Surya Enclave Developers, Surat vs Department Of Income Tax

I.T.A. No. 707/Ahd/11 A.Y. 08-09 [DCIT vs. M/s. Surya Enclave Deve lope rs) Page 2

"i) On the facts and circumstance of the case and in law, the Ld CIT(A) erred in law and in facts in deleting the addition at Rs.48,97,984 made on account of on-

money received by the assessee on sale of flats in the Surya Enclave Project without appreciating the documentary evidence regarding the on-money received by the assessee.

ii) On the facts and circumstance of the case and in law, the Ld CIT(A) erred in law and in facts in holding that the on-money received in one flat from an NRI buyer cannot be the basis for holding that same on-money was received by the assessee for all flats ignoring that the Ld CIT(A) himself in his order has held that the books of accounts maintained by the assessee were not proper and not reliable as complete receipts were not shown . In the circumstances, the estimation done by the Assessing Officer for other flats based on the evidence and also considering the assessee's own admission of on-money during the course of search in the same project and the market trend in real estate ought to have been upheld by the Ld CIT(A).

iii) On the facts and circumstance of the case and in law, the Ld CIT(A) erred in law and in facts in restricting the N.P estimation at 15 % from 16% estimated by the Assessing Office relying upon the decision of Hon.ble ITAT in other cases, where the facts are quite different from the facts of the instant case and also ignored that the Assessing Officer had made the estimation considering the growth of property market ,the market trend in real estate and also based on the on-money received by the assessee."

2. Assessee is a partnership firm. A search operation took place in assessee's case and various incriminating documents were found and seized. Assessee has developed Surya Enclave Project. One Shri Dhekhar Jagdischandra, an NRI, who purchased flat No.A-301 in Surya Enclave admitted in his on oath u/s.131 of Income Tax Act that he paid on money of I.T.A. No. 707/Ahd/11 A.Y. 08-09 [DCIT vs. M/s. Surya Enclave Deve lope rs) Page 3

Rs.40,23,000/- for 3100 sq.ft. flat whose document price was Rs.24,80,000/-. On the basis of this, Assessing officer adopted the figure of Rs.1296.77 per sq.ft. as on money received on all the flats of project for total area of 120000 sq.ft. giving rise the total turnover of on money received at Rs.15,56,12,400/- and applied net profit rate of 16% giving total profit of Rs.2,48,97,984/-. As assessee has offered income of Rs.2 crore, Assessing Officer has made addition for advance of Rs.48,97,984/-.

2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) restricted the net profit @ 15% and thereby addition in question was deleted.

2.2 Same has been opposed on behalf of Revenue inter alia submitted that CIT(A) was not justified in deleting addition of Rs.48,97,984/- made on account of on money received by assessee on sale of flats in Surya Enclave Project without appreciating documentary evidence regarding on money received by assessee. Learned Departmental Representative Shri Subhash Bains submitted that on money received in one plot from NRI buyer was sound basis for calculating on money received by assessee for all flats. In such situation, CIT(A) was not justified in restricting net profit estimation @ 15% from 16% estimated by Assessing Officer. Accordingly, order of CIT(A) be set aside and that of Assessing Officer on the issue be I.T.A. No. 707/Ahd/11 A.Y. 08-09 [DCIT vs. M/s. Surya Enclave Deve lope rs) Page 4

restored. On other hand, learned Authorized Representative Shri Rajesh Shah relied on the decision of CIT(A).

2.3 After going through rival submissions and material on record, it is found undisputed that books of accounts maintained by assessee were not proper and not reliable as complete receipts were not shown. Assessee himself admitted receipt of on money and disclosed an amount of Rs.2,00,00,000/- as unaccounted income on this account. The statement recorded of one purchaser confirmed the fact that assessee was getting on money. In view of these, Assessing Officer was justified in rejecting books of accounts. However, estimation of on money done by Assessing Officer was not found correct by CIT(A) as figures of on money received in one flat from an NRI buyer cannot be the basis for holding that same on money was received by assessee for all flats and also from the partner to whom 11 flats were given. Further net profit rate of 16% applied by Assessing Officer was not found justified by CIT(A). He observed that ITAT Bench decided in case of Naresh B Agarwal HUF and Mangatulal Harlalkar HUF, net profit rate of 15% as reasonable by CIT(A). Drawing the strength from various judicial pronouncements of ITAT Bench, CIT(A) observed that assessee has shown net profit of Rs. 2,00,00,000/- and for this net profit @ 15%, corresponding on money comes to Rs. 13,33,00,000/-.as against on money estimated by Assessing Officer at Rs. 15,56,12,400/- (including flats given to partner with on-money). He took out the flats I.T.A. No. 707/Ahd/11 A.Y. 08-09 [DCIT vs. M/s. Surya Enclave Deve lope rs) Page 5

given to partner, profit shown by assessee of Rs.2,00,00,000/- was more than the reasonable amount of net profit received on balance flats. Accordingly, addition in question was deleted. This reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same.

3. In the result, appeal filed by Revenue is dismissed.

Pronounced in the open Court on this the 30th day of January, 2015.

Sd/- Sd/- (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER True Copy

S.K.SINHA

आदे श क ूितिल(प अमे(षत / Copy of Order Forwarded to:-

1. राजःव / Revenue

2. आवेदक / Assessee

3. संबंिधत आयकर आयु1 / Concerned CIT

4. आयकर आयु1- अपील / CIT (A)

5. (वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड: फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।