9911796707
TMI Blog2019 (6) TMI 1479X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income for the year under consideration was filed on 29/09/2011 declaring total income of Rs. 2,19,64,310/-. The same was processed u/s.143(1) of the Income Tax Act 1961 accepting return of income. Thereafter, the case was selected for scrutiny and after serving statutory notices seeking reply of the assessee, the assessment u/s.143(3) of the Act was completed by AO on determining the total income of Rs. 24,67,68,540/- after making certain additions / disallowances. 3. Aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) after considering the case of both the parties partly allowed the appeal. Against this, both assessee as well as revenue has filed their respective appeals. Since first of all we are dealing with the appeal filed by the revenue, the grounds of which are reproduced below:- 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the assessing officer to delete the disallowance of interest expenses of Rs. 1,34,90,530/- without appreciating the facts that special auditor has observed that the assessee has primarily utilized the funds towards construction cost incurred in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Sales 1,63,60,735 15,87,46,062 - 17,51,06,797 Purchase Cost 1,61,67,727 7,91,79,885 - 9,53,47,612 Closing Stock - 15,03,41,354 - 15,03,41,354 Opening Stock - 18,98,72,399 - 18,98,72,399 Transfer in WIP - (1,20,81,700) 1,20,81,700 - Construction cost 7,08,87,227 Closing WIP - - 10,76,88,636 - Opening WIP - - 2,47,19,709 - Gross Profit 1,93,008 5,21,16,832 - 5,23,09,840 Indirect Income - 13,82,813 - 13,82,813 Expenses - (3,16,56,172) - 3,16,56,172 Net Profit 1,93,008 2,18,43,473 - 2,20,,36,481 5.3. A reference to above would show that the assessee has claimed the entire expenditure of Rs. 316.56 lakhs against Land Business. The said expenditure includes Interest Paid of Rs. 2,36,67,597/- , among other office & administrative expenses etc. The Special Auditors, while making comment on the Application of Funds of tiie assessee company have stated that" On the analysis of the bank account of the assessee company and based on the explanation given to us, we observe that the assessee company has utilised its fund for the constructions cost incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in Bhilwara Spinners Ltd and based on that fact he was having the opinion that this needs to be capitalized and is not the part of revenue expenditure., The assesses in his reply has merely submitted that all the projects under construction are funded by the advance payment from customer of Rs. 1407.24 lakhs which is more than the amount spent on construction till date, and further the amount invested in acquiring state in Bhilwara Spinners Ltd was out of his own funds. He has not even given the cash flow chart in which he may establish that investment in Bhilwara Spinners Ltd is from his own funds and advance payment from customers has been utilized for construction of project. It was the duty of the assessee to submit the cashflow and statement with respect to cash received from the customers and then utilized for the construction of the project. Therefore, on the failure on the part of the assessee to establish that the Bhilwara Construction Ltd investment was funded by his own fund and construction has been undertaken out of advance payment from customers, the submission made by him is not acceptable. The perusal of the balance sheet shows that the assessee has Secured Loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and the advances received in construction business are already used for making advances for purchase of other assets as discussed above. ln view of the above, 57% of the interest expenses of Rs. 2,36,67,597/- which works out to Rs. 1,34,90,530/- are disallowed and added to the total income of the assessee". 3.3. It was also submitted that since the present case is a case of Special Audit u/s.142(2A) and the AO in para No.5.2 of its order had given the details of the results of the audit and thereafter, the findings contained in para No.5.3 of the order of the AO is vital and uncontroverted. It was further submitted that the comments of the Auditors are vital thus, all interest expenses cannot be said to be towards acquisition of land. As far as the claim of own funds of assessee is concerned, in that reply, it was submitted that customer advances etc., being utilized for construction projects is a claim which was never supported by evidence by the assessee. It was further submitted that the CIT(A) has given a critic, laconic and perfunctory ruling inspite of apparently voluminous information being utilized for the same. It was further submitted that the finding of the ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Appellant is a company engaged in purchase and sale of lands and fabrics and development of infrastructure and construction of apartments and commercial premises in Bhilwara, a small town in Rajasthan. The interest debited to P&L Account wholly relates to purchase & sale of lands and fabrics. The A.O, made adhoc disallowance of Rs. 1,34,90,530/-, on the basis of erroneous reading of the Special Audit Report and observed that Special Auditor was having the opinion that this interest needed to be capitalized and was not a part of the revenue expenditure. The A.O. defeated the purpose of Special Audit, "recording" a finding that a portion of interest has to be capitalized, (ii) It is important to note that, infact report of the Special Auditor supports the case of the Appellant [Ref: Pg. 124 of the P.B.) (iii) After due verification of the audited accounts, the auditor had certified that no capital expenditure was debited in any of the item of Profit & Loss Account, this included interest expenses. (iv) As will be evident from the above submission referred, it was repeatedly submitted before the A.O. that the interest bearing funds were used exclusively for land business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant, further made submission vide letter dt. 04.01.2017, contents of the same is reproduced thereunder:- A. Para - wise summary 5.1: "Facts pertaining to the income and expenditure accounted in the books or accounts are discussed. 5.2: Segment - wise Profit and Loss Account arrived at by the Special Auditors is reproduced. 5.3: A.O has reproduced the comment of the Special auditors on application of funds of the Assessee Company the contents of which are self explanatory. However, after so referring, the A.O came to wrong conclusion that the interest cost has not been allocated to the construction cost and in such a situation it was imperative to capitalise part of the interest towards the construction cost. In fact, the Special Auditor, after due verification had given the finding that "the assessee has utilised its funds for the construction cost incurred in the four projects of the company." . . . 5.4 A.O has questioned why the balance interest expenditure should not be disallowed and assessee has explained how the interest expenditure is correctly charged and why the same should not be capitalised or added to the construction cost. 5.5 A.O has stated that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst property sale in the earlier year. For the assessment year under consideration, the Appellant had received advance of Rs. 4,07,03,74s/- against flat booking and Rs. 2,55,75,242/- against commercial bookings and Rs. 7,44,44,700/- as advance against property. The nexus of the funds is shown as under: Particulars Amount Amount Advance against property sale 7,44,44,700/- Advance against commercial booking 2,55,75,242/- Advance against flat booking 4,07,03,745/- Less: Construction Cost 9,56,06,936/- (v) It should be noted that the Appellant had very huge dealings in land and plots running into lacs of square feet area [Ref: ty$3$$^tftjj&4 and also as certified by the Special Auditor at Pg. 95 of the P.B.]. Letter/Pg. No. Remark Order appointing Special Auditor dated,, 26.03.20U[75 (back)] \ Ref: The terms of reference at Sr. No. 2, 5, 6, 12, 13, 14, 1$,. 23 & 24. As such, very clear and specific mandate to verify allowability of interest expenses. Letter of Special Auditor dated 10.04.2014 [77 - 78] Requiring specific profit & loss account for each project, details of all the projects including details of amount rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material, in support of his action and, instead, has simply gone by surmises and conjecture. (ix) Thus, the Appellant submits that addition on account of interest of Rs. 1,34,90,530/- be deleted." 7.2.3. The appellant's relevant submission vide letter dt. 09.02.2017 is reproduced hereunder: "2.1 It is important to note that this disallowance is made contrary to the specific and clear findings given by the Special Auditor, appointed by the A.O. himself u/s. 142 (2A) of the Act. For ready reference, we attach complete correspondence in this regard [Ref: Pg, 75 to 148 of the P.B.]. The following points are noteworthy: For ready reference, we reproduce the relevant findings of the Special Auditors as under: In continuation to special audit report in form No. 6B we are submitting our further report based on the various points outlined on terms of reference latter dated 26/03/2014 as under:- Sr. No. Ref. in form 6B Particulars of terms of reference Remarks 1 Point 1 Whether proper books of accounts are maintained ? Based on our review and understanding of various records and documents, we believe that the assessee has maintained proper books of accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the real estate to a degree usually associated with ownership. b) no significant uncertainly exists regarding the amount of the consideration that will be derived from the real estate's sales; and c ) it is not unreasonable to expect the ultimate collection. The assessee company believes that significant risks and rewards of ownership are normally considered to be transferred when legal title passes to the buyer (e.g., at the time of registration/ with the relevant authorities, of the real estate in the name of buyer) or when the seller enters into an agreement for sale and gives possession of the real estate to the buyer under agreement. Based on the certificate received from the Architect we understand that the projects are still under construction and are expected to be complete during F.Y. 2014-15 / 2015-16. Copy of architect certificate is enclosed for your perusal. 10 Profits derived by the assessee from sale of land since April 2007. Whether any cash receipt has been considered by the assessee for calculation of profit from safe of land Annexure - 4 10 Profits derived by the assessee from sale of project since April 2007. Whether any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2595894 3009981 4 Keventer Agro Ltd/ 09/12/2009 1050216 SXQ MT 89,000,000 5561,2000 12516392 107077583 1128922.00 Several Dates Different Parties 1080794 149872187 102512703 47359484 153823046 158746062 106628230 52116832 Note 1 The assessee has considered and recognized the consideration received in cash in books of accounts. Copy of sales ledger is enclosed AHIN5A INFRASTRUCTURE & DEVELOPERS LTD. SEGMENTAL PROFIT & LOSS ACCOUNT F.Y. 2010-11 Annexure 9 PARTICULARS FABRICS LAND BUSINESS CONSTR. BUSINESS TOTAL SALES 16,360,735 158,746,062 175,106,797 PURCHASE COST 16,167,727 79,179,885 95,347,612 CLOSING STOCK - 150,341,354 150,341,354 OPENING STOCK - 189,872,399 189,872,399 TRANSFER IN WIP (12,081,700) 12,081,700 - CONSTRUCTION COST 70,887,227 CLOSING - WIP 107,688,636 OPENING - WIP 24,719,709 GROSS PROFIT 193,008 _ 52416,832 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant that the expenditure were incurred in connection with buying and selling of land and also for the purpose of business, for working capital for the business. No expenditure out of this was incurred for its construction project. (ii) The Appellant is a limited company whose accounts are certified by the statutory auditors as depicting true and fair view of the affairs of the Appellant The accounts are also certified as showing true and correct in Form 3CD, which include specific examination of the issue concerning claiming any expenditure of capital nature debited to profit & loss account [Clause 17 (a)] as well as amount of interest inadmissible u/s. 36 (l)(iii) [Clause 17 (m)]. (iii) In course of the assessment proceeding, the Appellant had submitted various explanations and details as under: Letter dated - Submissions in brief 30.12.2013 - Details of bank accounts along with bank statements 03.02.2014 & 12.02.14 - Details of advances received against sale of property 24.02.2014 - Details of advance received in' earlier year and subsequent years 24.03.2014 - Submitted detailed statement of working of profit in land business, including interest cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as to verify whether any capital expenditure was debited to profit and loss account. Towards this, the Special Auditor had, among other, called for details of loan taken for all the businesses, specifically for the construction and land business. The Special Auditor reviewed / verified the expenses debited to Profit and Loss Account, along with supporting vouchers and invoices and gave clear findings that the same were in agreement with the audited accounts of the Appellant and that the Appellant had not debited any capital expenditure to the profit & loss account. The Special Auditor also verified the cost of work - in - progress of the project. The Special Auditor also approved Segmental Profit & Loss account in which no interest expenditure was debited to construction activity but interest expenses were debited to land business. The Special Auditor has acknowledged that the major source of funds for the assessee company was the advance received from the sale of flats and the sale proceed received from sale of plots of land. The AO has chosen to completely ignore the clear findings of the Special Auditor and, instead, has relied upon couple of general observations as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be deleted. In the result, this ground of appeal is to be treated as ALLOWED. 4.1. After having gone through the orders passed by the ld. CIT(A) and hearing the parties at length, we found that total interest expenditure of Rs. 2,36,67,597/- was debited to profit and loss account. As per the claim of the assessee, the expenditure was incurred in connection with buying and selling of the land and also for the purpose of the business for working capital for the business. According to the assessee no expenditure out of this amount was incurred for its construction project. It is an undisputed fact that assessee is a limited company whose accounts are certified by the statutory auditors as depicting true and fair view of the affairs of the assessee. The accounts had also certified as showing true and correct in form 3CD which include specific examination of the issue concerning claiming any expenditure of capital nature debited to profit and loss account as well as the amount of interest in admissible u/s.36(1)(iii). In the course of assessment proceedings, the assessee had submitted various explanations and details which are given in detail in para 7.3 of the order of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he report. 4.2. Even independent to the report of Special Auditor, it is significant to note that the AO has not disputed the basic facts and figures as placed on record by the assessee. The AO had not denied the availability of huge interest free funds with the assessee for its construction activity. At the same time, the revenue has not brought on record any cogent material to support its action. Thus, it appears that the disallowance made by the AO was passed purely on the basis of surmises. There was contradiction of inconsistency in the approach of the AO as much as he did not allege interest component to the work in progress either. We have further noticed that nowhere in the past or even in subsequent years any such disallowance is made, although the principle of fast Res judicata will not apply to the assessment proceedings, however, the settled legal position is that the rule of consistency equally applies to the assessment proceedings. More particularly, when a position was accepted in the past years in subsequent years then the same cannot be altered by the AO for a particular year except if there are changes in facts of legal position but nothing of this kind has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Assistant : "7. How the sales of flats are arranged? The sales of flats are arranged by directors only 8. How the prices of the flats are fixed? The prices of the flats are fixed by the directors only. 9. What are paper found in your office? Sir, these are the list of the flats with their prices. 10. Whether these papers are related to the company? Sir, I have seen all the papers and these are related to the company only. I have already signed on the paper. 11. What are bank received and cash received in the paper? Sir, the bank received are the payment for sale of flats received by cheque and cash received are received in cash only. Statement of Shri Ranieet Singh fain, Accountant Assistant: "7. How the sales of flats are arranged? The sales of flats are arranged by directors only. 8. How the pi-ices of the flats are fixed? The prices of the flats are fixed by the directors only. 9. What are paper found in your office? Sir, these are the list of the flats with their prices. 10. Whether these papers are related to the company? Sir, I have seen all the papers and these are. related to the company only. I have already signed on the paper. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ames of flat owner and flat no appearing in both the data extracted from seized material and submission of the assessee is as under; From comparing the two data submitted by the assessee and extracted from the seized material, it is evident that a) The names of the flat purchases corresponding to their flat Nos. are the same. b) The assessee has not shown the amount received in cash in the list submitted by them. c) The assessee has shown the accounted money upto 31.03.2011, however the seized documents are having details of the money received in cash also upto 31.12.2013. d) The assessee has shown the rate of flat Ks. 2632 per sq feet, however the rate of flat is Rs. 2040 sq feet as per that documents seized from the premises of the assessee. e) The sheet in which the details of cash received is found is self explained and the flat No., Name, Ph No., area, rate, cheque, cash all are written. The accountant has acknowledged the existence of document receipt of cash in the sale of flats. The issue has been confessed to assessee during the assessment proceeding and assessee has tried to deny it without giving all the details. The rate of flat submitted by assessee and rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wri on the seal of the annexure. Even during scrutiny proceedings, the AR of assessee has only referred to the remarks of Special Auditors. The aforesaid "terms of reference" at sr. no.22 shows that the same were restricted to analysis of transactions indicated from documents/ back up taken by the survey team from computer data of the assessee, i.e. what were recorded in the computer system. It may be understood that the cash received on the sale of flats is never recorded in the computer system, and hence the same were not a part of the terms of reference for special audit. The Special Auditors, in their aforesaid remarks, have only clarified their position vis-a vis the said terms of reference, which does not anyway help in the assessee's case. 6.8 It is on record that the incriminating loose papers have been found and seized from the business premises of assessee company, which indicates certain cash receipts against sale of flats, and the said loose papers have also been identified & signed by employee of assessee company. The employee Shri Ranjit Singh Jain, accountant assistant, has admitted of the assessee receiving al least 30% of cost of flats in cash. The exact quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as per statement of Mr.Ranjit Singh Jain corroborated by the documents impounded during the survey works out to Rs. 2086.37 Lakhs being 30% of total value of flats. Total value of flats (100%) Bank Received/receivable (70%) Cash Received (30%) 6954.58 4868.21 2086.37 6.9 The aforesaid amount of Rs. 2086.37 Lakhs is brought to tax in hands oftiie assessee u/s 68 of l.T, Act, 1961. Therefore, the said cash receipts is to be taxed as Unexplained Cash Credit u/s 68 of the Act. bitfocaseofHajiNaziHussainvs.ITO{2004}91lTD 42 (Delhi) (TM), the Hon'ble ITAT, Delhi observed that the assessee could not explain source of various cash receipts entered in note book/rough cash book found during course of survey u/s 133A and therefore, an addition u/s 68 was made. It was contended in that case that section 68 was not attracted as no sums were found credited in anyone's account in books of account maintained by assessee. It was, however, held by Hon'ble ITAT, Delhi that the failure on the part of assessee to make credit entry in respective accounts would not entitle assessee to claim that no amount was credited and assessee could not be allowed to take undue advantage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been invoked to make such addition does not apply at all. This section 68 applies when a sum is found credited in the books of an assessee maintained for any previous year. As such, it is only when there is a credit entry in a book that is maintained by the assessee that the section gets triggered, not otherwise. In the present case, it not even the A.O/s case that this amount of alleged cash component was found credited in the books maintained by the Appellant. The only issue remains is whether the loose papers so found during the survey were part of the books maintained by the Appellant. Since they were not part of the books of the assessee maintained in the regular course nor was there any direct evidence to prove so, the onus was on the A.O. to prove so. In fact, the A.O. not even bothered to verify who was author of the documents and for what purpose and under what circumstances they were prepared. As will be discussed in subsequent para, these documents otherwise also were dumb documents. As such, the A.O. failed to establish with any cogent evidence that these loose papers were books of the Appellant maintained for its business, within the meaning of section 68 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ap of application of mind by the AO which disregarded the details and evidences produced during the assessment proceedings. Referring to the copy of order sheet enclosed at paper book page no.35 to 47 read with appellant's submission para 2 col. 26, which was filed along with the paper book on 09.09.2016, the Ld.AR further pointed out that, there was change in the office of Addl.CIT where the earlier Addl.CIT which called for various details on 23.07.2014 onwards and before whom the appellant had made submissions got transferred out and on his place another Addl CIT came and the case was heard by him also. However, at the fag end of the time available for passing the assessment order [since the case was referred to Special Auditor, namely Hari Bhakti& Co., C A firm, for audit, the assessment was to be passed within the time limit from the end of receipt of special auditors report dated 25.06,2014 (copy placed in paper book), or else the case gets time barred], the incumbent AO [DCIT-4(1), Mumbai ], was passed the assessment order making additions without adequate and proper application of mind to arrive at the conclusions. 8.3.5. As explained earlier, the Ld.AR emphasised thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said addition of Rs. 36 crores is proposed to be made. We however request you to provide the working of 36 Crores as made by your honors. In this respect it is submitted that during the course of survey the statement of the accountant Shri Ranjeet Singh Jain was recorded u/s 133A. The relevant extract of the same is reproduced as under: "5. What type of the job you do at M/s Ahinsa Infrastructure & Developers Limited, Bhilwara. I do the job feeding work of computers and do the work of accounts. 6. Who are the persons who look after the accounts. Mr. B.S. Choudhary and Ram Copal Sharma also perform the ivork of accounts. 7. How the sale of Flats are arranged. The sale of flats are arranged by directors only. 8. How the price of the Flats are fixed? The price of the flats are fixed by the directors only. 12. How much cash do you receive for the sale of flats? We take cash amounting to at least 30% of the cost of flat." Thus your honors will appreciate that the accountant was authorised to do data feeding and accounting jobs. He is nowhere mentioned to have authorised to look after the sales. He has categorically mentioned that the sales are arranged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker.); (Hi) The expression "such other materials or Information as are available with the Assessing Officer" contained in section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133Af vide CITv. G. K. Senniappan [2006] 284 ITR 220 (Mad.); (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this court in T. C (A) No. 2620 of 2006 (between CIT v. S. Ajit Kumar [2008] 300 ITR 152(Mad.); (v) Finally, the word "may" used in Section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for or relevant to any proceeding under this Act", as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself. For all these reasons, particularly, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the provisions of sub-section (4A) of section 132 shall, so far as may be, apply in relation to such assets or books of account or other documents. Tins clearly spells out the intention of legislature that wherever the legislature intended to continue the presumption under sub-section (4A) of section 132, it has provided so. It has not been provided that the presumption available under section 132(4A) would be available for framing the regular assessment under section 143 as well. Thi also evident from the fact that whereas the legislature under section 132(4) has provided that the books of account, money, bullion, jewellery and other valuable articles or things and any statement made by such person during examination may thereafter be used as evidence in any other proceedings under the Act but has not provided so under sub-section (4A) of section 132, It docs not provide that the presumption under section 134A would be available while framing the regular assessment or for that matter under any other proceeding under the Act except under section 378D. Section 132 being a complete code in itself cannot intrude into any other provision of the Act. Similarly, other provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. in relying upon such confession in statement is contrary to Instruction No. F. No. 286/2/2003 - IT (Inv.' II) dt. 10.03.2003 and Instruction No. F. No. 286/98/2013 - IT (Inv. II) dt. 18.12.2014 issued by Central Board of Direct Taxes. b) In any case, in view of decision of the Hon'ble Supreme Court in the case of CIT v/s. S. Kader Khan - [(2013) 352 ITR 480 (SC)] a statement taken during a survey proceeding is not binding / conclusive piece of evidence. This judgement has been followed in many cases thereafter, as already referred by the Appellant in its submission. c) Even otherwise, no blind reliance could have been placed on the statement of these two employees/ as is apparent from their statements itself. These statements are given by two low level employees (as is apparent from the amount of salary paid to them), whose job was only to do data feeding in computer. They were working in the back office (Navkar City Centre - as is apparent from their statement)/ away from the main office of the Appellant where the directors operate and from where only the main activities, including sales, take place (Bazar No. 2 - as intimated to the A.&. as principle place of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clarified with evidence. In the present case the AO has drawn adverse conclusion regarding the alleged sale of properties without making independent enquiry from the actual purchaser and confronting them and allowing cross examination to the appellant, It has been pleaded by the Ld.AR that under facts and the circumstances and under facts and the circumstances and under the law, such survey statement could not be relied upon to make such huge additions (ii) As regards the loose papers, the AO has not been able co-relate the writings with the actual income / asset which could have been derived by the appellant form any other manner. a) First of all, the Appellant was not provided with copies of the loose in the very beginning upon which the AO. addition has been made in the assessment order. Copy of the documents provided to the Appellant just few days before the assessment do not contain these documents (except page 29). {Ref: Letter of A.O. dated 20.08.2014]. It has been explained by the Ld.AR that although the appellant submitted its explanations and replies once it received the loose paper but the AO passed the assessment order immediately and could hardly appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thor of these loose papers. It is not known who had prepared these papers and for what purpose and under what circumstances. It is also not mention when such cash was allegedly received. As such in absence of such crucial facts having brought on record by the A.O., these documents are nothing but dumb documents and in any case do not provide cogent and definite material to justify such a huge addition. e) It is a well - settled law that no addition can be made merely on the basis of loose paper / loose working, rather the co-relation between the loose paper or rough working needs to be co-related with reference to any income or any asset, then only, any addition can be sustained and in the absence of establishment of such co-relation between rough working and any income, it will be difficult to sustain any addition in the present case. f) In any case, a perusal of the loose papers, as copied in the assessment order, reveals that this working did not reflect any actual cash transaction. As pointed out by the Appellant, these loose papers include names of the directors and shareholders and their family members /relatives, who had not booked any flat nor any amount was shown as ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant and had no adverse comments to offer on this crucial aspect. Even otherwise, even if the addition is evaluated in the backdrop of the well -principle/of Preponderance of Probability, the probability is clearly in favour of Appellant for the followings reasons: (a) Absolutely no incriminating material or document was found, no unaccounted asset or unexplained expenditure was found and no other discrepancy was found. This factor is very important because if at all the allegation of the A.O. is correct then such huge unaccounted cash received must find its destination in the form of either undisclosed investment or unexplained expenditure. This is specially so when the allegation is about receiving crores of rupees in cash. Absence of any evidence regarding application of such alleged huge cash amount negates the very theory propounded by the A.O. b) The agreement values were more than the circle rate / stamp duty rate. This is also another important and crucial factor in favour of the Appellant, especially when the legislature itself regards stamp duty value as a barometer representing fair market value of immovable properties. 8.3.10. In the backdrop of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition and deleted the addition on account of alleged on - money received by the assessee therein. This one judgement itself takes care of most of the legal issues involved in the present appeal as well and fully supports the case of the Appellant. In the Legal Note, such various propositions are already analysed and they are found to be applicable to the present case as well. Without prejudice even otherwise also no addition on account of on money was called for.. This is because, the amount mentioned against names of the directors / shareholders their relatives as well as other person who had not made any booking are to be excluded. Similarly, the flats for which the agreements are cancelled are also required to be excluded. Still further, the papers only related to the projects for construction of Gulmohur and Chinnair. Admittedly, no papers were found with respect to the other projects. Consequently, the addition with respect to such other projects also needs to be excluded. If this is done, the amount of such exclusion is more than the amount of the addition made. This is clear from the figures and the calculations as already referred earlier. 8.3.12. In any case, no addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey. 6.2.As far as the statement of two employees are concerned, they cannot be relied upon for the reasons recorded by Ld. CIT(A) in para No.8.3.8. and as far as loose papers are concerned, the AO has not been able to co-relate the said writing. As per the factual position, this issue was confronted to the assessee at the fag end of the proceedings. The AO has not considered the earlier detailed submissions already filed by the assessee and also requested the AO to provide copies of the seized material as well as statements taken during the survey. In this respect, letter as well reminder was also given, however the copies of some of the documents were only provided which have already been detailed in the order passed by Ld. CIT(A). Since it was the duty of the AO to confront the assessee with the material, which was being relied or used by the AO, but in the absence of said material, no additions could have been made as has already been held in the case of Kishanchand Chelaram 125 ITR 713 (SC). According to Hon‟ble Suprme Court in such a scenario, the legality of the additions are required to be adjudicated de hors such material. Thus, if we go by the above analogy, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by Central Board of Direct Taxes. b) In any case, in view of decision of the Hon'ble Supreme Court in the case of CIT v/s. S. Kader Khan - [(2013) 352 ITR 480 (SC)] a statement taken during a survey proceeding is not binding / conclusive piece of evidence. This judgement has been followed in many cases thereafter, as already referred by the Appellant in its submission. c) Even otherwise, no blind reliance could have been placed on the statement of these two employees/ as is apparent from their statements itself. These statements are given by two low level employees (as is apparent from the amount of salary paid to them), whose job was only to do data feeding in computer. They were working in the back office (Navkar City Centre - as is apparent from their statement)/ away from the main office of the Appellant where the directors operate and from where only the main activities, including sales, take place (Bazar No. 2 - as intimated to the A.&. as principle place of business of the Appellant). In fact, both persons categorically stated that the sales of flats were arranged and the prices of the flats were fixed by the directors only. Interestingly, their answers are wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them and allowing cross examination to the appellant, It has been pleaded by the Ld.AR that under facts and the circumstances and under facts and the circumstances and under the law, such survey statement could not be relied upon to make such huge additions (ii) As regards the loose papers, the AO has not been able co-relate the writings with the actual income / asset which could have been derived by the appellant form any other manner. a) First of all, the Appellant was not provided with copies of the loose in the very beginning upon which the AO. addition has been made in the assessment order. Copy of the documents provided to the Appellant just few days before the assessment do not contain these documents (except page 29). {Ref: Letter of A.O. dated 20.08.2014]. It has been explained by the Ld.AR that although the appellant submitted its explanations and replies once it received the loose paper but the AO passed the assessment order immediately and could hardly appreciate the factual analysis given by the appellant in its submission. As such, in terms of the ruling of the Supreme Court in the case of Kishinchand Chellaram[ 125 ITR 713 (SC)], these papers have no evidentiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of such crucial facts having brought on record by the A.O., these documents are nothing but dumb documents and in any case do not provide cogent and definite material to justify such a huge addition. e) It is a well - settled law that no addition can be made merely on the basis of loose paper / loose working, rather the co-relation between the loose paper or rough working needs to be co-related with reference to any income or any asset, then only, any addition can be sustained and in the absence of establishment of such co-relation between rough working and any income, it will be difficult to sustain any addition in the present case. f) In any case, a perusal of the loose papers, as copied in the assessment order, reveals that this working did not reflect any actual cash transaction. As pointed out by the Appellant, these loose papers include names of the directors and shareholders and their family members /relatives, who had not booked any flat nor any amount was shown as having received from them at the time of booking [cheque receipts]. It is elementary that owner and / or his family will not pay any on-money to the owner himself. In any case, nobody would pay on money w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... probability is clearly in favour of Appellant for the followings reasons: (a) Absolutely no incriminating material or document was found, no unaccounted asset or unexplained expenditure was found and no other discrepancy was found. This factor is very important because if at all the allegation of the A.O. is correct then such huge unaccounted cash received must find its destination in the form of either undisclosed investment or unexplained expenditure. This is specially so when the allegation is about receiving crores of rupees in cash. Absence of any evidence regarding application of such alleged huge cash amount negates the very theory propounded by the A.O. b) The agreement values were more than the circle rate / stamp duty rate. This is also another important and crucial factor in favour of the Appellant, especially when the legislature itself regards stamp duty value as a barometer representing fair market value of immovable properties. 6.4. It is a settled proposition of law that no addition of undisclosed income on mere suspicion can be made. In this respect we rely upon the decision in the case of Common Cause vs. Union of India (2017)394 ITR 220 and in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any documentary evidence. The Tribunal was justified in law and on facts in deleting the addition. 4. Jawaharbhai Hathiwala v/s. ITO - ((2010)128 TTJ (Ahd) (UO) 36] Merely recording made by a third party or statement of a third party cannot be treated as so sacrosanct so as to read as a positive material against the assessee. 5. ITO v/s. Smt. Neelam Chawla - [(2008) 6 DTR (Del) (Trib) 141] The statement of a person may give rise to conduct further enquiry but that cannot be held as a sacrosanct particularly when a person challenges the contention of such statement in view of specific proof. : 6. First Global Stockbroking Ltd. v/s. ACIT - [(2008) 4 DTR 172 (Mum)] There should be some more corroboration for putting the assessee under a burden of .v, tax. Simply on the basis of statement of third person it cannot be held that this amount has been remitted by assessee from undisclosed sources, more so, when an opportunity to cross examine this person was not granted to the assessee. This statement can at best be information for probing the issue further. 7. ACIT v/s. Ramanbhai Patel - [(2008) 12 DTK (Ahd) (Trib) 471] The law on the statement is very much clear. No add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, we find no reasons to interfere in to the findings so recorded by the ld. CIT(A), hence this ground raised by the revenue stands dismissed. C.O. No. 310/Mum/2017 for AY 2012-13 7. Now we take up C.O. No. 310/Mum/2017 for AY 2012-13 filed by the assessee. Since we have already decided the similar ground of appeal in ITA No. 2926/Mum/2016 for AY 2012-13 on merits. Therefore, following our own decision in ITA No. 2926/Mum/16, we apply the same findings in the present appeal in order to maintain judicial consistency which is applicable mutatis mutandis. ITA No.3990/Mum/2017 8. The following grounds have been taken by the assessee:- 1. DISALLOWANCE U/S. 14A 1.1 The Learned Commissioner of Income - tax (Appeals) - 9, Mumbai ["Ld, CIT (A)"], erred in confirming the action of the A.O. of making disallowance under section 14A of the Income - tax Act, 1961 read with Rule 80 of the Income -tax Rules, 1962 at Rs. 3,16,865/-. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the case of the Appellant was not covered under section 14A of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
