TaxTMI 
TaxTMI 
2021 (1) TMI 1068
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.... 2.1 The Id. CIT (A) having deleted the disallowance on the ground that it is not on the basis of any seized documents/materials, ought to have appreciated that u/s 1 53A of the IT Act, the AO is entrusted with the duty of bringing to tax, the total income of the assessee whose case is covered by Sec. I53A of the IT Act for each assessment year falling within the six assessment years immediately preceding the previous year in which search was conducted and that even if an assessment order was passed u/s 143(1)/143(3)/147, the AO is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during search and seizure operation. 2.2 Having regard to the fact that in spite of ample opportunity accorded, the assessee failed to produce the original bills/vouchers and the details of all the expenses debited to the P & L account before the AO. the Id.CIT(A) ought to have confirmed the disallowance made by the AC in the assessment order passed u/s 153A r.w.s 143(3) of the IT Act for AY 2008-09 in the assessee's case. 3. The Id. CIT(A) erred in deleting the addition of Rs. 5 crores made u/s 40A(3) by the A....
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....vailable on record nor assessee has filed any photocopy of the same duly acknowledged by AO and as such production of letter dated 25/3/2014 before learned CIT(A) is an afterthought on part of the assessee. 4.2 Admitting but not accepting that the letter dt. 25/3/2014 was handed over to the AO. the ld.CIT(A) ought to have appreciated that the same was NOT considered for the simple reasons that the total income could only be revised by filing revised return of income and not by filing a reconciliation statement as laid down by the Hon'ble Supreme Court in the case of M/s Goetz (India) Ltd 284 ITR 323." 3. At the outset, we find that there is a delay of 3 days in filing appeal by Revenue, for which necessary petition along with affidavit has been filed for condonation of delay. The reasons given by Revenue for not filing appeal within the time allowed under the Act is under a bonafide belief. The learned AR has no objection for condoning delay in filing the appeal. Therefore, we condone the delay in filing appeal by the Revenue and admit the same for hearing. 4. Brief facts of the case are that assessee is a Director of Belair Group of Companies, which is engaged in th....
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.... that the unaccounted investment was from the amount of undisclosed receipt of Rs. 2,50,00,000/- from Om Shakthy Agencies in the Asstt. Yes 2007-08. However it was found that out of the total amount of Rs. I0,00,00,000/- paid to Kokilam Foundation it was found that Rs. 500,00,000/- was paid in cash. When asked to show cause why it should not ho disallowed u/s4OA(3) of the Act, the Id. A/R submitted a reply that it was an investment and not an expenditure. It was also submitted that an additional income of Rs,4,25,00,000/- on the investment was being offered for taxation in the Asstt. Year 2009-10. But the contention of the assesses is not correct and acceptable. The assessee is regularly engaged in purchase and sale of land in an organized manner, The land has been shown as stock in trade in the balance sheet, The assossee may, now claim that R,,4,25,00,000/- is the return on investment. But it is actually the profit of the assessee. Hence the payment of Rs, 10,00,00,000/- was his revenue expense even bough he is now claiming it to be investment and even though it was not paid directly to the persons from whom the land was purchased. For this reason, the amount of Rs. 5,00....
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....ourse of search. The learned CIT(A) further noted that Assessing Officer has not made any reference to search finding which warrants disallowance of expenditure on ad-hoc basis and accordingly deleted additions made towards 50% of ad-hoc disallowance of expenses. As regards additions made towards disallowance of cash payment u/s.40A(3) amounting to Rs. 5.00 crores , learned CIT(A) by taking note of various facts and also by following the decision of ITAT Chennai Bench in the case of M/s. RK Power Gen Pvt. Ltd in ITA No.1864 to 1867/Chny/2015 deleted additions made towards disallowances of expenditure u/s.40A(3) by holding that cash payment made to M/s. Kokilam Foundations Pvt.Ltd. was more like financial arrangement whereby assessee has invested a sum of Rs. 10 crores with an expectation of 24% rate of return. As per the terms of MoU and supplementary agreement dated 27.02.2013, transactions between the parties are akin to investment activity which cannot be considered as payment made for purchase of land merely for the reason that by inadvertent error the same has been shown as stock-in-trade in the relevant assessment year, more particularly, when assessee has subsequently rectif....
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....learned CIT(A) after considering relevant facts has rightly deleted additions made towards 50% ad-hoc disallowance of expenses. 10. We have heard both parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from the records indicate that ad-hoc disallowances made by Assessing Officer towards various expenses have been allowed as genuine in the scrutiny assessment completed u/s.143(3) of the Act for the relevant assessment year. It is also an admitted fact that Assessing Officer has made ad-hoc/estimated disallowance of expenses without making any reference to incriminating materials found as a result of search which indicate that expenditure debited to profit & loss account is not genuine expenditure and which are not incurred for the purpose of business. It is well settled principle of law that unless Assessing Officer makes out a case that expenditure debited to profit & loss account is not genuine and which are not supported by necessary evidences, he cannot make ad-hoc disallowance on the ground that assessee has not produced necessary details and vouchers for verification. In this case, on perusal of assessment or....
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....turn of income, assessee has shown investments made with joint venture as purchase of land and stock-in-trade which itself sufficient to hold that transactions between the parties are in the nature of purchase of lands and as such any cash payments made for revenue expenditure was hit by provisions of section 40A(3) of the Act. The learned CIT(A) without appreciating above facts has simply deleted additions made by Assessing Officer by considering supplementary agreement filed by assessee, which is much after the date of search. 13. The learned AR for the assessee, on the other hand, supporting order of learned CIT(A) submitted that assessee has filed necessary evidences before learned CIT(A) to prove that entries in books of account was an inadvertent error committed by Accountant and which is not detrimental to decide the nature of transaction and what is relevant is true nature of transaction as per evidences placed before authorities. In this case, MoU and supplementary agreement between the parties clearly indicate that amount paid to M/s.Kokilam Foundations Pvt. Ltd. is investment in joint venture with assured rate of return, which cannot be considered as purchase and sale....
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..... Ltd. is only investment in joint venture which cannot be considered as payment for purchase of land. Further, in order to treat purchase of land as stock in trade, the assessee must be owner of lands and land should be registered in the name of the assessee. However, in this case Assessing Officer has failed to bring on record any evidence to prove that lands have been registered in the name of assessee. In fact, assessee has clearly proved that lands were never purchased in the name of assessee. No doubt, assessee has originally treated payment made to M/s.Kokilam Foundations Pvt. Ltd., as stock-in-trade in his books of account. But, at the time of assessment, assessee has filed revised profit and loss account excluding transactions and stated that by inadvertent error committed by Accountant, the transaction regarded as purchase of land and stock-in-trade in books of account. However, real nature of transaction between the parties was only investment which was supported by necessary MOU between the parties. Therefore, when evidences clearly indicate nature of transaction as only an investment in joint venture, merely for the reason that assessee has shown said transaction....
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....he case of M/s. R.K.Powergen Pvt.Ltd.(supra) has rightly deleted additions made by Assessing Officer towards disallowance of cash payment u/s. 40A(3) of the Act. We do not find any error or infirmity in the order of learned CIT(A) and hence, we are inclined to uphold the findings recorded by learned CIT(A) and reject ground taken by Revenue. 18. The next issue that came up for our consideration from ground no.4 of Revenue appeal is deletion of addition of Rs. 58,97,318/- made by Assessing Officer towards profit and gains from business or profession. The facts with regard to impugned dispute are that assessee has declared profits from business or profession amounting to Rs. 24,40,011/-. Further, at the time of assessment proceedings, he has filed revised statement of profit & loss account and declared loss of Rs. 34,57,307/- by excluding purchase of land and stock in trade from books of account which resulted in reduction of net profit into net loss. The Assessing Officer has rejected revised statement of total income filed by assessee. However, the learned CIT(A) has accepted revised statement of total income and directed the Assessing Officer to consider net loss as per revised....