TMI Blog2013 (9) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000/- in the assessment year 2008-09, he upheld the addition to this extent by observing that merely because the assessee has not debited this expenditure in the profit and loss account, no disallowance should be made. However, such disallowance should be made only in the year in which assessee claimed such payment as expenditure in its profit and loss account and not in the years under consideration, wherein undisputedly no claim of any of such expenditure is made by the assessee as per the audited profit and loss account and balance sheet placed before the lower authorities, which also find placed in the paper book. We direct accordingly. Undisclosed investment in land - addition u/s 69 - Held that:- , it is clear that the ld. CIT(A) ahs not deleted the addition by controverting the finding recorded by the Assessing Officer with respect to the applicability of provisions of Section 69 under which investment from undisclosed sources is added. The CIT(A) has simply deleted the addition by relying on the addition confirmed by him u/s 40A(3). We set-aside the order of CIT(A) on this ground and in the interest of justice, matter is restored back to the file of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed additional Income of Rs. 105 crores in the hands of Zoom Developers Pvt Ltd Rs.25 crores in the hands of Zoom Reality Projects Pvt Ltd; Rs5 crores each in the hands of Shri Vijay Choudhary and Smt. Manjary Choudhary. Subsequently, while filing" the returns, the surrendered income of Rs. 105 crores were offered for taxation in the cases of Zoom Developers Pvt Ltd in A.Ys. 2003-04 to 2009- 10. However, the surrender made in the hands of Zoom Reality Projects Pvt Ltd was retracted fully, while Shri Vijay Choudhary and Smt Manjary Choudhary made partial retraction and offered Rs.50 lakhs and Rs.1 crore respectively for taxation. 3. The addition in various assessment years are based on the items already shown in the original returns. The assessee claims that no incriminating documents were found during the search and therefore no addition on the regular items shown in its original returns cannot be made in the proceedings u/s. 153A pursuant to search. The additions in various assessment years have been made on account of disallowances of expenses u/s 40A(3) for purchase of land through cash payments and the illegal payment to government officials through Advocates named M/s. Parkar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments have been made in cash. 5. In view of the above discussion the Assessing Officer held that the payment of Rs.3,50,00,000/- for purchase of land has been made in cash and hence twenty percent of the same was disallowed u/s 40A( 3) and added back to the total income of the assessee. 6. By the impugned order, the ld. CIT(A) deleted the disallowance made u/s 40A(3) after having the following observations :- Ground no.(3), (3.1) (3.2): Through these grounds, the assessee has challenged the addition of Rs. 70,00,000/- u/s 40A(3). The addition has been made by the Assessing Officer considering the payment of Rs. 3.5 crore in cash towards purchase of land. On that basis, the Assessing Officer has added 20% thereof u/s 40A(3) which amounted to Rs. 70,00,000/-. During the appeal proceedings, it is submitted that payment of Rs. 3.5 crore was made through pay orders/drafts and not through cash as assumed by the Assessing Officer. It has been further submitted that the payment was made towards the cost of land which was purchased through an open auction by the High Court of Bombay; that the amounts were paid by M/s. Zoom Developers Pvt. Ltd" on their behalf; that AO did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement of the dispute. The auction sale was confirmed by the Hon'ble Mr. Justice Khanvilkar on 05.02.2004 wherein Zoom Developers Pvt. Ltd. was declared as the successful auction purchaser on sale consideration amounting to Rs.3.5 crores which was deposited with the Commissioner for taking accounts, High Court, Bombay and on an application made by Zoom Developers Pvt. Ltd. to the Hon'ble High Court for an order that the conveyance should be executed in favour of the assessee company, Magnificent Constructions Pvt. Ltd., the Hon'ble High Court by its order dated 24.03.2004 granted the said prayer. In view of these facts, it is very clear that the entire payment of Rs. 3.5 crore was made to the Commissioner for taking accounts through pay orders and drafts prepared from the bank accounts of Zoom Developers Pvt. Ltd., on behalf of the assessee. Even otherwise also in such auction, which is executed by the High Court, payments through cash could not be accepted. Therefore, just because the details of payments were not mentioned in the conveyance deed, the AO's conclusion that payments were made through cash cannot be sustained. The assessee's ground is allowed. The addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld.CIT(A) in the assessment year 2008-09 amounting to Rs. 87,03,841/- and in assessment year 2009-10 Rs. 64,45,097/-. In view of the detailed findings recorded by the CIT(A) which has not been controverted by Department by bringing any positive material on record, we confirm the action of CIT(A) for deleting these disallowances made u/s 40A(3). 10. During the course of search, the Assessing Officer also found letter of M/s. Parker Parker Associates dated 1st July, 2006, according to which the assessee was required to make payment of Rs. 3 crores by 3rd July, 2006, by DD favouring M/s. Parker and Parker. The AO has made addition of Rs.57,11,000/-in A.Y. 2006-07; Rs. 96,04,690/- in A.Y. 2007-08 and Rs. 7,94,830/- in A.Y. 2008-09 on account of payments made to the said concern on this account. The AO has considered such payments as illegal on the basis of a letter dated 01.07.2006 of Parker Parker Associates addressed to Mr. Vijay Choudhary on the subject 'Professional fees I speed money'. This letter was found and seized during the search. Through this letter, the Parker Parker Associates had asked for payment of professional fee amounting to Rs.3 crore by 03.07.2006 thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociates in which the said firm was appointed as a facilitator for procurement of land at various places as mentioned in the MOU; that as per the understanding entered with them they have to procure the land and give it to the assessee at a fixed price; that the agreements were to be entered directly with the farmers/land owners in which they were also to be named as confirming party; that the payments to farmers and land owners were to be made from their account; that as such the assessee was making the payment to Parker Parker and in turn they were making the payments to the farmers / land owners; that number of agreements were entered by them with the farmers and the assessee company, however no final conveyance deed (sale deed) could, be executed and therefore the amounts paid by the assessee company were shown in the balance sheet as advance. 12. By the impugned order, the ld. CIT(A) confirmed the disallowance only to the extent of Rs. 7 lakhs in the assessment year 2006-07, Rs. 4 lakhs in the assessment year 2007-08 and Rs. 50,000/- in the assessment year 2008-09 after having the following observations :- 4.3.2 It is noted from the balance sheet for the years relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 During the appellate proceedings before me, the assessee submitted the copy of MOU dated 29.12.2005 with M/s Parkar Parkar Associates in support of their claim. that the said concern was appointed as a facilitator for procurement of land at various places at fixed rates. As per the MOU, the said concern was also responsible to get the conversion of land-use to Non-agricultural purpose; to obtain the NOC from concerned Competent Authorities and to facilitate the assessee group to get the particular development rights on the said Scheduled Properties including clearance from Urban Land Ceiling Authorities. The assessee also filed a two page documents, which are said to have been issued during the course of search operation and placed in the loose papers seized at S-8 Annexure A-1 on page Nos. 74-80. The said documents reflects the status report on the land acquisition following the MOU with M/s Parker and Parker Associates. The status report has been prepared by Mr. Kishore A. Shivkar, an employee of Zoom Group. According to this status report Rs. 99.11 Lakhs were paid to M/s. Parker Parker Associates during 29.02.2005 to 08.05.2006, whereas the expense statement given by Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociates. Further details as regards to the illegal payments as speed money out of the payments made in AY 2007-08 and 2008-09 are not available. In circumstances proportionate ( approx @ 7% i.e 7 out of 99.11) disallowances to extent of Rs. 4 Lakhs and Rs. 50,000/- are estimated in respect of the balance payment of Rs. 54 Lakhs (96.04 - 42) and 7.94 Lakhs in AYs 2007-08 and 2008- 09 respectively. To summarize, the disallowance to extent of Rs. 7 Lakh as against Rs 57.11 Lakhs in AY 2006-07; Rs. 4 Lakh as against Rs. 96.04 Lakhs in AY 2007-08 and Rs. 50,000/- as against Rs. 7.94 Lakhs are confirmed. 4.3.4 A plea has been taken by the assessee that amounts paid to M/s. Parkar Parker Associates have not been claimed as a deduction in the P L account and the disallowance on this account (i.e. as illegal payment) cannot be made in all these years [i.e. A.Y. 2006-07, 2007-08 and 2008-09), meaning thereby that the disallowance, if any, on this account can be made only in those years (which would fall thereafter) when expenses are claimed as a deduction in its P L account based on project completion method. As mentioned earlier, the assessee company is in the business of property dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective years in which such payments were made to the extent of Rs. 7 lakhs in assessment year 2006-07, Rs. 4 lakhs in assessment year 2007-08 and Rs. 50,000/- in assessment year 2008-09 is upheld. Accordingly, addition to the extent of Rs. 7 lakhs as against the disallowance of Rs. 57.11 lakhs made in the total income of the year under consideration ( i.e. assessment year 2006-07) stands confirmed. The assessee will get relief of Rs. 50.11 lakhs. 13. It is clear from the detailed findings recorded by the ld.CIT(A) that out of the total payment only a sum of Rs. 7 lakhs has been paid as speed money relevant to assessment year 2006-07, Rs. 4 lakhs in assessment year 2007-08 and Rs. 50,000/- in the assessment year 2008-09, he upheld the addition to this extent by observing that merely because the assessee has not debited this expenditure in the profit and loss account, no disallowance should be made. We found that after appreciating entire fact, the CIT(A) found that the payments to Parker Parker was made for acquisition of land and the assessee has not claimed such payment as a deduction in the profit and loss account, therefore, he confirmed the disallowance only to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenditure for arriving at its business profits. We direct accordingly. 17. In the assessment year 2007-08, the Revenue is in appeal for deleting addition of Rs. 1,37,98,459/- representing undisclosed investment in land, particularly when books of account and Bank account and relevant crucial details were not produced before the Assessing Officer. 18. In this regard, we found that the Assessing Officer has made addition after having the following observations :- During the assessment proceedings the assessee was asked to file explanation of the above document the assessee has stated that all the payments are through banking channels. However, the assessee never produced the books of accounts. The seized hard disk could not be opened for want of password. Bank statements were not filed. The assessee in its reply dated 22.12.2010 in point no. 2 stated that bank statements for A Y 2003-04 to A.Y. 2006-07 are not available and that there not much transactions during the relevant period. Inspite of repeated request hard copies of books of accounts were never produced and the soft copies were provided as late as on 24.12.2010, which also could not be opened for the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer for deciding afresh after giving due opportunity to the assessee. 21. In the result, the appeals of the assessee and Revenue are allowed in part in terms indicated hereinabove. I.T(SS).A.Nos. 89 to 94/Ind/2011 : 22. In these appeals, the assessees are aggrieved for addition made by invoking provisions of Section 2(22)(e) being advance received against sale of property. 23. By the impugned order, CIT(A) confirmed the addition after having following observations :- The addition was made by the Assessing Officer in respect of loan/advances received from Choudhary Innovative Business Pvt.Ltd. The table below reflects the assessment year-wise addition on account of deemed dividend in the hands of Shri Vijay Choudhary and Smt. Manjiri Choudhary. S.No. Appeal No. Name A.Y. Amount of addition u/s 2(22)(e) 1. IT-435/10-11 Shri Vijay Choudhary 2005-06 682,751 2. IT-430/10-11 Smt.Manjiri Choudhary 2006-07 174,000 3. IT-436/10-11 Shri Vijay Choudhary 2007-08 545,727 4. IT-437/10-11 Shri Vijay Choudhary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.) and the other is between Smt. Manjiri Choudhary and Choudhary Trading Finance Pvt.Ltd. Both the agreements are dated 23.08.2004 and purports to sell the share of their respective properties comprising of upper ground floor and first floor situated at Road No.2, Malharganj, Indore. The total cost of the properties, as per the agreements was Rs.81,92,500/- and Rs. 76,57,500/- respectively. As against that Rs. 16,25,000/- was to be paid to both of them on the day of agreement and Rs.18,75,000/- on 31.03.2005. The balance amounts of Rs.46,92,500/- and Rs. 41,57,500/- was to be paid at the time of conveyance deed and handing over the possession of the constructed area. In this context, I have looked into the balance sheet of Choudhary Innovative Business Pvt. Ltd. and find that the said company has shown the amounts given to Shri Vijay Choudhary and Smt Manjiri Choudhary as pure advances during all these years. It is noted that the said company has reflected advance against land and properties separately and the amount paid to Shri Vijay Choudhary and Smt Manjiri Choudhary had not been included therein. Rather, the amount paid to both of them had been shown under the head 'other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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