TMI Blog2016 (5) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... September 25, 2005, duly executed by the parties, there is no reason to doubt the claim of the assessee that ₹ 2.56 crores was returned back which was deposited back in the books and surrendered by the assessee as a part of the total surrender of ₹ 5.50 crores, especially when the abovenoted some material facts by the learned Commissioner of Income-tax (Appeals) mentioned above in paragraph 13.3 of the present order have not been disputed. In the background of the above discussion, we hold that the learned Commissioner of Income-tax (Appeals) was very much justified in deleting the addition of ₹ 9.63 crores which is upheld. He, however was not justified in sustaining the addition of ₹ 2.56 crores under section 68 of the Act for the reasons discussed above. The same is, accordingly, directed to be deleted.- Decided in favour of assessee Addition of amount paid for bribe for awarding of contract - Held that:- The entire addition made by the Assessing Officer was solely based upon suspicion and surmises. The Assessing Officer has quoted the report of the Vigilance Bureau at pages 50 and 60 of his order revealing the facts that the report of the Vigilance Bur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts the above view. Further, that once the expenses have been found to be genuine and having been incurred for the purpose of the business, the quantum of the expenses cannot be examined by the Assessing Officer to adjudicate as to the aspect that how much of the expenses were justifiable and whether the expenses claimed are proportionate or disproportionate vis-a-vis the requirement of the business. Under these circumstances, we are of the view that the learned Commissioner of Income-tax (Appeals) has rightly deleted the addition in question. - Decided in favour of assessee - I. T. A. Nos. 4073 and 4147/Del/2013 - - - Dated:- 8-2-2016 - I. C. Sudhir (Judicial Member) And Prashant Maharishi (Accountant Member) For the Petitioner : S. K. Tulsiyan For the Respondent : Kartar Singh ORDER I. C. Sudhir (Judicial Member) 1. These are the cross-appeals addressed against the order of the learned Commissioner of Income-tax (Appeals)- XXXIII, New Delhi. 2. The assessee had questioned the first appellate order on the following grounds : 1. That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in upholding the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 31 lakhs has resulted in double taxation of the very same amount, which is not permissible in law. 3. The Revenue, on the other hand, has impugned the first appellate order on the following grounds : 1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of ₹ 9.63 crores out of the total addition of ₹ 12.19 crores, made by the Assessing Officer on account of unaccounted payment for acquisition of shares of M/s. PR Infrastructure Ltd. 2. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of ₹ 21.62 crores made by the Assessing Officer on account of unaccounted expenditure. 3. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of ₹ 59,04,788 made by the Assessing Officer on account of brokerage and commission. 4. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 5. The facts in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses incurred in cash not recorded in books ₹ 9,56,000 (v) Payment in cash to Mr. Ramesh Kumar Dutta against Indira Puram plot ₹ 31,00,000 (vi) Payment in cash against Amritsar plot to Mr. Arun Kapoor of M/s. P. R. Infrastructure Ltd. (PRIL) ₹ 2,56,00,000 (vii) Payment in cash to Mr. R. K. Sharma for purpose of property at Amritsar ₹ 2,00,00,000 ₹ 5,50,00,000 9. Pursuant to the search, the assessee in its return of income declared ₹ 19,77,97,633 wherein the above amount of ₹ 5.50 crores was included in schedule XIII to the profit and loss account filed, as miscellaneous income. Equivalent to the surrendered income, the assessee had introduced cash amounting to ₹ 5 crores in his books of account for the year under consideration. 10. The Assessing Officer in the assessment framed under section 143(3) of the Act has assessed the total income of the assessee-company at ₹ 54,65,30,610 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Nil (v) Brokerage and commission paid on leased properties (paragraph 8.3, page 62) Rs. Nil (vi) Late payment of TDS (paragraph 9.3, page 64) Rs. Nil 12. Since the issue raised in ground No. 1 of the appeals preferred by the parties is common, hence, we will deal with it after adjudicating the other ground of the assessee. 13. In ground No. 2, the assessee has questioned sustaining of the addition of ₹ 31 lakhs under section 68 of the Act as unexplained cash introduced in the books of account. The relevant facts are that the assessee had entered into an agreement regarding purchase of land located at Ghaziabad through Mr. Ramesh Kumar Dutta and an advance of ₹ 31 lakhs was made by the assessee to him. On the basis of pages 54 and 55 of annexure A4 found during the course of search which were cash receipts issued by Mr. Ramesh Kumar Dutta against the said land dealing, the Assessing Officer has made this addition while rejecting the explanation of the assessee that the said advance of ₹ 30 lakhs was returned to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not establish the receiving back of the cash amounting to ₹ 31 lakhs and that the said payment of ₹ 31 lakhs made by the assessee-company to Shri Ramesh Kumar Dutta was in fact not returned by him to the assessee. 16. The learned authorised representative contended that the authorities below are in total ignorance of the statement recorded by them and the evidences produced before them. The very preliminary statement of Shri Arun Nayyar recorded during the course of the search on July 17, 2006, itself clearly indicated that the amount paid to Shri Ramesh Kumar Dutta was received back on March 31, 2006, by the assessee-company as the title of the property was found defective and, therefore, the deal with him did not mature. He referred pages 96 to 105 of the paper book, i.e., a copy of his statement wherein at page 100, the said statement has been made by Shri Arun Nayyar. He submitted that this statement has not been proved wrong by the authorities below. Even Shri Ramesh Kumar Dutta in his statement recorded during the course of assessment proceedings on July 17, 2007, has accepted the receipts of the cash but has denied to have refunded any amount to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se bearing upon the deal under contemplation. The assessee in regard to the said purchase of land in Ghaziabad had given advertisement in the newspapers, copies of such newspapers showing the advertisement have been made available at pages 79, 82 and 84 of the paper book. In response to the said advertisement given by the assessee-company, some new facts were brought to the notice of the assessee in the form of one court case by S. V. P. Builders in respect of the said land, vide the honourable Allahabad High Court's order dated February 23, 2005, in the case of Delhi Auto and SVP Builders (pages 85 to 95 of the paper book) from which it was evident that there existed a dispute regarding the ownership of the said land between the two parties and the dispute was not resolved and was pending. Thus, the fact regarding the disputed ownership as stated by the assessee and also by Shri Ramesh Kumar Dutta stands confirmed and substantiated. 19. The learned authorised representative submitted that the authorities below have placed part reliance on the statement of Shri Ramesh Dutta wherein he has stated that the money was not refunded back to the assessee but have failed to take not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below. He submitted that the assessee has thoroughly failed to establish that the money of ₹ 31 lakhs advanced by the assessee to Mr. Ramesh Kumar Dutta was returned back, hence, the authorities below were justified in rejecting the above claim of the assessee. He submitted that the onus was lying upon the assessee to establish the claimed receiving back of the amount. 22. Having gone through the above submissions in view of the orders of the authorities below and the decisions relied upon by the assessee, we find that the authorities below have not disputed the fact that the amount of ₹ 31 lakhs was advanced by the assessee to Shri Ramesh Kumar Dutta towards the land dealing which ultimately did not materialise. The only dispute is regarding the refund of the said advance amount of ₹ 31 lakhs by Shri Ramesh Kumar Dutta to the assessee on the non-materialisation of the dealing. We concur with the finding of the authorities below to this extent that the assessee could not establish that the said advance amount of ₹ 31 lakhs was returned to the assessee but we agree with the above submission of the assessee that the dealing in question was part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount earned by carrying on a profession or a business which necessarily requires deducting expenses and losses incurred in carrying on business or profession. The Supreme Court in the matter of Badridas Daga v. CIT [1958] 34 ITR 10 (SC) has held that in assessing the amount of profits and gains liable to tax, one must necessarily have regard to the accepted commercial practice that deduction of such expenses and losses is to be allowed, if it arises in carrying on business and is incidental to it. There is no bar in claiming a loss as a business loss, if it is incidental to carrying on of a business. The fact that conditions for deduction as bad debt were not satisfied by the assessee would not prevent him from claiming deduction as a business loss. 25. Respectfully following the ratio laid down in the abovecited decisions, we hold that the assessee is at least very much entitled to claim deduction under section 28 of the Act regarding the above amount of ₹ 31 lakhs as business loss. We, thus, direct the Assessing Officer to allow the claimed deduction. The ground No. 2 of the appeal of the assessee is accordingly allowed. 26. Ground Nos. 1 to 1.3 (assessee) and Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account of the assessee over and above the actual purchase consideration of ₹ 6 lakhs towards the purchase of shares of PRIL. Thus, a sum of ₹ 12.19 crores was added as the undisclosed income of the assessee. The Assessing Officer held that the seized papers cannot be ignored as rough as has been claimed by the assessee during the assessment proceedings. The learned Commissioner of Income-tax (Appeals) concluded that the assessee-company had in the said deal paid ₹ 2.56 crores in cash and promised to allot 36,000 square feet constructed area and ₹ 6 lakhs was paid in cheque. Thus, the addition made by the Assessing Officer at ₹ 12.19 crores has been restricted by the learned Commissioner of Income-tax (Appeals) to ₹ 2.56 crores being the unaccounted cash paid for acquisition of shares of PRIL. The learned Commissioner of Income-tax (Appeals) has further held that the said unaccounted payment of ₹ 2.56 crores cannot be taxed twice, on the source of ₹ 2.56 crores. The learned Commissioner of Income-tax (Appeals) held that the source of returned cash of ₹ 2.56 crores remained unexplained due to denial by Shri Arun Kapoor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages 132 to 136 of the paper book has been shown the details of the consideration. 31. The learned authorised representative submitted that as far as the payment of ₹ 6 lakhs for purchase of shares is concerned, there is no dispute and, hence, no verification is required. Regarding the aggregate payment of ₹ 1.19 crores by cheque, the learned authorised representative submitted that the same is a matter of record and can be very much verified. He submitted that it can be seen that the total payment of ₹ 1.25 crores (Rs. 1.19 + ₹ 0.06 crores) was paid to PRIL, ₹ 1.19 crores being towards discharge of liability and ₹ 6 lakhs being towards sales consideration of shares. 32. Thus, the statement wherein Shri Arun Nayyar (page 100 of the paper book) stated that against the deal PRIL was to accept ₹ 1.25 crores and a built-up space of 36,000 square feet area stands corroborated. 33. The learned authorised representative submitted further that in any case while comparing the total consideration made, the amount paid by cheque as well as in any other form which payment was towards liability and the built-up portion in this case, have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Arun Kapoor, the same was added by the learned Commissioner of Income-tax (Appeals) to the income of the assessee- company under section 68 of the Act as unexplained cash credit. The learned authorised representative contended that the learned Commissioner of Income-tax (Appeals) has grossly contradicted himself in confirming this addition. The learned Commissioner of Income-tax (Appeals) without any restriction has accepted the fact of the case of the assessee whereby the said memorandum of understanding dated September 25, 2005, was duly executed, stamped, signed and sealed. The learned Commissioner of Income-tax (Appeals) has accepted that 36,000 square feet constructed area was to be delivered to PRIL as consideration for the sale of shares (impugned land of the value of ₹ 12.25 crores) in addition to ₹ 6 lakhs paid by cheque. It was on this basis that the learned Commissioner of Income-tax (Appeals) in all tightness deleted the addition of ₹ 9.63 crores. The learned Commissioner of Income-tax (Appeals) contended that when the learned Commissioner of Income-tax (Appeals) has accepted the said memorandum of understanding stating that the consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact and, accordingly, has been put to tax by the Assessing Officer and the learned Commissioner of Income-tax (Appeals). The assessee has already offered this amount of ₹ 2.56 crores to tax as part of the total surrendered amount of ₹ 5.50 crores. In making the said surrender, the assessee has stated that the said payment of ₹ 2.56 crores was refunded back to him by PRIL since the deal was changed and the final deal did not require the said payment. The authorities below have very conveniently chosen to rely upon the statement of Shri Arun Nayyar in parts only. Part of the statement has been relied upon and part thereof has been rejected. He submitted that if the addition of ₹ 2.56 crores to be undisclosed cash payment to PRIL is made solely on the basis of the statement of Shri Arun Nayyar, then, the fact of refund of the same as also stated by Shri Arun Nayyar in the same statement should also be relied upon. It is a matter of fact that the refund is still evidenced by the memorandum of understanding which lays down the deal did not have any payment of ₹ 2.56 crores in it. The allegations of the authorities below that the said ₹ 2.56 crores wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 holding the impugned amount as bogus cash credit or unexplained cash credit. The entire addition made by the Assessing Officer pertained to investment acquisition of the Amritsar plot and not against the cash credit. Thus, the action of the learned Commissioner of Income-tax (Appeals) in making the addition under section 68 of the Act without any notice to the assessee is beyond the provisions of the Act. He submitted that a perusal of the assessee's surrender of ₹ 5.50 crores and its break-up quoted above, it is apparent that the assessee had stated the following three refund payments being offered as undisclosed income and included in the said surrender : (i) Payment in cash to Mr. Ramesh Kumar Dutta against Indrapuram Plot (Ghaziabad) ₹ 31,00,000 (ii) Payment in cash against Amritsar plot to Mr. Arun Kapoor of PR Infrastructure Ltd. (PRIL) ₹ 2,56,00,000 (iii) Payment in cash to Mr. R. K. Sharma for purchase of property at Amritsar ₹ 2,00,00,000 39. The learned authorised represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of law that the onus always lies upon the claimant to establish its claim. He submitted that in the present case, the addition in question has been made on the basis of documents seized during the course of search proceedings. All these evidence revealed that there was transaction in relation to purchase of property at Amritsar and different kinds of receipts were issued by PRIL showing that different kinds of bills were under contemplation. On the basis of said seized papers, Shri Arun Nayyar, director of the assessee-company had admitted that in furtherance of the said plan/negotiation with regard to the proposed deal, the assessee has paid an aggregate cash of ₹ 2.56 crores to Shri Arun Kapoor (erstwhile director of PRIL). Thus, the assessee had made a surrender of ₹ 5.5 crores. The assessee, however, could not establish that ₹ 2.56 crores paid in cash was received back from PRIL on March 31, 2006, since the terms of negotiations were revised whereby it was agreed by Shri Arun Kapoor (PRIL) to accept ₹ 1.25 crores and a built-up space of 36,000 square feet in the proposed shopping mall at Amritsar in consideration of takeover of the company. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The seized documents were marked as pages 41, 42, 50 and 56 on the basis of which the Assessing Officer had made an addition of ₹ 12.19 crores. The Assessing Officer did not agree with the assessee that as per the revised terms of the negotiations, it was agreed by PRIL to accept ₹ 1.25 crores and a built-up space of 36,000 square feet in the proposed shopping mall at Amritsar in consideration of the takeover of the company and, thus, the entire amount of ₹ 2.56 crores paid in cash was received back by the assessee from PRIL on March 31, 2006, and the same money was introduced in the books as cash by the assessee. The Assessing Officer held that the cash introduced in the books of the assessee-company was not the same cash as paid by it to PRIL and, thus, observed that a sum of ₹ 2.56 crores was also undisclosed income and he added the same separately. The Assessing Officer held further that since a separate addition of ₹ 12.19 crores was being made by him for the purchase of the shares of PRIL, therefore, no separate addition of ₹ 2.56 crores was made. The Assessing Officer held that for purchase of shares of PRIL the assessee had paid a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In his statement dated July 12, 2006, Shri Arun Nayyar upon which Assessing Officer has relied upon, has stated that the total consideration of the land was at ₹ 12.25 crores out of which ₹ 2.56 crores was paid to PRIL. Explaining the seized papers Nos. 41, 42, 50 and 51, he has clearly stated that the pages record a payment of ₹ 1 crore which included the cash payment of ₹ 49 lakhs (Rs. 42 lakhs and ₹ 7 lakhs). The said payment was included in the above payment of ₹ 2.56 crores. Shri Arun Nayyar further clarified that initially it was agreed to take over the business and the land of the company but later on it was agreed to take over the company at a revised terms, wherein the directors of PRIL agreed to accept ₹ 1.25 crores and the built-up area of 36,000 square feet in the proposed shopping mall at Amritsar, hence, the cash of ₹ 2.65 crores paid earlier was returned on March 31, 2006. The Assessing Officer has also relied upon the statement of Shri Arun Kapoor wherein he had totally denied having received the constructed area of 36,000 square feet. He stated that Ambika Resorts Pvt. Ltd., a company owned by him and his family membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) the seized page 56 referred to by the Assessing Officer clearly talks about shares between the two parties ; (viii) thus there exists some talks about share of the built-up commercial area as noted in the seized material also ; (ix) regarding the locker, there was mention in some seized material about opening of a joint locker ; (x) the said memorandum of understanding was sent to the Assessing Officer for examination ; (xi) on a perusal of the memorandum of understanding, it was seen that the memorandum of understanding dated September 25, 2005, is duly signed by the assessee- company, Shri Arun Kapoor and also by two witnesses. We concur with the finding of the learned Commissioner of Income-tax (Appeals) that the existence of the memorandum of understanding duly executed by the parties cannot be ignored unless it is proved to be false. The learned Commissioner of Income-tax (Appeals) was thus justified in coming to the conclusion on the basis of the said memorandum of understanding that the assessee-company had in the said deal paid ₹ 2.56 crores in cash, promised to allot 36,000 square feet constructed area and ₹ 6 lakhs paid in cheque. He has, however, not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further contended that the authorities below while choosing to rely upon the statement of Shri Arun Nayyar (assessee) have referred only parts of it to justify the addition of ₹ 2.56 crores. Again, while relying upon the statement of Shri Arun Kapoor (PRIL), the lower authorities have used his part statement only which was favourable to the Revenue. Shri Arun Kapoor has in his statement categorically denied not only the refund of the cash but also its receipts. We agree with this contention of the assessee as it is an established proposition of law that a statement either can be accepted or denied wholly and in its totality. When we consider the statement of these two persons, one represented the assessee and the other PRIL in its totality keeping in mind the documents seized indicating about the ongoing negotiation regarding the acquisition of the property/PRIL ultimately settled in the memorandum of understanding dated September 25, 2005, duly executed by the parties, there is no reason to doubt the claim of the assessee that ₹ 2.56 crores was returned back which was deposited back in the books and surrendered by the assessee as a part of the total surrender of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order was passed on December 28, 2007. Thus, no proper opportunity was granted to the assessee to explain such a complex issue and to rebut such a serious allegation. Still, the assessee, vide letter dated December 24, 2007, tried to explain the issue which has been ignored by the Assessing Officer. The Assessing Officer has placed reliance on the letter dated November 26, 2007, received from the ADIT (Inv.) which nowhere contains the name of the assessee or indicates to any payment being given by the assessee. The Assessing Officer has also failed to appreciate that in his statement, Shri Chetan Gupta recorded on December 18, 2007, has denied all connection with the assessee. 53. Having gone through the orders of the authorities below, we find that the learned Commissioner of Income-tax (Appeals) has deleted the addition in question on the basis that there was no evidence to establish that the payment of ₹ 21.62 crores was made by the assessee. He has held that the entire addition was made by the Assessing Officer on the basis of report of the Vigilance Bureau, Punjab Police, Ludhiana. The report of the Vigilance Bureau relied on the contents of the accounts extracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Commissioner of Income-tax (Appeals). We find no infirmity or illegality in the aforesaid order. No substantial question of law arises for consideration. Accordingly the present appeal is dismissed. 54. We concur with the finding of the learned Commissioner of Income-tax (Appeals) as the entire addition made by the Assessing Officer was solely based upon suspicion and surmises. The Assessing Officer has quoted the report of the Vigilance Bureau at pages 50 and 60 of his order revealing the facts that the report of the Vigilance Bureau relied on the contents of accounts was extracted from the pen drive recovered from Shri Chetan Gupta, wherein there was no mention anywhere in the accounts forwarded by the Vigilance Bureau about the name of the assessee or its director. Even the accounts forwarded by the Vigilance Bureau did not contain any reference of Citi Centre, Ludhiana. Shri Chetan Gupta had denied the ownership of the pen drive before the ADIT (Inv.), Ludhiana, during his statement which has been reproduced in the assessment order. The statement recorded during the custody of Punjab Police was not available with the Assessing Officer as it has been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the form of rent and, thus, the same was to be assessed as income from house property subject to deduction under section 24 of the Act and not as profits and gains from the business subject to deduction under section 37 of the Act. He observed further that no lease rent was received by the assessee and there was no income from house property. The learned Commissioner of Income-tax (Appeals) deleted the addition with this finding that if lease income from the renting of the mall space has been by the assessee as his business income in the subsequent years and if the same is accepted as such, then, the brokerage and commission paid on the same is to be allowed as expenditure under section 37 of the Act as has been claimed by the assessee. Against this action of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal on the issue. 56. In support of the ground, the learned Commissioner of Income-tax (Appeals) has basically placed reliance on the assessment order which we have discussed hereinabove. The learned authorised representative on the other hand tried to justify the first appellate order on the issue and reiterated the submissions of the assessee mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc. Reliance has been placed on the following decisions : (i) Eastern Investments Ltd. v. CIT [1951] 20 ITR 1 (SC) ; (ii) J. R. Patel and Sons (P.) Ltd. v. CIT [1968] 69 ITR 782 (Guj) ; (iii) CIT v. Raipur Manufacturing Co. Ltd. [1972] 84 ITR 508 (Guj) ; (iv) Security Printers of India (P.) Ltd. v. CIT [1970] 78 ITR 766 (All); (v) Tata Sons Ltd. v. CIT [1950] 18 ITR 460 (Bom) ; (vi) CIT v. Walchand and Co. Pvt. Ltd. [1967] 65 ITR 381 (SC) ; (vii) J. K. Woollen Manufacturers v. CIT [1969] 72 ITR 612 (SC) ; (viii) Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11 (SC) ; (ix) Orissa Cement Ltd. v. CIT [1969] 73 ITR 14 (Delhi) ; (x)Travancore Rubber and Tea Co. Ltd. v. Commissioner of Agricultural Income-tax [1961] 41 ITR 751 (SC) ; and (xi)Commissioner of Agricultural Income-tax v. Calvary Mount Estates (Private) Ltd. [1961] 41 ITR 755 (SC). 57. Considering the above submission, we find that this material fact is undisputed as the Assessing Officer has accepted the factum of incurring of expenditure as well as rendering of services by the agents to whom the amount of commission/brokerage was paid during the year. The only grievance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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