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2016 (5) TMI 311 - ITAT DELHI

2016 (5) TMI 311 - ITAT DELHI - [2016] 46 ITR (Trib) 586 - Non-refund of the advance amount - whether treated as a business loss? - Held that:- 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 - Decided in favour of assessee

Unaccounted payment for purchase of shares - It was contended that the ass .....

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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 ₹ 5.50 crores, especially when the abovenoted some material facts by the learned Commissioner of Income-tax (Appeals) mentioned above .....

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f 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 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 Vigilanc .....

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Besides, the above material were never provided to the assessee by the Assessing Officer before taking any action against the assessee despite the specific request by the assessee made on December 24, 2004. There was also no statement of confirmation from the alleged recipient or his son regarding the impugned amount. And above all in the case of the recipient, Shri Ravinder Singh, for the alleged bribe, the same has been deleted by the learned Commissioner of Income-tax (Appeals) which was uphe .....

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pense is incurred for overall business advantage of the assessee then such expense is allowable under section 37 of the Act. We also concur with the findings of the learned Commissioner of Income-tax (Appeals) that merely because any income had not been earned during the year directly from any partner activity, it cannot be said that the related expense is not expense for the business of the assessee. Whether the income has been earned or not and whether the ultimate benefit has accrued immediat .....

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e 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 : Kar .....

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urchase of shares in M/s. P. R. Infrastructure Ltd. 1.1 That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in not appreciating that the above amount of ₹ 2.56 crores represented the amount paid by the appellant in relation to the purchase of land at Punjab, which was received back, surrendered and offered for tax by the appellant during the course of search proceedings as part of the total undisclosed income of ₹ 5.50 crores. 1.2 That the learned Comm .....

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of ₹ 2.56 crores has resulted in double taxation of the very same amount, which is not permissible in law. 2. That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in upholding the action of the Assessing Officer in making addition of ₹ 31 lakhs under section 68 of the Act as unexplained cash introduced in the books of account. 2.1 That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in not appreciating that the above amou .....

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t of Shri S. K. Dutta, without appreciating that the ex parte statement of Mr. Dutta, not tested by cross-examination, had no evidentiary value. 2.3 That the learned Commissioner of Income-tax (Appeals) further failed to appreciate that the aforesaid addition of ₹ 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 ci .....

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ccount 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 brief are that the assessee-company incorporated on Se .....

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ocuments were seized from the office of the assessee indicating that the land in question was valued at ₹ 12.25 crores. Earlier there was a proposal for outright purchase of the said land but, subsequently, there was negotiation of sharing of space after the development of commercial complex on the said land and, finally, PR Infrastructure Pvt. Ltd. was taken over by the assessee and its promoters. 6. After analysing the seized papers and statements of the directors, the Assessing Officer .....

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ommissioner of Income-tax (Appeals) has given a part relief against which parties are in appeal. 7. The assessee-company had surrendered an undisclosed income of ₹ 5 crores and also ₹ 50 lakhs being the cash seized on March 30, 2006, from the possession of the assessee's employees at the Bhopal airport. These amounts were surrendered as undisclosed income of the assessee. 8. The break-up of the undisclosed income submitted by the assessee is as follows : (i) Income earned in cash .....

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77; 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 .....

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Ramesh Kumar Dutta against Indira Puram Plot in Ghaziabad (additional undisclosed income paid in cash out of books) (paragraph 4.2, pages 3-4 of the order) ₹ 31,00,000 (iii) Unaccounted cash paid to Mr. Arun Kapoor towards purchase of shares of M/s. PRIL (Amritsar Plot) (paragraph 4.3, pages 4 to 6 : no separate addition for ₹ 2.56 crores paragraph 4.4., pages 6 to 15 of the order) ₹ 12,19,00,000 (iv) Unaccounted expenditure in Ludhiana City Centre (paragraph 4.5, pages 15 to .....

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Ramesh Kumar Dutta under section 68 of the Act (paragraph 6.3, pages 36-37) ₹ 31,00,000 (iii) Unaccounted cash received back from Arun Kapoor, the erstwhile director of M/s. PRIL paid towards purchase of shares of M/s. PRIL (Amritsar Plot) under section 68 of the Act. (paragraph 4.11, pages 29 to 31) ₹ 2,56,00,000 (iv) Unaccounted payment in Ludhiana City Centre (paragraph 7.3, pages 55 to 57) Rs. Nil (v) Brokerage and commission paid on leased properties (paragraph 8.3, page 62) Rs .....

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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 assessee since the dealing could not r .....

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essee-company to Shri Ramesh Kumar Dutta was shown made as on April 7, 2005, and April 11, 2005. Shri Arun Nayyar, the director of the assessee-company, therefore, when questioned on the said pages found during the search proceedings, vide answer to question No. 11 (page 100 of the paper book) of his statement offered the said sum of ₹ 31 lakhs as his undisclosed income as part of the total surrendered amount of ₹ 5.50 crores. Shri Arun Nayyar further said that, however, later on the .....

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the same cash amount which the assessee claimed to have received back from Mr. Ramesh Kumar Dutta and, therefore, he made a separate addition of ₹ 31 lakhs for the cash given to Mr. Ramesh Kumar Dutta as the undisclosed income of the assessee. The Assessing Officer alleged that the impugned amount of ₹ 31 lakhs has not been received back by the assessee-company. In this regard, the Assessing Officer has placed reliance on the statement of Shri Ramesh Kumar Dutta recorded on July 17, .....

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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 ass .....

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cash but has denied to have refunded any amount to the assessee which has been fully and wholly relied upon by the authorities below. The learned authorised representative referred to pages 74 and 75 of the paper book wherein the relevant statement of Shri Dutta has been made available. 17. The learned authorised representative has further contended that from the perusal of the statement of Shri Ramesh Kumar Dutta recorded in response to question No. 4, it is clear that the said land deal at Gha .....

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questions Nos. 6 and 7 that since the cash received from the assessee was paid to Delhi Auto and General Finance Ltd. and since the said company had not returned the said cash, he was not in a position to refund the cash back to the assessee-company. Thus, it is clear that Shri Ramesh Kumar Dutta has confirmed the transaction of the land deal and receiving of the said advance of ₹ 31 lakhs by way of cash. The learned authorised representative submitted that it was further confirmed by him .....

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difference between the two statements is that where the assessee has stated that the money was received back by him, Shri Ramesh Kumar Dutta has denied the refund of the same. He submitted further that whenever a property involving a substantial amount is purchased, an advertisement is given in the newspaper by way of public notice, to call for any objection from any person who may have had any interest in the said property which could have any adverse bearing upon the deal under contemplation. .....

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y 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 par .....

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he above land against which an advance deposit of ₹ 31 lakhs given. Eventually, the deal got cancelled and the refund was due. The deal being cancelled and the refund being due has been accepted by both the parties and even the authorities below have nowhere denied or differed on the said facts. However, both the authorities below have failed to appreciate that in the given facts of the case of the assessee, it is a well-accepted and uncontroverted fact that the assessee-company is in the .....

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eduction under section28 of the Act. The learned authorised representative submitted further that for claiming business loss under section 28 or as business expenditure under section 37(1) of the Act, the assessee is not required to write off the amount in its books of account and the only criteria for claiming such deduction is whether the loss or the expenses were incidental to the business of the assessee or not and since the abovementioned facts clearly show that the transaction in question .....

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placed reliance on the orders of the 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 th .....

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ies 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 of the business of the assessee and non-refund of the advance amount to the assessee was a business loss incidental to the business of the assessee. The loss was thus an allowable deduction under section 28 of the Act. In this regard, we find strength from the ratio .....

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osses in the running of the business cannot be said to be of capital. The questions to consider in this connection are : for what purpose was the money laid out ? Was it to acquire an asset of an enduring nature for the benefit of the business, or was it an outgoing in the doing of the business ? If money be lost in the first circumstances, it is a loss of capital but if lost in the second circum stance, it is a revenue loss. In the first, it bears the character of an investment but in the secon .....

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uld be stated to be loss of capital expenditure, and it being a plain case of business loss, it would certainly be allowable to be deducted under the provisions of section 37." 24. The honourable Bombay High Court in the case of Harshad J. Choksi v. CIT [2012] 349 ITR 250 (Bom) has been pleased to hold as under (headnote) : "Section 28 of the Income-tax Act, 1961, imposes a charge on the profits or gains of business or profession. The expression 'profits and gains of business or pr .....

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ed 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 th .....

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ssioner of Income-tax (Appeals) has given a part relief to the assessee, hence, both the parties are in appeal on this ground. 27. The relevant facts are that during the course of search, some papers were seized with regard to certain negotiations between the assessee- company with PRIL. These papers were related to a transaction in relation to purchase of property by way of company acquisition at Amritsar. On the reference of those papers, Shri Arun Nayyar, the director of the assessee- company .....

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ept ₹ 1.25 crores and a built-up space of 36,000 square feet in the proposed shopping mall, Amritsar, in consideration of the takeover of the company. Thus, the entire amount of ₹ 2.56 crores paid in cash was received back from PRIL on March 31, 2006, and was introduced as cash by the assessee. The Assessing Officer did not accept the explanation of the assessee that since the amount was received back by the assessee-company, the same was introduced as cash in the books of account. T .....

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of the total unaccounted consideration paid for the acquisition of the shares of PRIL. 28. The Assessing Officer alleged that for purchase of shares for PRIL, the assessee-company had paid a sum of ₹ 12.19 crores outside the 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 se .....

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7; 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 and, thus, deserves to be added under section 68 of the Act as unexpl .....

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other shareholders of PRIL. After some negotiations as are evident from the seized papers, it was ultimately mutually agreed between Shri Arun Kapoor and the assessee-company that the total consideration of purchase of shares should be paid in the form of cheques as mentioned above and in addition to that it was agreed that a built-up space of 36,000 square feet in the proposed shopping mall in Amritsar was also to be provided by the assessee-company to Shri Arun Kapoor and his other shareholder .....

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ion for purchase of 59,400 shares of M/s. PRIL against the payment of ₹ 6 lakhs by cheque. 2. Total 36,000 square feet area out of portion of built-up area of the proposed mall which was to be built upon the above said captioned land. Also it was agreed between the two companies to pay a sum of ₹ 1.19 crores by cheque as per detail given below, with the object to help the said company to discharge its liabilities. Date Vide Assets 3-8-2005 Ch. No. 942457 51 lakhs 9-8-2005 Pay orders .....

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uthorised 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 .....

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diciously with the objective to make fair assessment of tax. 34. The learned authorised representative submitted that while accepting that the land value was to the tune of ₹ 12.25 crores, the allegation of the Assessing Officer that only ₹ 6 lakhs was paid against the same, was a gross attempt on the part of the Assessing Officer to misdirect himself and giving a false impression that the shares were acquired only for ₹ 6 lakhs as against the value of ₹ 12.25 crores. He .....

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nd has been estimated by the Assessing Officer at ₹ 12.25 crores without any valuation report but on the basis of inferences drawn by him from the rough papers and scribbling seized during the course of search upon the assessee-company. The learned authorised representative pointed out that this point has been duly noted by the learned Commissioner of Income-tax (Appeals) while deleting the addition to the extent of ₹ 9.63 crores. The learned Commissioner of Income-tax (Appeals) has .....

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e assessee that the said sum was returned back and the same was thus deposited back in the books as has been surrendered by the assessee. The source of return of cash of ₹ 2.56 crores being unexplained due to the denial by 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 .....

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and 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 the shares and the deal was to the tune of ₹ 6 lakhs and the cons .....

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y during the initial negotiation stage has to be refunded back to the assessee as it no longer was the consideration to be paid as per the final deal arrived at. The purpose of the alleged payment gets lost. 35. The learned authorised representative contended further that an examination of the seized papers will reveal that the said seized page 50 (copy enclosed at page 138 of the paper book) indicating the value of the land decided on August 3, 2005, at ₹ 12.25 crores and also at pages 41 .....

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he assessee and Mr. Kapoor and they were all at negotiation stage. Thus, when the memorandum of understanding was finalised as the final deal for the said transaction between the assessee and PRIL, as has been accepted by the learned Commissioner of Income-tax (Appeals) himself, then, any payments made prior to the said memorandum of understanding and which are not in conformity with the terms of the memorandum of understanding have to be refunded back to the assessee, contended the learned auth .....

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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 submitte .....

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₹ 2.56 crores was not refunded back to the assessee by Shri Arun Kapoor is also solely based on the statement of Shri Arun Kapoor, wherein he has denied the refund of the cash to the assessee. In this connection, the learned authorised representative referred the statement of Shri Arun Kapoor wherein he has categorically denied not only the refund of the cash but also its receipt. The authorities below have taken due consideration and not of this but they both have again very conveniently .....

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ad to double addition, which would cause grave injustice to the assessee-company. He submitted that the principle of approbate and reprobate is not applicable upon the Income-tax proceedings. The Assessing Officer cannot simply pick and chose part of the accounts/statement to be correct and the other part to be not genuine. He placed reliance on the following decisions : (i) Indore Malwa United Mills Ltd. v. State of Madhya Pradesh [1966] 60 ITR 41 (SC) ; (ii) CIT v. Arman Sheikh [2007] 293 ITR .....

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by invoking section 68 of the Act. The learned Commissioner of Income-tax (Appeals) while doing so has enhanced the income of the assessee by ₹ 2.56 crores without giving the assessee a reasonable opportunity of being heard as per section 251 of the Act. 38. The learned authorised representative submitted further that admittedly the Assessing Officer has not made any assessment under section 68 holding the impugned amount as bogus cash credit or unexplained cash credit. The entire additio .....

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ayments 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 representative about the first refund submitted that it was because of cancell .....

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e refund. Other than the surrender of the assessee, no evidence of either payment or refund has been found in the books of the assessee. 41. Lastly, with regard to the third payment of ₹ 2 crores, the learned authorised representative submitted that the same was payment made to Shri R. K. Sharma on behalf of one of the group companies, GPS Properties Pvt. Ltd. for the purchase of land, which, however, did not materialise and, thus, was refunded back to the assessee. 42. The learned authori .....

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articular contract and the subsequent refund but has not accepted the same in the earlier two surrenders. 43. He submitted that the assessee was questioned on the surrenders and he has at page 102 of the paper book in his statement stated that ₹ 2 crores was refunded as on March 31, 2006, which has been accepted by the Assessing Officer and the Assessing Officer on the same facts for the earlier two surrenders has accepted this refund but has not accepted the earlier two. Thus, it goes to .....

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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 ₹ .....

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ompany. The Assessing Officer was justified in coming to the conclusion that the cash introduced in the books of account by the assessee was not the same cash as paid by it to PRIL in the absence of evidence in support. Thus, he was justified in treating ₹ 2.56 crores as undisclosed income. The Assessing Officer was also justified in holding that for purchase of shares of PRIL, the assessee has paid a sum of ₹ 12.19 crores outside the books of the assessee-company over and above the .....

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for the shares of PRIL, therefore, the difference amount of these two figures has been assumed by the Assessing Officer to have been paid by the assessee-company and that is how the addition has been made by him. The learned Commissioner of Income-tax (Appeals) was thus not justified in giving the relief to the assessee by deleting ₹ 9,63,00,000 out of the amount added by the Assessing Officer by entertaining additional evidence filed before him, i.e., the memorandum of understanding whic .....

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rores as part of the total surrendered amount of ₹ 5.5 crores. The seized papers were different kinds of receipts for the same amount issued by PRIL showing that different kinds of deals were under contemplation and nothing concrete had been executed by that time. Certain negotiation between the assessee and PRIL (owner of the property at Amritsar) was going on in relation to the transactions of the said property. The seized documents were marked as pages 41, 42, 50 and 56 on the basis of .....

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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 .....

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d also placed reliance on the statements of Shri Arun Nayyar dated July 12, 2006, and Shri Arun Kapoor dated December 17, 2007. Copies of these seized pages have been made available in the paper book filed by the assessee. Pages 41 and 42 are the documents dated August 14, 2005, titled as "undertaking/affidavit" wherein a further payment of ₹ 42 lakhs towards part consideration making the total receipts to ₹ 1 crore out of the sale consideration of ₹ 12.25 crores has .....

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r also alleged that the books of PRIL and the director of PRIL were never produced and, thus, held that ₹ 12.19 crores was paid outside the books by the assessee towards the purchase of the shares. 46. The case of the assessee, on the other hand, remained that when some papers were seized during the course of search, certain negotiations between the assessee-company and PRIL was going on in relation to purchase of property by way of company acquisition at Amritsar. It was also supported by .....

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to that effect in support. 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 inclu .....

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as 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 members had booked 36,000 square feet area in the proposed mall and as part of consideration ₹ 51 lakhs had been paid to them. The contention of the assessee remained that the Assessing Officer quoting part of the said statement has alleged that Shri Arun Kapoor had avoi .....

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sessing Officer. The learned Commissioner of Income-tax (Appeals) called for a remand report from the Assessing Officer wherein the Assessing Officer, vide his report dated May 6, 2011, opined that fresh evidence in the form of the memorandum of understanding should not be entertained inasmuch as none of the representatives during search had indicated about the presence of any memorandum of understanding. Also that there was several documents found during the course of search indicating that the .....

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ot of land ; (iii) subsequently, however, it was agreed by the assessee to acquire the land through the purchase of the shares of PRIL ; (iv) it was clearly stated by Shri Arun Nayyar, the director of the assessee during the search itself that ₹ 2.56 crores paid was received back by him when it was agreed to take over the land by purchase of shares ; (v) there was evidently a change from purchase of land to purchase of shares of PRIL ; (vi) there were noting in the seized material for shar .....

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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 Commissio .....

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learned Commissioner of Income-tax (Appeals) has justified this action with this observation that the source of the returned cash of ₹ 2.56 crores remained unexplained due to the denial of Shri Arun Kapoor. He thus restricted the addition to ₹ 2.56 crores and added this amount under section 68 of the Act as unexplained cash credit. The contention of the assessee against this addition remained that the learned Commissioner of Income-tax (Appeals) was not justified in sustaining the ad .....

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nderstanding while deleting the addition of ₹ 9.63 crores but has failed to appreciate that nothing more, over and above the said documented sales consideration was to be paid to PRIL and ₹ 1.19 crores was paid in cheque towards settling the liability of the company which did not form part of the consideration to the shareholders. Thus, it was most logical corollary that the said ₹ 2.56 crores which was paid by the assessee during the negotiation stage has to be refunded back t .....

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7; 2.56 crores to tax as a part of the total surrender of ₹ 5.50 crores. While making the said surrender, the assessee had stated that the said payment of ₹ 2.56 crores was refunded back to him by PRIL. It was 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 aut .....

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cuments 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 ₹ 5.50 crores, especially when the abovenoted some material facts by the learn .....

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ed. 49. In the result, ground No. 1 of the appeal of the assessee is allowed and that of the Revenue is rejected. 50. Ground No. 2 (Revenue) : The Assessing Officer had made an addition of ₹ 21.62 crores alleging that the assessee had paid an aggregate sum of ₹ 21.62 crores to the Captain Amrender Singh, Ex-CM of Punjab in the form of bribe for awarding of contract by the Ludhiana Improvement Trust/ Punjab Government with regard to the Ludhiana City Centre Mall. The learned Commissio .....

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in the year 2005-06. Pursuant to the said letter, the Assessing Officer questioned the assessee on the same and being not satisfied with the reply of the assessee the Assessing Officer was justified in making the addition. The learned Commissioner of Income-tax (Appeals) had, however, deleted the addition without appreciating the material facts and ignoring the information received from the Vigilance Bureau of Punjab Police establishing that the money for beneficiary in the Ludhiana City Centre .....

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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. 5 .....

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racted from the pen drive was recovered from Shri Chetan Gupta. Shri Chetan Gupta had denied the ownership of the pen drive before the ADIT (Inv.), Ludhiana, during his statement which was reproduced in the assessment order. The learned Commissioner of Income-tax (Appeals) while deleting the addition in question has placed reliance on the decision of the honourable Delhi High Court in the case of Ravinder Singh, vide the order dated February 28, 2011, in I. T. A. No. 1934/2010. The relevant port .....

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reliance cannot be placed on the pen drive. More so, that Mr. Chetan Gupta had denied the payment to the assessee in his statement recorded under section 131. The Income-tax Appellate Tribunal has upheld this order on the following terms : As regards the merits of the addition, there is no evidence in the possession of the Revenue authorities to prove that the assessee ever paid cash to Sh. Chetan Gupta except the so-called report of the ADIT (Investigation), Ludhiana, which in turn based on the .....

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mitting receipt of cash. Therefore, in the absence of any evidence on record, the addition was not sustainable. It is strange to note that the Assessing Officer having recorded the statement of Sh. Chetan Gupta chosen to remain silent. This proves that in the statement of Sh. Chetan Gupta was no adverse factor affecting the tax liability of the assessee. Accordingly, the addition was rightly deleted by the learned Commissioner of Income-tax (Appeals). We find no infirmity or illegality in the af .....

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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 .....

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ecipient, Shri Ravinder Singh, for the alleged bribe, the same has been deleted by the learned Commissioner of Income-tax (Appeals) which was upheld by the Income-tax Appellate Tribunal and ultimately approved by the honourable Delhi High Court in the abovecited decision dated February 28, 2011. The learned Commissioner of Income-tax (Appeals) was thus justified in deleting the addition in question. The same is upheld. Ground No. 2 of the appeal of the Revenue is, accordingly, rejected. 55. Grou .....

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of commission/brokerage to the property dealers and real estate agents for facilitating booking of sale of property as well as leasing out of property which were in the process of sale by the assessee-company. The Assessing Officer accepted the factum of income of expenditure as well as rendering of services by these agents to whom the amount of commission/brokerage was paid during the year. The only grievance of the Assessing Officer was with respect to the amount of ₹ 59,04,788 out of th .....

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received 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 .....

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der 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 made before the authorities below and the decision cited before them. He submitted that it is the business of the assessee to lease out property and to earn lease rent out of the same, which fact has been fully accepted as such by the Assessing Officer. The properties are all held as business assets .....

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ll with reputed national/international brand to establish the name of the company for future project, better marketability of the shopping mall to attract customers with the leased property and not for the whole purpose of earning the rental income or any other income from the lessee. He submitted that this facts has not been disputed by the Assessing Officer as the impugned amount of commission has been paid. He has also not disputed that the services were rendered and the commission was paid f .....

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contended that whether the income has been earned or not and whether the ultimate benefit has accrued immediately or not, the expenses incurred shall be allowable if these have been incurred for business or for commercial expediency. 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 wheth .....

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alchand 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 submiss .....

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for facilitating booking of sales of property as well as leasing out of the property which were in the process of sale by the assessee-company. According to the Assessing Officer, the amount of ₹ 59,04,788 was incurred with regard to the leasing of the property and not sales of the property and since the assessee had not booked any income on account of leasing under the head "income from house property", therefore, the claimed expenditure in question was not allowable under secti .....

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me 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. It has not been rebutted that the assessee-company is engaged in the business of real estate development which includes the leasing out of various properties. This fact has also been fully accepted as such by the Assessing Officer. The properties are all held as business assets and not as house properties. The fixed assets .....

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