TMI Blog2017 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... t date cannot be accepted. Since AO has not based the assessment directly on the seized material but on Receipts and Payments Statements and assessee also has furnished different statements at different points of time, in the interest of justice, we are of the opinion that the assessments pertaining to these three impugned assessment years are to be set aside, with a direction to AO to compute the incomes on basis of the incriminating material found and the returns if any filed earlier in any assessment year. AO is also directed to quantify the incomes either on the basis of the seized material or if entire seized material is considered in the Receipts and Payments Statement furnished by assessee, on the basis of such statements. Assessee is also directed to furnish the correct computation of incomes for the impugned assessment years before the AO. Needless to say that assessee should be given due opportunity. AO is also directed to examine the issues afresh and need not base his computation either on the returns of income filed in August, 2009 or on the basis of the revised computations filed subsequently. With the observations made above, we hereby set aside the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r evidence. In the third statement again u/s.132(4) recorded at his residential premises, the same was reiterated. 2.1. Consequent to search and seizure operations as notices u/s. 153A of the Act were issued on 26-06-2008 for the block period from AYs. 2002-03 to 2007-08, assessee was required to file returns of income within thirty days of the receipt of the notice. Vide letter dt. 28-07-2008, assessee requested for extension of time on the reason that he has to analyse the seized records, bank accounts and documents etc., to compute the income for each assessment year and to file the returns accordingly. Assessee has not filed returns even upto 15-09-2008. AO has issued a show cause letter cautioning about initiation of prosecuting proceedings u/s. 276CC. Assessee filed returns on 18-08-2009 along with computation of income. While there is no change of income returned for AYs. 2002-03 to 2005-06, which were originally filed prior to the survey, assessee admitted incomes as under in the returns filed: AY. Income Returned (Rs) 2006-07 50,59,365 2007-08 2,80,15,181 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee and also obtained a report from the AO on the submissions made by assessee. These were extracted as part of the order, but without giving a finding whether the revised computation is accepted or not or whether assessee s appeals were covered by the provisions of Section 249(4) or not, Ld.CIT(A) went on adjudicating the issue on merits. He has deleted almost all the additions for various reasons given, but mostly on the reason that there is no incriminating material found during the search, therefore, the additions are not warranted. Since the additions made by the AO to the returned income were deleted by the CIT(A), Revenue is aggrieved in all the years under consideration on merits of the additions deleted. Revenue is also contesting the issue that CIT(A) should not have entertained the appeals in terms of Section 249(4) for AY. 2006-07 to 2008-09, which was in violation of law. Assessee is not in appeal for AY.2002-03 and 2004-05. Since the CIT(A) deleted the additions made to the returned income, the consequential orders passed by the AO resulted in determining the total income as returned by assessee while filing the returns on 18- 08-2009. As assessee contested t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant that for the year under consideration there was an opening capital of ₹ 75,94,804/-, consisting of individual cash balance of ₹ 14,82,059/- and cash balance of HUF of ₹ 61,12,745/-. This is the outcome of brought forward balances of the previous year. In fact it is the brought forward position of many a previous year. It is also a fact that there was no finding by the AO that some material was found during the course of action under section 132(1) pointing out that the opening balance was manipulated and requires correction and that correction is also possible as such period falls under the block period. Thus, in the absence of any finding as a result of search and seizure operations, the action of the AO in making the impugned addition has to be struck down as such action was not as per the provisions of law and the AO is directed accordingly . 6.1. Even though Ld.DR objected to the deletion of the above amount, we are of the opinion that Revenue has not made out any case for bringing it to tax- the opening capital shown by assessee. It is already admitted in the statement u/s. 132(4), which was relied on by the Revenue for making various addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A / PMR / Res / 11 Rs . 20,00,200 Rs . 53,25,300 The above said quantification was done by the assessee himself and it was submitted on 05.10.2009. The page wise of analysis of each and every seized material also done during the course of assessment proceedings and it is found that the above said quantification was true and correct. Accordingly the total investment in the form of payment to brokers, and landlords was ₹ 53,25,300. It was duly considered in the receipt and payment account filed for the financial year 2003-04. This is apart from ₹ 7,99,000 invested by the assessee in De-Lee Diamond Pvt Ltd. Hence the total investment of the assessee was ₹ 61,24,300. However the assessee has not disclosed this in his return of income. This is mainly because of the huge opening circulating capital introduced in the receipt and payment account of the financial year 2001-02. As the opening circulating capital did not have any supporting evidences the same was not considered. As per the above said discussion the undisclosed investment in the form of deficit cash balance for the A.Y 2004-05 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus nature of investments made in lands. In the circumstances, I am of the opinion that the additions made for all the assessment years need to be set aside and the AO is directed accordingly. 8.2. I have considered the submissions made by the appellant, gone through the order of the AO. This is the addition connected with cash credits under the provisions of section 68 of the IT Act, 1961. These were reflected in books of account maintained. Once these were found recorded in books and no finding in search adverse to cash credits were found then prima facie no addition on such items is contemplated in the block assessment proceedings. The AO has observed that the appellant has failed to produce evidence for huge cash deposits and NRI receipts appearing in the bank accounts. If these deposits were found recorded in books, then no addition is called for, because such deposits are already disclosed in books. But, however, in case material is found in the action under section 132(1) pointing out adverse inference, then it could be stretched and a clear cut finding could be given before making any addition in the block assessment. In the present case, such a scenario is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not considered by the AO. As briefly stated earlier, Ld.CIT(A) neither adjudicated the issue u/s 249(4) nor adjudicated the issue whether the revised computation is acceptable or not? He deleted almost all the additions made by AO on the reason that there is no incriminating material. The order of the CIT(A) is more or less similar and on same lines to the order extracted above in AY. 2004-05. His main thrust for deleting the amounts was that there is no incriminating material in the search and seizure proceedings. Revenue has raised the grounds mainly on the issue of admitting the appeals violating the terms and conditions of Section 249(4) and also on merits of the deletions made by AO. Assessee however, is aggrieved on the issue that CIT(A) has not given any direction to the AO to accept the revised computation, even though specific ground was raised. 8.1. Ld.DR argued vehemently, relied on various case law and also filed written submissions, the summary of which is as under: i. Assessee has admitted most of the amounts u/s. 132(4) in various statements recorded over a period of time and followed up with filing the returns admitting deficit cash. Thus, CIT(A) has erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income as there is no statutory requirement as in the case of return required to be filed u/s. 139(1). In respect of return to be filed u/s. 153A, the AO has power to extend the date of filing the return or the return filed beyond the time limit provided in the notice shall be considered for the purpose of completing assessment, if it is filed before the due date prescribed for completion of assessment u/s. 153A. However, such return filed beyond the time limit provided in notice u/s.153A or extended by the AO or in case there is no specific extension granted also, the return, if any, filed by the assessee before the completion of the proceedings shall be considered as valid return of income. On the other hand, the assessee has to face the consequences for not filing the return of income within the time limit provided in the notice u/s. 153A or beyond the time extended by the AO in terms of a. interest u/s. 234A(3) subsequent to completion of assessment from the date of expiry of time provided u/s. 153A till the date of filing the return of income or in case no return of income is filed, up to the date of completion of the assessment; b. the assessee is liable to penal pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additions cannot be sustained. It was submitted that the observation of the CIT(A) is not correct in as much as the statements were recorded on the basis of supporting documentary evidence found during the course of search and the statement was made by assessee without any pressure or coercion. It was further submitted that in the preliminary statement, assessee admitted an amount of ₹ 5 Crores. Subsequently on examination of the documents, a higher amount in the second statement was admitted and reiterated in the third statement given. It was further submitted that assessee also worked out the deficit cash and filed the returns, even though belatedly and admitted deficit cash on the basis of statements prepared by him. He referred to the letter of retraction to submit that the said letter was filed after two years from the date of original statement without any sworn affidavit or furnishing reasons along with corroborative evidences for such retraction. Ld.DR placed reliance on the following decisions: i. CIT Vs. O. Abdul Razak (2012) [20 Taxmann.com 48] (Kerala High Court); ii. CIT Vs. Hotel Meria (2011) [332 ITR 537] (Kerala High Court); iii. CIT Vs. T. Rangroo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the revised computation filed. For AY. 2007-08, assessee filed computation of income declaring loss of ₹ 3,35,01,000/- and no tax could be payable. For AY. 2008-09, assessee has revised the computation to NIL but paid the tax of ₹ 10,04,650/- which was claimed as refund . It was the contention that since the returns were filed beyond the time limit given, the returns are to be considered as invalid returns. Therefore, subsequent proceedings are null and void ab-initio. Consequently, the provisions of Section 249(4) do not apply. 10.2. It was also contended that even though revised computations were filed along with retraction letter in the course of assessment proceedings, the AO has neither discussed about the retraction nor considered the revised computation and the orders are totally silent on that. Therefore, AO computed wrongly from the income of so called invalid returns. It was submitted that if assessee s revised computation of income is taken up, then, there would be no demand of taxes. Thus, the appeals entertained by the CIT(A) are to be considered as valid. It was further submitted that Ld.CIT(A) has taken all steps by sending the documents filed bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat only issue arising for consideration before us in the present appeal is whether CIT(A) was justified in not entertaining assessee s additional ground claiming exemption u/s. 10A. As can be seen, CIT(A) has dismissed assessee s additional ground only for the reason that the claim of deduction u/s. 10A was not raised by assessee by filing a revised return relying upon a decision of Goetz India Ltd., and Hindustan Housing Development Corpn (supra). However, we find force in the contention of learned AR that ratio laid down in the aforesaid two decisions are restricted to the proceedings before the AO and will not apply to the appellate authorities. iv. Mumbai ITAT in the case of Lok Housing Construction Limited [27 taxmann.com 15] it was held that wrong statement which was corrected by the assessee by filing the revised return and the AO as well as the learned CIT(Appeals), in our opinion, was not justified in bringing to tax such hypothetical income in the hands of the assessee company on the basis of original return of income ignoring the revised return filed by the assessee. We, therefore, decide this issue in favour of the assessee on merit and delete the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of B. Vijaya Kumar in ITA No. 235-236/H/2010; c. Order of Mumbai ITAT in the case of All Cargo Logistics Limited cited in 23 taxmann.com 103; d. Order of Hyderabad ITAT in the case of Midwest Gold Limited in ITA No. 1062/H/2014; e. Order of Hyderabad ITAT in the case of AMR India Limited in ITA No. 1828-1831; f. Order of Hyderabad ITAT in the case of Sri Nilaya Projects in ITA No. 80/H/2013; 11. Coming to the merits, the submissions of assessee are as under: 8. Wrongful additions made basing on Documents for the years 2006-07, 2007-08 2008-09: The Assessing Officer completed the assessment by making the additions under ( i) Unexplained investment/deficit cash balance ( ii) Profit earned out of real estate transaction ( iii) Undisclosed Profit out real Estate transactions ( iv) Disallowance of Loss ( v) Unexplained cash credit u/s. 68 of IT Act. The detailed position is as follows: Addition Details AY 2006-07 AY 2007-08 AY 2008-09 ( i) Unexplained investment/deficit cash balance 89,35,110 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll continue for longer time. The AO wrongly calculated profits separately for some other transaction on hypothetical basis. The AO himself calculated the cost of land and profitability without understanding the real estate business. Some of the sales/ advances are only receipts not income. The assessee, in some cases, acts as agent for the owners of the land. All these transactions are reflected in the bank statements and cash flows. The AO cannot disturb the method of accounting followed by the assessee and arrive at profitability. The same thing explained very clearly in the following cases: a. The Hon'ble jurisdictional High Court in the case of CIT Vs. Pact Securities Financial Services Ltd., [61 taxmann.com 192] (Andhra Pradesh and Telangana); b. The Hon'ble Supreme Court in the case of S.A. Builders Ltd., Vs. CIT(Appeals), Chandigarh; c. The Hon'ble High Court of Delhi in the case of CIT Vs. Dalmia Cements (P) Ltd., [121 Taxman 706 (Delhi)]; d. The Hon'ble High Court of Delhi in the case of CIT Vs. Oracle India (P) Ltd., [11 Taxmann.com 139 (Delhi)]; 11 Explanation regarding- Disallowance of Loss : 11.1 The Assessee claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (p) Ltd [2008] 216 CTR 195 (SC) held that If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of the assessee company. ( b) The Hon'ble Supreme Court of India in the case of CIT vs Orissa Corpn (p) Ltd [1986] 25 taxman 80F (SC) held that In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,13,90,068 for the assessment year 2006-07,2007-08 and 2008-09 respectively. ii. Profit on sale of properties amounting to ₹ 25,00,000/-, ₹ 42,24,550/ - and ₹ 28,70,000/- for the AY 2006-07, 2007-08 and 2008- 09 respectively. The Ld CIT (A) appreciated the fact that the assessee is in the real estate business and after considering the explanations and submissions of the assessee Revised computation was prepared by considering all the transactions and all the profits/ loss on sale of land during the particular years was also accounted. The Ld CIT (A) also opined that all transactions are recorded and separate profit on each items cannot be taken. The Ld CIT(A) rightfully deleted the additions made by the AO vide para no.9.2 and 12.2. The Ld CIT (A) already allowed and mentioned that profit on sale of land already reflected and there was no incriminating material. The Ld CIT(A) on having accepted the computation, failed to give specific directions on deletion of profit on sale of land. . 11.1. Relying on the various legal precedents, it was submitted that the case law relied on by the Revenue are not applicable to the facts of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us investments, which he could not reconcile on the date of search or subsequently and wanted time to analyse the issues. That he has taken time to analyse the seized documents can be gazed from the fact that he went on seeking time in filing returns of income from the time he received notices u/s. 153A till he filed the returns. The returns for the three impugned assessment years were filed after due verification of the documents and bank account pass books/statements and he has quantified the difference between investments and sources as deficit cash and accordingly filed the returns. It is also fact that he did not pay self-assessment tax pertaining to AYs. 2006-07 and 2007-08 and partly paid to an extent of ₹ 10,04,650 for the AY. 2008-09. Even the so called statement of retraction filed does not contain any evidence on what basis it was withdrawn. As pointed out by the Ld.CIT-DR, it is almost after two years from the time the statements u/s 132(4) were given. Ld.CIT-DR has relied on various case law in his submissions, which we do not intend to repeat here, but suffice to say that the self-serving retraction without any documentary evidence cannot dispel the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhadruka, 3. Ahura Holdings Vs. DCIT [346 ITR 106] (AP) has held as under: Sections 153A, 153B and 153C were inserted in the Income-tax Act, 1961 with effect from June 1, 2003, in Chapter XIV. These sections are applicable to search operations or requisitions made after May 31, 2003. Simultaneously, section 158BI was inserted in Chapter XIV-B. By virtue of section 158BI of the Act, the various provisions of Chapter XIV-B of the Act are made inapplicable to proceedings under sections 153A and 153C of the Act. The effect of this is that while the provisions of Chapter XIV-B of the Act limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation, no such limitation is found in so far as sections 153A and 153C of the Act are concerned. Therefore, it follows that for the purposes of sections 153A and 153C of the Act, the Assessing Officer can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee. A search and seizure operation was conducted in the residentialcum- business premises of the assessee. The sale consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings does not arise. Consequent to the search as per the provisions, re-assessment has to be done quantifying the undisclosed income. Accordingly, we are of the opinion that the order of the CIT(A) deleting various additions on the reason that there is no incriminating material cannot be upheld. 14. At the same time, it is also to be noted that the tax has to be collected in accordance with law and any legal claim which is not properly made by inadvertence or ignorance should not be denied merely because assessee did not make a claim in the return of income. The Income Tax Act is meant for collection of correct tax and it cannot be treated as a lis between two parties but a tax adjustment as explained by the Hon'ble Madras High Court in the case of CIT Vs. Indian Express (Madurai) Pvt. Ltd., [140 ITR 705] at page No. 724. At any rate, appellate authority is entitled to admit any additional claim. However, the CIT(A) failed to consider assessee s contentions with reference to revised computation and as there is no direction regarding that to the AO, assessee in his appeals raised the contentions before us that the revised computations have not been considered. More over t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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