MONEY IN 2007 DID NOT ARISE 3493 SINCE FLAT NUMBER IS NOT MENTIONED IN RM/5 SO ACTUAL AREA IS NOT DETERMINABLE SMT N.KUNDU NO SUCH SALE 1798 SINCE FLAT NUMBER IS NOT MENTIONED IN RM/5 SO ACTUAL AREA IS NOT DETERMINABLE H.TATED SALES MADE 2514 3422 S.BACHWAT NO SUCH SALE 2514 2518 OM JALAN NO SUCH SALE 5028 2518 R.BACHWAT NO SUCH SALE 5028 5036 DILIP LAHOTI NO SUCH SALE 2729 5940 DILIP DUGAR NO SUCH SALE 2729 2729 ASHOK SURANA NO SUCH SALE. FLAT DOES NOT BELONG TO THE ASSESSEE BUT TO THE LAND OWNERS ON WHICH THE PROPERTY WAS CONSTRUCTED 2729 2729 WE FIND THAT AO REJECTED ASSESSEES PLEA THAT SEIZE D PAPERS WERE FORCIBLY MANUFACTURED BY SEARCH PARTY AT THE TIME OF SEARCH ON THE PRETEXT T HAT THE SAID ISSUE HAD BEEN RAISED AFTER 22 MONTHS FROM THE DATE OF SEARCH AND FURTHER MORE THE RE WAS NO EVIDENCE THAT SRI VIVEK KATHOTIA WAS FORCED TO WRITE SAID PAPERS BY SEARCH PARTY. TH E AO OBSERVED THAT ASSESSEE HAD SUO-MOTO OFFERED SUMS MENTIONED IN RM/5 AS ITS INCOME FOR A. Y. 2008-09 AND EVEN CIT(A) ALSO REJECTED ASSESSEES STAND ON SIMILAR GROUNDS. WE FIND THAT S AID SEIZED PAPERS WERE NOT MANUFACTURED BY SEARCH PARTY AT THE TIME OF THE SEARCH BUT WERE FOU ND FROM THE POSSESSION AND CONTROL OF ASSESSEE IN COURSE OF SEARCH. AS SUCH THE PRESUMPT ION U/S 292C REGARDING THE CORRECTNESS OF THE CONTENTS OF SEIZED DOCUMENTS APPLY TO RM/5 ALSO . FURTHER IT IS ASSUMED THAT THE PRESUMPTION REGARDING THE CORRECTNESS OF CONTENTS O F SEIZED DOCUMENTS U/S 292C IS APPLICABLE TO RM/5 THE SAID PRESUMPTION IS REBUTTABLE AND ASS ESSEE UNSUCCESSFULLY TRIED TO REBUT THE PRESUMPTION U/S 292C BY POINTING OUT DEFECTS/MISTAK ES IN RM/5 BUT UNABLE TO DO THE SAME BY ANY COGENT EVIDENCE. ACCORDINGLY WE HAVE TO ACCEP T THE SEIZED DOCUMENT RM/5 AS CORRECT AND TRUE. 8 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 6. WHEN WE HAVE ASSUMED THAT ASSESSEE WAS BOUND BY THE PRESUMPTION U/S 292C IN RESPECT OF THE CONTENTS OF SEIZED DOCUMENTS MARKED RM/5 THE ADDITION OF RS. 64.83 CRORES IS ALSO UNSUSTAINABLE BECAUSE NO CORROBORATING DOCUMEN TS OR EVIDENCE WHATSOEVER WAS FOUND IN THE COURSE OF SEARCH OR SURVEY ACTION IN SUPPORT OF ADDITION OF RS. 64.83 CRORES. THE SAID FIGURE OF RS. 64.83 CRORES WAS ARRIVED AT BY THE AO BY EXT RAPOLATING THE NOTINGS IN RM/5 TO ALL THE OTHER FLATS IN THREE PROJECTS. WE ARE OF THE VIEW T HAT AO WAS NOT JUSTIFIED IN EXTRAPOLATING FEW STRAY NOTINGS IN RM/5 TO THE BALANCE FLATS IN THREE PROJECTS GIVEN THAT NO INCRIMINATING EVIDENCE PERTAINING THERETO WAS FOUND IN COURSE OF SEARCH MO RE SO WHEN THE AUTHENTICITY OF THE SUBJECT SEIZED DOCUMENTS RM/5 WAS ITSELF CHALLENGED BY ASS ESSEE. SINCE IT WAS PRESUMED BY US THAT ASSESSEE WAS BOUND BY PRESUMPTION U/S 292C IN RESPE CT OF SEIZED PAPER RM/5 ADDITIONS ON ACCOUNT OF ALLEGED ON-MONEY COULD AT BEST BE LIMITE D TO THE SEIZED MATERIALS AND SINCE ASSESSEE HAD SUO-MOTO OFFERED ENTIRE ON-MONEY IN ITS RETURN OF INCOME NO FURTHER ADDITION ON THIS COUNT WAS WARRANTED. WE FIND THAT HONBLE COURTS AND TRIB UNALS HAVE TIME AND AGAIN HELD THAT ASSESSMENTS CANNOT BE FRAMED MERELY ON EXTRAPOLATIO N THEORY I.E. DISCREPANCIES IN RESPECT OF ITEMS MUST HAVE EXISTED IN OTHER YEARS OR OTHER INS TANCES OR PROJECTS UNLESS A DEFINITE TREND OF MALPRACTICE IS CONCLUSIVELY PROVED BY SUBSTANTIAL E VIDENCE ON RECORD. WE FIND THAT REVENUE CONTENDED THAT ON-MONEY RECEIPTS HAVE TO BE ADDED I N THE YEAR OF RECEIPT AND THAT CIT(A) ERRED IN PUTTING EMPHASIS ON THE PROJECT COMPLETION METHO D OF ACCOUNTING IGNORING FACTS THAT BOOKS OF ACCOUNT OF ASSESSEE WERE REJECTED BY AO. WE FIND THAT CIT(A) OBSERVED THAT THE ASSESSEE WAS CONSISTENTLY FOLLOWING PROJECT COMPLETION METHO D OF ACCOUNTING AND PROJECTS AGAINST WHICH THE ASSESSEE RECEIVED ON MONEY WERE NOT COMPLETE DURING A.Y. 2008-09. THE CIT(A) FURTHER OBSERVED THAT INCOME FROM PROJECTS WERE BEING OFFER ED BY ASSESSEE ONLY ON THE COMPLETION OF PROJECTS AND THEREFORE UNACCOUNTED ADVANCE RECEIPT IF ANY PERTAINING TO THE SAID PROJECTS HAD TO HAVE THE SAME TREATMENT AND FURTHER AO HAD HIMSE LF DISALLOWED CERTAIN EXPENDITURE HOLDING THAT SAME PERTAINED TO SPECIFIC PROJECTS AND HAD TO BE CAPITALIZED IN THE CLOSING WORK-IN- PROGRESS. THUS THE AO HAVING NOT REJECTED AND THUS HAVING ACCEPTED THE PROJECT COMPLETION METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY ASSES SEE THERE WAS NO JUSTIFICATION FOR ESTIMATING ASSESSEES PROFITS FOR THESE YEARS BY ES TIMATING UNDISCLOSED INCOME EARNED FROM PROJECTS. WE FIND THAT THE AO HAD NOT DISPUTED THAT ON-MONEY RECEIPTS WERE TRADING RECEIPTS RECEIVED AS ADVANCE FROM THE PROSPECTIVE BUYERS OF FLATS AND ONLY NET PROFIT COULD BE BROUGHT TO TAX AND NOT GROSS RECEIPTS. THE CIT(A) HAS RIGHTLY HELD THAT ONLY THE PROFIT EMBEDDED IN TRADING RECEIPT COULD BE TAXED WHICH COULD BE DETERMINED ON LY ON COMPLETION OF PROJECTS. THE CONDUCT OF SEARCH AND SEIZURE OPERATION IN A PARTIC ULAR YEAR DID NOT LEAD TO AN INFERENCE THAT UNDISCLOSED INCOME DETECTED AS A CONSEQUENCE THEREO F HAD TO BE TAXED IN THE ASSESSMENT YEAR 9 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 RELEVANT TO PREVIOUS YEAR IN WHICH THE SEARCH WAS C ONDUCTED BUT ACCOUNTING PROFITS HAVE YET TO BE MADE ON THE BASIS OF METHOD OF ACCOUNTING FOLLOW ED BY ASSESSEE. THEREFORE WE AGREE WITH THE FINDINGS OF CIT(A) THAT ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING THEREFORE ALL THE AMOUNTS WHETHER ALLEGEDLY RECEIVE D IN CASH OR BY CHEQUE WERE TAXABLE IN THE YEARS IN WHICH THE PROJECTS WERE COMPLETED. IN REGA RD TO EXTRAPOLATING OF NOTING IN RM/5 THE SAME CANNOT BE APPLIED TO OTHER PROJECTS BECAUSE O N-MONEY WOULD FRUCTIFY INTO INCOME OR PARTAKE THE CHARACTER OF INCOME ONLY IN THE YEAR OF COMPLETION OF PROJECT IN ACCORDANCE WITH PROJECT COMPLETION METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE. THE UNDISCLOSED INCOME IF ANY HAD TO BE COMPUTED IN ACCORDANCE WITH THE METH OD OF ACCOUNTING FOLLOWED BY ASSESSEE AND NOT IN THE YEAR OF RECEIPT IN ACCORDANCE WITH CASH SYSTEM OF ACCOUNTING. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GHODAWAT P AN MASALA PRODUCTS PVT. LTD. (2001) 250 ITR 570 HELD THAT FOR THE BLOCK ASSESSMENT PERI OD 1984 TO 1995 THERE WAS NO MATERIAL TO INDICATE THAT THE GROSS PROFIT RATE OF 15% WAS THE BASIS FOR ENTIRE PERIOD. AN EXCESSIVE RATE OF G.P. WAS APPLIED TO ARRIVE AT A CONCLUSION THAT CLO SING STOCK WAS SUPPRESSED BUT TRIBUNAL FOUND THAT THE AO MADE ADDITION WITHOUT ANY MATERIAL TO I NDICATE THAT THE GROSS PROFIT WAS AT THE RATE OF 15% FOR ENTIRE BLOCK PERIOD. HONBLE HIGH COURT DISCUSSING FACTS HELD AS UNDER: MR. DESAI LEARNED COUNSEL APPEARING ON BEHALF OF THE DEPARTMENT CONTENDED THAT THE TRIBUNAL ERRED IN DELETING THE ADDITION. HE CONTEND ED THAT DURING THE COURSE OF SEARCH STOCK WORTH RS. 1 32 52 685 CAME TO BE DETECTED. H E FURTHER CONTENDED THAT IN RESPECT OF THE PERIOD APRIL 1 1995 UP TO SEPTEMBER 27 199 5 THE TENTATIVE TRADING ACCOUNT PREPARED BY THE ASSESSEE SHOWS THAT THE GROSS PROFI T RATE APPLIED WAS 15 PER CENT. AND IF THAT RATE IS TAKEN INTO ACCOUNT THEN THE CLOSING S TOCK FIGURE SHOULD BE RS.2 05 90 919 AND NOT RS. 1 38 14 855. IT WAS URGED ON BEHALF OF THE DEPARTMENT THAT UNDER THE ABOVE CIRCUMSTANCES THE ASSESSING OFFICER WAS RIGHT IN M AKING THE ABOVE ADDITIONS. WE DO NOT FIND ANY MERIT IN THE SAID CONTENTION. FIRSTLY THE BLOCK ASSESSMENT IS FOR THE PERIOD 1984-1995. ONE FAILS TO UNDERSTAND AS TO WHETHER TH E ASSESSING OFFICER WAS JUSTIFIED IN APPLYING THE GROSS PROFIT RATE OF 15 PER CENT. ONLY ON THE BASIS THAT THE TENTATIVE TRADING ACCOUNT FOR PART-PERIOD OF APRIL 1 1995 TO SEPTEM BER 27 1995 WAS ARRIVED AT BY APPLYING THE GROSS PROFIT RATE OF 15 PER CENT. THE ASSESSING OFFICER HAS NOT AT ALL CONSIDERED AS TO WHAT WAS THE AVERAGE GROSS PROFIT RATE DURING THE PERIOD 1984 TO 1995. SECONDLY THE ASSESSEE HAD CON- TENDED BEFORE THE A SSESSING OFFICER THAT ON ACCOUNT OF ACUTE COMPETITION THE GROSS PROFIT RATE COULD NOT BE APPLIED AT 18 PER CENT. THIS FACT HAS NOT BEEN APPRECIATED BY THE ASSESSING OFFICER IN IT S PROPER CONTEXT. THIRDLY IT MAY ALSO BE MENTIONED THAT ALTHOUGH UNDER CHAPTER XIV-B THE ASSESSING OFFICER IS ENTITLED TO TAKE INTO ACCOUNT THE ESTIMATE PARTICULARLY WHEN D OCUMENTARY EVIDENCE WAS NOT FORTHCOMING AN ARBITRARY METHOD CANNOT BE APPLIED. THERE IS NO MATERIAL TO INDICATE THAT THE GROSS PROFIT RATE OF 15 PER CENT WAS THE BASIS FOR THE ENTIRE PERIOD 1984-1995. IN THE CIRCUM- STANCES AN EXCESSIVE RATE OF GROSS PROFIT WAS APPLIED TO ARRIVE AT THE CONCLUSION THAT THE CLOSING STOCK WAS SUPPRESSED. L ASTLY AS POINTED OUT BY THE TRIBUNAL IN THE MATTER OF THE SECOND ADDITION THE ASSESSING OFFICER HAS WORKED OUT THE SAID ADDITION ON THE BASIS OF EXCESS OF STOCK WHICH FIND ING IS CONTRARY TO THE FINDING OF THE ASSESSING OFFICER WHILE COMPUTING THE CLOSING STOC K. UNDER THE ABOVE CIRCUMSTANCES THE TRIBUNAL WAS RIGHT IN ALLOWING THE APPEAL. 10 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 7. FURTHER HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS. RAJENDRA PRASAD GUPTA (2001) 248 ITR 350 (RAJ) WHEREIN HONBLE HIGH COUR T OBSERVED THAT UNDER THE SCHEME OF PROVISIONS FOR BLOCK ASSESSMENT IT IS APPARENT THAT IT RELATED TO ASSESSMENT OF UNDISCLOSED INCOME OF ASSESSEE EXCLUDING INCOMES SUBJECTED TO REGULAR ASSESSMENT IN PURSUANCE OF RETURNS FILED BY ASSESSEE FOR SUCH PERIOD. AND FURTHER OBSE RVED THAT A PERUSAL OF SECTION 158BB OF THE ACT MAKES IT CLEAR THAT RETURNS ARE REQUIRED TO BE FILED IN PURSUANCE OF A NOTICE UNDER SECTION 158BC(A) AND ASSESSMENT HAS TO BE FRAMED ON THAT BA SIS IN THE LIGHT OF MATERIAL THAT HAD COME INTO POSSESSION OF ASSESSING AUTHORITY DURING THE C OURSE OF SEARCH WHICH WAS THE FOUNDATION OF PROCEEDINGS. THE CORRECTNESS OR OTHERWISE OF THE RE TURNS FILED IN PURSUANCE OF THE NOTICE UNDER SECTION 158BC(A) HAS TO BE EXAMINED WITH REFERENCE TO THE MATERIAL IN POSSESSION OF THE ASSESSING AUTHORITY HAVING NEXUS TO ASSESSMENT OF UNDISCLOSED INCOME. IF THE RETURNS FILED DID NOT ACCORD WITH THE MATERIALS WHICH WERE ALREAD Y IN THE POSSESSION OF THE AUTHORITY THE INCOME COULD BE ESTIMATED TO THE BEST OF HIS JUDGME NT BY THE ASSESSING AUTHORITY ON THE BASIS OF THE MATERIAL IN HIS POSSESSION. AND HONBLE HIGH CO URT HELD THAT THERE WAS NO FINDING BY THE ASSESSING OFFICER THAT THE ESTIMATE OF INCOME WAS M ADE AFTER CONSIDERATION OF THE MATERIAL THAT CAME TO LIGHT DURING THE COURSE OF SEARCH AND SEIZU RE ACCORDINGLY TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE BEST JUDGMENT ASSESSMENT MADE BY ASSESSING OFFICER. 8. SIMILARLY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. C. J. SHAH & CO. (2000) 246 ITR 671 HELD THAT WHERE MATERIAL IS DETECTED AF TER SEARCH AND SEIZURE OPERATION ARE CARRIED OUT THE AO IS REQUIRED TO DETERMINE THE UNDISCLOSE D INCOME AND IN SUCH CASES ADDITIONS ARE BASED ON ESTIMATES BUT IN MATTER OF ESTIMATION SOME AMOUNT OF LATITUDE IS REQUIRED TO BE SHOWN TO AO PARTICULARLY WHEN RELEVANT DOCUMENTS ARE NOT FORTHCOMING. HOWEVER HONBLE HIGH COURT OBSERVED THAT IT DOES NOT MEAN THAT THE AO CA N ARRIVE AT ANY FIGURE WITHOUT ANY BASIS BY ADOPTING ANY ARBITRARY METHOD OF CALCULATION. HON BLE HIGH COURT HAS OBSERVED AS UNDER: IT IS WELL SETTLED THAT IN CASES WHERE MATERIAL IS DETECTED AFTER SEARCH AND SEIZURE OPERATIONS ARE CARRIED OUT THE ASSESSING OFFICER I S REQUIRED TO DETERMINE THE UNDISCLOSED INCOME. IN SUCH CASES ADDITIONS ARE GENERALLY BASED ON ESTIMATES. IN MATTERS OF ESTIMATION SOME AMOUNT OF LATITUDE IS REQUIRED TO BE SHOWN TO THE ASSESSING OFFICER PARTICULARLY WHEN RELEVANT DOCUMENTS ARE NOT FORTHCOMING. HOWEVER IT DOES NOT MEAN THAT THE ASSESSING OFFICER CAN ARRIVE AT ANY FIGURE WITHOUT ANY BASIS BY ADOPTING AN ARBITRARY METHOD OF CALCULATION. IN THE PRESENT MATTER A3 A4 AND A6 N OWHERE RECORDS THE TURNOVER OF THE ASSESSEE AS FOUND BY THE TRIBUNAL AND YET ON THE WR ONG BASIS OF THE INCOMING AND OUTGOING CASH TRANSACTIONS THE ASSESSING OFFICER H AS ARRIVED AT THE TURNOVER. MOREOVER THE PEAK INVESTMENT WAS RS.40 14 806 FOR THREE MONT HS. HOWEVER THERE IS NO MATERIAL SEIZED TO JUSTIFY ANY FIGURE TO BE INCLUDED FOR A P ERIOD EARLIER TO THE SAID PERIOD OF THREE MONTHS. IN THE CIRCUMSTANCES THE TRIBUNAL HAS RECO RDED A FINDING OF FACT AND HAS HELD THAT THE ADDITION OF RS. 3.40 CRORES WAS TOTALLY UN JUSTIFIED. THE ENTIRE FINDING OF THE TRIBUNAL IS BASED ON THE FACTS. NO SUBSTANTIAL QUES TION OF LAW ARISES. HENCE THE APPEAL IS DISMISSED. 11 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 9. WE FIND THAT EVEN HONBLE APEX COURT IN DHAKESWA RI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) LAID DOWN PRINCIPLE REGARDING ESTIM ATION THAT WHILE MAKING ASSESSMENT U/S. 23(3) OF THE INCOME TAX ACT 1922 THE ITO IS NOT FE TTERED BY TECHNICAL RULES OF EVIDENCE AND PLEADINGS AND HE IS ENTITLED TO ACT ON MATERIAL WH ICH MAY NOT BE ACCEPTED AS EVIDENCE IN A COURT OF LAW BUT HE IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. T HERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT ASSESSMENT UNDER SECTION 23(3) . HONBLE APEX COURT ON FACTS OF THE CASE HELD THAT BOTH ITO AND TRIBUNAL IN ESTIMATING THE G ROSS PROFIT RATE ON SALES OF THE ASSESSEE DID NOT ACT ON ANY MATERIAL BUT ACTED ON PURE GUESS AND SUSPICION AND THEREFORE IT WAS A FIT CASE FOR THE EXERCISE OF THE POWER OF THE SUPREME COURT UNDE R ARTICLE 136 OF THE CONSTITUTION OF INDIA. THE HONBLE APEX COURT HELD AS UNDER: AS REGARDS THE SECOND CONTENTION WE ARE IN ENTIRE AGREEMENT WITH THE LEARNED SOLICITOR- GENERAL WHEN HE SAYS THAT THE INCOME-TAX OFFICER IS NOT FETTERED BY TECHNICAL RULES OF EVIDENCE AND PLEADINGS AND THAT HE IS ENTITLED TO ACT ON MATERIAL WHICH MAY NOT BE ACCEPTED AS EVIDENCE IN A COURT OF LAW BUT THERE T HE AGREEMENT ENDS ; BECAUSE IT IS EQUALLY CLEAR THAT IN MAKING THE ASSESSMENT UNDER S UB-SECTION (3) OF SECTION 23 OF THE ACT THE INCOME-TAX OFFICER IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL A T ALL. THERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE ASSESSMENT UNDER SECTION 23(3). THE RULE OF LAW ON THIS SUBJECT HAS IN OUR OPINION BEEN FAIRLY AND R IGHTLY STATED BY THE LAHORE HIGH COURT IN THE CASE OF SETH GURMUKH SINGH V. COMMISSIONER O F INCOME-TAX PUNJAB (1). IN THIS CASE WE ARE OF THE OPINION THAT THE TRIBUN AL VIOLATED CERTAIN FUNDAMENTAL RULES OF JUSTICE IN REACHING ITS CONCLUSIONS. FIRST LY IT DID (1) [1944] 12 I. T. R. 393.NOT DISCLOSE TO THE ASSESSEE WHAT INFORMATION HAD BEEN SUPPLIED TO IT BY THE DEPARTMENTAL REPRESENTATIVE. NEXT IT DID NOT GIVE ANY OPPORTUNI TY TO THE COMPANY TO REBUT THE MATERIAL FURNISHED TO IT BY HIM AND LASTLY IT DECLINED TO TAKE ALL THE MATERIAL THAT THE ASSESSEE WANTED TO PRODUCE IN SUPPORT OF ITS CASE. THE RESUL T IS THAT THE ASSESSEE HAD NOT HAD A FAIR HEARING. THE ESTIMATE OF THE GROSS RATE OF PROFIT O N SALES BOTH BY THE INCOME-TAX OFFICER AND THE TRIBUNAL SEEMS TO BE BASED ON SURMISES SU SPICIONS AND CONJECTURES. IT IS SOMEWHAT SURPRISING THAT THE TRIBUNAL TOOK FROM THE REPRESENTATIVE OF THE DEPARTMENT A STATEMENT OF GROSS PROFIT RATES OF OTHER COTTON MIL LS WITHOUT SHOWING THAT STATEMENT TO THE ASSESSEE AND WITHOUT GIVING HIM AN OPPORTUNITY TO S HOW THAT THAT STATEMENT HAD NO RELEVANCY WHATSOEVER TO THE CASE OF THE MILL IN QUE STION. IT IS NOT KNOWN WHETHER THE MILLS WHICH HAD DISCLOSED THESE RATES WERE SITUATE IN BEN GAL OR ELSEWHERE AND WHETHER THESE MILLS WERE SIMILARLY SITUATED AND CIRCUMSTANCED. NO T ONLY DID THE TRIBUNAL NOT SHOW THE INFORMATION GIVEN BY THE ELSEWHERE AND WHETHER THE SE MILLS WERE SIMILARLY SITUATED AND REFUSED EVEN TO LOOK AT THE TRUNK LOAD OF BOOKS AND PAPERS WHICH MR. BANERJEE PRODUCED BEFORE THE ACCOUNTANT MEMBER IN HIS CHAMBER. NO HAR M WOULD HAVE BEEN DONE IF AFTER NOTICE TO THE DEPARTMENT THE TRUNK HAD BEEN OPENED AND SOME TIME DEVOTED TO SEE WHAT IT CONTAINED. THE ASSESSMENT IN THIS CASE AND IN THE C ONNECTED APPEAL WE ARE TOLD WAS ABOVE THE FIGURE OF RS. 55 LAKHS AND IT WAS MEET AN D PROPER WHEN DEALING WITH A MATTER OF THIS MAGNITUDE NOT TO EMPLOY UNNECESSARY HASTE A ND SHOW IMPATIENCE PARTICULARLY WHEN IT WAS KNOWN TO THE DEPARTMENT THAT THE BOOKS OF THE ASSESSEE WERE IN THE CUSTODY OF THE SUB-DIVISIONAL OFFICER NARAYANGANJ. WE THINK T HAT BOTH THE INCOME-TAX OFFICER AND THE TRIBUNAL IN ESTIMATING THE GROSS PROFIT RATE ON SALES DID NOT ACT ON ANY MATERIAL BUT ACTED ON PURE GUESS AND SUSPICION. IT IS THUS A FIT CASE FOR THE EXERCISE OF OUR POWER UNDER ARTICLE 136. 12 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 10. IN THE PRESENT CASE BEFORE US WE FIND THAT ASS ESSEE WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING AND THESE PROJECTS WERE INCOMP LETE DURING THE YEAR UNDER CONSIDERATION EVEN IF IT IS ASSUMED THAT THAT AO WAS JUSTIFIED IN EXTRAPOLATING THE NOTING IN RM/5 NO INCOME FROM OTHER PROJECTS COULD BE RECOGNIZED FOR A.Y. 20 08-09. WE ARE OF THE VIEW THAT ON-MONEY WOULD FRUCTIFY INTO INCOME OR PARTAKE THE CHARACTER OF INCOME ONLY IN THE YEAR OF COMPLETION OF THE PROJECT IN ACCORDANCE WITH THE PROJECT COMPLETI ON METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE AO WAS NOT JUSTIFIED IN EXTRAPOLATING FEW NOTING OF RM/5 TO BALANCE FLATS OF OTHER THREE PROJECTS GIVEN THAT NO INCRIMINATING EV IDENCE PERTAINING THERETO WAS FOUND DURING THE COURSE OF SEARCH AND EVEN AUTHENTICITY OF DOCUM ENT RM/5 WAS UNDER CHALLENGE. UNDER THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT REVENU E AS WELL AS ASSESSEE WAS BOUND BY PRESUMPTION U/S. 292C OF THE ACT IN RESPECT OF SEIZ ED PAPERS AND ADDITION ON ACCOUNT OF ON- MONEY CAN BE LIMITED TO THE SEIZED MATERIALS. SINC E ASSESSEE HIMSELF HAS OFFERED ENTIRE ON- MONEY SEIZED AS PER DOCUMENT RM/5 IN ITS RETURN OF INCOME NO FURTHER ADDITION CAN BE SUSTAINED. WE FIND THAT THE ASSESSEES RELIANCE ON THE JUDGMENT OF THE HONBLE ITAT PUNE BENCH IN THE CASE OF DHANVARSHA BUILDERS & DEVELOPE RS (P.) LTD. VS. DCIT 102 ITD 375 (PUNE) WHEREIN UNDER THE GIVEN FACTS IT WAS HELD T HAT ON-MONEY RECEIPTS WAS ASSESSABLE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING FOLLOWED B Y THE ASSESSEE IRRESPECTIVE OF THE DATE OF RECEIPT OF THE CASH. IN THE SAID CASE CONSEQUENT U PON SEARCH AND SEIZURE OPERATIONS CONDUCTED UPON ONE OF THE SHAREHOLDERS OF THE ASSESSEE COMPAN Y SOME INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. SUBSEQUENTLY STATEMENT OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY WAS RECORDED IN WHICH HE MADE DECLARATION OF UNDISCLOSE D INCOME OF RS. 48.95 LACS WHICH ACCORDING TO HIM WAS ON-MONEY RECEIVED BY THE ASSES SEE FROM ITS CUSTOMERS BY WAY OF CASH BUT NOT ACCOUNTED FOR IN ITS BOOKS. ON THE BASIS OF SEI ZED MATERIAL THE AO ASSESSED UNDISCLOSED INCOME AT RS. 49.25 LACS AND FRAMED BLOCK ASSESSMEN T. IN APPEAL TRIBUNAL GAVE FOLLOWING FINDINGS IN REGARD TO THE YEAR OF ASSESSABILITY OF THE ON-MONEY RECEIPTS RECEIVED IN CASH AS UNDER: THE DATE OF RECEIPT OF CASH WAS NOT MATERIAL FOR D ECIDING THE ASSESSMENT YEAR IN WHICH THE PROFITS EMBEDDED IN SUCH RECEIPTS WERE TO BE TAXED. THE ASSESSEE WAS FOLLOWING THE PROJECT COMPLETION METHOD AND THEREFORE ALL AMOUN TS I.E. AMOUNTS RECEIVED IN CASH AS WELL AS AMOUNTS RECEIVED BY CHEQUES WERE TAXABLE IN THE YEAR IN WHICH PROJECT WAS COMPLETED OR SUBSTANTIALLY COMPLETED. WE FIND THAT KOLKATA TRIBUNAL IN THE CASE OF SOUTH CALCUTTA PROMOTERS (PVT.) LTD. VS. ITO I.T.A. NOS. 2216 & 2217/ KOL/ 2003 CONCERNED ASSES SEE WAS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND DEVELOPMENT. THE ASSESSEE BOOKED I NCOME AS AND WHEN FLATS WERE SOLD. PURSUANT TO SEARCH & SEIZURE OPERATION IN THE SAID ASSESSEES CASE IT WAS FOUND TO HAVE RECEIVED 13 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 AMOUNT IN CASH IN THE NATURE OF ADVANCE OVER AND AB OVE THE ADVANCES REFLECTED IN BOOKS OF ACCOUNT. THE AO TAXED THE SAME AS INCOME IN THE YE AR OF RECEIPT IGNORING THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. TRIBUNAL OBSER VED AS UNDER: THE AMOUNT RECEIVED BY CHEQUE BY THE ASSESSEE WAS SHOWN IN THE LIABILITY SIDE OF THE AUDITED BALANCE SHEET FILED BY THE ASSESSEE. THE A. O. HIMSELF HAS OBSERVED IN THE ASSESSMENT ORDER FOR THE RELEVANT ASSESSMENT YEAR 1 992-93 THAT THE AMOUNT OF RS. 37 79 234/- AS PER THE AUDITED BALANCE SHEET WAS SH OWN AS ADVANCE FROM PARTIES AND NO ADVERSE ACTION ON THIS AMOUNT HAS BEEN TAKEN BY THE AO. WE FIND THAT ALTHOUGH THE ASSESSEE HAS NOT ACCOUNTED FOR THE AMOUNT OF RS. 36 1 7 453/- RECEIVED IN CASH FROM THE PROSPECTIVE BUYERS IN ITS ACCOUNTS BUT IT SHALL NO T CHANGE THE CHARACTERISTIC OF THE AMOUNT RECEIVED BY THE ASSESSEE WHICH REMAINS AN ADVANCE F ROM THE PARTIES ONLY. NO FLAT WAS SOLD DURING THE RELEVANT PERIOD. WE FIND THAT THE PAYEES OF THESE AMOUNTS IN CASH WERE NOT EXAMINED BY THE A.0. TO FIND OUT WHETHER THE AMOUNT REPRESENTS SOME OTHER NATURE AND NOT ADVANCE FROM THE PAYEES FOR THE PURCHASE OF FLATS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE IDENTITY OF THE PAYEES OF THE ADVANCE MONEY IN CASH OR THE GENUINENESS OF THE TRANSACTION IS NOT PROVED OR THAT THIS AMOUNT OF RS . 36 1 7 453/- BELONGS TO THE ASSESSEE ITSELF THE AMOUNT RECEIVED AS ADVANCE MONEY AGAINST THE BOOKING OF FLATS IS NOT ASSESSABLE AS INCOME IN THE HANDS OF THE ASSESSEE. THE PROFIT OR LOSS AS THE EASE MAY HE SHALL HE DE/ERMINED AND IS ASSESSABLE ONLY AS AND WHEN THE F LATS ARE SOLD BY THE ASSESSEE. IN THE INSTANT CASE ALSO AS FAR AS THE RECEIPTS OF REGULAR NATURE I.E. ADVANCES RECEIVED IN CHEQUE FROM BUYERS ARE CONCERNED THE AO HAS NOT CHALLENGE D TAXABILITY OF THE SAME IN THE YEARS OF COMPLETION OF THE PROJECTS IN ACCORDANCE WITH THE P ROJECT COMPLETION METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE AO HAS NOT CHALLENGED DISCLOSURE OF RECEIPTS IN CHEQUES AS ADVANCES ON THE LIABILITIES SIDE OF THE BALANCE S HEET. HE HAS NOT PROPOSED TO TAX THE SAME IN THE YEAR OF RECEIPT AS IN THE CASE OF ON-MONEY. THU S IN RESPECT OF RECEIPTS IN CHEQUES AO HAS ACCEPTED PROJECT COMPLETION METHOD OF ACCOUNTING. A CCORDINGLY WE ARE OF THE VIEW THAT AO ERRED IN DEVIATING FROM THE SAID METHOD OF ACCOUNTI NG AND ESTIMATING ON-MONEY RECEIPTS FOR PROJECTS AND TAXING THE SAME DURING AY 2008-09 ON R ECEIPT BASIS. THE SAID METHOD OF ACCOUNTING HAS BEEN CONSISTENTLY ACCEPTED AS SUCH B Y THE AO IN ASSESSMENTS FRAMED U/S 143(3) OF THE ACT FOR THE PAST YEARS. HOWEVER IN ASSESSME NTS FRAMED U/S 144/153C PURSUANT TO SEARCH ACTION AO DISCARDED THE PROJECT COMPLETION METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSEE AND ESTIMATED ON-MONEY RECEIPTS IN RESPECT OF ON-GOING PROJECTS FOR A.Y. 2008-09 AND TAXED THE SAME ON RECEIPT BASIS. IN VIEW OF THE ABO VE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT SEIZED DOCUMENT RM/1 TO RM/5 ARE CORRECT DOCUMENTS AND THESE HAVE TO BE READ AS IT IS. FURTHER WE ARE OF THE VIEW THAT THE CIT(A) HA S RIGHTLY HELD THAT ONLY PROFIT ELEMENT OF ON- MONEY RECEIPTS IF ANY WILL BE ASSESSED IN THE YEA R WHEN PROJECT IS COMPLETED WE CONFIRM THE SAME. AS REGARDS TO REJECTION OF BOOKS OF ACCOUNTS CHALLENGED BY ASSESSEE WE ARE OF THE VIEW THAT IN VIEW OF SEIZED DOCUMENT RM/1 TO RM/5 THE B OOKS OF ACCOUNT ARE TO BE REJECTED BUT THE BOOKS OF ACCOUNT REFRAMED AFTER INCORPORATING THE E NTRIES OF THESE SEIZED DOCUMENTS THE 14 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 ASSESSMENT IS TO BE FRAMED ON THIS AND CIT(A) HAS R IGHTLY HELD SO. EVEN OTHERWISE WE HAVE ACCEPTED THE SEIZED DOCUMENT RM/1 TO RM/5 AS CORREC T IN THE CASE OF VIVEK KUMAR KATHOTIA IN IT(SS)A NOS. 4 6 AND 7/KOL/2011 OF ASSESSEES APPE ALS WHEREIN VIDE PARA 15 TO 17 WE HAVE HELD UNDER: 15. WE FIND THAT THE TERM USED IN THE PROVISION OF SECTION 292C OF THE ACT MAY BE PRESUMED IS DISCUSSED BUT IN THE CONTEXT OF SECTI ON 132(4) OF THE ACT BY HONBLE APEX COURT IN THE CASE OF P. R. METRANI (SUPRA) AND SAID TERM IMPLIES THAT THE PRESUMPTION IS REBUTTABLE. THE TERM REBUT MEANS TO DISPROVE. IN OTHER WORDS UNLESS CONTRARY IS PROVED WHAT IS STATED IN THE SEIZED DO CUMENTS HAS TO BE PRESUMED TO BE TRUE AND THUS THE PROVISIONS OF SECTION 292C OF TH E ACT DOES NOT CONFER DISCRETIONARY POWER ON THE DEPARTMENT TO PRESUME OR NOT TO PRESUM E THE CORRECTNESS OF SEIZED DOCUMENTS HELD BY CIT(A). WE FIND THAT CIT(A) OBSE RVED THAT SECTION 292C OF THE ACT IS NOT FOR THE BENEFIT OF THE ASSESSEE BUT IT IS FO R BENEFIT OF DEPARTMENT. WE ARE OF THE VIEW THAT THE PROVISION WILL EQUALLY APPLY TO BOTH ASSESSEE AS WELL AS DEPARTMENT AND SECTION 292C OF THE ACT ONLY CREATES A LEGAL FICTIO N WHEREBY IN CASE OF SEARCH AND SEIZURE CONTENTS OF SEIZED MATERIAL ARE PRESUMED T O BE TRUE UNLESS REBUTTED BY THE PARTY CLAIMING CONTRARY. NOW WE ARE OF THE VIEW T HAT ONUS OF REBUTTING THE PRESUMPTION U/S. 292C OF THE ACT IS ON THE PARTY CL AIMING OTHERWISE BE IT ASSESSEE OR REVENUE. IN THE PRESENT CASE BEFORE US THE SEIZED DOCUMENTS RM-1 AND RM-2 WERE FOUND FROM THE POSSESSION AND CONTROL OF THE ASSESS EE. IN PRESENT CASE SINCE SEIZED DOCUMENTS RM/1 & RM/2 WERE FOUND FROM POSSESSION AN D CONTROL OF THE ASSESSEE DURING THE COURSE OF SEARCH IN HIS CASE AND BY LEGA L FICTION A PRESUMPTION U/S 292C HAD TO BE DRAWN THAT THE SAID DOCUMENTS BELONGED TO THE ASSESSEE AND THE CONTENTS THEREOF WERE TRUE UNLESS DISPROVED BY COGENT EVIDEN CE. THE ONUS TO PROVE THAT WHAT WAS APPARENT FROM THESE BOOKS WAS NOT REAL WAS ON T HE PARTY WHICH CLAIMED IT TO BE SO. THE DEPARTMENT CLAIMED THAT THE CONTENTS OF RM/ 1 & RM/2 FOUND FROM THE POSSESSION AND CONTROL OF THE ASSESSEE IN COURSE OF SEARCH WER E INCORRECT. THUS THE ONUS WAS ON THE DEPARTMENT TO BRING ON RECORD SOME ACCEPTABLE EVIDENCE TO PROVE THAT WHAT WAS STATED IN THE SEIZED DOCUMENTS DID NOT DEPICT THE A CTUAL STATE OF AFFAIRS. THE AO AND CIT(A) FAILED TO DISCHARGE SUCH ONUS BY BRINGING ON RECORD SOME COGENT EVIDENCE TO DISPROVE NOTING IN THE SEIZED PAPERS. ON THE CONTRA RY CIT(A) AND AO TRIED TO SHIFT ONUS OF PROVING ENTRIES IN SEIZED BOOKS/ PAPERS ON THE ASSESSEE IN CONTRADICTION TO PROVISIONS OF SECTION 292C OF THE ACT. WE ARE OF TH E VIEW THAT SEIZED DOCUMENTS RM/ 1 & RM/2 CLEARLY DEPICTING THE PURCHASE AND SALE OF G OLD DIAMONDS AND PAINTINGS AND INVESTMENT OF THE SALE PROCEEDS IN PROPERTY AND SHA RES HAD TO BE ACCEPTED AS SUCH UNLESS SOME EVIDENCE OR MATERIAL WAS BROUGHT ON REC ORD BY THE REVENUE TO SHOW THAT WHAT WAS STATED IN THE SEIZED DOCUMENTS WAS NOT COR RECT. CIT(A)S OPINION THAT ONUS WAS ON THE ASSESSEE TO PROVE THAT WHAT WAS STATED I N THE SEIZED DOCUMENT WAS TRUE. SUCH AN INTERPRETATION WOULD RENDER THE DEEMING PRO VISIONS OF SECTION 292C OTIOSE AND PRESUMPTION AS TO THE CORRECTNESS OF SEIZED DOCUMEN TS IS AUTOMATIC UNDER SECTION 292C OF THE ACT UNLESS THE CONTRARY IS PROVED AND AS SUC H THE ASSESSEE WAS NOT LEGALLY REQUIRED TO SUBSTANTIATE THE SEIZED DOCUMENTS WITH SUPPORTING EVIDENCE. WHERE THE STATUTE PROVIDES A DEEMING PROVISION WHAT IS PRESC RIBED IS TO BE DEEMED WITHOUT SEEKING CORROBORATIVE EVIDENCE. WE FIND FROM A BARE PERUSAL OF RM/ 1 & RM/2 WHICH WOULD REVEAL THAT SEIZED DOCUMENTS HAVE BEEN MAINTA INED IN CONSIDERABLE DETAILS SUCH AS EXACT CARATAGE OF DIAMONDS THE WEIGHT OF GOLD A ND THE RATES OF PURCHASES AND SALES THE DATES OF PURCHASE AND SALES HAVE BEEN MENTIONED . FURTHER IN RESPECT OF PAINTINGS MINUTE DETAILS SUCH AS THE EXACT SIZE OF THE PAINTI NGS AND THE NAMES OF THE ARTISTS HAVE ALSO BEEN MENTIONED IN THE SEIZED DOCUMENTS. THUS THESE ARE SPEAKING DOCUMENTS AND NOT DUMB DOCUMENTS. A DUMB DOCUMENT IS A DOCUMENT W HICH DOESNT SPEAK FOR ITSELF AND NOT A SELF EXPLANATORY AND DETAILED DOCUMENT LI KE PRESENT ONE. FURTHER GOING THROUGH THESE DOCUMENTS IT IS REVEALED THAT THESE D OCUMENTS ALSO RECORD SEVERAL REGULAR TRANSACTIONS OF THE ASSESSEE WHICH STAND DU LY DISCLOSED IN REGULAR BOOKS OF 15 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 ACCOUNT. THE ASSESSEE HAS CITED FEW EXAMPLES IN HIS WRITTEN SUBMISSIONS OF TRANSACTIONS OF DISCLOSED/ REGULAR NATURE FOUND RECORDED IN RM/ 1 ARE AS UNDER: DATE PARTICULARS OF TRANSACTIONS 02.12.2002 PAYMENT OF RS.12 65 322/- IN THE BOOKS O F RAMANI PROJECTS ON ACCOUNT OF REGISTRATION STAMP DUTY ET C. TO REGISTRY OFFICE 15.02.2002 PAYMENT OF RS.11 15 514/- IN THE BOOKS O F RAMANI PROJECTS TO KMC 30.03.2006 CASH WITHDRAWN OF RS.16 00 000/- AND RS. 25 00 000/- FROM ANDHRA BANK BELONGING TO SALASAR MAHANIRMAN PVT. LTD SIMILARLY SEVERAL OTHER NOTING PERTAINING TO WITHD RAWAL OF CASH FROM THE REGULAR BANK ACCOUNTS OF VARIOUS COMPANIES PAYMENT OF CASH ON A CCOUNT OF VARIOUS PROPERTIES ACQUIRED BY VARIOUS COMPANIES DULY RECORDED IN THE BOOKS OF THOSE COMPANIES ETC. WERE ALSO RECORDED IN RM/ 1 & RM/2. ALL THESE ENTRI ES WERE VERIFIED FROM REGULAR BOOKS OF ACCOUNT AND FOUND TO BE CORRECT AND ACCEPT ED AS SUCH BY THE DEPARTMENT. THIS ALSO FORTIFIES THE FACT THAT RM/ 1 & RM/2 CONTAINED GENUINE ENTRIES OF THE APPELLANT AND WERE NOT DUMB DOCUMENTS. 16. WE FURTHER FIND THAT REVENUE DID NOT MAKE ANY E FFORT TO CONTROVERT THE CORRECTNESS OF THE NOTING IN THE SEIZED DOCUMENTS. REVENUE BOTH AUTHORITIES BELOW DID NOT DOUBT THE RATES AT WHICH GOLD DIAMONDS AND PAI NTINGS WERE PURCHASED AND SOLD BY THE ASSESSEE AND WERE NOT PROVED TO BE UNFEASIBLE O R IMPRACTICABLE. LOWER AUTHORITIES FAILED TO PROVE A SINGLE INSTANCE WHERE SALE PROCEE DS OF DIAMONDS GOLD OR PAINTINGS ACTUALLY REPRESENTED ON-MONEY OR SOME OTHER FORM OF UNDISCLOSED RECEIPT AND IN THE ABSENCE OF COGENT EVIDENCE EXPRESS NOTING IN THE SE IZED DOCUMENTS COULD NOT BE ARBITRARILY DISREGARDED AND NO ADDITIONS COULD BE M ADE SOLELY ON THE BASIS OF SURMISES AND CONJECTURES. EVEN SEIZED DOCUMENTS COULD NOT BE OUT-RIGHTLY REJECTED AS DUMB DOCUMENTS WITHOUT DISPROVING THE SAME. IT IS ALSO A FACT THAT SEIZED PAPERS WERE FINDINGS OF SEARCH OPERATIONS CARRIED OUT BY THE DE PARTMENT AND NOT PAPERS SUBMITTED BY THE ASSESSEE SUO MOTO IN COURSE OF NORMAL ASSESS MENT WHICH REQUIRED SUBSTANTIATION. THESE PAPERS WERE PART OF DEPARTMEN TS EVIDENCE UNEARTHED AS A RESULT OF SEARCH CARRIED OUT BY THE DEPARTMENT AND THUS THE SAME WERE TO BE TAKEN AT FACE VALUE UNLESS CONTRARY IS PROVED. THE SAID PAPERS WE RE NOT MEANT FOR PRODUCTION BEFORE THE DEPARTMENT BUT FOR PERSONAL INFORMATION OF THE ASSESSEE AND AS SUCH COULD NOT HAVE BEEN UNTRUE OR FABRICATED. THEREFORE IT WAS H IGHLY ILLOGICAL ON THE PART OF THE DEPARTMENT TO ASSUME THAT THE SAID PAPERS HAD BEEN PURPOSELY PREPARED BY THE ASSESSEE TO DEFRAUD THE DEPARTMENT. AS REGARDS CIT( A)S CONTENTION THAT NO STOCK OF GOLD DIAMONDS OR PAINTINGS WERE FOUND IN COURSE OF SEARCH AT THE RESIDENTIAL PREMISES WE ARE OF THE VIEW THAT MOST OF THE GOLD DIAMONDS AND PAINTINGS WERE SOLD PRIOR TO SEARCH ACTION AND AS SUCH CONSIDERABLE STOCK OF AFO RESAID ITEMS WERE NOT REMAINING AT THE TIME OF SEARCH. EVEN DURING THE COURSE OF SEARC H THE ASSESSEE IN REPLY TO QUESTION NO. 8 OF HIS STATEMENT RECORDED ON OATH U/S 132(4) ON 14.03.2008 PAGES 101 TO 102 OF ASSESSEES PAPER BOOK REFERRED BY LD. COUNSEL WHER EIN HE STATED THAT THE GOLD AFTER PURCHASE WAS KEPT AT VARIOUS LOCATION AND THIS EXPL AINS THE REASON WHY THE REMAINING 2 KGS OF GOLD WAS NOT FOUND IN COURSE OF SEARCH AT TH E RESIDENTIAL PREMISE OF THE ASSESSEE. EVEN DURING THE COURSE OF SEARCH IN REGARDS PAINTI NGS ASSESSEE ADMITTED VIDE QUESTION NO. 15 ON THE DATE OF SEARCH THAT THE SAME WERE ON DISPLAY AT HIS RESIDENCE AND THE SAME QUESTION NO. 15 PAGES 104-105 OF ASSESSEES P APER BOOK IS REPRODUCED AS UNDER: ANS 15. I AM FOND OF PAINTINGS AND HAVE BEEN COLLE CTING THEM FOR MY PERSONAL PURPOSE TO DISPLAY IN MY RESIDENCE FROM YEAR 1993. I GOT BORED OF HAVING THE SAME PAINTINGS IN THE HOUSE FOR SO LONG AND THEREFORE DE CIDED TO SELL THE OLD ONES AND 16 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 PURCHASED NEW ONES TO DISPLAY IN THE RESIDENCE WHIC H WERE ALSO ON DISPLAY IN THE RESIDENCE ON THE DATE OF SEARCH IN VIEW OF THESE FACTS WE ARE OF THE OPINION THAT RM/1 AND RM/2 WAS A DAY TO DAY ACCOUNT PREPARED BY ASSESSEE AND DISCOVERED AS A RE SULT OF SEARCH AND THE CONTENTS THEREIN HAD TO BE PRESUMED TO BE TRUE U/S 292C UNLE SS PROVED OTHERWISE. THE CIT(A) REJECTED THE CLAIM OF THE ASSESSEE THAT THIS IS NOT A AUTHENTICATED DOCUMENT BUT RELIED ON DOCUMENTS MARKED GB/ 12 IMPOUNDED IN COURSE OF S URVEY IN THE PREMISES OF M/S. FORT PROJECTS (P) LTD AND THE SAID SEIZED DOCUMENTS CONTAINED CERTAIN DETAILS OF UNRECORDED CASH PAYMENT ON ACCOUNT OF ACQUISITION O F SALT LAKE PROPERTY. SINCE RM/ 1 & RM/2 EXPLAINING THE SOURCE OF ACQUISITION OF SUCH PROPERTY AND ACCOUNTS PREPARED ON THE BASIS OF THE SAME WERE REJECTED BY CIT(A) W E ARE OF THE CONSIDERED OPINION THAT NOTING IN GB-12 ONLY SUBSTANTIATE/ CONFIRM THE ENTR IES PERTAINING TO INVESTMENT IN PROPERTY AT SALT LAKE NOTED IN RM/ 1 & RM/2. THUS GB-12 ONLY FORTIFIES THE CORRECTNESS OF RM/ 1 & RM/2 AND CIT(A) FAILED TO EX PLAIN THE LOGIC BEHIND RELYING ON ONE SET OF SEIZED DOCUMENTS MARKED GB-12 CONTAINING DETAILS OF UNACCOUNTED INVESTMENT IN PROPERTY AND REJECTING THE OTHER SET OF SEIZED DOCUMENTS MARKED RM/ 1 & RM/2 CONTAINING BOTH THE DETAILS OF INVESTMENT IN P ROPERTY AS WELL AS EXPLAINING THE SOURCE THEREOF. CIT(A) FAILED TO APPRECIATE THAT SI NCE RM/ 1 & RM/2 WERE FOUND FROM THE POSSESSION AND CONTROL OF THE APPELLANT IN COUR SE OF SEARCH CONDUCTED IN THE ASSESSEES OWN CASE PRESUMPTION U/S 292C COULD MOR E APTLY BE DRAWN IN RESPECT OF RM/ 1 & RM/2 RATHER THAN DOCUMENTS IMPOUNDED IN COU RSE OF SURVEY IN GROUP CASE I.E. GB-12. 17. IN VIEW OF ABOVE FACTS IT IS CLEAR THAT THE DO CUMENTS SEIZED DURING THE COURSE OF SEARCH FROM THE POSSESSION OF ASSESSEE ARE TRUE TIL L IT IS PROVED OTHERWISE BY COGENT EVIDENCE. THE ONUS TO PROVE THAT THE APPARENT IS N OT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. HERE IN THE PRESENT CASE DEPARTMENT CLAIMED THAT DOCUMENTS INVENTORISED RM-1 TO RM-4 ARE DUMB DOCUMENTS AND FOR THIS REVENU E HAS NO BASIS WHATSOEVER. TO GIVE A FINDING THAT THE DOCUMENTS ARE DUMB AND SUCH A FINDING CAN BE REVIEWED ON THE GROUND THAT THERE IS NO EVIDENCE TO SUPPORT IT OR I T IS PERVERSE. FURTHER WHEN A CONCLUSION HAS BEEN REACHED ON AN APPRECIATION OF A NUMBER OF FACTS WHETHER THAT IS SOUND OR NOT MUST BE DETERMINED NOT BY CONSIDERING THE WEIGHT TO BE ATTACHED TO EACH SINGLE FACT IN ISOLATION BUT BY ASSESSING THE CUMU LATIVE EFFECT OF ALL THE FACTS IN THEIR SETTING AS A WHOLE. WHEN A COURT OF FACTS ACTS ON MATERIAL PARTLY RELEVANT AND PARTLY IRRELEVANT IT IS IMPOSSIBLE TO SAY TO WHAT EXTENT THE MIND OF THE COURT WAS AFFECTED BY THE IRRELEVANT MATERIAL USED BY IT IN ARRIVING AT I TS FINDING. SUCH A FINDING IS VITIATED BECAUSE OF USE OF INADMISSIBLE MATERIAL AND HENCE D ECISION IN SUCH SITUATION IS BASED ON CONJECTURES SURMISES AND SUSPICION. HENCE WE C ONSIDER DOCUMENTS FOUND FROM THE POSSESSION OF THE ASSESSEE DURING THE COURSE OF SEA RCH WAS REAL AND DECLARATION MADE BY ASSESSEE ON THE BASIS OF ENTRY RECORDED IN THESE DOCUMENTS OF LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF GOLD AND DIAMOND AND ALSO REC EIPTS ON ACCOUNT OF SALE OF PAINTINGS ARE TRUE AND THERE IS NO BASIS NOT TO ACC EPT THE SAME. ACCORDINGLY WE DELETE THE ADDITION MADE BY CIT(A) OF RS.6.009 CR. AND RS. 90 LACS FOR AY 2006-07 AND 2007- 08. THIS INTER-CONNECTED ISSUE OF THE ASSESSEES AP PEALS IS ALLOWED. ACCORDINGLY OUT OF THESE INTERCONNECTED ISSUES TH E ISSUE OF ASSESSEES APPEALS IN IT(SS)A NOS. 11 12 AND 13/K/2011 IS DISMISSED. THE INTERCONNEC TED ISSUE OF REVENUES APPEALS IN IT(SS)A NOS. 19 20 AND 21/K/2011 IS ALSO DISMISSED. 11. EVEN WE FIND FROM THE RECORDS AND ARGUMENTS OF BOTH THE SIDES THAT THERE ARE SEVERAL MISTAKES AND CALCULATION ERRORS HAVING AN IMPACT RU NNING INTO SEVERAL CRORES OF RUPEES 17 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 COMMITTED BY AO WHILE MAKING THE ADDITION OF RS.64 .83 CRORES CIT(A) HOWEVER WHILE DECIDING APPEAL OF ASSESSEE HELD THAT THE QUANTUM O F UNDISCLOSED INCOME ON ACCOUNT OF ALLEGED ON MONEY AND THE MISTAKES POINTED OUT BY ASSESSEE WERE IRRELEVANT FOR THE YEAR UNDER CONSIDERATION SINCE SAME WERE TO BE CONSIDERED IN T HE YEARS IN WHICH THE PROJECTS WERE COMPLETED. AS POINTED OUT BY LD. COUNSEL THAT AT T HIS STAGE SINCE THERE IS A DEPARTMENTAL APPEAL CONTESTING DELETION OF ADDITION OF RS.64.83 CRORES BY CIT(A) IT WOULD BE PERTINENT TO DISCUSS THE MISTAKES COMMITTED BY THE AO WHILE ESTI MATING ON MONEY RECEIPTS AND THE METHOD ADOPTED BY HIM FOR EXTRAPOLATION. THE ASSESSEE HAS POINTED OUT FOLLOWING MISTAKES IN THE ORDER OF AO IN RESPECT OF ALL THE FLATS IN 20 LEE ROAD OVER AND ABOVE ON-MONEY RECEIPTS OF RS. 2.584 CRORES MENTIONED IN RM/5. SIMILAR EXERCISE WA S UNDERTAKEN WITH RESPECT TO THE PROJECT AT 68 HINDUSTAN PARK AND 24 LEE ROAD KOLKATA: 68 HINDUSTAN PARK WHILE ESTIMATING THE ON-MONEY RECEIPTS IN RESPECT O F PROJECT AT 68 HINDUSTAN PARK ON PAGE 7 OF THE ASSESSMENT ORDER U/S 144/153C FOR A.Y. 2008-09: THE AO ALLEGED THAT THE HIGHEST RATE PER S.FT. WA S RECEIVED FOR FLAT NO. 4D FROM SRI A. DAS. HOWEVER AS PER GB/I 7 (PLEASE REFER TO TABLE ON PA GE 4 OF THE ASSESSMENT ORDER) THE SAID FLAT 4D BELONGS TO MR. KUNDU AND NOT A. DAS. AGAIN THE AO ALLEGED THAT THE ASSESSEE HAD ACCOU NTED FOR RS. 6 20 16 500/- ON ACCOUNT OF FLAT NOS. 2A. 2B 3A 3B 3C 3D 4C 4D 5A 5B 5C 5D . THE SAID FIGURE WAS PURPORTEDLY CALCULATED BY THE AO FROM PAGES 56 AND 57 OF SEIZED DOCUMENTS MARKED GB/17. HOWEVER ON A PERUSAL OF THE SAME (REPRODUCED AT PAGE 4 OF THE ASSESSMENT OR DER) IT IS SEEN THAT THE TOTAL DISCLOSED CONSIDERATION IN RESPECT OF SUCH FLATS WAS RS. 7 63 42 000/- AND NOT RS. 6 20 16 500/-. THUS THE ALLEGED ADDITIONAL ON-MONEY ESTIMATED BY THE AC AT RS. 5 34 64 632 (I.E. RS. 14 41 99 132/- MINUS RS. 6 20 16 500/- MINUS RS. 2 87 18 000/-) WILL ACT UALLY COME TO RS. 3 91 39 132/- (I.E. RS. 14 41 99 132/- MINUS RS. 7 63 42 000/- MINUS RS. 2 87 18 000/-) IF THE CALCULATION ERROR COMMITTED BY THE AO IS RECTIFIED. THUS THE AFORESAID ERROR ON PART OF THE AO HAS RES ULTED IN SURPLUS ADDITION OF RS. 1 43 25 500/-. 20 LEE ROAD WHILE ESTIMATING THE ON-MONEY RECEIPTS IN RESPECT O F PROJECT AT 20 LEE ROAD ON PAGES 7 & 8 OF THE ASSESSMENT ORDER U/S 144/153C FOR A.Y. 2008-09 THE AO COMMITTED THE FOLLOWING ERRORS: THE AO HAS TAKEN THE TOTAL AREA OF FIATS SOLD AT 54 008 SQ FT. (78 290 MINUS 24 282 (ALLOCATED TO LANDLORDS). HOWEVER THE AREA OF FLATS ALLOCATED TO THE LANDLORDS WAS ONLY 19246 SQ. FTS. FURTHER THE AO FAILED TO APPRECIATE THAT THE FLAT MENTIONED AGAINST MR. VIVEK AGARWAL (5036 SQ. FT.) WAS NOT SOLD TO HIM. MR. VIVEK AGARWAL WAS JUST A TENAN T IN THE SHOWROOM SPACE AND THUS HE WAS PAYING RENT TO THE APPELLANT. THUS THE QUESTION OF RECEIVING ANY ON-MONEY FROM HIM DID NOT ARISE. FURTHER FLAT NO. 501 HAVING AN AREA OF 2518 SQ. FT WAS STILL LYING IN STOCK (AS PER NOTING ON PAGE 52 OF GB/17). THUS THE AREA OF FLATS SOLD IN 20 L EE ROAD WORKS OUT TO 51 490 SQ. FT. (78290 MINUS 19246 MINUS 5036 MINUS 2518). THUS THE TOTAL AMOUNT AT THE ALLEGED RATE OF 4 995/- PER SQ. FT. WORKS OUT TO RS. 25 71 92 550/- (I.E. 51490 X 4995) . IN RESPECT OF THE FLATS SOLD THE ASSESSEE HAS ACCOUNTED F OR RS. 9 77 88 200/- (I.E. 13 30 40 200 /- MINUS 2 51 80 000/- (VIVEK AGARWAL) MINUS 1 00 72 000/- (STOCK)). THUS AFTER REDUCING THE DI SCLOSURE OF RS. 2 58 40 000/- MADE BY THE 18 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 ASSESSEE ON THE BASIS OF RM/5 THE ADDITIONAL ALLEG ED ON-MONEY WORKS OUT TO RS. 13 35 64 350/- (I.E. 257192550 MINUS 97788200 MINUS 25840000) AS A GAINST RS. 13 60 69 760/- WRONGLY CALCULATED BY THE AO. THUS CORRECTION OF THE AFORESAID ERROR ALONE WILL REDUCE THE ADDITION ON ACCOUNT OF ALLEGED ON- MONEY BY RS. 25 05 410/-. 24 LEE ROAD THE AO HAS CONSIDERED TOTAL AREA OF THE FLATS IN TH E AFORESAID PROJECT AT 86 987 S.FT. OUT OF THIS ACCORDING TO THE AO THE TOTAL AREA ALLOCATED TO LA NDLORD IS 19 684 SQ. FT. THEREFORE AS PER THE AO THE AREA OF FIATS SOLD IN THE AFORESAID PROJECT IS 67 303 SQ.FT. HOWEVER ON A PERUSAL OF PAGES 51 & 52 OF GB/17 (REPRODUCED AT PAGES 6-7 OF THE ASSESSMENT ORDER) IT MAY BE SEEN THAT THE TOTAL AREA ALLOCATED TO LANDLORD IS 22 413 S. F T. (FLAT NOS. 3A 4B SB SC SD 6A 6C 6D). FURTHER FLAT 6B MEASURING 2729 S.FT. WAS STILL LYI NG IN STOCK. AGAIN UNIT NO. GA/IA/2A MEASURING 47 619 S.FT. WAS GIVEN ON RENT TO PANTALO ONS RETAIL INDIA LTD. (I.E. STILL OWNED BY THE APPELLANT). THE SAID COMPANY PAID RENT TO THE APPEL LANT. AS SUCH THE ACTUAL AREA OF FLATS SOLD IN THE AFORESAID PROJECT WORKS OUT TO 14 226 SQ. FT. ( I.E. 8698722413 2729 47619) AS AGAINST 67 303 S.FT. WRONGLY CONSIDERED BY THE AO. THUS THE TOTAL CONSIDERATION INCLUDING ALLEGED ON MONEY (2) RS. 8000/- IN RESPECT OF FIATS SOLD WILL WORK OUT TO RS. 11 38 08 000/- (I.E. 14226 X 8000) AS AGAINST RS. 53 84.24.000 - (I.E. 67303 X 8 000) WRONGLY CONSIDERED BY THE AC. AS PER GB/17 IN RESPECT OF THE FLATS SOLD THE ASSESSEE H AS ACCOUNTED FOR RS. 3 57 97 900!- (I.E. FOR FLAT NOS.3B 4A. 4C 4D 5A). FURTHER THE ASSESSEE HAS ALREADY MADE A DISCLOSURE OF RS. 3 56 66 000/- FOR THE IMPUGNED PROJECT ON THE BASIS OF RM/5. ACCORDINGLY THE ALLEGED ADDITIONAL ON-MONEY WORKS OUT TO RS. 4 23 44 100/- (I.E.113808000 MINUS 35797900 MINUS 35666000) AS AGAINST RS. 45 87 73 100/- ERRONEOUSLY COMPUTED BY THE AO. THE ASSESSEE HIMSELF CONTENDED THAT THESE ARE MISTA KES APPARENT FROM RECORD AND IT WILL REDUCE THE ADDITION MADE BY AO ON ACCOUNT OF ADDITIONAL ON -MONEY IN RESPECT OF THESE PROJECTS BY RS.41 64 29 000/-. SINCE ASSESSEE ITSELF CONTENDED THAT THESE ARE MISTAKES APPARENT FROM RECORD AND WE HAVE DECIDED THE ISSUE ON THE BASIS THAT THE RECEIPTS CANNOT BE ADDED SINCE PROJECT HAS NOT BEEN COMPLETED AND ASSESSEE IS FOLLOWING PROJEC T COMPLETION METHOD THEREFORE ONLY THE CALCULATION ERRORS (SUPRA) COMMITTED BY AO IN RESPE CT OF ALL THE AFORESAID THREE PROJECTS CAN BE RECTIFIED BY AO. FOR THESE YEARS THIS EXERCISE WIL L BE ACADEMIC ONLY BECAUSE WE HAVE ALREADY UPHELD THE ORDER OF CIT(A) DELETING ADDITION. 12. THE NEXT COMMON ISSUE IN THESE APPEALS OF REVEN UE IN IT(SS)A NOS. 15 16 17 18 19 & 20/K/2011 IS IN REGARD TO DELETION OF ADDITION ON ACCOUNT OF ALLEGED ON-MONEY FOR AY 2002- 03 TO 2007-08. IN IT(SS)A NO. 12/KOL/2001 FOR AY 20 07-08 ASSESSEE IS ALSO AGGRIEVED BY THE ORDER OF CIT(A) CONFIRMING THE ADDITION OF UNDISCLO SED INCOME ON RECEIPT OF ON-MONEY IN RESPECT OF PROJECT FORT ROYAL COMPLETELY DURING THE YEAR UNDER CONSIDERATION. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.5: 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF UNDISCLOSED INCOME BY WAY OF SO-CALLED RECEIPT OF ON-MONEY ON 19 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 FLATS IN RESPECT OF THE FORT ROYAL PROJECT OF THE APPELLANT COMPANY COMPLETED DURING THE YEAR UNDER CONSIDERATION AT RS.39 95 243/-. REVENUE IN IT(SS)A NOS. 15 16 17 18 19 AND 20/ KOL/2011 FOR AY 2002-03 TO 2007- 08 HAVE RAISED IDENTICALLY WORDED GROUNDS AND THE G ROUND RAISED IN IT(SS)A NO. 15/KOL/2011 I.E. 1 2 AND 3 READ AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. CIT(A) HAS ERRED IN BOTH LAW AND FACTS IN DELETING THE ADDITION OF RS.11 70 6-00 /- SOLELY ON THE BASIS OF THE DECISION OF HONBLE TRIBUNAL. 2. THAT IN DOING SO LD. CIT(A) OVERLOOKED THE FAC TS THAT ADDITIONS WERE MADE ON THE BASIS OF DOCUMENTS REGARDING RECEIPT OF ON-MONEY FO UND RELATING TO SUBSEQUENT ASSESSMENT YEARS AND THE STATEMENT OF THE DIRECTOR OF THE COMPANY. 3. THAT THE LD. CIT(A) OVERLOOKED THE FACT THAT A DDITIONS/ESTIMATIONS CAN BE MADE IN EARLIER YEARS ON THE BASIS OF DOCUMENTS RELATING TO SUBSEQUENT YEAR FOUND IN COURSE OF SEARCH/SURVEY. IN OTHER ASSESSMENT YEARS GROUNDS ARE EXACTLY IDEN TICALLY WORDED EXCEPT QUANTUM. 13. THE BRIEF FACTS ARE THAT DURING COURSE OF SURVE Y VARIOUS DOCUMENTS MARKED GB/2 GB/10 AND GB/17 WERE IMPOUNDED BY DEPARTMENT WHICH CONTAI NED DETAILS OF BOOKINGS MADE AT DIFFERENT TIMES AT DIFFERENT RATES FOR VARIOUS PROJ ECTS. THE AO CHALLENGED THE VALIDITY OF NOTING MADE IN THE SAID DOCUMENTS AND OBSERVED THAT ALL FL ATS IN A PARTICULAR PROJECT MUST HAVE BEEN SOLD AT UNIFORM & SAME RATE PER SQUARE FOOT IRRESPE CTIVE OF THE TIME OF BOOKING AND OTHER FACTORS EFFECTING THE RATES OF BOOKING. AO ADOPTED THE MAXIMUM RATE OF BOOKING FOR EACH PROJECT TO ALL THE FLATS THEREIN AND ASSUMED BALANC E AMOUNT AS UNDISCLOSED ON-MONEY RECEIPT. BEFORE AO ASSESSEE STATED THAT EACH PROJECT TAKES A SUBSTANTIAL PERIOD OF TIME FOR COMPLETION AND BOOKINGS ARE MADE OVER THE ENTIRE LIFE SPAN OF THE PROJECT AND FACTORS AFFECTING THE RATES OF BOOKING HAVE ALREADY SUBMITTED VIDE SUBMISSIONS DAT ED 28.12.2009 BEFORE AO. THE ASSESSEE EXPLAINED VARIOUS FACTORS AFFECTING RATES OF BOOKIN GS AND REASONS WHY UNIFORM RATES COULD NOT BE ASSUMED IN CASE OF ALL FLATS IN A PARTICULAR PRO JECT BUT IGNORED SUBMISSIONS OF ASSESSEE AND MADE ADDITION AGGREGATING TO RS. 5 63 32 175/- FOR THE AY 2002-03 TO A.Y. 2007-08 AS ON- MONEY RECEIPT ON PURE ESTIMATION BASIS IN RESPECT O F FOLLOWING PROJECTS: NAME OF THE PROJECTS ASSESSMENT YEAR AMOUNT OF ADDITION(RS.) TOTAL ADDITION FORT ROYAL 2003-04 2006-07 13 61 250 38 45 142 52 06 392 RAMANI PROJECTS 2002-03 2004-05 2005-06 2006-07 11 70 600 30 23 412 13 19 248 9 38 000 64 51 260 20 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 FORT POINT 2005-06 14 57 000 14 57 000 TOWER-1 2006-07 19 61 520 19 61 520 TOWER-2 2006-07 1 52 63 360 1 52 63 360 BLOCK-1 2006-07 2007-08 22 06 000 76 97 354 99 03 354 BLOCK-2 2006-07 7 08 240 7 08 240 OASIS BLOCK-4 2006-07 2007-08 9 42 500 27 57 810 37 00 310 OASIS BLOCK-5 2005-06 2007-08 8 13 780 97 00 069 1 05 13 849 OASIS BLOCK-7 2007-08 11 56 890 11 56 890 BEFORE CIT(A) ASSESSEE ARGUED THAT RAMANI PROJECT FORT POINT BLOCK-1 & 2 TOWER-I & TOWER-2 DID NOT BELONG TO THE ASSESSEE COMPANY AND AS SUCH NO ADDITION COULD BE MADE IN THE HANDS OF ASSESSEE AS AO FAILED TO APPRECIATE THAT RAMANI PROJECT BELONGED TO RAMANI PROJECTS PVT. LTD. FORT POINT BELONGED TO BALAJI GRIH NIRMA N PVT. LTD. AND TOWER-I & II BLOCK-I &2 BELONGED TO PARTNERSHIP FIRM M/S. FORT BUILDERS WHI CH WERE COMPANIES/PARTNERSHIP CONCERNS DISTINCT FROM ASSESSEE -COMPANY. ACCORDINGLY CIT(A) AFTER VERIFICATION OF AFORESAID FACTS DELETED ADDITIONS AGGREGATING TO RS. 3 57 44 734/- MADE IN RESPECT OF RAMANI PROJECT FORT POINT TOWER 1 & II AND BLOCK I & 2 FOR THE RESPECT IVE YEARS AS PERTAINING TO SEPARATE TAXABLE ENTITIES. DEPARTMENTAL GROUND CHALLENGING DELETION OF ADDITIONS IN RESPECT OF SAID PROJECTS NOT BELONGING TO ASSESSEE IS THUS CLEARLY UNSUSTAINABLE . FURTHER ADDITIONS MADE BY AO ON ACCOUNT OF ON-MONEY RECEIPTS FOR A.YS. 2002-03 TO 2005-06 W ERE ALSO DELETED BY CIT(A) WITH THE FINDING THAT SINCE ASSESSMENTS FOR THESE YEARS HAD ALREADY BEEN COMPLETED U/S 143(3) OF THE ACT BEFORE THE DATE OF SEARCH AND NOTHING INCRIMINATING WAS FOUND DURING THE COURSE OF SEARCH OR SURVEY IN RESPECT OF RECEIPTS OF ON-MONEY FOR THESE YEARS COMPLETED ASSESSMENTS FOR THESE YEARS COULD NOT BE DISTURBED AND NO ADDITION ON ACC OUNT OF ON-MONEY COULD BE MADE MERELY ON THE BASIS OF CHANGE OF OPINION. FOR THIS RELIANCE WAS PLACED BY CIT(A) ON THE ORDER OF KOLKATA TRIBUNAL IN THE CASE OF LMJ INTERNATIONAL VS. DCIT (2008) 119 TTJ (KOL) 214. OUT OF ADDITIONS MADE IN RESPECT OF THE REMAINING PROJECTS BELONGING TO ASSESSEE VIZ. FORT ROYAL OASIS BLOCKS 4 5 & 7 FOR A.YS. 2006-07 AND 2007-08 CIT(A) DELE TED ADDITIONS MADE IN RESPECT OF OASIS BLOCKS 4 5 & 7 FOR A.YS 2006-07 AND 2007-08 WITH O BSERVATION THAT SINCE ASSESSEE HAD BEEN CONSISTENTLY FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING AND SAID PROJECTS WERE NOT COMPLETE DURING THESE YEARS NO ADDITION COULD BE MA DE FOR A.YS. 2006-07 & 2007-08. THE ADDITION OF RS. 38 45 142/- IN RESPECT OF FORT ROYA L PROJECT FOR A.Y. 2006-07 WAS ALSO DELETED WITH SIMILAR OBSERVATION. CIT(A) FURTHER OBSERVED T HAT FORT ROYAL PROJECT HAD BEEN COMPLETED IN A.Y. 2007-08 AND THERE WAS SUBSTANTIAL DIFFERENC E IN RATES AT WHICH FLATS IN THE SAID PROJECT HAD BEEN SOLD OVER A PERIOD OF TIME. THE CIT(A) OBS ERVED THAT IN THE CASE UNDER 21 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 CONSIDERATION THE FIRST FLAT IN THE SAID PROJECT NO . 3B HAVING AREA OF 1100 S.FT HAS BEEN BOOKED ON 24/ 08/2001 @ 1475 PER S.FT. WHEREAS FLAT NO. 6B IN SAME PROJECT HAVING SAME S.FT. AREA IS BOOKED @ 900/- PER S.FT. ON 20/03/2003. FURTHER THE FIAT NO. 8A HAVING AREA OF 1550 S. FT.. HAS BEEN BOOKED ON 19/01/2005 @ 1600 PER S.FT. WHEREAS FLAT NO. 9A & 9B FLAT HAVING AREA OF 1100 S. FT. AREA EACH IS BOOKED @ 1000/- PER S. FT. ON 2 6/04/2005 AND FLAT NO. 9C/D HAVING AREA OF 2650 S.FT. AREA IS BOOKED @ 919/- PER S.FT. ON 11.0 5.2005. WITH THESE OBSERVATIONS CIT(A) HELD THAT FLAT SOLD BY ASSESSEE IN THE SAME PROJECT COULD BE TAKEN AS COMPARABLE CASE. BUT ASSESSEE CONTENDED THAT THERE COULD BE DIFFERENCE O N ACCOUNT OF DIFFERENT VARIABLES LIKE LOCATION TIME OF BOOKING MODE OF PAYMENT MARKET FLUCTUATIO NS EXTRA FITTINGS ETC HENCE HE HELD THAT AO WAS NOT JUSTIFIED IN CHARGING HIGHEST RATE AS BA SE RATE FOR MAKING ESTIMATION AND REJECTED BOOKS OF ACCOUNT AND ARBITRARILY ESTIMATED PROFIT O F THE PROJECT @ 6% OF THE TOTAL EXPENDITURE. CIT(A) WORKED OUT UNDISCLOSED INCOME FROM THE SAID PROJECT AT RS. 39 95 243/-. HE THUS MADE AN ADDITION OF RS. 39 95 243/- AS ALLEGED UNDISCLOS ED PROFIT FROM FORT ROYAL PROJECT FOR A.Y. 2007-08 AS AGAINST RS. 52 06 392/- ESTIMATED BY THE AO FOR THE SAID PROJECT FOR A.YS. 2003-04 & 2006-07. 14. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE HAS CHALLENGED ADDITION OF RS . 39 95 243/- MADE BY CIT(A) FOR A.Y. 2007-08 ON ACCOUNT OF ESTIMATED UNDISCLOSED PROFIT FOR FORT ROYAL PROJECT. AS SHALL BE CLEARLY EVIDENT FROM FACTS ON RECORD THIS ADDITION IS NOT BASED ON ANY INCRIMINATING EVIDENCE DISCOVERED AS A RESULT OF SEARCH IN RESPECT OF RECE IPT OF ON-MONEY FOR FORT ROYAL PROJECT OR ANY OF AFORESAID PROJECTS. THE CIT(A) DOUBTED THE PROFI T DISCLOSED BY ASSESSEE FOR THE SAID PROJECT SOLELY ON ACCOUNT OF DIFFERENCE IN RATES OF BOOKIN G OF DIFFERENT FLATS IN THE SAID PROJECT OVER A PERIOD OF TIME. THUS ONLY THE CORRECTNESS OF THE SALE PRICE OF FLATS IS IN DOUBT. THE TOTAL EXPENDITURE AND ALL THE OTHER ENTRIES PERTAINING TO THE SAID PROJECT HAVE BEEN ACCEPTED BY THE AO AND CIT(A). WE FIND THAT THE ASSESSEE TIME AND A GAIN EXPLAINED BEFORE AO AND CIT(A) VARIOUS FACTORS AFFECTING RATES OF BOOKINGS IN CASE OF BUILDERS BUT CIT(A) DILUTED SIGNIFICANCE OF THE SAME BY POINTING OUT FEW INSTANCES OF SALES BY TAKING DIFFERENT RATES IN CASE OF FORT ROYAL PROJECT. HE ALLEGED THAT THE SAME WAS SIGNIFICANT A ND COULD NOT HAVE RESULTED MERELY ON ACCOUNT OF FACTORS POINTED OUT BY ASSESSEE. WE FIND THAT CI T(A) HAS SINGLED OUT FEW INSTANCES OF SALES IN CASE OF FORT ROYAL PROJECT BUT ASSESSEE HAS ALSO PO INTED OUT CASES FOR SALE THEREOF AT A PARTICULAR PRICE AND THE VARIATION IN RATES AND EXPLAINED AS UNDER:- 22 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 COMPARISON-1 PARTYS NAME FLAT NO. AGREEMENT DATE AREA (SQ.FT) RATE PER SQ.FT (RS.) CONSIDERATION (RS.) REMARKS ABHIJIT BANERJEE 3B 24-AOG 01 1100 1475/- 17 72 500/- FLAT NO.6B WAS SOLD AT RS.900/- PER SQ. FT ON ACCOUNT OF CRASH IN REAL ESTATE MARKET. THE APPELLANT WAS UNABLE TO SELL THE EXPECTED NUMBER OF FLATS IN ITS PROJECT SINCE ITS LAUNCHING. THUS TO GENERATE FUNDS FOR PROJECT DEVELOPMENT THE APPELLANT WAS BOUND TO SELL AT LOWER RATES AVIJIT SINGHA 6B 20 MAR-03 1100 900/- 9 90 000/- COMPARISON-2 PARTYS NAME FLAT NO. AGREEMENT DATE AREA (SQ.FT) RATE PER SQ.FT (RS.) CONSIDERATIO N (RS.) REMARKS AHANA ROY UMA DEVI DHANDHANIA BISHNU KR. DHANDHANIA 8A 9A 9B 19 JAN-05 26 APR-05 26 APR-05 20-MAR-03 1550 1550 1100 1100 1600/- 1000/- 1000/- 26 80 000/- 16 00 000/- 11 00 000/- FLAT NO.9A & 9B WAS RAW/BARE FLATS AS MENTIONED IN THE AGREEMENTS. THE FIFTH SCHEDULE WORK WAS DONE BY THE BUYERS AND NOT BY THE APPELLANT COMPANY DUE TO WHICH LOWER PRICES WERE OFFERED TO THEM COMPARISON-3 PARTYS NAME FLAT NO. AGREEMENT DATE AREA (SQ.FT) RATE PER SQ.FT (RS.) CONSIDERATIO N (RS.) REMARKS MUALIDHAR VC 9C/D 11 APR-05 2650 918/- 24 35 000/- THE SAID FLAT WAS SOLD AT LOWER RATE SINCE THE BUYER WAS HIGH RANKING POLICE OFFICER AND IN TERMS OF BENEFITS ARISING ON ACCOUNT OF SECURITY ETC OF THE PROJECT THE APPELLANT DEEMED IT FIT TO SELL FLAT AT LOWER RATES IN VIEW OF THE ABOVE EXPLANATION WE ARE OF THE VIE W THAT DECISION TO SELL A PARTICULAR FLAT AT A PARTICULAR PRICE WAS TAKEN OUT OF COMMERCIAL EXPEDI ENCY AND ON VALID GROUNDS AND CANNOT BE RANDOMLY DOUBTED BY DEPARTMENT IN THE ABSENCE OF AN Y TANGIBLE EVIDENCE TO SHOW THAT THE SAME DID NOT DEPICT THE ACTUAL STATE OF AFFAIRS. E VEN OTHERWISE UNDER TAXING SYSTEM IT IS FOR THE ASSESSEE TO DECIDE HOW TO CONDUCT THE BUSINESS. THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT 23 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 ITSELF IN THE ARMCHAIR OF BUSINESSMAN AND JUDGE HOW BUSINESS SHOULD BE CONDUCTED OR AT WHAT PRICE A PARTICULAR PRODUCT SHOULD BE SOLD. HENCE W E ARE OF THE VIEW THAT IN THE ABSENCE OF CONCLUSIVE EVIDENCE SUGGESTING RECEIPT OF ON MONEY BY ASSESSEE PRICES AT WHICH FLATS WERE SOLD TO PURCHASERS VIDE DULY EXECUTED AGREEMENT CANNOT B E DOUBTED AND MOREOVER FLATS WERE SOLD TO KNOWN AND IDENTIFIABLE PARTY AT THE RATE MENTIONED ABOVE AS PER DULY EXECUTED AGREEMENT. THE AGREEMENTS WITH THE BUYERS OF THE FLATS WERE PART O F REGULAR RECORDS AND COULD HAVE VERY WELL BEEN VERIFIED BY THE AO AND CIT(A). ACCORDINGLY WE HAVE NO HESITATION IN DELETING THE ADDITION MADE IN RESPECT OF FORT ROYAL PROJECTS FOR AY 2007-08. IN REGARD TO REVENUES APPEALS ADDITIONS MADE BY AO ON ACCOUNT OF ON-MONE Y RECEIPTS FOR A.YS. 2002-03 TO 2005-06 WERE ALSO DELETED BY CIT(A) WITH THE FINDING THAT S INCE ASSESSMENTS FOR THESE YEARS HAD ALREADY BEEN COMPLETED U/S 143(3) OF THE ACT BEFORE THE DAT E OF SEARCH AND NOTHING INCRIMINATING WAS FOUND IN COURSE OF SEARCH OR SURVEY IN RESPECT OF R ECEIPT OF ON-MONEY FOR THESE YEARS COMPLETED ASSESSMENTS FOR THESE YEARS COULD NOT BE DISTURBED AND NO ADDITION ON ACCOUNT OF ON- MONEY COULD BE MADE MERELY ON THE BASIS OF CHANGE O F OPINION. AS THE REVENUE COULD NOT CONTROVERT THE SAME WE CANNOT INTERFERE IN THE FIN DINGS OF CIT(A) AND WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY THE ISSUE IN IT( SS)A NOS.12/K/2011 OF ASSESSEES APPEAL IS ALLOWED AND THE INTERCONNECTED ISSUE IN IT(SS)A NO. 15 TO 20/K/2011 OF REVENUES APPEAL IS DISMISSED. 15. THE NEXT COMMON ISSUE IN THESE APPEALS OF REVEN UE FOR AY 2002-03 TO 2008-09 AGAINST DELETION OF DISALLOWANCE OF INTEREST AND CAPITAL EX PENDITURE. FOR THIS REVENUE HAS RAISED SIMILAR GROUNDS IN ALL THE YEARS. 16. THE BRIEF FACTS ARE THAT THE AO DISALLOWED A SU M OF RS. 19 92 060/- BEING INTEREST EXPENSE AND RS.29 54 976/- BEING 10% OF THE EXPENDI TURE DEBITED IN P/L ACCOUNT ON ESTIMATION BASIS FOR AYS 2002-03 TO 2008-09 BY STATING THAT TH E SAME SHOULD HAVE BEEN CAPITALIZED AS WORK-IN-PROGRESS. THE YEAR WISE DETAILS OF ADDITION S MADE BY THE AO ARE AS UNDER: PARTICULARS OF ADDITION A.Y 2002-03 A.Y 2003-04 A.Y 2004-05 A.Y 2005-06 A.Y 2006-07 A.Y 2007-08 A.Y 2008-09 TOTAL DISALLOWANCE OF INTEREST PAID 461 882 793 619 736 559 1992060 EXPENDITURE DISALLOWED 174 249 187 841 234 450 180 728 342 548 434 417 140 0 743 2954976 THE ASSESSEE CONTENDED THAT IT IS FOLLOWING COMPLET ED PROJECT METHOD OF ACCOUNTING WHEREIN PROFITS ON SALE OF RESIDENTIAL AND COMMERCIAL UNITS IS RECOGNIZED ONLY WHEN THE WORK IN RESPECT 24 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 OF PROJECT IS COMPLETED. THE COST INCURRED AND PAYM ENTS RECEIVED WHILE PROJECT IS IN PROGRESS ARE ACCUMULATED AND CARRIED FORWARD AS WORK-IN-PROG RESS (WIP) UNDER INVENTORIES AND AS ADVANCES RECEIVED FROM CUSTOMERS UNDER CURRENT LIAB ILITIES RESPECTIVELY. IT HAS VALUED ITS WIP AS PER ACCOUNTING POLICY SPECIFIED UNDER AS-7. COST S THAT ARE (I) DIRECTLY RELATABLE TO SPECIFIC PROJECT (II) ATTRIBUTABLE TO THE PROJECT ACTIVITY IN GENERAL AND CAN BE ALLOCATED TO SPECIFIC PROJECTS ARE INCLUDED IN WIP. HOWEVER COSTS THAT RELATE TO THE ACTIVITIES GENERALLY OR THAT RELATE TO PROJECT ACTIVITY BUT CANNOT BE RELATED TO SPECIFIC PROJECTS ARE DEBITED IN THE PROFIT & LOSS ACCOUNT AS PERIOD COSTS. THE ASSESSEE TO ELUCI DATE THIS ARGUMENT FILED DETAILS OF WORK-IN- PROGRESS FOR THESE ASSESSMENT YEARS AND COPIES ARE FILED AT PAGES 138 - 205 OF ASSESSEES PAPER BOOK. FROM THESE DETAILS IT IS VERIFIED THAT ALL T HE COST DIRECTLY RELATED TO SPECIFIC PROJECTS E.G. RAW MATERIALS CARRIAGE LABOUR CHARGES LICENSE E LECTRICITY CHARGES EQUIPMENTS MATERIAL AND DELIVERY CHARGES MAINTENANCE CHARGES MOTOR CAR EX PENSES POSTAGE PRINTING & STATIONERY SECURITY CHARGES SITE DEVELOPMENT AND CLEANING CHA RGES STAFF WELFARE ADVANCE TRAVELING TRANSPORTATION ETC. ARE INCLUDED IN WIP. FURTHER CO STS ATTRIBUTABLE TO CONTRACT ACTIVITY IN GENERAL SUCH AS GENERAL EXPENSES INSURANCE CONSTRUCTION O VERHEADS ETC. ARE ALSO ALLOCATED TO SPECIFIC CONTRACTS AND INCLUDED UNDER WIP. FURTHER ON A PER USAL OF FINANCIAL STATEMENTS FILED ALONGWITH RETURNS OF INCOME WE FIND THAT ONLY COST S WHICH CANNOT BE ATTRIBUTED TO CONTRACT ACTIVITY SUCH AS VARIOUS GENERAL ADMINISTRATION COS TS SELLING COSTS OFFICE MAINTENANCE IT CONSULTANCY CHARGES ETC. ARE NOT ALLOCATED TO SPECI FIC CONTRACTS AND DEBITED IN THE PROFIT & LOSS ACCOUNT. THUS THE VALUATION OF WIP HAS BEEN DONE S TRICTLY IN COMPLIANCE WITH AS-7 ISSUED BY THE ICAI. 17. THE CIT(A) DELETED AD-HOC DISALLOWANCE OF 10% O F THE GENERAL EXPENDITURE AND INTEREST EXPENSES FOR A.YS 2002-03 TO 2008-09 MADE BY AO BY OBSERVING THAT ADDITIONS ON ACCOUNT OF DISALLOWANCE OF INTEREST AND COMMON EXPENSES DID NO T EMANATE FROM INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND SINCE ASSESSM ENTS FOR THESE YEARS HAD ALREADY BEEN COMPLETED BEFORE THE DATE OF SEARCH THE SAME COULD NOT BE DISTURBED AND THE SAID ISSUES COULD NOT BE SUBJECT MATTER OF CONSIDERATION FOR PROCEEDI NGS UNDER SECTION 153A. CIT(A) FOLLOWED THE ORDER OF KOLKATA TRIBUNAL IN THE CASE OF LMJ IN TERNATIONAL VS. DCIT (2008) 119 TTJ (KOL) 214. WE FIND THAT REVENUE COULD NOT BRING ANYTHING OR MAKE ANY ARGUMENT THAT THERE IS FAULT IN THE ORDER OF CIT(A). WE FIND THAT SEARCH ACTION IN THE GROUP CASE OR THE SURVEY ACTION IN THIS CASE DID NOT LEAD TO DISCOVERY OF ANY INCRIMINATING EVIDENCE WHATSOEVER IN RESPECT OF A.YS 2002-03 TO 2006-07 AND AS SUCH COMPLETED ASSESSMENT S FOR SUCH YEAR COULD NOT BE DISTURBED AND ITEMS OF REGULAR ASSESSMENTS COULD NOT BE ADDED BACK IN ASSESSMENTS FRAMED U/S.153C OF 25 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 THE ACT. THUS ENTIRE ASSESSMENT ORDERS FRAMED U/S. 144/153C FOR THE SAID YEARS MAKING EXORBITANT ADDITIONS IN THE HANDS OF THE ASSESSEE C OMPANY ON THESE ISSUES IS WITHOUT ANY BASIS. FURTHER AS DISCUSSED ABOVE IN THE INSTANT CASE N O SEARCH WAS CONDUCTED PROCEEDINGS U/S.153C WERE INITIATED AGAINST THE ASSESSEE ON THE BASIS OF ONE SET OF DOCUMENTS MARKED RM/5 SEIZED FROM THE PREMISES OF ONE OF ITS DIRECTORS. HOWEVER NO INCRIMINATING MATERIAL OR DOCUMENTS WERE FOUND IN COURSE OF THE SEARCH OR SURVEY ACTION WITH RESPECT TO THE ALLOWABILITY OR OTHERWISE OF THE EXPENDITURE OR INTEREST EXPENSES FOR ANY OF THE YEARS UNDER CONSIDERATION. IN THE ORIGINAL ASSESSMENTS FRAMED U/S. 143(3) OF THE ACT FOR AYS. 2002-03 TO 2005-06 THE AO AFTER APPLICATION OF MIND AND DETAILED SCRUTINY OF ACCOUN TS HAD CONSCIOUSLY ALLOWED SAID EXPENSES AND INTEREST ON LOAN. FURTHER SAID EXPENSES HAD A LSO BEEN ALLOWED IN SUMMARY ASSESSMENT U/S. 143(1) FOR A.Y 2006-07. HOWEVER LATER ON WHILE FRA MING ASSESSMENTS U/S.144/153C FOR THE SAID YEARS UNDER IDENTICAL CIRCUMSTANCES VIS--VIS PAST THE AO OPINED THAT A PART OF SUCH EXPENSES AND INTEREST SHOULD HAVE BEEN CAPITALIZED TO WIP. ACCORDINGLY THE SAME WAS ADDED BACK BY THE AO U/S.144/153C MERELY ON THE BASIS OF CHANGE OF OPINION IN THE GUISE OF SEARCH ASSESSMENT. HENCE CIT(A) HAS RIGHTLY DELETED THIS ADDITION. ACCORDINGLY THESE TWO COMMON ISSUES OF REVENUES APPEALS IN IT(SS)A NOS. 15 16 17 18 19 20 AND 21/K/2011 ARE DISMISSED. 18. THE NEXT ISSUE IN IT(SS)A NO. 19/K/2011 OF REV ENUES APPEAL FOR AY 2006-07 IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE ADDITIO N MADE BY AO ON ACCOUNT OF LOAN RECEIVED FROM TOPLIGHT VINIMAY (P) LTD. FOR THIS REVENUE HA S RAISED FOLLOWING GROUND NO.4. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED BOTH IN FACT AND IN LAW IN DELETING THE ADDITION OF RS.10 LAKHS ON ACCO UNT OF CASH CREDIT OVERLOOKING THE FACT THAT THE PAPER TRAIL WAS CREATED TO MAKE THE TRANSA CTION LOOK GENUINE WHICH IS OTHERWISE BOGUS. 19. THE BRIEF FACTS ARE THAT ASSESSEE DURING F.Y. 2005-06 HAD RECEIVED A SUM OF RS. 10 LAKHS AS LOAN FROM TOPLIGHT VINIMAY (P) LTD. THE AO ALLEGED THAT THE SAID COMPANY TOPLIGHT VINIMAY (P) LTD. WAS A TYPICAL ENTRY COMPA NY AND THEREFORE THE LOAN RECEIVED BY ASSESSEE WAS BOGUS. THE AO THUS TREATED SAID SUM O F RS. 10 LAKHS AS INCOME OF THE ASSESSEE-COMPANY FROM UNDISCLOSED SOURCES FOR A.Y. 2006-07. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE ADDITION BY OBSERVING THAT AO HAD NOT PROVED THAT TOPLIGHT VINIMAY PVT. LTD. WAS A TYPICAL ENTRY COMPANY WITH SUPPORTING EVIDENCES AND NO SPECIFIC FINDING IN RES PECT OF DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE IN SUPPORT OF IDENTITY C REDITWORTHINESS AND GENUINENESS OF TRANSACTION WAS GIVEN. FURTHER AO HAD NOT FURNISH ED ANY ADVERSE EVIDENCE FOUND DURING 26 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 THE COURSE OF ENQUIRY FROM KALYAN VYPAAR PVT. LTD. U/S 131 OF THE ACT AND NO INDEPENDENT OR CORROBORATIVE EVIDENCE HAD BEEN BROU GHT ON RECORD BY THE AO TO PROVE THAT ASSESSEE HAD OBTAINED ACCOMMODATION ENTRY IN THE FO RM OF LOAN. THERE WAS NO JUSTIFICATION ON THE PART OF AO TO MAKE ADDITION ONLY ON THE BASI S OF CERTAIN ENQUIRY MADE IN RESPECT OF THIRD PARTY WITHOUT BRINGING ON RECORD ANY COGENT E VIDENCE TO PROVE THAT ASSESSEE HAD TAKEN ACCOMMODATION ENTRY. THE AOS ALLEGATION THA T UNACCOUNTED MONEY EARNED BY ASSESSEE HAD BEEN BROUGHT BACK TO BUSINESS BY WAY O F BOGUS UNSECURED LOAN WAS NOT SUSTAINABLE IN THE ABSENCE OF ANY MATERIAL ON RECOR D TO THE SAID EXTENT. THE ASSESSEE HAD DULY PROVED THE NATURE AND SOURCE OF LOAN BY DOCUME NTARY EVIDENCES AND AO HAD HELD IT UNSATISFACTORY WITHOUT BRINGING ON RECORD ANY CONTR ARY MATERIAL. AS SUCH NO ADDITION COULD BE MADE U/S 68. AGGRIEVED AGAINST FINDINGS OF CIT( A) NOW REVENUE IS IN APPEAL BEFORE US. 20. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE COMPANY HAD IN FACT REC EIVED A LOAN OF RS. 10 00 000/- FROM TOPLIGHT VINIMAY (P) LTD. WHICH IS DULY ASSESSED TO TAX UNDER PAN AABCT 2411 L. IN SUPPORT OF THE AFORESAID ASSESSEE SUBMITTED FOLLOW ING EVIDENCES IN ITS PAPER BOOK: (I) ACKNOWLEDGEMENT OF FILING RETURN OF INCOME FOR A.Y. 2006-07 OF M/S. TOPLIGHT VINIMAY PVT. LTD. PAGE 217 OF THE PB. (II) AUDITED BALANCE SHEET AS AT 31.3.2006 OF TOPLI GHT VINIMAY PVT. LTD. SHOWING BALANCE OF LOANS ADVANCED TO M/S. FORT PROJECTS (P) LTD. OF RS. 10 07 076/- AS ON 31.03.2006 PAGE 218 OF THE PB. (III) AUDITED PROFIT & LOSS ACCOUNT OF M/S. TOPLIGH T VINIMAY PVT. LTD. FOR THE YEAR ENDING 31.03.2006 PAGE 219-222 OF THE PB. (IV) EXTRACT OF BANK BOOK AND BANK STATEMENT IN ABN -AMRO BANK OF M/S. TOPLIGHT VINIMAY PVT. LTD. SHOWING PAYMENT OF RS. 10 LACS TO M/S. FORT PROJECTS (P) LTD. ON 23.02.2006 PAGE 223-224 OF THE PB. (V) CONFIRMATION OF ACCOUNT RELATING TO LOAN OF RS. 10 09 123/- (INCLUDING RECEIPT OF RS. 10 LACS IN CHEQUE) FROM M/S. TOPLIGHT VINIMAY ( P) LTD. PAGE 225 OF THE PB. WE FIND THAT TOPLIGHT VINIMAY (P) LTD. IS ASSESSED TO INCOME-TAX AND LOAN WAS RECEIVED THROUGH BANKING CHANNEL AND DISCLOSED IN THE FINANC IAL STATEMENTS FILED ALONGWITH RETURNS OF INCOME BOTH BY ASSESSEE AND TOPLIGHT VINIMAY (P) LT D. WE FIND THAT AO FOR MAKING ADDITION REFERRED TO SOME ENQUIRY CONDUCTED BY THE INVESTIGATION WING AGAINST SOME CHAMPAL LAL MITTAL AND HIS ASSOCIATED BANK ACCOUNTS . THE AO FURTHER OBSERVED THAT HUGE AMOUNT OF CASH HAD BEEN DEPOSITED IN CERTAIN BANK A CCOUNTS OF SRI MITTAL FROM WHERE ENTIRE AMOUNT WAS TRANSFERRED BY CHEQUES TO VARIOUS ACCOUN TS IN ABNAMRO BANK AND SO ON. 27 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 AFTER CROSSING FIVE TO EIGHT INTERMEDIARY LAYERS A MOUNTS WERE DEPOSITED IN BANK ACCOUNTS OF DIFFERENT BENEFICIARIES AND TOPLIGHT VINIMAY (P) LT D. WAS ONE SUCH INTERMEDIARY COMPANY WITH NO ACTUAL BUSINESS AND ASSESSEE HAD ON 24.02.2 006 RECEIVED A SUM OF RS. 10 LACS FROM SAID COMPANY. THE AO NOTED THAT ENQUIRIES HAD BEEN CONDUCTED WITH RESPECT TO SOURCE OF RS. 10 LACS IN THE BANK ACCOUNT OF TOPLIGHT VINIMAY (P) LTD. AND FEW LAYERS HAD BEEN IDENTIFIED. FURTHER AO ALLEGED THAT THE ASSESSEE COMPANY WAS SPECIFICALLY ASKED FOR EXPLANATION BUT HAD NOT COMPLIED. THUS THE SAID SU M OF RS. 10 LACS WAS ADDED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. WE FIND THAT AFORESAID ALLEGATIONS AND SO-CALLED FINDINGS OF AO SERVE NO PURPOSE AS FAR AS ASSESSEE IS CONCERNED. THE AO HAS OBSERVED THAT FEW LAYERS HAD BEEN IDENTIFIED WITH REGARD TO THE SOURCE OF RS. 10 LACS RECEIVED FROM TOPLIGHT VINIMAY (P) LTD. BUT HAS NOT GIVEN ANY DET AILS REGARDING SUCH LAYERS. FURTHER THE AO HAS FAILED TO PROVE BY BRINGING ON RECORD SOME C OGENT EVIDENCE THAT THIS AMOUNT OF RS. 10 LACS HAD BEEN ACTUALLY BEEN DEPOSITED BY ASSESSE E COMPANY DIRECTLY OR INDIRECTLY THROUGH INTERMEDIARIES INTO THE ACCOUNT OF TOPLIGHT VINIMAY (P) LTD. AND AS SUCH REPRESENTED INCOME FROM UNDISCLOSED SOURCES OF THE ASSESSEE. NO SUCH FINDING HAS BEEN RECORDED OR PROVED BY AO. AS SUCH NO ADDITION CAN BE MADE IN T HE HANDS OF ASSESSEE. AS FAR AS ASSESSEE COMPANY IS CONCERNED IT HAS SUCCESSFULLY PROVED GE NUINENESS AND SOURCE OF LOAN BY FURNISHING THE REQUISITE EVIDENCES IN THE FORM OF I NCOME-TAX RETURN AND FINANCIAL STATEMENTS OF TOPLIGHT VINIMAY (P) LTD. EVIDENCING RECEIPT OF LOAN FOR THE RELEVANT YEAR AND ALSO CONFIRMATION OF THE SAID PARTY. IN VIEW OF THESE FA CTS AND CIRCUMSTANCES WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION AND THIS ISSU E OF REVENUES APPEAL IS DISMISSED. 21. IN THE RESULT ALL THE APPEALS OF THE REVENUE A RE DISMISSED AND ASSESSEES APPEALS BEING IT(SS)NOS. 11 & 13/K/2011 ARE DISMISSED AND I T(SS) NO.12/K/2011 OF ASSESSEE IS PARTLY ALLOWED. 22. ORDER PRONOUNCED IN OPEN COURT ON 29.7.2011. SD/- SD/- . . . . . . . . ' ' ' ' #!' #!' #!' #!' $% (G. D. AGRAWAL) (MAHAVIR SINGH) VICE PRESIDENT JUDICIAL MEMBER ( & & & &) )) ) DATED 29TH JULY 2011 PRONOUNCED BY SD/- C.R. RAO SD/- M. SINGH AM 29/7/ JM 29/7/11 56 #*7 #8 JD.(SR.P.S.) 28 IT(SS)A NO.11 TO 13 & 15 TO 21/K/2011 M/S. FORT PROJECTS (P) LTD. A.Y.06-07 TO 08-09 & 2002-03 TO 2008-09 $34 9 1##: 3: ;- COPY OF THE ORDER FORWARDED TO: 1 . /0 / APPELLANT M/S. FORT PROJECTS (P) LTD. 7/1A HAZR A ROAD KOLKATA-700 026 2 12/0 / RESPONDENT DCIT CENTRAL CIRCLE-VI KOLKATA 3 . #4* ( )/ THE CIT(A) KOLKATA 4. #4* / CIT KOLKATA 5 . A#B 1#* / DR KOLKATA BENCHES KOLKATA 2: 1#/ TRUE COPY $34*C/ BY ORDER ' ! /ASSTT. REGISTRAR .