TaxTMI 
TaxTMI 
2015 (8) TMI 1597
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....allenged the additions/disallowances made by the Assessing Officer and confirmed by the CIT (A) on the ground that no incriminating material was found during the course of the search & seizure action pertaining to the assessment year 2002-03 for which assessment stood completed and was unabated and, therefore, the additions made therein are beyond the scope of section 153A. In other words the assessment for the assessment year 2002-03 stood finalized before the date of search and, therefore, it was a non-abated assessment and no addition or disallowance could have been made unless some incriminating material is found during the course of search for making the addition or disallowances. 3. The brief facts qua the aforesaid ground is that assessee has filed its return of income for the AY 2002-03 on 30.10.2002, u/s 139(1) declaring total loss of Rs. 1,51,95,901/-. The time limit for issuance of notice u/s 143(2) had expired on 31st October, 2003. Since the assessee's case was not selected for scrutiny, hence, the returned income stood accepted by the Department and as such, an assessment attained finality. Post this event, a search and seizure action was carried out on 'Phoenix....
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....icial precedence, especially settled in the jurisdiction of Bombay High Court, the scope of addition in the non-abated assessment is limited to the materials found during the search having live-linknexus with such additions or disallowances. If we analyse the provisions of section 153A, it is apparent that, where search has been initiated u/s 132 or requisition has been made under section 132A, it is incumbent upon the assessing officer to issue notices requiring the person searched to file return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year in which search is conducted. The assessing officer has to assess or reassess the total income in respect of each assessment year falling within six assessment years. Thus, it is statutory mandate upon the assessing officer to assess or reassess the total income on which a person can be said to be assessable under the provisions of the Act. The first proviso to section 153A covers the income which is to be assessed i.e. emanating not only, from the declared sources but also from any material found during the course of search. However if the assessment has already been....
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....dings pending in appeal, revision or rectification proceedings finalized assessment/ against reassessment shall not abate. It is only because, the finalized assessments/reassessment do not abate, the appeal, revision or rectification pending against finalized assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalized for the years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A (1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). 11) In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalised on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in the facts of the present case initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12) Once it is held that the assessment finalised on 29.12.2000 has attained finality, then the deduction allowed under section 80H....
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....ould be the assessment for the said year. 23. The necessary corollary of the above second. proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessment already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of ss. 147, 148 and 151 of the Act and determine the total income of the assessee. 24. The argument raised by the counsel for the appellant to the effect that once a notice under s. 153A of the Act is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 25. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under ss. 132 and 132A of the Act, it is apparent that :- (a) the assessments or reassessments, which....
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....umstances of the case and in law, the Ld. CIT (A) erred in holding that Rs. 13,81,420/- being 62.60% of legal and professional expenses of Rs. 22,06,740/- are allowable expenses against business income, without appreciating the fact that the expenditure has been incurred on development of property to be let out on rent or the property that has already to the service charges income against which the claim was directed to be allowed." 3. "On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in allowing foreign travel expenses of Rs. 30,43,980/- without appreciating the fact that the assessee had not substantiated the claim with any documentary evidence in support of its business purpose and justification." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that Rs. 1,25,342/- being 62.60% of commission and brokerage payment of Rs. 2,00,226/- are allowable expenses against business income without appreciating that commission is always paid towards the introduction of new clients and not towards rendering service charges." 5. "On the facts and in the circumstances of the case....
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....covered by series of Tribunal decisions in the case of the assessee, right from the assessment year 1997-98 to assessment year 2005-06. The Ld. CIT(A), following the earlier orders of the CIT (A) as well as of the Tribunal directed the Assessing Officer not to reduce the amount of municipal taxes from the ALV for the purpose of computing the income under the head "house property". 15. We find that the Tribunal in its consolidated order dated 27.04.2012 for the assessment year 1997-98 to 2005-06, has decided the aforesaid issue in the following manner :- "We have heard the arguments of both the sides on this issue and also perused the relevant material on record. As found by the learned CIT(Appeals) on perusal of relevant lease agreement, the burden of municipal taxes in respect of properties let out by the assessee was borne by the tenants and there is nothing brought on record before us to controvert or rebut this finding off act recorded by the learned CIT(Appeals). Proviso to section 23 lays down in very clear terms that if the property is in occupation of the tenants, then the tax levied by local authority in respect of that property shall be deducted in determining the annu....
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.... 49.24% 2006-07 20,09,99,756 33,67,02,897 37.40% 62.60% 2007-08 24,44,69,390 32,69,41,304 46.53% 53.47% 2008-09 46,62,41,058 25,04,66,319 65% 35% Accordingly, he reworked out the disallowances in accordance with the above directions, as under: AY Rental Income Service Charges % of rental income to the total receipts % of service charges to the total receipts 2002-03 2,18,268 50.75% 1,10,792 1,07,476 2006-07 22,06,740 37.40% 8,25,320 13,81,420 2007-08 2,25,030 46.53% 1,04,706 1,20,324 2008-09 1,02,82,794 65% 66,83,816 35,98,978 18. The aforesaid view of the CIT (A) has been affirmed by the Tribunal in the following manner: 19. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. It is observed that the details of legal and professional charges paid by the assessee in the year under consideration were furnished before the AO as well as before the learned CIT(Appeals) and after analyzing the nature and purpose of the said expenditure, it was held by the AO as well as by the learned CIT(Appeals) that the same to the extent of Rs. 9,2 1,120/- was not incurred for the p....
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....esponse, the assessee submitted that the clientele from whom the rental income are being received are foreign based companies and hence in order to fetch more business and also to retain existing foreign clientele, the directors of the company need to undertake foreign travel to lease and negotiate within foreign companies. However, the Assessing Officer did not accept the assessee's contention and disallowed the foreign travelling expenses claimed by the assessee. 22. Before the CIT(A), the assessee has filed detailed submissions and also pointed out that the similar disallowance have been deleted by the CIT (A) in the earlier years and also affirmed by the Tribunal. The Ld. CIT (A) after noting down the entire facts, held that this issue is covered in favour of the assessee by the order of the CIT (A) and the Tribunal for the earlier years. 23. We find that the assessee is in the business of development of property and ancillary services. It has established a huge retail mall which known as High Street Phoenix Mall, wherein large number of foreign brand shops have been opened. It has come up with the Mall known as "Palladium" in High Street Phoenix, which consists of various fo....
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....ology is conformity with the earlier years, approved by the Tribunal, accordingly, we also affirm the same that the brokerage and commission which is allocable to earning of service charges is allowable and which is allowed to rental income is to be disallowed. Ground no. 4 as raised by the revenue is thus, dismissed. 27. In ground no. 5, the revenue has challenged deletion of addition of Rs. 1,12,87,068/- made by the Assessing Officer under the head "income from other sources" on account of undisclosed income in respect of transaction in relation to accommodation bills, which CIT (A) though has confirmed the action of the Assessing Officer that it is to be added however has directed the Assessing Officer to reduce it from the work-in-progress as these are related to cost of the project. Briefly stated the relevant facts are that, the Assessing Officer observed that during the course of search and seizure operation certain incriminating documents in the form of bogus bills were found and when these bills were confronted with the directors of the group companies, the assessee company claimed that the materials were purchased from the following three concerns in different asses....
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....n the order, added the amount on account of alleged accommodation entry to be taxable as "income from other sources". After making the addition in the aforesaid manner the Assessing Officer further observed that the assessee is constructing Mall at Lower Parel, which is let out on rentals and such material purchased increases the capital work-in-progress by way of introduction of bogus bills for purchases and further the capital WIP is part of the net block of the assessee and therefore, net WIP to the extent of bogus bills is reduced from the relevant previous year and the assessee was required to carried forward the modified net WIP in the following manner: AY 2006-07(Rs.) 2007-08 (Rs.) 2008-09 (Rs.) The Net Capital WIP as per Balance 26,06,36,296 96,96,39,053 178,16,91,793 The reduction in Capital WIP due to bogus bills as Discussed 1,12,87,068 2,35,29,537 4,05,88,531 The revised Capital WIP the A.Y. 24,93,49,228 94,61,09,516 174,11,03,262 29. Before the CIT(A), the assessee had made detailed submissions and also produced various corroborative material in support of the contention that it has not taken any accommodation entry for the purchase of mate....
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....e Assessing Officer. There is no question of further adding the said amount as undisclosed income, because it amounts to "double taxation". Reliance was placed on various decisions in this regard, in support of his contention. The Ld. CIT (A) agreed with the contention of the assessee that, if the Assessing Officer has reduced the work-in-progress (WIP) to the extent of bogus purchases, which action too has been confirmed by him, then further addition of the same cannot be made as "income from other sources". No evidence of receipt of the cash or availability of the cash was found during the course of search and seizure proceedings. Thus, he held that no further addition of this kind should be made in the form of "income from other sources". The relevant finding of CIT (A) in this regard reads as under: 19.0 The reasons stated by the AO in the assessment order for making additions under the head 'Other Sources' equivalent to the value of bogus purchases and the contentions of the appellant as captured in the foregoing paragraphs are carefully examined. The action of the A.O in reducing the WIP to the extent of bogus purchases is upheld in the foregoing paragraphs of this ....
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....nstructed a Mall at Lower Parel in relation to which huge purchase of building materials were made. Some of the bills for the purchase of materials have been held to be bogus on the ground that these were taken from the parties who are providing accommodation entries. The Assessing Officer has reduced the capital work-in-progress by quantum of such alleged bogus purchase in the following manner: AY 2006-07(Rs.) 2007-08 (Rs.) 2008-09 (Rs.) The Net Capital WIP as per Balance 26,06,36,296 96,96,39,053 178,16,91,793 The reduction in Capital WIP due to bogus bills as Discussed 1,12,87,068 2,35,29,537 4,05,88,531 The revised Capital WIP the A.Y. 24,93,49,228 94,61,09,516 174,11,03,262 Such reduction of WIP has been confirmed by the CIT(A), against which, the assessee has not preferred any appeal or raised any objections before us in any of the assessment years. After making the addition in the aforesaid manner i.e. by reducing the WIP by the quantum of alleged bogus purchase, the Assessing Officer has further made the addition on the ground that the assessee must have received the equivalent amount of cash from the bogus purchases. We are unable to appreciate....
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....let out on rent or the property that has already to the service charges income against which the claim was directed to be allowed." 3. "On the facts and in the circumstances of the case and in Law, the Ld CIT (A) erred in allowing foreign travel expenses of Rs. 44,65,498/- without appreciating the fact that the assessee had not substantiated the claim with any documentary evidence in support of its business purpose and justification." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT (A) while confirming the reduction in the WIP, erred in deleting addition of Rs. 2,35,29,537/- made by the Assessing Officer under the head Income from Other Sources' on account of undisclosed income by way of cash received back in respect of the transactions relating to accommodation bills". 34. At the outset both the parties admitted that these grounds are exactly similar to the grounds raised by the department in the assessment year 2006-07 and, therefore, the finding given therein will apply this year also. From the perusal of the grounds raised and also the impugned order, we find that the Ld. CIT (A) has decided the issue for all the years in the ....
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.... negotiate with Mr. Nathu Maharaj for vacating his premises. The final deal was struck on Rs. 4 crores only. In the e-mail paper Mr. Siva is merely informing to Mr. Bharat Bajoria, the terms proposed by Mr. Nathu Maharaj initially. On such proposal Mr. Bharat Bajoria, Director of the assessee company has put his remark that if the deal is to be finalised then "pay Rs. 8 crores in cheque only". However, later on, this amount was found to be too high and excessive particularly looking to the market rate, therefore, Mr. Siva re-negotiated the proposal at the a lower price of Rs. 4 crores in cheque, which was full and final settlement for the surrender of the tenancy rights. There cannot be any inference of payment of cash, which is neither borne out from the seized document nor has been found from the possession these persons. Further, the terms stated in the email were just a proposal and is only a stage of negotiation whereas, the final deal only took place after two months that too after great deliberation. The Ld. Assessing Officer rejected the assessee's contention and stated that the email contains a statement that finally they have agreed at Rs. 8 crores and....
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.... relied upon by the Assessing Officer is the email print-out which firstly, suggests "negotiation" between the parties and not final settlement and the amount of Rs 8 crores have been mentioned as a gross amount. The landlord share was approximately 33.33% which was to be deducted to arrive at net payable amount. Therefore, the net proposal if at all was for 5.34 crores and since same was on a much higher side the deal was closed finally at Rs. 4 crores which was paid in cheque. Secondly, he submitted that, if the print-out of the email is to be strictly construed, then it is categorically mentioned in said paper itself that sum of Rs. 8 crores is to be paid in "cheque only" and, therefore, there cannot be any inference that part of the payment was made in cash out of the said component. Neither the buyer nor the recipient has ever admitted that cash of such magnitude has been passed on in this deal, nor any evidence have been found during the course of search or has been brought on record in the post search assessment proceedings to corroborate this fact. To rebut the observation of the CIT(A), Mr Mehta submitted that, if the payment made to M/s Paridhi Udyog & M/s Runit....
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....of Rs. 4 crores was not paid at all as after negotiation the amount finally agreed was Rs. 4 crores. There is no evidence found for payment of cash. On the other hand, the revenue's case is that, in case of other two similar parties, the assessee has surrendered cash payment of Rs. 3.85 crores and, therefore, the inference can be drawn that assessee must have paid Rs. 4 crores in cash. 41. We find that other than this e-mail print-out, there is no evidence with the Department that the assessee has paid any amount of Rs. 4 crores in cash to the parties. However strong inference may be drawn by the department on this e-mail print out, but to make such an addition entire attendant facts, circumstances and actual inference of the seized documents has to be examined. If there is a strong rebuttal, then, onus shifts upon the revenue to corroborate by further enquiry. If correct interpretation of the seized document is taken into account, then it can be inferred that firstly, it was purely a negotiation with one, Mr. Natthu Maharaj who was demanding certain amount and certain area of shop as a part of his negotiation to surrender tenancy rights; secondly Rs. ....
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....and lower in the subsequent year. This fact noted by the CIT (A) itself, goes in favour of the assessee and corroborates the stand of the assessee. Thus, in absence of any evidence or material on record to prove that assessee has paid any amount in cash over and above the amount shown in the books or without there being any enquiry, such an addition made by the Assessing Officer and confirmed by the CIT(A), cannot be sustained and accordingly, the amount of Rs. 4 crores added u/s 69C is deleted. In view of the finding given above, ground no. 2 is purely academic and same is treated as infructuous. 42. In the result, appeal of the revenue stands dismissed whereas appeal of the assessee is treated as allowed. Assessment year 2008-09 - ITA No 7270/M/2012 (Assessee's appeal) :- 43. In the grounds of appeal, the assessee has raised following grounds :- "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in partly confirming the disallowance made by AO to the extent of Rs. 66,83,816/- may kindly be deleted. 2. On the facts and in the circumstances of the case and in law, the learned CIT (A)....
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....eable to tax under the head "Income from house property" and since there was no deduction allowable on account of the said expenditure under the head "Income from house property" as per the relevant provisions of section 24, we are of the view that the expenditure claimed by the assessee on account of legal and professional charges to the extent of Rs. 9,21,120/- was rightly disallowed by the authorities below. As regards the reliance placed by the learned counsel for the assessee on the decision of the Tribunal on the similar issue in assessee's own case for assessment year 2001-02, it is observed that the expenditure incurred by the assessee on account of legal and professional charges in that year was found to be for the purpose of assessee's business and accordingly the same was allowed by the Tribunal. As already noted, the facts involved in the year under consideration, however, are different and there being nothing brought on record to show that the legal and professional charges paid by the assessee in the year under consideration to the extent of Rs. 9,21,120/- were the expenditure incurred for the purpose of assessee's business, we find no justifiable reason to ....
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....e following manner :- Usage of Funds Rs. In Crores Investment in Mutual Funds 373.55 Other Investments 180.44 Investment in projects 358.29 Intercorporate Deposits 26.5 Repayment of Bank Loans 121 Repayment of unsecured Loans 45.35 Expenses 45.35 Loans to Subsidiaries 62.06 Capital Work in Progress 80.63 Total 1297.72 Reliance was placed on the decision of Hon'ble Bombay High Court in the case of CIT vs Reliance Utilities and Power Ltd., reported in 313 ITR 340. Regarding operating expenses also, the assessee gave detailed submission that the expenses debited for sum aggregating to Rs. 23,52,04,191/- was directly related to day-to-day business activities of the assessee company and none of them have been incurred for earning of the exempt income. The details of such expenses were as under :- Particulars Ant (Rs.) Electricity (Net)/power 1,19,38,954 Repairs and Maintenance 64,76,111 Insurance 14,54,437 Rent 53,88,556 Rates & Taxes 4,33,85,104 Legal and Professional Expenses 4,09,85,363 Travelling Expenses 1,30,72,967 Auditor's Remuneration 30,25,000 Directors' Remuneration and sitting fees 65,17,649 ....
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....se and hence no disallowance u/s 14A can be made to that extent. In support, he relied upon the following decisions: (a) M/s Garware Wall Ropes Ltd vs Addl. CIT in ITA 5408/M/2012(AY 09-10); (b) CIT v Oriental Structural Engineers Pvt Ltd in ITA 605/2012 (Delhi High Court); (c) M/s JM Financial Ltd vs Addl. CIT in ITA 4521/Mum/2012(09-10) 49.2 As an alternative he submitted that the disallowance if at all under clause (iii) of Rule 8D is to be made, then only those investments are to be considered on which, dividend has been received during the year. In support, he relied upon following decisions: - ACB India Ltd v ACIT reported in 374 ITR 108 - ACIT v M Baskaran in ITA 1717/M/2013(AY 09-10) - CIT v Corrtech Energy (P) Ltd. reported in 272 CTR 262 (Guj) - CIT v Holcim India (P) Ltd. reported in 272 CTR 282 (Del) - CIT v Lakhani Marketing Incl. reported in 272 CTR 265 (P&H) 49.3 Lastly, without prejudice, he submitted that looking to the nature of expenditures debited, it can be seen that major expenses debited are purely for the business purpose. The disallowance if at all, should be made on reasonable basis by estimating part of the Directors remuneration....
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....h is or can be said to be attributable for earning of the exempt income i.e. income which do not form part of the total income. Such a disallowance can be made/quantified in accordance with the provisions of sub-section (2) of section 14A. In other words, disallowance u/s 14A(1) can only be triggered, once the conditions laid down sub-section (2) are satisfied. To work out the disallowance under Rule 8D(2) and for its quantification, the Assessing Officer has to first examine the accounts of the assessee and also correctness of the claim and thereafter, if having regard to such accounts and claim of the assessee, the Assessing Officer is not satisfied either with the correctness of the claim made by the assessee or by the claim that no expenditure at all has been incurred, then only he can resort to Rule 8D. Thus, the 'satisfaction' of the Assessing Officer is a mandatory requirement to trigger the computation mechanism of Rule 8D. Here in this case, once the assessee has given all the detail of its accounts' nature of expenses incurred; explained that the expenses claimed has direct relation with the earning of business income and also why such an expenditure cannot be held to be ....