TaxTMI 
TaxTMI 
2025 (7) TMI 2071
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....against the consolidated Appellate order passed by the Commissioner of Income Tax -11, Bangalore [ the ld. CIT (A) ] for the AYs 2012-13 to 2017-18 dated 30.9.2024 raising a solitary ground of appeal that the ld. CIT(A) is not justified in upholding the disallowance of 50% of depreciation on luxury car without appreciating the facts that (i) the cars were used wholly & exclusively for the purposes of business and (ii) the assessment for the year under appeal is unabated and therefore no disallowance could have been made in absence of any incriminating material found during the course of search. 3. The brief facts of the case show that for AY 2012-13 assessee filed its return of income on 29.9.2012 declaring total income at Rs. Nil. Subsequently search was carried out on 1.2.2018 and based on that, assessee was issued a notice u/s. 153A of the Act on 10.1.2019. The assessee filed its return of income u/s. 153A on 27.2.2019 at Rs. Nil. Subsequently notice u/s. 143(2) was also issued on 4.3.2019. 4. During search proceedings, it was found that the assessee is claiming depreciation on luxury cars used for the personal purposes of the directors of the assessee company. A statement....
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....A) upheld the finding of the ld. AO regarding disallowance, but restricted the disallowance to 50% of the depreciation as per Para no. 5.4.12. Aggrieved with that, assessee is in appeal before us. 8. The contention of the ld. AR is that :- (i) the addition/disallowance made by the ld. AO is devoid of any merit for the reason that the date of search was 1.2.2018 which was concluded on 29.3.2018. As on the date of search, the assessment for AY 2012-13 was not pending. The return of income was filed for that assessment year on 29.9.2012 and therefore if any addition is required to be made it could only have been made on the basis of incriminating material found during the course of search. His submissions is that the ld. AO has made the disallowance only on the basis of the statement of Managing Director u/s. 132(4) of the Act, which cannot be considered as incriminating material. He submits that as there is absence of incriminating material found during the course of search relating to this disallowance, the issue is covered in favour of assessee by the decision of the Hon'ble Supreme Court in the case of Abhisar Build well P. Ltd.(2023) 454 ITR 212 (sc) [TS-5106-SC-2....
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....s the mandate of the decision of the Hon'ble Supreme Court in the case of The Principal Commissioner of Income-tax, Central-3 vs. Abhisar Build well (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/ [2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04- 2023] [TS-202-SC-2023] . On examination of the assessment order at page 14, we do not find any reference to any incriminating material found during the course of search which could have shown that the vehicles are used by the directors and his family members for personal purposes. 11. It is the claim of the ld. CIT DR that statement made by the Managing Director u/s. 132(4) of the Act is incriminating material. The statement of the Managing Director is reproduced at page 15 of the assessment order. Q.No.77 its starts from the examination of the books of account and did not relate to reference to any material found during the course of search. In any case, statement u/s. 132(4) of the Act is without any incriminating material. The statement u/s. 132(4) also cannot be said to be incriminating material. This is also because of the reason that no person can incriminate himself by making a statement against himself. Honourable Delhi H....
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....e 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 Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation. .. . However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of account, documents, assets, etc. Plainly, the intention of Parliament is to permit such examination only where the books of account, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of section 132(4) of the Act are read in the context of section 158BB(1) read with section 158B(b) of the Act, it is at onc....
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....h we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded 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 are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. In CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171 (T&AP), a Division Bench of the Telangana and Andhra Pradesh High Court held that a statement recorded under section 132(4) of the Act which is retracted cannot constitute a basis for an order under section 158BC of the Act .. . . " 14. This case was challenged in the Supreme Court and SLP No. 13345 of 2018 was admitted. But subsequently, it was dismissed as withdrawn. Thus, the decision in Best Infrastructure(supra) has not been disturbed. 15. This case was subsequently referred to a larger Bench in the case of CIT v. M.S. Aggarwal(2018) 406 ITR 609 (Delhi) ; (ITA 169/2005), where subsequently the question was not answered as the referral court dismissed the same on account of low tax effect on August....
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....e time of search under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B and 234D of the Act, which under the facts and in the circumstances of the appellant's case and the same deserves to be cancelled. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." 22. Ground No.1 is general in nature. Ground No.3 is not pressed and therefore same is dismissed. Ground No.4 of the appeal is with respect to interest u/s. 234B & 234D of the Act which is consequential in nature and therefore same is also dismissed. 23. This leaves us with ground No.2 of the appeal wherein the ld. CIT(A) has confirmed the disallowance to the extent of 50% of depreciation on luxury cards allegedly used by the family members of director, but the claim of the assessee is ....
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.... without making detailed enquiries & verifications into transactions shown in order to build up of cash balances in the cash book on dates of impugned payments." 30. The brief facts of the case show that the ld. AO made an addition of Rs.2,97,47,130 as unexplained investment u/s. 69 of the Act. During the course of search proceeding seized material was found marked as Annexure A/GTP/BD1-04 which contains the details of cash payment made by the assessee for purchase of property to one land aggregator, Mr. Sajjad Khan & Mr. Fahd Khan who are partners of the firm, Xotic Ventures. A statement u/s. 132(4) was recorded wherein in Q.No.22 & 74 were asked on this issue. The answer given in response to Q.No.74, it was submitted that cash payment is made for procurement of land for logistic park and cash is paid to the farmers. The amount of cash payment made by the assessee was Rs.64.71 lakhs for FY 2012-13 Rs.97.44 lakhs for FY 2013-14 & Rs.11.35 lakhs for FY 2014-15. Thus aggregate payment of Rs.173.50 lakhs was made in excess of Rs.20,000 in cash. Further the sworn statement of Sajjad Khan was recorded u/s. 131 on 12.9.2018 wherein he admitted that cash is paid to the farmers for proc....
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....ed the source for cash payment to be from out of the cash balances available in the regular books of account. Further he held that the seized document marked as A/GTP/BD1-04 is nothing but part of the books of account maintained by the assessee in the regular course of carrying on of the business. These payments are shown as loans & advances in the annual accounts which were filed prior to the date of search along with the audit report is not in dispute. Therefore the addition was deleted. 33. The ld. AO aggrieved with the same has preferred this appeal. 34. The ld. CIT(DR) mainly contended that under Rule 46 of the I.T. Rules, the AO should have been granted an opportunity before admitting the evidence by the ld. CIT(A). It was further contended that the ld. First Appellate Authority was not right in accepting the explanation of the assessee without making detailed enquiry that whether the assessee was having cash in hand on that date on which the payments are made. 35. The ld. AR vehemently submitted that the ld. CIT(A) has deleted the addition u/s.69 for the reason that Annexure found during the course of search is part of the regular books of account of the assessee an....
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....ed by the ld. AO. 37. Accordingly ITA No.2363/Bang/2024 filed by the ld. AO for AY 2013-14 is dismissed. AY 2014-15 (ITA No.2317/Bang/2024) | By Assesseel 38. This appeal for AY 2014-15 filed by the assessee is identical to appeal for AY 2012-13 raising the following grounds of appeal :- ' 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified in upholding 50% of the disallowance of depreciation on Luxury Cars without appreciating that the cars were used wholly and exclusively for the purposes of the business and at any rate, the assessment for the year under appeal had not abated on the date of search and therefore, no disallowance ought to have been sustained in the absence of any incriminating material found in course of search to warrant any disallowance under the facts and in the circumstances of the appellant's case. 2.1 Without prejudice to the above, the disallowance sustained by the learned CIT[A] at 50% of the depreciation claimed is excessive and liable to be redu....
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.... search and therefore, no disallowance ought to have been sustained in the absence of any incriminating material found in course of search to warrant any disallowance under the facts and in the circumstances of the appellant's case. 2.1 Without prejudice to the above, the disallowance sustained by the learned CIT[A] at 50% of the depreciation claimed is excessive and liable to be reduced substantially. 3. The learned CIT[A] is not justified in upholding the addition of Rs.1,12,67,172/- made u/s.69 rws 115BBE of the Act on account of interest accrued on loan given to Century Woods without appreciating that the said addition cannot be made in the unabated assessment proceedings u/s. 153A of the Act in the absence of any incriminating materials found at the time of search under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234A and 234B of the Act, which under the facts and in the circumstances of the appellant's case and the same deserves to be cancelled. 5. For the above and othe....
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.... the appellant's case and the same deserves to be cancelled. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." 47. Ground No.1 is general in nature, ground No.3 is not pressed, ground Nos.5 & 6 are consequential in nature and therefore same are dismissed. 48. This leaves us with ground Nos.2 & 4 of the appeal. 49. Ground No.2 of the appeal is against the confirmation of the disallowance of depreciation on luxury cars which is identical to appeal of the assessee for AYs 2012-13 to 2015-16 wherein we have directed the ld. AO to delete the disallowance. For similar reasons, we direct the ld. AO to delete the disallowance for this year too. Accordingly ground No.2 of the appeal is allowed. 50. Ground no 3 is dismissed as not pressed. 51. Ground No.4 is with respect to upholding the addition of Rs.10 crores by the ld. CIT(A) as unexplained investment being cash paid towards charges of loan from Divyas....
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....strain on the own funds of the Company. At a point during the discussion, the bank representatives were sceptical on the value of the project and refused to fund the project to the desired level - However, to achieve the objectives of negotiation, it was represented before them that the building was acquired by paying additional consideration in cash amounting to Rs 10 Cr plus, a flat in Mumbai was given to the seller in exchange. All these conversations have happened orally with the sole objective to rack up the financial assistance from the bankers - whereas in reality, the building was acquired at the price mentioned in the purchase deed without paying any additional consideration and neither Satish P Chandra nor any of the family members nor the company had any owned a flat in Mumbai. Thus, it is the submission of the Assessee that no addition could be made in relation, based on assumptions and surmises, without any cogent evidence for the same." 55. The ld. AO rejected the submission of the assessee that seized material is a draft calculation to rake up the purchase consideration for obtaining the loan. The assessee has not explained why the draft calculation inclu....
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....the discussion the bank representative were sceptical and the value of the project and refused to fund the project to the desired travel. However to achieve the objectives of negotiation it was represented before them that the building was acquired by paying an additional consideration in cash amounting to Rs. 10 crore plus and a flat in Mumbai was given to the seller in exchange. These were all the conversations with the sole objective to rack up the financial assistance from the bank. The building was acquired at the documented price which is mentioned in the purchase deed which is also shown to the assessing officer that there is no such transaction that took place. The purchase of the building was documented by a purchase deed which is accepted by the Stamp authorities. Further during the course of search as well as during the course of assessment proceedings the assessee also stated that these are merely the draft calculation is for obtaining the bank loan. It was stated that the statement of the CF for, statement of the managing director at the time of search also stated the same thing. The learned assessing officer did not have any corroborative material that assessee has pa....
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.... the rival contentions and perused the order of the ld. Lower Authorities. Brief facts show that during search on 1/02/2018 a loose paper was found as seized as A/ GTP/BD-1-03 page no 155 where some figures are mentioned. This document is diary written by CFO of the assessee company Mr B.V. Vijendra. The Deputy Director of Income tax (investigation), Bengaluru recorded statement of Shri Satish Praphulla Chandra u/s 131 of the Act on 07/09/2018 where in question no. 165 was raised to him as under: - Q. 165 I am showing you page no 155 of the seized material marked as A- GTP-BD1-03 found and seized during search operation. Please go through the same and explain its contents. A. This is the Divyashree draft calculation for loan purposes. 60. It is also important that the statement of Mr. Satish was recorded u/s 132 (4) of The Act on 03/02/2018 by the Deputy Director of Income Tax (investigation) where in sum of Rs 51.665 crores were declared. Not a single question was raised to him on this loose paper. 61. Statement of The CFO of the company Mr. B V Vijendra was recorded u/s 131 of the Act by the Deputy Director of Income tax (investigation) on 7/09/2018 wherei....
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....es, there is no whisper in the assessment order, statements about these facts. This part of the documents has not been looked at or enquired by the ld AO. Further the documents also speak "comm. On 122 cr @ 2 %" how this figure matches with the alleged figures mentioned the loose paper. There is no inquiry what these figures are and to whom they relate. 69. There is no inquiry from the lender who provided a loan to the assessee i.e., Aditya Birla Finance Limited for purchase of this building that whether this proposal was shown to them and on what basis the loans were granted to the assessee of Rs. 65 Crores on purchase price of Property of Rs 92 Crores. It would have given an idea to the ld. AO about the correctness of the claim of the assessee. 70. To prove that assessee has purchased this property for Rs 92 Crs, Assessee has substantiated with the purchase deed, therefore, the observation of the ld. CIT (A) is incoherent that assessee did not show any other evidence showing that purchase consideration is only Rs 92 Crs. The ld. CIT (A) did not consider that there is no other evidence with the ld. AO to make the addition. 71. Thus, the document found during the course of....
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.... or scraps of paper cannot be termed as books." In this regard, it is relevant to extract Section 69A of the Act, which reads thus: "69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." The lack of corroborative evidence to show how the loose sheets found at the house of Sri K Rajandran are connected to the Respondents herein, or their occupation, is evident from the panchanama provided by the Assessing Officer. 22. The entire allegation is made out based on loose sheets of documents, which does not come under the ambit and scope of 'books ....
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....be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed. 18. "Book" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as 'book' for they can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram vs. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed :- " In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book ... I think the term "book" in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound toget....
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.... the contention of the respondents that the documents were not admissible in evidence under section 34 with the following words: "70. .... an account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debts and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arised to do for his future purpose. Admittedly the said diaries were not being maintained on day-to day basis in the course of business. There is no mention of the dates on which the alleged payment were made. In fact, the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. they have been shown in abreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to." 20. Mr. Sibal, the learned counsel for the Jains, di....
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....unt 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 prove, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business re 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 the were in accordance with facts. 282. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court." 26. It is established in law by the Hon'ble A....