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2019 (5) TMI 693

..... r purchase of the property - HELD THAT:- As rightly contended by the assessee, the seized ledger of Indian Shipping Agencies Pvt. Ltd., in which these entries were made is not the regular cash book or any other books of account; and it is apparent that this ledger has been used for rough jottings and notings. As perused the letter of retraction dated 15.04.2008 filed before the ADIT (Inv.), Mangalore by the assessee in which the M.D. of the assessee has stated that there was no consideration paid over and above the consideration mentioned in the registered sale deed and the cash advance noted in the seized ledger were returned by the recipient after cheques were given, but no noting of the cash returned were made in the seized material. No addition could be made in respect of the so-called cash payments outside the books of account as unexplained investment. The contentions of Shri Ajit Kumar Rai (Shetty), that no cash payment was received by him from the assessee cannot be brushed aside lightly and his averments have not been controverted by the authorities below. No material has been brought on record to disbelieve / discredit Shri Ajit Kumar Rai’s (Shetty) claim; which .....

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..... earch that this shows that these amounts were being collected and recorded as such in the seized materials. Considering the fact that the material found shows the collection of cash, which was not recorded in the assessee’s books of account, we are of the considered view that the addition made on this account is justified. Payments of speed money - genuineness of the expenses claimed - HELD THAT:- Considering the AO’s remand report and the enquiries made at the relevant point in time, it is seen that even on facts, the assessee has been able to establish the genuineness of the expenses claimed under this head and we find that there is no adverse material on record to establish that there is any inflation of expenses by the assessee. In this view of the matter, we are of the view that no interference is called for in the impugned orders of the CIT(A) on the issue of payments of speed money. Consequently, the grounds raised by Revenue on this issue are dismissed. Unexplained expenditure based on seized material A/HML/18 - HELD THAT:- From the orders of assessment, it is seen that the assessee has put forth the very same explanation before the AO, as was put forth be .....

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..... d no reason to interfere with or deviate from his decision. TDS u/s 194C - disallowance u/s 40(a)(ia) - payment less than ₹ 20,000/- HELD THAT:- It is not disputed that each voucher for the aforesaid payments is less than ₹ 20,000/- and the payments have been made to various persons and therefore the provisions of section 194C of the Act are not attracted at all. The fact is that several vouchers of less than ₹ 20,000/- are prepared and no adverse finding has been rendered thereon. Revenue has also not adduced any material to establish that these payments by the assessee are in the nature of works contract with M/s. S. S. Associates or M/s. Divya Enterprises and therefore the provisions of section 194C are not attracted to these payments made. No disallowance u/s 40(a)(ia) can be made since there was no requirement to deduct TDS in the first place. In this view of the matter and after taking into account the facts and circumstances of the case on this issue, we are of the opinion that the CIT(A)’s finding directing deletion of the disallowance made by the AO for any interference and is accordingly upheld. - ITA Nos.771 to 776/Bang/2012, ITA Nos. 818 to .....

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..... se of search; besides addition in respect of machinery hire charges held to be unaccounted. In these orders of assessment, the AO also disallowed expenses claimed under tipper mamool, labour charges paid as speed money and disallowance under section 40(a)(ia) of the Act. 2.3 Aggrieved by the orders of assessment passed for Assessment Years 2002-03 to 2008-09 dated 04.12.2009, the assessee filed appeals before the CIT(A)-VI, Bangalore. The CIT(A), while disposing off these appeals by way of separate orders dated 27.03.2012, allowed the assessee partial relief by entirely deleting the disallowance made in respect of speed money; disallowance made under section 40(a)(ia) of the Act; and the additions made towards unexplained expenditure based on the seized ledger of M/s. Indian Shipping Agencies Pvt. Ltd. The CIT(A) confirmed / upheld the additions made in respect of unexplained investment, as well as machinery hire charges; and allowed partial relief in respect of disallowance made under the head tipper mamool. 3.1 Being aggrieved by the orders of CIT(A)-VI, Bangalore dated 27.03.2012 in the case on hand, the assessee has filed appeals for Assessment Years 2003-04 to 2008-09 and Reve .....

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..... w [224 ITR 19 (SC)] and consequent assessment U/S.153A is null and void-ab-initio on the parity of the ratio of the decision of the Hon'ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80 (iii) That the warrant issued in the joint names of the persons said to have been specified in the warrant is bad in law to initiate search in the individual cases of the several persons whose names are specified in the warrant although a joint warrant had to be issued in all the names of the occupants of the premises to seize their records, if warranted, which does not mean that search is initiated against each one of the occupants; (iv) That the search is also bad in law in that separate lists of the items seized belonging to each one of the assessees, which have to be prepared in accordance with the mandatory rule 112[9] of the I.T.Rules enjoining preparation of such lists and further furnishing the same to each one of the assessees including the appellant, if the search were to have been considered as individually initiated against each one of the persons whose names are stated to have been specified in the warrant including the appellant; (v) That the assessment is also bad .....

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..... ity of the ratio of the decision of the Hon'ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80. 6. The finding of the learned A.O. that the validity of search could not be questioned by relying upon several decisions is erroneous and is contrary to the decision of the jurisdictional High Court in the case of RAMAIH REDDY reported in 339 ITR 210 and therefore, the assessment requires to be cancelled. 7. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B and 234C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 8. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2004-05 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances .....

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..... ses are not in the nature of bribes and are in the nature of customary mamools payable to the crew of the trucks, who bring cargo for loading or unloading from the ships in the port yard. 5.1 The disallowance sustained is only out of suspicion and surmise, assumptions and presumptions, without an iota of evidence and requires to be deleted. Grounds urged and not pressed before CIT[A] and again urged before the Hon'ble ITAT as additional grounds and application for their admission as additional grounds is separately filed. 6. The appellant denies itself liable to be assessed u/s.153A rws 143[3] of the Act under the impugned order on the ground - (i) That the search initiated in the case of the appellant is illegal and ultra vires the provisions of Section 132[1][a], [b] and [c] of the Act; (ii) That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action u/s.132[1] is bad in law [224 ITR 19 (SC)] and consequent assessment U/S.153A is null and void-ab-initio on the parity of the ratio of the decision of the Hon'ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80. (ii .....

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..... and [c] of the Act to issue the warrant and the satisfaction note recorded therein under the facts and in the circumstances of the appellant's case especially in the light of the decision of the jurisdictional high court in the case of SOUTHERN HERBALS reported in 207 ITR 55 and consequently, the assessment is bad in law and liable to be annulled. 8. The learned A.O. has erred in law in holding the appellant is not entitled to question the validity of the search in the course of the assessment proceedings and is failed to appreciate that the search proceedings u/s.132 are in aid of ultimate assessment and a statutory appeal is provided against such assessment and therefore the issue of validity of search is an adjudicatory and justifiable issue, which had to be adjudicated by the A.O. to assume jurisdiction to make a valid assessment. 9. The learned AO failed to appreciate that a valid search is a sine qua non for making a valid asses sment under section 153A of the Act on the par ity of the ratio of the decision of the Hon ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80. 10. The finding of the learned A.O. that the validity of search could not be questioned .....

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..... arity of the ratio of the decision of the Hon'ble Supreme Court in the case of AJITH JAIN reported in 260 ITR 80. (iii) That the warrant issued in the joint names of the persons said to have been specified in the warrant is bad in law to initiate search in the individual cases of the several persons whose names are specified in the warrant although a joint warrant had to be issued in all the names of the occupants of the premises to seize their records, if warranted, which does not mean that search is initiated against each one of the occupants; (iv) That the search is also bad in law in that separate lists of the items seized belonging to each one of the assessees, which have to be prepared in accordance with the mandatory rule 112[9] of the I.T.Rules enjoining preparation of such lists and further furnishing the same to each one of the assessees including the appellant, if the search were to have been considered as individually initiated against each one of the persons whose names are stated to have been specified in the warrant including the appellant; (v) That the assessment is also bad in law since the warrant is in the joint names of certain persons and not in their indiv .....

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..... N reported in 260 ITR 80. 7. The finding of the learned A.O. that the validity of search could not be questioned by relying upon several decisions is erroneous and is contrary to the decision of the jurisdictional High Court in the case of RAMAIH REDDY reported in 339 ITR 210 and therefore, the assessment requires to be cancelled. 8. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s.234A and 234B of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 9. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. Assessment Year 2006-07 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT[A] is not justified under the facts and circumstances of t .....

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..... nt is also bad in law since the warrant is in the joint names of certain persons and not in their individual names and therefore, the assessee against whom the warrant is issued should be considered either as AOP or BOI consisting of such persons and such assessee entity alone could be considered as assessee or person against whom search proceedings are initiated and therefore, the provisions of Section 153A could be invoked only against AOP or BOI and not against the appellant, who is a member of such AOP/B01 to make a valid assessment in its separate status as either as company/individual/firm as the case may be having regard to the ratio of the Hon ible Karnataka High Court, Circuit Bench, Gulbarga in ITA Nos.6005 a 6006/2010, which is binding on the authorities below (vi) The learned A.O. has not discharged the burden of proving that there is a valid initiation of the search u/s.132[1][a], [b] a [c] of the Act, its execution and its completion in accordance with law to render the proceedings valid and to assume jurisdiction to make an assessment u/s.153A of the Act even when challenged before him and consequently, an adverse inference ought to be drawn and the assessment requir .....

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..... cumstances of the case. 2. The learned CIT[A] is not justified under the facts and circumstances of the appellant as set out in Annexure-1 annexed, in sustaining a sum of ₹ 7,50,000/- as against a sum of ₹ 76,20,956/- made by the A.O. under explanation to section 37[1] in respect of tipper mamools as these expenses are not in the nature of bribes and are in the nature of customary mamools payable to the crew of the trucks, who bring cargo for loading or unloading from the ships in the port yard. 2.1 The disallowance sustained is only out of suspicion and surmise, assumptions and presumptions, without an iota of evidence and requires to be deleted. 3.1 The learned CIT[A] is not justified under the facts and circumstances of the appellant as set out in Annexure-1 annexed, in sustaining a sum of ₹ 18,70,440/- as unaccounted machinery hire receipts under the facts and in the circumstances of the appellant's case. 3.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to the evidence and legal presumptions u/s.292C of the Act. 3.3 Without prejudice to the above, the addition made is excessive and liable to be reduced sub .....

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..... ate status as either as company/individual/firm as the case may be having regard to the ratio of the Hon'ble Karnataka High Court, Circuit Bench, Gulbarga in ITA Nos.6005 & 6006/2010, which is binding on the authorities below. (vi) The learned A.O. has not discharged the burden of proving that there is a valid initiation of the search u/s.132[1][a], [b] Et [c] of the Act, its execution and its completion in accordance with law to render the proceedings valid and to assume jurisdiction to make an assessment u/s.153A of the Act even when challenged before him and consequently, an adverse inference ought to be drawn and the assessment requires to be annulled. 5. The authorities below are not justified in denying the appellant the copy of the warrant and the materials inducing the belief in the existence of the condition specified in Section 132[1][a], [b] and [c] of the Act to issue the warrant and the satisfaction note recorded therein under the facts and in the circumstances of the appellant's case especially in the light of the decision of the jurisdictional high court in the case of SOUTHERN HERBALS reported in 207 ITR 55 and consequently, the assessment is bad in law .....

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..... ed is only out of suspicion and surmise, assumptions and presumptions, without an iota of evidence and requires to be deleted. 3.1 The learned CIT[A] is not justified under the facts and circumstances of the appellant as set out in Annexure-1 annexed, in sustaining a sum of ₹ 32,15,032/- as unaccounted machinery hire receipts under the facts and in the circumstances of the appellant's case. 3.2 The addition made is purely on suspicion and surmise, assumptions and presumptions and contrary to the evidence and legal presumptions u/s.292C of the Act. 3.3 Without prejudice to the above, the addition made is excessive and liable to be reduced substantially. 4 The learned CIT[A] is not justified under the facts and circumstances of the appellant as set out in Annexure-1 annexed, in sustaining a sum of ₹ 40,00,000/- as unexplained investment in the property u/s.69B of the Act under the facts and in the circumstances of the appellant's case. The addition made is on the erroneous appreciation of facts and purely on suspicion and surmise, assumptions and presumptions and contrary to evidence and consequently deserves to be deleted. 5. Without prejudice to the right to see .....

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..... ing officer may be restored. Assessment Year 2005-06 1.1 The Ld. C.I.T (Appeals) erred in deleting the speed money amounting to ₹ 76,74,539/- through sub contractors and ₹ 1,25,00,000/- through port laborers. 1.2 The Ld. C.I.T (Appeals), failed to appreciate the fact that, the assessee has failed to prove that whole of such expenditure said to have been incurred in the interest of business expediency. 1.3 The Ld. C.I.T (Appeals), failed to appreciate the fact that, the assessee has failed to prove that the payment of so called speed money to the Port Labourers, who are also employees of New Mangalore Port Trust governed by the Central Civil Services Conduct Rules. 1.4 The Ld. C.I.T (Appeals) failed to appreciate the fact that the decision of the Hon'ble High Court of Karnataka in the case of M/s Konkan Marine Agencies was accepted by the Department only on the monitory limit and not on principle. 1.5 The Ld. C.I.T (Appeals) failed to appreciate the fact the in the case Sri Maddi Venkataraman and Co. (p) Ltd. v. CIT reported in 229 ITR 534 (1998), the Hon'ble Supreme Court has clearly stated that any payment for infraction of law cannot be allowed. 2. The Ld.CIT( .....

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..... that, the assessee has failed to prove that whole of such expenditure said to have been incurred in the interest of business expediency. 1.3 The Ld. C.I.T.(Appeals), failed to appreciate the fact that, the assessee has failed to prove that the payment of so called speed money to the Port Labourers, who are also employees of New Mangalore Port Trust governed by the Central Civil Services Conduct Rules. 1.4 The Ld. C.I.T. (Appeals) failed to appreciate the fact that the decision of the Hon'ble High Court of Karnataka in the case of M/s. Konkan Marine Agencies was accepted by the Department only on the monitory limit and not on principle. 1.5 The Ld. C.I.T. (Appeals) failed to appreciate the fact that in the case Sri Maddi Venkataraman and Co. (P) Ltd. v. CIT reported in 229 ITR 534(1998), the Hon'ble Supreme Court has clearly stated that any payment for infraction of law cannot be allowed. 2. The Ld.CIT(Appeals) failed appreciate the fact that the declaration made by the assessee ₹ 1,35,00,000 u/s 132(4) of the I T Act was voluntary and binding on the assessee. The Ld.CIT(Appeals) is erred by linking the speed money issue to the voluntary declaration made by the assess .....

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..... ny payment for infraction of law cannot be allowed. 2. The Ld.CIT(A) erred in law in deleting the disallowance of expenses ₹ 33,00,000/- paid to M/s SS Associates and ₹ 8,69,000 paid to M/s Divya Enterprises in the light of section 194C and section 40(a)(ia) of the I.T.Act. 3. The Ld.CIT(A) erred in law in deleting the disallowance of expenses ₹ 50,969/- paid to contractors in the light of section 194C and section 40(a)(ia) of the I.T.Act. 4. The Ld.CIT(A) erred in law in deleting the disallowance of ₹ 90,47,498/-made u/s.37(1) of the I.T.Act as the expenditure incurred towards tipper mamool by the assessee was prohibited by law and opposed to public policy. 5. That on the facts and circumstances of the case and in law, the Ld. CIT(Appeals) erred in deleting the addition made as unexplained expenditure u/s 69C of Rs, 3,00,000. 6. For these and such other grounds that may be urged at the time of hearing the orders of Ld. C.I.T (A) may be set aside and that of assessing officer may be restored. Ground Nos.3 to 6 and Additional Grounds for Assessment Year 2003-04 Assessee s appeals Ground Nos. 6 to 10 and Additional Grounds for Assessment Year 2004-05 Ground No .....

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..... additions made on this count are ₹ 7,50,000/- for AY 2003- 04 Et ₹ 3,22,500/- for AY 2004-05. [b] In course of search a ledger of Indian Shipping Agency was found and seized and inventorised as A/HML/18. At page 61 of the seized material, a ledger folio in the name of Ajith Kumar Rai was found recorded, which has been scanned and reproduced in page [26] of the assessment order for the assessment year 2003-04. [c] As per the notings made in the aforesaid seized material at page 61, there were payments made to Ajith Kumar Rai in capacity as GPA holder of Mr. Sharath Kumar Alwa and Vinay Kumar Shetty, which included payments in cash and cheque. The Managing Director of the assessee company was examined at the time of search and he admitted that a sum of ₹ 10,72,500/- as noted in the aforesaid seized material was paid by way of cash, which was agreed to be offered as undisclosed income. Later, under the letter dated 15/04/2008, Shri Mohiuddin, retracted the aforesaid disclosure and it was contended before the A.O. that an abandoned ledger of Indian Shipping Agency that was used to make certain jottings and notings, which were all not accurate. The A.O. rejected the sa .....

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..... re not entirely accurate. Merely because some of the entries made in the seized documents accord with the payments made and recorded in the sale deed is no ground to presume that the other payments made [h] therein are also correct. In the absence of material gathered to discredit the statement of Sri Ajith Kumar Rai, the addition sustained by the learned CIT[A] is unjustified and liable to be deleted. It is prayed accordingly. 7.2 Per contra, the learned Standing Counsel for Revenue submitted that the seized material A/HML/18 where cash payments noted was not an abandoned ledger and the transactions recorded therein are correct and accurate. According to the learned Standing Counsel, the AO has reproduced the relevant noting made in the ledger account, which shows payments made both in cheque as well as cash. The payments made by cheque are found recorded in the books of account, whereas the cash payments are not recorded therein. He referred to the admission of the Managing Director (M.D) of the assessee at the time of search vide statement under section 132(4) of the Act dated 18.01.2018 and contended that the subsequent retraction by the assessee on 15.04.2008 was not based on .....

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..... vestments. 7.3.2 We find from the assessee s contentions that no cash was paid for purchase of the property as noted in the seized ledger stands corroborated by the evidence gathered by the Department from Shri Ajit Kumar Rai (Shetty). As rightly contended by the assessee, the seized ledger of Indian Shipping Agencies Pvt. Ltd., in which these entries were made is not the regular cash book or any other books of account; and it is apparent that this ledger has been used for rough jottings and notings. We have perused the letter of retraction dated 15.04.2008 filed before the ADIT (Inv.), Mangalore (copy placed at pages 71 to 75 of paper book) by the assessee in which the M.D. of the assessee has stated that there was no consideration paid over and above the consideration mentioned in the registered sale deed and the cash advance noted in the seized ledger were returned by the recipient after cheques were given, but no noting of the cash returned were made in the seized material. Considering the factual matrix of the case, as discussed above, we are of the considered view that no addition could be made in respect of the so-called cash payments outside the books of account as unexplai .....

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..... erence in respect of this sum of ₹ 1,14,172/-. However, no reconciliation was filed before the A.O. and neither has any such reconciliation being filed before me. In the circumstances the addition made by the A.O. requires to be confirmed and no interference is called for. 8.2.3 In the course of hearing before us, the learned AR for the assessee did not file any reconciliation in respect of the difference in creditors balance; as already pointed out by the CIT(A). There is a difference of ₹ 1,14,172/- in the creditor s balances and this fact was noticed by the AO in the course of assessment proceedings. In the absence of any reconciliation being furnished to explain the difference of ₹ 1,14,172/- in creditor s balances, we find no reason to interfere with or deviate from the action of the CIT(A) in sustaining the aforesaid disallowance. Consequently, ground No.2 of assessee s appeal for Assessment Year 2004-05 is dismissed. 9. Ground No.5 and 5.1 (Assessment appeal for Assessment Year 2004-05) Ground No.2 and 2.1 (Assessee s appeal for Assessment Years 2005-06 to 2008-09) Tipper Mamools Ground No.2 (Revenue s appeal for Assessment Years 2004-05 and 2005-06) Ground .....

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..... t the relevant stations by the truck drivers for obtaining gate passes, etc. According to the learned AR, there was no material on record to show that these expenses are either illegal or prohibited expenses and even in the orders of assessment, the AO has reproduced certain vouchers, which show small amounts under entertainment; which are presumed to be illegal payments like tips, greasing, etc., without any material on record to arrive at such a conclusion. 9.3 Per contra, the learned Standing Counsel for Revenue supported the orders of the AO and contends that the CIT(A) has deleted the disallowances substantially, based on the presumption that the entire expenses claimed by the assessee are legitimate business expenses. With regard to the AO s remand report pointing out the break-up of expenses, he submitted that the total expenditure claimed was disallowed by the AO as there was no supporting evidence given by the assessee and in remand proceedings, the vouchers were examined afresh and a report was rendered for the limited purpose of ascertaining the expenses that related to payments made to government officials. According to the learned Standing Counsel, the assessee had not .....

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..... as illegal gratification to government officials. According to the assessee s explanations, the amounts paid under this head, have been paid to the transportation crews of trucks for incurring wayside expenses and there were no illegal payments made and the reference to various stations such as CISF, Customs, NMPT, etc., are only limited to expenditure incurred at the relevant station. The CIT(A), on examination thereof has rendered a finding that majority of the payments are unconnected with any payments that are referred to government officials of CISF, Customs, NMPT, etc., and in that view of the matter, deleted the disallowance / additions substantially and confirmed adhoc additions for various years to take care of any such payments to government officials. Having considered the rival contentions, the impugned orders of the CIT(A) and the AO s remand report dated 01.11.2010; we find that substantial part of the addition / disallowance made out of the expenditure claimed on tipper mamools represents legitimate business expenditure like hotel bills, port pass, crew / driver s batta, labour charges, etc. Some notations with regard to the expenses bearing the CISF, Customs, NMPT, .....

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..... eals for Assessment Years 2007-08 and 2008-09) 10.1 The next issue in the assessee s appeals for Assessment Years 2007-08 and 2008-09 are the grounds raised in respect of the additions made in respect of machinery hire charges amounting to ₹ 18,70,440/- and ₹ 32,15,032/- respectively. 10.2 On this issue, the learned AR for the assessee has put forth the following written submissions: 11. MACHINERY HIRE CHARGES [AY 2007-08 Et 2008-09]: [a] The additions made under this head are ₹ 18,70,440/- for the AY 2007-08 and ₹ 32,15,032/- for AY 2008-09. [b] During the course of search a note book was seized and inventorised as A/HML/04 dated 17/01/2008. In this book unloading charges through JCBs were recorded. At the time of search one Sri H.Asif, Cashier of the assessee company was examined and he stated that the unloading charges were collected at ₹ 180 for a Ten wheeler truck and ₹ 100 for a Six wheeler truck and these were not recorded in the main cash book of the assessee. [c] In course of assessment proceedings it was explained to the A.O. that these machine hire charges were collected and distributed amongst the workers, who share the collections wi .....

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..... een given sufficient opportunity by the A.O. in course of assessment proceedings to explain the receipts in the seized note book. Except for asking for cross-examination of Sri Asif, the appellant did not give any other explanation or justification before the A.O. I find that the request for cross-examination has also not been availed by the appellant before the A.O. Infact, the statement of Sri Asif has been shown to the Managing Director of the appellant and the same was confirmed by him in the statement recorded on 18.01.2008. Under these circumstances, I am not inclined to interfere with the findings recorded by. the A.O. The addition of ₹ 18,70,440/- is confirmed. 10.4.2 As rightly submitted by the learned Standing Counsel, we are also of the view that the assessee has not been able to adduce any evidence in support of the explanation and claim put forth; that the amounts collected towards machinery hire charges as per the seized materials found at the time of search did not belong to it and it was used for distribution amongst the staff and other members of the gang / crew that was carrying out the work. It is also seen that the AO and CIT(A) have relied on the statemen .....

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..... d material, the addition of ₹ 40 lakhs was rightly sustained by the CIT(A). 11.3 We have considered the rival contentions and perused and carefully considered the material on record. We notice that there has been no examination of the Managing Director of the assessee company on the basis of the relevant seized material at the time of search. There is no admission of any cash payment made by the assessee. The assessee has contended that the notings made in the seized material was erroneous and has sought to substantiate the explanation by calling upon the AO to examine the vendors of the property in question at Kalur. It is a matter of record that all 3 vendors viz., Mrs. Bitty D souza, Mrs. Philomena D souza and Mrs. Agnes D souza have been examined by the AO and in their statements recorded on 20.07.2009 have denied receipt of any amount in excess of the consideration mentioned in the registered sale deed. In similar circumstances, in Assessment Years 2003-04 and 2004-05, while dealing with ground No.2 raised by the assessee in those Assessment Years on the issue of unexplained investment in property (supra), we had taken the view that the assessee s contention that no cash .....

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..... he time of search had denied having received any speed money from the assessee. The learned Standing Counsel also submitted that the assessee was paying speed money directly upto Assessment Year 2005-06, and from Assessment Year 2006- 07, the assessee started claiming this expenditure towards sub-contractors, which are held to be bogus by the AO in the impugned orders of assessment. In this regard, reference was made to the discussion made by the AO in the orders of assessment and submitted that the CIT(A) had deleted the disallowances following the decision of the Co-ordinate Bench of this Tribunal in assessee s own case for Assessment Year 2005-06 (supra). It was contended that the aforesaid decision of the Tribunal for Assessment Year 2005-06 in the assesse s own case was not applicable since it was rendered before the search action conducted in the case on hand and that then there was no detailed examination made of the facts with regard to the genuineness of the payments; as has been done in these assessments pursuant to search conducted in the assessee s case. In the light of the above, it was prayed that the decision of the CIT(A) on this issue be reversed. 12.3 Per contra, .....

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..... opinion, the payment is clearly for business consideration and cannot be considered to be illegal in nature and have been incurred in the ordinary course of business and, therefore, the said amount ought to be allowed as deduction by way of business expenditure. 12.4.2 In the light of the aforesaid view expressed by the Hon ble Karnataka High Court in the case of Konkan Marine Agency (supra), it is evident that there is a prevailing practice of paying speed money to the port labour at NMPT; which is allowable expenditure. We find that following the judgment of the Hon ble Karnataka High Court in Konkan Marine Agency (supra), the speed money disallowed by the AO in regular assessment proceedings was deleted by the CIT(A) in the assessee s own case for Assessment Years 2005-06, 2009-10 and 2010-11, which was upheld by the orders of Co-ordinate Benches of this Tribunal for Assessment Years 2005-06, 2009-10 and 2010-11 (supra). In this factual and legal matrix of the case, as discussed above, we are of the view and hold that the CIT(A) was justified in deleting the disallowance of speed money on the ground that it was paid to port labourers who are employees of New Mangalore Port Trust .....

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..... ment statement in respect of various Vessels issued by NMPT. b. Discharge Summary issued by NMPT regarding quantity of cargo handled. c. Vouchers regarding payment of speed money. 1.4 The above documents have been examined in detail. It is noticed from the above documents that the speed money payments to the port labourers were made according to the rates fixed in the Understanding entered into between the Labour unions, Stevedores Association, and New Mangalore Port Trust. 1.5 However, it is to be mentioned here that the vouchers maintained toprove the speed money payment to the port labourers do not contain the signature of individual/each labourer, but common vouchers are maintained for a Group of labourers where signature of one labourer only is put who is claimed to have put the signature representing other labourers. Regarding the genuineness of these signatures and other issues, the same have been elaborately discussed in the assessment orders u/s 153A while disallowing the expenses under this head. 12.5.3 Considering the aforesaid findings and the AO s remand report, the CIT held that the assessee has followed the established the practice for payment of speed money prevalen .....

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..... ed the additions in the case on hand, relying on the order passed by the CIT(A) in the case of M/s. Indian Shipping Agencies Pvt. Ltd. Therefore, it is submitted, the deletion of the additions made in the case of the assessee was not justified and the additions made by the AO have to be restored. 13.3 Per contra, the learned AR for the assessee submitted that the CIT(A) has correctly relied on the order of the CIT(A) in the case of M/s. Indian Shipping Agencies Pvt. Ltd. According to the learned AR, the CIT(A) in the appellate order passed in the case of M/s. Indian Shipping Agencies Pvt. Ltd., had examined the various additions made on merits and had recorded categorical findings that the entries in the seized materials were duly recorded in the books of account of various group concerns of the assessee. The learned AR submits that in view of the above, the CIT(A) s finding in the case of M/s. Indian Shipping Agencies Pvt. Ltd., rendered after examining the books of account of various group concerns was correctly relied upon by the CIT(A) in the case on hand for deleting the additions. It was also submitted by the learned AR that no further appeals were filed by Revenue against th .....

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..... atrix of the case as discussed above and the material on record, we find no reason to interfere with the findings recorded by the learned CIT(A) while deleting the aforesaid additions made by the AO on account of unexplained expenditure. Consequently, grounds raised by Revenue at No.3 for Assessment Years 2004-05 and 2005-06 and ground No.6 raised for Assessment Year 2007-08 are dismissed. 14. Ground No.2 (Revenue s appeal for Assessment Year 2006-07) Disallowance under section 40(a)(ia) for of the Act Ground No.4 (Revenue s appeal Assessment Year 2007-08) Ground No.3 (Revenue s appeal for Assessment Year 2008-09 14.1 In ground No.2 for Assessment Year 2006-07, Revenue has challenged the CIT(A) s action in deleting the disallowance of ₹ 44,430/- made by the AO on account of short deduction of TDS on the payments to labour contractors. Similarly, Revenue has also raised ground No.4 for Assessment Year 2007-08 and ground No.3 for Assessment Year 2008-09 in respect of deletion of disallowances under section 40(1)(ia) of the Act, amounting to ₹ 3,10,000/- and ₹ 50,969/- respectively, in respect of short deduction of TDS on payments made to contractors. 14.2 On this is .....

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..... other expenses of conversion, commission, registration, lawyer, survey, etc., were also recorded. The total of these expenses was ₹ 45,06,255/-. At the time of search, the M.D. of the assessee company was examined and he admitted that there was a cash payment of ₹ 35,50,000/- towards purchase of land, which was received from Shri P. Badruddin. Later, in a statement under section 131 of the Act recorded on 27.06.2008, the M.D. of the assessee company denied that there was any cash payment made and that the Accountant had wrongly mentioned the Land Cost as land Cash . The AO noted both the aforesaid statements recorded from the M.D, but relied upon the initial statement given on the date of search while making the addition of ₹ 40,79,000/-, after noting that the registration of ₹ 4,27,255/- was paid by cheque. The learned Standing Counsel further submitted that the property was purchased in the name of Shri Mohiuddin and Smt. Shahanaz Mohiuddin and the additions were only made protectively in the hands of the assessee. It was contended that the CIT(A) was not justified in deleting the addition without ascertaining the fate of the substantive addition. 15.3 Pe .....

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..... lure to deduct tax at source as required under section 194C of the Act as these payments were in the nature of contract payments. 16.2.1 The learned Standing Counsel for Revenue submitted that cash payments were made to M/s. S. S. Associates through debit vouchers to the extent of ₹ 33,00,000/- and these vouchers were found in the course of search. According to the learned Standing Counsel, these cash payments were not accounted in the regular books of account. Similarly, cash payments were also made to M/s. Divya Enterprises on various dates amounting to ₹ 8,69,000/-, and vouchers recording these payments were found at the time of search; which again were not recorded in the regular books of account. It is submitted that in the course of assessment proceedings, the assessee took the stand that the payments through debit vouchers were made to individual labouerrs engaged by these two contractors; i.e., M/s. S. S. Associates and M/s. Divya Enterprises and Vouchers in support were produced before the AO. The AO, however, rejected the same because the seized vouchers were prepared in the names of M/s. S. S. Associates and M/s. Divya Enterprises. In that view of the matter, .....

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