TMI Blog2019 (5) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 supports the stand of the assessee that no cash payment was made as stated at the time of search. Therefore, making any addition on the basis of the assessee s statement at the time of search by ignoring the assessee s subsequent explanation / rebuttal, which is corroborated by the statement of Shri Ajit Kumar Rai (Shetty), is clearly not justified. Addition on account of differences in liabilities - HELD THAT:- 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 explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 before the CIT(A) and the addition was made as the relevant books of account were not produced at that point of time. Before the CIT(A), in the case of M/s. Indian Shipping Agencies Pvt. Ltd., it appears that the books of account of various group concerns were produced and after due verification, these additions have been deleted. Following the conclusions arrived at and findings rendered by the CIT(A) in the case of M/s. Indian Shipping Agencies Pvt. Ltd., the CIT(A) has deleted the additions made in the hands of the assessee in the case on hand as well. - Revenue grounds are dismissed. Short deduction of TDS on the payments to labour contractors - disallowances made u/s 40(a)(ia) - HELD THAT:- We find that the CIT(A) had rightly deleted these disallowances made u/s 40(a)(ia), holding that it would amount to duplication. The CIT(A), on examination of the details on record in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 822/Bang/2012 - - - Dated:- 8-5-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P Boaz, Accountant Member For the Assessee : Shri. V. Srinivasan, Advocate For the Revenue : Shri. K. V. Aravind, Advocate Standing Counsel for Department ORDER PER BENCH These are appeals by the assessee for Assessment Years 2003-04 to 2008-09 and cross appeals by Revenue for Assessment Years 2004-05 to 2008-09, directed against separate orders of the CIT(A)-VI, Bangalore, all dated 27.03.2012. Since common issues are involved in all these appeals, they were heard together and we deem it appropriate to dispose them off by way of this consolidated order. 2. Briefly stated, the facts relevant for disposal of these appeals are as under: 2.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Revenue has preferred cross appeals for Assessment Years 2004-05 to 2008-09. We have heard and considered the submissions put forth by the learned AR for the assessee and the standing counsel for Revenue. We have also carefully perused the material placed before us by the learned AR (page 1 to 323), the list of citations, synopsis, written submissions; as well as the paper book filed by Revenue (pages 1 to 70) comprising written submissions, opinions of standing counsel and citations. We now proceed to dispose off these appeals by grouping all common issues raised by the assessee and Revenue in their respective appeals hereunder. Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IH 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 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 ₹ 3,22,500/- as unexplained investment in the purchase of property from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (iii) That the warrant issued in the joint names o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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. (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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of validity of search is an adjudicatory and justiciable issue, which had to be adjudicated by the A.O. to assume jurisdiction to make a valid assessment. 6. The learned A.O. failed to appreciate that a valid search is a sine qua non for making a valid assessment u/s.153A of the Act 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords, 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 1.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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 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, 234B and 234D 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 2007-08 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 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 expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1.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 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'ble K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged to interest u/s.234A, 234B and 234D of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 10. 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 2008-09 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 the appellant as set out in Annexure-1 annexed, in sustaining a sum of ₹ 21,00,000/- as against a sum of ₹ 1,11,47,498/- 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 loadin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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(A) erred in law in deleting the disallowance of ₹ 19,93,623/-made u/s.37(1) of the I.T.Act as the expenditure incurred towards tipper mamool b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.1 The Ld. C.I.T. (Appeals) erred in deleting the speed money amounting to ₹ 4,67,17,395/-. 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 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(A) erred in law in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, same income is added protectively. The 0T(A) in the case of Shri Mohiuddin has dismissed his appeal but not stated that the same has to be substantially assessed in his hands.(The income is substantially assessed in the hands of Smt.Shahnaz Mohiuddin and her appeal is pending before CIT(A)-V1,Bangalore.) 4. The Ld.CIT(A) erred in law in deleting the disallowance of expenses ₹ 3,10,000/- made u/s.40(a)(ia) of the I.T.Act. 5. The Ld.CIT(A) erred in law in deleting the disallowance of ₹ 68,70,956/-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. 6. That on the facts and circumstances of the case and in law, the Ld. OT(Appeals) erred in deleting the addition made as unexplained expenditure of ₹ 3,22,000. 7. 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. Assessment Year 2008-09 1.1 The Ld. C.I.T. (Appeals) erred in deleting the speed money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground Nos. 6 to 10 and Additional Grounds for Assessment Year 2004-05 Ground Nos. 3 to 7 and Additional Grounds for Assessment Year 2005-06 Ground Nos. 3 to 7 and Additional Grounds for Assessment Year 2006-07 Ground Nos. 4 to 8 and Additional Grounds for Assessment Year 2007-08 5.1 At the outset of the hearings, the learned AR for the assessee submitted at the Bar before the Bench that the assessee is not pressing ground Nos. 3 to 6 and additional grounds raised in its appeal for Assessment Year 2003-04; Ground Nos. 6 to 10 and Additional Grounds raised in its appeal for Assessment Year 2004-05; ground nos. 3 to 7 and additional grounds raised in its appeals for Assessment Years 2005-06 and 2006-07 and ground Nos. 4 to 8 and additional grounds for Assessment Year 2007-08. In view of the assessee not pressing the aforesaid grounds in these appeals, the same are dismissed as not pressed. Assessee s appeals charging of interest under section 234A, 234B and 234C of the Act Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 said contention by observing that the cheque payments made as noted in the seized materials were tallying with the sale deed under which the assessee purchased the property from Ajith Kumar Rai. Hence, the learned A.O. held that the cash payments noted therein would have to be considered as true and invoked the provisions of section 292C of the Act. [d] The assessee contended before the learned C1T[A] that the notings made in page [61] of the seized material A/HML/18 were not accurate and that the Assessing Officer had summoned Ajith Kumar Rai, in course of assessment proceedings and had examined him. Copy of the statement of Ajith Kumar Rao, is placed at pages 83 to 88 of the Paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions 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 any evidence to show that there were no cash payments made. The learned Standing Counsel submitted that in view of the above, the additions were rightly made and the CIT(A) has correctly sustained the said additions. 7.3.1 We have considered the rival submissions / contentions put forth and perused the material on record. In the course of search proceedings, a ledger belonging to Indian Shipping Agencies Pvt. Ltd., was found wherein several transactions were recorded on various pages thereof. Page 61 of the said ledger contained the account of Shri Ajit Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 supports the stand of the assessee that no cash payment was made as stated at the time of search. Therefore, making any addition on the basis of the assessee s statement at the time of search by ignoring the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 No.3 (Revenue s appeals for Assessment Year 2006-07) Ground No.5 (Revenue s appeals for Assessment Year 2007-08) Ground No.4 (Revenue s appeals for Assessment Year 2008-09) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 discharged the burden of proving that these expenses were incurred for the purposes of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, etc., are also found in the vouchers and this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeals 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Sri Asif before the A.O. have been given in consultation with the accounts manager of the appellant company. Therefore, there is no dispute that the machine hire collections as per the seized note book is not accounted. The appellant has been 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 charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the contentions put forth by the assessee, submitted that merely because the aforesaid vendors have denied the receipt of undisclosed consideration of ₹ 40 lakhs, it does not mean that the assessee has not made any such payments and contended that since the assessee has not submitted any plausible explanation for the notings made in the seized 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for Revenue contended that the assessee has been claiming huge deductions towards speed money paid to port labourers. He submitted that the M.D. of the assessee company had admitted an amount of ₹ 1,35,00,000/- as undisclosed income on account of speed money paid for Assessment Year 2007-08 in his statement under section 132(4) of the Act at the time of search proceedings. It was further submitted that the evidences detected at the time of search showed that the assessee s claim of having made payment to the port labourers was bogus; as many of the port labourers examined at the 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 Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have perused the orders passed by the authorities below and taking into consideration the assessee s business and the prevailing practice in the trade, whereby payments have to be made by the firms such as the assessee in order to ensure that work of handling goods are done within a reasonable time and to handle emergency operations of cargo handling beyond the working hours, such payments are made either through labour or workers union, cannot be considered to be either prohibited by law and further the assessee cannot be expected to take the receipt from individual workers or make payment by way of cheques. In our 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the Stevedores Association (the information collected from the Stevedores Association is enclosed to this letter). It is ascertained that in order to speed up the Stevedoring work in the Port, there is the practice of payment of Speed money to the Port labourers as per the understanding entered into between the Labour unions, Stevedores Association, and New Mangalore Port Trust. The rates of paying this speed money are as per the rates fixed for various articles handled by the port laborers. 1.3 However, no vouchers relating to speed money payment were seized in respect of this assessee during the search action. During the remand report proceedings, the assessee produced the following documents in respect of the speed money payment: a. Labour allotment 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 lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of ₹ 1,66,02,075/- and ₹ 59,67,500/- that was made as unexplained expenditure based on seized material A/HML/18 for the Assessment Years 2004-05 and 2005-06 respectively. A similar ground No.6 has been raised for Assessment Year 2007-08 in respect of the deletion of ₹ 3,22,000/- as unexplained expenditure. 13.2 The learned Standing Counsel for Revenue submitted that in the course of search, a ledger belonging to M/s. Indian Shipping Agencies Pvt. Ltd., was found and seized i.e., A/HML/18. On various pages of this seized ledger, there were notings of cash payments and in this regard, the assessee did not furnish any explanation before the AO to show that the entries recorded therein were recorded in the regular books of account. For these reasons, the AO has made the said additions / disallowances based on the various payments that were found recorded in the seized ledger. In this regard, substantive additions were made in the case on hand and protective additions were made in the case of M/s. Indian Shipping Agencies Pvt. Ltd., a group company. The CIT(A) deleted the additions in the case on hand, relying on the order passed by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gular books of account of various group companies. Thereafter, the CIT(A) deleted the additions rendering the finding that these expenditures cannot be made on the basis of notings made in the seized material that were uncorroborated. 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 before the CIT(A) and the addition was made as the relevant books of account were not produced at that point of time. Before the CIT(A), in the case of M/s. Indian Shipping Agencies Pvt. Ltd., it appears that the books of account of various group concerns were produced and after due verification, these additions have been deleted. Following the conclusions arrived at and findings rendered by the CIT(A) in the case of M/s. Indian Shipping Agencies Pvt. Ltd., the CIT(A) has deleted the additions made in the hands of the assessee in the case on hand as well. It has also been informed that the order of the CIT(A) in the case of M/s. Indian Shipping Agencies Pvt. Ltd., has reached finality since the Department had not filed any appeals against the said order. On a careful consideration of the factual matrix of the case as disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no disallowance can be made under section 40(a)(ia) of the Act in respect of short deduction of TDS as was held by the ITAT Kolkata Bench in the case of DCIT Vs. S. K. Tekriwal in ITA No.1135/Kol/2010, we are of the view that no interference is called for in the impugned orders of the CIT(A). Consequently, ground No.2 for Assessment Year 2006-07, ground No.4 for Assessment Year 2007-08 and ground No.3 for Assessment Year 2008-09 raised by Revenue are dismissed. 15. Ground No.3 (Revenue s appeals - for Assessment Year 2007-08) Kuthar Lands 15.1 In this ground, Revenue assails the decision of the CIT(A) in deleting he amount of ₹ 40,79,000/-, which was considered as unexplained investment in Kuthar Lands. 15.2 The learned Standing Counsel for Revenue submitted that the AO had made the aforesaid addition of ₹ 40,79,000/- in the assessee s hands on the basis of the seized document A/HML/20, that was found and seized at the assessee s premises at the time of search. Page 107 of the seized material A/HML/20 showed payments recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company and therefore, the protective addition made in the case on hand was to be deleted. We are not aware / informed as to the fate or present status of the appeal filed in the case of Shri. A. Mohiuddin. The fact remains that the AO made the addition towards unexplained investment in the purchase of Kuthar lands in the hands of the assessee only on protective basis and not on substantive basis. As rightly contended by the assessee, there is no need for making this addition of the said unexplained investment in the hands of the assessee in the case on hand as it is not Revenue s case that the lands at Kuthar were purchased either by the assessee or that unexplained funds of the assessee were used to make the said payment. It is seen that even the AO has only made the addition protectively in the hands of the assessee because the seized material, in which these payments were noted, were found in the course of search conducted in the case of the assessee company. In the facts and circumstances, as narrated above, we are of the view that the CIT(A) has rightly deleted the addition and we find no reason to interfere with or deviate from his decision. Consequently, ground No.3 of Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Divya Enterprises. According to the learned Standing Counsel, the entire vouchers produced and the explanations put forth was an after thought by the assessee to extricate itself from the disallowance made by the AO. It is submitted that , in view of the above, the disallowance under section 40(a)(ia) of the Act made by the AO ought to be restored since admittedly no TDS was made on these payments by the assessee. 16.3 Per contra, the learned AR for the assessee relied upon the findings rendered by the CIT(A) in the impugned order. According to the learned AR, assessee produced the vouchers in proof of the payments made, which were all recorded in the books of account. It was submitted that the CIT(A) had noted that each payment was made to different workers and each voucher was for an amount less than ₹ 20,000/-. The CIT(A) had accepted that the payments were made as disbursement to the labourers and that there was no works contract given by the assessee to either M/s. S S Associates or M/s. Divya Enterprises. The learned AR contends that, on the basis of the above facts and circumstances, there was requirement for deducting tax at source under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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