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TMI Blog2018 (12) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting the addition of Rs. 10,00, 000/- made by the Assessing Officer on account of undisclosed brokerage expenses in cash based on incriminating evidence in the form of seized document." 4. Briefly stated the facts are that the Assessing Officer while completing the assessment noticed that in the course of search and seizure proceedings carried out at the residential premises of Shri M.A. Lokhandwala, one of the directors of the assessee's company, some incriminating documents and loose papers were found and seized. He noticed that certain details of payments to CRZ for clearance of project "Harmony" was made and in the statements recorded from Shri M.A. Lokhandwala, he has stated that there are some expenses of Rs..35,000/- for clearance of CRZ (Part A) and these expenses were incurred by him out of pocket. Similarly, he also noticed that some of the details of payments were made to registration authorities, totaling to Rs..24,22,000/-. However, in the course of search and seizure proceedings assessee denied that he is not aware of these transactions. In the course of assessment proceedings assessee furnished that there is no evidence or material found which can be proved to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-which according to him is the payments made to various authorities for registration of land. The above seized document was put before Shri Mohammed Abdul Hussain Lokhandwala during the course of search on 24.12.2008 and in response to Q. No. 6 of that statement, while explaining page no. 22 of annexure A-1, he made it clear that the sums referred to in Part 'A' of the seized document is Rs. 35,000/- and these were the expenses incurred by him out of his pocket. With regard to part 'B' of the seized document, he had replied that the same was not known to him. Therefore, if the AO had to state that it is not Rs. 35,000/- but it is Rs. 35,00,000/-, contrary to the explanation of the appellant given during the course of search, the onus is upon the AO to prove that the sums involved is Rs. 35,00,000/- and not Rs. 35,000/-. The AOs explanation that there are instances that the appellant used to write in similar manner and also admitted undisclosed income on the basis of such other seized material will not be relevant when it was categorically-explained by the appellant at the time of search itself, that the sums involved is only Rs. 35,000/-. The AOs contention that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessment year 2009-10 wherein the Ld.CIT(A) in the case of M/s. Lokhandwala Infrastructure (P.) Ltd. also given a finding that the assessee group sold flat to Shri Ravi Bhushan and Rs..88 lakhs was received towards amenities and Rs..10 lakhs for other amenities and Rs..25 lakhs in cheque. Therefore, in view of the finding of the Ld. CIT(A) in the case of M/s. Lokhandwala Infrastructure (P.) Ltd., the Ld. CIT(A) in the present assessee's case concluded that the explanation of the assessee shows that Rs..10 lakhs was received by the assessee from Shri Ravi Bhushan and since the entire sum was offered to tax for the Assessment year 2009-10 as per the Assessment Order at Para. 6.2, 6.3 and 6.4, the Ld. CIT(A) concluded that the addition should not be made. While holding so it has been observed by the Ld. CIT(A) as under: - "8.1 The Assessing Officer's contention is that a sum of Rs. 10,00,000/- was paid by cash by the appellant company to Shri Ravi Bhushan, commission agent, from the undisclosed sources and therefore the same was brought to tax. However, the appellant disputes the same by stating that Rs. 10,00,000/- is the cash portion received by the appellant company from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer that these expenses are in round figures and almost all the expenses were incurred towards government bodies for providing services, therefore he disallowed the expenditure. Ld. CIT(A) sustained the same. 15. Before us Ld. Counsel for the assessee submitted that entire expenses cannot be disallowed and adhoc disallowance may be made. 16. Ld. DR strongly supported the orders of the authorities below. 17. On a perusal of the Assessment Order, we find that the Assessing Officer observed that almost all the expenses were incurred towards government bodies. However, the Assessing Officer has not given a finding that the entire expenses incurred were only towards government bodies. Therefore, in the absence of specific finding that entire expenses were incurred only for the government bodies entire expenditure cannot be disallowed. Therefore, keeping in view the totality of the facts and circumstances, we direct the Assessing Officer to restrict the disallowance to 75% of the expenses and allow only 25% of the said expenses as deduction. 18. The second issue in the appeal of the assessee is with regard to the disallowance of Rs..6,56,625/- to M/s. Western Outdoor St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer disallowed the entire purchases of Rs..2,00,651/-, which was sustained by the Ld. CIT(A). Ld.Counsel for the assessee submitted that as the sales were not doubted and are accepted by the Assessing Officer entire purchases cannot be disallowed. 25. On hearing both the sides and perusing the orders of the Assessing Officer and Ld. CIT(A) and various case laws, we observe that the sales were accepted and the assessee produced copies of invoices, bank statements, copies of delivery challans etc., entire purchases cannot be treated as bogus. Keeping in view the nature of business conducted by the assessee we direct the Assessing Officer to restrict the disallowance to 8% of the expenses. This ground is partly allowed. 26. Coming to Ground No.3 which is the addition made on account of payment to M/s. Western Outdoor Structures (P.) Ltd. we observed while disposing off the appeal in ITA.No. 4387/MUM/2015 that the expenses which was paid towards advance has to be allowed as deduction in the F.Y. 2010-11 relevant to A.Y.2011-12 as the party has confirmed that they have rendered services and they have accounted for the sales in the F.Y. 2010-11 relevant to the A.Y. 2011-12. Thus, we d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the nature of an offence or which is prohibited by the law is not allowable as deduction. It is the contention of the assessee that penalty paid to SRA, Mumbai is for regularization of certain constructions which was commenced before issue of commencement certificate, but not for violation or infringement of any law. The assessee further contended that it has paid amount to SRA for obtaining commencement certificate beyond certain specified period which was delayed due to ambiguity in demarcation of the Coastal Regulation Zone. The assessee further contended that the National Institute of Oceanography was approached by the Maharashtra Coastal Zone Management Authority for proper demarcation of the coastal regulation boundaries and after duly surveyed and demarcation was made, further commencement certificate for the project was obtained belatedly due the reasons beyond its control. The fact remains that SRA has issued commencement certificate by collecting applicable fees. This itself shows that the said violation is not an offence under the Act. 6. Having heard both the sides and considered material on record, we find force in the argument of the assessee for the reason th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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