TMI Blog2017 (12) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... n AY 2005-06. As relying on SIR KIKABHAI PREMCHAND VERSUS COMMISSIONER OF INCOME-TAX (CENTRAL) , BOMBAY [ 1953 (10) TMI 5 - SUPREME COURT] we uphold the deletion of addition Addition on account of discrepancy in the books of accounts of the assessee company - HELD THAT:- The fact of the matter remains that ₹ 2,00,00,000/- was explained by the assessee having been paid by debiting account of the group company and such payments have been made through banking channels. The revenue has not been able to place any material to rebut the aforesaid cogent explanation tendered in the appellate proceedings. No opportunity was granted in the assessment proceedings. We also notice that identical addition had been made in the order of assessment dated 31.12.2010 u/s 153A/143(3) of the Act in pursuance to search conducted on 5.11.2009 under section 132(1). The said addition stood deleted in an order passed by CIT(A) though the revenue has preferred an appeal but such deletion of addition has not been challenged before us which also supports the aforesaid claim of the assessee company. Having regard to the aforesaid factual position, we uphold the deletion of addition Addition bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when any incriminating material was found during the search. The only material (if any) on which reliance is placed by AO is the statement of Sh. Mohinder Puri and construing it to be incriminating in nature is also unjustified, as the statement cannot be construed to be incriminating in nature and more specifically when the said statement has been retracted subsequently and has not been acted upon and as such, the additions so made in an order under section 153A/143(3) of the Act for impugned assessment year are in excess of scope of assessment. Thus, it is held that the additions so made under section 153A of the Act are mere repetition of additions made in assessments already made under section 143(3) of the Act and as such, all the additions so made are beyond the scope of assessment of provisions of section 153A of the Act and thus, the said ground raised in Rule 27 of ITAT Rules by assessee appellant is allowed. - ITA No. 995/DEL/2011, ITA Nos. 754/DEL/2015 & 1327/DEL/2011 - - - Dated:- 27-12-2017 - SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For the Appellant : Shri Salil Aggarwal, Adv, Shri Shaliesh Gupta, Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and on facts in deleting the addition of ₹ 2,00,00,000/- made by the AO on account of discrepancies in the books of account of the assessee. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of ₹ 10,50,00,000/- made by the AO without going into the merits of the case. 4. On the facts and in the circumstances of the case the CIT(A) has erred in law and on facts in holding that issue of payment of ₹ 10,50,00,000/- is still alive and may be examined afresh in the order u/s 153A without appreciating the fact the search assessment in the present case was time barring on 31.12.2010 i.e. the date of pronouncements of order by CIT(A). 3. As regards confirmation of disallowance of ₹ 2,30,11,467/-, the assessee company has preferred an appeal in ITA No. 995/Del/2011 in which following grounds have been raised: 1. That on the facts and circumstances of the case and in law the CIT(A) erred in holding that the sum of ₹ 3 Crores paid to M/s.Manami Construction Co.Pvt.Ltd towards land development expenses was not proved to have been incurred wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in law, the CIT (A) has erred in not appreciating the statement recorded on oath u/s 131 on 19.12.2008 and u/s 133A on 20..11.2007 and 05.01.2009 of Sh.SK Gupta wherein he was admitted that M/s Sino Credits Leasing Ltd is one of the companies controlled and managed by him being engaged in providing accommodation entries to M/s.Mad Entertainment Network Ltd on the basis incriminating documents found impounded during the course of survey and collected during the independent investigation. 5. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in holding that these statement recorded u/s 133A of the Income Tax Act, 1961 of Shri S.K.Gupta on 05.01.2009 has no evidentiary value against the provisions of section 133A (3) (iii) which empowers the Income Tax Authority to record the statement of any person which may be useful for, or relevant to, any proceedings under this Act. 6. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in ignoring the statement recorded on oath u/s 132(4) of Sh.Mohinder Puri wherein he offered unaccounted income for taxation on account of entries provided by M/s.Sino Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings of order of CIT(A) dated 17.11.2014 and as such, another issue involved in the instant appeals is as under: That additions made in the order of assessment dated 31.12.2010 under section 143(3) of the Act since are not based on any incriminating material found as a result of search on the assessee company, the same are in excess of jurisdiction and therefore, not in accordance with law. 6. In view of the above factual background, we now firstly take up ITA No. 1327/Del/2011 being appeal preferred by revenue arising from the order of CIT(A) dated 31.12.2010 disposing off the appeal against an order of assessment dated 31.12.2008 under section 143(3) of the Act. 7. Ground 1 relates to deletion of addition of ₹ 11,45,18,528/- being the expenditure claimed by the assessee under section 40(a)(ia) of the Act in the instant assessment year. 7. The factual matrix emanating from the order below is that the appellant sold land measuring 10.53 acres in Sector-53, Gurgaon to M/s. Parsvnath Developers Ltd. The sale of land was by the appellant alongwith two directors namely Mohinder Puri and Arjun Puri and other related persons n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT(A) and reads as under: (i) Following evidence was furnished in support of the genuineness of the expenditure incurred. (ii) Copies of account of the payees, confirmation of the payees. PAN of payees and details of payments made by cheques/drafts. (b) Copies of bills/invoices issued by the payees on the basis of which the payments were made to them. (c) Copies of TDS Certificates in Form No. 16A to all the payees giving PAN of payees, amounts credited, date of payments/credits, Tax deducted and Tax paid giving Challan No. date and branch of bank where deposited. (d) Latest proof of existence of some of the contractor companies. (ii) A request was made that the evidence gathered on the back of the assessee in the form of statements recorded, submissions made and documents furnished by the various parties, reports of the inspector, copies of the bank accounts etc. may be furnished to enable the Appellant to go through them and also to enable it to exercise right of cross examination based on the case law cited. (iii) It was also requested that the appellant be allowed time to find out and furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was not relevant so long as the expenditure was incurred and accounted for in the year 2005-06. (iv) This brings the matter to an important aspect as to whether on the present facts the AO while dealing with the assessment for the AY 2006-07 could consider the genuineness of the expenditure in the AY 2006-07. It is undisputed that the expenditure was incurred in the AY 2005-06. The genuineness of that expenditure can be considered in that year only i.e. in the course of assessment proceedings for that year. No expenditure was incurred in the AY 2006-07 and as we have stated the claim was made in the computation of total income to this year only because of the compulsion of Section 40(a)(ia). If Section 40(a)(ia) itself does not apply according to the AO s findings then the only jurisdiction of the AO is to consider the admissibility of the expenditure u/s 37 for which the focus must shift to AY 2005-06. It is in that year a finding about the genuineness has to be given. 7.4 Apart from the above, vide written submissions dated 4.11.2010, it was submitted as under: In continuation of our submissions on grounds No.3 to 9 filed on 21-9-2010 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO and the explanation/submissions filed were considered by the AO who passed the assessment order u/s 143(2) on 26- 3-2007, a copy of which is enclosed at pages 123 to 126. The details and explanation furnished with regard to land development expenditure incurred were accepted. IV. It is relevant to mention that ledger copy of account of land development e expenditure as appearing in the books of account is at pages 28 to 35. This shows that the expenditure was accounted for in the books of account for the F.Y.2004-05. It is also borne out from the record that tax was deducted in respect of each payment which was credited in the books of account for the year ending 31-3-2005. A copy of TDS Account is at page 36. Further, the tax deducted was not paid within the prescribed period but was deposited only on 25-10-2005 as is evident from the copy of the consolidated challan at page 122. V. To reiterate (i) Necessary6 details in respect of land development expenses incurred during the F.Y.2004-05 were called for and furnished. Also was furnished copy of ledger account of the land development expenses. (ii) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of proviso to section 40a(ia) of the Act and once TDS was duly deposited in the instant assessment year i.e. 2006- 07, expenditure ought to have been allowed in terms of proviso to section 40(a)(ia) of the Act and as such, the disallowance made was deleted. 7.6 The learned CIT DR read page 3 para 4 and page 4 para s 6 to 8 of AO s order passed under section 143(3) of the Act, wherein, learned AO has discussed regarding the facts of said claim of land development expenses so made by assessee company. It was contended by learned CIT DR that the assessee company has claimed land development expenses paid to 24 parties for which detailed investigations were carried out by learned AO during the course of assessment proceedings (at pages 12 to 60 of AO s order), wherein, at pages 59 to 60 of the AO s order it was held by learned AO that the said claim made by assessee company is a bogus claim, as none of the parties were found at the their given addresses and summons issued to these parties were never complied. 7.7. Further the learned CIT DR argued that, the only finding recorded by learned CIT (A) vide order dated 31.12.2010 while deleting the said disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings for AY/ 2005-06, wherein, specific reply was furnished to the AO regarding claim of land development expense along with necessary documentary proofs containing bills and confirmations of the parties to whom said payments are being made by assessee company (see page 72 73, 76 83 and 85 169. e) Copy of assessment order for AY 2005-06 dated 26.03.2007 under section 143 of the Act. 7.10. Further, it was submitted by the learned counsel of the assessee company that the said payment with respect to land development expense was paid by assessee company for the reason that the assessee had sold its 10.53 acres of land located in Sector 53, Gurgaon during the assessment year under consideration to M/s Parsvnath Developers Ltd. For the same, the appellant had incurred a total expenditure of ₹ 11, 51, 81, 489/- under the head land and development expenses in AY 2005-06 and since out of aforesaid total expenditure, TDS was not deposited within time though deducted with respect to expenditure of ₹ 11, 45, 18, 528/- and as such, the same was added back in computation of income for AY 2005-06, by describing it as expense not allowable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have given a finding that the expenses for the preceding assessment year were not genuine in the course of making assessment for AY 2006-07 and as such, the relief so given by learned CIT (A) is just and proper and be upheld. 8. We have heard the rival contentions and perused the material on record. The learned CIT(A) in its order dated 31.12.2010 deleted the disallowance by holding as under: 5. I have carefully considered the submissions filed by the appellant and the case laws relied upon by him. The following facts emerge from these submissions and are borne out from record: 1. The expenses of ₹ 11,45,18,528/- were incurred in the FY 2004-05 and were accounted for in the books of account in the FY 2004-05 as per mercantile system of accounting regularly employed by the Appellant. ii. Tax was deducted in respect of each sum credited to the accounts of the payees as required by section 194C of the Act. iii Tax deducted was reflected in the books of account for the year ending 31-3-2005. It was not paid within the period prescribed under the Act but was paid on 25-10-2005. Necessary proof of payment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us case laws cited by him, I am of the view that since the expenditure was incurred and accounted for in the books of account maintained for the Asstt. Year 2005-06, its genuineness could only be considered in the Asstt.Year 2005- 06 and could not be shifted to the Asstt.Year 2006-07, as the law on this issue has been laid down in the case of Kikabhai Premchand vs.CIT 24 ITR 506 (SC) and CIT^ vs.S.M.Chitnavis (1932) 2 Company cases 464, that the assessing officer can only take into consideration income profit or gains made in that year and is not concerned with the profits or losses for another year. Thus, for considering the genuineness of expenditure, a finding ought to have been given in the course of assessment for the assessment year 2005-06 when it was incurred and the A.O., while making assessment for the asstt.Year 2006-07, could not examine the transactions of the proceeding year and telescope those transactions for computing the income for the asstt.Year 2006-07. I, therefore hold that it was not permissible for the A.O. to make the transactions entered into in the preceding year subject matter of assessment for the assessment year 2006-07. The only aspect, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture disallowed under section 40(a)(ia) in AY 2005-06. 8.2 On going through the paper book filed by the assessee, we have seen that the amount of ₹ 11, 45, 18, 528/- was never claimed as expenditure in the Profit Loss Account for impugned assessment year 2006-07, rather the same was claimed as expenditure in AY 2005-06, for which due assessment was made by learned AO under section 143(3) of the Act, who accepted the genuineness of said expenditure after due and proper examination. Following documents have been filed by assessee company in support of the above: (a) Profit Loss Account for AY 2005-06, wherein, said expenditure of ₹ 11, 45, 18, 528/- was claimed as expenditure (see page 55 of PB I). (b) Computation of income for AY 2005-06, wherein, the said expenditure was added back as TDS was deducted but not deposited within due date (see page 50 of PB I). (c) Notice of AO dated 19.02.2007 during assessment proceedings for AY 2005-06, wherein, specific query was raised by AO with regards to claim of said land development expenses (see page 68 69 of PB I). (d) Copy of reply to AO during assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of the above conclusion, we seek to draw support from the case of Kikabhai Premchand vs CIT (SC) reported in 24 ITR 506 wherein it was held as under: It is well recognized that in revenue cases regard must be had to the substance of the transaction rather than to its mere form. In the instant case disregarding technicalities it was impossible to get away from the fact that the business was owned and run by the assessee himself. In such circumstances it was wholly unreal and artificial to separate the business from its owner and treat them as if they were separate entities trading with each other and then by means of a fictional sale introduce a fictional profit which in truth and in fact is non existent. Cut away the fictions and one reach the position that the man is supposed to be selling to himself and thereby making a profit out of himself which on the face of it is not only absurd but against all canons of mercantile and incometax law. He may keep it and not show a profit. He may sell it to another at a loss and cannot be taxed because he cannot be compelled to sell at a profit. But in this purely fictional sale to himself he is compelled to sell at a ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts only a sum of ₹ 5,35,00,000/- shown as payable by the assessee to SCLL instead of ₹ 7,35,00,000/-. He therefore, observed and held that the assessee company had paid ₹ 2,00,00,000/- over and above the amount of ₹ 10,50,00,000/- debited to the profit and loss account of SCLL and since the assessee has not been provided any explanation for the above difference in compensation payable, the same was added to the total income of the assessee company for the year under consideration under the head income from other sources on account of discrepancies in the books of account of the assessee. 9.1 Before the ld. CIT(A), the assessee contended that the aforesaid addition was made without giving any opportunity to the assessee company. It also stated that the basis adopted for making the addition was Annexure in order of assessment and a printout was taken which contained loan transactions from April, 2005 to March, 2006 extracted from the laptop belonging to Shri S.K. Gupta, who was a director of SCLL. It was contended that the aforesaid alleged discrepancy is based on fundamental misconception as sum of ₹ 2,00,00,000/- was paid vide cheque no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the rival submissions and perused the material on record. The learned CIT(A) while deleting the addition has held as under: 6 I have considered the submissions. The facts as started in the submissions show that AO is not right in the stating that no explanation was provided for the said payment of ₹ 2 Crores. This was because the appellant was not called upon to explain the matter. The appellant has clarified the matter based on the records maintained by it to the effect that payment of RTs.1 crore each, aggregating ₹ 2 Crores was made to M/. Sino Credits Leasing Ltd on behalf of M/s. Florentine Estates of India Ltd and M/s. Mad Network Ltd respectively, and, necessary adjustment was made in the books of account by the appellant by raising debit notes. There was therefore no discrepancy in the matter and accordingly the addition of ₹ 2 crores cannot be sustained. The addition of ₹ 2 crores is deleted and Grounds No.10 is allowed. 10.1 The ld CIT DR in his contentions, has not rebutted the aforesaid factual findings recorded in the impugned order of CIT(A) and in absence of such rebuttal, we are unable to persuade ourselves to fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished to the Assessing Officer and, it was submitted as under: We have further also received on 24.12.2008 your notice u/s 142(1) dated 23.12.2008 regarding the statement of Sh. S.K Gupta, Director, Sino Credits Leasing Ltd. We do not know under what circumstances Sh. S.K. Gupta has given the attached statement. We hereby reaffirm and reiterate all of the above documentary evidences regarding this transaction. All the payment made to M/s Sino Credits Leasing Ltd. were made under the judicial award passed by an Additional District Sessions Judge (Retd.) and a settlement agreement reached with M/s Sino Credits Leasing Ltd. It is obvious that Sh. S.K Gupta in an attempt to wriggle out of his liability in pay hefty taxes on account of the damages received by him under the judicial order has concocted a new story out of his imaginations. In view of the documentary evidence, which speaks for itself, the claim of deduction of ₹ 10.50 crores is justified on facts and in law and may be accepted. It is further stated that we have been confronted with this shocking statement of Sh. S.K Gupta only on 24.12.2008. We have been asked to show cause the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of shares and securities and there is no hint therein implying any kind of land development activities being done by SCLL. It was held that though the confirmation letters filed do not bear the signature of authorized signatory of SCLL and therefore, they do not have any evidentiary value. The Assessing Officer therefore, concluded as under: 18. Hence, in the light of the above facts in respect of the payments claimed by the assessee company to have been made to SCLL, it is held that SCLL is a bogus concern existing primarily for the purpose of providing accommodation entries to beneficiaries like PCL and that the payments of ₹ 10,50,00,000/- made by Puri Construction Ltd. to Sino Credits Leasing Ltd. is not a genuine transaction in contradiction to the claims made by the assessee company. Therefore, the total amount of ₹ 12,50,00,000/- is added to the total income of the assessee company for the year under consideration. 11.3 Before the CIT(A), the appellant submitted that addition made is not valid since no opportunity for cross examination was granted to the assessee company. The CIT(A) however deleted the additions by holding as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MOU / AWARD/SETTLEMENT was not even considered and as held by the apex court in the two cases cited, could not be rejected on the face of it unless valid reasons were given for doing so. Instead cognizance was taken of oral statement of Sri S.K.Gupta which was not tested by cross-examination. Under these circumstances, it has been pointed out that there has been a total violation of the principles of natural justice and non adherence of the proper procedure for making the assessment. Likewise, with respect to the statement recor4ded on 19-12-2008, do doubt a copy was given but no cross examination could be carried as Shri S.K.Gupta did not appear. The action of the AO in drawing adverse inference under these circumstances was totally in violation of the principles of natural justice and the rule of law and violation of the proper procedure of making assessment. A long list of case of law has been cited which uniform ally states that the material collected on the back of the assessee and intended to be used against the assessee must be produced before the assessee so that he can controvert it and if any statement is to be used against the assessee, an opportunity to cross examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in Ground No.14 is also a matter which is being pursued by the AO in the course of assessments relating to search and in view of the fact that on the basis of the order passed by the AO it is not possible to continue the disallowance and since the matter is still alive with the same A.O., I consider it proper that the issue be examined afresh. Under the circumstances, the disallowance of ₹ 10.50 crores in the present assessment is deleted. 10. In the result, the appeal of the appellant is party allowed. 11.4 The ld CIT DR submitted that the said addition is made on the basis of statement so recorded of one Sh. S.K. Gupta on 19.12.2008 during the course of assessment proceedings under section 143(3) of the Act, wherein, it was stated by Sh. S.K. Gupta that the transactions entered between assessee company and M/s Sino Credit Leasing Ltd. (SCLL) is not genuine and is nothing but a mere accommodation entry provided by Sh. S.K. Gupta to Puri group of companies. That further, learned CIT DR relied on pages 70 to 77 of assessment order, wherein, it was mentioned by learned AO that during the course of survey on Sh. S.K. Gupta on 20.11.2007, various do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Fibers (P) Ltd. Delhi High Court, 2016, 2017 TIOL 30 HC Del IT 1 Addition made on basis of director s statement recorded during the course of search proceedings is sustainable, where the statements recorded are duly corroborated by evidences on record. 2 Adoption of estimated valuation is justified, when the purchases were made outside the books of account and proper accounting or reconciliation was not made by the assessee 3 Rejection of valuer s report is sustainable, where neither the valuer s report was produced within the stipulated time nor was it unverified 5 M/s Pebble Investment and Finance Ltd. v. ITO Supreme Court 2017, 2017-TOIL-238-SC-IT Dismissed SLP challenging the judgment, whereby, the High Court had held that statement made u/s 133A could be relied upon for purposes of assessment, in absence of any contrary evidence or explanation as to why such statement was not credible. 6. Video Master vs JCIT, supreme court, 2015 66 taxmann.com 361 (SC) Where addition on account of undisclosed income was based on statement of partner of assessee firm, it could not be said that addition was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee relied on the statement of Sh. Om Prakash, retired Additional Sessions Judge, who acted as an arbitrator between assessee company and M/s SCLL, wherein, the learned judge had accepted regarding the award so granted between dispute pending between assessee and M/s SCLL and the said fact has not been rebutted by the learned counsel of Revenue and as such, the addition needs to be deleted on this ground also. 11.11 That further, the learned counsel of assessee relied on following documentary evidences in support of his argument that the payment so made to M/s SCLL is genuine and duly backed by documentary evidences: (i) Copy of reply filed before AO containing copies of six interim orders passed by Sh. Om Prakash, Additional District Sessions Judge (at pages 22 to 37 of PB I). (ii) Copy of account of M/s SCLL in books of assessee company (at pages 203 of PB I). (iii) Copy of MOU entered into with SCLL on 20.06.2004 (at page 204 to 219 of PB I). (iv) Copy of Judicial Award from Arbitrator (at pages 220 to 244 of PB I). (v) Copy of agreement of settlement dated 02.04.2005 (at pages 245 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement. b) Andaman Timber Industries vs CCE (SC) reported in 127 DTR 241. Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cheque of ₹ 1 crore was received from PCL through Sh.S.S.Aneja, Advocate /CA and after deducting his commission @ 3.5% the balance ₹ 96.50 lacs was returned back. He further stated that he is doing the business of accommodation entries. He further stated that he never had any dispute with the assessee. In his statement on 19/12/2008 recorded u/s131 protested by the appellant as recorded at the back of the assessee he stated that he does not know anyone in Puri Construction Ltd. Probably someone from their finance department approached him through some chartered accountant known to him. They delivered him the cheques and he returned them equivalent amount in cash after taking his commission. 2.3 The AR of the assessee argues that the statement recorded u/s 133A dt 19/12/2008 recorded on the back of assessee has no evidentiary value since it was violative of the principles of natural justice. As regards the statement recorded u/s 133A on 5/1/2009 the AR of the assessee states that the statement of Sh.Gupta recorded during the survey operations at his business premises cannot be used against him in view of S.Khader Khan decision (supra) and Dhinga Metals (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities as under: It is submitted that the statements of Shri S.K.Gupta is baseless and without any evidence. I am looking after the taxation work of Taneja Group and Puri Construction Company. No cash has even been routed through me for any type of transaction to Shri S.K.GGupta. 2.9. This contradiction was brought to the notice of Shri Gupta during cross examination at Question No.68. Shri Gupta responded by saying that Mr.Aneja is free to give any statement. The Assessing Officer, however concluded in Para 2.5 that there is every possibility that Shri Aneja may have also given a false statement on oath. The conclusion drawn by the Assessing Officer is based on surmises conjectures and is not supported by any evidence. 2.10. It is relevant to point out that the alleged role of Aneja as a mediator has been denied by Aneja, and that Gupta has admitted that he had not other evidence to show that cash was paid to Aneja or to any Directors of the assessee company or any other person of the Company. In the face of denial by Aneja and in the absence of evidence that cash was actually passed on to Aneja or to any director or any person of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal statement shall be obtained during the search and seizure operations. The Board has also in his letter No.F-287/2/2003(1) dated 10tyh March, 2003 pointed out that the past confessions, if any, not based on any credible evidence, are retraced by the assessee and, therefore, the Board had advised that no attempt should be made to obtain the confession for the undisclosed income. The Assessing Officer should rely upon the evidence gathered during the course of search and thereafter, while framing the assessment order. The instructions issued by the CBDT are binding on the officer of he department. 2.15. Keeping in view the circumstances under which the statement was recorded and also the instructions issued by the CBDT dt.10/3/2004 *supra), the Assessing Officer should rely on the evidence gathered. 2.16. In view of the facts that the case and legal position, I hold that there was no ground to disbelieve that the amount paid amounting to R.10.50 crores to SCIL on account of land development expenses is allowable expenditure. Accordingly, the disallowance of ₹ 10.50 crores deserves to be deleted. 2.17. Further, I have carefully considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt out of the aforesaid sum was ₹ 2,30,11,467/-. The Assessing Officer made enquiries in respect of the aforesaid claim by issuing summons under section 131 of the Act which were returned back with postal remarks N/F Rg.10/11 and Not known Rg. 11/11 . Subsequently, the Assessing Officer issued commission under section 131(1)(d) of the Act to the DDIT (Inv), Unit (III)(3), Kolkata who got enquiries made through his Inspector. The Inspector could not serve the summons as no concern of the said name existed at the address namely 156A, Lenin Sarani, Kolkata. The inspector also reported that there were two companies of the same name with different Permanent Account Numbers. One company was assessed with DCIT, Circle 3, Kolkata and a small income of ₹ 569/- was returned for the assessment year 2007-08. The records also showed that return for assessment year 2006-07 showing income of ₹ 1227 was filed and the assessment was pending. One address was given in the return for refund purposes i.e. 1A, Grant Lane Room No. 14, Kolkata. It was also reported that there is only a small room and notice could not be served at the person sitting at the given address did not know an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-2005 008482 20,00,000/- 03-10-2005 008483 20,00,000/- 03-10-2005 008485 20,00,000/- 25-12-2005 151864 20,00,000/- 26-12-2005 151865 20,00,000/- 27-12-2005 151866 20,00,000/- 28-12-2005 151867 20,00,000/- 29-12-2005 151868 20,00,000/- 30-12-2005 151869 20,00,000/- 02-01-2006 151870 10,00,000/- 04-01-2006 151871 15,00,000/- 23-01-2006 424309 15,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is incidental and necessary to running his business. The appellant has only proved that the money was paid and it was paid to an existing person but the appellant has not been able to prove either that the expenditure was incurred or that it was for the purpose of his business. It is a case where some payments have been made even prior to the receipt of the Invoice. There is also no independent evidence to show that the payee had requisite experience and expertise to carry on this work and that it did actually employ the labour and machinery for doing the work and that that any profit or loss resulted which was shown by it in the books of account. It is therefore, held that the expenditure is not proved to have been incurred wholly and exclusively for the purpose of business and is therefore not allowable as deduction. I, however, agree with the appellant that in this case for part of the expenditure incurred recovery was made from five parties. At best, therefore, the disallowance could have been only proportionate amount of ₹ 3 crores worked out to 12.71/16.57 of ₹ 3 crores i.e. 2,30,11,467. Since there is no adverse inference in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished following documentary evidences in support of the said transaction: (i) Copy of Account of M/s Manami Construction Pvt. Ltd. in books of assessee company (at pages 274 to 275 of PB I). (ii) Copy of invoice dated 26.10.2005 so raised by M/s Manami Construction Pvt. Ltd (at page 276 of PB I). (iii) Certificate of TDS on payment so made to M/s Manami Construction Pvt. Ltd. (at page 277 of PB I). (iv) Copy of Affidavit of Sh. Pramod Sharma (director of M/s Manami Construction Pvt. Ltd.) dated 24.12.2006. (v) Copy of annual accounts of M/s Manami Construction Pvt. Ltd. (at pages 280 to 286 of PB I). 13.7 We have noticed that all the above documentary evidences were arbitrarily brushed aside by both learned AO and CIT (A) and further, the reliance so placed on investigation carried out by learned AO was prior to the date of affidavit of director of M/s Manami Construction Co. Pvt. Ltd., wherein, current address of the said concern was furnished by the assessee company and further, all the details in the shape of nature of work done and payment made was also furnished before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately. 10. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd.(supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. [Emphasis supplied] b) 357 ITR 146 (Del) CIT vs. Fair Finvest Ltd. 6. This Court has considered the submissions of the parties. In this case the discussion by the CIT (Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue is rejected. 14.3 Ground 12 and 13 are general and therefore, are dismissed. 15. Now the only issue remaining is the legal issue raised by the assessee under Rule 27 of ITAT Rules whereby the assessee had submitted that that additions made in the order of assessment dated 31.12.2010 under section 143(3) of the Act since are not based on any incriminating material found as a result of search on the assessee company, the same are in excess of jurisdiction and therefore, not in accordance with law. 15.1 The learned counsel of assessee submitted that during the course of search on 05.01.2009, no incriminating material was seized from the assessee s premises. The books of accounts seized were already part of record, which were made basis of additions in original order of assessment under section 143(3) of the Act; and thus, the same could not be said to be incriminating in nature. It was submitted that reliance placed by AO on the statement of Sh. Mohinder Puri and construing it to be incriminating in nature is also unjustified and uncalled, as the statement cannot be construed to be incriminating in nature and more specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant under Rule 27, argued and submitted that during the course of search on 05.01.2009, no incriminating material was seized from the assessee s premises, and further, the learned CIT DR had relied on books of account seized from the assessee s premises and further, the statement of Sh. Mohinder Puri during the course of search on 05.01.2009. 16. We have considered the rival submissions and perused material on record. We have noticed that learned AO in section 153A proceedings has merely repeated the additions so made in original assessment proceedings under section 143(3) of the Act and there was no new addition made by learned AO during section 153A proceedings. Thus, on the date of search i.e. on 05.01.2009, the assessee company s assessment was finalized on 31.12.2008 and as such, the proceedings were not pending on the date of search and thus, additions could only have been made in proceedings under section 153A of the Act only when any incriminating material was found during the search. Our above view derives strength from the following judgments: a) Hon ble High Court of Delhi in the case of CIT vs Kabul Chawla reported in 380 ITR 573: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. b) Pr. Principal CIT vs. Meeta Gutgutia reported in 395 ITR 526 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Principal Commissioner of Income Tax v. Saumya Construction Pvt. Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of ₹ 14.5 crores against declared income of ₹ 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, subsection (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 62. Subsequently, in Principal Commissioner of Income Tax- 1 v. Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. (supra) followed the decision of this Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, as the statement cannot be construed to be incriminating in nature and more specifically when the said statement has been retracted subsequently and has not been acted upon and as such, the additions so made in an order under section 153A/143(3) of the Act for impugned assessment year are in excess of scope of assessment. In support of the said proposition reliance is placed on following judgments: (i) PCIT vs Best Infrastructure (P) Ltd. (Delhi High Court) reported in 397 ITR 82. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta(supra) where the admission by the Assesses themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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