TaxTMI 
TaxTMI 
2024 (9) TMI 1871
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....e assessee has not pressed the issue relating to jurisdiction u/s 153A of the Act in Ground Nos. 1 to 4. Accordingly, ground nos. 1 to 4 are dismissed as not pressed for both the AYs. 4. The issue which remains to be considered by us is Ground No. 5 in both the years which is in relation to the confirmation of part addition of Rs. 20,00,000/- made by the Assessing Officer on account of non disclosure of value of residual assets and confirmation of addition of Rs. 70,600/- made by the Assessing Officer u/s 40(a)(ia) of the Act in A.Y 2005-06. 5. The challenge before us is whether the impugned additions made in the assessment orders are devoid of any incriminating material found at the time of search and therefore, the ratio laid down by the Hon'ble Jurisdictional High Court of Delhi in the case of Kabul Chawla 380 ITR 573 affirmed by the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt Ltd 454 ITR 212 squarely apply making the impugned additions invalid. 6. Briefly stated, the facts of the case are that there was survey action u/s 133A of the assessee 20.03.2007. Thereafter a search and seizure operation was also conducted by the Investigation Wing V(I), D....
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....gal ground that the entire addition is devoid of any incriminating material found at the time of search and since the addition has been made without there being any incriminating material, it should be deleted. 14. The ld. CIT(A), after considering the facts and submissions, upheld addition of Rs 20,00,000/- out of Rs 85,00,000/- for AY 2005-06 and Rs 20,00,000/- out of Rs 1,25,00,000/- for AY 2006-07. 15. Now both the assessee and the Revenue are aggrieved by the part relief given by the ld. CIT(A) and have come in appeal before us. 16. Before us, the ld. counsel for the assessee vehemently contended that the Assessing Officer has made additions which are not based on any incriminating materials. The Ld AR pointed out that the date of search is 27-08-2008. The ld AR further pointed out that the return for AY 2005-06 was filed on 26th October, 2005 and the assessment was made under section 143(1). The time limit for issuance of Notice under section 143(2) was 31st October 2006. Since no notice u/s 143(2) was issued within time prescribed, assessment for the AY 2005-06 becomes a case of acompleted/unabated assessment. Similarly, the ld AR pointed out that the return for AY ....
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....ssing Officer. On the issue of additions made in absence of incriminating materials, the ld. DR relied on the decision of the Hon'ble Kerala High Court in the case of E.N. Gopakumar 75 Taxmann.com 215, Hon'ble High Court of Allahabad in the cases of CIT VS. Raj Kumar Arora 52 Taxmann.com 172 and CIT Vs. Kesarwani Zarda BhandarSahson ITA No. 270 of 2014 and other cases. On merits of the additions, the ld DR could not controvert the findings of the ld. CIT(A). 21. We have carefully perused the orders of the authorities below. Having heard the rival submissions and perusing the relevant material on record we note that the search on the assessee was conducted on 27.08.2008. We also note that the AY 2005-06 and AY 2006-07 has become a completed/unabated assessment as in both the AYs, assessment u/s 143(1) has been made and the time to issue notice u/s 143(2) has expired. The ld. DR could not rebut this pertinent fact that the two AYs involved are completed/unabated assessment years. We also find from the perusal of the assessment order that there is no mention of any incriminating material found at the time of search on the basis of which the impugned additions have been made....
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....ismissed. No costs." 23. The ratio laid down by the Hon'ble Supreme Court in the case of Abhisar Buildwell P Ltd [supra] squarely apply to the facts and circumstances of the instant case. The AYs of 2005-06 and 2006-07 are completed/unabated assessments. The impugned addition is not based on any incriminating material found relevant to the A.Ys under consideration. Respectfully following the judgement in the case of Abhisar Builder, we direct that the addition made by the AO on account of residual rights be deleted. Accordingly, the ground No. 5 raised by the assessee in both the appeals in this respect is allowed in both the A. Ys under consideration. As the additions are deleted on the legal ground, no opinion is being given on the merits of the additions made. 24. Ground No. 6 raised by the assessee in A.Y 2005-06 pertains to the confirmation of addition of Rs. 70,600/- made by the Assessing Officer u/s 40a(ia) of the Act. 25. Facts relating to this issue are that the Assessing Officer during the course of assessment proceedings disallowed an amount of Rs 70,600/- u/s 40a(ia) of the I T Act on account of the fact that the assessee had not deducted TDS on earth work ....
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...., the assessee group surrendered an amount of Rs. 16.95 crore which was over and above the net profit for A. Y 2007-08 in the case of respective companies. 36. Subsequently, a search and survey operation u/s 132 was conducted on the assessee group on 27.08.2008 during which incriminating documents and diaries containing entries of unaccounted income generated on account of receipt of on-money was seized. On being confronted, the Managing Director of the group Shri Amit Jain in his statement u/s 132(4) offered Rs. 30 crores as additional income on account of cash receipts/entries which was over and above the regular income to be declared without ascribing the AYs for which it was attributable. 37. The Assessing Officer examined incriminating materials at Annexures A-20,21,22&24seized during the search and concluded that sum total of figures of Rs 32,82,27,143/-appearing on the credit side of the AnnexuresA-20, 21,22 & 24 along with Rs 16,95,88,000/-admitted during the survey, represent undisclosed income of the assessee. Accordingly, the Assessing Officer considered the entire receipts of Rs 49,78,59,943/- as undisclosed income and apportioned it in the AYs of 2003-04 to 2009-....
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....ts/sale/extrapolated sales at Rs. 49,78,59,943/- & Rs. 42,98,06,439/- respectively which has been spread over the block years in the ratio as determined by the auditor following Percentage of Completion Method of Accounting(PCOM) as under: - Name of the company Asst Year Addl Income declared by the appellant Extrapolation by Special Auditor Extrapolation by the A.O. Mahagun Realtors Pvt. Ltd. 2006-07 5,22,91.433 6,05,71,018 Mahagun Developers Pvt. Ltd. 2004-05 - - - -- do- 2005-06 2,02,54,253 2,34,61,235 -do- 2006-07 5,54,20,982 6,41,96,022 Mahagun India P. Ltd. 2004-05 - -do- 2005-06 1,79,63,669 2,08,07,939 -do- 2006-07 13,33,88,185 15,44,27,160 -do- -do- 2007-08 2008-09 16,95,88,000 2,09,41,931 35,58,41 11 2,42,57,786 8,42,41,21 -do- 2009-10 17,97,85,305 12,60,57,575 16 941 Total 34,93,73,305 - ....
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.....00 1695.88 On perusal of the above information it is observed as under .- 1. Such receipts pertain to the period starting from April, 2006 till February, 2007 relevant to A.Y. 2007-08 2. It relates to various Mahagun Group of Companies as their names are mentioned in abbreviation on these pages. Such as MDL, MIPL, MRL etc 3. The numerical figure mentioned alongwith abbreviated name of the company appear to represent the project undertaken by the respective company such as "4" mentioned with MDL appears to represent its project Mahagun Mansion-II, 1/4, Indirapuram, Ghaziabad. "5" Mentioned with MIPL appears to represent its project Mahagun Mansion-I, 1/5 Indirapuram, Ghaziabad. "21" mentioned with MRL appears to represent its project "Mahagun Maistro"F-21, Noida & "4" mentioned with MIPL appears to represent its project "Mahagun Morpheus" E-4, Sector 50, Noida. Though it is apparent from the diary that income relates to the projects of the appellant's group companies, but it is difficult to presume that such receipts are either "on money" or "suppressed sales" of the appellant in the absence of any other evidence or infor....
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....here is no correlation between unaccounted receipts reflected on credit side and the amount reflected on debit side of these ledger/ Annexure does not appear to be correct. On verification of the annexure, it is observed that there are contra entries, adjustment on account of refund and price adjustment etc on the same pages which reflects impugned receipts as pointed out by the appellant during these proceedings as under ..... Following ledger accounts of the respective annexures exhibit that the appellant has received the amount and refunded the same. Meaning thereby, when the documents itself suggest that the credit sum has already been refunded, the same cannot be included in the impugned suppressed sale / receipt at Rs. 32,42,27,143/-. Keeping in view the above factual status, it is not in order to ignore the debit entries recorded in these annexures itself. The AO has not pointed out any single entry which is not related to the impugned suppressed sale/receipt credited in these ledger books. In the absence of such observation, in view of settled law that the documents found at the time of search has to be read as a whole, if it has to be relied upon. It cann....
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.... these ledgers and the debits as appearing in the annexures has direct-link with the credit appearing therein. It appears that the surrender of Rs. 30 Cr. as made by the director was without verification of the transactions recorded in the Annexures. Therefore, in absence of any bar under the Act to rectify the mistake committed by the appellant while recording his statement u/s 132(4) at the time of assessment no adverse inference can be drawn against the appellant merely on the basis of statement. It is establish principle of law that the party is entitled to show and prove that the admission made by him probably is infact not correct and true as held in Kishan Lal Shiv Chand Rai 88 ITR 293 (P & H). 22. Now as far as the working given by the Special Auditor is concerned, it is observed that he has calculated extrapolated sales at Rs. 42,98,06,439/-for the entire block years which includes additional income offered by the appellant for the A.Y. 2007-08 and A.Y. 2009-10 on the basis of these annexures, in the following manner: 1. The Auditor has prepared Project-wise charts, showing customer-wise, flat-wise, and Area- wise detail for all the projects executed duri....
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....her their names are there or not in the books of accounts and seized material or vice-versa. Documents regarding receipt of "on money" by appellant having been found in respect of sale of flats to one party, addition could not be made in respect of all the parties to whom appellant sold flats merely on the basis of presumption as held in D.N.K. Kamani (HUF) v/s. Dy. CIT (1999) 70 ITD 77 TM (Pat.). In my considered opinion, the Special Auditor is not justified in deciphering the figures on the basis of seized documents based on unfounded presumptions and conjunctures without bringing any corroborative material evidence in support thereof, as held in the case of Atul Kumar Jain - Vs - DCIT, 64 TTJ 786 (Delhi) due to following reasons :-. The law of averages sometimes gives very erratic results if the denominator value is substantially low than the numerator. In the instant case, average sale price has been determined for all the customers by considering the alleged "on money" paid by a very small segment of the customers as mentioned below: S. No. Project / Financial Year Total customers Of the Project, No. of Tainted customers as I per the seized; records ....
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....irmity in the manner of offering of additional income as alleged by the A.O. The appellant during the course of survey u/s 133A in the year of 2007 had offered Rs. 16.95Cr. as additional income which was also "progressive highest credit balance" as on date of survey calculated on the basis of similar type of ledger seized during survey. 24. I also do not find any infirmity in the method of capitalization of Rs. 16.97 Cr. out of total additional income at Rs. 17.97 Cr. offered by the appellant, in the work in progress of continuing projects namely "Mahagun Mall" & "MahagunMescott". If there was any likelihood that the undisclosed income was utilized by the appellant for any other purpose other than investing in the excess stock, the A.O should have brought something on record to show that the disclosure by the appellant was not correct. The onus was on the A.O. to prove that the undisclosed income was not invested in the stock. The A.O. neither has discharged its onus to prove that the undisclosed income was not invested in the stock nor it has bought any evidence to show that the explanation offered by the appellant was not correct. Even the appellant was not asked to expl....
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....ion of Rs. 49,78,15,143/- on substantive basis during the block years and simultaneously has also made addition on protective basis during A.Y. 2007-08 (survey year) and A.Y.2009-10 (search year). This position got further compounded during remand proceeding from his successor confirming that the impugned amount of extrapolated sales has been derived from the working of special auditor. The successor of the A.O. in the remand report has confirmed that the alleged amount of extrapolated sales i.e Rs 49,78,15,143/- has been taken on the basis of working done by special auditor report whereas in the impugned assessment order, the impugned sum has been calculated by adding the figures of surrender made at the time of survey i.e Rs 16,95,88,000 and Rs 32,82,27,143 being the sum total of credit side of the annexures seized at the time of search. The relevant portion of the remand report is reproduced below :- "An addition of Rs. 2,08,37,929/- was made by the A.O. on the account of unaccounted receipts on the basis of surrender of Rs. 49.78 Cr. in the proportionally form as worked out by the Special Auditor for the A.Y. 2004-05. This issue has been discussed in length by AO in hi....
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....the assessee company during A.Y 2007-08 & 2009-10 may please be given and adjusted as part and parcel of extrapolatedsales as determined by the Auditor Therefore, the contents of impugned letter cannot be regarded as any admission by the appellant on this account. 27. Under these circumstances, the Assessing Officer at the time of framing of impugned addition, has come to a conclusion that the contents of the annexures are correct and sum total of figures on the credit side of these annexures represent undisclosed income of the appellant. The A.O. has neither explained that sums recorded on the credit side of the annexures represent suppressed sale/receipts of the appellant nor that the sums recorded on the debit side of these annexures are not related to the credit side. There is no direct/indirect or corroborative evidence so as to arrive at such conclusion. It is settled proposition of law, that undisclosed income arising out of search has to be based on correct, ascertainable and quantifiable undisclosed income evidenced from a search. The impugned sums on credit side of the annexures also cannot be accepted as "on money" as held by the A.O. as there cannot be....
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....-05 to AY 2009-10. At para 15 of his order, the CIT(A) has described the basis of addition made by the Assessing Officer and the basis of Special Auditor's working of the suppressed sales. 40. We have incorporated the findings of the CIT(A) as above in our order which may be summarized as under: 1. The auditor in the course of special audit, has determined the suppressed receipts/sale/extrapolated sales at Rs. 42,98,06,439/- which has been spread over the block years AY 2004-05 to AY 2009-10 in the ratio as determined by the auditor following Percentage of Completion Method of Accounting. 2. The assessing officer has, however, made an addition of Rs 49,78, 15,413/- by adding the figures of surrender made at the time of survey u/s 133Ai.e Rs 16,95,88,000/- and Rs 32,82,27,143/- being the sum total of credit side of the annexures seized at the time of search. The total amount of Rs 49,78,15,413/- was apportioned, on extrapolation basis, for each of the assessment year in the block period of AY 2004-05 to AY 2009-10. 3. The addition of Rs. 16,95,88,000/-, based on receipts as found in the diary impounded during survey u/s 133A dated 20.03.2007, pertai....
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....For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs". The SLP filed against this judgement before the Hon'ble Supreme Court was also dismissed as reported in PCIT v Meeta Gulgutia (2018) 257 Taxmann 441 (SC). Therefore, for the reasons as enumerated above, we hold that the addition made by the AO for AY 2005-06 and AY 2006-2007 are not made on the basis of seized material qua the assessment years involved and accordingly we direct the AO to delete the addition on account of suppressed sales for both the AYs. 43. Accordingly, Ground No. 2 raised by the Revenue in both the A.Y 2005-06 and AY 2006-2007 are dismissed. 44. At this juncture, we may mention that the CIT(A) has determined the undisclosed income of the assessee at Rs 17,97,85,305/- for three AYs 2007-08 to 2009-10 and has discussed the disclosure of Rs 30 crore by Shri Amit Jain, Director of the assessee group at para 18 of his order and the capitalization of Rs 16.97 crore as work in progress....
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....ed that this was a case of an unabated assessment and therefore, in the absence of any incriminating material found as a result of search, no disallowance could be made. The ld AR also relied on the decision of the CIT(A). 52. On the other hand, the ld. DR relied upon the orders of the authorities below. 53. Having heard the rival submissions and perusing the relevant material on record, we find that the impugned AY is a completed/unabated assessment year. The law laid down in Abhisar Builders's case is equally applicable to the facts of this disallowance. Respectfully following the judgement in the case of Abhisar Builder, we direct that the disallowance made by the AO on account of violation of the provision of the section 40a(ia) of the I T Act be deleted. Accordingly, the ground No. 3 raised by the revenue in its appeal for AY 2005-06 is dismissed. 54. As a result, the appeals of the Revenue in ITA Nos. 3661 and 3662/DEL/2012 stand dismissed. 55. To sum up and conclude, the appeals of the Revenue in ITA Nos. 3661 & 3662/DEL/2012 stand dismissed. Appeals of the Assessee in ITA Nos. 2818/DEL/2012 and 2819/DEL/2012 are allowed. The order is pronounced in the ope....