TMI Blog2018 (4) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that, in principle, the said agreement to sale seized by the Department during the course of search seizure action is an accounted transaction and therefore it is not an incriminating document for the AO to rely on for making additions of any kind in the search assessment, like the present one. In our view, it is settled legal proposition of law that the additions if any have to be allowed to be made in the non-abated assessment only based on incriminating material. Addition on account of income from let out properties - HELD THAT:- It is settled legal proposition that so long as Municipal values are available the same becomes bindings and therefore, the decision of the AO in calculating the rental value based on any other method is unsustainable in law. Therefore, the above conclusion drawn by the CIT(A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed. Addition on account of adhoc declaration made during search proceedings carried out u/s.132 - HELD THAT:- We find the AO has merely relied on the statement given by the assessee and he did not go into the issues that requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,40,419 CIT(A) not justified in deleting addition on account of profits earned from sale of land at GEORAI without appreciating that the said transaction was an adventure in nature of trade 5,43,85,990 Assessee s Grounds A.Y.2010-11 ITA No.699 No addition for Adhoc declaration made during statement recorded during search proceeding, which was subsequently retracted and no any corresponding material found during search 2. We shall take up the assessment year-wise issues in the following paragraphs. First, we shall take up the Cross Objection with a legal issue raised by the assessee and then the appeal by the Revenue for the A.Y. 2008-09. C.O.No.10/PUN/2018 A.Y. 2008-09 (By Assessee) 3. Condonation of delay of 312 days : Before us, at the outset, Ld. Counsel for the assessee brought our attention to the CO and submitted that the same is filed with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2010. 3. Assessee craves leave to add/modify/alter/delete all/any of the grounds of the grounds of cross objection. 6. Brief facts of the case for the year includes that the assessee is an individual and is engaged in execution of Irrigation Contracts and generation of energy from windmills. Assessee filed the return of income declaring total income of ₹ 25,86,730/- including agricultural income. There was search and seizure action u/s.132 of the Act related to Shraddha group of cases on 08-09-2010. Assessee disclosed ₹ 10.99 crores on account of on-money payments in purchase of lands and suppression of closing stock etc. Assessee filed the return of income in response to notice u/s.153A of the Act. AO determined the assessed income at ₹ 5,49,21,631/- which includes deemed income of ₹ 5,35,041/- on account of let out of properties. 7. During the First Appellate proceedings for the A.Y. 2008-09, CIT(A) discussed both the issues of capital gains on sale of Gevrai land as well as income on rental properties. CIT(A) held that the addition on account of Gevrai land is not sustainable and directed the AO to accept the claim made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 114 to 116 of paper book along with English Translation. He fairly mentioned that the said documents is seized from the premises of the assessee and submitted that the said paper is not incriminating one from any point of view, i.e., ownership, value, schedule of payments. Further, bringing our attention to the entries in the balance sheet of earlier years, Ld. Counsel demonstrated that this particular land is accounted for in the books of account/financial statements of the assessee. Pages 113A to 113F of the paper book are relevant. Assessee also demonstrated the fact that the lands were acquired by the assessee and they belong to him before they were sold for earning the gains. The fact that these lands were accounted in the books of account and the same constitutes accounted transactions and the said agreement to sale does not come in the definition of incriminating material/documents. From this point of view, the said agreement to sale (the said seized document) did not constitute an incriminating material for the AO to assume jurisdiction and make addition in a completed assessment, like the present one. 10. Ld. DR for the Revenue relied heavily on the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No.680/PUN/2015 A.Y. 2008-09 (By Revenue) 13. Revenue raised the following grounds : 1. On the facts and circumstances of the case, the Ld. CIT(A) was not justified in deleting the addition made by the Assessing Officer on account of business profits on sale of land in A.Y. 2008-09 by holding the same as long term capital gain to be taxed in A.Y. 2011-12 without appreciating the fact that the sale transaction was actually an adventure in the nature of trade as against the capital gain declared by the applicant in the later year. 2. On the facts and circumstances of the case, the Ld. CIT(A) was not justified in deleting the addition made by the A.O. on account of income from let out properties without appreciating that municipal value does not represent the fair rent which a property can fetch if let out. It is computed very mechanically by the corporation and is not revised periodically. 3. The order of Ld. CIT(A) may be vacated and that of the Assessing Officer be restored. 4. The appellant crave leave to add, alter, amend, and modify any of the above grounds of appeal. From the above, it is evident that the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AO stated that according to the law, as amended by the Finance Act, 2002, the Appellant s case falls under section 23(1)(a) according to which, ALV should be the sum for which, the property might reasonable be expected to let from year to year. 2.5.4 Although I agree with the learned AO, however, I find that in Pune Municipal Area, property is levied u/s.127(1)A of the Maharashtra Municipal Corporation Act. The amount of the property tax payable is based on the Municipal Valuation Municipal valuation determines the Annual Rebatable Value (ARV) of the property on the basis of the locality of the property, its sq.ft. area, its nature of use (residential or commercial etc.) and type of construction (RCC, temporary etc.). Rateable Value broadly represents the annual rent that the property could have been let for on the open market. Therefore, when Municipal valuation represents the annual rental value of the property, I do not find any justification to resort to other method of determining ALV, such as % of return on the investment made in the property. According to me, the learned AO s reliance on the case of Radhika devi Dalmia misplaced. 2.5.5. However, the mun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding evidence found during the course of search. 2. The Hon ble CIT(A)-12, Pune erred in law and on facts in treating appellant s retraction of statement as unreliable and not genuine, merely on the ground that retraction was made on 19-09-2011, i.e. around one (1) year after the date of admission and hence an afterthought. 3. The appellant craves leave to add/modify/delete/amend all/any of the grounds of appeal. 24. Briefly stated relevant facts are that during the assessment AO noticed that assessee has constructed huge bungalows at Hadashi and incurred an expenditure on account of land development. When the same was confronted, assessee offered a sum of ₹ 54 lakhs towards the omissions or commissions. On finding that there is no omission or commission at the time of filing of return of income assessee did not offer the same and retracted to that extent on this issue. However, relying on the statement given by the assessee on 06-10-2010, the AO proceeded to make addition of ₹ 54 lakhs on this account and reasoned that the said retraction has been done after a year and therefore, it is an afterthought and does not have any evidentiary val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lal Shiv Chand Rai v CIT (1973) 88 I7R 293 (P H) that in case of retraction, burden of proof is on the assessee. I do not find any such evidence with the Appellant discharging its onus. Hence, I agree with the learned AO that the Appellant's retraction is unreliable and not genuine. Accordingly, I confirm the addition of ₹ 54,00,000/-. 25. Before us, Ld. Counsel for the assessee submitted that this disclosure of ₹ 54 lakhs offered by the assessee for the year under consideration is without any basis or any incriminating material. Therefore, the retraction made by the assessee on 12-09-2011 is sustainable. It is not the case of the Revenue that there is common issue which attracts disclosure of said additional income. Ld. Counsel for the assessee relied on various High Court judgments/decisions in support of the assessee s submissions and filed a chart showing the summary of cases where retraction has been accepted. 26. Ld. DR for the Revenue relied on various decisions to suggest that the AO merely made addition stating but for the disclosure of ₹ 54 lakhs the investigation wing abruptly stopped the proceedings on the bonafide belief. With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the claim made by the assessee that such income of ₹ 1 crore may be excluded from the total income assessed by the assessee as no discrepancies were found during the assessment proceedings, cannot be accepted as the said additional income was offered voluntarily in the return of income. If accepted, the assessed income shall be lower than the returned income. The alternative claim of the assessee for set off of such contingencies against other disallowances u/s.14A of the Act made by the AO was also rejected despite the existence of the favourable decision of the Tribunal in the group cases of the assessee (M/s. Adurjee Brothers Pvt. Ltd.). Aggrieved with the order of CIT(A) the assessee is in appeal before us. 30. Before us, Ld. Counsel for the assessee submitted that similar issue with some variance came up for adjudication before the Tribunal in a case belonging to the same group named M/s. Adurjee Brothers Pvt. Ltd. (supra). In this case, the demand of the assessee was for set off of the other disallowances made u/s.14A of the Act against such contingency disclosure. The Tribunal allowed the argument of the assessee on this issue of set off. Contents o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on various binding judgments of Apex Courts and others. We shall now proceed to analyse each of them here as under. 33. To start with, we will take up the Apex Court s judgment in the case of Commissioner of Income-tax v. Shelly Products [2003] 261 ITR 367 (SC), the Apex Court held in favour of refunding of the excess taxes paid (of advance tax as well as self-assessment tax) out of abundant caution or owing to error or non taxability. Held portion of this judgment is extracted as under : However, failure or inability of the Revenue to frame a fresh assessment should not place the assessee in a more disadvantageous position than he would have been in if a fresh assessment were made. In a case where the assessee chooses to deposit, by way of abundant caution, advance tax or tax on self assessment which is in excess of his liability on the basis of the return furnished or, if there is an arithmetical error or inaccuracy, it is open to the assessee to claim refund of the excess tax paid in the course of the assessment proceedings. He can certainly make such a claim before the concerned authority calculating the refund. Similarly, if the assessee has, by mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. Revenue took the issue to the Hon ble High Court on the issue, if the Tribunal s direction to the AO to allow complete effect to the order of the CIT(A) without restricting the income to the returned income. In this case, after giving effect to the order of the CIT(A), the income assessed has fallen below the returned income of the assessee. The Hon ble High Court upheld the order of the Tribunal. Relevant lines from this judgment also are extracted as under : 7. In view of the above, we do not find any reason to interfere with the Tribunal s ultimate conclusion in allowing the assessee s appeal. Though some of the observations may not appeal to us, nevertheless, for the reasons somewhat different from those recorded by the Tribunal we come to the same conclusion. Decision of the Apex Court in case of Shelly Products Others (supra), was rendered in very different background. It was a case where the assessee had filed return. Assessee had paid self assessment tax on the income disclosed in the return. Tribunal on appeal by the assessee held that the order of the assessment passed by the Assessing Officer was ab-initio void since he had no jurisdiction to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same and when the subsequent working submitted by him reveals that the undisclosed income actually assessable in the hands of the assessee is lower than the returned income, the same has to be assessed at such lower income based on the concept of Real Income. Only condition specified in the said decision relates to the verification and correctness of the statements so submitted giving the detailed working before the AO. Relevant portion is extracted as under : 12. It is observed that a similar issue in the context of regular assessment arose for consideration before the Hon'ble Delhi High Court in the case of CIT v. Bharat General Insurance Co. Ltd. [1971] 81 ITR 303 wherein it was held by their Lordships that even if an assessee declares an income in the return, the Assessing Officer cannot assess it merely on that basis and he has to consider its taxability in the light of other circumstances de hors the admission made in the return. In the case of Narayanan v. Gopal AIR 1960 SC 235, the Hon'ble Supreme Court has held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to whether the fact that assessee had made an admission with respect to an addition / disallowance in its original return or in the revised return would ipso facto bar the assessee from claiming an expense or disputing an addition if it is otherwise permissible under law. This is so especially in view of the circumstances, that the Assessing Officer while making the additions /disallowances did not call upon the assessee to furnish any explanation. The upshot of the submission made by the learned counsel for the assessee, is that, had the assessee been given an opportunity by the Assessing Officer it could have demonstrated that no additions or disallowances were called for, in view of the binding precedents of Courts and/or Tribunal in respect of each of the addition/disallowance. The observations made in the Tax Audit Report could not have formed the basis of additions/ allowances by the Assessing Officer. On this aspect of the matter the observations in the judgment of the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 being apposite are extracted hereinbelow: It is no doubt true that entries in the account books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance made by the AO also cannot be accepted as discussed above. Ground of appeal No.8 stands rejected. The CIT(A) denied the claim of the assessee ignoring the settled legal propositions on the topic. The reasons given above by the CIT(A) are artificial and not supported by the legal precedents. 39. The CBDT issued a Circular No.549 dated 31-10-1989 imposing fetters on the AOs for not determining the assessed income at a lower figure than the returned income. The said Circular was held ultra vires by the higher judiciary in the case of Gujarat Gas Company Ltd. (supra). Infact, it is the duty of the AO to make an assessment basing on the facts of the case and as per the provisions of the I.T. Act. In the case of Shelly Products (supra), the Hon ble Apex Court held that the advance tax/self assessment tax paid as part of an abundant caution are required to be refunded on verification of the claim of the assessee. The Nagpur Coordinate Bench of the Tribunal in the case of DCIT Vs. Sanmukhdas Wadhwani (supra) held that the assessed income can be lower qua the returned income of the assessee. Further, the Tribunal held in this case, any amount which is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount of ₹ 1 crore. Considering the above, we are of the opinion that the AO is directed to verify the working of total undisclosed income assessable in the hands of the assessee going by the concept of real income. He shall grant reasonable opportunity of being heard to the assessee. AO is directed to apply the ratio laid down by the above referred judgments in general and the ratio laid down by the Nagpur Bench of the Tribunal in the case of DCIT Vs. Sanmukhdas Wadhwani (supra) while arriving at the assessed income of the assessee. AO shall not consider the so-called voluntary disclosure of the said amount of ₹ 1 crore as the same does not amount to any voluntary disclosure in a real sense. Had it been really voluntary, the assessee would not have raised this issue before us. It is the requirement of the statute that the AO shall make assessment strictly as per the provisions of the law and determine the assessed income accordingly. For applying the said legal principles as well as the judgments and the order of the Nagpur Bench of the Tribunal, we remand this issue to the file of the AO for the limited purpose of adjudication of the issue relating to taxabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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