TaxTMI 
TaxTMI 
2010 (7) TMI 834
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..... Embassy Classic P. Ltd., and the Revenue. In the case of the assessee, M/s. Embassy Classic P. Ltd., a return of income declaring Rs. 2,45,880 was filed for the impugned assessment year. It is engaged in the business of developers and builders. The assesseecompany has developed a project known as Embassy Heights at Margareth Road, Bangalore. Certain units of the said building were sold to Shri K. M. Viswanath and his mother Smt. K. M. Parvathamma for a consideration of Rs. 8,60,69,500. The sales were made under two sale deeds, both dated March 30, 2005 and executed by the assessee-company in favour of those persons. There was a search action in the case of the assessee along with a simultaneous raid against Shri K. M. Viswanath and Smt. K. M. Parvathamma. In the light of the materials and information collected in the course of search, the assessee was asked to file returns. In such returns filed by the assessee, it has claimed deduction by way of bad debts to the tune of Rs.3.67 crores. The assessee explained that as against the sale consideration of Rs.8,60,69,500 the buyers had paid an amount of Rs. 4,93,97,650 and a cheque for Rs. 4 crores was issued for the balanc....
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....pt from that stray entry there is nothing on record to prove that the payment refers to the payment of on-money to the assessee-company through the hands of its director, Shri Jaikishan Virwani. This is mainly because, according to the Commissioner of Income-tax (Appeals), no supporting evidence are available in any of the seized materials so that it is possible to come to a legitimate conclusion that Rs. 2.85 crores related to payment of on-money. The Commissioner of Income-tax (Appeals) also found material contradictions in the statements given by Shri K. M. Viswanath at the time of search as well as in the course of cross-examination. Shri K. M. Viswanath had stated in his deposition made under section 132(4) that he himself along with his mother had sold their mines at Bellary to certain buyers from Andhra Pradesh for a sum of Rs. 23 crores and the property sold by the assessee-company were purchased from the said sale consideration relating to mines at Bellary. He had also stated that the amount was kept in bank locker and was utilised for spending for various purposes. The Commissioner of Income-tax (Appeals) found that there was no evidence to support these statements given ....
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....3,67,71,850. The Revenue is aggrieved for the reason that the Commissioner of Income-tax (Appeals) has deleted the addition of Rs. 2.85 crores. Therefore, these cross-appeals. First we will consider the appeal filed by the assessee-company. Shri V. Srinivasan, the learned chartered accountant appearing for the assesseecompany raised some preliminary objections in respect of the assessment itself. According to him the assessment order passed under section 153A is void ab initio. The reason pointed out by the learned Commissioner of Income-tax (Appeals) is that the search was conducted in the case of the assessee on the strength of a common search warrant issued not only in the name of the assessee-company but also in the name of its directors and other persons. He relied on a judgment of the hon'ble High Court of Allahabad, Lucknow Bench, in the case of CIT v. Smt. Vandana Verma [2009] 31 DTR 214, where the court has held that where warrant of authorisation has been issued in the joint names of M and V who are living together in a single premises, it is not open to the assessing authority to assess "V" in an individual capacity on the basis of the seized documents and assets. The....
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....ion made by the assessee is legitimate and sustainable in law. He argued that the amount was realised in the succeeding previous year and the same was offered for taxation in the succeeding assessment year. Therefore, in the circumstances of the case, the learned chartered accountant argued that there is no reason to reject the legitimate claim made by the assessee-company. Shri Jason P. Boaz, the learned Commissioner of Income-tax on the other hand contended that the contentions of the bad debts advanced by the assessee-company is only a technical argument. He explained that the assessee has not pursued any serious legal proceedings against the buyers of the property to account them for the payment. He explained that the registration of the immovable property was made in utmost good faith. The consideration was paid partly in cash and partly by cheque. Out of the cheques, certain cheques were honoured by the bank. When the balance amount was not honoured by the bank and the payment has become due, the sale contract itself becomes voidable because the fundamental terms of the contract have been vitiated. Therefore, the assessee-company had every right to apply to a competent aut....
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....rned Commissioner of Income-tax regarding the non-committal of the assessee-company in pursuing the legal remedies available before it for the recovery of the amount. Therefore, in these circumstances, we do not find that the debt has become bad debt. It was only a case of delayed payment. Therefore, we find that the judgment of the hon'ble Supreme Court in the case of T. R. F. Ltd. [2010] 323 ITR 397 does not apply to the facts of the present case. In short, we find that the Commissioner of Income-tax (Appeals) has rightly confirmed the disallowance of Rs. 3,66,71,850. The appeal filed by the assessee-company is, therefore, liable to be dismissed both on law and facts. Next we will consider the cross-appeal filed by the Revenue. As already stated, the only grievance of the Revenue is that the Commissioner of Income-tax (Appeals) has erred in deleting on-money addition of Rs. 2.85 crores made by the assessing authority. We heard both sides in detail on this issue. The Commissioner of Income-tax (Appeals) has considered this issue in a very detailed manner in his appellate order. The basis for the allegation of payment of on-money, according to the Revenue, is the sta....
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....ri K. M. Viswanath that he had gone to the residence of Shri Jaikishan Virwani and had made the payment of Rs. 2.85 crores in cash as on-money for the purchase of the property. Even that initial statement, in fact, is not definitive. Doubt still lingers on whether he intended to state that the amount was paid as on-money or the amount was paid as advance, which was ultimately forming part of the declared consideration. In addition to the above ambiguity in his first statement itself, Shri K. M. Viswanath has changed his stand later on. Subsequently, he stated that the entire transaction was negotiated and arranged through agents and he never had an occasion to discuss the matters relating to the purchase price and payment of the purchase consideration with Shri Jaikishan Virwani or any other director. Thereby he has stated that he had no occasion to make any payment to them by way of on-money. He has categorically stated in his subsequent statement that he had met Shri Jaikishan Virwani just three or four days before the registration of the document. A perusal of the conduct and the statements given by Shri K. M. Viswanath will show that the statements and admissions made by ....