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2016 (3) TMI 20
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....3 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal, the Department has challenged the deletion of addition of Rs. 2 crores, again on the basis of alleged retraction of statement. 4. I.T.A. No. 3240 pertains to yet another assessee Ramprastha Promoters & Developers Pvt. Ltd. in the Ramprastha group of companies. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal for Assessment Year 2010-11, the Department is agitating the deletion of Rs. 14 crores based on alleged retraction of statement by the Chairman of the Group. Another dispute in this appeal is regarding the deletion of addition of Rs. 7,31,89,263/- on account of pro rate notional interest on interest free advances given to associated concerns. 5. I.T.A. 3241 pertains to Assessment Year 2009-10 and the assessee is Ramprastha Promoters & Developers Pvt. Ltd. This appeal has been preferred against the order dated 20.2.2013 passed by the Ld. CIT(A)-XXXIII, New Delhi. The issues in dispute in this appeal are deletion of addition of Rs. 55 crores (added u/s 40A (3) of the Income Tax Act, 1961 and deletion of Rs. 5,10,38764/- being notional int....
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....tising & Marketing (P) Ltd. 2007-08 4,71,56,625 (-do-) -do- 3. Ramprastha Builder (P) Ltd. 2007-08 2,00,320 -do- -do- 4. Kamla Vallabh Developers (P) Ltd. 2007-08 2,00,000 -do- -do- 5. Corporate Exim Pvt. Ltd. 2008-09 1,74,90,400 As per page 2 & 3 of the statement -do- 6. Ramprastha SARE Land Holding Co. Pvt. Ltd. 2008-09 27,94,000 -do- -do- 7. Ramprastha Greens Pvt. Ltd. 2008-09 2,76,000 -do- -do- 8. SA Propcon Pvt. Ltd. 2008-09 15,000 -do- -do- 9. Ramprastha Builders Pvt. Ltd. 2009-10 4,00,00,000 Unexplained investment in stock i.e. work in progress 10. Mahamaya General Finance Co. Pvt. Ltd. 2009-10 1,00,00,000 Unaccounted receipts 11. Ramprastha Builders Pvt. Ltd. 2010-11 12,00,00,000 Unexplained investment in stock i.e. work in progress 12. Ramprastha Greens Pvt. Ltd. 2010-11 2,00,00,000 Unexplained investment in stock i.e. work in progress 13. Ramprastha Promoters & Developers Pvt. Ltd. 2010-11 14,00,00,000 Unexplained investment in stock i.e. work in progress 14. Ch. Balwant Singh Yadav....
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....mount payable in September, 2009 amounting to Rs. 2 crore will be paid by 30th September, 2009. The remaining tax on the additional income surrendered of Rs. 52 crore, will be paid on due dates as per law and as committed earlier. Q3 More you anything else to say? A3 No thanks. I have read above over had (sic.) over above said statement and found it correctly recorded. I have given this statement without any fear, threat, pressure or coercion." 6.3 During post search investigations, when the assessees were asked to explain the entries appearing in various seized documents, the AR of the assessee vide his letters dated 30.10.2009, inter alia, submitted as under:- "Without prejudice to the above, it is further submitted that there is a total surrender of Rs. 52 crores in various entities in terms of statement of Shri Balwant Singh u/s 132(4) of the Act at the time of search and the surrender was made by the group without pinpointing any documents seized by the search party and the same was in the totality of the facts and circumstances of the case as conveyed to Shri Balwant Singh during the course of search and therefore, even though, the conte....
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....o say that the surrender was made without pinpointing any documents." Since in the returns of income filed, all the three assessees did not declare the surrendered amount as per the statement of Shri Balwant Singh, show cause notices were issued to the three assessees and it was pointed out that that in the return filed by it in the additional income as surrendered during the course of search u/s 132(4) of the Act, had not been declared. 7. All the three assessees filed various objections against recording of statement and the surrender made by the Shri Balwant Singh. The main objections were that the statement of Shri Balwant Singh recorded u/s 132(4) of the Act was not voluntary recorded statement as it was recorded under coercion, threat and compulsion and he was compelled to sign the said statement as being voluntary. Another objection was that Shri Balwant Singh had made the surrender on behalf of 10 persons (which were different entities) whereas one person could not make surrender on behalf of the other and fasten the latter with the liability. The three assessees also objected by submitting that these types of statements were usually prepared in all search actions by ....
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.... was also of the view that the Assessing Officer did not take any action even after the statement was, in effect, retracted. The Ld. CIT (A) also held that the surrender was on mistaken facts because as per the statement of Shri Balwant Singh, cash payments for acquiring land were debited in the books of account whereas as per records, Ramprastha group of companies had made payments only through cheques to Dharam Raj Construction and Infrastructure (P) Ltd. who in turn has made cash payments to the sellers of land. The Ld. CIT (A), in the result, proceeded to hold that additions based on retracted statement alone and that too based on mistaken facts could not be sustained. Hence, the appeals of the three assessees viz. Ramprastha Builders Pvt. Ltd., Ramprastha Greens Pvt. Ltd. and Ramprastha Promoters & Builders (P) Ltd. for Assessment Year 2010-11 were allowed by the Ld. CIT (A) through a somewhat similarly worded order on a similar set of facts. 8. Now, the Department is before us in appeal and is contesting the deletions made by the Ld. CIT (A). Ld. D.R. submitted that a statement recorded on oath is presumed to be carrying force of truth. The statement recorded on oath canno....
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....ude the matter. The Ld. DR submitted that for any retraction to be successful in the eyes of law, the maker of the statement has to show as to how the statement recorded earlier does not state the true facts or that there was coercion, undue influence or threat while recording his earlier statement. The Ld. DR further submitted that the courts have accorded importance to the statement recorded u/s 132(4) by observing that surrender made in the course of search by way of a statement u/s 132(4) has got evidentiary value and it could not be used to sidetrack the attention of the department from making deeper investigation in the matter. The Ld. DR submitted that in the case of Rabindra D. Trivedi vs. CIT 2008 215 CTR 313 (Raj.), the Hon'ble Rajasthan High Court upheld the addition of Rs. 3 lacs representing discrepancies in the stock admitted by the assessee in the statement u/s 132 (4) by holding that during the search the assessee had accepted the discrepancies and had made disclosure by way of calculated attempt to sidetrack the attention of the search party and, therefore, sidetrack the investigations of the discrepancies. But on a later date, the assessee did not disclose the adm....
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....he Board of Directors of these companies and, therefore, he was fully competent to make a declaration of additional income in the hands of assessee companies. The Ld. DR also submitted that although there is no concept of on-spot assessment at the time of search but the surrender of additional income was made by Sh. Balwant Singh after proper thought and after he was confronted with the various books of accounts/documents seized during the course of search. Therefore, it cannot be said that the disclosure was at the spur of the moment and that no thinking had gone into it before making disclosure of additional income. 11. In response, the Ld. AR submitted that it is on the basis of seized documents that Sh. Balwant Singh was made to believe that there were huge discrepancies and that he had no option but to surrender the income. On this basis, Mr. Balwant Singh made the surrender of the sum of Rs. 52 crores. Post search, on verification of facts and seized documents, the assessees realized that there is no discrepancy and all the transactions stated in the seized documents were recorded in the books of accounts and hence while filing the returns, income was computed on the basis....
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....zed documents. The Ld. AR also submitted that the AO has referred to the statements dated 17.9.2009 to support his case. However, this statement is in the continuation of the statement dated 31.7.2009 and is a simply reiteration. The Ld. AR submitted that the assessees can compute the correct income only after getting seized documents and verification thereof with the books of accounts. He further submitted that the AO has referred to letters dated 30.10.2009 whereby it has been categorically stated without prejudice to the above. The use of these words clearly shows that the surrender is without prejudice to the explanation regarding the seized documents. The Ld. AR submitted that it has also been stated that surrender was made without pinpointing any error in the seized document. The Ld. AR further pointed out that thereafter during the course of assessment proceedings a detailed explanation vide letter dated 05.12.2011 was filed. However, the AO instead of dealing with the issue tried to meet the objections raised by referring to case laws. 11.2 The Ld. AR also submitted that the surrender was made on the basis of seized documents as Shri Balwant Singh was made to believe tha....
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....ad given interest free loans/advances to group companies. Ld. DR further submitted that the assessee company had failed to discharge the onus to prove that the fund borrowed, on which the interest was paid, was used for the purpose of business. He submitted that the assessee had failed to bring any evidence on record to prove that the advances given to sister concerns were given in furtherance of the business objects of the assessee and, therefore, the Assessing Officer had rightly held that the interest relatable to the amount advanced to its sister concern could not be allowed as a deduction u/s 36(1)(iii) of the Act. Learned Departmental Representative submitted that the Ld. CIT (A) has wrongly deleted the disallowance and prayed that the order of the Assessing Officer should be restored. 12.1 In response the Ld. AR submitted that as per section 36(1)(iii) of the Act any amount of interest paid in respect of capital borrowed for the purpose of business and profession has to be allowed as deduction in computing income u/s 28 of the Act. He submitted that the AO ignored the explanations given by the assessee and without any justification considered the transactions as not for t....
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....s of section 40A (3) cannot be invoked in a mere technical manner. He submitted that if the contention of the assessing officer taken as correct an artificial income will be assessed. He further submitted that otherwise also, the Honorable Supreme Court in Attar Singh Gurumukh Singh vs ITO 191 ITR 667 has clearly observed that the purpose of section 40A(3) is to disallow bogus cash payment for increasing the expenditure for artificially reducing assessable income only but not to disallow genuine expenditure though incurred in cash due to business exigencies. He further submitted that the latest judgment of various High Court and Tribunals after considering the judgment of Attar Singh Gurumukh Singh vs ITO after considering the genuineness of the payment, identity of the payee and compelling and mitigating circumstances has taken a view favorable to the tax payer .He submitted that in the present case, the assessee is engaged in the business of real estate, it purchased agricultural land in village surrounding Gurgoan vide registered sale deed and the purchaser has admitted before the sub registrar having received the entire consideration. This clearly proves that the payment and th....
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....cise. We also find force in the arguments of the Ld. AR that mere one person not authorized by other persons (here assessee companies and individual) being independent and separate assessees cannot fasten any liability on others. Shri Balwant Singh cannot be treated as spokesperson for others who have not adopted his statement in writing. Further, knowledge and capacity of a single person who is not having full and complete knowledge of financial affairs of everybody connected to search operations, needs to be appreciated. 15. The Hon'ble High Court of Kerala in the case of Commissioner of Income Tax, 'Kerala-11 vs. A.P. Parukutty Mooppillamma and Others, 149 ITR 131 held that, "An assessment is to be made, not solely based on the admission of a person and this view of law which he takes. A proper order of assessment should be made on the basis of all facts and circumstances and on a correct appreciation of the relevant provision of the law. " It is trite law that income tax needs to be assessed on income actually earned and not on something which is notional and hypothetical and based on a global surrender like the present one. 16. The Mumbai bench of ITAT in the case of....
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....d to have a focus on the collection of evidence, search and seizure and survey operations, which leads to an information as regards the undisclosed income. The Board viewed that confessions recorded during the course of search and seizure and survey operations did not serve any useful purpose. The Board also insisted that while recording statements during search and seizure and survey operations, no attempt should be mode to obtain confession statement as to the undisclosed income. It was also stated that any action on the contrary, shall be viewed seriously and the said circular has to be applied to all pending assessments. Thus the Board insisted the Assessing Officer to rely upon the evidences/materials gathered during search operation and that the assessment could not rest simply on the confession statements made. Thus going by the said decision of the Supreme Court, as well as the law declared in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another) that it is always open to a person who made the admission, to show that the statement to offer income is incorrect and had material to substantiate so, we hold that the Tribun....
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.... company, namely, M/s. D.M W.P. Ltd., we are of the opinion that the AO could, not have made the aforesaid addition solely on the basis of the statement made on behalf of the respondent-assessee during the course of survey." 16.3 It is trite law that a statement has its value in the eyes of law if it is corroborated by connected evidence. As far as the statements being recorded under the Act are concerned, there are two situations i.e. sometimes statement is recorded u/s 133A of the Act at the time of survey. The courts have clearly held that there is no evidentiary value in respect of a statement u/s 133A unless it is supported by some material. Second situation is that the Act has empowered the Revenue to record the statement during the course of search and statement is recorded u/s.132 (4) of the Act. However, merely on the basis of a statement recorded u/s 132(4), no addition can be made until some corroborative evidence was found in support of such admission. As far as the general principle is concerned, an admission can be said to be an extremely important piece of evidence, if made as per the prescribed law. But such an admission cannot be said to be conclusive. It is ope....
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....ny expenditure or deduction debited or claimed in the books of account which is not genuine. Under the law the assessee is supposed to state the correct income. The correct income will mean income which is not less than the income earned and not more than the income actually earned. Thus the assessee has offered the correct income in its return of income and AO has not been able to point out or give any instance of any error or discrepancy in the income offered. Having considered the entire facts and arguments, we find that the neither the Investigation Wing nor the Assessing Officer has correlated any seized document with the surrender of unaccounted stock or work-inprogress. At the time of putting the question leading to surrender of income some seized document was referred, namely, A-2 to A-27. Exact incriminating nature of document was never confronted either by Investigation Wing or the Assessing Officer to Sh. Balwant Singh. The only seized document discussed by the Assessing Officer is signed blank letter heads of contractors in support of unaccounted work-in-progress. These blank letter heads in no way prove unaccounted payment to the contractors, specially under the circum....
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....ing in his order that the advances given to the various sister concerns was for business purposes. The Revenue has not been able to contradict this finding before us also. The Hon'ble Apex Court has held in the case of SA Builders Ltd vs. CIT (supra), "We agree with the view taken by the Delhi High Court in CIT v. Dalmia Cement (Bharat) Ltd. [20021254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial exped....
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....ture admissible to be deducted from out of the income, which may include the expenditure on purchase and the like, and the sub-section provides that if any such expenditure is incurred after specified date, in a specified manner, then 20 per cent of such expenditure shall not be allowed as a deduction. In the present case the assessee has not claimed any deduction of any expenditure of Rs. 3,88,000 or Rs. 7,35,000 and therefore, there is no question of not allowing any part of that expenditure, as deduction. Thus, the finding arrived at in this regard, by the learned CIT (A), and the learned Tribunal cannot be said to be wrong. Question No.2 is accordingly answered in favour of the assessee and against the Revenue." 17.2 Similarly, it is seen that the judgement of the Hon'ble Punjab & Haryana High Court in the case of CIT vs Alpha Toyo Ltd. (2008) 174 Taxmann 427 (P & H) also fully supports the view taken. For ready-reference, we reproduce paras 6 & 7 of the said judgement:- "We have heard learned counsel for the revenue. The Tribunal has found as a fact that the annual reports for the assessment year 1989-90 of the assessee clearly shows the outstanding loans to the three parti....