TaxTMI 
TaxTMI 
2025 (5) TMI 509
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....solidated order. 2. Before we advert to the grounds taken in the cross appeals, it would first be relevant to cull out the basic facts of the case and effect of law in brief in respect of certain AYs. Search u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was conducted against the assessee, on 14.02.2023. Consequent to the search, the AO issued notices u/s 148 of the Act for AYs 2016-17 to 2021-22, pursuant to which, the assessments under section (hereinafter referred to as "u/s.") 147/143(3) of the Act were completed all dated 27.03. 2024. Further, the AO also completed the scrutiny assessment for AY 2022-23 u/s 143(3) of the Act on 27.03.2024. The summary of the additions/disallowances in Rupees made by the AO which are in dispute in the cross- appeals for AYs 2016-17 to 2022-23 are as follows: - Issues AY 201617 AY 201718 AY 201819 AY 201920 AY 202021 AY 2021-22 AY 2022-23 Addition of Unaccounted cash collected from customers for sale of flats 1,87,27,107 2,52,19,672 3,53,50,730 2,61,86,252 8,06,82,126 10,71,58,995 24,95,02,394 Addition of cash collected from sale of plots in Project Residencia -....
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....l sheets viz., (i) "Expense details- EB.xlsx in 'Kingston Data Traveler 16 GB Pen drive" and (ii) "project payables Final (EB).xlsx recovered from E-Drive'. It was further gathered from the WhatsApp conversations between the Customer Relationship Managers ('CRMs') that they were using a term "EB" for certain payments which are received in respect of the flat / plot sold / booked. Upon enquiry in the course of search, it was initially explained that the term 'EB' was an acronym for 'Extra Budget'. Later on, the concerned employee Smt. Karthiga, CRM staff from whose possession this excel sheet was found, gave her sworn statement u/s 132(4) of the Act, in which while answering to Q.No.13 put forth to her, she had admitted that the term "EB" means "Extra Benefits" and further in response to Q.No.15, she stated that "EB" means payment received in cash and not recorded in tally and EB payments received were communicated to the accounts team for reporting purpose. The Authorized Officer noted that, this explanation was also corroborated by the WhatsApp conversation between Smt. Karthiga and Accounts staff, Ms. Pinki. The Authorized Officer is noted to have sought an explanation re....
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....ed 'project payables final (EB)' contains details of EB receipts i.e. the unaccounted cash receipts that were received from customers project wise and date wise. 4.4 All the above affirmations of the employees are noted to have been placed before the CEO, Shri. T.N. Madan, who also confirmed the statements of the above persons and admitted that cash received from the customers which were recorded as "EB" was not accounted in the books of accounts. Thereafter, the statement of the Managing Director, Shri Varun Manian was recorded u/s 132(4) of the Act on 15.02.2023 who in his answer to Q. No. 21 also confirmed that EB means "Extra Budget" which comprises of cash component and other extra payments made. In addition, he also confirmed the depositions of Smt. Rajeswari, Smt. Pinki, Smt. Karthiga, Shri. TN Madan and others. Further, on compilation of the data from the seized material, the search team ascertained that the assessee had received a total amount of Rs. 83,23,20,157/- in cash, during the period from FY 2013-14 to 2022-23, which was termed as "EB" in the seized data. The relevant break-up is noted to be as follows: - Asst Year Unaccounted cash receipts from variou....
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....ve contended that, Smt. Karthiga from whose possession the electronic data was seized, used to handle customer issues, loans, customizations, and feedback, and therefore according to the assessee, the data found on her laptop was of no relevance. With regard to the statement of Smt. Pinki, who confirmed the statement of Smt. Karthiga and also had WhatsApp conversation with her regarding collection of "EB" was submitted to have given such a statement under coercion and therefore the assessee urged that her statement was also not reliable. It was explained that, the employees would have misunderstood the regular individual cash collections of less than Rs. 2 lacs which was also accounted in the books of accounts to represent unaccounted cash and thus gave statements under mistaken belief and confusion. According to the assessee, the Managing Director, Shri Varun Manian had also retracted his statement in which he had also highlighted infirmities in the data found from possession of Smt. Karthiga and therefore it was submitted that the purported electronic data was not reliable. 4.7 The AO however is noted to have rejected the explanation put forth by the assessee and has set out h....
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....sations between the employees were not admissible as it did not comply with Section 65B of the Indian Evidence Act, 1872. We find that, the lower authorities had rightly observed that, the Authorized Officer had followed the due procedures mandated in law and had also obtained the necessary certificates u/s 65B of the Act prior to the seizure of such electronic records. The AO is noted to have extracted the said certificate obtained u/s 65B of Indian Evidence Act, 1872 in the impugned order as well. Before us, the Ld. AR for the assessee was unable to controvert this certificate or point out the fallacy therein. We accordingly agree with the Ld. CIT(A) that there was no non-compliance with the provisions of Section 65B of the Indian Evidence Act, 1872 and therefore this preliminary contention of the assessee stands rejected. 4.10 The next plank of assessee's argument was that, the contents of the seized material were not reliable and that the Managing Director had retracted his statement and therefore no addition was otherwise permissible on account of undisclosed cash receipts from sale of flats. Assailing the action of lower authorities, the Ld. AR had argued that, the stateme....
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.... Ld. AR was unable to point out the mistaken fact admitted by the Managing Director in his statement which led to the retraction nor was the Managing Director able to disprove the facts admitted by him with relevant evidence. Hence, in our considered view, such bald retraction was rightly ignored by the lower authorities. As noted by the lower authorities, the electronic data including whatsapp conversations and excel sheets indeed related to the assessee's business activities and pertained to the actual units sold and therefore the contents thereof could not be discarded. The notings therein suggests that, it contained detailed project and unit-wise data, and the "EB" heading, in light of the statements of the employee/s, suggests the assessee collected cash payments over and above the declared sale consideration. The assessee was neither able to offer plausible explanation for these "EB" notings nor was the assessee able to demonstrate the purported extra work carried out in relation to these units. We thus countenance the following findings of the Ld. CIT(A) rejecting the assessee's contention objecting to the reliability of these seized material and the statements given by ....
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.... of flats. Having perused these excel sheet on sample basis, it is noted that these notings suggested collection of cash from the customers towards sale of flats. From the admission of the Managing Director, it is observed that, he had only admitted to receipt of on-monies from sale of flats and nowhere had he stated that this entire receipt constitutes the undisclosed income of the assessee. Also, later on, in the return(s) of income filed in response to notice(s) issued u/s 148 of the Act, the assessee is noted to have admitted and offered to tax 20% of the cash collections by way of the income element embedded therein and paid taxes thereon as well. The case of the Revenue however is that, the entire on-monies collected upon sale of flats ought to be brought to tax. According to us, however, it cannot be a matter of an argument in the given facts of the present case that, the amount as receipts/sales by itself would represent the income of the assessee. For this, we gainfully rely on the following findings rendered by the Hon'ble Gujarat High Court in the case of CIT Vs President Industries (258 ITR 654). "3. Having perused the assessment order made by the Assessing Off....
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....ssee, then the profits of the assessee would show unrealistic outcome. We therefore find merit in the assessee's plea that the entire cash receipts cannot be said to constitute its income. 4.14 The Ld. CIT, DR for the Revenue further contended that, the assessee was unable to provide the exact details of cash expenses incurred out of these cash collections and therefore the benefit of same should not be given and thus the entire proceeds ought to be taxed as undisclosed income of the assessee. In this regard, we find that, on same set of facts, similar contention was raised by the Revenue before this Mumbai Tribunal in the case of M/s. Prime Developers Vs ACIT (ITA Nos.175 - 178/Mum./2010 by order dated 22.03.2013) viz., the set-off/benefit of expenses against on-monies shouldn't be allowed as the assessee was unable to substantiate the incurrence of expenses with evidences. This Tribunal is noted to have rejected this plea of the Revenue and upheld the assessee's plea for estimation of profit element embedded in on-monies by observing as under: - "42. Scope of Reasonable Expenditure: Assessee needs to expend in order to earn income/profit and it is basic and universal ....
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....xed but only the profit element embedded therein was to be taxed in its hands. On this aspect, it is noted that in the case of ITO Vs. Anand Builders, Tribunal in similar circumstances had held that, 8% of the unaccounted on-money could be taxed in place of the entire unaccounted on-money receipts since there is always the unaccounted payments. The above decision of this Tribunal is noted to have been upheld by the Hon'ble Gujarat High Court and the SLP filed against the judgment before the Hon'ble Supreme Court was also dismissed and reported in 265 ITR 37. The relevant findings of Hon'ble Apex Court is noted to be as follows: "Dismissed the special leave petition filed by the Department against the judgment dated January 21, 2002 of the Gujarat High Court in ITA No. 52 of 2002 whereby the High Court dismissed the Department's appeal on the ground that no substantial question of law arose. The question of law raised in the appeal before the High Court was whether the Appellate Tribunal's finding while directing the Assessing Officer to tax only 8 per cent of the unaccounted on money receipt instead of fully taxing it, in the absence of any evidence of expenditure,....
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....re sale consideration received by the assessee, as revealed from the materials recovered, as the undisclosed income and levied tax on it. In first appeal, the assessment order for the block period was confirmed. 5. The assessee was before the Tribunal. The Tribunal directed that only 15% of the total sales receipts be taken for the purpose of levy of income tax. This was after looking into the statement filed by the assessee as to the net profit from the four projects, in which, there was found suppression of sale consideration. The net profit worked out to 14.47% as per the statement of the assessee and the Tribunal directed adoption of 15% as profits and hence the undisclosed income for the purpose of levy of tax. 6. We do not see any infirmity in the said direction. We specifically notice sub-section (2) of Section 158B of the Act, which defines "undisclosed income" as including inter alia any income based on an entry in the books of accounts or other documents or transactions representing whole or part of the income, which has not been or would not have been disclosed for the purposes of this Act. The provision does not permit tax to be levied on the entire re....
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....be the profit that is embedded in such unaccounted cash receipts that can be attributed as additional business income. The search team has not come across any evidences relating to the expenses or any unaccounted investments relating to such unaccounted cash receipts. .... 6.5.31 As brought out by the appellant, the search has not resulted in identifying any unexplained expenditure or investment. Only the unaccounted cash receipts were found. In such a scenario, the best option available before the undersigned is to estimate the profit margin that can be attributed as additional business income for the respective assessment years. Naturally any estimation should have some basis. The Income Tax Act, 1961 provides certain presumptive provision(s) to tax income when books of accounts are not maintained. Some of these are envisaged in section 44AD, 44AAD of the Act wherein the income is allowed to be estimated upon percentage. The provisions of section 44AD allows to taxation @ 8% of total receipts as taxable income. Whereas in section 44AAD of the Act, tax is not a fixed rate; it is based on the presumptive income calculated at 8% or 6%, and then the individual tax r....
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....0/- 8,88,69,163/- 2,34,08,884/- 46,85,773/- 1,87,27,107/- 2017-18 6,81,27,989/-* 7,41,48,530/- 3,12,40,213/- 60,20,541/- 2,52,19,672/- 2018-19 21,32,86,450/- 21,32,86,450/- 3,53,50,730/- 0 3,53,50730/- 2019-20 20,70,08,700/- 21,35,55,260/- 3,27,32,815/- 65,46,563/- 2,61,86,252/- 2020-21 12,62,67,540/- 16,16,43,500/- 10,08,52,658/- 2,01,70,532/- 8,06,82,126/- 2021-22 12,67,18,340/- 16,26,97,990/- 13,39,48,744/- 2,67,89,749/- 10,71,58,995/- 2022-23 27,80,69,230/- --- 24,95,02,394/- 4,99,00,478 24,95,02,394/- 6.5.33 It is observed that for the AY 2018-19, the AO has brought on record the claim of the assessee about the admission of Rs. 70,70,146/-. In this regard the AR contended that during the course of assessment proceedings, the Computation of total income was reworked and the additional income offered was incorporated and the consequent taxes were paid, whereas in the assessment proceedings completed the re-working of additional income admitted was not considered by the AO. Further, the AR during the course of appellate proceedings, submitted that on th....
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....2020-21 AY 2021-22 Rs.1,57,64,756/- Rs.1,87,27,107/- Rs.2,52,19,672/- Rs.2,61,86,252/- Rs.8,06,82,126/- Rs.10,71,58,995/- 6.5.36 For the AY 2018-19, the undersigned has observed that the appellant has not admitted additional income in the return of income filed in response to the notice u/s 148 of the Act for the AY 2018-19 due to certain technical glitches as brought out in para 6.5.33. As the appellant had no occasion to admit the additional income in the return of income filed, the appellant during the course of assessment proceedings has admitted additional income in its revised computation by admitting Rs. 70,70,146/- being 20% of unaccounted cash receipts, therefore, the undersigned is constrained to sustain (20% of Rs. 3,53,50,730/- of the addition made by the AO) Rs. 70,70,146/- and the AO is directed to delete the balance amount of Rs. 2,82,80,584/- for the AY 2018-19. Similarly for the AY 2022-23, the appellant company has not admitted additional income in the return of income filed u/s 139 of the Act, however the appellant, during the course of assessment proceedings has admitted additional income of Rs. 4,99,00,478/- being 20% of the unacco....
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....ies. Following our findings rendered while adjudicating Issue No.1 above, we hold that the notings contained in the impugned excel sheet under the heading "EB" indeed denoted cash collections upon sale of plots. Likewise, we also hold that, the AO's action of adding the entire on-monies by way of income of the assessee was not justified and that only the profit element embedded therein ought to have been brought to tax. As noted by us, while adjudicating Issue No. 1 above, the judicial forums across India have generally estimated profit in the range of 8%-12.5% in relation to on-monies involved in real estate. Respectfully following the same, we thus countenance the Ld. CIT(A)'s action of estimating the profits embedded in the impugned cash receipts at 12.5%. Hence, we see no reason to interfere with the order of Ld. CIT(A) on this issue. Accordingly, these grounds raised by the Revenue and cross objections of the assessee are dismissed. 6. Issue 3: Addition u/s.43CA Ground Nos. 6 for the Revenue's appeal and Ground Nos. 4 to 8 of the assessee's appeal for AY 2021-22 Ground Nos. 6 for the Revenue's appeal and Ground Nos. 4 to 8 of the assessee's appeal for AY 2....
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.... 4389925 4389925 2500 28-102020 7 Logu 65 1651 SOLD 2225 3673475 3673475 2500 28-102020 8 Gurunathan 23 1208 SOLD 2248 2715584 2715584 2500 25-022021 In respect of those cases, the AO should have re- computed the sale consideration in respect of the cases which are below 10% of the guide line value (Rs. 2500/- per sq ft) i.e. Rs. 2250/- per sq ft to arrive at the Short admission of business income arising out of sale of plots in project Residencia as per the provisions of section 43CA of the Act for the AY(s) 2021-22 & 2022-23. The undersigned has worked out the sale consideration after providing 10% benefit as provided under the proviso to section 43CA (1) of the Act. Accordingly, the short admission is worked out for the AY 2021-22 at Rs. 41,37,325/- and for the AY 202223 is at Rs. 31,06,100/- as against the addition of Rs.51,36,281/- & 58,75,349/- contemplated by the AO. Therefore, out of the addition of Rs.51,36,281/- & 58,75,349/- for the AY(s) 2021-22 & 2022-23 a sum of Rs. 41,37,325/- & Rs. 31,06,100/- are hereby sustained and the AO is directed to delete the balance addition of Rs.9,98,956/- & R....
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....uation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. 9. For the aforesaid reasons, the order under challenge is set aside. 10. The impugned order including orders passed by the CIT(A) and the assessing officer are all set aside. The matter is remanded to the assessing officer. He shall refer the matter to the departmental valuation officer in accordance with la....
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.... sales whose payments were received in cheque and the same has been found to correlate with the entries in the regular books of accounts. This material fact corroborates the Revenue's case that the notings of scrap sales made in cash found on the same excel sheet cannot be ignored or treated as a dumb noting. Accordingly, the plea of the assessee that the impugned addition was based on loose sheets & statement(s) having no evidentiary value is hereby rejected. 7.3 Now we address the dispute relating to the income attributable in relation to the unaccounted proceeds received from sale of scrap. Having regard to the specific nature & magnitude of work of the assessee, numerous project sites, we agree with the assessee's alternative submission that, the scrap generated at project sites are usually sold the employee(s) working there and there is a likelihood that the actual scrap sale proceeds would not fully reach the coffers of the assessee. Reason being, there is no fixed or rationale basis for ascertaining the price of scrap. The scrap is usually valued by the vendor at the time of removal and the scrap price communicated by the employee(s) to the head office is generally accept....
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....chase of steel Ground Nos. 3 for the Revenue's appeal and Ground Nos. 6 & 7 of the assessee's cross-objection for AY 2020-21 Ground Nos. 3 for the Revenue's appeal and Ground Nos. 6 & 7 of the assessee's cross-objection for AY 2021-22 Ground Nos. 3 for the Revenue's appeal and Ground Nos. 3 & 4 of the assessee's cross-objection for AY 2022-23 8.1 These grounds relate to the disallowance of purchases of steel made by the assessee from M/s PK Vaduvammal. The facts as noted are that, during the course of search, a pen drive was seized from the possession of Shri. Ananda Padmanabhan, DGM, purchase department of the assessee which contained a folder named "PKV" comprising of several excel sheets. Upon perusal of the excel sheets, the Investigating Officer suspected that M/s PK Vaduvammal was issuing bogus invoices of sale of steel to the assessee. When confronted, Shri. Ananda Padmanabhan in his statement recorded u/s 132(4) of the Act is noted to have stated that M/s PK Vaduvammal was genuinely supplying steel to the assessee but at the same time was also issuing bogus invoices. He is noted to have explained that, the genuine invoices were identifiable bas....
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....ses which were supported by transportation challans and weighment slips and those purchases which were not supported by such documentation, was unjustified. According to the assessee, not all the transportation challans and weighment slips were maintained in the head office and that most of these documents were retained at the respective project sites and thus the reasoning given by Shri Anand Padmanabhan in his statement was based on mistaken / wrong assumption of fact. In so far as the statement of Shri P.C. Shyamsundar was concerned, the assessee submitted that it didn't get opportunity to cross-examine Shri. P.C. Shyamsundar and therefore the reliance being placed on this third-party statement was bad in law. The AO is noted to have given his detailed reasoning rejecting these contentions of the assessee and thereafter disallowed the entire value of purchases which was identified to be bogus in nature. On appeal, the Ld. CIT(A) though upheld in principle that the purchases identified by Shri Ananda Padmanaban and also confirmed by Shri. P.C. Shyamsundar, Partner in the supplier M/s. PK Vaduvammal was bogus, but held that only the profit element embedded therein was to be brough....
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....rting documentation and therefore have been held to bogus. It thus appears to be a case that, the assessee would have purchased these materials from the grey market and obtained the bills/invoices from this supplier. In this regard, the Ld. AR has rightly pointed out that, the quantitative details, consumption of raw materials, construction of the buildings, corresponding sales and the book results have not been rejected by the AO. It is also not the case of the Revenue that in the given facts of this case, the volume of purchases made by the assessee was excessive or that the steel shown to have consumed in the construction of real estate was unreasonably high. Rather, the AO is noted to have accepted the overall book results of the assessee. According to us therefore, it is a case where the purchases were indeed made for the business, butalbeit from different parties in grey market, and the assessee had obtained invoices from M/s PK Vaduvammal in relation thereto. In this regard, we may gainfully refer to the decision of the Hon'ble Gujarat High Court in the case of CIT Vs Bholanath Polyfab (P.) Ltd. (355 ITR 290) wherein similar issue was involved. In that case also, it is n....
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....llows: - "12. A bare perusal of the compared results of the Gross Profit and Net Profit by the Assessee given in para 7 of the Tribunal's order clearly shows that the said Gross Profit at the rate of 14.21% and Net Profit at the rate of 3.83% declared by the Assessee, with the addition of 10% agreed by the Assessee before the learned Commissioner of Income-tax (Appeals), resulted in a much better result of profits declared by the Assessee in the present Assessment Year viz., A.Y. 2010-11 as compared to the previous years. The Net Profit rate in the previous three years was less than 3%, whereas the Assessee himself declared the net profit at the rate of 3.83% before the aforesaid addition of 10% of Rs. 4,41,08,210/-. Therefore, the estimation of profit by the Appellate Authorities even on the premise taken by the Assessing Authority that some of the Sub-Contractors could not be produced before the Assessing Authority, does not result in any perversity in the findings of the learned Commissioner of Income-tax (Appeals) as well as the learned Tribunal. 13. It is well known that where the books of accounts maintained by the contractors are not accepted by the Dep....
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....P.) Ltd. (165 taxmann.com 48). In the decided case, the assessee was also a contractor engaged in development of infrastructure. The AO is noted to have doubted the genuineness of purchases and held it to be bogus for being non-verifiable. The AO accordingly rejected the book results and estimated the income of the assessee at a much higher sum. On appeal, the Hon'ble High Court held that, even if the purchases were not verifiable, it was not in dispute that the assessee had indeed carried out civil construction and therefore would have made purchases otherwise. Accordingly, it held that only the profits could have been estimated by the AO which was determined at 8%. The relevant findings are as follows: - "3. Learned Counsel for the revenue/appellant submits that certain purchases disclosed by the assessee were found not variable and therefore the additions were lawfully made by the assessing officer. Therefore, there was no occasion for the CIT(A) to apply a net profit rate based on the net profit disclosed by others in the same line of trade. He, therefore, submits that the appeal deserves to be allowed and the substantial question of law deserves to be answere....
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....ncome at Rs.1,79,98,687/- by appellant and net profit rate of 8% on the contract received of Rs.22,49,83,589/-. While affirming the best judgment assessment and after detailed discussion and reference to various judgments of Hon'ble Supreme Court, different High Courts and Tribunal in paragraphs 11 to 20 of its order, concluded in paragraph 21 and 22 as under: .... 10. It has not been disputed by the assessing officer that the assessee carried civil work and in view thereof he received a certain amount as consideration. The materials in execution of contract have not been disbelieved by the assessing officer. In this regard, the CIT(A) and ITAT have also recorded findings of fact. The ITAT has also noticed net profit rate of last seven years which ranged from 0.45% to 3.84%. The ITAT has also noticed net profit rate determined in matters of others in the same line of trade, to be about 4%. The assessee himself has agreed before the CIT(A) for net profit at the rate of 8% on the gross receipts under the contract. Learned Counsel for the appellant could not place any material before us on the basis of which determination of net profit at the rate of 8% in the li....
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....ssessee claimed to have purchased the steel did not own up to such sales. However, the vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. 6. In the present case, the Commissioner of Income-tax (Appeals) believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence, therefore, the Commissioner (Appeals) believed the assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of account. 7. That being the position, not the entire purchase price but only the profit element embedded in such p....
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....g Officer could not have disallowed the entire purchases in absence of any finding on correctness of the amount paid/payable to creditors, the possibility of purchasing the goods from grey market at lower rates and recording the same at inflated price in books of account cannot be ruled out and hence, made an addition of gross profit @ 13.05%. The CIT(A), in support of its findings, relied upon the following decisions: '(i) The CIT v. Simit P. Sheth [2013] 38 taxmann.com 385/219 Taxman 85/356 ITR 451 (Gujarat) (ii) [Bombay HC WRIT PETITION NO.2860 OF 2012/NickunjEximp Enterprises (P.) Ltd. v. Assistant Commissioner of Income-tax [2014] 48 taxmann.com 20/229 Taxman 99 (Bombay)] (iii) A decision of the Hon'ble Bombay High Court in the case of Pr. CIT v. Pinaki D. Panani [IT Appeal No. 1543 of 2017, dated 8-1-2020]. (iv) A decision of the Hon'ble Bombay High Court in the case of Usha Exports v. Asstt. CIT [Writ Petition No. 2506 OF 2019, dated 12-122019]. 11. In view of the concurrent finding of facts arrived at by both CIT(A) and the Tribunal, we are of the opinion that no question of law, much less any substantial question of ....
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....om Stella Maris College and was assisting the company with all literature works, content, project pitching, promotional material, company's website etc., being proficient in English language. Due to the digitization of work, she was given flexibility to work from home. The assessee submitted that, only because she was a family member, that the search team presumed that the salary was being paid to her, without her actually doing any work. The assessee also furnished Form 16 issued to Smt.Viswanathan and showed that regular PF contributions were also being from her monthly salary. The assessee further submitted that, having regard to her educational qualification and work profile, the salary being paid to her was commensurate to the market rates and that it was not excessive or unreasonable in terms of Section 40A(2) of the Act as well. The AO however rejected the contention of the assessee and disallowed the salary payment(s) made to her, by solely relying on the statement of Smt.Viswanathan wherein she had admitted that she was not rendering any services in lieu of the salary payment. Aggrieved by the action of the AO, the assessee preferred appeal before the Ld. CIT(A) who delete....
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....iness, or - The benefits derived by the assessee from such services. 6.8.7 The related persons or entities referred to under Section 40A(2)(b) of the Act include relatives, directors, partners, shareholders, or associated entities, where the relationship may lead to preferential or excessive payments. The intention behind Section 40A(2) of the Act is to prevent tax evasion by disallowing excessive payments made to related parties, which could otherwise reduce taxable profits. However, the AO is required to exercise judgment in a fair and reasonable manner, considering whether the payments genuinely exceed market norms or business needs. 6.8.8 In the instant case, the appellant has provided details of Smt. Viswanathan's qualifications and the nature of the services rendered. While the AO has dismissed these claims as vague, it is crucial to recognize that the work described-content creation and digital marketing support-is indeed a valid business activity that does not necessarily involve daily office attendance. The appellant has also submitted documentary evidence, such as Form 16 and proof of PF contributions, which substantiate the claim that Smt. Visw....
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.... included sum of Rs.5,00,00,000/- which was offered to tax in AY 2018-19. The assessee however in the return of income filed for AY 201819 didn't offer the aforesaid sum to tax. The AO, in the course of assessment, required the assessee to explain as to why it didn't offer the additional sum of Rs.5 crores which it had admitted in the course of survey. After considering the submissions of the assessee, the AO rejected the same and held that this voluntary disclosure was given by the Managing Director without being under any duress or pressure and that once he had admitted to offer the impugned sum voluntarily on account of improper vouchers u/s 37 and/or cash expenses incurred beyond limits set out in Section 40A(3) of the Act, the assessee ought to have offered to tax the same. Accordingly, the AO added the impugned sum to the total income of the assessee. On appeal, the Ld. CIT(A) was pleased to delete the same. Now the Revenue is in appeal before us and the assessee has filed cross objections in support of the action of Ld.CIT(A). 10.2 Heard both the parties. The case of the Revenue hinges solely on the admission made by Shri Varun Manian in his statement recorded u/s 133A of....
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....e admission made during the course of survey. Further, the statement recorded u/s 133A cannot have any binding force unlike a statement recorded u/s 132(4) of the Act. In addition, as evident from the assessment order passed by the AO for the AY 2018-19, it can be seen that the disallowance was not based upon any material evidence found during the course of survey but only based upon statement recorded u/s 133A of the Act. 6.4.7 As per the provisions of section 133A of the Act, the Authorised officer is not empowered to record the statement on oath. The section has empowered the Authorised officer to record statement which may be useful for, or relevant to, any proceedings under the Act. Obviously, such statement recorded cannot be taken as an evidence and used against the assessee. The AO while completing the assessment instead of relying upon the statement recorded must have attempted to bring cogent and corroborative evidence and a reasonable finding in making the addition. The AO at least should have verified the materials collected during the course of survey and satisfy himself before making the disallowance. 6.4.8 Further even if it is presumed that the ass....
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....f the AO relying upon the statement of the Appellant recorded during the course of survey u/s 133A of the Act and making disallowance is not legally tenable." 10.3 We also note that the Revenue was unable to correlate or link the impugned sum offered by assessee in the statement u/s 133A of the Act with any evidence or material found in the course of survey. Reading of the statement recorded u/s 133A of the Act shows that the impugned disclosure was given by the Managing Director, over and above the sums already admitted, to cover any errors/omissions which may be later found u/s.37 / 40A(3) of the Act, but no details was given in this regard. Instead, it was a bald disclosure given in the statement u/s 133A of the Act. Hence, once the assessee had retracted the statement and did not offer the impugned sum to tax, the onus was on the Revenue to justify the addition of the impugned sum with tangible material or evidence. We however note that, the AO had failed to do so. Instead of pointing out the expenses which were un-vouched for and therefore disallowable u/s 37 of the Act or the specific expenses which were paid in cash beyond the limit prescribed in Section 40A(3) of the Act....
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....de u/s 132(4) of the Act, but is applicable with equal force to the facts of the present case as well. The relevant findings taken note of by us, is as follows:- "5. We have duly considered the rival contentions made by learned advocates for both the sides. It is true that the addition was made by the Assessing Officer pursuant to the statement recorded u/s 132(4) of the Act. The assessee has retracted from the said disclosure which has not been accepted by the revenue. It is required to be borne in mind that the revenue ought to have collected enough evidence during the search in support of the disclosure statement. It is a settled position of law that if an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities are required to assist him and ensure that only legitimate taxes are collected. The Assessing Officer cannot proceed on presumption u/s 134(2) of the Act and there must be something more than bare suspicion to support the assessment or addition. In the present case, though the revenue's case is based on disclosure of the assessee stated to have been made during the search u/s 132(4) of the Act, there is ....