TMI Blog2016 (7) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... the existence of multiple co-owners except making an oral statement in this regard. We find that the Learned AR without discharging his onus to prove the veracity of the claim of deduction had only tried to simply shift the burden to the department by making the Learned AO to verify the facts from the landlord. We find that the primary onus lies on the assessee to prove and substantiate its claim which is not discharged in the instant case. Hence we find no infirmity in the order of the Learned CITA in this regard. - Decided against assessee Disallowance of rent paid to Kolkata Port Trust u/s 40 (a)(ia) - Held that:- AR placed before us a copy of the certificate issued by the ACIT, TDS, Kolkata u/s 197(1) of the Act in Proceedings No. ACIT/TDS/Cir-58/Certificate u/s 197(1)/2005-06/7 dated 18.5.2005 directing all the payers to deduct 0% TDS on rental payments made to M/s Kolkata Port Trust and the said certificate shall remain in force up to 31.3.2006 until otherwise cancelled by the issuing authority. The Learned AR fairly submitted that this document was not furnished by the assessee before the lower authorities. Hence in the interest of justice and fair play, we deem it fit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on each date of funding to other godowns though it is recorded int the cash book on a subsequent date. The assessee had also stated before the Learned AO that it is ready to demonstrate the availability of cash balance for making payments to other godowns and what is maintained in the seized document is only memoranda records and hence the delay in recording the entries in the cash book on a subsequent date is quite natural. But this fact is very crucial which has not been the subject matter of examination by the revenue and substantiated properly by the assessee. We find in the facts and circumstances, deem it fit and appropriate, to set aside this issue to the file of the Learned AO, to decide this issue afresh, in accordance with law. - Decided in favour of assessee for statistical purposes. Addition towards payment through credit card - Held that:- We hold that the assessee company being a non-natural person cannot have any personal element thereon and all the expenditure incurred thereon had to be construed only for official purposes - Decided in favour of assessee. Addition towards immovable property in Gurgoan - Held that:- We find that the Learned CITA had given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed document has got linkage and nexus with the assessee. We find that the primary onus lies on the assessee to disprove that the documents seized during search does not belong to it which has not been discharged by the assessee in the instant case. - Decided against assessee Addition as undisclosed income - Held that:- We hold that the statement u/s 132(4) of the Act made by Shri Laxmi Narain Somani disclosing a sum of ₹ 9 Crores in the hands of the assessee without the consent of the assessee cannot be legally enforceable on the assessee. It is not in dispute that no incriminating documents or assets representing such undisclosed income of ₹ 9 Crores belonging to assessee were found in the search and seizure operations. We also find that the statement u/s 132(4) of the Act given by Shri Laxmi Narain Somani had been later retracted by him clearly adducing the reasons for the retraction. Hence no addition could be made in the hands of the assessee based on the statement of a third party which was later retracted.- Decided in favour of assessee. Addition towards cash and Jewellery - Held that:- We find that no defects were pointed out by the Learned AO in the cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cross objections of the assessee arise out of the separate orders of the Learned CITA in Appeal Nos. 235-241/CIT(A)C-I/CC- IV/Kol/11-12 dated 18.06.2012, 19.06.2012, 06.07.2012, 13.07.2012 18.07.2012 in the case of Inland Road Transport (P) Ltd and Appeal No. 163/CIT(A)C-1/CC- IV/Kol/11-12 dated 09.07.2012 for Asst Year 2010-11 in the case of Shri Rattan Kumar Somani, against the separate orders of assessment framed by the Learned AO u/s 153A/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). As the issues involved are identical in nature, they are taken up together and disposed off by a common order for the sake of convenience. 2. Rejection of books of accounts of the assessee and resorting to estimation of profits u/s 145(3) of the Act for all the years Since ground is common for all the years, we dispose of this ground by this common order by taking the facts from ITA No. 1179/Kol/2012. 2.1. The brief facts of this issue are that the assessee is engaged in the business of transportation and predominantly deriving freight income. There was a search u/s 132 of the Act in the residential and business premises of the assessee along with survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NA NA 8 Income declared u/s 153A 1422390 2029890 12518449 54191200 62336025 61567441 NA 9 Date of filing the return u/s 153A 15.3.11 15.3.11 15.3.11 15.3.11 15.3.11 15.3.11 NA 10 Income assessed u/s 153A 22980430 53572690 59137540 853881630 126225500 98194840 NA 11 Date of Order u/s 153A 30.12.11 30.12.11 30.12.11 30.12.11 30.12.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as explained before the Ld. AO that lorry-wise or party-wise ledger of lorry hire charges was not maintained by the assessee in its financial records as there was no requirement of law to maintain such records nor the assessee needed such details for the purposes of its business. The expenditure was charged to lorry hire charges account on actual payment basis. However, the assessee being public carrier maintains Lorry hire contract cum challan wherein all relevant particulars such as lorry number, driver's license number, etc. is mentioned for the purposes of record as well as for internal control. It was further explained that party-wise ledger of expenses was not maintained in the financial records as there was no requirement of law to maintain such records nor the assessee needed such details for the purposes of its business. The expenditure was charged to respective accounts on actual payment basis. As relevant details are available in the vouchers which was properly maintained and preserved, there was no need to enter such details in electronic data. The assessee reiterated that it was unable to produce hard copy of the documents desired by the Ld. AO as the same was dest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year relevant to the previous year in which the search is conducted. For, the AO placed reliance on the decision of the Hon ble ITAT 'D' Bench, Delhi in the case of Shivnath Rai Harnarian (India) Ltd vs DCIT [2009] 117 ITD 74 and that of the Hon ble ITAT 'A' Bench, Chennai in the case of Harvey Heart Hospitals Ltd vs ACIT [2010] 130 TTJ 700. The Ld. AO finally concluded that re-assessment u/s 153A or 153C of the Act need not necessarily be based on incriminating material found in search. (c) The Ld. AO found that TDS certificates were issued in the name of one Sri N K Sharma for payments made to different vehicle operators totalling to ₹ 73,22,73,315/- on account of lorry hire charges in the financial year 2006-07. The tax was also deducted at source on such payments and TDS certificates were issued in the name of Sri N K Sharma. Search u/s 132 was simultaneously conducted in the case of Sri N K Sharma who in his statement u/s 132(4) of the Act denied having any involvement in the business activity of the assessee. Sri N K Sharma also stated that payment @ ₹ 25,000/- per month was made to him by the assessee for lending his name for disburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, that it was also within the parameters of law. The AO observed in the assessment order that there are many transporters who make payments through banking channel for lorry hire charges as well as for expenses. If the assessee had made payments in cash, it was all the more important to maintain proper records. But, the assessee failed to substantiate its claim by producing supporting, records and documents on the ground that they were destroyed in fire. (e) The AO has referred to seized diaries marked ILRT/1 and IRLT/2 containing details regarding disbursement of cash (totalling to ₹ 90,44,020 in the assessment year 2008-09 and ₹ 12,29,600/- in the assessment year 2009-10) by the assessee. It was claimed at the assessment stage that the seized diaries were memorandum records kept for the purposes of internal control only; and, that the noting made therein does not refer to any expenditure. However, alternatively, the total disbursement on any particular day was covered by the cash balance available with the assessee company. It was contended at the assessment stage that the abstract of cash available with the assessee company as filed before the AO clearly shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It was declared at the assessment stage that the statement regarding bogus claim of expenses was incorrect. The AO observed that there was no material on record to show that the statement u/s 132(4) was made under threat or coercion. The AO also referred to various judicial decisions in this regard. Lastly the Ld. AO concluded, in view of the above, that he was not satisfied about the correctness or completeness of the books of account; and consequently, has decided to apply the provisions of section 145(3) of the Act. The Ld. AO then estimated the net profit at ₹ 2,38,10,815/- by applying net profit rate of 1.93% on gross receipts of ₹ 1,23,37,21,009/- thereby resulting in addition of ₹ 2,16,23,041/-. 3. The revenue has raised the following grounds for the Asst Year 2004-05 :- 1. That on the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding that provisions of section 145(3) of I.T. Act, 1961 cannot be invoked in this case and also in overlooking the judicial decisions mentioned by the AO in paragraph 23 of the Assessment Order. 2. That on the facts and circumstances of the case and in law, Ld. CIT(A) failed to apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is without any proper basis. He argued that there is absolutely no need to reject the book results as it was duly explained that the assessee s business premises was severely hit by fire in Feb 2010 in which important records and documents of business, including computers and substantial electronic data were destroyed. He further argued that the books of accounts and records including the computer data were seized and impounded during the course of search and survey operations from various premises and the details called for were very much available with the records of the department itself. Despite this fact, the assessee had produced the details that were available with it out of data retrieved together with the supporting documents to the extent possible. He argued that original assessment proceedings for three assessment years 2004-05,2005-06 2006-07 were completed u/s 143(3) of the Act wherein the entire books of accounts and all relevant records were produced before the Learned AO prior to the search and the same were duly accepted by the Learned AO in the scrutiny proceedings. In the said regular assessment proceedings, the books results have always been accepted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... papers. It was argued that fire broke out when the post search investigation was in progress and so the same was also verified by the ADIT (Inv). The fire was spread over large area of the premises and the fire authority of the Government had to struggle for many days before they could control it. He argued that as the fire broke out suddenly, it was practically impossible for the assessee to prepare inventory of the records which were destroyed in fire and accordingly he argued that the Learned AO was not justified in his observation that there was no detail of the records which were destroyed in the fire. He argued that the Learned AO erred in wondering as to how the electronic data could also be destroyed. In this regard, he argued that the Learned AO failed to appreciate that computers are not fire proof and as the computers were destroyed in fire, substantial electronic data were also lost. With regard to the observation of the Learned AO that the assessee should be following the normal practice of maintaining parallel set of records at an alternative location, he explained that the record of business as maintained by the assessee is already voluminous and so it cannot be expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpiled and furnished as much information as was practically possible in view of the event of fire and consequent destruction of important records and electronic data. Secondly, the appellant also produced records for different branches which were not destroyed in the fire. The AO found no defect in the data that was produced before him at the assessment stage. Also, the AO found no defect in the voluminous electronic data that was seized in course of the search and was naturally available with him. The Ld AR submitted that the original assessment for three assessment years 2004-05, 2005-06 and 2006-07 was made u/s 143(3); and, the books of account and all relevant records were produced during the course of the original assessment proceedings as was evident from the order sheets). The then AO had accepted the books of account as no adverse finding was recorded by him in the original assessment orders). The book result was always accepted by the AO; and, routine disallowances only were made in the assessment order(s). Also, the method of record maintenance regularly followed by the assessee was never questioned or disputed by the AO. The Ld AR submitted that the AO was insisting on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter XVII B and also paid to the credit of the central government. The Ld AR contended that even if the TDS certificate was issued in wrong name, there was no violation of the TDS provisions as the tax was duly deducted at source and also paid. But, even otherwise, there was no case for invoking the provisions of section 145(3). Above all, the issue relates to the assessment year 2007-08 which cannot be made the basis for drawing adverse inference in the year under consideration i.e. for the Asst Years 2004-05 to 2006-07. 4.6. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. The Learned DR at the outset doubted the fact of premises of assessee gutted by fire. According to him , only premises at 223 , Strand Bank Road , Kolkata was gutted by fire as evidenced in Learned CITA order. But the registered office of the assessee is at No. 221/2, Strand Bank Road, Kolkata. Hence the basic premise of the assessee that the premises was gutted by fire wherein the books of accounts together with several other documents were destroyed and hence, the books of accounts could not be produced before the Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AO in the assessment order itself. It is not in dispute that the assessee had submitted the entire documents and records of various branches which were not affected in fire before the Learned AO. It is also not in dispute that the soft copies of the data regarding lorry hire charges for Asst years 2007-08 to 2010-11 were very much available with the Learned AO which fact has not been controverted by the revenue before us. Hence there is no need to resort to any estimation of profits for those years. As far as Asst Years 2004-05 to 2006-07, the book results have been accepted as such by the Learned AO u/s 143(3) proceedings and assessments completed accordingly. The Learned AR further stated that the corresponding comparable cases cited before the Learned AO should have been considered, in case the book results were not acceptable to the Learned AO. The assessment u/s 144 has to be based on past records of the assessee. We find that the assessee had filed its objections before the Learned AO objecting to the comparables chosen by the Learned AO for estimation of net profits as below:- (i) Associated Road carrier (ARC) has a portfolio of business where we were either not all pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to even small variances in rates at the time of actual deliveries, there will be adverse variances in margins. The assessee produced comparable cases of 14 cases to make it comparable with its net profit ratio and proved before the Learned AO that its net profit was higher than the comparables for the Asst Years 2006-07, 2007-08 and 2008-09. These are reproduced in pages 22-24 of assessment order. 4.6.3. We find that there is no finding given by the Learned AO that freight paid or received is not recorded accurately and correctly. Similarly, there is no finding that the various expenses claimed in the accounts are not incurred for the purposes of the business of the assessee or not related to the business activities of the assessee. There is no finding that the entries in the soft copies made available to the Learned AO are false or fabricated. The comparable cases given by the Learned AO were duly distinguished by the assessee on various counts and we find that the same was not discussed by the Learned AO in his order. On the contrary, the assessee had given lot of comparables ( ie comparable 14 public carriers ) wherein the data were taken from website of Registrar of Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source on the said lorry hire charges as per the provisions of Chapter XVII B of the Act and TDS remitted to the account of Central Government. The Learned CITA had given a categorical finding that the freight paid vide said TDS certificates earned corresponding freight receipts at the destination for which the necessary supporting evidences for such receipts were duly produced at the assessment stage which has not been mentioned in the assessment order. This finding has not been controverted by the revenue before us. We find that the Learned CITA had observed that there is no failure on the part of the assessee in deducting and remitting the tax due on the payments made towards lorry hire charges amounting to ₹ 73,22,73,315/-. We find that there is a violation of provisions of section 203 of the Act in as much as the TDS certificates were not issued in the name of the concerned vehicle operators. We find that the Learned AO had made this disallowance on the ground that there was violation of TDS provisions which was infringement of law without explaining under which explicit provisions of law, he intends to disallow the subject mentioned expenditure. It is not the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property . Aggrieved, the assessee has preferred cross objections before us on the following ground No.1:- 1. That in the facts and circumstances of the case, the Ld. CIT(A) erred in confirming disallowance of rent paid to various co-owners totaling ₹ 762000/- for so called non deduction of tax at source under sec. 194-I, where there was no obligation to deduction of tax at source. 5.1. The Learned AR reiterated the submissions made before the lower authorities. In response to this, the Learned DR vehemently relied on the orders of the lower authorities. 5.2. We have heard the rival submissions. We find that the Learned AR was not able to furnish the original rent agreements or any other documents even before us to prove that the endorsement made in hand in the rent agreements have been duly authenticated by the various lessors by affixing their signatures in the rent agreement. Hence it could safely be concluded that the Learned AR was not able to produce any evidences to prove the existence of multiple co-owners except making an oral statement in this regard. We find that the Learned AR without discharging his onus to prove the veracity of the claim of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and if the same is found to be correct, then the Learned AO is directed to allow deduction of rent paid to Kolkata Port Trust as there will be no obligation to deduct tax at source on the assessee for the Asst Year 2006-07. Accordingly, the Ground No. 2 in CO 83 /Kol/2012 raised by the assessee is allowed for statistical purposes. 7. Addition made u/s 68 of the Act ₹ 68,50,000/- 7.1. The brief facts of this issue is that the Ld. AO has mentioned in the assessment order that survey u/s 133A was conducted on 05-11-2009 in the offices of two companies - Respect Vyapaar (P) Ltd and Akashnet Sales (P) Ltd; and, statement of their directors was recorded. It was stated by the director of Respect Vyapaar (P) Ltd that, during the financial year 2006-07, his company had given loan totalling to ₹ 28,00,000/- to the appellant in lieu of cash received from them. Similarly, it was stated by the director of Akashnet Sales (P) Ltd that, during the financial year 2006-07, his company had given loan totaling to ₹ 40,50,000/- to the appellant in lieu of cash received from them. The Ld. AO verified from the bank account of the said companies maintained with the UCO Bank t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the rival submissions. We find that the Learned CITA had deleted the addition by observing as under:- The only ground on which the addition was made by the AO is that the loans were obtained by the appellant by transferring equal amounts of cash to the loan creditors. The AO has made this conclusion on the basis of the statement given by the directors of the lending companies in course of survey u/s 133A at their offices. But then, these statements were retracted when the lending companies gave their loan confirmation which was filed at the assessment stage. The AO has brought no material on record to dispute the loan confirmations duly filed before him. The AO has verified the bank account of the loan creditors. It is not the case of the AO that cash was deposited in their bank account before, or after, the loan was given to the appellant. The department has made no recovery of cash from the premises of the loan creditors. No incriminating material was found in search nor was any gathered or brought on record by the AO in course of the assessment proceedings which could even remotely suggest that cash was transferred by the appellant to the loan creditors. In this factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sarat Chandra Patra showing total cash deposits of ₹ 2,48,500/- in Punjab National Bank, BRBB, Kolkata was seized in search. It was contended at the assessment stage that the appellant was neither related to the hank account mentioned in the deposit slips nor with the person Sarat Chandra Patra. It was explained that some of the visitors to the office of the assessee company might have left the deposit slips by mistake; however, the AO could investigate the matter further as the details of the bank account was available with him. The AO found that the cash deposits were made in a branch of the PNB in Durgapur through its branch at BRBB, Kolkata. The AO observed that no person can leave 13 bank deposit slips by mistake. The AO then held that, since the bank deposit slips were seized from the premise of the assessee company, the cash deposits reflected therein had to be treated as its undisclosed income. The AO thus made addition of ₹ 2,48,500/-. The addition made by the Learned AO was deleted by the Learned CITA. 8.2. Aggrieved, the revenue is in appeal before us on the following ground no.12:- 12. That on the facts and circumstances of the case and in law, Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low:- Asst Year 2008-09 - ₹ 42,88,000/- Asst Year 2009-10- ₹ 31,87,300/- Asst Year 2010-11 - ₹ 15,68,720/- 9.2. It was explained that the diary was only memorandum record maintained for the purposes of internal control. For the sake of clarity of the issue, the submissions made at the assessment stage is extracted from the assessment order as under - In view of the nature of business of the company, funds have to be kept ready at different points where goods are loaded in the vehicles. The loading takes place after 10 p.m. in the night, before which the vehicles are not permitted to enter the places of loading. The office of the C0mpany closes by 6 p.m. The funds required at such booking points are estimated by staff of the company at such booking point and approximate required amounts are to be kept ready. The person handing over the cash at office keeps record of the amounts paid and the name of the person to whom the amounts are paid. Generally, even the acknowledgements of the receiving persons are obtained and the same are visible in the copies of the seized papers. The details of ultimate utilization of such funds are forwarded to the office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to him in the office of the company. Once such accounts are received, the contra entry is made in the diary (on the left-hand side) recording the date and amount. It is for this reason that the date of receipt of accounts is always at a later date than that when the cash fund was handed over to the employee. The amount is the same as the cash fund given to the employee would tally with the total expenses incurred and the left-over of such cash fund. Copy of seized diary marked ILRT/l was filed in course of the appellate proceedings. The Ld AR explained that the-source of the cash fund provided to the employee is the cash-in-hand available in the cash book of the appellant company. However, when the cash fund is given to the employee, no entry is made in the cash book. On receipt of the accounts from the employee, necessary entry is made in the cash book and the cash balance is reduced accordingly. It was for this reason that the entry made in the diary would not tally with the cash book on day-to-day basis. But then the source of the cash fund made available to the employee for the purposes of the business on any date is explained as the cash fund is covered by the cash-in-hand a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the submission that the 'payments' correspond to the handing over of cash fund whereas the 'receipts' mean receipt of accounts regarding incurring of expenses and the left-over of the cash fund. In this factual background, it appears that the payments appearing on the right-hand side correspond to 'payment of cash whereas the left-hand side represents its utilisation. The appellant was therefore liable to explain the source of such payments which total to ₹ 21,84,000/-. It was contended before me that these payments were made from the cash-in-hand available in the cash book of the appellant company; and, that the corresponding expenses were also subsequently recorded in the cash book. For, the abstract of the cash available with the appellant company was filed at the assessment stage which clearly shows that there was sufficient cash balance to account for the cash disbursement on any particular day. However, it was conceded that the entry made in the diary would not tally with the cash book on day-to-day basis. It is not the case of the AO that there was not sufficient cash balance in. the books of the appellant company. The AO has made the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted before the Learned AO that it is ready to demonstrate the availability of cash balance for making payments to other godowns and what is maintained in the seized document is only memoranda records and hence the delay in recording the entries in the cash book on a subsequent date is quite natural. But this fact is very crucial which has not been the subject matter of examination by the revenue and substantiated properly by the assessee. We find in the facts and circumstances, deem it fit and appropriate, to set aside this issue to the file of the Learned AO, to decide this issue afresh, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is at liberty to file fresh evidences in this regard to substantiate its contentions. Accordingly, the Ground No. 11 of revenue in Asst Year 2008-09 CO No.1 of assessee in Asst Year 2008-09 ; Ground No. 10 of revenue in Asst Year 2009-10 CO No.1 of assessee in Asst Year 2009-10 and Ground No. 7 of revenue in Asst Year 2010-11 CO No.1 of assessee in Asst Year 2010-11 are allowed for statistical purposes. 10. Addition towards cash payments Seized Document Reference IL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is at liberty to file fresh evidences in this regard to substantiate its contentions. Accordingly, the Ground No. 8 of revenue in Asst Year 2010-11 and CO No.2 of assessee in Asst Year 2010-11 are allowed for statistical purposes. 11. Addition towards payment through credit card The facts of the case with regard to this issue for the Asst Year 2008-09 are stated herein and considered for adjudication. Similar facts are prevalent in Asst Year 2009-10 except with variance in figures. 11.1. During the course of assessment proceedings, the Learned AO found that the assessee had made payments of ₹ 58,63,375/- to ICICI Bank against credit card bills and ₹ 4,75,903/- to its Director Sri Ratan Kumar Somani. The Learned AO observed that no details of credit card payments were furnished by the assessee and also stated that the nexus of the same vis a vis the business of the assessee was not established by the assessee. Accordingly he proceeded to disallow a sum of ₹ 63,39,278/- on account of payments against credit card bills in Asst Year 2008-09. Similar addition was made in Asst Year 2009-10. The Learned AO held that the credit card expenses were personal ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re payment on account of credit cards is made from the bank account of the assessee company which is duly disclosed in its books of account. The payment or its source is not in dispute. The AO has made the disallowance on the ground that the expenses were not made for the purposes of the business. But then, there was no material on record which could possibly constitute the basis for the conclusion that was drawn by the AO. Secondly, without having any supporting material on record, the AO has concluded that the credit card payments relate to the personal expenses of the directors and employees, The AO has failed to appreciate the ground reality that no company could possibly afford to burden itself with the personal expenses of its directors or employees to the extent of an astronomical figure of ₹ 63,39,278/-. The Ld AR finally concluded that the action of the AO was not based on any material fact or evidence found in course of the search or collected during the proceedings of assessment. 11.3. The Learned CITA observed that on perusal of the assessment records, it was found that no details were called for by the Learned AO regarding the credit card expenses to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d towards credit card bills were genuinely incurred for the purpose of the business of the assessee. The Learned DR could not controvert the findings of the Learned CITA before us in this regard. 11.5. With regard to the credit card payments of Sri Ratan Kumar Somani (Director), the Learned AR stated that the assessee company availed the facility of credit cards issued in the names of the Directors including Sri Ratan Kumar Somani. Such usage was done mainly for meeting the travelling expenses and charges for hotels. Payments were made by the assessee directly to the service providers. He placed some of the evidences of credit card statements and payments made thereon in the paper book filed before us and also stated that the said payments were duly reflected in the regular books of accounts maintained by the assessee and hence there is no need to make any addition in this regard. It was argued that no payment was made to Director Sri Ratan Kumar Somani. The payments were made to different service providers such as banks for travelling expenses incurred for the purposes of the assessee company. The Learned AR stated that the tax auditor and the statutory auditor had reported th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d document that the AO has referred in the assessment order is actually the conveyance deed which was registered in the year under consideration. But then, payments by way of advance was made in the earlier years as well. For, the appellant started with payment of ₹ 29,44,000/- in the financial year 2006-07 which was followed by those of ₹ 85,12,500/-, ₹ 37,69,368/- and ₹ 29,79,261/- in the subsequent years. These payments were made through banking channel which is recorded in the regular books of account. The investment is duly reflected in the balance sheet for the assessment year 2007-08 and the subsequent years which the AO has not cared to verify. The investment was financed to the extent of ₹ 1.15 crores by the ICICI Bank which was duly explained at the assessment stage. The AO is not justified in his observation that there is no supporting evidence to explain the investment when the same is duly reflected in the balance sheet of the company filed from year to year. The amount of ₹ 1,67,07,000/- as considered by the AO in the assessment order actually comprises the consideration of ₹ 1,56,00,000/-, stamp duty of ₹ 10,92,000/- an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee chose to capitalize the same. But in the return, the same was claimed as deduction which was disallowed by the Learned AO treating the same as capital expenditure. The Learned AO did not grant depreciation on the said capital expenditure. The Learned CITA upheld the action of the Learned AO. Aggrieved, the assessee has preferred cross objections before us for Asst Year 2010-11 as below:- 3. That in the facts and circumstances of the case, the Ld. CIT(A) erred in confirming disallowance of ₹ 4,45,66,268/- being expenditure for the purposes of the business of the appellant treating the same as capital expenditure. 4. Without prejudice and in the facts and circumstances of the case, the Ld. CIT(A) erred in denying depreciation on the aforesaid amount of ₹ 4,45,66,268/-. 13.1. The Learned AR argued that the land and godowns were taken on rent by the assessee from M/s Somani Services P Ltd and used for the purpose of business of the assessee. Hence the renovation expenditure incurred on the rented premises is to be allowed as revenue expenditure. Without prejudice to this argument, he argued that the assessee should at least be granted the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Cross Objection for Asst Year 2010-11 on the following grounds:- 5. That in the facts and circumstances of the case, the Ld. CIT(A) erred in confirming addition of ₹ 6,82,500/- for the alleged expenditure vide seized material marked as ILRT/12, whereas the said seized document did not contain record of any expenditure relating to the company at least to the extent of ₹ 5,32,500/- and in any case the same were noting of memorandum record only for/by others. 6. That in the facts and circumstances of the case, the Ld. CIT(A) erred in confirming addition of ₹ 1,50,000 on the basis of seized document marked as ILRT/12, which was noting of some estimate only. 7. That in the facts and circumstances of the case, the Ld. CIT(a) erred in confirming addition of ₹ 11,24,093 on the basis of seized document marked as IRTL/23 whereas the said seized document did not contain record of any expenditure relating to the company and in any case the same were noting of memorandum record only for/by others. 14.1. The Learned AR reiterated the submissions made before the lower authorities and the Learned DR vehemently supported the orders of the lower authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the Asst Year 2010-11. Thereafter, the assessee filed his return of income declaring taxable income of ₹ 6,36,590/- without including the sum of ₹ 9 crores. Laxmi Narayan Somani was asked by the Learned AO vide questionnaire dated 28.02.2011 to explain the reason for not declaring income for AY 2010-11 as per disclosure because he had made disclosure on behalf of Ratan Kumar Somani himself. He stated vide his letter dated 24.03.2011 (para No. 9) that there was no evidence of earning of any undisclosed income by Ratan Kumar Somani resulting in any undisclosed thing. He further added that the said statement was never made by him with the consent/authority/advice of Ratan Kumar Somani and that it was not based on any document seized during search, hence submission in relation to Ratan Kumar Somani should be treated as unwarranted/irrelevant and contrary to the facts and should not be relied upon. 15.1. Before the Learned CITA, the assessee contended that the AO has erred in law in relying solely on the statement made by third party for drawing adverse inference in the case of the assessee; and, that too, when such third party had also retracted the declaration con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the executives looking after the accounts of the company. Thus statement for undisclosed income; if any, would not have been possible. However, the statement made during continuance of search was made without any corroborative evidence - except certain basic facts about delay in filing of returns of income for asst year 2009-10 of various persons. I am in the bona fide belief that in case the return of income of any person is not filed for any asst year before .the date of search, the same is considered as undisclosed income for the purpose of search. With this belief, I made the statement which contained statement regarding undisclosed income. I again wish to reiterate that there was no material, at the time of making the statement, indicating any undisclosed income. In para 12 of the submissions made by me as per annexure to your notice/letter- the basis for giving the break up was 'to make the total of 24 crores . Thus, it is evident that the disclosure was made for a particular amount - without looking into any details it was stated in the submissions it may be noted that neither there is detail or manner or record of earning such undisclosed income in the seized r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 132(4) of the Act given by Shri Laxmi Narain Somani had been later retracted by him clearly adducing the reasons for the retraction. Hence no addition could be made in the hands of the assessee based on the statement of a third party which was later retracted. Reliance in this regard is placed on the following decisions:- (i) Pullangode Rubber Produce Co. vs State of Kerala and Anr (1973) 91 ITR 18 (SC) The Hon ble SC has observed that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. (ii) CIT vs Ravindar Kumar Jain (2011) 201 taxman 95 (Jharkhand HC) 6. We have considered the submissions made by the learned counsel for the appellant and perused the reasons given in the orders passed by the CIT(A). 7. It is not in dispute that during the course of search, the assessee first submitted that he has nothing to disclose and therefore first stand of the assessee was that he had no undisclosed income and then the assessee alleged to had stated that he had also undisclosed income of ₹ 7 lakhs. However, the Assessing Officer himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n house property he had stated that he took the plot in 1964 from the housing society which was constructing the bungalow for which the assessee made contribution from time to time and took possession in 1974 when only one ground floor was constructed. He had been living there and during 1986 to 1988 he had constructed the first floor and had incurred expenses of ₹ 2,03,185.65 and this amount had been withdrawn from the account of the firm which he was a partner. The Departmental Valuer had accepted the cost of construction and there was no reason to make addition of ₹ 4 lakhs on the basis of the disclosure made by the assessee. The Revenue had not brought any evidence to establish that the assessee had in fact incurred ₹ 4 lakhs and that amount was invested out of undisclosed income. The addition on account of gold ornaments could not be sustained since looking into the quantum of holding and the assessee s explanation this was a normal holding which could be found in any middle class Indian family. The furniture on the ground floor was 15 years old and the assessee had spent ₹ 25,000 for renovation after making withdrawal from the firm s account. With resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition was made towards the same in the assessment in view of addition made in the sum of ₹ 9 Crores by the Learned AO. 16.1. Before the Learned CITA, the assessee contended that the explanation given by the assessee vide letter dated 17.3.2011 that the cash of ₹ 3,23,283/- found in search belongs to Shyam Sundar Kamal Kumar Somani (HUF) was not appreciated by the Learned AO. The income tax assessment particulars of the said HUF file was given together with its PAN. The AO issued a letter dated 28-10-2011 to the Karta of the HUF requiring him to produce the cash book and bank statement for the financial year 2009-10 and copy of income tax return along with the computation of income, profit loss account and balance sheet pertaining to the assessment year 2010-11. The Karta of the said HUF responded vide its letter dated 03-11-2011 and submitted all documents as required by the AO. The cash book and bank statement as well as copy of income tax return along with the computation of income, profit loss account and balance sheet pertaining to the assessment year 2010-11 was produced before the AO. The copy of correspondence between the AO and the HUF was filed in cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the warrant of authorisation u/s. 132 was issued in the name of the four brothers and the panchanama at the residential premise in Kolkata was also drawn in their joint name. It was submitted before the AO that the jewellery found at the residential premises actually belong to the family members and their HUFs. While the AO has considered the jewellery found in Mumbai in the hands of Sri Laxmi Narayan Somani and that found in Delhi in the hands of Smt Chandu Somani wlo Sri Radha Kishan Sornani: the entire jewellery found in Kolkata has been considered by the AO in the hands of the assessee on the presumption that he alone resides in Kolkata. But then, this was factually incorrect. For example, one brother Sri Shyarn Sunder Somani was present in Kolkata at the time of the search; secondly, Sri Navin Somani s/o Sri Laxmi Narayan Somani was also present who actually signed the panchanama. The finding of the AO that the entire jewellery belongs to the assessee is also contrary to the material on record. For, the panchanama containing description of jewellery drawn at the residential premise in Kolkata clearly shows that different items of jewellery was recovered from different bed room ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 6763.820 637.400 1.01.56,190 7. Mohini Devi Sornani AJWPS3193F CC-IV 645.410 162.800 15,44,583 8. Laxmi Devi Sornani AMIPS6052J CC-IV 2156.560 222.320 22,83,625 9. Shanti Devi Somani ALOPS2029Q CC-IV 2957.640 330.000 29,67,100 10. Chandu Somani AXEPS3622D CC-IV 2551.080 219.600 26,38,598 11. Navin Somani AXEP53620B CC-IV 2741.400 141.000 15,93,819 GRAND TOTAL 17815.910 1713.120 2,11,83,915 The Ld AR contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee. Aggrieved, the revenue is in appeal before us on the following ground:- 2. That on the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding that no addition in respect of cash of ₹ 3,23,283/- and jewellery of ₹ 97,70,729/- found during the course of search can be made by AO and that the assessee s explanation on this issue is acceptable. 16.4. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find that the assessee had explained before the Learned AO that the cash found in search belongs to Shyam Sundar Kamal Kumar Somani (HUF) . We find that the Learned AO had verified this contention of the assessee by cross verification from the Karta of the HUF who had duly confirmed by replying in writing before the Learned AO. We find that no defects were pointed out by the Learned AO in the cash book and the details submitted by the Karta of HUF. We also find that the said HUF in its Balance sheet filed as on 31.3.2010 (Pg 186 of the paper book) had duly disclosed the cash seized of ₹ 3,00,000/- in its Balance Sheet. This itself goe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from the fact that the jewellery other than those under consideration was not found in the search, which means the logical conclusion would be that the same are sent for re-making to be in line with the changing fashion and designs. We find that the confirmation filed by the different family members of the assessee claiming ownership of their respective jewellery together with the respective list of items were neither disputed nor disproved by the Learned AO. Hence we hold that the entire jewellery found at the time of search valued at ₹ 97,70,729/- stands duly explained. We also find that the Learned AO had not given any finding in his assessment order as to how the Jewellery amounting to ₹ 97,70,729/- would become the undisclosed income of the assessee. Under these circumstances, we find no infirmity in the order passed by the Learned CITA in this regard. Accordingly, the Ground No. 2 raised by the revenue is dismissed. 17. Non-granting of benefit of set off of Long Term Capital Loss of Asst Year 2004-05 The brief facts of this issue is that the assessee filed the return of income for the Asst Year 2004-05 on 1.11.2004 which according to the Learned AO was be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That on the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting addition of ₹ 4,31,806/- as made by the AO on LTCG. 17.2. We have heard the rival submissions. We find that the Learned CITA had rightly granted the benefit of set off of carry forward long term capital loss of Asst Year 2004- 05 to be set off against the long term capital gain in Asst Year 2010-11 by placing reliance on the CBDT Circular supra and section 10 of General Clauses Act. Hence we find no infirmity in the order passed by the Learned CITA in this regard. Accordingly, the Ground No. 3 raised by the revenue is dismissed. In the result, to Sum up:- ITA No. 1179/2012 AY 2004-05 Revenue Appeal Dismissed ITA No. 1226/2012 AY 2005-06 Revenue Appeal Dismissed ITA No. 1225/2012 CO No. 83/2012 AY 2006-07 AY 2006-07 Revenue Appeal Assessee Cross Objections Dismissed Partly allowed for statistical purposes ITA No. 1426/2012 AY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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