TaxTMI 
TaxTMI 
2017 (7) TMI 37
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....Y. 2005-06. There were search and seizure operations u/s. 132 of the Income Tax Act [Act] on 09-10-2007. During the course of search and seizure operations, certain documents have been found and seized pertaining to assessee's real estate activity and investments in various properties and companies etc. In the course of search proceedings itself, the Investigation Unit has identified certain transactions which assessee admitted and further that he was not maintaining the books of account and he would explain his investments in various real estate transactions as he has borrowals as well as other sources including sale/advance sale receipts. However, vide statement dt. 09-10-2007, assessee admitted a sum of Rs. 5 Crores as his undisclosed income pertaining to the earlier five years. Subsequently, the Investigation Unit has also examined the documents and correlated to an extent the information furnished/seized and vide the statement dt. 20-11-2007, they have quantified the sum of Rs. 6,41,33,000/- as excess investment over the known sources and Rs. 2,99,00,000/- as capital gains during the period. To this quantification, assessee however, accepted subject to verification of the d....
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....mostly based on the cash flow statement furnished by assessee. Many of the additions in the impugned years was stated to be not verifiable/for not furnishing full information by assessee. Even though cash flow statement seems to have been prepared on the basis of the various documents impounded during the course of survey, AO has not discussed any of those issues in the impugned assessment orders, but made various additions. 4. Assessee contested before the CIT(A) not only on the issue of various additions made by the AO to the incomes returned in response to the notices u/s. 153A, but also contested nonconsideration of the revised computations filed, wherein assessee has disclosed reduced incomes. These are part of the grounds raised before the CIT(A). AO objected to entertaining the appeals for AYs. 2006-07 to 2008-09, as assessee has not paid the admitted tax u/s. 249(4) of the Act. Ld.CIT(A) issued a show cause notice to assessee and also obtained a report from the AO on the submissions made by assessee. These were extracted as part of the order, but without giving a finding whether the revised computation is accepted or not or whether assessee's appeals were covered by the ....
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....led Receipts and Payments A/c, statement of affairs and other information along with return of income. It was also submitted that AR has appeared from time to time and filed information called for and AO has erred in making addition of Rs. 75,94,804/- without considering the explanation offered by assessee. It was also contended that the opening cash balance cannot be income of the year and relied upon various case law particularly of Co-ordinate Bench of Hyderabad in the case of R. Ram Reddy and Smt. R. Neelima Reddy and Smt. R. Manoharamma in ITA No. 103 to 105/Hyd/2004. Ld.CIT(A) accepted assessee's contentions and deleted the same by stating as under: "4.5. I have considered the submissions made by the appellant, gone through the order of the AO and the decisions relied on by the appellant. The facts of the case have already been brought on record as narrated above. It is the case of the appellant that for the year under consideration there was an opening capital of Rs. 75,94,804/-, consisting of individual cash balance of Rs. 14,82,059/- and cash balance of HUF of Rs. 61,12,745/-. This is the outcome of brought forward balances of the previous year. In fact it is the ....
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.... The findings of the AO on this are as under: "1. Unexplained investment/deficit cash balance: The assessee has invested an amount of Rs. 7,99,000 in De-lee diamond Pvt Ltd in which he is the Managing Director. Further the assessee has also incurred various expenditures like payments to brokers, advances to purchase of lands etc. All the documentary evidences were found and seized in the annexure A/PMR/Res/1 to 13. The bundle-wise of the payments made by the assessee in the relevant assessment year is as under: A/PMR/Res/3 Rs. 14,75,000 A/PMR/Res/6 Rs. 3,00,100 A/PMR/Res/8 Rs. 7,00,000 A/PMR/Res/9 Rs. 8,50,000 A/PMR/Res/11 Rs. 20,00,200 Rs. 53,25,300 The above said quantification was done by the assessee himself and it was submitted on 05.10.2009. The page wise of analysis of each and every seized material also done during the course of assessment proceedings and it is found that the above said quantification was true and correct. Accordingly the total investment in the form of payment to brokers, and landlords was Rs. 53,25,300. It was duly considered in the receipt and payment acco....
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....ade by the appellant, gone through the order of the AO. While making adjudication at para 6.2, it was observed that prima facie those were double additions. Now it has to be observed here that these are the triple additions. The queries raised by the AO regarding payments made to brokers and advance to purchase of lands considered as undisclosed investment in the form of deficit cash balance by the AO were answered by the appellant, which were completely ignored by the AO. In addition, it may be noted here that there was no finding by the AO that in the action under section 132(1), material was found pointing out to the bogus nature of investments made in lands. In the circumstances, I am of the opinion that the additions made for all the assessment years need to be set aside and the AO is directed accordingly. ......... 8.2. I have considered the submissions made by the appellant, gone through the order of the AO. This is the addition connected with cash credits under the provisions of section 68 of the IT Act, 1961. These were reflected in books of account maintained. Once these were found recorded in books and no finding in search adverse to cash credits were f....
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.... this appeal of revenue is dismissed. AYs. 2006-07, 2007-08 & 2008-09: 8. The facts in these three assessment years are similar and issues raised are also similar. The assessments were completed u/s. 153A for AY. 2006-07 and 2007-08 and under Section 143(3) for AY. 2008-09. In all the three years, assessee has disclosed higher incomes on which taxes were not paid and subsequently the revised computations were filed reducing the incomes, as stated earlier. Since the AO based computation on the basis of the returned incomes, assessee not only contested the additions made in the assessment, but also that revised computation was not considered by the AO. As briefly stated earlier, Ld.CIT(A) neither adjudicated the issue u/s 249(4) nor adjudicated the issue whether the revised computation is acceptable or not? He deleted almost all the additions made by AO on the reason that there is no incriminating material. The order of the CIT(A) is more or less similar and on same lines to the order extracted above in AY. 2004-05. His main thrust for deleting the amounts was that there is no incriminating material in the search and seizure proceedings. Revenue has raised the grounds mainly on....
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....Madhya Pradesh High Court); iii. CIT Vs. Smt. G.A. Samantakamani [259 ITR 215] (Madras High Court); iv. Bharat Kumar Sekhasaria Vs. DCIT [82 ITD 512] (Mum Trib.); v. Kushmallal Hiralal Vs. ACIT [57 ITD 531] (Ahmedabad Trib.); 8.3. It was his contention that CIT(A) should not have entertained the appeals and therefore, the order of the AO is required to be restored. 8.4. With reference to the contentions of assessee that the returns filed in response to Section 153A are invalid, it was submitted that the return of income filed in response to notice issued u/s. 153A subsequent to time limit provided therein cannot be considered as invalid return of income as there is no statutory requirement as in the case of return required to be filed u/s. 139(1). In respect of return to be filed u/s. 153A, the AO has power to extend the date of filing the return or the return filed beyond the time limit provided in the notice shall be considered for the purpose of completing assessment, if it is filed before the due date prescribed for completion of assessment u/s. 153A. However, such return filed beyond the time limit provided in notice u/s.153A or extended by the....
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....r making the additions and relied on the following cases: i. E.N. Gopa Kumar Vs. CIT [75 Taxmann.com 215] (Kerala High Court); ii. CIT Vs. St. Francis Clay Décor Tiles [70 Taxmann.com 234] (Kerala High Court); 9.1. It was submitted that the department has laid hands on certain incriminating documents containing the details of unrecorded transactions of assessee in the real estate business and assessments were completed based on such material and also on the basis of the statement recorded u/s. 132(4). 9.2. It was further submitted that Ld.CIT(A) has wrongly stated that additions were made on the basis of statement given by assessee u/s. 132(4) which was retracted later, therefore, the additions cannot be sustained. It was submitted that the observation of the CIT(A) is not correct in as much as the statements were recorded on the basis of supporting documentary evidence found during the course of search and the statement was made by assessee without any pressure or coercion. It was further submitted that in the preliminary statement, assessee admitted an amount of Rs. 5 Crores. Subsequently on examination of the documents, a higher amount in the secon....
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....ubmitted that the assessments u/s. 153A were based on invalid returns of income, hence the same was ab initio-void. It was submitted that assessee has not filed returns of income in response to notice u/s. 153A. Assessee received notices u/s. 276CC on 12-03-2009 to file the returns of income otherwise non-filing will lead to prosecution. Assessee filed returns on 18- 08-2009 therefore, these returns which are filed in a hurry, were beyond the time limit given in the notices given u/s. 153A and are accordingly invalid returns of income. It was submitted that for AY. 2006-07, assessee filed originally return of income u/s. 139(1) on 31-10-2006 admitting income of Rs. 4,89,088/- and the taxes have been paid, the same computation was reiterated in the revised computation filed. For AY. 2007-08, assessee filed computation of income declaring loss of Rs. 3,35,01,000/- and no tax could be payable. For AY. 2008-09, assessee has revised the computation to NIL but paid the tax of Rs. 10,04,650/- which was claimed as 'refund'. It was the contention that since the returns were filed beyond the time limit given, the returns are to be considered as invalid returns. Therefore, subsequent proceedi....
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....aw. ii. Bombay High Court in the case of CIT Vs. Prithvi Brokers & Shareholders Pvt. Ltd., [349 ITR 336] - the court held that the orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claims as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corporation Limited. This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal. iii. M/s. Vivera IT Applications Consulting (P) Ltd., Vs. Income Tax Officer, Ward-3(2), Hydreabad; 129/Hyd/2014 - the Hon'ble jurisdictional ITAT held that only issue arising for consideration before us in the present appeal is whether CIT(A) was justified in not entertaining assessee's additional ground claiming exemption u/s. 10A. As can be seen, CIT(A) has dismissed assessee's additional ground only for the reason that the claim of deduction u/s. 10A was not raised by assessee by filing a revised return relying upon a decision of Goetz India Ltd., and Hindustan Housing Development Corpn (s....
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.... was not fully convinced about the discrepancy. He has still reserved his right to explain and reconcile the accounts and accepted for any addition such reconciliation. However, he has fully reconciled the cash flow, which was not considered by the AO. 10.4. It was further submitted that AO accepted part of cash flow statement but did not accept the full and made additions on the basis of the Receipts and Payments Statement only. Ld. Counsel relied on the following decisions for the proposition that no addition can be made, when there is no incriminating material and all the documents were part of cash flow statements. a. Order of Hyderabad ITAT in the case of Maa Highways in ITA No. 1832-1841/H/2014; b. Order of Hyderabad ITAT in the case of B. Vijaya Kumar in ITA No. 235-236/H/2010; c. Order of Mumbai ITAT in the case of All Cargo Logistics Limited cited in 23 taxmann.com 103; d. Order of Hyderabad ITAT in the case of Midwest Gold Limited in ITA No. 1062/H/2014; e. Order of Hyderabad ITAT in the case of AMR India Limited in ITA No. 1828-1831; f. Order of Hyderabad ITAT in the case of Sri Nilaya Projects in ITA No. 80/H/2013....
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....ons" for AYs 2007-08 & 2008-09 amounting to Rs. 80,00,000/- and Rs. 88,00,000/- respectively. 10.1 The Assessee is in the business of real estate. He is doing multiple projects. He is following project completion method. As some of the lands are involved in litigation, profits will not arise unless the projects complete and litigation resolves. In some of the cases the litigation will continue for longer time. The AO wrongly calculated profits separately for some other transaction on hypothetical basis. The AO himself calculated the cost of land and profitability without understanding the real estate business. Some of the sales/ advances are only receipts not income. The assessee, in some cases, acts as agent for the owners of the land. All these transactions are reflected in the bank statements and cash flows. The AO cannot disturb the method of accounting followed by the assessee and arrive at profitability. The same thing explained very clearly in the following cases: a. The Hon'ble jurisdictional High Court in the case of CIT Vs. Pact Securities & Financial Services Ltd., [61 taxmann.com 192] (Andhra Pradesh and Telangana); b. The Hon'ble Supr....
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..../Statement recorded, the AO has not verified the evidences available and documents submitted. For this purpose we rely on the following case laws. Non application of own mind in deciding a quasi-judicial order is bad-in-law. 12.2 In this regard, reliance is placed on the following case laws: (a) The Hon'ble Supreme Court of India in the case of CIT vs Lovely Exports (p) Ltd [2008] 216 CTR 195 (SC) held that If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of the assessee company. (b) The Hon'ble Supreme Court of India in the case of CIT vs Orissa Corpn (p) Ltd [1986] 25 taxman 80F (SC) held that In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at....
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....d CIT (A) erred in not giving specific directions to the AO for consideration of revised computation. Following items were not deleted by the AO in the consequential order. Since, Ld. CIT(A) did not give any specific directions for deletions of the same:- i. Cash deficit amounting to Rs. 21,39,235/-, Rs. 5,73,50,481, and Rs. 1,13,90,068 for the assessment year 2006-07,2007-08 and 2008-09 respectively. ii. Profit on sale of properties amounting to Rs. 25,00,000/-, Rs. 42,24,550/ - and Rs. 28,70,000/- for the AY 2006-07, 2007-08 and 2008- 09 respectively. The Ld CIT (A) appreciated the fact that the assessee is in the real estate business and after considering the explanations and submissions of the assessee Revised computation was prepared by considering all the transactions and all the profits/ loss on sale of land during the particular years was also accounted. The Ld CIT (A) also opined that all transactions are recorded and separate profit on each items cannot be taken. The Ld CIT(A) rightfully deleted the additions made by the AO vide para no.9.2 and 12.2. The Ld CIT (A) already allowed and mentioned that profit on sale of land already reflected and there w....
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.... was quantified in the course of search. However, the statements so recorded from assessee are qualified statements. Assessee himself has stated that he has received advances/obtained loans for various investments, which he could not reconcile on the date of search or subsequently and wanted time to analyse the issues. That he has taken time to analyse the seized documents can be gazed from the fact that he went on seeking time in filing returns of income from the time he received notices u/s. 153A till he filed the returns. The returns for the three impugned assessment years were filed after due verification of the documents and bank account pass books/statements and he has quantified the difference between investments and sources as deficit cash and accordingly filed the returns. It is also fact that he did not pay self-assessment tax pertaining to AYs. 2006-07 and 2007-08 and partly paid to an extent of Rs. 10,04,650 for the AY. 2008-09. Even the so called statement of retraction filed does not contain any evidence on what basis it was withdrawn. As pointed out by the Ld.CIT-DR, it is almost after two years from the time the statements u/s 132(4) were given. Ld.CIT-DR has rel....
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....ame, without considering the factual aspect of the additions made or the contentions stated by assessee. The Hon'ble Jurisdictional High Court in the case of 1. Gopal Lal Bhadruka, 2. Avadesh Bhadruka, 3. Ahura Holdings Vs. DCIT [346 ITR 106] (AP) has held as under: "Sections 153A, 153B and 153C were inserted in the Income-tax Act, 1961 with effect from June 1, 2003, in Chapter XIV. These sections are applicable to search operations or requisitions made after May 31, 2003. Simultaneously, section 158BI was inserted in Chapter XIV-B. By virtue of section 158BI of the Act, the various provisions of Chapter XIV-B of the Act are made inapplicable to proceedings under sections 153A and 153C of the Act. The effect of this is that while the provisions of Chapter XIV-B of the Act limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation, no such limitation is found in so far as sections 153A and 153C of the Act are concerned. Therefore, it follows that for the purposes of sections 153A and 153C of the Act, the Assessing Officer can take into consideration material other than what was available during the search and seizure oper....
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....ng as on the date of search for conclusion would get abated. In this case, assessee has filed returns up to AY 2006-07 and there seems to be no scrutiny assessments. Question of abatement of pending proceedings does not arise. Consequent to the search as per the provisions, re-assessment has to be done quantifying the undisclosed income. Accordingly, we are of the opinion that the order of the CIT(A) deleting various additions on the reason that there is no incriminating material cannot be upheld. 14. At the same time, it is also to be noted that the tax has to be collected in accordance with law and any legal claim which is not properly made by inadvertence or ignorance should not be denied merely because assessee did not make a claim in the return of income. The Income Tax Act is meant for collection of correct tax and it cannot be treated as a lis between two parties but a tax adjustment as explained by the Hon'ble Madras High Court in the case of CIT Vs. Indian Express (Madurai) Pvt. Ltd., [140 ITR 705] at page No. 724. At any rate, appellate authority is entitled to admit any additional claim. However, the CIT(A) failed to consider assessee's contentions with reference ....