TaxTMI 
TaxTMI 
2016 (11) TMI 961
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....ated order. 2. ITA No.4075/Mum/2011( by the asseseee) Grounds of appeal taken by the assessee are as under : "1. On the facts and in the e circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 6,76,23,000/- made by the AO as unexplained investment u/s.69 on the basis of noting made in page 4 and 5 of the loose papers file Annexure A found and impounded at the premises of the appellant. 2. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in upholding the addition of Rs. 11,97,000/- made by the Assessing Officer as unexplained expenditure u/s.69C of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in upholding the disallowance of depreciation of Rs. 22,99,096/- made by the Assessing Officer in the absence of supporting vouchers. 4. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals) erred in holding disallowance of interest of Rs. 22,75,714/- paid to Corporation Bank. 5. On the facts an....
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....eedings on 11^th /12th May, 2007 made on the premises of the assessee, the survey team found that some loose papers numbered as 4 & 5 file-A which were confronted to the assessee during survey. In the said loose papers the total amount of Rs. 6,88,22,000/- was shown as expenditure in cash and the assessee was requested to identify the various heads under which the above amounts have been spent during the recording of statement u/s 131 of the Act on 12.05.2007. The assessee replied to question no.11 that he was not able to identify the heads under which the said amounts were spent and therefore he voluntarily offered this amount for taxation of Rs. 6,88,22,000/- as additional income over and above the regular income for the assessment year 2006-07. Just 3 days after another statement of Mr Kashan Ghaswala, Partner of the assessee was recorded on 15.05.2007 u/s 131 of the Act in which he stated while answering query no 2 that sources of Rs. 6,88,22,000/- were from the Corporation Bank and the details of pay orders issued by the bank were also given. Subsequently, the assessee vide letter dated 4.6.2007 which was filed on 7.6.2007 retracted surrender/disclosure made vide statement rec....
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....bmitted that the said cash received from the parties who provided accommodation entries after commission of one per cent was used in the construction of hotel. The details of parties in whose names the pay orders were issued by the assessee were also given by the AO at page no.5 of the Assessment Order. Lastly, the assessee submitted that since the source of expenditure of Rs. 6,88,22,000/- was fully explained out of the cash taken/returned by the five suppliers/contractors to whom the bank directly issued pay orders and thus sources of expenditure were fully explained and no additional income of Rs. 6,88,22,000/- could be offered in the hands of the assessee for the assessment year 2007-08. During the assessment proceedings, the Assessing officer deputed an Inspector for verification of five parties from whom the assessee claimed to have received the cash back, however, the Inspector from the Department reported in most of the cases these parties were not found as the premises were used for residences and only in the case of M/s Priyanka Corporation, it was confirmed by the watchman that the letters in the name of M/s Priyanka Corporation were received off and on....
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....e appellant, the Assessing Officer's enquiries have also not been able to prove the existence of the parties at the addresses provided by the appellant, nor has the appellant been able to provide the bills furnished by the contractor's/workmen from whom he claims to have ultimately got the work done, nor has the appellant even produced any of such contractors/workmen. Further the amounts mentioned at pages 4 & 5 of the impounded papers (Rs. 6.88 crore) referred to by the Assessing Officer do not match with the amount of pay orders issued by Corporation Bank (Rs.7.85 crore). Even if the explanation of the appellant that the amounts mentioned are amounts disbursed by Corporation Bank less the discounting fee, (of 1%), the amount would work out to Rs. 7.78 crore. Further page 5 mentions on the left hand side, besides 'Corp Cash' entries also entries containing the details as 'CR (JK) 5,000,000.00', 'From Sanjay 1,000,000.00' and 'From Sanjay 300,000.00', which have not been explained, and taking into account these facts the figure from Corp Cash would only remain at Rs. 6.08 crore which is still lesser than Rs. 7.85 crore. The appellant's ex....
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.... the Corporation Bank. The ld. AR further argued that the AO could not establish that there was any other source of money available with the assessee apart from the loan from the Corporation bank which was used for the purposes of renovation and the modus operandi was that the assessee was to get pay orders issued in the name of material suppliers and contractors who actually were not carrying out the work and accordingly arranged the pay orders in their names who after deducting 1% commission returned cash to the assessee. Ultimately, the assessee paid the said money to the material suppliers and contractors who actually undertook and performed the renovation work of the hotel. The ld. AR submitted that the findings of the AO for unaccounted money in the assessment order were nothing but guess work and imagination of the assessing officer without any corroborating evidences and materials. The ld. AR drew our attention to the page 13 of the assessment order in which the AO has noted that "Apart from this the sheer quantum of Rs. 6.88 crores indicates that the outflow must have been utilized for building assets (construction/renovation/loans). Thus, there was no do....
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....,76,23,000/- made u/s 69 of the Act as unexplained investments deserved to be deleted on the same analogy as the similar additions made on the basis of loose paper no 4 and 5 were deleted by CIT(A) and upheld by the Tribunal specially in view of the fact that the renovation and repairs were duly explained with sources out of the loan taken from the Corporation Bank, and praying that the addition of Rs. 6,76,23,000/- be deleted. Similarly, an amount of Rs. 11,97,000/- was incurred as expenditure on renovation of hotel and on the same analogy the said addition be deleted in view of the facts and arguments considered by the Mumbai Bench of the Tribunal in the case of Shri Parvez Mohammed Hussain Ghaswala(supra). 8. On the other hand, the ld. DR heavily relied on the orders of authorities below and submitted that the assessee during the course of survey while recording statement one of the partners of assessee-firm Shri Kashan Ghaswala, admitted that the expenditure incurred on the basis of loose papers No.4 and 5 impounded during the course of survey were incurred in cash and was unable to identify to heads under which they were incurred and as a result of which he volu....
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....ets no 4 and 5 containing some cash receipts and payments of Rs. 6,88,22,000/-. We further find that in the second statement recorded on 15.05.2007, Mr Kashan Ghaswala stated in reply to query no 2 that the said expenditure was incurred out of bank loan taken from Corporation Bank. The surrender/disclosure was retracted by the assessee vide letter dated 4.6.2007 filed on 7.6.2007. At the time of the survey, the assessee could not explain the source of Rs. 6,88,22,000/- and various heads under which the expenditures were incurred and debited. However, in the retraction letter, the assessee submitted that the expenditure was incurred on the hotel renovation as recorded at page 4 and 5 of the impounded documents during the course of survey and the sources of the said expenditure were out of loan taken by the assessee from the Corporation Bank. The assessee also submitted that one of the condition by the bank for sanctioning the loan was that all the pay orders would be issued only in the name of the third parties i.e suppliers and contractors and no money would be disbursed in the name of the assessee directly. The ld. AR further submitted that due to reluctance of the contracto....
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....and surmises and there was no material on record which proved that the renovation work was met out of money other than the borrowed from the Bank, nor could the AO or ld.CIT(A) record any findings that the assessee had any other source of income apart from its regular income of the assessee. In our opinion, the assessee has explained the source of expenditure and the nature of expenditure incurred and therefore the Additions made by the AO u/s 69 of the Act as unexplained investments of Rs. 6,76,23,000/- and u/s 69C of the Act unexplained expenditure of Rs. 11,97,000/- could not be sustained in the present facts and circumstances. Moreover, the co-ordinate bench of the Tribunal in the case of Shri Parvez Mohammed Hussain Ghaswala (supra) has dismissed the departmental appeal for the assessment year 2007-08 by upholding the order of the ld.CIT(A) wherein the CIT(A) deleted the addition of Rs. 2,62,40,000/- made on the basis of page 4 and 5 impounded during the course of survey from the assessee and which were also the basis for making additions in the hands of the assessee which are subject matter of the current appeal before us. The additions in the hands of Mr.Parvez Ghaswala, the....
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.... is not "Pervez Sir" as mentioned in the papers found from the premises of Alliance Hotel. Assessee also objected to the action of the Assessing Officer in making addition under section 69 of the Act. For invoking provisions of section 69 of the Act assessee should be the owner of any money, bullion, jewellery or any other valuable articles. In this case of assessee he was not found to be the owner of any money, bullion, jewellery or any other valuable articles in previous year relevant to assessment year. In such a situation invoking of provisions of section 69 was not justified. The entries made on pages 4 & 5 of the impounded papers were not made contemporaneously. The right hand top corner of page 5 shows that the entries were made on 19.12.2006 (after the assessee retired from the firm), the transactions as such relate to 11.11.2006, 11.12.2006, 16.12.2006 and 19.12.2006 showing that the entries were made a few days after the transactions were completed. In this background the stand of the assessee has been that the amounts alleged to have been paid to "Parvez Sir" (as per the impounded papers) also show that such amounts were disbursed by him to the various heads of labourers....
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....s required to be made. In view of our discussion coupled with the fact that provisions of section 69A has no application on the act of assessee's case therefore, the addition of Rs. 40,00,000/- made by Assessing Officer under section 69A of the Act was rightly directed to be deleted. Accordingly, both the additions of Rs. 2,62,40,000/- plus Rs. 40,00,000/-, aggregating to Rs. 3,02,40,000/-, were rightly directed to be deleted. This reasoned findings of the CIT(A) need not any interference from our side. We uphold the same. In the result, appeal of the Revenue is dismissed." 10. From the above facts and discussions, we find that the coordinate bench of the Tribunal has upheld the deletion of addition by ld. CIT(A) which was made by the AO on the basis of loose papers page no 4 and 5 impounded during the course survey action to the tune of Rs. 2,62,40,000/- + Rs. 40,00,000/- totaling to Rs. 3,02,40,000 holding that the same were made on the basis of surmises and conjuncture and rightly deleted by the ld.CIT(A). Following the same analogy and the ratio laid down in the said decision and also the facts that no corroborating materials were found by the department to make these ....
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....aquo; The assessee in the course of the survey operation u/ s 133A admitted the unaccounted expenditure of Rs. 688.20 lacs. Later he retracted his statement and to explain the papers he took resort of dual explanation. On the one hand he explained that the source of the funds was loan from the bank. On the other hand, he contended that the expenditure mentioned in the sheet is the expenditure for the renovation of the hotel. He indeed capitalized the same, without the bills supporting that. In the FY 2006-07, as per the submissions of the assessee, he capitalized Rs. 4,59,81,928/- of expenses. » The assessee failed to produce the supporting evidences of the capitalization of the expenses. » Assessee failed to produce the parties, through whom he claimed to withdraw cash, for verification. In the course of the verification by the department, it was found that none of the parties exist at the addresses mentioned by the assessee. » Thus both the contentions of the assessee do not stand the test of the evidence. » Loan mentioned by the assessee was sanctioned only in Nov 2006 and the expenditure on the renovation of the assess....
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....l building which was being used for the purposes of business of the assessee of running the hotel and benefit of depreciation could not be denied to the assessee and prayed that the claim of the assessee be allowed. 15. The ld. DR, heavily relied on the orders of authorities below and prayed that the order of ld.CIT(A) be upheld on this issue. 16. After considering the rival submissions and on perusal of material including the orders of authorities below, we find that the assessee has already proved before the authorities below that the assessee has incurred expenditure for the purpose of construction and renovation of the hotel for creating some more space/rooms for residential purposes and the source was out of money borrowed from Corporation Bank. We have already decided in grounds no.1 and 2 above that the source of renovation and repairs were out of funds arranged from the Corporation Bank by the assessee firm. Accordingly we are of the considered opinion that money spent by the assessee towards construction and renovation in the block of assets was eligible for depreciation as the same was being used for the purpose of business of the assessee as the fact of expenditure....
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.... cash transactions of receipts and payments. 23. During the course of appeal proceedings, the ld. CIT(A) partly allowed the appeal of the assessee by deleting the addition to the extent of Rs. 1,57,85,000/- and sustained the remaining amount of Rs. 44,81,000/- by observing and holding as under : "5.3 The assessment order, submissions made for the appellant and materials on record have been considered. The computer was found' in the premises of and under the control of the appellant and thus the presumption is that the entries found recorded in the files on the computer belong to the appellant which presumption has not been rebutted. The appellant has merely denied the same which is not sufficient to rebut the presumption. The additions made are thus upheld. However with regard to addition with regard to file RELlABLE_EXPS.xls, it has been stated in appeal order dated 31/03/2011 in the appellant's appeal for AY 2006-07 in appeal No. CIT(A)-23/ACIT 12(1)/IT- 357//08/09 that "It is seen that entries on the sheets referred to by the AO relate to Upadastra account, Stamp House (Botawala), Reliable Investments & Developers and Maria Developers. In view of the....
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....at alter date. Vide affidavit dated 11.6.2007" We find merit in the contentions of the assessee that since the assessee has already offered and added a sum of Rs. 50 lakhs suo mottu at the time of filing of return and the benefit of unexplained transactions Rs. 44,81,000/- should be allowed to be adjusted against the said voluntary disclosure which was specifically made to cover any expenses , notings or cash transactions as per the affidavit as in respect of suo motto disclosure no other materials was found. We are, therefore, not in agreement with the findings of the ld. CIT(A) in upholding the addition. In our opinion, the same should be allowed to be covered and adjusted against the surrender of Rs. 50 lakhs at the time of filing of return of income. Accordingly, we set aside the order of the ld.CIT(A) and direct the AO to delete the addition of Rs. 44,81,000/- made u/s 69C of the Act. 3. ITA No.4739/Mum/2011( by the revenue) 26. Grounds of appeal taken by the revenue are as under: "1 On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.l,57,85,000/- made u/s. 69C on the reasons that the photocopy of pr....
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....on file RELlABLE_EXPS.xls pertain to Botawala Building and Upadastras Bldg, Maria Developers, on the same reasoning as in appeal for AY 2006-07, addition in respect of expenses relating to file RELlABLE_EXPS.xls are deleted. 29. We have heard the rival submissions and perused the material placed before us. We find that the ld.CIT(A) has recorded the finding of the facts while deleting the said addition and by holding that the entries in the said papers/sheets did not belong to the assessee or sister concern or its partners. We are in agreement with conclusion drawn by the ld.CIT(A) as nothing to controvert the finding of ld.CIT(A) has been brought before us by the ld. DR. Therefore we dismiss the appeal of the revenue by upholding the order of CIT(A). 30. Other grounds raised in this appeal is general in nature, therefore, dismissed. 4. ITA No.5498/Mum/2011( by the assessee) 31. Grounds of appeal taken by the assessee are as under : "1. On the facts and in the circumstances of the case, the learned Commissioner 0f Income tax (Appeals) erred in confirming the disallowance of depreciation of Rs. 59 37,593/- made by the Assessing Officer. " 2. On the fact....