TaxTMI 
TaxTMI 
2018 (4) TMI 1725
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....1.2009 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 collected through independent investigation in the form of bank statement, return of income, balance sheet etc. which unequivocally established the modus operandi of M/s Sino Credits & Leasing Ltd. as an entry operator. 4. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in not appreciating the statement recorded on oath u/s 131 on 19.12.2008 and u/s 133A on 20.11.2007 and 05.01.2009 of Sh. SK Gupta wherein he has admitted that M/s Sino Credits & Leasing Ltd. is one of the companies controlled and managed by him being engaged in providing accommodation entries to M/s Mad Entertainment Network Ltd. on the basis incriminating documents found impounded during the course of survey and collected during the independent investigation. 5. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in holding that the statement recorded u/s ....
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.... 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." 2. Briefly the facts of the case are that a search and seizure operation under section 132 of the I.T. Act was carried-out on 05th January, 2009 in M/s. Taneja Puri Group of cases the three premises of M/s. Puri Construction Pvt. Ltd., ("PCL") were covered by the search. During the course of these proceedings, certain documents belonging to the assessee were also found and seized from these premises. Notice under section 153C of the I.T. Act was issued to the assessee. In response to the same, return declaring income of Rs. 95,74,040/- was filed. Originally, return in this case was filed on 30.11.2006 declaring total income of Rs. 95,62,760/- . The case was selected for scrutiny and explanation of assessee were called for. The A.O. referred to satisfaction note for initiating proceeding against the assessee under section 153C of the I.T. Act. The main business of the assessee-company is stated to be promoters, developers and dealing in trading of licensed land and real estate. The A.O. note....
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....expenses and other expenses were also made by PCL on behalf of all land owners and subsequently, such expenditure was allocated to all the land owners on the basis of their land holdings. In the case of M/s. Puri Construction Ltd., assessment under section 143(3) of the I.T. Act was passed on 31st December, 2008 by the predecessor of the A.O. The findings of the A.O. in that case are reproduced in the assessment order and on the basis of that assessment order, the A.O. disallowed the land development expenses of Rs. 1,46,14,435/-. The A.O. passed the assessment order under section 143(3) r.w.s. 153C of the I.T. Act, dated 16th December, 2010. 4. Both the additions were challenged before the Ld. CIT(A). Written submissions of the assessee were reproduced in the impugned order. The Ld. CIT(A) confirmed the action of the A.O. in passing the order under section 153C of the I.T. Act. However, as regards the additions on merit, the Ld. CIT(A) deleted both the additions. The findings of the Ld. CIT(A) in paras 2.1 to 2.15 of the appellate order and paras 4.1 to 4.3 of the appellate order are reproduced as under : 2. "Grounds Nos. 3, 3.1. 3.2 & 3.3 2.1 I have considere....
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..../2014 & 21/4/2014 respectively by Sh. Mohinder Puri, Managing Director of the assessee company. 2.5 In his statement on 19/12/2008 (Q. No. 3) Sh. Gupta stated that he did not know anyone in Puri Construction Ltd. and probably someone from their finance department approached him through some Chartered Accountant known to him when cheques were delivered and equivalent amount of cash was returned after deducting commission. 2.6 As regards the deposition that some persons from the finance department of the assessee approached Sh. Gupta through CA/Advocate known to him (Q. No. 33 of cross examination is reproduced) Question No.33: In the statement of that day you further stated, "probably someone from their Finance Department approached me through some chartered accountant known to me". I put it to you that your statement clearly indicates that it was based upon conjecture and surmises and you did not even state the name of the person from the finance department of Puri Construction Ltd. Is that correct ? Answer by Shri S.K. Gupta: Yes 2.7. Sh. Gupta refers to the role of Sh. Aneja in facilitating the transaction between the....
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.... 2.10 Further on the issue regarding arbitration award, I have perused the statement recorded on oath of Sh. Om Prakash, ADJ (Retd.) Sole Arbitrator. He has confirmed the MOU, the arbitration award. His statement is being disbelieved by the Assessing Officer on the suspicious account that no record of the proceedings has been kept and he is not sure to which party these records have been returned. There is no specific guideline as to how many years the records pertaining to such arbitrations should be kept. The award was given by him in April, 2005. His statement was recorded in April, 2009. As stated there was no statutory obligations on him to keep such records. In view of this, there is no ground for the Assessing Officer to draw adverse conclusions. 2.11 I have perused the statement of Sh. Mohinder Puri recorded during the course of search on 5th & 6th January, 2009. He has categorically stated that the transactions are genuine. As is also mentioned in the order of assessment, he refers to his age i.e. 68 years and triple bye-pass heart surgery and subsequently in 2002 to 2004 and 2006 6 stents have been inserted in his heart vessels and the doctors having suggested to....
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....f Rs. 6,12,60,000/- made by the Assessing Officer is deleted. The Ground Nos. 3, 3.1. 3,2 & 3.3 are allowed." 3. Ground No.4 xxx xxx xxx 4. Ground No.5 : 4.1. I have considered the grounds raised in appeal and the facts of the case. I have also considered the submission filed by the AR of the appellant. 4.2. The appellant has raised ground against the disallowance of Rs. 1,46,14,435/- on account of land development expenses. The facts are that the total amount of Rs. 14,03,92,386/- was spent by M/s. Puri Construction Pvt. Ltd. (PCL). Keeping in view land share holding expenses were apportioned amongst holding companies and subsidiaries. As per this allocation assessee's share was Rs. 1,46,14,435/-. While completing the original assessment u/s 143(3) on 31/12/2008 the entire amount of Rs. 14,03,92,386 was considered in the hands of holding company i.e. PCL. This matter was carried before the CIT (Appeals)- III, who vide order No. 484/08-09 dt.31/12/2010 deleted the entire amount of Rs. 11,73,80,919/-. The balance amount of Rs. 2,30,11,464/- was confirmed in the hands of PCL. Since the entire amount has been considered and assessed in ....
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....sp; Vs. The Dy. C.I.T W-82/A, Greater Kailash - II &nbs....
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....sp; W-82/A, Greater Kailash - II New Delhi &nbs....
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....39; for short]. ITA No. 754/Del/2015 preferred by revenue arises from an order of assessment dated 31.12.2010 u/s 153A/143(3) of the Act. Since the issues involved in all the appeals are common and pertain to same assessee, therefore we have heard all the appeals together and thus are being decided by this consolidated 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 resp....
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....y appellant towards providing the transaction as business transaction." 4. Further, there was a search conducted on 05.01.2009 under section 132(1) of the Act on the appellant and the learned AO vide an order dated 31.12.2010 in assessment u/s 153A/143(3) of the Act repeated all the additions so made earlier in assessment framed 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....
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....ve genuine business transaction with M/s Sino Credits & Leasing Ltd and M/s.Mad Puri Construction Pvt.Ltd is false in view of his statement recorded on oath during the cross examination before Sh.Mohinder Puri on 17.04.2014 and 21.04.2014. 9. On the facts and in the circumstance of the case and in law, the CIT(A) has erred 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) i....
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....45,18,528/-was claimed as deduction under the narration "expenditure disallowed under section 40a(ia) of the Act in financial year 2004-05 now allowable". It is relevant to state here that expenditure of Rs. 11,45,18,828/- was claimed under section 37(1) of the Act in assessment year 2005-06 but disallowed in the computation of income filed by the assessee 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....
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....owance of Rs. 11,45,18,528/- under section 37(1) of the Act. Before the CIT(A), the appellant inter-alia, submitted as under: "(iii) The claim was disallowed under section 37 of the IT Act, the final conclusion of the AO being that the sum of Rs. 11,45,18,528/- was- * not genuine but fictitious, and * the "contractors" are all mere name lenders. 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 o....
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....(Page 23) specific details were called for in respect of land development expenses. 3.1 The assessee furnished a reply which is at pages 24 to 121. In para 9 (b) it was stated as under: (Page 25). "During the Financial year the assessee company has incurred expenses on its land and land of its associate companies/partners on the Gurgaon Land on account of 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 expe....
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....he expenditure was incurred and also accounted for in the assessment year 2005-06. It was held that during the assessment year 2005-06, the said expenditure was not claimed because of nondeduct of TDS under section 40a(ia) of the Act. It was held that the ground that expenditure cannot be disallowed on account of nongenuineness in assessment year 2006-07 because the said issue does 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 consideratio....
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....7.8 That further the learned CIT DR reiterated the above submissions for the same additions again made in assessment under section 153A of the Act, as learned AO has merely repeated the said addition and even the findings so recorded in original assessment proceedings have been merely extrapolated in assessment framed under section 153A of the Act dated 31.12.2010. 7.9 The learned counsel of assessee 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....
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....was incurred in AY 2006-07 and the same was only claimed in computation of income for AY 2006-07 due to provisions of section 40(a)(ia) of the Act. In other words, for considering the genuineness and deciding the admissibility of deduction in respect of expenditure on land development expenses, a finding was necessarily supposed to be given by AO in the course of assessment for AY 2005-06 (which was not given) and 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....
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....ment order that the Assessing Officer has disallowed the expenditure of Rs. 11,45,18,528/- out of total disallowance of Rs. 14,03,92,386/- by holding the as non genuine and fictitious. However, it is not disputed by the Assessing Officer that the expenditure was incurred and accounted for in the asstt.year 2005-06 under the mercantile method of accounting regularly employed. The same was not claimed in A.Y 2005-06 only because of compulsion 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....
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....eduction of Rs. 11,45,18,5628/- be allowed by the A.O. However the Assessing officer is free to investigate the genuineness of the expenditure of Rs. 11,45,18,528/- in assessment year 2005-06 by taking appropriate action as per law and tax the above sum if the expenditure is not genuine." 8.1 On examination of the facts on record, it is undisputed that appellant had incurred a total expenditure of Rs. 11, 51, 81, 489/- under 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 i....
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....ty in terms of proviso to section 40a(ia) of the Act. The said proviso to section 40a(ia) of the Act reads as under: "Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in subsection (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid." 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 finding....
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....when he withdrew them for a purely non-business purpose and utilised them in a transaction which brought him neither income nor profit nor gain. Hence in the circumstances of this case, no income arose to the appellant as a result of the transfer of the shares and silver bars to the trustees." 8.7 In view of the above facts and circumstances of the case, we uphold the deletion of addition of Rs. 11,47,18,428/- by the CIT(A) and dismiss the ground raised by the revenue 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 co....
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.... the appeal so filed under section 153A proceedings but revenue has accepted the said deletion by learned CIT (A) only in 153A proceedings. 9.3 The ld. counsel for the assessee again supported the order of learned CIT (A) dated 31.12.2010 and further, submitted that during the impugned assessment year the 2006-07, the assessee company had showed payments of cheques aggregating to Rs. 5,27,00, 000/-, however, the party to whom the said amount was paid M/s Sino Credit & Leasing Ltd. (SCLL) 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....
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....ground raised by the revenue is rejected. 11. Ground No. 3 and 4 relates to addition of Rs. 10,50,00,000/- being an expenditure incurred on payments to SCLL as compensation by the assessee company the relevant facts as noted in the order of CIT(A) are that during the assessment proceedings, AO noted that appellant had claimed a deduction of Rs. 10.50 crores paid to M/s Sino Credits and Leasing Ltd. as compensation against their claim consequent upon the arbitration settlement dated 2.05.2005. A query was raised 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 ....
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....trator in the course of arbitration proceedings were also filed. 11.2 Since the assessee had sought an opportunity to cross examine Shri S.K. Gupta, a notice dated 26.12.2008 was issued to enable the assessee to cross examine Shri S.K. Gupta. However, he failed to attend the said proceedings on the designated date and time and as a result, the Assessing Officer proceeded to make the addition without providing any cross examination in the course of assessment proceedings. The Assessing Officer relied on the statement dated 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 m....
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....so said that P & L A/c & B/s of SCLL does not indicate any nature of receipts corresponding to payment by the appellant. For these cumulative reasons the AO has held the payment of Rs. 10.50 crores as non-genuine and disallowed the same. The appellant's contention is that copy of the statement said to have been recorded by the DDIT on 20-11-2007 has not been provided in the course of assessment not even till date. Likewise, copy of the aforesaid printout also was not provided in the course of assessment. The AO, it is stated, 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 th....
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.... the assessee company. The AO has reported that there has been an offer of the amount involved as additional income. The assessment in this case was completed on 31-12-2008. The search was carried out on 5-1-2009 is a subsequent event. On the question of whether cognizance of subsequent events can be taken in the course of Appeal the apex court has laid down as under: "Subsequent events may be taken not of by the appellate authority-During the progress and passage of proceedings from the taxing authority to appellate 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]. ....
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....submissions, in addition to her oral submission, which is compilation of various case laws sought to be relied by her, the said submission is extracted here below: "In the above case, it is humbly submitted that the following decisions may kindly be considered. 1 "Bhagirath Aggarwal v. CIT Delhi High Court, 2013 31 taxmann.com 274 An addition in assessee's income relying on statements recorded during search operations cannot be deleted without providing statements to be incorrect. 2 Raj Hans Towers (P) Ltd. v. CIT, 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. De....
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.... Timber Industries vs CCE (SC) reported in 127 DTR 241. 11.9 That further, it was submitted that even the statement of Sh. S.K. Gupta so relied on by the Revenue, cannot be relied on, as Sh. Gupta had retracted the said statement by filing an affidavit dated 27.02.2009 (at pages 36 to 39 of PB - II) and further, in proceedings under section 153A of the Act, when learned CIT (A) remanded the matter back to the file of AO for remand report, than Sh. S.K. Gupta appeared before AO and was also cross examined by director of assessee company, wherein, learned CIT (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, retir....
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....orementioned documentary evidences so furnished by the assessee and learned AO has relied on the statement of Sh. S.K. Gupta dated 24.12.2008, where statement needs to be excluded for consideration, as he has not been produced for cross - examination, even though specific request for the same was made by assessee vide letter dated 26.12.2008 and specific notices were issued to Sh. S.K. Gupta during course of appellate proceedings and as such, since he being witness of the department should have been brought forward and should have been allowed to cross examine by assessee company and in absence of 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.....
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....documentary evidences so relied on by the assessee company is hereby deleted and as such the findings so recorded by the learned CIT(A) extracted below is held to be justified and proper: "2.1 I have considered the grounds raised in appeal and the facts of the case. I have also considered the submission filed by the AR of the appellant. 2.2 The appellant raised ground against disallowance of Rs. 10.50 crores on account of payments made to Sino Credits Leasing Ltd (SCLL). During the year under consideration the appellant has shown payment of Rs. 10.50 crores to SCLL on account of land development. 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. 96.5....
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....ce department of Puri Construction Ltd. Is that correct?. Answer by Shri S.K.Gupta - Yes 2.7 Sh.Gupta refers to the role of Sh.Aneja in facilitating the transaction between the assessee and Sh.Gupta. For this purpose department recorded statement of Sh.Aneja on oath on 5/1/2009, wherein his attention was drawn to the statement given by Sh.Gupta. He has categorically stated in his statement before the assessing Officer as under: 2.8 The A.O. refers to the role of Shri Aneja in facilitating the transaction between the assessee and Shri Gupta. He also refers to the commission of 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 a....
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....ge i.e.68 years and triple by pass heart surgery and subsequently in 2002 to 2004 a nd 2006 6 stents have been inserted in his heart vessels and the doctors having suggested to him to have a second bypass surgery and in view of the false allegations made by Sh. Gupta and the search operation being carried. On Gurupurab of Sh.Guru Gobind Singh he suffered mental agony and stress on his heart and feared fatal consequences. He further starts that he is compelled to end all litigations and offers to agree to additional income. He has further stated that at this stage he is not in a poiostion to examine Sh.SK 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....
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....sh and substantiate the fact that the amount so paid to M/s SCLL is genuine and justified. 12.5 Thus, the relief so given by learned CIT (A) with respect to ground no. 3 and 4 in ITA No. 1327/Del/2011 is upheld and, ground raised by the revenue are rejected. 13. Now we take up ITA No. 995/Del/2011, the appeal preferred by the assessee against the order of CIT(A) dated 31.12.2010 wherein the solitary addition confirmed of Rs. 2,30,11,467/- by learned CIT (A) on account of land development expense paid to M/s Manami Construction Pvt. Ltd. 13.1 The relevant facts are that during the instant assessment year, 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....
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....owing effect: Affidavit I, Pramod Sharma, Director, Manami Construction Co.Pvt.Ltd ., currently having office at 44-B, 1st Floor, Kali Krishna Tagore Street, Kolkata-700072, West Bengal, do hereby solemnly affirm as under:- I. In the calendar year 2005, I have carried out work of removal and filling of rocky soil to make level one at Village Wazirabad, Sector 53, Gurgaon site of M/s Puri Construction Ltd., That I had received an amount of Rs. 3,05,00,000/- for above work against following cheque Nos.: Amount (Rs.) Date Cheque No. 20,00,000/- 03-10-2005 008479 20,00,000/- 03-10-2005 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 ....
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....r that the expenditure was incurred or that it was for the purpose of his business. It is a case where some payments have been made even prior to the receipt of the Invoice. There is also no independent evidence to show that the payee had requisite experience and expertise to carry on this work and that it did actually employ the labour and machinery for doing the work and that that any profit or loss resulted which was shown by it in the books of account. It is therefore, held that the expenditure is not proved to have been incurred wholly and exclusively for the purpose of business and is therefore not allowable as deduction. 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 w....
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....Ltd (at page 276 of PB - I). (iii) Certificate of TDS on payment so made to M/s Manami Construction Pvt. Ltd. (at page 277 of PB - I). (iv) Copy of Affidavit of Sh. Pramod Sharma (director of M/s Manami Construction Pvt. Ltd.) dated 24.12.2006. (v) Copy of annual accounts of M/s Manami Construction Pvt. Ltd. (at pages 280 to 286 of PB - I). 13.7 We have noticed that all the above documentary evidences were arbitrarily brushed aside by both learned AO and CIT (A) and further, the reliance so placed on investigation carried out by learned AO was prior to the date of affidavit of director of M/s Manami Construction Co. Pvt. Ltd., 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....
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.... distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd.(supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law." [Emphasis supplied] b) 357 ITR 146 (Del) CIT vs. Fair Finvest Ltd. "6. This Court has considered the submissions of the parties. In this case the discussion by the CIT (Appeals) would reveal that 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....
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....ny, the same are in excess of jurisdiction and therefore, not in accordance with law." 15.1 The learned counsel of assessee submitted that during the course of search on 05.01.2009, no incriminating material was seized from the assessee's premises. The books of accounts seized were already part of record, which were made basis of additions in original order of assessment under section 143(3) of the Act; and thus, the same could not be said to be incriminating in nature. It was submitted that reliance placed by AO on the statement of Sh. Mohinder Puri and construing it to be incriminating in nature is also unjustified and uncalled, as the statement cannot be construed to be incriminating in nature 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....
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....ditions so made in original assessment proceedings under section 143(3) of the Act and there was no new addition made by learned AO during section 153A proceedings. Thus, on the date of search i.e. on 05.01.2009, the assessee company's assessment was finalized on 31.12.2008 and as such, the proceedings were not pending on the date of search and thus, additions could only have been made in proceedings under section 153A of the Act only when any incriminating material was found during the search. Our above view derives strength from the following judgments: a) Hon'ble High Court of Delhi in the case of CIT vs Kabul Chawla reported in 380 ITR 573: b) "On a conspectus of Section 153A(1) of the Act, read with the 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 reassessmen....
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....ourt in Principal Commissioner of Income Tax v. Saumya Construction Pvt. Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) and one earlier decision of the Gujarat 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 ....
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....ion can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while 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 requ....
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....ng Officer with respect to the sale transactions in the particular assessment year." 62. Subsequently, in Principal Commissioner of Income Tax- 1 v. Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta 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 ....
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....arjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta(supra) where the admission by the Assesses themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. (ii) 290 CTR 263 CIT v. Harjeev Aggarwal 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 examin....
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....nbsp; Sd/- [SUDHANSHU SRIVASTAVA] &nb....