TaxTMI 
TaxTMI 
2019 (6) TMI 1479
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....elopment and trading in various goods. The return of income for the year under consideration was filed on 29/09/2011 declaring total income of Rs. 2,19,64,310/-. The same was processed u/s.143(1) of the Income Tax Act 1961 accepting return of income. Thereafter, the case was selected for scrutiny and after serving statutory notices seeking reply of the assessee, the assessment u/s.143(3) of the Act was completed by AO on determining the total income of Rs. 24,67,68,540/- after making certain additions / disallowances. 3. Aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) after considering the case of both the parties partly allowed the appeal. Against this, both assessee as well as revenue has filed their respective appeals. Since first of all we are dealing with the appeal filed by the revenue, the grounds of which are reproduced below:- 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the assessing officer to delete the disallowance of interest expenses of Rs. 1,34,90,530/- without appreciating the facts that special auditor has observed that the assessee has primarily uti....
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....essee, which is reproduced below: Particulars Fabrics Land Business Construction business Total Sales 1,63,60,735 15,87,46,062 - 17,51,06,797 Purchase Cost 1,61,67,727 7,91,79,885 - 9,53,47,612 Closing Stock - 15,03,41,354 - 15,03,41,354 Opening Stock - 18,98,72,399 - 18,98,72,399 Transfer in WIP - (1,20,81,700) 1,20,81,700 - Construction cost 7,08,87,227 Closing WIP - - 10,76,88,636 - Opening WIP - - 2,47,19,709 - Gross Profit 1,93,008 5,21,16,832 - 5,23,09,840 Indirect Income - 13,82,813 - 13,82,813 Expenses - (3,16,56,172) - 3,16,56,172 Net Profit 1,93,008 2,18,43,473 - 2,20,,36,481 5.3. A reference to above would show that the assessee has claimed the entire expenditure of Rs. 316.56 lakhs against Land Business. The said expenditure includes Interest Paid of Rs. 2,36,67,597/- , among other office & administrative expenses etc. The Special Auditors, while making comment on the Application of Funds of tiie assessee company have stated that" On the anal....
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.... 4 projects of the company for which he has paid interest of Rs. 2,36,67,597/-. The Special Auditor has also 'observed that the assessee has acquired land and made further investments in acquiring the stake in Bhilwara Spinners Ltd and based on that fact he was having the opinion that this needs to be capitalized and is not the part of revenue expenditure., The assesses in his reply has merely submitted that all the projects under construction are funded by the advance payment from customer of Rs. 1407.24 lakhs which is more than the amount spent on construction till date, and further the amount invested in acquiring state in Bhilwara Spinners Ltd was out of his own funds. He has not even given the cash flow chart in which he may establish that investment in Bhilwara Spinners Ltd is from his own funds and advance payment from customers has been utilized for construction of project. It was the duty of the assessee to submit the cashflow and statement with respect to cash received from the customers and then utilized for the construction of the project. Therefore, on the failure on the part of the assessee to establish that the Bhilwara Construction Ltd investment was funded by h....
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.... construction cost) for Construction business. Therefore 57% of the funds {Total WIP of construction cost and land business Rs. 3536.37, the WIP of construction business constitutes 57% of total WIP are blocked in construction business and the advances received in construction business are already used for making advances for purchase of other assets as discussed above. ln view of the above, 57% of the interest expenses of Rs. 2,36,67,597/- which works out to Rs. 1,34,90,530/- are disallowed and added to the total income of the assessee". 3.3. It was also submitted that since the present case is a case of Special Audit u/s.142(2A) and the AO in para No.5.2 of its order had given the details of the results of the audit and thereafter, the findings contained in para No.5.3 of the order of the AO is vital and uncontroverted. It was further submitted that the comments of the Auditors are vital thus, all interest expenses cannot be said to be towards acquisition of land. As far as the claim of own funds of assessee is concerned, in that reply, it was submitted that customer advances etc., being utilized for construction projects is a claim which was never supported by evidence by the....
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....ellate proceedings, the AR of the appellant filed written submissions vide letter dated 09.09.2016, contents of the same are reproduced hereunder; 7.2.1. "In this regard, the following points are noteworthy: (i) The Appellant submits that the Appellant is a company engaged in purchase and sale of lands and fabrics and development of infrastructure and construction of apartments and commercial premises in Bhilwara, a small town in Rajasthan. The interest debited to P&L Account wholly relates to purchase & sale of lands and fabrics. The A.O, made adhoc disallowance of Rs. 1,34,90,530/-, on the basis of erroneous reading of the Special Audit Report and observed that Special Auditor was having the opinion that this interest needed to be capitalized and was not a part of the revenue expenditure. The A.O. defeated the purpose of Special Audit, "recording" a finding that a portion of interest has to be capitalized, (ii) It is important to note that, infact report of the Special Auditor supports the case of the Appellant [Ref: Pg. 124 of the P.B.) (iii) After due verification of the audited accounts, the auditor had certified that no capital expenditure ....
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....he A.O. has not controverted / disputed the above explanations and evidences. As against that, the A.O. has not brought on record any material, much less, cogent material, in support of his action and, instead, has simply gone by surmises and conjecture. 2. Thus, the Appellant submits that addition on account of interest of Rs. 1,34,90,530/-be deleted". 7.2.2. The AR of the appellant, further made submission vide letter dt. 04.01.2017, contents of the same is reproduced thereunder:- A. Para - wise summary 5.1: "Facts pertaining to the income and expenditure accounted in the books or accounts are discussed. 5.2: Segment - wise Profit and Loss Account arrived at by the Special Auditors is reproduced. 5.3: A.O has reproduced the comment of the Special auditors on application of funds of the Assessee Company the contents of which are self explanatory. However, after so referring, the A.O came to wrong conclusion that the interest cost has not been allocated to the construction cost and in such a situation it was imperative to capitalise part of the interest towards the construction cost. In fact, the Special Auditor, after due verif....
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....ing funds were used exclusively for land business. The construction cost was met exclusively from the advance received from flat purchasers. The Appellant had already submitted enough explanations and documents in support of the above during the assessment proceeding. The Appellant liad explained that it had received an amount of Rs. 1,56,56,420/- as advance against flat booldng and Rs. 27,10,240/- as advance against commercial booking and Rs, 6,53,81,000/- as advance against property sale in the earlier year. For the assessment year under consideration, the Appellant had received advance of Rs. 4,07,03,74s/- against flat booking and Rs. 2,55,75,242/- against commercial bookings and Rs. 7,44,44,700/- as advance against property. The nexus of the funds is shown as under: Particulars Amount Amount Advance against property sale 7,44,44,700/- Advance against commercial booking 2,55,75,242/- Advance against flat booking 4,07,03,745/- Less: Construction Cost 9,56,06,936/- (v) It should be noted that the Appellant had very huge dealings in land and plots running into lacs of square feet area [Ref....
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....comes and expenditures were maintained (d) No capital expenditure was debited to Profit & Loss Account (e) All the expenditure were fully verifiable and genuine [Ref: Pg. 102 to 105 of the P.B.]. The Special Auditor has also prepared/approved segmentivise Profit & Loss Account, in which the interest expenditure was debited to land dealing business [Ref Pg. 140 of the P.B.]. (viii) It is important to note that the A.O. has not controverted / disputed the above explanations and evidences. As against that, the A.O. has not brought on record any material, much less, cogent material, in support of his action and, instead, has simply gone by surmises and conjecture. (ix) Thus, the Appellant submits that addition on account of interest of Rs. 1,34,90,530/- be deleted." 7.2.3. The appellant's relevant submission vide letter dt. 09.02.2017 is reproduced hereunder: "2.1 It is important to note that this disallowance is made contrary to the specific and clear findings given by the Special Auditor, appointed by the A.O. himself u/s. 142 (2A) of the Act. For ready reference, we attach complete correspondence in this regard [Ref:....
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....nts and invoices verified, we are of the view that the WIP of the flat projects have been valued at cost. Based on the information and explanation provided to us we understand that the assessee company has been consistently following project completion method of accounting of recording of revenues. As a policy company recognizes the revenue when 100% of the projects gets completed as the company believes that the significant risk in term of cancellation of the flats & other units in various projects is still borne by the company. Hence, the company believes the revenue can only be recognized when:- a) The seller has transferred to the buyer all significant risks and rewards of ownership and the seller retains no effective control of the real estate to a degree usually associated with ownership. b) no significant uncertainly exists regarding the amount of the consideration that will be derived from the real estate's sales; and c ) it is not unreasonable to expect the ultimate collection. The assessee company believes that significant risks and rewards of ownership are normally considered to be transferred when legal title passes to the buyer (e.g., ....
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....d Annexure 4 S.No. Name of Party From Whom Purchased Date of purchase Area As Per Agreement Value Regn. / Stamp Duty Other Expe Nses Total Cost Area In Sq.ft Sale Date Name Of The Party To Whom sold Area Sold Sale Value Proportionate cost Profit Remark Note 1 1 Surbhi Hold- Ings 21/03/2007 9100 Sq.ft 4,000,000 - 415,590 4415590 9100.00 21/07/2010 Neelam Jain & Aarti Jain 2800 2147000 1358643 788357 Rs. 103000 recd. In cash 2 Khuman Gadri 25/07/2007 1 BIGA 17 NISWA 150,000 11,990 - 1619 90 50366.25 20/09/2010 Evergreen Texpark Pvt Ltd 50366 1123000 161990 959010 3 Bhilwara Spinners Ltd 11/09/2009 9 BIGA 13 BISWA 33,900,000 1,747,080 4520790 40167874 262721.25 Several Dates Different Parties 10103 5605875 2595894 3009981 4 Keventer Agro Ltd/ 09/12/2009 1050216 SXQ MT 89,000,000 5561,2000 12516392 107077583 1128922.00 Several Dates Different Parties 1080794 149872187 102512703 47359484 ....
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....c statements as well as vouchers and valuation of WIP. The claim of the Appellant was self-evident from these documents. The A.O. has not disputed / doubted even these documents nor have found any discrepancy. 2.4 In the circumstances, there was absolutely no case for making such huge disallowance of interest on fact as well as in law". 4. We have heard the Counsel for both the parties at length and we have already perused the materials placed on record, the submissions filed by the parties and the judgments relied upon by the respective parties. Before we decide the merits of this ground, it is necessary to evaluate the order passed by the ld. CIT(A) before disposing this ground. The ld. CIT(A) has dealt with this ground in para No.7.3 of its order and the same is reproduced herein below:- 7.3. I have considered the stand of the AO in the assessment order as well as the submissions of the appellant and on careful perusal of the assessment order as well as submission of the Appellant, the following facts emerge: (i) The total interest expenditure of Rs. 2,36,67,597/- are debited to profit & loss account. It is die claim of the Appellant that the exp....
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....d explanation regarding allocation of interest expanses, highlighting the fact that advances received from buyers [Rs. 1407.24 lacs were more than the project expenses. - Submitted details of advances against property purchases and property sales. - The investments were out of own funds. 21.08.2014 - Submitted detailed explanation on allowability of interest as well as nexus of funds. Significantly, the above submissions, the facts and the figures remain undisputed / uncontroverted by the A.O. (iv) It appears that the heavy reliance is placed by the A.O. only on the comments by / the Special Auditor appointed by Department u/s. 142 (2A) of the Act in his report / dated 25.06.2014. I have carefully gone through the copy of the report and I find that / the action of the A.O. to support this disallowance on the basis of the Audit Report of / the Special Auditor is misplaced. Nowhere the Special Auditor held that interest bearing funds were used towards construction business. In fact the report of the Special Auditor goes to support the contentions of the Appellant. It is noticed mat one of the specific mandate given to t....
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....arged its preliminary onus in support availability of the interest expenses/ by bringing on record various submissions/ facts has not found any discrepancy, including from the bank statements which clearly depict fund flow position. Besides/ the Report of Special Auditor, appointed by the A.O. himself, clearly supported the Appellant's claim. As against that, the A.O. has miserably failed to bring any convincing material to support his action. (vii) The A.O. has also not given any benefit of addition to work in progress to the extent the interest expenses were so held by him to be relatable to the construction business, in contradiction and in inconsistent to his own stand. (vii) It is important to note that no where irt past or even in subsequent ear any such disallowance is made though the principle of Res judicata does not strictly apply to assessment proceeding, another equally well settled legal position is that Rule of "Consistency equally applies to assessment proceedings. In other words, a position Accepted in past as well as in subsequent year cannot be altered by A.O. only for a particular year, unless there is change in fact or legal position. ....
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....agreement with contractors, permission letter for consent of project, statement etc., vide letter dated 10/05/2014. Thereafter, vide letter dated 03/06/2014 and 16/06/2014, the assessee had also filed other documents called by the Special Auditor. The specific mandate was also given to the Special Auditor to verify all accounts of expenses debited to profit and loss account including their genuineness as well as to verify whether any capital expenditure was debited to profit and loss account towards this Special Auditor after appreciating the documents and details filed by the assessee, give clear finding that the same were in agreement with the audited accounts of the assessee and the assessee had not debited any capital expenditure to the profit and loss account. The Special Auditor also verified the cost of work in progress of the project and also approved signatory profit and loss account in which no interest expenditure was debited to construction activity, but interest expenses were debited to land business. It was also acknowledged by the Special Auditor with the major source of funds for the assessee company was the findings received from the sale of flats and the sale proc....
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....t they have clinched the evidence against assessee. There is no primary and direct evidence which is in the form of mandated material detailed in para 8.1 of AO‟s order and the same is reproduced hereinunder: 8.1. During the course of assessment proceedings, the A.O. has made this addition in the following words: "6.1 During the course of Survey action at assessee's premises on 13/14 31.03.2014, the Survey team found and impounded some incriminating documents, from which it is observed that the assessee company has accepted cash of Rs. 36 crores or more against sale of flats which have not been recorded in books of accounts. The relevant papers extracted from impounded material (Annexure Al Page No. 13,11,10& 29) are reproduced as below and forms part of assessment order. The above loose papers found and impounded during the survey proceedings reflects the details such as flat no., area of the flat, name of the purchaser, mobile no., value of the flat with break up of the bank received and cash received etc. it is evident from the above mentioned Xerox of the loose papers that the assesses hass received the part of sale price in cash. In this re....
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....u/s 131 on 14.03.2014 is reproduced below(as translated in English): "Q. 11 You are shown Annexure A-l, containing page nos. 1 to 108. These are the collection of hose papers found in your office. Please give details. Ans. I have no knowledge. Q. 12 These loose papers are found at Computer & Table desk of your office. Please see these again and give details. Ans. I have no knowledge. Q. 13 One of the employees of your office has admitted in his statement that these papers contain the details of flats sold. Ans. I have no knowledge. 6.3 The incriminating documents found from the premises of the assessee during time of survey action was scanned and some of the pages have already been reproduced. The copies of agreement to sell the flats had been called for. The assessee has not submitted any copy of agreement till date. The assessee has only submitted the copy of sample agreement of sale which is reproduced below. It is evident from the copy of agreement that there is no details of full consideration, saleable area, rate and other administrative charges in the agreement. There is no details rega....
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....nts received in cash; on the other hand, the director of assessee company Shri Ashok Kumar Kothari simply chose to show his ignorance. Such ignorance of the director of assessee company does not any way prove his innocence, rather it shown that he had nothing to explain on the spot, after being caught with incriminating papers in his own office. The employees of assessee company have however spoken the truth behind such loose papers, wherein the cash received indicated the cash received against sale of flats. In the above instance, the onus was on the assessee to prove that such transaction including transaction in cheque had never taken place. 6.4 During the course of assessment proceedings, the assessee was asked to submit explanation in respect of the cash received of Rs. 36 crores, and show cause as to why the said amount should not be added to total income u/s 68 of the Act. In response, vide letter dated 23.07.2014, the AR of assessee has submitted as under: "Our client is called upon to explain 'cash receipts" of Rs. 36 crores. The amount has no relevant to any facts. It may be some rough projection. In the circumstances of our client is hard put to exp....
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....#39;if^assessee has made total sales of flats/plots at Rs. 4868.21 lakhs, against which it received advances of Rs. 1407.24 lakhs, as summarized below: (Rs. in Lakhs) Particular Value of Total Sale( Received or receivable) Navkar City Centre 377.99 Navkar Green Project (i) Gulmohar (ii) Chinar (Hi) Amaltas 1335.79 934.64 2002.26 RIICO Shop Project 58.53 Land Sale 159.00 Total 4868.21 On the basis of Statement of Mr.Ranjit Singh Jain, Accountant Assistant corroborated by the documents the assessee company has received 30% in cash on sale of flats. It means that 70% of the value of flat is received in cheque and 30% in cash. There is normal practice in the building construction business, all the cash component part is received well before booking of the flats. Only after receiving the cash component, the flats are booked on the price which was to be received by cheque i.e. 70% As per the page No. 25 of Annexure Al of seized materials, the assessee is maintaining records in following formats. s, No Floor Flat no. BHK Booking date Name Address Contac (No, Saleable Area Rate Value 70....
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....flat is received in cheque and 30% in cash. It was also submitted that from the statements it was also clear that only after receiving cash component the flat was booked on the price which was to be received by cheque i.e., 70%. In this respect, as per Annexure A1 of seized material, the assessee was maintaining records in a specific form and from the said table, it is evident that the assessee from the said table which is at page No.47 of CIT(A), it is clear that the assessee is segregating the cash and bank receipts while maintaining the record. However, at the time of making the entries in the books of accounts only cheque part was entered. Thus, the cash component of total value of flat which was received during the year as per the statement of Shri Ranjit Singh Jain corroborated by the documents. It was further submitted that since the assessee could not explain the source of various receipts and entered in the note book u/s.133A and therefore, the additions were rightly made by the AO u/s.16A of the IT Act. 5.3. On the other hand, ld. DR relied on the order of CIT(A) and also drawn our attention to the report statements as well as the submissions filed before the CIT(A) wh....
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....'. Under general law and otherwise also, there is a vast difference between the word 'book' and the words 'loose paper, bothare not synonymous. In this regard, the ratio of the decisions in the case of Common Cause ( A Registered Society) &Ors. v/s. UOI &Ors. - [W.P. (Civil) No. 505 of 2015, Order Dated 11.01.2017] as well as In case of Sheraton apparels v/s. ACIT - [(2002) 256 ITR 20 (Bom)] clearly applies, in which it has been held that these two terminologies are different. As such, on this ground only the entire addition deserves to be quashed as bad in law. 8.3.3. The Appellant has filed certain documents, consisting of (i) Statements and working -which are based on the impounded papers as well as the books of accounts already produced for verification before the A.O., (ii) Agreements for flats in the surrounding area - which are registered documents with government authority and (iii) Stamp duty rates - which are publicly notified government data. The Appellant has filed the reasons for filing the same before me. As is t from the sequence of events unfolded during the assessment proceeding, as from the assessment records and the submissions o....
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....etter dated 07.08.2014. It was only thereafter the A.O. supplied copies of the relevant material on 20.08.2014 at 6:30 p.m. However, the A.O., surprisingly, directed the Appellant to submit its comments by 3:00 p.m. of the next day. The A.O. was aware that the directors of the Appellant are at Bhilwara, Rajasthan. Even here, copy of not all documents was provided. While the reliance is placed by the A.O., for making such huge addition, to loose paper nos. 10,11,13 and 29 of Annexure A-l, copies provided were of page nos. 23 to 32 of Annexure 1, In terms of the ratio laid down by the Supreme Court in case of Kishinchand Chellaram [ 125 TTR 713 ]material, that is the material relied and used by the A.O. without confronting same to the assessee, is liable to be ignored all together and the legality of the addition is required to be adjudicated de hors such material. In the present case, if such loose papers are to be ignored, there was no material with the A.O. to make this addition. In any case, even within such short time provided, the Chartered Accountant of the Appellant anyhow submitted details and very exhaustive submission on the next day, that is, 21.08.2014,....
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....n of cash or even receipt of the same. Further the Hon'ble Supreme Court has held that the statement u/s 133A Alone Can't Be Reason for Addition. The Hon'ble Supreme Court has quashed Special Leave Petition of the Income Tax department against the Madras High court judgement that statement u/s.133Ahas no evidentiary value The Hon'ble Supreme Court has dismissed the Special Leave Petition vide its order dated 20/09/2012 against the Madars High Court judgment in case of S. Kader Khan 300ITR 157 (MAD.)/[2008J 214 CTR 589 (MAD.) in which the Hon'ble high court had held that an ITO was not empowered u/s section 133A to examine any person on oath and therefore statement recorded in a survey wider section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition. The exact issue before High Court of Madras was "whether the materials collected and the statement elicited during the survey operation under section 133A of the Act had any evidentiary value" The High Court held on the issue of evidentiary value of statement recorded during survey proceeding as under: the following ....
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....es we do not see any reason to interfere with the order of the Tribunal. When a survey u/s 133A is conducted , and any statement is recorded by the A.O , that statement itself can not be used for making any addition without any other material evidence in support of the said statement. Therefore, if at all under duress and pressure , a tax payer has signed a statement u/s 133A , he can very well retract from such statements without any legal consequences. Further the seized papers nos. 23 to 32 are rough unsigned excel sheets. This do not belong to us. Further your honors may appreciate that the Papers are titled " (Building name) 31.01.2014 while booting dates are mentioned from January 2010 to October 2011 i.e. more than 2 years backwards. There could be no logic of making the same on 31.01.2014 . Further no cash was found during the course of survey proceedings. If these papers establish the practice of the assessee to collect cash the department could have found excess cash to that regard on the date of survey. Further your honors have appointed special auditor to audit the books of the company. The special auditors have made no adverse comments as reg....
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....g the assets under section 132(5) and their application under section 132B. It is not available for any other proceeding, except where it is provided that the presumption under section 132(4A) would be available. Thus, merely because the documents were found at the premises of the assessee does not bind the assessee. The assessee has time and again denied the ownership of same and also again beg to state that the same to not belong to us. Thus in view of the above no addition on account of alleged cash received is warranted in the case of the assessee". From the above submissions, it is clear that the AO had made certain presumptions which are rebuttable presumption and which has been explained and clarified by the Ld.AR in the above submissions. Therefore, no adverse conclusion can be drawn on the presumptions assumed by the AO. 8.3.7. It is very important to note that the AO has not disputed / denied the contentions of the Appellant that are contained in this letter. From the copy of the order sheet submitted by the appellant it can be inferred that the assessment order was passed by the AO on 22-08-14 without giving any further opportunity to ....
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....fixed by the directors only. Interestingly, their answers are word to word identical. The sales of flats were arranged and the prices of the flats were fixed by the directors only.. Neither they were author of such loose papers nor were they even aware about author of the papers. In such a situation, how they could straightway give answer, accepting truthfulness of the papers? As such, it was highly unlikely for they being privy to receipt, or even in knowledge, of such huge amount of unaccounted cash, along with the directors. Under the circumstances, keeping in mind the principle of Preponderance of Probability, blind reliance on their statements, especially without cross verifying with the directors themselves, was uncalled for. Their statements obviously could not have been relied upon exclusively, blindly and mechanically. This is specially so when such statements were confronted only one day prior, without giving any meaningful opportunity to the Appellant to meet the contentions in the statement, including by way of cross examining the concerned persons to enable it to bring out the truth. d) It is surprising that neither the survey party nor the A.O. in co....
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....the Supreme Court in the case of Kishinchand Chellaram[ 125 ITR 713 (SC)], these papers have no evidentiary value to support the addition. b) Even otherwise, these papers are basically unsigned as held in the case of Layers Exports P. Lp %$$$} 53 ITR (Trib) 416 (Mumbai), CIT v/s. P. V. Kalyansundaram - [(2007) 249 ITR 49 (SC) at Pg. 52], Mohammed Yusuf v/s. D. - [AIR 1968 Bom 112], CIT v/s Mrugeshjaykrishna - [(2000) 245 ITR 638(Guj)], CIT v/s ChamanlalDhingra - [(1994) 121 Taxation 272 (All)], Harish Inani v/s. DCIT - [(2008) 24 SOT 541 (Mum)], ACIT v/s. Shailesh S. Shah -[(1997) 3 ITD 153 (Mum)], AtuI Kumar Jain v/s. DCIT - [(1999) 64 TTJ (Del) 786], ACIT v/s. Sri RadheShyamPoddar - [(1992) 41 ITD 441 (Cal)], Ashwini Kumar v/s. ITO - [(1992) 42 TTJ (Del) 644)], D.A. Patel v/s. Dy. CIT- [(2000)72 ITD 340 (Mum)], ACIT v/s. Rakesh M. Shah - [(2004) ISOT (Mum) 224], S.P. Goyal v/s. Dy. CIT - [(2002) 82 ITD 85 (Mum) (TM)], Dy. CIT v/s Ex. Of the Estate of Late Shri D.K. Shah - [I.T.A. No. 2996/M/02, Order Dated 23 January, 2013 (Mumbai-Trib)], Amarjit Singh Bakshi [HUF] v/s. ACIT [(2003) 263 ITR (AT) 75 (Del) (TM)], S.K. Gupta v/s. Dy. CIT-[(1999)63 TTJ (Del) 532], Vijaybhai ....
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....ts]. It is elementary that owner and / or his family will not pay any on-money to the owner himself. In any case, nobody would pay on money without booking a flat by making at least a token payment in cheque towards booking. As such, again going by the principle of preponderance of probability, this working does not seem to be depicting true state of affairs. Further, these papers include the agreements which were cancelled. Obviously, there cannot be any addition on account of on-money with respect to the agreements which are cancelled. g) The Ld.AR has clarified that the loose papers were only rough working / tentative planning for the work that did not materialise and did not represent any actual transaction and therefore, mechanical reliance by the AO upon these loose papers is devoid from actual facts and figures. Even otherwise, I find that the addition is not sustainable, on the following grounds: (i) There was no unaccounted cash found during course of the survey proceeding. If the allegation of the A.O, about the Appellant receiving such huge on money had any truth, then surely some excess cash should have been found at the time of the s....
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....10. In the backdrop of the above facts, the various very well settled legal positions, as pointed out by the Appellant, get fully applicable to the facts of the Appellant's case. They are: (i) Apparent is real Apparent must be considered as real, until it is shown by the party alleging otherwise that it is not so by bringing cogent evidence on record. Under the Income tax Act, such onus is on the department. There should be some direct nexus between such conclusion and the primary facts. (ii) Onus/Burden - Undisclosed Income In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provisions. (iii) Department - how to discharge the burden If the explanation (given by the assessee) shows that the receipt was not of an income mature, the department cannot act unreasonably and reject that explanation to hold that it 'was income. The department cannot be merely rejecting unreasonably a good explanation, convert proof into no proof. iv) No addition of undisclosed income on merely suspicion The Income - tax officer is not entitl....
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....ion made. This is clear from the figures and the calculations as already referred earlier. 8.3.12. In any case, no addition could have been made in the present year on account of alleged on-money it is an admitted & accepted fact that the Appellant is following project completion method and the project was not completed substantially in the pervious year. In view of the decision in the case of "Layers Exports P. Ltd.[2017] 53 ITR (Trib) 416 (Mum), no income in the form of on - money can be taxed in the year in which the project is going on. Therefore the claim of the Appellant for deletion of such addition is sustainable on this ground as well. 8.3.13. In view of the above, neither on fact nor in law such addition is sustainable. Consequently, the addition of Rs. 20,86,37,000/- is directed to be deleted. In the result the ground of appeal is allowed. 6.1. After having gone through the orders passed by the ld. CIT(A) and hearing the parties at length and judicial precedents cited by the parties, we find that the addition in the present case were made by the AO u/s 68 of the Act by holding "cash receipts‟ received by the assessee. At the outset it was conte....
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....such a scenario, the legality of the additions are required to be adjudicated de hors such material. Thus, if we go by the above analogy, then in the present case, if such loose papers relied upon by the AO are to be ignored, then in that eventuality, there was no material with the AO to make the additions. As far as the statement of two employees are concerned, the same cannot be relied upon as the action of the AO in relying upon such confession in statement is contrary to instruction no. F.No 286/2/2003-IT(Inv.II) dated 10.03.03 and instruction no. F.No 286/98/2013-IT(Inv.II) dated 18.12.14 issued by CBDT. Even otherwise as per the decision of Hon‟ble Supreme Court in the case of CIT vrs. S. Kaderkhan (2013) 352 ITR 480 (SC), wherein it was held that statement taken during assessment proceedings is not binding /conclusive piece of evidence. It is also important to mention here that these two persons were neither the authors of such loose paper nor were they even aware about the author of the papers, therefore in such a situation, they cannot be treated as privy to the receipt or even in knowledge of such huge amount unaccounted cash. Thus in these circumstances, keeping....
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....ppellant). In fact, both persons categorically stated that the sales of flats were arranged and the prices of the flats were fixed by the directors only. Interestingly, their answers are word to word identical. The sales of flats were arranged and the prices of the flats were fixed by the directors only.. Neither they were author of such loose papers nor were they even aware about author of the papers. In such a situation, how they could straightway give answer, accepting truthfulness of the papers? As such, it was highly unlikely for they being privy to receipt, or even in knowledge, of such huge amount of unaccounted cash, along with the directors. Under the circumstances, keeping in mind the principle of Preponderance of Probability, blind reliance on their statements, especially without cross verifying with the directors themselves, was uncalled for. Their statements obviously could not have been relied upon exclusively, blindly and mechanically. This is specially so when such statements were confronted only one day prior, without giving any meaningful opportunity to the Appellant to meet the contentions in the statement, including by way of cross examining the concerned person....
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....nd could hardly appreciate the factual analysis given by the appellant in its submission. As such, in terms of the ruling of the Supreme Court in the case of Kishinchand Chellaram[ 125 ITR 713 (SC)], these papers have no evidentiary value to support the addition. b) Even otherwise, these papers are basically unsigned as held in the case of Layers Exports P. Lp %$$$} 53 ITR (Trib) 416 (Mumbai), CIT v/s. P. V. Kalyansundaram - [(2007) 249 ITR 49 (SC) at Pg. 52], Mohammed Yusuf v/s. D. - [AIR 1968 Bom 112], CIT v/s Mrugeshjaykrishna - [(2000) 245 ITR 638(Guj)], CIT v/s ChamanlalDhingra - [(1994) 121 Taxation 272 (All)], Harish Inani v/s. DCIT - [(2008) 24 SOT 541 (Mum)], ACIT v/s. Shailesh S. Shah -[(1997) 3 ITD 153 (Mum)], AtuI Kumar Jain v/s. DCIT - [(1999) 64 TTJ (Del) 786], ACIT v/s. Sri RadheShyamPoddar - [(1992) 41 ITD 441 (Cal)], Ashwini Kumar v/s. ITO - [(1992) 42 TTJ (Del) 644)], D.A. Patel v/s. Dy. CIT- [(2000)72 ITD 340 (Mum)], ACIT v/s. Rakesh M. Shah - [(2004) ISOT (Mum) 224], S.P. Goyal v/s. Dy. CIT - [(2002) 82 ITD 85 (Mum) (TM)], Dy. CIT v/s Ex. Of the Estate of Late Shri D.K. Shah - [I.T.A. No. 2996/M/02, Order Dated 23 January, 2013 (Mumbai-Trib)], Amarjit S....
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....ives, who had not booked any flat nor any amount was shown as having received from them at the time of booking [cheque receipts]. It is elementary that owner and / or his family will not pay any on-money to the owner himself. In any case, nobody would pay on money without booking a flat by making at least a token payment in cheque towards booking. As such, again going by the principle of preponderance of probability, this working does not seem to be depicting true state of affairs. Further, these papers include the agreements which were cancelled. Obviously, there cannot be any addition on account of on-money with respect to the agreements which are cancelled. g) The Ld.AR has clarified that the loose papers were only rough working / tentative planning for the work that did not materialise and did not represent any actual transaction and therefore, mechanical reliance by the AO upon these loose papers is devoid from actual facts and figures. Even otherwise, I find that the addition is not sustainable, on the following grounds: (i) There was no unaccounted cash found during course of the survey proceeding. If the allegation of the A.O, about the Appellant receiving....
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....islature itself regards stamp duty value as a barometer representing fair market value of immovable properties. 6.4. It is a settled proposition of law that no addition of undisclosed income on mere suspicion can be made. In this respect we rely upon the decision in the case of Common Cause vs. Union of India (2017)394 ITR 220 and in the case of Sheraton Apparels vs. ACIT (2002) 256 ITR 20 (Bom) and even no addition on the basis of statement of third party is sustainable and in this respect we draw strength from the following judgments. It was held as under:- 1. M/s. Prem Ex-Servicemen Co.op v/s. State of Haryana - [AIR 1974 SC 1121 It is well settled that the effect of an alleged admission depends upon the circumstances in which it was made. 2. Ambika Devi v/s. Balmakund Pandey - [AIR 1981 Patna 111] An admission must be a clear and unambiguous statement. The value of admissions must depend upon the circumstances in which they are made and possible motives for incorrect statements by interested persons should not be ignored. (II) UNDER INCOME TAX ACT, 1961 1. CIT v/s. Mantri Share Brokers (P.) Ltd - [(2018) 96 taxmann.com 279 (Raj -H....
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....e corroboration for putting the assessee under a burden of .v, tax. Simply on the basis of statement of third person it cannot be held that this amount has been remitted by assessee from undisclosed sources, more so, when an opportunity to cross examine this person was not granted to the assessee. This statement can at best be information for probing the issue further. 7. ACIT v/s. Ramanbhai Patel - [(2008) 12 DTK (Ahd) (Trib) 471] The law on the statement is very much clear. No addition can be made merely on the basis of the statement recorded under s. 132 (4) during the course of regular assessment until and unless the statement is supported by corroborative evidence. 8. Bansal Strips (P) Ltd. v/s. ACIT - [(2006) 99 ITD 177 (Del)] The only basis on which the additions have been made is the first statement of third party. Apart from this statement there is not an iota of corroborative material in the possession of the Department that alleged commission was indeed paid to third party. No reasons have been given as to why the statement of third party should be accepted to be true while the statement of the assessee well supported by regular books ....
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....is mutandis. ITA No.3990/Mum/2017 8. The following grounds have been taken by the assessee:- 1. DISALLOWANCE U/S. 14A 1.1 The Learned Commissioner of Income - tax (Appeals) - 9, Mumbai ["Ld, CIT (A)"], erred in confirming the action of the A.O. of making disallowance under section 14A of the Income - tax Act, 1961 read with Rule 80 of the Income -tax Rules, 1962 at Rs. 3,16,865/-. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the case of the Appellant was not covered under section 14A of the Act and, in any case, no disallowance was called for under this section. 1.3 Without prejudice to the above, it is submitted that assuming - but not admitting - that some disallowance was required to be made under section 14A of the Act, the calculation of the disallowance is not in accordance with the law, is arbitrary and is excessive. 2. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing. 8.1. All the grounds raised by the assessee are interrelated and inter connected and are challenging the order of CIT(A) in confirming the action of AO in m....