IT : Where assessee itself contended before lower authority that assessee would earn profit in ratio of 35 per cent on on-money and same should be considered assessee's income, subsequent claim of assessee that it had incurred some expenditure to earn said profit and same should be reduced could not be accepted
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[2013] 40 taxmann.com 24 (Gujarat)
HIGH COURT OF GUJARAT
Gargi Construction Co.
v.
Income-tax Officer*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
TAX APPEAL NO. 797 OF 2011†
SEPTEMBER 17, 2012
Section 143 of the Income-tax Act, 1961 - Assessment - Addition to income [On money transaction] - Assessing Officer having found that there was 40 per cent cash components in project developed by assessee, added same to income of assessee - Before Commissioner (Appeals), assessee contended that entire on-money should not be taken to be income of developer and only 35 per cent of such on-money could be considered as service charges and as income of assessee - Commissioner (Appeals) accepted contention of assessee and confirmed addition to extent of 35 per cent - Tribunal upheld order of Commissioner (Appeals) and rejected claim of assessee that assessee incurred certain expenditure to earn such income and, hence, net profit should be less than 35 per cent of receipt - Whether no question of law arose out of order of Tribunal - Held, yes [Paras 7 & 8] [In favour of revenue]
S.N. Divatia for the Appellant.
ORDER
Akil Kureshi, J. - The assessee is in appeal against the judgment of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 31.12.2010. Following questions have been proposed for our consideration :
| "(A) | Whether on the facts and in the circumstances of the case, Income Tax Appellate Tribunal was right in law in confirming the addition of Rs.46,55,000/- as service charges # 35% out of unaccounted receipts ? | |
| (B) | Whether on the facts and in the circumstances of the case, Income Tax Appellate Tribunal could have reached to the conclusion to uphold the addition of Rs.46,55,000/- though the appellant had not admitted it and raised ground of appeal before Appellate Tribunal in this regard? | |
| (C) | Whether on the facts and in the circumstances of the case, the conclusion reached by the Income Tax Appellate Tribunal to uphold the addition of Rs.46.55 lakhs is as such could have been arrived at from the material on record or is reasonable?" |
2. The issue pertains to addition of Rs.46,55,000/- made by the revenue authorities and confirmed by the Tribunal in the income of the assessee.
3. The assessee was engaged in the business of construction and development activities. During the course of survey operations, certain materials were seized leading to Assessing Officer ultimately framing an assessment during which, he held that there was 40% cash components in the projects developed by the assessee. On such basis, he computed unaccounted receipt of Rs.1,33,00,000/-. The Assessing Officer taxed the entire amount in the hands of the assessee. The assessee thereupon approached the Commissioner. Before the Commissioner, the assessee questioned the very conclusion of on-money transactions. In the alternative, the Commissioner records that the assessee contended that the entire on-money should not be taken to be the income of the developer and only 35% of such on-money could be considered as the service charges and as the income of the assessee developer.
4. The Commissioner in the appellate order, while confirming that there was on-money transaction of Rs.1,33,00,000/-, confirmed the addition only of Rs.46,55,000/- on the premise that not the entire on-money but only the income of the assessee which should be taxed. He thus reduced the addition to 35% of Rs.1,33,00,000/- and confirmed it to the limited extent of Rs.46,55,000/-.
5. Dissatisfied with such order of the Commissioner, the assessee carried the matter in appeal before the Tribunal. The Tribunal also recorded the contention on behalf of the assessee that the profit from the sale of the bungalows would be in the vicinity of 25% to 35% which could be treated as the income of the assessee. The Tribunal in view of the opposition of the revenue that no such contention was taken before the lower authorities and that there was no material on record, directed the assessee to file a chart of the net/gross profit rate for five years preceding the assessment year under consideration. The Tribunal noted that for the year ending on 31.3.2000, the gross profit rate was 42.44% and for the year ending on 31.3.2002, the gross profit rate was 34.41%. We may recall that the appeal pertains to the assessment year 2002-03. ON the basis of such materials, the Tribunal confirmed the view of the CIT (Appeals) and rejected the assessee's appeal. The Tribunal recorded that the assessee had admitted before the CIT (Appeals) that a developer - assessee would earn profit in the ratio of 35% on the on-money which should be considered as the assessee's service charges and the income. The Tribunal held that the assessee could not be allowed to now turn around such contention. The Tribunal also upheld the contention of the revenue that before the CIT (Appeals), there was no further grounds raised that the assessee incurred certain expenditure to earn such income and therefore, net profit would be less than 35% of the receipts. The Tribunal, in any case, examined such a ground and found that the same was not supported by any evidence on record. The Tribunal recorded that no details or evidences were found during the course of survey to prove that the assessee incurred or spent any other expenditure for earning the service charges income.
6. Counsel for the appellant vehemently contended that the Tribunal committed an error in confirming the addition of 35% under service charges. It was submitted that only net income and not the gross receipt can be taxed. It was submitted that there was sufficient evidence to show that to earn service charges, the assessee had incurred considerable expenditure.
7. We are, however, of the opinion that the entire issue is based on appreciation of the evidence on record. In fact, before the Commissioner (Appeals), the assessee's representative himself had suggested that even if there is any finding of on-money transaction, only 35% thereof should be taxed in the hands of the assessee by way of income in the form of service charges. Before the Tribunal also, it was reiterated that the net profit would be in the vicinity of 25% to 30% of the gross receipts. The Tribunal in addition to recording the contentions made before the CIT (Appeals), independently examined and found that there was no material to show any expenditure incurred for earning the service charges. The Tribunal also compared the gross profit rate of the assessee in last few years before the year under consideration and found the same favourable to 35% return.
8. In our view, therefore, no question of law arises. The appeal is dismissed.
USPRegards
Prarthana Jalan
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