TMI Blog2018 (4) TMI 1725X X X X Extracts X X X X X X X X Extracts X X X X ..... e were found. On that basis, proceedings were initiated under section 153C against the assessee. Further, in the case of M/s. Puri Constructions Ltd., (supra), the entire additions have been deleted by the Tribunal and no evidence was found admissible against the assessee. Therefore, nothing survive against the assessee so as to proceed under section 153C - no admissible evidence have been brought on record against the assessee so as to make any addition. The additions were made merely on presumptions without bringing any concrete material against the assessee on record. All the evidences found during the course of search and found in post-search enquiry have been considered in the case of M/s. Puri Constructions Ltd., (supra) and entire additions have been deleted by the Tribunal. Therefore, on the basis of the same evidence and material, no additions could be made against the assessee. the Ld. CIT(A) on proper appreciation of evidence and material record, correctly deleted the additions. - Decided in favour of assessee. - ITA. No. 753/Del/2015 - - - Dated:- 20-4-2018 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts 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 Leasing Ltd. 7. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in ignoring the fact that even during the course of cross examination on oath of Sh. S.K. Gupta with Sh. Mohinder Puri held on 17.04.2014 and 21.04.2014, Sh. Gupta admitted to be an entry operator who had provided entries to M/s MAD Entertainment Network Ltd. and earned commission income thereon. 8. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in ignoring the fact that the affidavit submitted by Sh. SK Gupta on 27.02.2009 wherein he has claimed to have genuine business transaction with M/s Sino Credits Leasing Ltd. and M/s Mad Puri Construction Pvt. Ltd. is false in view of his statement recorded on oath during the cross examination before Sh. Mohinder Puri on 17.04.2014 and 21.04.2014. 9. On the facts and in the circumstance of the case and in law, the CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was providing accommodation entries in various forms. The list of the companies controlled by Shri S.K. Gupta are mentioned in the assessment order including M/s. Sino Credits and Leasing Limited ( SCLL ). The details of entry provided to various companies and MOU and Arbitration Award and Settlement between PCL and SCLL are mentioned in assessment order. The A.O. referred to the statement of Shri S.K. Gupta and Shri Mohinder Singh Puri, M.D. of PCL recorded during the course of search in the assessment order. The enquires conducted from Shri Omprakash, Sole Arbitrator in the case of dispute between PCL group and SCLL is also referred to. The A.O. after discussion noted that various companies of Puri Group were having transactions with the companies controlled by Shri S.K. Gupta mainly SCLL. Shri S.K. Gupta has admitted in his statement that transactions between group are not genuine transaction and are mere accommodation entries. The developer SCLL did not suffer any actual loss. The A.O. further noticed that assessee has declared an amount of ₹ 2.75 crores paid to M/s. SCLL and further amount of ₹ 3,44,60,000/- has been reflected as payable to this company. The am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- on account of payments made to Sino Credits Leasing Ltd. (SCLL). During the year under consideration the appellant has shown payment of this amount to SCLL on account of land development. The assessee is the owner of land approx. 2.21 acres in Gurgaon. The SCLL is the developer. As per the MOU between the owner and the developer the SCLL was to develop land in Sector 53, Gurgaon belonging to the assessee company. Survey u/s 133A was carried out on 5/1/2009 at the business premises of SCLL. Sh. Gupta admitted that the MOU signed by him is only to give legal colour to the entire transaction. He further explains that a cheque of ₹ 1 crore was received from PCL through Sh. A.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 has any dispute with the assessee. In his statement on 19/12/2008 recorded u/s 131 stated to be the recorded at the back of the assessee he states that he does not know anyone in Puri Construction Ltd. Probably someone from their finance department approached him through some chartered acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has categorically stated in his statement before the Assessing Officer as under : The Assessing Officer refers to the role of Shri Aneja in facilitating the transaction between the assessee and Shri Gupta. He also refers to the commission of 3.5% received by Shri Gupta and the remaining paid in cash to the assessee. Firstly, it may be emphasized that statement of Shri Aneja was recorded on 5.1.2009 on oath by the Income Tax Department and his attention was drawn to the statement of Shri Gupta wherein he has stated that the entries given to the assessee are through Shri A.S. Aneja. He has categorically stated in his statement before the Income Tax 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. Gupta. 2.7 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, proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind Singh he suffered mental agony and stress on his heart and feared fatal consequences. He further states that he is compelled to end all litigations and offers to agree to additional income. He has further stated that at this stage he is not in a position to examine Sh. SK Gupta. 2.12 In this regard the Kelkar Committee Report, reported in 258 ITR (Statute) 50, wherein the Committee had made critical references to the procedures adopted by the Officers during the course of search operations. The Finance Minister has observed in his Budget Speech for the Financial Year 2003- 04 that in view of the recommendations of the Kelkar Committee that no confessional statement shall be obtained during the search and seizure operations. The Board has also in its letter No. F-287/2/2003(I) dated 10th March, 2003 pointed out that the past confessions, if any, not based on any credible evidence, are retracted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings before the ITAT in the case of Puri Construction Pvt. Ltd., if any apportionment is directed then the corresponding effect shall be given in the case of the appellant as per the order of the ITAT in the case of PCL. 4.3. In view of this the disallowance of ₹ 1,46,14,435/- is deleted. Ground raised in appeal is allowed. 5. Learned Counsel for the Assessee at the outset submitted that identical issue have been considered by the ITAT in the case of Puri Construction Ltd., in ITA.No.995/Del./2011, ITA.No.754/ Del./2015 and ITA.No.1327/Del./2011 for A.Y. 2006-2007 and vide order dated 27th December, 2017, the additions similarly deleted by the Ld. CIT(A), have been confirmed by the Tribunal and further additions sustained by the Ld. CIT(A), have also been deleted. Copy of the order is placed on record. Learned Counsel for the Assessee submitted that all the grounds raised in the departmental appeal are similarly worded in departmental appeal in the case of M/s. Puri Constructions Ltd., (supra) and findings of Ld. CIT(A) in the case of M/s. Puri Constructions Ltd., are exactly same. He has, therefore, submitted that the facts are same and issue is cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2760 K [Appellant] [Respondent] Date of Hearing : 29.11.2017 Date of Pronouncement : 27.12.2017 Assessee by : Shri Salil Aggarwal, Adv Shri Shaliesh Gupta, Adv Shri Madhur Aggarwal, Adv Revenue by : Smt. Aparna Karan- CIT [DR] ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, The above captioned appeals - one by assessee and two by revenue - relate to Assessment year 2006-07. ITA No. 1327/Del/2011 and ITA No. 995/Del/2011 are cross appeals arising from an order of assessment dated 31.12.2008 u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. ITA No. 754/Del/2015 preferred by revenue arises from an order of assessment dated 31.12.2010 u/s 153A/143(3) of the Act. Since the issues involved in all the appeals are common and pertain to same assessee, therefore we have heard all the appeals togeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). 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 wholly and exclusively for the purposes of business and was, therefore, not allowable as deduction. Based on this finding the disallowance of ₹ 2,30,11,467/- being the proportionate amount of expenditure out of ₹ 3 Crores relating to the assessee and claimed by it in its accounts, is erroneous on facts and in law. 1.1. That both the AO and the CIT(A) erred in rejecting the affidavit filed on behalf of M/s Manami Construction Co.Pvt.Ltd confirming the work done and the payment having been received. Also ignoring the further evidence filed by appellant towards providing the transaction as business transaction. 4. Further, there was a search conducted on 05.01.2009 under section 132(1) of the Act on the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 Leasing Ltd. 7. On the facts and in the circumstance of the case and in law, the CIT(A) has erred in ignoring the fact that even during the course of course of cross examination on oath of Sh.S.K.Gupta with Sh. Mohinder Puri held on 17.04.204, Sh. Gupta admitted to be an entry operator who has provided entries to M/s.MAD Entertainment Network Ltd and earned commission income thereon. 8. On the facts and in the circumstances of the case and in law, the CIRT(A) has erred in ignoring the fact that the affidavit submitted by Sh.SK Gupta on 27.02.2009 wherein he has claimed to have genuine business transaction with M/s Sino Credits Leasing Ltd and M/s.Mad Puri Construction Pvt.Ltd is false in view of his statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 namely M/s MAD Entertainment Network Ltd., M/s. Florentine Estates of India Ltd. and M/s. Sunil/Gurlien Manchanda. This sale was under an agreement dated 4.4.2005 and aggregate consideration accruing as a result of the said sale was of ₹ 149.98 crores. Against the consideration accrued to the assessee on the sale of land and, the appellant claimed an expenditure of ₹ 11,45,18,828/- under proviso to section 40(a)(ia) of the Act. The premise of the claim is that TDS was deposited on 25.1.2005 i.e. during the instant assessment year 2006-07; and therefore, in the computation of total income for the instant assessment year, sum of ₹ 11,45,18,528/-was claimed as deduction under the narration expenditure disallowed under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 furnish the current addresses of the various payees, to whom the notices issued by the A.O. were not served. (iv) In order to show the genuineness of the transaction 12 affidavits of the payees were filed which showed that these parties existed, that they were identifiable and had worked for the Appellant and the payments were made to them; (v) As the opportunity provided was inadequate, further time was asked to be given to gather more evidence and furnish the same. 7.3 The Assessing Officer however held that the expenditure claimed is not genuine and fictitious and contractors to whom payments have been made are mere name lenders. He therefore, made the disallowance of ₹ 11,45,18,528/- under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 make further submissions as under: 2. Return for the A.Y.2005-06 was filed on 31-10-2005. Copy of the acknowledgement of return is at page 1. The computation of total income is at page 2. Copy of Annual Accounts is at Pages 3 to 17. 2.1 The profit and loss account, inter-alia, showed an expenditure of ₹ 11,51,81,489/- under the head Land Development Expenditure (page 7), In the computation of total income a sum of ₹ 11,45,18,428/- was added back, describing it as Expenses not allowable u/s 40(a) (ia) of I.T. Act, 1961 (Page 2). 3. On 19-2-2007 the AO issued a notice u/s 143(2) and a notice u/s 142(I) alongwith a questionnaire which are at pages 18 to 23. In Query No.24(G) (Page 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) The expenses were incurred in the F.Y.2004-04, as per mercantile method of accounting employed (kindly see page 13). (iii) Tax was deducted from the payment credited in the books during F.Y.200-05 but was not paid within the prescribed period. (iv) Tax deducted in F.Y.2004-05 was paid in F.Y.2005-06 on 25/10/2005. (v) Along with the details of expenditure were also furnished copies of bills/invoices along with confirmation from suppliers in respect of expenses incurred on development of land. (vi) AO considered the above facts/details/explanations and completed the assessment for the Asstt.Year 2005-06 u/s 143(3) on 26/3/07 after accepting the same. 7.5 The learned CIT(A) having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs (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 disallowance is that, since the said expenditures pertained to preceding assessment year, wherein, claim was made in Profit Loss Account of AY 2005-06, the said expenditure was only disallowed in Return of Income of AY 2005-06, as TDS was not deposited on the same and since in the instant assessment year 2006- 07, TDS has been duly deposited, as such, learned AO was only supposed to apply the provisions of section 40(a)(ia) mechanically and the expenditures so claimed could not have been examined under the provisions of section 37 of the Act, is contrary to the provisions of the Income Tax Act, as the assessee has claimed the said expenditure in the Return of Income of impugned assessment year and as such, the said claim was correctly examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... svnath 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 section 40(a)(ia) of the Income Tax Act. The reason for adding back the same in computation of income for AY 2005-06 was that even though the said expenditure was incurred and claimed in AY 2005-06 and tax was also deducted at source and though it was claimed as expenditure in P L Account, since the TDS was not deposited with the statutory period, the expenditure so claimed was voluntarily added back in the computation of income as not allowable under section 40(a)(ia) of the Act. The tax was duly deposited on 25.10.2005 (see page 170 of PB I) i.e. during AY 2006-07, therefore, in the computation of total income for AY 2006-07, the same was claimed as deduction by showing it as expenditure disallowed under section 40(a)(ia) in AY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Total TDS of ₹ 31,17,853/- on 25-10-2005 was furnished by filing copy of the Challan. iv. In the computation of total income for the assessment year 2005-06 the sum paid of ₹ 11,45,18,428 was added back as expenses not allowed u/s 40 (a) (ia) of the Act,1961. v. Since tax was paid on 25-10-2005 the amount of ₹ 11,45,18,428/- was claimed as deduction in the Astt.Year 2006-07 in view of the proviso to Section 40(a) (ia). vi. Necessary details in respect of land development expenses were called for by the AO in the course of assessment for the A.Y.2005-06, vide questionnaire dt 19-12-07 and furnished along with bills/ invoices confirmation from suppliers and were considered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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, which the A.O. could examine in the asstt.Year 2006-07, was whether the expenditure incurred in the preceding year could be allowed in view of the proviso to sec 40(a) (ia). I agree with the appellant that the proviso to section 40(a) (ia) is a mandatory provision and if the conditions set out therein are fulfilled it is obligatory to allow the deduction. In the present case the facts which are borne out from record are that the expenditure was shown and accepted as one in respect of which tax was deductible u/s 194C. Tax was actually so deducted in the assessment year 2005-06 when the expenditure was incurred. The tax deducted u/s 194C has been shown to be deposited on 25-10-2005. Thus all the conditions set out in the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (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 proceedings 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. 8.3 The genuineness of the expenditure on land development expenses incurred in assessment year 2005-06 under section 37(1) of the Act can only be examined in assessment year 2005-06 and not in the instant assessment year. Infact, such an examination as is evident from the order of CIT(A) and facts stated by us wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fictional profit when the market rises in order that he may be compelled to pay to Government a tax which is anything but fictional. The appellant's method of book-keeping reflected the true position. As he made his purchases he entered his stock at the cost price on one side of the accounts. At the close of the year he entered the value of any unsold stock at cost on the other side of the accounts thus cancelling out the entries relating to the same unsold stock earlier in the accounts; and then that was carried forward as the opening balance in the next year's accounts. This cancelling out of the unsold stock from both sides of the accounts left only the transactions on which there had been actual sales and gave the true and actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity 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. 245122 dated 25.2.2006 and cheque no. 245128 dated 1.3.2006 of ₹ 1,00,00,000/- drawn on Citi Bank, New Delhi. It was stated that these payments were made on behalf of M/s. Florentine Estates of India Ltd. and M/s. Mad Entertainment Network Ltd. respectively and were duly reflected in the books of accounts and the accounts of the respective companies were duly debited. The ledger accounts and all evidences to support the aforesaid claim were furnished. The CIT(A) on examination of the aforesaid, deleted the addition. 9.2 Learned CIT DR argued that said addition was correctly made by learned AO, as the assessee company was not able to substantiate the discrepancies in its books of accounts of a sum of ₹ 2,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count 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 form an opinion to the contrary. 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 under section 153A/143(3) of the Act in pursuance to search conducted on 5.11.2009 under section 132(1) of the Act. The said addition stood deleted in an order dated 17.11.2014 passed by CIT(A) though the revenue has prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes 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 this transaction 26.12.2008, whereas 25.12.2008 is a Christmas holiday. We are, therefore, left with no option at this juncture but to reiterate and reaffirm the documentary evidence on record. We would also like to be given an opportunity to exercise our right to allow our advocate to cross examine Mr. S.K Gupta on the incredible stamen given by him. It is shocking that any reliance can be placed on his statement when he himself has been a signatory to all the agreements, a party before the Ld. Arbitrator and a recipient of all the cheques. It is prayed that no disallowance is called for. 11.1 The appellant along with the above reply, furnished evidences in the shape of MOU dt. 20.06.2004 entered into between the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine 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: I have carefully considered the submissions made on behalf of the Appellant. The AO has made the addition on the following evidence/documentsa) Statement of Shri S.K.Gupta said to have been recorded by the DDIT in the course of survey on 20-11-2007; b) A printout stated to have been taken out from the laptop impounded from Shri S,K.Gupta in the course of survey on 20- 11-2007; and c) Statement of Shri S.K.Gupta recorded by the AO on 19- 12-2008. With regard to the statement of Shri S.K.Gupta, said to have been recorded on 20-11-2007, the AO has remarked that there is an admission by Shri Gupta of issuing accommodation entries. In respect of the printout sated to have been tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the deponent ought to be allowed. In view of the fact that the main objection/ground taken by the appellant was that cross examination of Shri S.K.Gupta, Director SCLL, should be allowed, my predecessor required the A.O. to allow opportunity to the appellant to cross examine Shri Gupta. The AO in his report dt.7-6-2010 has stated that summons were issued u/s 131 to Shri Gupta for personal attendance on 20-5-2010 but Shri Gupta did not appear Summons were again issued for 28-5-2010 also but Shri Gupta did not appear. Summons were again issued for 28-5-2010 also but Shri Gupta did not attend even on this date. Yet another summons were issued for 4-6-2010 which also resulted in nonappearance of Shri Gupta. The AO reported that, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 documents were impounded substantiating the fact that the said amount of ₹ 10.50 crores is nothing but mere accommodation entries. Further, learned CIT DR argued that the said statement was provided to the assessee company for rebuttal, and further, Sh. S.K. Gupta was also summoned for cross examination, however, Sh. S.K. Gupta failed to turn up for cross examination and as such, the addition so deleted by learned CIT (A) is not just and proper. 11.5 That further, learned CIT DR argued that the said addition was again made by learned AO in 153A proceedings, as there was incriminating material in the shape of statement of Sh. Mohinder Puri (discussed at pages 10 to 13 of the assessment order under section 153A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 based on no evidence. 11.7 The learned counsel of assessee submitted that the said sum was paid by assessee to M/s Sino Credit Leasing Ltd and the said payment was made by assessee company on the directions and judicial award granted by Additional District Sessions Judge and on settlement agreement reached with M/s Sino Credit Leasing Ltd. That however, learned AO in the order of assessment has relied on the statement of Sh. S.K. Gupta recorded on 24.12.2008 and also on survey being conducted on Sh. S.K. Gupta on 20.11.2007. 11.8 It was further, submitted by the learned counsel of assessee that statement of Sh. S.K. Gupta, being director of M/s Sino Credit Leasing Ltd. cannot be relied and needs to be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 to 245 of PB I). 12. We have considered the rival submissions and perused the material on record. 12.1 The fact of the case are that the assessee company remitted sum of ₹ 10.50 crores to M/s Sino Credit Leasing Ltd. in terms of judicial award by Additional District Sessions Judge and settlement agreement reached with M/s Sino Credit Leasing Ltd. The learned AO in the order of assessment has relied on the statement of Sh. S.K. Gupta recorded on 24.12.2008 and also on survey being conducted on Sh. S.K. Gupta on 20.11.2007. We have gone through the following documentary evidences with regard to payment made by assessee company to M/s SCLL: (i) Copy of reply filed before AO containing copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough 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 wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. 12.3 That further, it is seen from the record that even the statement of Sh. S.K. Gupta so relied on by the Revenue, cannot be relied on, as Sh. Gupta had retracted the said statement by filing an affidavit dated 27.02.2009 (at pages 36 to 39 of PB II) and further, in proceedings under section 153A of the Act, when learned CIT (A) reman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 (supra). I am in agreement on the issue that the statement recorded on 5/1/2009 has no evidentiary value. 2.4 Coming to the statement recorded on 19/12/2008 the Assessing Officer was directed to provide opportunity to the appellant to cross-examine Sh.Gupta. For this purpose the matter wa s remanded back to him. Detailed crossexamination was carried out on 17/4/2014 21/4/2014 respectively by Sh.Mohinder Puri, Managing Director of the assessee company. 2.5. In his statement on 19/12/2008 (Q.No.3) Sh.Gupta stated that he did not know anyone in Puri Construction Ltd and probably someone from their finance department approached him through some Chartered Accountant known to him when cheque were delivered and equivale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 company, there is no evidence to substantiate the finding of the Assessing Officer. 2.11 The alleged ledger account in the laptop has not been corroborated by any independent evidence. The fact remains that there is no evidence except the statement of Sh.Gupta to corroborate the so called transaction between the appellant and Sh.Gupta. 2.12 Further, on the issue regarding Arbitration award, I have perused the statement recorded on oath of Sh. Om Prakash, ADJ (Retd) Sole Arbitrator, he has confirmed the MOU, the arbitration award. His statement is being disbelieved by the Assessing Officer on the suspicious account that no record of the proceedings has been kept and he is not sure to which party these record have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/3/2004 *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 the submission made on behalf of the appellant. On the basis of documents filed in the course of assessment, Shr.SK Gupta was exhaustively cross examined by the appellant. The final conclusion which emerges from the cross-examination is that S.K.Gupta himself had deviated from his own statements made earlier by filing an affidavit dated 27/02./2009 and a confirmation certificate of the transactions with the appellant dated 21/03/2009, In fact, SK Gupta had stated that the transaction with the appellant company was duly disclosed by SCLL in their books of account and that return of income was filed on the basis of such books of account and that return of income was filed on the basis of such books of account 2.18. In the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 anything about this concern. The Assessing Officer also noted that in form No. 3CD attached along with the return of income for the assessment year 2006-07 the assessee had shown dealings in trading and investments and there was no concrete evidence of any kind of construction related work having been done by MCCPL either for assessee company or any other party. The Assessing Officer has also noted that perusal of copy of the invoice showed that there was no registration number. The Assessing Officer also remarked that at the bottom of invoice, it was stated that all disputes, if any, shall be subject to Delhi Jurisdiction although MCCPL was a Kolkata based company. 13.2 Having regard to the above, the Assessing Officer conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/- 24-01-2006 424312 8,00,000/- 24-01-2006 245040 All the above cheques were drawn on Citibank, New Delhi. 3. That I further verify that my address at the time of billing was 156-A, Lenin Sarni, Kolkata-13, which was shifted to 44-B, 1st Floor, Kali Krishna Tagore Street, Kolkata 72 later on and further reaffirm that I had received the above amount of ₹ 5,05,00,000/- towards carrying out the work at Village Wazirabad, Sector 53, Gurgaon site of M/s.Puri Construction Ltd. 4. Our PAN NO is AADCM3686J A perusal of the affidavit shows that the work was allotted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 remaining expenditure no proportionate disallowance would be justified in respect thereof. The disallowance therefore, is restricted to ₹ 2,30,11,467/- as against to ₹ 2,58,73,858/- made by the AO. The appellant will, therefore, get a relief of ₹ 28,62,391/-. 13.3 Before us, the learned counsel of the assessee company submitted that the said payment was made to M/s Manami Construction Pvt. Ltd. for removal and filling of rocky soil to make level one at Village Wazirabad, Sector 53, Gurgaon site of assessee company and the assessee company had furnished following documentary evidences in support of the said transaction: (i) Copy of Account of M/s Manami Construction Pvt. Ltd. in books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 learned AO, which all remained unrebutted and uncontested by lower authorities and as such, relying on the following judgments on the proposition of lack of enquiry the said disallowance so made is deleted: a) 361 ITR 10 (Del) CIT v. Gangeshwari Metal (P) Ltd. 9. As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'its back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, 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 application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the assessing officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized 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 when the said statement has been retracted subsequently and has not been acted upon and as such, it was submitted by the learned counsel of assessee company that no incriminating material was found as a result of search from assessee s premises and as such, the additions so made under section 153A of the Act for impugned assessment year are uncalled for and unjustified. In support of the said proposition reliance was placed on following judgments: (i) PCIT vs Best Infrastructure (P) Ltd. (Delhi High Court) reported in 397 ITR 82. (ii) CIT vs. Kabul Chawla 380 ITR 573 (Del) iv) Pr. CIT v. Meeta Gutgutia 395 ITR 526 (Del) v) CIT v. Harjeev Aggarwal 290 CTR 263 (Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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: b) On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: 15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 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 in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in CIT-2 v. Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. Gurinder Singh Bawa (supra), the Bombay High Court held that: 6...once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. (ii) 290 CTR 263 CIT v. Harjeev Aggarwal 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sd/- [SUDHANSHU SRIVASTAVA] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27th December, 2017 VL/ 7. We may note that all the grounds raised in the departmental appeal in the instant appeal are similar as have been considered in the case of M/s. Puri Constructions Ltd., (supra). The findings of the Ld. CIT(A) are similarly worded. It is agreed position that facts are identical in the case of Assessee as well as M/s. Puri Constructions Ltd., (supra). Therefore, all the issues are covered in favour of the assessee by the Judgment of Tribunal in the case of M/s. Puri Constructions Ltd., (supra). It may also be noted here that search was conducted in the case of M/s. Taneja-Puri Group of cases in which some alleged documents pertaining to assessee were found. On that basis, proceedings were initiated under section 153C of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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