TaxTMI 
TaxTMI 
2017 (12) TMI 1708
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....ated order for the sake of convenience and brevity. 2. The factual matrix of the case, in brief, are that the assessee is engaged in the business of real estate development and promotion and dealing in sale and purchase of land. A return of income declaring an income of Rs. 4,72,53,660/- was filed on 30.11.2006. The assessment was completed u/s 143(3) of the Act at total income of Rs. 33,06,83,820/- making addition of Rs. 14,03,92,386/- on account of land development expenses Rs. 10,50,00,000/- on account of payment made to M/s. Sino Credit and Leasing Ltd. (hereinafter referred to as 'SCLL') and Rs. 2,00,00,000/- as income from other sources. On further appeal, CIT(A) vide order dated 31.12.2010 deleted all the additions so made by ld. AO except an addition of 2,30,11,467/- (included in figure of 14,03,92,386/-) and as such revenue has preferred appeal with respect to deletion of additions amounting to Rs. 11,45,18,528/- on account of land development expenses, Rs. 2,00,00,000/- on account discrepancy in books of accounts and Rs. 10,50,00,000/- with respect to amount paid to M/s SCLL. Thus the grounds so raised by revenue in ITA No. 1327/Del/2011 read as under: "1. On ....
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....ramed u/s 143(3) of the Act dated 31.12.2008 i.e. making additions of Rs. 14,03,92,386/- on account of land development expenses, Rs. 10,50,00,000/- on account of payment made to SCLL and Rs. 2,00,00,000/- as income from other sources and the learned CIT (A) vide order dated 17.11.2014 deleted all the additions and as such, revenue has preferred appeal in ITA No. 754/Del/2015 wherein following grounds have been raised: "1. On the facts and in the circumstance of the case and in law, the CIT (A) has erred in deleting the addition of Rs. 10.50 crores made by the AO on account of disallowance of sum paid to M/s.Sino Credits & Leasing Ltd. 2. On the facts and in the circumstance of the case and in law, the CIT(A) has erred Ld.CIT(A) erred in ignoring the corroborating/incriminating evidences found during the course of survey proceedings u/s 133A carried out twice on 20.11.2007 and 05.01.2009 at the business premises of Sh.S.K.Gupta in the form of ledger account and other relevant incriminating documents/evidences. 3. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in ignoring the corroborating/incriminating evidences collecte....
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....in ignoring that the assessee produced fabricated evidences in the form of MOU and arbitration award to give legal colour to the alleged transactions to escape from taxation. 10. On the facts and in the circumstance of the case and in law, the order of the Ld. CIT (A) is bad in law in as much as the same is rendered in violation of the categorical finding of the Income Tax Settlement Commission (ITSC) vide their order u/s 245 D(4) dated 22.6.2012 that Sh.S.K.Gupta is an entry operator and the companies managed and controlled by him are doing no real business but providing accommodation entry. 11. On the facts and in the circumstance of the case and in law, the CIT(A has erred in law and on facts in deleting the disallowance of Rs. 14,03,92,386/- made against the claim for land development expenses. 12. The order of the CIT(A) is erroneous and is not tenable on facts and in law. 13. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 5. During the course of hearing, the learned AR for the assessee has also raised a legal plea under Rule 27 of ITAT Rules, 1....
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.... for assessment year 2005-06 under section 40(a)(ia) of the Act and assessee had added back expenditure debited in the profit and loss account of Rs. 11,45,18,528/- on the ground that though the company deducted TDS but the same was not deposited before the due date for assessment year 2005-06. 7.2 During the assessment proceedings for assessment year 2006- 07, the learned Assessing Officer has noted that expenditure of Rs. 11,45,18,528/- pertained to 24 parties and in order to verify the identity and genuineness of these 24 parties and the work stated to have been done by them, he made enquiries by issuing summons under section 131 of the Act to them, deputing inspector to conduct inquiries at the premises of the above parties and issuing notices u/s 133(6) of the Act to certain banks asking for the account opening forms and statement of account of the aforesaid parties. The learned Assessing Officer has also noted that summons were also issued to some persons who were found related to one or more of the 24 parties on the basis of account opening forms received from the banks. The result of the enquiries was incorporated in the show cause notice issued to the assessee company o....
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....ers. The expenditure has not been allowed u/s 37 of the Act, on the inherent finding that it was not genuinely incurred as "land development expenditure" and was not paid to the contractors, who according to him, did not do any work and were mere name lenders. In the face of this finding the question for consideration of the applicability u/s 40(a)(ia), which applies only where the expenditure is otherwise allowable, by the AO does not arise. Because if the AO gives a finding that the expenditure itself is not allowable as deduction u/s 37, it is not an expenditure being amount payable to a contractor and, therefore, in the first place, tax is not deductible thereon under Chapter XVII-B. This being the position emerging from the order of the AO itself, the logical result would be that the deductibility of the expenditure in the AY 2006-07 cannot be considered because the deductibility was shifted from the AY 2005-06 to AY 2006-07 only because of the compulsion of Section 40(a)(ia). If Section 40(a)(ia) does not survive on the basis of the finding of the AO the matter has necessarily to be relegated for its consideration in the AY 2005-06. This is so because the expen....
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....its development which includes clearing and leveling of land, its soiling, fencing, lighting sanitation, boundary etc to make it in salable conditions and to attract high profile buyers. At last assessee company alongwith its associate companies/partners dealt with Parsvanath Developers Ltd. For development of this land. Copies of Bills / Invoices alongwith confirmation from suppliers in respect of expenses incurred on development of land are enclosed." Further in para 14 it was stated as under : (Page26) "As mentioned above, Development expenses were incurred for cleaning leveling etc., or preliminary development expenses to make the land of section 53, village Wazirabad, Gurgaon into saleable conditions. Details of these expenses are enclosed herewith. Further to state that these expenses were incurred during the year but final payments were made in next year. On audit objection regarding accounting conventions which state Mercantile basis of Accounting bills were accounted for on accrual basis therefore there was delay in depositing the TDS amount and same were disallowed u/s 40(a) (ia) of 1. Tax Act of calculating Income of the Company for year." ....
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....es not relate to this year. It was noted that this plea was taken by the appellant before Assessing Officer also during the assessment proceedings but the Assessing Officer had overruled the objection by saying that the disallowance is to be made in the year when the expenditure is claimed. However, the CIT(A) on examination of the issue held that since expenditure was incurred and accounted for in the books of accounts maintained for assessment year 2005-06, its genuineness could only be considered in the assessment year 2005-06 and could not be shifted to the assessment year 2006-07 as the law on this issue has been laid down in the case of Kikabhai Premchand vs. CIT reported in 24 ITR 506 (SC) and CIT vs. S.K. Chitnavis (1932) 2 Company Cases 464 that the assessing officer can only take into consideration income, profit or gains made in that year and is not concerned with the profits or losses for another year. It was thus held that genuineness of expenditure could have been examined only in assessment year 2005-06 and not in the present assessment year 2006-07. It was held that only aspect which would be examined in the instant year whether the expenditure incurred in preceding....
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....sessee supported the order of learned CIT (A) and further argued that the said disallowance of Rs. 11, 45, 18, 528/- is beyond the jurisdiction of learned AO, as the same was never claimed as expenditure in the Profit & Loss Account for impugned assessment year 2006-07, rather the same was claimed as expenditure in AY 2005-06, for which due assessment was made by learned AO under section 143(3) of the Act, who accepted the genuineness of said expenditure after due and proper examination. Learned Counsel of Assessee Company relied on following pages of Paper Book - I: a) Profit & Loss Account for AY 2005-06, wherein, said expenditure of Rs. 11, 45, 18, 528/- was claimed as expenditure (see page 55 of PB - I). b) Computation of income for AY 2005-06, wherein, the said expenditure was added back as TDS was deducted but not deposited within due date (see page 50 of PB - I). c) Notice of AO dated 19.02.2007 during assessment proceedings for AY 2005-06, wherein, specific query was raised by AO with regards to claim of said land development expenses (see page 68 - 69 of PB - I). d) Copy of reply to AO during assessment proceedings for AY/ 2005-06, where....
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....the transactions for AY 2005-06 cannot be considered for the purposes of computation of total income for AY 2006-07. 7.12 That further, the ld CIT (A) vide order dated 31.12.2010, while giving relief to the assessee - appellant, gave directions to the revenue authorities to take appropriate action as per law for AY 2005- 06 and bring to tax the above expenditure as non genuine in AY 2005- 06, which has not been done by revenue authorities and as such, the addition needs to be deleted on this ground also. 7.13 To sum up, it was argued by learned counsel for assessee that the transaction relating to land development expense were incurred in AY 2005-06. That the expenditure were also booked in P&L Account for AY 2005-06, because of the provisions of section 40(a)(ia) of the Act, the said claim was deferred to AY 2006-07. The only jurisdiction of the AO in AY 2006-07 was to consider the allowability by confining himself to provisions of section 40(a)(ia). Instead, of doing that the AO transgressed his jurisdiction by looking into the genuineness of the expenses for the preceding assessment year. The AO could not have given a finding that the expenses for the preceding assessment ....
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....mpulsion of section 40(a) (i) and its deduction was shifted to Asstt. Year 2006-07 where it was claimed as per mandatory provision contained in proviso to section 40(a) (ia). The ground, that the expenditure cannot be disallowed in A.Yr.2006-07 because it does not relate to the year, was taken by the appellant before the Assessing Officer also during the assessment proceedings but the Assessing Officer had overruled the objection by saying that the disallowance is to be made in the year when the expenditure is claimed. Although, the issue is a bit complete because , in the year 2005-06, the expenditure was incurred but the claim was withdrawn in the computation of income on technical ground (u/s 40(a)(ia) of the I.T.Act) so there was no question of disallowing the same whereas in the near year, i.e. A.Yr 2006- 07 was expenditure is claimed and disallowed but the disallowance is challenged on the ground that the expenditure does not relate to this year. However, after going through the submissions of the assessee and the various case laws cited by him, I am of the view that since the expenditure was incurred and accounted for in the books of account maintained for ....
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....nder the head "land and development expenses" in AY 2005-06 and since out of total expenditure of 11, 51, 81, 489/-, TDS was not deposited within time though deducted with respect to expenditure of Rs. 11, 45, 18, 528/- and as such, the same was added back in computation of income for AY 2005-06, by describing it as "expense not allowable under section 40(a)(ia) of the Income Tax Act. The reason given for adding back the same in computation of income for AY 2005-06 was that even though the said expenditure was incurred and claimed in AY 2005-06 and tax was also deducted at source and though it was claimed as expenditure in P&L Account, since the TDS was not deposited with the statutory period, the expenditure so claimed was voluntarily added back in the computation of income as not allowable under section 40(a)(ia) of the Act. The tax was duly deposited on 25.10.2005 i.e. during AY 2006-07, therefore, in the computation of total income for AY 2006-07, the same was claimed as deduction by showing it as "expenditure disallowed under section 40(a)(ia) in AY 2005-06. 8.2 On going through the paper book filed by the assessee, we have seen that the amount of Rs. 11, 45, 18, 528/- was ....
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....id." 8.4 The aforesaid proviso expressly provides that where in respect of any sum, tax has been deducted in any subsequent year, such sum shall be allowed as deduction in computing the income of the previous year in which such tax has been paid. In such circumstances, the conclusion of CIT(A) to hold that since genuineness of expenditure stood examined in assessment year 2005-06 and tax was duly deducted in assessment year 2006-07, therefore, the disallowance made in the impugned order of assessment was on account of non-genuineness of expenditure was not tenable. 8.5 We also find that the learned CIT DR has though extensively relied on enquiries conducted by learned AO but has failed to controvert the factual findings recorded by learned CIT (A), and the status of directions to the revenue authorities to take appropriate action as per law for AY 2005-06 and bring to tax the above expenditure as non genuine in AY 2005-06. 8.6 In support of the above conclusion, we seek to draw support from the case of Kikabhai Premchand vs CIT (SC) reported in 24 ITR 506 wherein it was held as under: "It is well recognized that in revenue cases regard must be had to the substance....
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....nue 9. Ground 2 relates to addition of Rs. 2,00,00,000/- on account of discrepancy in the books of accounts of the assessee company. The Assessing Officer in the order of assessment has perused of profit and loss account of the assessee. It was observed that sum of Rs. 10,50,00,000/- had been debited on account of payment in terms of arbitration order which had been claimed to have been paid to SCLL. Further in the balance sheet of the assessee, it reflected a payment of Rs. 7,35,50,000/- as compensation payable. However, from the perusal of the Citi Bank account of assessee, it is noticed that Rs. 5,27,00,000/- has been actually paid to SCLL during the instant assessment year which fact had also been confirmed from Shri S.K. Gupta's SCLL account which gives complete narrations of entries amounting to Rs. 5,27,00,000/- given to PCL. Thus, the Assessing Officer was of the opinion that it reflects only a sum of Rs. 5,35,00,000/- shown as payable by the assessee to SCLL instead of Rs. 7,35,00,000/-. He therefore, observed and held that the assessee company had paid Rs. 2,00,00,000/- over and above the amount of Rs. 10,50,00,000/- debited to the profit and loss account of SCLL and s....
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....has confirmed of receiving only cheques upto Rs. 3, 27, 00, 000/- from the assessee company. That however, the correct position is that the amount of Rs. 1 crore each, no doubt was paid by the assessee company, but was paid on behalf of M/s Florenstine Estates India Ltd. and M/s Mad Entertainment Network Ltd., these payments were duly reflected in the books of assessee company and the accounts of the respective companies were duly debited as well. These being subsidiary companies their accounts were duly submitted in the course of the assessment. However, the addition was made by learned AO without providing any opportunity what so ever, and also without verifying the facts, which was duly examined and appreciated by learned CIT (A) and as such, the relief given by learned CIT (A) is just and proper. 10. We have considered the rival submissions and perused the material on record. The learned CIT(A) while deleting the addition has held as under: "6 I have considered the submissions. The facts as started in the submissions show that AO is not right in the stating that no explanation was provided for the said payment of Rs. 2 Crores. This was because the appellant was not ....
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....aised in the questionnaire dated 19.02.2008 regarding the payment of Rs. 10.5 crores to M/s Sino Credits and Leasing Ltd. Subsequently, on 24.12.2008 notice u/s 142(1) dated 23.12.2008 was given to the assessee by the Assessing Officer alongwith copy of a statement of Shri S.K Gupta, Director SCLL recorded in which Shri Gupta and reportedly stated that SCLL was involved in giving bogus entries, that the impugned transaction with Puri Construction Ltd. was not a genuine transaction, that he did not attend any arbitration proceedings and does not know the Judge who conducted such proceedings. The AO therefore required the Appellant to show cause why Rs. 10.50 crores be not disallowed. A consolidated reply to the questionnaires dated 19.12.2008 and 29.12.2008 was furnished to the Assessing Officer and, it was submitted as under: "We have further also received on 24.12.2008 your notice u/s 142(1) dated 23.12.2008 regarding the statement of Sh. S.K Gupta, Director, Sino Credits & Leasing Ltd. We do not know under what circumstances Sh. S.K. Gupta has given the attached statement. We hereby reaffirm and reiterate all of the above documentary evidences regarding this transaction.....
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....ated 20.11.2007 and 19.12.2008 of Shri S.K. Gupta and Annexure -2 seized from the premises of Shri S.K. Gupta to hold that the expenditure incurred is an accommodation entry and not an eligible business expenditure. It was held that agreements referred by the appellant though run into several pages elaborating every aspect relating to the various litigations involved with the subject land but there is no mention of any litigation between PCL and SCLL. It was observed that perusal of the balance sheet and profit & loss account of SCLL for assessment year 2006-07 does not indicate any nature of receipt corresponding to the payments that PCL has claimed to have made to SCLL. It was also held that the SCLL Is a company involved in transactions of shares and securities and there is no hint therein implying any kind of land development activities being done by SCLL. It was held that though the confirmation letters filed do not bear the signature of authorized signatory of SCLL and therefore, they do not have any evidentiary value. The Assessing Officer therefore, concluded as under: "18. Hence, in the light of the above facts in respect of the payments claimed by the assessee co....
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....d, is wrong in stating-in para 16 that assessee was confronted with the copy of thereof. The Appellant was not even given a chance to controvert the proposed inference sought to be drawn against it. The Appellant came to know that a statement was recorded on 20-11-2007, from the assessment order. Similarly, the printout, which has been annexed as Annexure II, came to be known only after the receipt of the assessment order. Even the P & L A/c and B/s of SCLL, which has been annexed as Annexure III to the assessment order was not furnished in the course of assessment and it came to be known only on receipt of assessment order. It has also been contended that the documentary evidence in the form of MOU / AWARD/SETTLEMENT was not even considered and as held by the apex court in the two cases cited, could not be rejected on the face of it unless valid reasons were given for doing so. Instead cognizance was taken of oral statement of Sri S.K.Gupta which was not tested by cross-examination. Under these circumstances, it has been pointed out that there has been a total violation of the principles of natural justice and non adherence of the proper procedure for making the assessment. Likewi....
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....te authority or authorities if subsequent events occur, the appellate authority has to examine and evaluate the same and mould the relief accordingly. This is so because for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceedings provided the rules of fairness to both sides are scrupulously obeyed [Pasupuleti Venkateswarlu vs.The Motor & General Traders, AIR 1975 SC 1409, 1410: Hasmat Rai vs.Raghunath Prasad, AIR 1981 SC 1711,1716-17]. Since the issue involved in Ground No.14 is also a matter which is being pursued by the AO in the course of assessments relating to search and in view of the fact that on the basis of the order passed by the AO it is not possible to continue the disallowance and since the matter is still alive with the same A.O., I consider it proper that the issue be examined afresh. Under the circumstances, the disallowance of Rs. 10.50 crores in the present assessment is deleted. 10. In the result, the appeal of the appellant is p....
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.... Delhi High Court, 2015, 56 taxmann.com 67 Where assessee had not offered any satisfactory explanation regarding surrendered amount being not bonafide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified. 3 PCIT v. Avinash Kumar Setia, Delhi High Court, 2017 81 taxmann.com 476 Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bonafide and hence, addition would sustain. 4 CIT v. Kuwer Fibers (P) Ltd. Delhi High Court, 2016, 2017 TIOL 30 HC Del IT 1 Addition made on basis of director's statement recorded during the course of search proceedings is sustainable, where the statements recorded are duly corroborated by evidences on record. 2 Adoption of estimated valuation is justified, when the purchases were made outside the books of account and proper accounting or reconciliation was not made by the assessee 3 Rejection of valuer's report is sustainable, where neither the valuer's report was produced within the stipulated tim....
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....A) has recorded a finding in order dated 17.11.2014 at page 119 of the said order, that Sh. S.K. Gupta has deviated from his statement at different stages and has also filed an affidavit dated 27.02.2009, which he accepted when he was cross examined by director of assessee company and as such, the addition so made solely on the basis of statement of Sh. S.K. Gupta's statement needs to be deleted, as such, as the said statement has been correctly held to be unreliable in face of subsequent denials by Sh. S.K, Gupta. 11.10 Further, the ld. counsel for the assessee relied on the statement of Sh. Om Prakash, retired Additional & Sessions Judge, who acted as an arbitrator between assessee company and M/s SCLL, wherein, the learned judge had accepted regarding the award so granted between dispute pending between assessee and M/s SCLL and the said fact has not been rebutted by the learned counsel of Revenue and as such, the addition needs to be deleted on this ground also. 11.11 That further, the learned counsel of assessee relied on following documentary evidences in support of his argument that the payment so made to M/s SCLL is genuine and duly backed by documentary evidences: ....
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.... such, the statement of Sh. S.K. Gupta is not an admissible evidence and should be excluded altogether In support of our said findings, we rely on following judgments: (a) PCIT vs Best Infrastructure (P) Ltd. (Delhi High Court) reported in 397 ITR 82. 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement. b) Andaman Timber Industries vs CCE (SC) reported in 127 DTR 241. Not allowing the assessee to cross-examine the witnesses by the Adjudicat....
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....evelopment. The assessee is the power of land approx.10.53 acres in Gurgaon. The SCIL is the developer. As per the MOU between the owner and the developer the SCIL was to develop land in Sector 53, Gurgaon belonging to the assessee company. Survey u/s 133A was carried out on 5/1/2009 at the business premises of SCIL. Shri Gupta admitted that the MOU signed by him is only to give legal colour to the entire transaction. He further explains that a cheque of Rs. 1 crore was received from PCL through Sh.S.S.Aneja, Advocate /CA and after deducting his commission @ 3.5% the balance Rs. 96.50 lacs was returned back. He further stated that he is doing the business of accommodation entries. He further stated that he never had any dispute with the assessee. In his statement on 19/12/2008 recorded u/s131 protested by the appellant as recorded at the back of the assessee he stated that he does not know anyone in Puri Construction Ltd. Probably someone from their finance department approached him through some chartered accountant known to him. They delivered him the cheques and he returned them equivalent amount in cash after taking his commission. 2.3 The AR of the assessee argues that....
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....3.5% received by Shri Gupta and the remaining paid in cash to the assessee. Firstly, it may be emphasized that statement of Shri Aneja was recorded on 5.1.2009 on oath by the Income Tax Department and his attention was drawn to the statement of Shri Gupta wherein he has stated that the entries given to the assessee are through Shri A.S.Aneja. He has categorically stated in his statement before the Income Tax authorities as under: "It is submitted that the statements of Shri S.K.Gupta is baseless and without any evidence. I am looking after the taxation work of Taneja Group and Puri Construction Company. No cash has even been routed through me for any type of transaction to Shri S.K.GGupta." 2.9. This contradiction was brought to the notice of Shri Gupta during cross examination at Question No.68. Shri Gupta responded by saying that Mr.Aneja is free to give any statement. The Assessing Officer, however concluded in Para 2.5 that "there is every possibility that Shri Aneja may have also given a false statement on oath." The conclusion drawn by the Assessing Officer is based on surmises conjectures and is not supported by any evidence. 2.10. It is relevant t....
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....K Gupta. 2.14 In this regard the Kelkar Committee, reported in 258 ITR (Statute) 50, wherein the committee had made critical references to the procedures adopted by the Officers during the course of search operations. The Finance Minister has observed in his Budget Speech for the Financial Year 2003-04 that in view of the recommendations of the Kelkat Committee that no confessional statement shall be obtained during the search and seizure operations. The Board has also in his letter No.F-287/2/2003(1) dated 10tyh March, 2003 pointed out that the past confessions, if any, not based on any credible evidence, are retraced by the assessee and, therefore, the Board had advised that no attempt should be made to obtain the confession for the undisclosed income. The Assessing Officer should rely upon the evidence gathered during the course of search and thereafter, while framing the assessment order. The instructions issued by the CBDT are binding on the officer of he department. 2.15. Keeping in view the circumstances under which the statement was recorded and also the instructions issued by the CBDT dt.10/3/2004 *supra), the Assessing Officer should rely on the evidence....
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....ear, the appellant incurred an expenditure of Rs. 3,28,89,260/- on account of land development expenses. The aforesaid expenditure inter-alia included an expenditure of Rs. 3,00,00,000/- paid to M/s.Manami Construction Pvt. Ltd. (hereinafter referred to as 'MCCPL') and the proportionate expenditure claimed by the appellant out of the aforesaid sum was Rs. 2,30,11,467/-. The Assessing Officer made enquiries in respect of the aforesaid claim by issuing summons under section 131 of the Act which were returned back with postal remarks "N/F Rg.10/11" and "Not known Rg. 11/11". Subsequently, the Assessing Officer issued commission under section 131(1)(d) of the Act to the DDIT (Inv), Unit (III)(3), Kolkata who got enquiries made through his Inspector. The Inspector could not serve the summons as no concern of the said name existed at the address namely 156A, Lenin Sarani, Kolkata. The inspector also reported that there were two companies of the same name with different Permanent Account Numbers. One company was assessed with DCIT, Circle 3, Kolkata and a small income of Rs. 569/- was returned for the assessment year 2007-08. The records also showed that return for assessment year 2006-07....
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....05 008480 20,00,000/- 03-10-2005 008482 20,00,000/- 03-10-2005 008483 20,00,000/- 03-10-2005 008485 20,00,000/- 25-12-2005 151864 20,00,000/- 26-12-2005 151865 20,00,000/- 27-12-2005 151866 20,00,000/- 28-12-2005 151867 20,00,000/- 29-12-2005 151868 20,00,000/- 30-12-2005 151869 20,00,000/- 02-01-2006 151870 10,00,000/- 04-01-2006 151871 15,00,000/- 23-01-2006 424309 15,00,000/- 24-01-2006 424312 8,00,000/- 24-01-2006 245040 All the above cheques were drawn on Citibank, New Delhi. 3. That I further verify that my address at the time of billing was 156-A, Lenin Sarni, Kolkata-13, which was shifted to 44-B, 1st Floor, Kali Krishna Tagore Street, Kolkata - 72 later on and further reaffirm that I had received the above amount of Rs. 5,05,00,000/- towards carrying out the work at Village Wazirabad, Sector 53, Gurgaon site of M/s.Puri Construction Ltd. 4. Our PAN NO is AADCM3686J A perusal of the affidavit shows that the work was allotted in the end of October,2005 and was stated to have been carried out during a period of tw....
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.... I, however, agree with the appellant that in this case for part of the expenditure incurred recovery was made from five parties. At best, therefore, the disallowance could have been only proportionate amount of Rs. 3 crores worked out to 12.71/16.57 of Rs. 3 crores i.e. 2,30,11,467. Since there is no adverse inference in respect of the remaining expenditure no proportionate disallowance would be justified in respect thereof. The disallowance therefore, is restricted to Rs. 2,30,11,467/- as against to Rs. 2,58,73,858/- made by the AO. The appellant will, therefore, get a relief of Rs. 28,62,391/-." 13.3 Before us, the learned counsel of the assessee company submitted that the said payment was made to M/s Manami Construction Pvt. Ltd. for removal and filling of rocky soil to make level one at Village Wazirabad, Sector - 53, Gurgaon site of assessee company and the assessee company had furnished following documentary evidences in support of the said transaction: (i) Copy of Account of M/s Manami Construction Pvt. Ltd. in books of assessee company (at pages 274 to 275 of PB - I). (ii) Copy of invoice dated 26.10.2005 so raised by M/s Manami Construction Pvt. L....
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.... wherein, current address of the said concern was furnished by the assessee company and further, all the details in the shape of nature of work done and payment made was also furnished before the learned AO, which all remained unrebutted and uncontested by lower authorities and as such, relying on the following judgments on the proposition of lack of enquiry the said disallowance so made is deleted: a) 361 ITR 10 (Del) CIT v. Gangeshwari Metal (P) Ltd. "9. As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'its back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: - "Investigation made by the Investigation Wing of the Department clearly show....
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....t the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the assessing officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the assessing officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of Section 68....
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....re and more specifically when the said statement has been retracted subsequently and has not been acted upon and as such, it was submitted by the learned counsel of assessee company that no incriminating material was found as a result of search from assessee's premises and as such, the additions so made under section 153A of the Act for impugned assessment year are uncalled for and unjustified. In support of the said proposition reliance was placed on following judgments: (i) PCIT vs Best Infrastructure (P) Ltd. (Delhi High Court) reported in 397 ITR 82. (ii) CIT vs. Kabul Chawla 380 ITR 573 (Del) iv) Pr. CIT v. Meeta Gutgutia 395 ITR 526 (Del) v) CIT v. Harjeev Aggarwal 290 CTR 263 (Del) vi) CIT vs Naresh Kumar Aggarwal 369 ITR 171 (Andhra Pradesh) 15.2 The ld DR, however, supported the jurisdiction to frame assessment and contend that there was sufficient material in the shape of books of accounts found as a result of search to support the additions even in the assessment framed pursuant to search and referred to various judgments including the judgment of Jurisdictional High Court in the case of Dayawanti vs. CIT reported in 390 IT....
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....provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found ....
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.... High Court itself. It explained in para 15 and 16 as under: "15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the asses....
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.... in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have pa....
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....cutta High Court in CIT-2 v. Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. Gurinder Singh Bawa (supra), the Bombay High Court held that: "6...once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." c) CIT v. Sinhgad Technical Education Society 397 ITR 344 (SC) 18) In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to ....
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....ggarwal 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once c....