TaxTMI 
TaxTMI 
2024 (7) TMI 136
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....153A r.w.s. 143(3) 09/JAB/2018 2013-14 CIT(A)-1, Jabalpur 23.11.2017 DCIT (Central) 23.12.2016 153A r.w.s. 143(3) 10/JAB/2018 2014-15 CIT(A)-1, Jabalpur 23.11.2017 DCIT (Central) 23.12.2016 153A r.w.s. 143(3) 22/JAB/2018 2015-16 CIT(A)-1, Jabalpur 23.11.2017 DCIT (Central) 23.12.2016 153A r.w.s. 143(3) 82/JAB/2019 2007-08 CIT(A)-15, Kolkata 15/07/2019 ITO, Ward-1(3), Kolkata 19.12.2012 143(3)/ 147 1.1. As most of the issues involved in all these appeals are identical, they are taken together and disposed of by this common order for the sake of convenience. 2. Deduction U/s 80IA of the Act Ground No. 1 for AY 2009-10 Ground No. 1 for AY 2010-11 Ground No. 1 for AY 2011-12 Ground No. 1 for AY 2012-13 Ground No. 1 for AY 2013-14 Ground No. 1 for AY 2007-08 We have heard the rival submissions and perused the material available on record. The assessee is a part of Singhania Group on which search action u/s 132(1) of the Act was carried out on 16.10.2014. The main business concerns of the group are M/s. Tirupati Buildcon Pvt. Ltd., M/s. Shivangi Oil Pvt Ltd. and M/s. Tirupati Co....
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....n u/s 80IA(4) of the Act and had maintained regular books of account duly audited by Chartered Accountants. The audited financial statements along with audit report in Form 10CCB had been duly submitted along with return of income and the quantum of deduction u/s 80IA(4) of the Act had been duly certified by the Chartered Accountants. The deduction has been claimed in respect of profits derived from various development of infrastructure facilities being roads for the State Govt of Madhya Pradesh and National Highway Authority of India (NHAI). It was also submitted by the assessee that deduction u/s 80IA of the Act was indeed allowed by the ld Additional CIT, Range-1, Kolkata u/s 143(3) of the Act dated 16.12.2011 for the A.Y. 2009-10 after examining the claim extensively with the relevant agreements and documents. The assessee also placed reliance on the CBDT Circular No. 4 of 2010 dated 18.05.2010 wherein, it had been clarified that widening of existing roads by constructing additional lane as part of highway project by an undertaking would be regarded as new infrastructure facilities for the purpose of section 80IA(4) of the Act. The assessee has developed in terms of agreement w....
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..... The certificates and correspondence in this regard are enclosed in pages 44 to 50 of the Paper Book Vol -1. On perusal of these documents and contract documents, the scope of work of assessee company could be briefly summarized as under:- "i) Assessee company has to take possession of all parts of site for executing the development projects. Assessee company is responsible for safety of all injuries at the site. ii) Access to site by the Engineers or any other authorized person has also been provided. The site is under entire control and possession of assessee company. iii) Assessee company has all risk of loss or damages to physical properties and personal injury and death which arises during and in consequence of performance of development contract. iv) Assessee company after development of project has to handover the site to Government and has to obtain completion certificate from the Engineer as to completion of the project. v) Assessee company has to prepare drawings/operating manual "as built" and has to supply the same to the Engineer for approval. vi) Assessee company has defect liability period ranging upto 5 years du....
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....A of the Act, granted relief to the assessee by observing as under:- "7.2.3. DECISION:- 1 have carefully considered the submission put forth & the documents furnished on behalf of the appellant, perused the facts of the case and the observation of the AO in the impugned assessment order and other material brought on record. In these grounds of appeal, the appellant's claim of deduction under section 80IA(4) of Income Tax Act, 1961 has been disallowed by the A.O. as discussed at para 6.9 of the assessment order. The A.O. has concluded that the project executed by the appellant is in the nature of works contract and in view of provisions of section 80IA(13) of Income Tax Act 1961, the appellant is not eligible for grant of deduction under section 80IA(4) of I.T. Act 1961. In the case of appellant, it is seen that the appellant company is engaged in development of roads and complete details as to development of roads as well as terms of contract were placed before the A.O.in the course of assessment proceedings. The perusal of various contracts indicates that the appellant company is engaged in development of rural roads under the Pradhan Mantri Gram Sadak Yojana includin....
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....y on 17/11/2016 wherein also it has been certified that the appellant company has executed projects of infrastructure development of roads and its maintenance successfully in respect to projects observed in such certificate. The aforesaid certificate is reproduced hereunder for ready reference: "Office of the Executive Engineer PWD, NH Division Bhopal TO WHOM IT MAY CONCERN Under the Ministry of Road Transport and Highways, PWD National Highway Madhya Pradesh is a wing under which the project of Infrastructure Development and Maintenance of declared various National Highways Projects are executed and above referred works were awarded to Tirupati Build-Con Private Limited, Burhar for the same purpose ie Development and Maintenance of 3 years of National Highway Roads Project being Constructed and Development in mode of Contracts. M/s. Tirupati Buildcon Pvt. Ltd. has successfully completed the projects under NH-78, NH-86, NH-59A for Development Works. Sd/-17/11/2016 Executive Engineer, PWD, National Highway Division, Bhopal M.P." The receipts from this project have been shown in the profit and loss account of the respective ....
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....clearly makes the appellant company in the domain of being developer of infrastructure projects. 7.2.6 It is seen from the contract that all the risk and gain are that of developer in execution of development project. The developer has to procure various materials including consumable which would require for making development of roads. No material is being supplied by the Government Department for execution of development project. The grant of development project is also with a stipulation that company must possess minimum requirement as regard to plant and machinery for execution of development works. The company should also possess required technical and human resources in order to be eligible for development project to be granted by Government. The aforesaid condition/stipulation strengthens the submission of the appellant company that the contract given by the Government is not merely a works contract. As per contract appellant has to carry out set of activities to develop infrastructure project using its technical expertise, technical and other skilled and non skilled man power and its plant & machineries to execute projects, on this count itself it cannot be said th....
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....llant company during the year under consideration have been perused. The nature of work executed, including work relating to ports, air-ports, highway ad municipal corporation, all coming in the category of infrastructure facility from the perusal of the terms and conditions of all the agreements, it is abundantly clear that it is not a case where the appellant was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is employ labour. The appellant in the given case was to procure raw material, make arrangements for power, water, plant & machinery, obtain statutory clearances etc., and conduct all the other activities needed for construction to bring into existence an infrastructure facility. Further it was exposed to various risks like risk of damage of property, risk of accidents etc. therefore, having regard to the fact, and emerging legal position, in my view, the Assessing Officer was not justified in holding that the appellant company was merely executing works contract and therefore it was not entitled for the tax hol....
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....s of appeal. 5. Before us both the parties relied in the order authorities below as favourable to them." "6. We have heard rival contentions and perused the materials available on record. At the outset we find that the instant issue is already covered in favour of assessee in its own case by the order of Hon'ble Kolkata Tribunal in ITA No2168/Kol/2013 vide order dated 08.02.2017. The relevant extract of the order is reproduced below: "6. We have heard rival contentions and perused the materials available on record. From the foregoing discussion we find that the provisions of Section 80-IA of the Act applies to the enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfills all the following conditions, namely:- (a) It is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) It has entered into an agreement with the Central Government or a State Government or a l....
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.... direction to keep the assessment proceedings under abeyance. The AO treated the assessee as a mere works contractor conducting mere civil construction and hence as per the explanation to section 80-IA(13), the deduction is not available to him. However on examination of the records we find that the assessee has withdrawn the appeal filed before the Hon'ble High Court. At this juncture attention in this regard is firstly invited to the provisions of explanation of Section 80-IA of the Act as produced below: "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1)." From a plain reading of the above it is clear that deduction u/s 80-IA does not apply to works contract Now the relevant question arises before us for adjudication is that what constitutes a works contract. Section 80-IA nowhere defines the term "works contract", hence the natural meaning of the word shall ap....
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....earing immediately after the words 'deduct an amount equal to two per cent of such sum as income-tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made out of payments made to the contractor." 6.3 We see no reason to curtail or to cut down the meaning of the plain words used in the section "Any work" means any work and not a "works-contract", which has a special connotation in the tax law. Indeed in the sub-section the "work" referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of the Legislature that the "work" in the sub-section is not intended to be confined to or restricted to "works contract". The issue before the Supreme Court in the aforesaid case was whether the term "work" used in section 194C needs to be restricted to "works contract" The Apex Court laid out that the term "work" used in section 194C need not be restricted to "works contracts" (Le. labour contracts) because the sub-section expressly includes supply of labour to carry out ....
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..... contracts involving merely labour (or mere execution of construction without making investments) are outside the purview of the provisions of section 80-IA. Thus, the term "works contract" used in Explanation to section 80-IA(13) means a contract of developing infrastructure by merely employing labour and making no investments. We also find support from the following judgments The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 32 CCH 0296 HydTrib (2012) 51 SOT 0207 (Hyd) (URO). The relevant extract of the order is reproduced as under: "The next question to be answered is whether the assessee is a developer or mere works contractor. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement eritered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government The Government han....
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....uch activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer." 6.4 It was also observed that "The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Similarly the Chennai Bench of Tribunal in case of R.R. Constructions, Chennai vs Department Of Income Tax 2013) 35 CCH 0547 Chen Trib (2015) 152 ITD 0625 (Chennai) held that "when the assessee makes investment and himself executes development work and carries out civil works he is eligi....
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....h are furnished by the assessee at pages 20 and 65 of the paper-book. Similarly, assessee has invested its own fund of Rs. 5,55,00,000.00 for assessment year 2009-10 and of Rs 7,86,75,710.00 for the assessment year 2010-11, as seen from the Balance Sheet of the assessee as on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 21 and 66 of the paper-book. In this view of the matter, the reason given by the CIT(A) on this aspect for denying deduction to the assessee under S.80-IA is also not valid. Thus in light of the aforesaid decision of the Tribunal Hyderabad Bench, the contention of the AO is not valid. Further, merely because the assessee was receiving payments from the Government in progress of work it cannot be said that the projects were financed by Government. In this regard it is pointed out that under sub-section 4 of section 80-IA, deduction is available to a developer, i.e. if, an assessee, merely develops the infrastructure facility without operating and maintaining the same, it is entitled to deduction. The Bombay High court in case of Commissioner of Income-tax v. ABG Heavy Industries Limited [322 ITR 323] observed t....
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.... will never be entitled to deduction u/s 80-IA, which is clearly not the intention of legislature as discussed by the Bombay High Court in case of ABC Heavy Industries Ltd. Thus, merely because the assessee was paid by the Government for development work it cannot be denied deduction under section 80-IA(4). The contention of the assessee finds strength from the following judgments: The ITAT (Mumbai) in case of ACIT v. Bharat Udyog Ltd. (2009) 123 TTJ 0689 : (2009) 23 DTR 0433 (2009) 118 ITD 0336 (2008) 24 SOT 0412 "After the amendment effected by Finance Act, 1999 w.e.f. 1st April, 2000, the deduction under s 80-IA(4) has become available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Sub-cl (c) of cl. (i) of s. 80-IA(4) is obviously applicable to an enterprise which is engaged in 'operating and maintaining' the infrastructure facility on or after 1st April, 1995. It is not applicable to the case of an enterprise which is engaged in mere 'development' of infrastructure facility and not its 'operation' and 'mainte....
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....ncome to developer, Le, to the person who is carrying on the activity of only developing infrastructure facility. Obvious as it is, a developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorisation to operate the infrastructure facility and to collect toll therefrom, and has no other source of recoupment of his cost of development. Considered as such, the business activity of the nature of build and transfer also falls within eligible construction activity, that is, activity eligible for deduction under s. 80-IA inasmuch as mere 'development' as such and unassociated/ unaccompanied with 'operate' and 'maintenance' also falls within such business activity as is eligible for deduction under s. 80-IA. Therefore, merely because the present assessee was paid by the Government for development work, it cannot be denied deduction under s. 80-IA(4). A person who enters into a contract with another person will be a contractor no doubt, and the assessee having entered into an agreement with the Government agencies for development of the infrastructure projects, is obviously a....
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.... who develops the infrastructure facility project, realize its cost? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee had paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation done by the Assessing Officer is accepted, no enterprise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4), which is not the intention of the law. An enterprise, which develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. The legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction. It presupposes that there can be income to developer ie. to the person who is carrying on the activity of only development infrastructure facility. Ostensibly, a developer would have income on....
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....ction. Attention in this regard is invited to the following: (i) The ITAT (Ahmedabad) in case of Sugam Construction (P) Ltd. vs. ITO (56 SOT 45] held that "It is also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefore not a civil contractor simplicitor. (c) That if we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility. (d) That the role of a developer, according to us, is larger than that of a contractor. (e) That when a person is acting as a developer, then he is under obligation to design the project, it is another aspect that such design has to be approved by the owner of the project, i e. the Government in the present case. (f) That he has not only to execute the construction work in the capacity of a contractor but also he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it ca....
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....orks at it cost. Thus, it cannot be said that the assessee had not undertaken any risk. The ITAT (Hyderabad) in case of Siva Swathi Construction (P) Ltd. (supra) held that "Further reason given by the ld. CIT(A) for denying deduction under S.80IA to the assessee is that the assessee has not undertaken any risks. The observations of the Id. CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bond for a period of four years, indemnifying the Government against any loss or expenditure incurred, to repair any defect noticed due to faulty working done by the contractor or substandard material used by the contractor. Further, it is also mentioned in the contract agreement that the assessee shall not claim for any loss due to foreseen circumstances, including suspension of work due to cause. It is also provided that in the event of accident to people employed by the assessee resulting in compensation to be paid as per the Workmen's Compensation Act the same shall be paid by the contractor, viz. the assessee only. In view of the various specific clauses in the agreement fastening the risks....
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....the decision of Hon'ble Kolkata Bench, Kolkata, I am of the view that disallowance of deduction under section 80IA(4) of I.T. Act 1961 in the case of appellant company is unjustified and unsustainable. 7.2.8 The Hon'ble ITAT, Lucknow Bench, Lucknow in the case of M/s. Vijay Infrastructure Pvt. Ltd, vide order dated 30/10/2015 in ITA No. 254/LKW2015 has held as under: "14.1 From the above paras, reproduced from the order of CIT(A), we find that a categorical finding has been given by CIT (A) that the assessee company is not a mere work contractor but has developed the road from existing 2 lane to 4 lane and while doing so, the assessee company has also made substantial investment by itself and also executed the development works and carried out civil-works on its own by using its own material and expertise and no material consumed in the roads and bridges were provided by the NHAI and UP PWD. This is also noted by CIT(A) that the maintenance of the existing facility during the period of development also was of the assessee company and so also was the risk during this period to maintain the infrastructure and after the completion of development of road and i....
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....t of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word "ownership" is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc. 22. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word "it" denotes the enterprise carrying on the business. The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one Even otherwise, the word "it" is used to denote an enterprise Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. 23 The next question is to be answered is whether the assessee is a developer ....
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....ay not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. 25. We find that the decision relied on by the learned counsel for the assessee in the case of CIT vs Laxmi civil Engineering works (supra) squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 80IA of the Act after considering the Judgment of the Mumbai High Court in the case of ABG Heavy Engineering (supra). The case of ABG is not the pure developer whereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80IA of the Act, which ultimately culminated into Amendment under section 80IA of the Act, in the Finance Act 2001, to g....
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....to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. It is needless to say that similar view has been taken by the Chennai Bench of the Tribunal and deduction u/s. 80IA was granted in the case of M/s. Chettinad Lignite Transport Services (P) Ltd., in ITA No. 2287/Mds/06 order dated 27th July, 2007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has taken the same view by inter-alia holding as follows: "7. Moreover, the reasons for introducing the Explanation were clarified as providing a tax benefit because modernisation requires a massive expansion and qualitative improvement in infrastructures like expressways, highways, airports, ports and ....
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...., we find no infirmity that the order of CIT (A) on this aspect that in the facts of the present case, it cannot be said that the assessee company was mere a contractor and not a developer. Therefore, on issue No. 3, we find no infirmity in the order of the CIT(A). This issue is decided in favour of the assessee" In the aforesaid decision widening of road from two lanes to four lanes in terms of agreement with National Highways Authority was for consideration. The activity considered in the judgement is similar to that being carried out by the appellant on the basis of evidence on record. After considering the facts in detail the ITAT had concluded that the assessee therein was eligible for deduction under section 80IA(4) of I.T. Act 1961. The ratio laid down by the aforesaid decision squarely applies to the facts in the case of appellant company and thus the appellant company would be eligible for deduction under section 80IA of I.T. Act 1961 in respect to development of infrastructure project being roads. The aforesaid decision was challenged by the revenue before Hon'ble Allahabad High Court in Income Tax Appeal No. 29 of 2016 and the Hon'ble High Court has uphe....
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.... the relevant findings as recorded in the said order are reproduced hereunder. "8. We have carefully considered the arguments of both the sides and have perused the material placed before us In the case of Kabul Chawla (supra), Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below - "Summary of the legal position. 37. 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 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such ....
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.... above, their Lordships held "Obviously an assessment has to be made under this Section only on the basis of seized material". In clause (v), the same is reiterated by holding "In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". In clause (vu), it is stated "Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search" 10. In the case of RRJ Securities Ltd. (supra), in paragraph 21, it has been held.- "In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only b....
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....re retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee." 12. Thus, Hon'ble Jurisdictional High Court has held "The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations". Their Lordships further observed "However, such Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traf....
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....t to the facts of the assessee's case, the following position emerges. (1) No addition u/s 153A in respect of a completed assessment can be made unless some incriminating material was unearthed during the course of search Admittedly, in the case of the assessee, no incriminating material with regard to issue of share capital has been found and seized during the course of search. (i) Any statement recorded during the course of search cannot on a standalone basis without reference to any other material discovered during search and seizure operation would empower the Assessing Officer to make the addition. The words "evidence found as a result of search would not take within its sweep statement recorded during search and seizure operations. Therefore, the Revenue's stand that the addition u/s 153A can be made in respect of share capital on account of statement of ShriTarunGoyal and ShriAnuAggarwal cannot be accepted (iii) Even otherwise, the statement of ShriTarunGoyal cannot be utilized against the assessee as his statement was recorded behind the back of the assessee and the assessee was not allowed opportunity to cross- examine him. (iv) ....
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....no adversity with regard to activity of appellant being developer as discussed in above paras. 7.2.13 The decision rendered by Hon'ble Bombay High Court in case of in case of M/s Simple Foods Ltd in ITA No.27/2010 vide judgment dated 12/07/2017 and the decision of Hon'ble Delhi High Court in case of International Tractors Ltd. in ITA No. 1082/2005vide judgment dated 20/07/2017 also support the contention of appellant and deduction is claimed u/s 80IA of IT. Act 1961 cannot be denied when deduction u/s 80IA allowed in case of appellant in initial achieved finality assessment year has 7.2.14 It is seen that in the profit and loss account the appellant company is in receipt of interest on various deposits. It has been submitted that the aforesaid interest would go to reduce the claim of interest paid in profit and loss account and there is no resultant surplus in interest account for the purpose of exclusion for allowability of deduction under section 80IA of L.T. Act 1961 The Hon'ble ITAT, Nagpur Bench, Nagpur in the case of M/s Plasti Surge Industries Pvt Ltd. in ITA No 78 & 86/Nag/2012 vide order dated 19/10/2012 has held that interest received and pai....
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.... deleted. Thus, these grounds of appeal of appellant are allowed." 2.7. We find that the ld AO while granting deduction u/s 80IA of the Act to the assessee for AY 2009-10 u/s 143(3) of the Act on 16.12.2011 which is enclosed in pages 96 to 105 of the paper book Vol-1, had indeed narrated the entire activity carried out by the assessee and had categorically stated that the assessee is indeed engaged in the business of development of infrastructure facility. There is absolutely no such material which has been found during the course of search to disturb this particular finding of the ld AO. All the documents issued by the concerned regulatory authorities are only favoring the assessee. Similar was the view taken by the ld AO for AY 2010-11 also u/s 143(3) of the Act on 25.03.2013. We find that the ld CIT(A) had granted relief to the assessee both on merits with regard to claim of deduction u/s 80IA of the Act and also on the aspect of absence of incriminating material found during the course of search qua this addition. The existence of incriminating material in respect of unabated assessment as mandatory has been endorsed by the Hon'ble Supreme Court in the recent decision of....
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.... Ground No. 2 for assessment year 2011-12 Ground No. 2 for assessment year 2012-13 Ground No. 2 for assessment year 2013-14 Ground No. 2 for assessment year 2014-15 Ground No. 2 for assessment year 2015-16 We have heard the rival contentions and perused the materials available on record. During the course of search and seizure operation u/s 132(1) of the Act in the Singhania Group, the residence of Shri Govind Prasad Pandey situated at FF2, Manpreet Vihar Apartment, Kirpal Chowk, Gupteshwar Road, Jabalpur was also covered. Shri Govind Prasad Pandey works in the assessee company and his job profile in the company is management of project and to liaison with other departments with respect toworks and payment of bills. He was also the project in-charge of Damoh Hatta, Gaisabad site in the assessee company. During the course of search operation at the residential premises of Shri Govind Prasad Pandey, loose papers (LPS-1) and a diary (BS-1) were found and duly seized. The said seized documents contained certain notings representing certain payments made to various parties with dates, names and amounts. The ld. AO observed in Assessment Yea....
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....explained how those notings were made by him in the seized documents and filed a retraction statement on 15.01.2015 before the Investigation Wing itself. The ldAO completely ignored all the aforesaid contentions of the assessee and proceeded to make addition on account of illegal payments made to various Government officials as submitted herein under:- Year wise breakup of illegal payments to various officers/officials of MPRDC S No. Financial Year Asst Year Amount (In Rs. ) 1 2010-11 2011-12 16,75,000/- 2 2011-12 2012-13 50,000/- 3 2012-13 2013-14 1,08,94,000/- 4 2013-14 2014-15 1,37,58,000/- 5 2014-15 2015-16 1,84,58,000/- Total 4,48,35,000/- 3.2. The additions were made by the ld. AO by invoking the provisions of Explanation to Section 37(1) of the Act. This addition was made on substantive basis for various assessment years in the hands of the assessee company and on protective basis in the assessment of Shri Govind Prasad Pandey. 3.3. The ld. CIT(A) appreciated the contentions of the assessee and deleted the addition made on account of payments made for illegal gratificat....
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....i Govind Pandey at the time of search and subsequent statement being contradictory to each other no much credence can be given to same. Noting in diary by itself is not sufficient evidence to conclude that illegal payments like that of gratifications have been made by the appellant. Evidentiary value in respect to notings on loose papers and diaries have come up for consideration before Hon'ble ITAT, Ahemdabad Bench, Ahmedabad in case of M/s Nishant Construction Pvt. Ltd in ITA No. 1502/Ahmd/2015. The Hon'ble ITAT in its order dated 14/02/2017 has held as under: 19. at this stage, we would like to refer to the observations of the lower authorities to the effect that no one makes a loss in real estate business and that the market perceptions indicate that the prices of the immovable properties are always on the upward trend. It appears that both the lower authorities have been carried away with the "notorious practice prevailing in real estate circles all property transactions, there is non-disclosure of the full consideration. 20. In Lalchand BhasatAmbica Ram vs. CIT: (1959) 37 ITR 288, the Supreme Court disapproved the practice of making additions in the ....
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....ly in the computation of capital gains and cannot BE availed by the Revenue where the profits of the business are to be computed. 23. The third is the case of section 92BA inserted by the Finance Act, 2012 w.e.f. 01.04.2013. This section gives power to the Assessing Officer to recalculate the profits shown by the assessee in cases of "specified domestic transactions", where the aggregate of such transactions entered into in the relevant accounting year exceeds a sum of Rs. 5 crores. 24. Except in these three situations, the Act does not permit the enhancement of the profits of the business shown by the assessee. 25. Coming to the evidentiary value of the impounded loose sheet mentioned elsewhere, the Hon'ble Supreme Court in the case of Common Cause (A red Society) and Others vs. Union of India and Others in Writ Petition Register Civil Appeal No. 505 of 2015 has observed as under:- 16. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla's case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decisi....
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....what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said, that the rule as laid down in Section 34 of Tie Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with 28 It is apparent ....
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....n made by the A.O. on assumption and presumption is unjustified and unsustainable. 7.2.6 It is noted that the Investigation Wing of the Department had examined various persons in post search inquiry for verification of documents seized from Shri. Govind Pandey. The copies of various statement recorded have been submitted in the appellate proceedings to support the contention made by appellant that notiings found in the seized documents are not evidence of any payment made on account of illegal gratification. The perusal of statement recorded by the Department of various persons indicates that the seized documents along with entries represented by names of such persons were confronted to verify whether any payment has been received by them. The aforesaid persons in the statement given on oath before the Officer of Investigation Wing have clearly stated that no money was received by them from appellant or Shri GP. Pandey. The aforesaid evidence which demonstrates that the notings in seized documents are not in respect to payment made by appellant have not been faulted by the A.O. in assessment proceedings nor any independent evidence has been brought on record to show that t....
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.... case of appellant and considering the same addition made by A.O. is unjustified and unsustainable. 7.2.8 The Hon'ble Hyderabad ITAT in case of DCIT Vs. K. Baburao had considered the evidentiary value of the note book seized during the course of search which was not supported by any other corroborative material or evidence found during the course of search. The Hon'ble ITAT has held as under: 4. During assessment proceedings, the AO observed that as per the seized material Annexure KBR/A/02 and KBR/A/4, assessee was involved in several financial transactions relating to real estate business for the period 2003 to 2008 and these transactions were written in coded form. He observed that in the statement recorded on the date of search, assessee admitted that the seized books contain details of day to day expenditure. In the statement recorded u/s. 131 on 23-7-2008, the assessee further admitted that the seized books contain receipts and payments partly related to him and partly related to others and the entries were written in coded form. He also admitted that these books were written by his managers and his two wives Smt. Sridevi and Smt. Rani. The AO analyz....
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....sidered as a conclusive evidence to make any addition towards undisclosed income. It was held by the Supreme Court in the case of CBI vs. V.C. Shukla (1998) 3 SCC 410 that "file containing loose sheets of papers are not books" and hence entries therein are not admissible u/s. 34 of the Evidence Act, 1872. 28. In the present case, the seized material (two note books) marked as KBR/A/02 and KBR/A/04 wherein certain entries are found recording arious transactions pertaining to the assessee. These entries in the notebook are unsubstantiated and on that basis the AO reached to the conclusion that the figures mentioned therein are to be read by adding zeros and thereby he came to conclude that there is undisclosed income in these 6 assessment years. In our opinion, the document recovered during the course of search was a dumb document and led nowhere. The CIT(A) rightly came to the conclusion that it cannot be acted upon and deleted the addition. 29. Other than the loose paper, the AO has not brought on record any corroborative material or evidence to show that the inference made by him is correct. The CIT(A) after taking the totality of the circumstances into considera....
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.... has been brought on record by the revenue in the instant case. Hence, the primary onus and presumption in terms of Section 292C of the Act would lie on ShriGovind Prasad Pandey and not on the assessee company. Though, Shri Govind Prasad Pandey had initially stated in his statement u/s 132(4) of the Act that the payments reflected in the seized documents represent illegal gratification made to various Government officials for and on behalf of the assessee company and he had acted as per instructions of Shri Padam Singhania, the said statement stood retracted by him on 15.01.2015 before the Investigation Wing itself during the post search proceedings. This fact was further corroborated by Shri Padam Singhania's statement wherein he had categorically stated that he had not given any instructions to Shri Govind Prasad Pandey to make any payment in the form of illegal gratification to various Government officials and the assessee company had not made any illegal payments. Further, the Investigation Wing had also conducted independent enquiries with the concerned Government officials mentioned in the seized documents by recording statements on oath from them, behind the back of the asse....
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....62,000 shares to Kolkata based companies and offered a sum of Rs. 1,37,56,000 in the individual status of family members of Singhania's for AY 2015-16. However, on perusal of the returns of individuals, the ldAO observed that no such offer was made. Accordingly, the ld AO proceeded to add a sum of Rs. 1,37,56,000 in the hands of the assessee company for the year under consideration based on the statement given by Shri Padam Singhania. 4.1. Before the ld CIT(A), the assessee made a preliminary objection that AY 2011-12 being unabated/ completed assessment and no incriminating material was found during the course of search qua the issue of share capital either at par or at a premium, no addition per se could be made in the hands of the assessee company in the search assessment u/s 153A of the Act. Further, the assessee submitted that there was no receipt of any money during the year at all. The receipt of share capital and share premium from Kolkata based companies happened in earlier year, wherein no addition has been made by the ld AO u/s 68 of the Act despite completing the assessment u/s 143(3) of the Act on 06.03.2013. During the year under consideration, the promoters of the....
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....ital Ltd. reported at 365 ITR 0065 (M.P.) had explained the onus on appellant in the case of contribution of share capital. It has been held by Hon'ble Jurisdictional High Court that in respect to contribution of share capital, the onus on appellant is only to establish identity of shareholders. In the facts of the present case the identity of corporate shareholders is clearly evident from the evidences on record. Financial Statement of all the corporate shareholders is placed before me and the financial statements clearly substantiated and demonstrated the creditworthiness and genuineness of the transactions. PAN of the corporate shareholders is available on record. Share Capital amount have been received through proper banking channel. Copy of Bank Statement of appellant company is available on record. In view of above, the onus to explain the share capital contribution by the appellant stands explained. Hon'ble Jurisdictional High Court in the case of CIT Vs. People General Hospital Ltd. reported at 365 ITR 65 MP has held as under: "15. In Lovely Exports (supra) the Apex Court considering the question held thus:- "2. Can the amount of share money be reg....
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....ubstantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs." The aforesaid decision of Hon'ble Jurisdictional High Court has been upheld by the Hon'ble Apex Court on dismissal of appeal filed in SLP (Civil)CC-5997/2014 vide judgment dated 17/04/2014. The ratio laid down by the Hon'ble Jurisdictional High Court squarely applies to the facts in case of appellant and considering the same addition made by the A.O. is held to be unjustified and unsustainable. 7.5.5 It is also noted that the Hon'ble High Court of Bombay at Goa in case of M/s Paradise Inland Shipping Pvt. Ltd., vide judgment dated 10th April 2017 in Tax Appeal No. 66 of 2016 has dismissed the appeal of revenue challenging the addition in respect to share capital. It is noted by the Hon'ble High Court that the A.O. for making addition in respect to share capital had relied upon statement of two persons one from Calcutta and other from Delhi to show that companies who had subscribed to share capital of assessee company are not in existence. The aforesaid finding were reversed in appellate procee....
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.... drawn from the aforesaid report as discussed by the A.O. The AO has also made reference to statement of Shri Padam Kumar Singhania which has been pasted in assessment order. The aforesaid statement has been retracted. In any case in the aforesaid statement nothing has been stated on behalf of appellant company and thus there is nothing adverse which can be drawn from the statement referred to in assessment order. 7.5.7 It is seen in the case of appellant regular assessment has been framed pursuance to return filed u/s 139 of I.T. Act 1961 on 24/09/2011. In the course of search no incriminating material or evidence was found to impeach the genuineness of contribution of share capital received by appellant company. It is settled proposition of law that in assessment framed u/s 153A of I.T. Act 1961 the additions in the completed assessment have to be restricted to incriminating evidence or material found during the course of search. In the case of appellant there is no incriminating evidence or material found during the course of search with regard to share capital contribution received which was accepted in the regular assessment framed u/s 143(3) of I.T. Act 1961 during A....
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....or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material" v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153Ais relatable to abated proceedings (ie. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of vii Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course o....
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.... 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based on....
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....the Assessing Officer to make the addition. The words "evidence found as a result of search" would not take within its sweep statement recorded during search and seizure operations. Therefore, the Revenue's stand that the addition u/s 153A can be made in respect of share capital on account of statement of Shri Tarun Goyal and Shri Anu Aggarwal cannot be accepted. (iii) Even otherwise, the statement of Shri Tarun Goyal cannot be utilized against the assessee as his statement was recorded behind the back of the assessee and the assessee was not allowed opportunity to cross-examine him. (iv) In the statement of Shri Anu Aggarwal dated 15th September, 2008, the query was raised with regard to loose papers found and seized from their premises. Admittedly, none of the loose papers was relating to issue of share capital. The loose papers were pertaining to unaccounted receipt on sale and unaccounted expenditure on construction. In the statement dated 24th October, 2008, though the query was raised with regard to issue of share capital and the statement of Shri Tarun Goyal was confronted wherein he has alleged to have provided accommodation entry to the assessee group....
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....ed that difference amount of share premium on issuing 362000 shares in Financial Year 2009-10 works out Rs. 1,37,56,000/- which remains unexplained in Asstt. Year 2010-11. In the computation of assessment order at last page aforesaid addition has been made in Asstt. Year 2011-12. In view of detailed finding recorded in paragraphs hereinabove various observations made in assessment order as regard to share capital addition of Rs. 1,37,56,000/- is unjustified and unsustainable in Asstt. Year 2010-11 and also in Asstt.Year 2011-12 where the A.O. has made the addition under mistake. 7.5.10 It is evident from the evidence on record that no incriminating evidence or material is on record on the basis of which addition has been made by the A.O. Regular assessment framed has achieved finality. Appellant has established identity, creditworthiness of corporate shareholders and genuineness of transactions by placing sufficient evidences on record. For the detailed reasons recorded hereinabove, I am of the considered opinion that the share capital addition made by the A.O. is unjustified and unsustainable in Asstt. Year 2010-11 and also in Asstt.Year 2011-12 where the A.O. has made th....
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.... loose paper containing rough calculation prepared in a computer by one of the employee. It was explained that the said transactions pertain to cement purchase wherein, the assessee is dealing in contract business where work is carried out at various sites and many papers which are prepared by the employee and staff of the assessee company are being sent to the head office. It was pleaded that the assessee company cannot be held responsible to state the genuineness of each type of rough estimates or notings made by various employees at various sites. However, it was also submitted that the surrender was made only to avoid any litigation and attain mental peace. Since the individual family members of Singhania Group had disclosed Rs. 9 crores as undisclosed income, in any event, the same would be available for telescoping benefit with the said income. Based on this explanation, the ld AO concluded that the assessee had accepted the contents in the seized documents to be its undisclosed income and rejected the plea of the assessee that the notings are rough estimates. The ld AO however, held that the said payment could also be in contravention of provisions of Section 40A(3) of the A....
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....tax audit reports have been submitted in the regular assessment proceedings as well as in assessment proceedings u/s 153A of Income Tax Act 1961. The additions made by the A.O. are not finding any place in the tax audit report being payment made in violation of section 40A(3) of Income Tax Act 1961. In case of regular assessment proceedings of assessee no such addition as made by the A.O. had been made for violation of section 40A(3) of Income Tax Act 1961. It is seen that the payment made by appellant for purchase of cement is supported by proper bills and vouchers and entire payment made for purchase of cement is through proper banking channel. On above admitted undisputed factual position, there is no case for making addition u/s 40A(3) of Income Tax Act 1961 in respect to purchase of cement at the hands of appellant. The addition made by the A.O. for violation of section 40A(3) of Income Tax Act 1961 is unjustified and unsustainable. 7.4.5 The loose papers as found from the appellant are pasted in assessment order at page 95 and 96 of assessment order. Perusal of loose papers being A-1/LPS-6/Page-35 & 36 do not indicate that any payment has been made by appellant in ca....
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....assessment has been dealt by various Hon'ble High Courts. Hon'ble High Court of Jharkhand in the case of Shree Ganesh Trading Co. reported at 257 CTR 0159 has held as under: 6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific rea....
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....nstitute the sole basis for fastening liability upon the assessee. 12. In the instant case, the appellants specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine We do not hesitate to observe that an Assessing Officer does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force. 13. It is not as if the retraction from a statement by an assessee would put an end to the procedure that ensued on account of survey or search. The Assessing Officer well can very well support his findings on the basis of other material. If he did not have any other material, in a way, it reflects upon the very perfunctory nature of the survey. We find that the appellate authority and....
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....ion of invoking provisions of section 40A(3) of the Act. The entire addition has been made only based on allegations that there was some cash payment which was not supported by any corroborative evidence. These aspects were rightly appreciated by the ld CIT(A) while granting relief to the assessee as is evident from the observations made hereinabove. In view of the aforesaid observations, we do not find any infirmity in the order of the ldCIT(A) in granting relief to the assessee. Accordingly, the ground No. 4 raised by the revenue for AYs 2011-12 and 2012-13 is hereby dismissed. 6. Addition on account of sub-contract payments Ground No. 3 for AY 2012-13 of Rs. 1,23,62,077 Ground No. 3 for AY 2013-14 of Rs. 1,68,58,576 Ground No. 3 for AY 2014-15 of Rs. 1,57,89,630 We have heard the rival submissions and perused the materials available on record. During the course of search and seizure operation u/ 132(1) of the Act in the premises of the assessee company on 16.10.2014, consequential search warrant was issued in the case of Shri Sushil Singhal, a sub-contractor of the assessee company. This warrant was executed on the same date at his residence at Khaleswar Road, Uma....
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....e case and the observation of the AO in the impugned assessment order and other material evidences brought on record I find substantial force in the same. The appellant company has claimed sub contract expenses in respect to payments made to Shri Sushil Singhal. The A.O. has observed that the premise of Shri Sushil Singhal was simultaneously searched under section 132(1) of Income Tax Act 1961 on the same date that on 16/10/2014. The A.O. has observed that no books of account in respect to activity of business were available at the time of search. The A.O. has discussed addition at para 6.4 of the assessment order. The A.O. has observed as regard creditworthiness of Shri Sushil Singhal and has referred to report of the inspector which has been scanned and pasted in the assessment order. The A.O. has observed that Shri Sushil Singhal has offered nominal income in the return and he has not produced the books of account and vouchers and therefore payment made to Shri Sushil Singhal for assessment years 2012-13 to 2014-15 are disallowed as proved to be bogus. It is seen that the assessment of Shri Sushil Singhal has been framed by the same A.O. on 19/12/2016 ie. 4 days prior to framing....
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....the course of search no incriminating material or evidence was found to impeach the genuineness of sub contract expenses incurred by appellant company. It is settled proposition of law that in assessment framed u/s 153A of I.T. Act 1961 the additions in the completed assessment have to be restricted to incriminating evidence or material found during the course of search. In the case of appellant there is no incriminating evidence or material found during the course of search with regard to sub contract expenses paid to Shri Sushil Singhal which was accepted in the regular assessment framed and has achieved finality. The addition made in the absence of incriminating evidence or material on record came to be considered by Hon'ble ITAT, Delhi Bench, Delhi in case of M/s. Best Infrastructure Pvt. Ltd. reported at 47 CCH 0159 and relevant findings as recorded in said order are reproduced hereunder: "8. We have carefully considered the arguments of both the sides and have perused the material placed before us. In the case of Kabul Chawla (supra), Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered....
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....h AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material earthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment Conclusion 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 9. In clause (iv) above, their Lordships held "Obviously an assessment has to be made under this Section only on the basis of seized material". In clause (v), the same is reiterated by holding "In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". In clause (vi), it is stated "Comp....
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....ne basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessee to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are corded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted Therefore, it is necessary to ensure that such statements, which retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee' 12. Thus, Hon'ble Jurisdictional High Court has held "The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations" Their Lordships further observ....
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.... was raised with regard to loose papers found and seized from their premises. Admittedly, none of the loose papers was relating to issue of share capital. The loose papers were pertaining to unaccounted receipt on sale and unaccounted expenditure on construction. In the statement dated 24th October, 2008, though the query was raised with regard to issue of share capital and the statement of Shri Tarun Goyal was confronted wherein he has alleged to have provided accommodation entry to the assessee group, Shri Anu Aggarwal categorically denied to have received any accommodation entries from anybody. 24. In view of the above, we hold that the issue of share capital was out of the purview of assessment u/s 153A as the assessment for assessment year 2005- 06 was not pending on the date of search and no incriminating material relating to share capital was found during the course of search. Accordingly, the addition of Rs. 3,60,00,000/- made by the Assessing Officer and sustained by learned CIT(A) for unexplained share capital is deleted" 7.3.5 The aforesaid decision has further been upheld by the Hon'ble Delhi High Court vide, its judgment dated 01/08/2017 in ITA No....
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....f search of assessee company or in the course of search of Shri Sushil Singhal to doubt the genuineness of sub-contract payment to Shri Sushil Singhal. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. reported in 454 ITR 212 (SC). For AY 2014-15, the assessee though would not be covered by the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell (supra), still the assessee company would be entitled for relief on merits in view of the aforesaid observations. Accordingly, the ground No. 3 raised by the revenue for AYs 2012-13, 2013-14 and 2014-15 is dismissed. 7. Addition on Rs. 12,02,643/- account of Sale of Gitti Ground No. 5 for AY 2012-13 We have heard the rival submissions and perused the materials available on record. The ld AO observed that the assessee company apart from civil construction works is engaged in mining of minor minerals. It excavates black basalt, 'Gitti', 'murum' etc and the same are used as raw material at their construction sites and sold to others as well. The assessee has mines situated at Bilaspur, Lalpur, Distt. Shahdol, Distt. Umaria and Panjee Cam....
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....p of quantity sold for each of the financial years in the said seized documents. Apart from these rough notings in the loose papers, no other corroborative evidence was found by the search team or any other corroborative material brought on record by the ld AO in the assessment proceedings. In these circumstances, the said seized documents require to be considered as dumb documents based on which no addition could be made. It is pertinent to note that the addition has been made based on the statement of Shri Padam Sighania by the ld AO. But we find that the said statement had been retracted by him subsequently which fact has been ignored by the ld AO. There is absolutely no basis brought on record by the ld AO to adopt the sale rate of Rs. 250 per metric ton for arriving at the unaccounted sale of gitti. Accordingly, the Ground No. 5 raised by the revenue in AY 2012-13 is dismissed. 8. Addition on account of unaccounted cash payment of Rs. 8,62,692/-. Ground No. 1 for AY 2014-15. We have heard the rival submissions and perused the material available on record. During the course of search, seized documents A-1/LPS-6/ Pages 33 and 34 comprising loose papers were recovered fr....
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.... so, there was no reason to dismiss the explanation given by the assessee that the cash payments made to Shri Pradeep Khare are already reflected in the books of account of the assessee company for which the sources were drawn from the sufficient cash balance available with the assessee company. The ld CIT(A) appreciated these contentions of the assessee on examination of the cash book and petty cash book, which are already placed on record before the ld AO and deleted the addition. 8.2. We find that the deletion of this addition has been made based on verification of cash book made by the ld CIT(A). It is a fact that Shri Pradeep Khare is a liaison agent for the assessee working in site and had to be provided imprest cash for meeting the expenditure for and on behalf of the assessee company. Time and again, the imprest was given by the assessee company out of sources drawn from the cash book regularly maintained by the assessee company, which fact is not disputed at all. It is the duty of Shri Pradeep Khare to maintain an account for the imprest cash received by him from the company together with the relevant cash vouchers and evidences and seek replenishment of the imprest cas....
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....while filing the return of income u/s 153A of the Act for the assessee company. In response to the show cause notice issued by the ld AO during the course of search assessment proceedings, the assessee stated these are fabricated papers and has got no relevance either with income or expenditure of the assessee and these invoices are only sample bills which were not acted upon by the assessee. The ld AO, however, disregarded the said explanation and proceeded to add a sum of Rs. 28,76,300/- as unexplained expenditure in the hands of the assessee. The assessee requested the ld AO to make direct enquiry from M/s. Om marketing and Ishwari Industries to ascertain the facts. The ld AO made an independent verification from Sri Ravi Asudani, proprietor of Om marketing and Ishwari Industries who confirmed that these invoices were not acted upon by the parties and also denied having made any cash sales to the assessee company from the said concerns. Hence it goes to prove that the assessee had not purchased any goods from these concerns that are reflected in the seized documents and those invoices are mainly proforma invoices. All the transactions made with these two concerns were already re....
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....brought on record tatement any corroborative material or evidence to support the statement obtained. The evidentiary value and addition made on the basis of statement has been considered by Hon'ble High Court of Jharkhand in the case of Shree Ganesh Trading Co. reported at 257 CTR 0159 and Hon'ble High Court of Andhra Pradesh in the case of Gajjam Chinna Yellappa reported at 370 ITR 0671. The relevant portion of aforesaid two judgements are reproduced at para 16 & 17 above. The ratio laid down by the aforesaid decisions squarely applies to the facts in case of appellant. Circular of Board dated 10/03/2003 and further clarification issued on 18/12/2014 also support the contention of appellant. Respectfully following the same, I am of the considered opinion that the addition made by the A.O. on the basis of statement of Shri Padam Singhania which has been retracted subsequently is unjustified and unsustainable. Rough extracts of invoices are no credible evidence on the basis of which addition as made by the A.Ο. can be justified 7.5.5 In the course of search no corroborative evidence or material is found on record to show that the appellant has incurred any u....
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....e group as a whole. Alternatively, it was also understood by the group that the same would be available for telescoping benefit in the hands of various assessee's of the group. Accordingly, the various family members pertaining to the group offered a sum of Rs. 9 crores in total in their returns and paid taxes thereon. During the course of search, loose sheet identified as A-1/LPS-4 in page 21 was found which contained certain rough notings. The assessee pleaded that such rough notings does not represent any transaction that had materialized in the assessee's firm. Shri Padam Kumar Singhania, the key person of the Singhania group, during the course of search, gave a statement u/s 132(4) of the Act agreeing to offer the contents of the said seized documents totalling to Rs. 1,73,63,660/- as unaccounted receipts in the hands of the assessee. The main case of the revenue is that the noting in the said seized documents indicate that amount is received from Shri Ashok Singh for some Government work. The assessee on its part placed on record the evidences that Shri Ashok Singh have not received any contract work under the Pradhan Mantri Gram Sadak Yojna (PMGSY) and M.P.Rural Road Develop....
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.... there was no occasion at all for it to receive any cash from the said party. The ld. CIT(A) duly appreciated the contentions of the assessee by categorically observing that contents of the loose papers found in the course of search were not supported with any corroborative evidence. He also observed that the ld AO had not brought any evidence or material to show that the assessee was in receipt of money to the tune of Rs. 1,73,63,660/- during the year. But the assessee on its part had duly furnished the information obtained under RTI Act from PMGSY and MPRRDA stating that Shri Ashok Singh had not been awarded any Government work during the FY 2014-15 and this information have not been found to be incorrect or false. The ld. CIT(A) also observed that no addition can be made merely on the basis of a statement of any person. Thereafter, the ld CIT(A) by placing reliance on the decision of the coordinate bench of Ahmedabad Tribunal in the case of Nishant Construction Pvt. Ltd. in ITA No. 1502/Ahd/2015 dated 14/02/2017; decision of the Hon'ble Supreme Court in the case of Common Cause and others Vs. Union of India and others in Writ Petition (Civil) Appeal No. 505/2015 and decision....
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....ress of Shri Ashok Singh before the ld. AO. A simple verification on the part of the ld AO with Shri Ashok Singh in the manner known to law, would have brought the truth present in the transaction, which was admittedly not done by the ld. AO. Hence, there is absolutely no case for the revenue to make any addition in the hands of the assessee. We find no infirmity in the order of the ld. CIT(A) granting relief thereon. Accordingly, the ground No. 1 raised by the revenue for AY 2015-16 is dismissed. 11. Addition on account of difference in work in progress (WIP) of Rs. 4,14,08,000/-. Ground No. 3 for assessment year 2015-16 We have heard the rival submissions and perused the materials available on record. During the course of search and seizure operation at the Head Office of the assessee company located at Burhar, certain printouts in excel sheets related to work-in-progress at various sites of the assessee company were found and duly seized as A-1/LPS-6/Paged 42 to 50. As per these sheets, the total amount of WIP contract wise worked out to Rs. 28,75,83,000/- as on 31.08.2014. Another loose sheet was found as A- 1/LPS-6/page-51 which reads work-in-progress for the month of....
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....31.08.2014 also matches with the regular books of account maintained by the assessee which was also examined by the ld AO and accepted in the search assessment proceedings. The regular books of account maintained by the assessee and the net profit declared thereon had not been found to be low by the ld AO. The books of accounts were not rejected by the ld AO by pointing out some defects thereon. The source for increase in work in progress of Rs. 4.1408 crores are duly drawn and reflected in the regular books of account maintained by the assessee. Hence, there is absolutely no case for the revenue to make an addition on account of unaccounted income thereon merely based on statement of Shri Padam Singhania. It is pertinent to note that the said statement had been subsequently retracted by Sri Padam Singhania, which has been ignored by the ld AO while framing the addition. It is a fact that seized documents at page 42 to 50 representing closing WIP as on 31.08.2014, is a rough estimate submitted to the bank for availing the credit facility from the bank. It is also pertinent to note that in the instant case, the stock statement submitted to the bank is less by Rs. 4.14 crores than th....