TaxTMI 
TaxTMI 
2017 (11) TMI 1309
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....ving address at I-C, Viceroy Court, Thakur Village, Kandivali (East), Mumbai 400 101, solemnly affirms on oath as under:- I, That a copy of an order dated 29th March 2012 passed by the Commissioner of Income Tax (Appeals)-35, Mumbai for income tax assessment year 2008-09 was affixed on the outside of my premises at 4/153, Yoganand Society, Lokmanya Tilak Road, Vazira Naka, Borivali {W}, Mumbai 400 092 on 3rd May 2012, at which time I was not present in the said premises. I was incidentally residing at I-C, Viceroy Court, Thakur Village, Kandivali (E), Mumbai 400 101. 1. When the news of this affixture was learnt from my neighbours, the affixed order was collected by my employee within a span of two days or so. 2 That an appeal against this order was required to be filed to the Income Tax Appellate Tribunal Mumbai within sixty days of receipt of the order and the said appeal is now being filed in the month of May 2013 along with an application seeking condonation of delay in filing the appeal In support of this application, this affidavit is being made explaining the circumstances in which the filing of the appeal was delayed. 3. That I a....
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....t the above developments caused severe disruptions to both my business career and private life and instead of having lucrative businesses in my hand that I dreamt about, I got saddled with liabilities and commitments which I find difficult to discharge. was also left with no reliable source of income to sustain my family and meet the liabilities. 8. To add to my misfortunes, due to my exposure to some family business entities and also more particularly due to complaints filed by my enemies in my adverse business times, 1 got entangled into needless litigations with government agencies more particularly the Enforcement Directorate and the Crime Branch. The litigations, prompted by my enemies, acquired disproportionate publicity from the media more particularly when my brother, an ex-Deputy Collector, Shri Nitesh Thakur's name came to be mentioned in the cases where corruption with government agencies was alleged by the Anti Corruption Bureau. Because of these litigations, I have to constantly run pillar to post in New Delhi & Mumbai right from 2011 onwards in order to attend these legal proceedings even at the short notices. 9. That because of....
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....n its behalf. In fact, these advances form the very subject matter of the amounts decreed by Bombay High Court in the consent decree to be returned by me to this company. In the assessment order, the Assessing Officer has also treated the entire advances totalling Rs. 3 1,67,50,000 received by ne from S.D. Corporation to me towards my fees as my taxable income without allowing any deduction for expenditure contractually required to be borne by me My properties have been attached by the Income Tax Department in recovery proceedings in respect of the tax demand for this year. This has added to my woes and mental distress. 11. That for the financial year ended 3 1-3-2009, i.e. Assessment Year 2009-10, 1 state that the income tax department had passed an order on 28-12-2011 assessing me at an income of Rs. 99,89,57,370 and raised a demand of Rs. 48,87,5 1,210. In this assessment order, Assessing Officer has treated the advances totalling Rs. 4 1,00,00,000 received by me from Shapoorji Pallonji and Co as my taxable income disregarding the fact that these amounts do not belong to me but have been given to me by the company to acquire properties on its behalf. I....
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....it was sometime in December 2012 that I had to attend to appear before the Income Tax Commissioner {Appeals}- 35, Mumbai in connection with my appeal filed against the assessment order passed for Assessment Year 2009-10. Since I had lost my professional association with my previous chartered accountants (who maintained my file and papers), I began to attend the appeal proceedings personally and alone without any papers on hand. At that time, I learnt that as per income tax department's records, I had not filed any appeal to the Tribunal against the Commissioner {Appeals}'s order for the prior year i.e. Assessment Year 2008-09. Immediately thereafter, I searched my residence for papers and I was shocked to find in one of my cupboards the original copy of the Commissioner {Appeals}'s order for Assessment Year carrying an endorsement that the same had been affixed outside my premises at my premises at 4/153. Yoganand Society, Lokmanya Tilak Road, Vazira Naka, Borivali {W}, Mumbai 40092 on 3rd May 2012. To my anxiety, when I did not find any appeal papers filed against this order, I inquired with my family members and found that none of them recollect instructing m....
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....der by affixture as per Rules. I also made it clear in this application that these copies were required urgently by me in order to file my application to the Tribunal for condonation of delay in filing my appeal and that I intend to annex the copies to the application in order to refer to the same at the time of hearing of the appeal by the Tribunal. 18. That I made repeated visits to the office of the Commissioner {Appeals} -35 for this purpose. But, I was informed that that the service of the order by affixture was done by the office of the Assessing Officer in this regard and that the concerned file contains the copies of the records sought by me had been sent to the Office of the Concerned Commissioner/ Chief Commissioner in charge. 19. At as on date, I have not received the copies of the documents sought by me from the office of Commissioner {Appeals}-35 . I have therefore decided to file my belated appeal to the Tribunal without any further delay along with letter of condonation of delay based on the facts and circumstances averred in this affidavit. 20. That despite all my adverse circumstances, I have been duly compliant in attending to all income....
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....s, therefore, he was not aware of the order passed by the CIT(A). Therefore, he was not able to file the appeal in time. The assessee, immediately on coming to know of the CIT(A)'s order took measures to file the appeal before the Tribunal. Therefore, there was a delay in filing the appeal. The Ld.Senior Counsel further stated that there was tremendous pressure on the assessee because of his personal problems narrated in the affidavit, therefore, the delay in filing the appeal before the Tribunal may be condoned and admit the appeal for hearing. In this regard, the assessee has relied upon a plethora of case laws, including the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs MST Kattiji & Ors 167 ITR 471 (SC). 6. On the other hand, the Ld.DR strongly opposed the condonation of delay in filing the appeal. The Ld.DR further submitted that there is an inordinate delay of 312 days in filing the appeal which has not been explained by the assessee with necessary evidence. No doubt, the Courts are empowered to condone the delay in filing the appeal. But it is incumbent upon the assessee to explain the reasons for delay in filing the appeal beyond doubt. ....
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.... when technicality and substantial justice are pitted against each other, substantial justice should prevail over the technicalities. We further observe that the assessee cannot get any undue benefit by not filing the appeal within the time which is evident from the fact that there is a huge demand on the assessee out of various additions made by the AO. If the assessee could not file the appeal and prosecute the appeal before appellate authorities assessee was himself put under tremendous trouble. Therefore, we do not see any purported reasons for not filing the appeal in time. We further observe that the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs MST Kattiji & Ors (supra) laid down six principles while condoning the delay in filing the appeal. The principles laid down by the Hon'ble Apex Court are as follows:_ "(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would he decided on merits aft....
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....6(2)(vi) of the Income Tax Act to the Appellant's income in respect of advances received from Shapoorji Pallonji Company Ltd. The learned Commissioner {Appeals} also erred in sustaining the findings of the learned Assessing Officer that this sum of Rs. 43,50,00,000 was alternatively taxable either as unexplained cash credits u\s 68 or as business gains u\s 28 (iv). 2. On facts and circumstances of the case and in law, the learned Commissioner {Appeals} erred in confirming the addition of Rs. 3 1,67,50,000 made by the learned Assessing Officer as income from other sources in respect of consultancy charges received from S.D. Corporation Ltd. The learned Commissioner {Appeals} here failed to appreciate that - [a] the income from the consultancy work was chargeable to tax under the head 'profits & gains from business or profession' and not 'income from other sources' [b] based on the nature of the Appellant's work and the method of accounting employed by him, the consultancy charges of Rs. 31,67,50,000 were not chargeable to tax in the year under appeal and [c] without prejudice to the above, the expenses inc....
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....o verify the nature and source of credit, the AO called upon the assessee to furnish necessary details of creditors along with confirmation letter from parties, bank statement and nature of payment. In response to notices, the assessee has filed a letter on 15-11-2010 and filed various details called for by the AO. The AO further observed that the assessee has received a sum of Rs. 43,50,00,000 from M/s Shapoorji Pallonji & Co Ltd and a sum of Ras.31,67,50,000/- from M/s S.D. Corporation P. Ltd (SDCL). The assessee further stated that he had received advances from M/s Shapoorji Pallonji & Co Ltd for procurement of land for which necessary agreement had been entered into with the company. The AO also issued notice u/s 13(6) to M/s Shapoorji Pallonji & Co Ltd and SDCL calling for various details. In response to notice, M/s Shapoorji Pallonji & Co Ltd (SPCL) vide their letter dated 10-11-2010 submitted that it has paid advance to Shri Nilesh J Thakur towards acquisition of land with clear and marketable title in and around Alibaug and other areas of Raigad District. SPCL stated that it has entered into an agreement with the assessee with terms and conditions for procurement of land fo....
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....om the facts gathered during the course of assessment is that there is huge influx of funds in assessee's accounts by cheque from those two concerns, viz. SPCL & SDCL. The assessee has shown amount received from above concerns as sundry creditors in his unaudited balance-sheet. The opening capital shown by the assessee is not substantiated by way of documentary evidence, a third party confirmation. The assessee is not able to produce any written agreement copies to state that he has been appointed as agent for SPCL for procurement of land. Therefore, he opined that the facts gathered during the course of assessment proceedings coupled with statement and other evidence filed by the assessee proves the fact that the assessee is not able to prove that he is engaged in the activity of construction of buildings and other activities. 13. The AO further observed that the assessee shown to have received Rs. 43.50 crores from SPCL during the financial year 2007-08. The said amount had been credited in the bank account maintained in the name of M/s PR Enterprises, a proprietory concern of the assessee. The same was shown as sundry creditors in the balance-sheet of the assessee. Though the....
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.... been done. No action for recovery has been taken by SPCL. No land has been purchased by the assessee in the name of SPCL as has been confirmed by the assessee. No interest is charged on the amount received by the assessee. Moreover, the assessee has purchased various assets out of the money received from SPCL in his individual name and also kept money in FD. All these factors raise serious doubt about the genuineness of the transactions. Therefore, he opined that the assessee has received money from SPCL without any consideration in the nature referred to in section 56(2)(vi) of the Act. Accordingly, made addition of Rs. 43.50 crores u/s 56(2)(vi) of the Act. 15. Alternatively, the AO observed that without prejudice to above addition, even for sake of discussion, if it is presumed that the money received by the assessee represents loan, it still raises serious doubts about the genuineness of the transaction and section 68 of the Act comes into operation. Though the assessee has filed necessary evidence to prove the identity of the party, the genuineness of transaction is under serious doubt because of the conduct of the assessee as well as the creditor. Therefore, in case in ap....
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....r wherein the creditor has categorically stated before the AO that it has paid money for the purpose of procurement of land. The AO ignoring the substance of the transactions, went on to discuss the issue on hypothetical manner to say that the amount received from the company is in the nature of money received without consideration. 17. The CIT(A), after considering the relevant submissions of the assessee and taking into account the documents available on record, confirmed the findings of the AO to bring the impugned amount to tax u/s 56(2)(vi). The CIT(A) further observed that the reply of SPCL is also not plausible as nobody will advance such a huge sum without a written agreement. Finance against purchase of land is given to a person, who is owner of the land and not to the third party. The assessee is a novice man and has no experience in property related matters. As discussed, whereas SPCL is a corporate giant having its own machinery of legal, technical, marketing / financial departments and huge experience in dealing in property and construction activities, then a question of advancing a huge sum to the man like assessee raises serious doubts. The money received by the a....
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.... to the assessee for procurement of land. Though the assessee initially stated that he is associated with SPCL in its project, subsequently he has filed an affidavit stating that money received from SPCL is on account of advance for procurement of land. The Ld.Senior Counsel further submitted that the CIT(A) as well as the AO were factually incorrect in coming to the conclusion that SPCL has not taken any action on the assessee. But the fact remains that the creditor has filed suit before Bombay High Court on 06-09-2011 for recovery of the properties & FD acquired from the monies advanced to the assessee. The Bombay High Court has passed a decree on 19-10-2011 decreeing the suit on the basis of consent terms filed and on the terms and conditions stated in the court. In this regard, he filed a copy of consent decree passed by the Hon'ble Bombay High Court in Suit No.2576 of 2011. The Ld.Senior Counsel further submitted that the creditor SPCL has also filed an execution petition before Raigad Court for execution of consent decree passed by the Hon'ble Bombay High Court. All these facts go to show that the creditor had initiated recovery proceedings on money paid to the assessee. Ther....
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....ular amount is a business convenience or money received without any consideration. In this case, the assessee has purchased huge properties in his personal name and also kept fixed deposits in various banks out of money received from SPCL. Though the creditor has filed case before the Bombay High Court for recovery of dues, it is only after the assessment was completed by the AO, that too, in the nature of compromise petition. Therefore, no credence can be given to the decree passed by the Bombay High Court to decide the issue. The Ld.DR further submitted that Anti Corruption authorities including ACB and ED framed the assessee along with his brother, Shri Nitesh J Thakur and in the charge sheet filed by the authorities also contains the name of the assessee. The Ld.DR further submitted that though there is no apparent conclusion drawn in the charge sheet, whether money belong to Shri Nitesh J Thakkar or the assessee, the case filed by the authorities are pending for adjudication. The Ld.DR further submitted that though the assessee claims to have received advance from SPCL for procurement of land, right from beginning, not furnished any copy of agreement entered into with the cred....
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....s for the company in Raigad District. The assessee further submitted that he had entered into an agreement with SPCL as per the letter dated 16-07-2007 wherein terms and conditions of procurement of land has been specific and accepted by both the parties. According to the assessee, he has agreed to procure land for the company for which the company has paid advances. The assessee further contended that the AO has sought for various informations from the company for which the company has filed necessary details and also stated that it had paid advances to the assessee for procurement of land. The AO has recorded statement from the representative of the company u/s 131, wherein the company has categorically stated that it has paid advance for procurement of land. The company has filed copies of agreement along with board resolution copies for approving the payment of advance to the assessee for procurement of land. The assessee further contended that whether they have acted upon the terms and conditions of the agreement or not is not relevant to decide the particular receipt is taxable in the hands of the assessee or not. To tax a particular receipt as his income, it should be in the....
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.... Shri Nilesh J. Thakur with the money belonging to Shri Nitesh J. Thakur)" Considering the fact that here is no apparent connection is established between amount received by the assessee and charge sheet filed by the ACB/ED in assessee brother case, we are of the view that, there is no need to go into the controversy of chargesheet filed by the ACB/ED, in the name of assessee's brother and discuss the issue whether the impugned amount received by the assessee from SPCL is taxable in the hands of the assessee and if so, under what provisions of the Act. Moreover, it is not the case of the AO, as well as the CIT(A) that there is a nexus between the charge sheet filed by the ACB and ED in the case of assessee's brother to the amount received by the assessee. The lower authorities have not taken into account the charge sheet filed by the agencies at the time of deciding the issue. Therefore, without going into the additional details filed by the DR, we proceed to decide the issue before us in the light of the facts brought out by the Ld.AO as well as the CIT(A) in their orders. 25. The AOs case is that the assessee has received money without any consideration which is taxable und....
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.... nature of income as referred under the said provisions. A receipt cannot be taxed merely on conjecture or surmises. The AO needs to bring on record evidence which proves that the particular receipt is taxable under the provisions of the Act. No doubt, the assessee has received advances from the company which has been treated as sundry creditors in its balancesheet for the relevant financial year. The assessee, right from day one has stated that he has received money from the company for procurement of land. This fact has been further supported by the statement of the company which also categorically stated that it has paid amount to the assessee for procurement of land in its project in Raigad district. The company also filed various details including agreement entered into with the assessee, copies of board resolutions, bank statements and its financial statement to prove that the same has been treated as advance in its books of account. Therefore, we are of the considered opinion that merely because the assessee has not acted upon as per the terms and conditions of the agreement with SPCL and also the fact that the assessee has purchased properties in his personal name cannot be....
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.... Bombay High Court, both the parties agreed to settle the dispute as per which the assessee has agreed to refund the money along with interest which is evident from the order of decree passed by Hon'ble Bombay High Court. We further notice that SPCL has filed an execution petition before Raigad Court for recovery of dues from the assessee. All these facts go to prove an undisputed fact that SPCL has paid advance to the assessee for procurement of land on certain terms and conditions. Therefore, we are of the considered view that the AO was erred in bringing to tax the impugned advance received from SPCL under the provisions of section 56(2)(vi). The CIT(A), without appreciating the fact has reiterated the findings of the AO to confirm the addition made by the AO. Therefore, we set aside the order passed by the CIT(A) and direct the AO to delete the addition made towards advance received from SPCL u/s 56|(2)(vi) of the Act. 28. Coming to the alternative findings of the AO in his assessment order. The AO has discussed the issue under the provisions of section 68 and 28(iv) of the Act. The AO observed that without prejudice to the finding under the provisions of section 56(2)(vi), ....
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.... purp os e of advanc e s . The admitted stand of Nilesh Thakur in appellate proceeding for AY 2009-10 is duly supported by the record, which is further supported by the letter of the assessee company dated 6/07/2007 and subsequent acceptance vide letter dated 19/07/2007 given by Shri Thakur to the assessee company. In para 13.6 (page-45) of the impugned order the id. Commissioner of Income Tax (Appeals) has duly examined the availability of own funds as on 31/03/2007 the availability of own funds as on 31/03/2007 and 31/03/2008, wherein the net profit of the year was Rs. 126,19,01,513/- which includes current years overdraft maintained with the bank and the assessee has not made specific borrowing for advancing the funds to Shri Nilesh Thakur. The Id. Commissioner of income Tax (Appeals) has already placed reliance from the decision from Hon'ble Apex Court in Munjal Sales Corporation, CIT vs Reliance Utilities, and Power Ltd. from Hon'ble Bombay High Court and the decision of the Tribunal in Reliance Industries Ltd. vs DCIT (ITA No.3082/Mum/2006) order 28/05/2012. In para 13.8 (page-48), there is a finding that the own funds of the assessee were to the tune of Rs. 500.81 cr....
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....enses incurred in relation to execution of consultancy work has been treated as WIP. In this regard, he furnished copies of agreement alongwith financial statements to prove the expenditure incurred in relation to his business. Similarly, SDCL has filed details sought by the AO in response to notice issued u/s 133(6) and also confirmed tht they have paid consultancy charges to Shri Nilesh Thakur, prop of M/s PRS Developers in connection with their project. SDCL further confirmed that they have deducted TDS on consultancy charges paid to the assessee. In this regard, the assessee furnished necessary copies of agreements and other details to prove work done by the assessee and also total payment made to the assessee. 31. The AO, after considering the submissions of the assessee observed that the assessee has failed to establish any business connections with SDCL so as to claim receipt of consultancy charges. In the absence of any corroborate evidence that he has done any work relating to any project of SDCL, the claim of the assessee that he has received consultancy charges from SDCL cannot be accepted. The AO further observed that the assessee being a novice man does not have req....
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....to between the company and himself wherein the terms of agreement has been clearly specified. The assessee further submitted that the nature of work to be carried out for SDCL has been detailed under clauses 4(a) to 4(m) of the agreement. The developer has agreed to pay total consultancy charges of Rs. 95 crores. The mode of payment and period of payment has been specified in the agreement. Accordingly, the company has paid a sum of Rs. 31,67,50,000 during the financial year relevant to AY 2008-09 and the same has been treated as advance received from the company pending execution of work. The assessee further submitted that he had incurred various expenditure in connection with the project work which has been debited in the P&L Account. Since the work is not fully completed, the expenditure incurred during the year has been shown as WIP. Therefore, the AO was incorrect in treating the amount received from SDCL as income of the assessee under the head 'Income from other sources'. 33. The CIT(A), after considering relevant submissions of the assessee and also taking into account the findings of the AO in the assessment order, came to the conclusion that the AO was right in making....
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....recognised in the relevant financial year, only a reasonable net profit from gross receipts may be estimated. The assessee has filed all the relevant materials to prove providing of consultancy services and also filed necessary evidences to prove expenditure incurred. Therefore, once the receipt is treated as income, corresponding expenditure should be allowed. The AO, without appreciating the fact has treated total amount received from the company as 'Income from other sources' which is incorrect. 35. On the other hand, the Ld.DR strongly supported the order of the CIT(A). The Ld.DR further submitted that the conduct of the assessee goes to prove an undisputed fact that the money has been received for some unknown purposes, but not for the purpose of providing consultancy services. Though both the parties agreed that they have entered into a consultancy agreement for providing consultancy services for the project undertaken by SDCL, the assessee has filed to prove providing of any type of consultancy services. The assessee being a novice man, does not have any required experience in the field of consultancy services to a mega project has stated that he has provided consultancy ....
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....ious details from SDCL for which the company has filed all necessary details and also confirmed to have paid amount to the assessee. The company has deducted tax at source @10% on total amount paid. All these facts have been filed before the AO. The AO has conveniently ignored evidences filed to make addition purely on surmises and conjectures without bringing any cogent evidence to prove that the impugned amount is received for other than consultancy services. 37. The AO has made addition on the ground that the assessee has failed to prove providing any consultancy services to SDCL. The AO further observed that the assessee being a novice man does not have required experience and, therefore, cannot provide consultancy service to a corporate giant like SDCL. According to the AO, the assessee has failed to provide any evidence to prove existence of consultancy agreement between the company and the assessee and also failed to prove incurring of any expenditure towards consultancy services. Therefore, he opined that the amount received from SDCL is not for the purposes of providing consultancy services but for some unknown reasons. We do not find any merit in the findings of the AO....
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....aims to have incurred various expenditure in relation to work executed for SDCL which has been filed before the AO. The assessee further contended that because he is following project completion method for recognising revenue from the work, whatever expenditure incurred for the project has been shown under WIP, pending recognition of revenue. The assessee further contended that during the financial year relevant to AY 2008-09, he has incurred various expenditure which have been debited to P&L account in PRS Developers & PRS Enterprises. The AO has conveniently ignored evidences filed by the assessee to make addition towards gross receipts received from SDCL. 39. No doubt, the assessee has proved beyond doubt the impugned receipt from SDCL is for the purposes of providing consultancy services. The assessee also filed certain evidences to prove various expenditures incurred in relation to consultancy services. Income cannot be earned without incurring any expenditure. Income and expenditure are two paces of a single coin. To earn income necessary expenditure has to be incurred for providing consultancy services. The assessee has filed his financial statements as per which various ....
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....t ranging from 10% to 25% is reasonable. Therefore, taking into account overall facts and circumstances of the case, we deem it appropriate to direct the AO to estimate net profit of 20% on total gross receipts received from SDCL. We, ordered accordingly. 40. The next issue that came up for our consideration is addition towards opening capital of Rs. 5 lakhs. The AO made addition of Rs. 5 lakhs u/s 68, on the ground that the assessee has failed to prove opening capital with necessary evidence. The AO further observed that the assessee has filed return of income for the first time for the assessment year 2008-09 and hence, failed to prove opening balance with any evidences. It is the contention of the assessee that he was earning since the age of 18, however, he did not file return of income because his income for the previous years was below the taxable limits. We do not find any merit in the arguments of the assessee for the reason that the assessee has filed to file any evidence to prove the existence of opening capital of Rs. 5 lakhs. The assessee has filed return of income for the first time, therefore, carry forward of opening balance of Rs. 5 lakhs is not justified with an....