DY CIT Vs. PANNA CORPORATION

JUDGEMENT

(1.) THESE appeals arise out of common factual and legal background. They have been heard together and are being disposed of by this common judgement. For the purpose of this judgement, we may refer the facts as emerging in Tax Appeal No.323 of 2000. This appeal is filed by the revenue calling in question the judgement of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 1.9.1999.

(2.) THE respondent assessee is a partnership firm engaged in the business of construction of flats and residential complexes. The assessee started construction of a total of 120 flats in a complex called "Ashoplab Apartments" in the city of Surat. The scheme contained three types of flats admeasuring 725 square feet, 750 square feet and 975 square feet respectively. The flats were sold at a disclosed rate of Rs.185/- per square feet. A search was carried out on 4.7.1996. Initially, a disclosure was made of undisclosed income of Rs.3.5 lakhs by a partner of the assessee firm Shri K. R. Sardara. This disclosure was confirmed by the other partner of the firm Shri Janakbhai P. Balar in his statement on 5.7.1997. In response to notice issued by the Department, the assessee filed return declaring undisclosed income of Rs.26 lakhs. During the search of the residential premises of Shri Balar, a loose paper No.31 was found and seized. The paper pertained to details of sale of two of the flats. The statement of Shri Balar under section 132(4) of the Income Tax Act, 1961 was recorded on 4.7.1996. On the basis of the contents of the loose paper and the statement of the partner, the Assessing Officer came to the conclusion that the assessee partnership firm was collecting unaccounted cash from the purchasers of the flats. He estimated such cash collection at Rs.1 lakh per flat. Since for the block period under consideration, 62 flats were sold, he believed that the assessee had earned undisclosed income of Rs.62 lakhs during that period. He, accordingly, passed an order dated 30.7.1997 and ordered collection of tax and interest etc. on such basis.

(3.) LEARNED counsel for the revenue, Shri Sudhir Mehta submitted that the Tribunal committed a serious error in reversing the order of the Assessing Officer. He submitted that the on money collection by the respondent assessee firm was established. The Tribunal having confirmed such findings, ought not to have rescinded the directions for collection of tax, interest etc.