TMI Blog2020 (7) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer, after giving reasonable opportunity to the assessee, shall decide the issue in accordance with the law. Accordingly, the ground no.1 is partly allowed for statistical purposes. Deduction us. 80IA(4) - income offered by the assessee during the search and seizure action u/s 132 - HELD THAT:- We find the issue of granting of deduction u/s 80IA(4) of the Act in respect of the undisclosed business income of the assessee, is a covered issue by a series of judgements. A special reference is made here to the Co-ordinate Bench decision in the case of (i) M/s. Gajraj Constructions [ 2015 (10) TMI 1858 - ITAT PUNE] and (ii) Naresh T. Wadhwani [ 2014 (11) TMI 689 - ITAT PUNE] . In these cases, the Tribunal granted deduction u/s 80IA of the Act in respect of the undisclosed business income of the assessee. In our view, the issue is now covered one in favour of the assessee. Non-appropriation of seized cash toward the advance tax liabilities and consequent levy of interest u/s 234 - HELD THAT:- We find the seized cash is available for adjustment towards advance tax liability which constitutes any existing liability as defined in effect prior to the amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Laxmi Civil Engineering Services Pvt. Ltd. (LCESPL). Appeals in ITA Nos.1245 to 1247/PUN/2015 are filed by Revenue. Thus, these are the cross appeals and are directed against the common orders of the CIT(A)-1 2, Kolhapur dated 01.06.2015 for the (three) assessment years 2009-10 to 2011-12. Further, the appeal in ITA No.608/PUN/2016 relates to Sri Vijaykumar Rajaram Shah and is filed by the Revenue against the order of the CIT(A)-11, Pune dated 05.01.2016 u/s 143(3) of the Act for the assessment year 2011-12. Sri Vijaykumar Rajaram Shah is the Managing Director of the company- LCESPL. Since the facts and issues involved in all the above 7 captioned appeals of the Revenue as well as of the assessee are interlaced, therefore, all the above 7 captioned appeals were heard together and are being disposed of by this composite order. 2. Brief Facts common to the cross appeals for three assessment years : Briefly stated the relevant facts include that the assessee is engaged in the business of executing the Civil, Electrical and Mechanical contracts. The details of dates of filing of return of income, returned income and assessed income for the respective assessment years under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 743000 - 743000 L-1/B2/7 - 1013000 - 1013000 L-1/B2/10 70000000 92028000 12100000 174128000 L-1/B2/11 - 20000000 5000000 25000000 L-1/B2/12 - 6950000 - 6950000 L-1/B2/14 - 10785000 - 10785000 L-1/B2/15 - 20971000 - 20971000 L-1/B2/16 - 2500000 - 2500000 B] Amount receivable L-1/B2/17 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings u/s 153A of the Act, a question is raised by virtue of the correctness of said claim of deduction u/s 80-IA(4) of the Act in respect of the entire total claim of ₹ 14,22,78,057/-. The Assessing Officer raised the issue relating to the Developers versus Contractors qua the claim of deduction u/s 80IB(4) of the Act, and Assessing Officer held that the assessee is merely a Contractor. In this regard, the assessee filed the written submissions which found part of the Assessing Officer s order vide para 8. The Assessing Officer discussed the language of sub-section (4) of section 80-IA(4) of the Act and deliberated on various case laws relied upon by the assessee. The Assessing Officer also attempted to disregard the decision of Pune Bench of the Tribunal in assessee s own case vide ITA No.254/PUN/2008, ITA No.431/PUN/2007, ITA No.435/PUN/2007 and ITA No.766/PUN/2009 pertaining to assessment years 2006-07, 2005-06, 2003-04 and 2004-05 dated 08.06.2011 as well as the Jurisdictional High Court s judgement in the case of ABG Heavy Industries Ltd. Others, 322 ITR 323 (Bom-HC). Assessing Officer held that every decisions must be considered as applicable to the facts of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted as under :- The Business facilitation expenses are sourced by inflating various expenses debited to Profit Loss A/c. When source of income is generated from the profit loss a/c it is nothing but income from business. Therefore, it is eligible for deduction U/s. 80IA(4). Without prejudice to above the income sourced by inflating various expenses debited to profit loss a/c. has been used for incurring business facilitation expenses, which are basically business expenses and therefore the same shall be allowed as deduction to the assessee. 10. However, the Assessing Officer, as per discussion given in para 16.2 and 16.3 of the assessment order, rejected the above proposition of the assessee. Further, the Assessing Officer discussed the philosophy of the provisions of section 132 of the Act and relied on various decisions and held that the provisions of section 132 of the Act, is not for the benefit of the assessee. 11. Further, invoking the provisions of section 37(1) of the Act, the Assessing Officer discussed the application of the said explanation which refers to the non-allowability of certain expenditure, when used for the purpose of offences pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re considered as a business receipts. On finding, these receipts are not prima-facie business receipts arising out of the business activity of the assessee, the Assessing Officer raised them as non- business income and also proposed to deny the claim u/s 80IA(4) of the Act on these Miscellaneous Receipts. 13. In response to the query raised by the Assessing Officer, the written submissions were made by the assessee which was discussed in para 19.2 of the assessment order. In the said para 19.2 of the assessment order, a table is furnished wherein 20 types of miscellaneous recipes are reflected. The Assessing Officer discussed each of these miscellaneous receipts and held that, for the assessment year 2009-10, ₹ 16,86,241/- is only found eligible for such a claim. Balance of the income of ₹ 3,85,74,806/- is taxed as income from other sources as per discussion given in para 19.3 of the assessment order. Similar adjustments was done in all the assessment years under consideration. 14. Further, the Assessing Officer invoked the provisions of section 14A of the Act. Eventually, the Assessing Officer, as per discussion given in para 20 to 20.3 of the assessment order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of claiming of deduction u/s 80IA(4) of the Act. The ld. Counsel for the assessee further submitted that the facts are identical with that of the present case i.e. undisclosed income offered by the assessee is also for the reason of inflation of expenses. The facts that the Hon ble High Court remanded the matter in that case to the ITAT which eventually decided the issues in favour of the assessee were also discussed in para 25 of the order of the first appellate authority. After considering the written submissions and arguments of the assessee, the CIT(A) discussed the issue of allowability of deduction u/s 80IA(4) of the Act, analysed the applicability of the Pune Bench s decision in the case of M/s BT Patil Sons Belgaum Construction Pvt. Ltd., 126 TTJ 557 dated 26.10.2009 and also discussed the meaning of developers/contractors. The CIT(A) also analyzed the explanation given by the Board vide Circular No.3/2008 dated 12.03.2008 relating to the clarification regarding the developer with reference to the infrastructure facility, industrial park, etc for the purpose of section 80IA of the Act. Relying on the Bombay High Court s judgement in the case of ABG Heavy Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as well as the undisclosed business income offered by the assessee during the search and seizure action. 17. Regarding the addition made by the Assessing Officer u/s 14A of the Act for the assessment years 2008-09 to 2011-12, the assessee submitted that no exempt income was earned during the year under consideration. Out of the investments made by the assessee in such case there was no application of the provisions of section 14A of the Act. Further, there was a discussion about non-adjustment of seized cash towards the existing liabilities and resultant levy of interest u/s 234B of the Act for the assessment year 2010-11. 18. Aggrieved with the above order of the CIT(A) for the assessment year 2009-10, the assessee as well as the Revenue are in cross appeals before the Tribunal with the above extracted grounds. 19. The assessment year-wise/cross appeal-wise, appeal is taken up in the following paragraphs. The issue for adjudication in the appeals of assessee relates to the correctness of the disallowance u/s 14A of the Act when the total income does not include any exempt income. In assessment year 2010- 11, there is an issue relating to levy of penalty u/s 234B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee s submissions that no exempt income earned by the assessee out of the investments made in the shares of the sister concern. 23. Before us, the argument of the ld. Counsel for the assessee is that the said investments of ₹ 90 lakhs was made out of the interest free funds. Further, the ld. Counsel for the assessee filed the written submission in this regard and the said written submission is extracted hereunder :- 3. In the above appeal, the assessee has raised two grounds of appeal, both of which are against disallowance made by the Assessing Officer of ₹ 2,87,333/- u/s. 14A of the Act. The said disallowance has been upheld by the CIT (A) and, hence, the assessee is in further appeal before Your Honours. The above issue has been discussed by the Assessing Officer on Pg. No. 66 onwards of his order. The Assessing Officer has observed that the assessee has made investment of ₹ 90 lacs in the shares of its subsidiary, viz., Dimension Construction P. Ltd. It was contended before the Assessing Officer that the assessee-company has not received any tax-free income. It was also contended by the assessee that it has sufficient own fund in the form of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ltd. v. CIT (378 ITR 33). Subsequently, Hon ble jurisdictional High Court in the case of Ballarpur Industries in ITA No. (51 of 2016 dated 13.10.2016) considered the above decision of the Hon ble Delhi High Court and held that no disallowance could be made were the assessee has not received any exempt income during the year under consideration. Subsequently, the Hon ble jurisdictional High Court in the case of DCIT v. Rivian International P. Ltd. has observed as under. 3. We have given careful consideration to the submissions. On facts, it appears from the impugned judgment that the assessee had made investment in shares of closely held companies which did not declare any dividend. On facts, there is no dispute that the assessee has not earned any exempt income during the year under consideration. After consideration of Section 14A, the Delhi High Court followed the decisions of certain other High Courts. Section 14A of the said Act provides that for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the said Act. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) may be vacated and that of the Assessing Officer be restored. 4) The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal. 28. Ground no.1 relates to the allowability of claim of deduction u/s 80IA(4) of the Act in respect of miscellaneous receipts (supra), the ld. CIT(A) dealt with this issue by grouping the issues for the all three assessment years 2005-06, 2006-07 and 2007-08. Before the CIT(A), the assessee argued that such non-search issues cannot be decided by the Assessing Officer when the assessments are of non-abated assessments. The CIT(A) considered the same in favour of the assessee for these years relying on the various decisions of the Tribunal. It is finding of the Tribunal that the additions cannot be made on such non-search issue i.e. miscellaneous receipts qua the claim of deduction u/s 80IA(4) of the Act in the assessment made u/s 153A of the Act. On the allowability of claim of deduction u/s 80IA(4) of the Act for the assessment years 2005-06 to 2011-12 on the said miscellaneous receipts, the CIT(A) discussed each of such receipts and gave a finding, whether each of such receipts constitutes a busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT Reimbursement 1,70,77,488.00 Work Insurance 1,08,85,831.00 New Item FBT (Excess Provision) 1,246.00 New Item Other Deductions from Sub-Contractor 20,21,798.00 Material Deductions Sub-Contractor 2,82,140.00 3,84,40,573.21 11. It would be worthwhile to note that similar disallowance was made by the Assessing Officer in A.Y. 2008-09 in respect of following receipts which are common to the receipts during the year under consideration. Particulars of Miscellaneous Receipts Amount of AY 08-09 Amount of AY 09-10 Bank Interest Other Interest 78,85,014.50 73,28,660.44 Other Income 4,35,000.00 8,43,409.77 VAT Reimbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITR 283). (Refer Para 2 on Page no. 359 and Para 12 on Page 365 and No. 358 to 365 for the case law in Paperbook of Case Laws). 14. The Assessing Officer has not accepted the above receipts to be part of business income from eligible undertaking. According to the Assessing Officer, these receipts have got nothing to do with the business and they are not entitled for any deduction. 15. Elaborate submissions have been made before the CIT (A) which is recorded by him on page No. 8 to 11 of his order. The ld. CIT (A) has given a detailed finding on page No. 14 to 16 of his order. 16. The assessee relies upon the detailed submissions made before the CIT (A) and his findings as well as submissions made hereinabove. It is submitted that the assessee has undertaken various infrastructure development projects, all of which are eligible for deduction u/s. 80IA(4) of the Act and about which there is no dispute. Therefore, it is requested the finding of the Hon ble Tribunal in A.Y. 2008-09 so far as the common items for A.Y. 2008-09 and for A.Y. 2009- 10 are concerned be followed. As regards the other amounts, it is submitted these receipts are integral part of the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, the pending assessment proceedings were abated. Subsequently, a notice u/s. 153A of the Act was issued on 30.05.2011 in response to which the assessee filed return of income in which deduction u/s. 80IA(4) of the Act has been claimed at ₹ 14,22,78,057/- (It has been wrongly mentioned in the assessment order that the assessee has stated that return filed earlier may be treated as return in response to S. 153A of the Act.) 19. In the return of income the assessee has claimed deduction u/s. 80IA(4) of the Act of ₹ 14,22,78,057/-. This amount also included ₹ 7 crores on account of additional income declared during the course of search. The core dispute in this ground of appeal is regarding eligibility of deduction u/s. 80IA(4) of the Act. 20. It is imperative to understand the nature of transactions for which the declaration has been made during the course of search. Certain seized documents were found during the course of search which reflected certain cash expenditure. It is the case of the assessee that it has inflated certain expenditure like wages in its books of account and thereby generated cash. The said cash has been utilized for various purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, hence, there is no such embargo on the AO so far as the issues to be considered by him. As pointed out hereinabove, on the date of search i.e. 15.06.2010, the time limit for issuing the notice u/s. 143(2) of the Act had not expired. This is in light of the fact that the return of income for the year under consideration, i.e. A.Y. 2009-10 was filed on 31.10.2009 and the time limit u/s. 143(2) of the Act as up to 30.09.2010. Once, an assessment has been abated, the AO is not only entitled to consider all issues but duty bound to do so. Various decisions relied upon by the AO are in respect of non-abated years. 26. The next objection of the AO is that the undisclosed income is not a business income. In this regard, it is submitted that the assessee has been found to have generated certain cash. The source of the cash is inflation of expenditure. Once, the expenditure has been reduced by removing the inflated portion, the profit of the business would increase. The source of such increased profit could not be anything else than the eligible business. The source of the revenue remains the same irrespective of quantum of expenditure. Thus, the whole premise of the AO is conceptua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. In the further proceedings before the Hon ble Court at the instance of the revenue, it was found that since the addition made on account of employer s contribution was not assailed by the assessee, the only issue for consideration pertained to allowability of deduction u/s. 10A of the Act qua the additional income due to the disallowance pertaining to employees contribution. In answering the subject-issue in favour of the assessee, the Hon ble Court held as under: 12. By reason of the judgment of the Supreme Court in CIT v. Alom Extrusions Limited [2009] 319 ITR 306 the employer s contribution was liable to be allowed, since it was deposited by the due date for filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the Revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer s as well as the employees contribution towards provident fund/ESIC and the only question which is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page No. 178 of Paperbook for Case Laws) 32. In agreeing with the decision arrived at by the Hon ble Tribunal holding that such a claim was allowable, the Hon ble High Court held as under: 10. Chapter XIV-B of the said Act provides for special procedure for assessment of search cases and is contained in s. 158B to s. 158BI of the said Act. Further, this chapter applies only in cases of search initiated before 31st May, 2003. In this case, the search took place in 2002 and therefore, the present case is governed by Chapter XIV-B of the said Act. Sec. 158BB of Chapter XIV-B of the Act deals with computation of undisclosed income of the block period. The above Explanation to sub-s. (1) of s. 158BB of the Act was amended by the Finance Act, 2002 with retrospective effect from 1st July, 1995. Prior to the amendment, according to the Explanation the total income or loss was to be computed in accordance with Chapter IV of the said Act. Consequent to the amendment by Finance Act, 2002 with retrospective effect from 1st July, 1995 the total income or loss has to be computed in accordance with the provisions of this Act i.e. the said Act. Consequently, w.e.f. 1st July, 1995 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we rely on the case of Asst. Commissioner of Income Tax Circle 1, Kolhapur vs. Mahalaxmi Infraprojects Limited ITA No. 142 145 / PUN / 2016 and ITA No. 146 147 / PUN /2016, ITAT Pune. (Refer Page No. 133 148 of Paperbook for Case Laws) The following grounds of appeal were raised reproduced below: 1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in allowing deduction u/s.80IA(4) of the Act of ₹ 35,98,460/- on the additional income offered on account of purchases. 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in holding that the ratio laid down by the Hon ble Mumbai High Court in the case of CIT Vs. ABG Heavy Industries Ltd. (2010) (322 ITR 323) (Bom) is applicable to the facts and circumstances of assessee s case? Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] be read cumulative though it was not the issue prevailing in the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of expenses. He asked for set off of said disclosure while estimating the amount of non-genuine purchases. The Assessing Officer noted that the assessee had booked bogus expenses amounting to ₹ 89,79,588/- under the head Purchase of stilt and cement for the year under consideration, which was added in his hands. The assessee had sought set off with the disclosure already made and also it was contended that the said income offered in respect of purchases was part of business income and infrastructural activities and was eligible for deduction under section 80IA(4) of the Act. Decision for AY 2011 12 : . issue which is arising in the present appeal is whether the assessee is entitled to claim the aforesaid deduction under section 80IA(4) of the Act on additional income offered. We have already decided the said issue also in the paras hereinabove and following the same parity of reasoning as in the proceedings initiated under section 153A of the Act and order of the Tribunal dated 09.12.2015, we hold that the assessee is entitled to claim the deduction under section 80IA(4) of the Act on additional income offered. Accordingly, the grounds of appeal No.1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of on-money received on sale of flats in the project. Accordingly, the impugned sum bas been declared as unaccounted income from the housing project in question. 17. In-fact, the Hon ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s. 80-IB(10) of the Act in relation to the undisclosed income declared consequent to the search. In the case before the Hon ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a builder and the same was accepted by the department, but the claim of the deduction u/s. 80-IB(10) was denied in relation to such income. However, the claim was upheld by the Hon ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in question has been received in the course of carrying on its business activity of developing the housing project, The Crest at Pimple Saudagar, Pune, which is eligible for section 80-IB(10) benefits. Therefore, in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arefully perused the fact-situation in the case before the Chandigarh Bench of the Tribunal and find that the ratio of the said decision has to be understood with reference to peculiar facts of the case. In the case before the Chandigarh Bench of the Tribunal, the undisclosed income surrendered by the assessee in the course of search was in the shape of unaccounted cash, investments etc. and the material seized did not show the sources of acquisition of the undisclosed income reflected by such unaccounted cash, etc. So however, in the present case, it is factually clear that the impugned additional income is nothing but monies received by the assessee from customers against sale of flats in its housing project, Sai Nisarg Park Mayureshwar, which was not recorded in the regular account books. Clearly, in the case before us, source of additional income is the execution of the housing project and once the source of income is established, the assessability has to be has to follow. The said fact-position is quite different and distinct from what was before the Chandigarh Bench of the Tribunal and therefore the proposition laid down by the Chandigarh Bench of the Tribunal is not applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only grievance was against the treatment given to the income declared during the course of survey as deemed income u/s. 69A of the Act as against business income . Decision relied upon by Assessing Officer is distinguishable 35. In support of his decision to make the impugned disallowance, the Assessing Officer has relied upon the order of Ahmedabad Bench of the Hon ble Tribunal in the case of DCIT v. Rameshbhai C. Prajapati for A.Y. 2006-07 in I.T.A. No. 226/Ahd/2010 dated 21.09.2012. It is submitted that the aforesaid order does not advance the case of the revenue for more than one reason as discussed hereinbelow. 36. The issue involved in the aforesaid case was as to the allowability or otherwise of deduction u/s. 80-IB(10) of the Act with respect to disallowance u/s. 40(a)(ia) of the Act. The ground on which the benefit u/s. 80-IB(10) of the Act was denied was that the impugned disallowance was made for infringement of law in as much it was for lack of compliance to deposit the amount of tax deducted by the assessee to the government treasury within the specified time limit. We submit that the aforesaid order runs contra to the binding judgment of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Bombay, Gujarat and Allahabad have been accepted by the Department. 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 38. Similarly, the reliance placed by the AO on Explanation to S. 69C of the Act would not be of any relevance as S. 69C would be applicable only in a case where the source of expenditure is not established and the assessee has claimed deduction in respect of such expenditure. In the present case, the source of expenditure has been explained and the assessee has not claimed any deduction in respect of expenditure. The AO has observed that the assessee has never come forward to explain which were the expenses which were inflated and to what extent. In this regard, it is submitted that the AO has completely ignored the evidence and material available on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book? Ans. No. These transactions are not entered in the cash books which are maintained manually. They are directly entered into the books maintained in Tally on the computer on the instructions of Shri Vijaykumar Shah or Shri Rajendra Doshi. 40. The above statement of Anuradha Gulavani was shown to her senior Swati Kulkarni who has also agreed and accepted the entire modus operandi and explained the booking of expenditure without making actual cash payment. Her answer to Q. No. 4 is reproduced hereinbelow: Ans. Yes, I do confirm that the facts stated by Sou. Anuradha Gulavani are true. The expenditure under the head of wages debited to the P L A/c of Laxmi Civil Engineering Services Pvt. Ltd. are accounted for the in the books by me on the basis of such self-made vouchers. The actual payment against such vouchers is not made. 41. Attention is next invited towards the statement of Shri Rajendra Mohanlal Doshi, director of the assessee-company recorded u/s. 132(4) of the Act on the date of search itself, i.e. 15.06.2010. His attention was drawn to the statements of Anuradha Gulavani and Swati Kulkarni to which he admitted modus operandi and also admitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous expense heads. All of the above vouchers are not genuine or fully substantiated. As explained in my earlier answer the unexplained expenditure for facilitating various projects is met out through debiting certain unsubstantiated expenses. We shall provide further details in due course of time. 43. The statement of Shri Vijaykumar Rajaram Shah was again recorded on the same day and he was asked about the source of cash of ₹ 2.51 crores found during the course of search. In answer to question he has categorically replied that the source of cash is inflation of expenditure. The relevant question and answer is reproduced herein below. Q. 4 During the course of search at your residence on 15.06.2010, cash of ₹ 2,51,44,400/- was found. Please explain the source of the same along with documentary evidence. Ans. the cash of ₹ 2.51 crores was generated by inflating the expenses under various heads like wages etc. for which self-made vouchers were prepared. I offer the same as undisclosed income in the hands of Laxmi Civil Engineering Services Pvt. Ltd. for F.Y. 2010-11. Balance cash of ₹ 44,400/- was out of my own savings. 44. All the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... end of the extraction from the written note) 33. While the ld. AR for the assessee relies on the written submission, the ld. DR for the Revenue submitted that the order of the Assessing Officer should be approved. However, it is not the case of the Revenue supported by any direct evidences that the additional income offered by the assessee is not a business income-company. 34. After hearing both the sides, we find the issue of granting of deduction u/s 80IA(4) of the Act in respect of the undisclosed business income of the assessee, is a covered issue by a series of judgements extracted above. A special reference is made here to the Co-ordinate Bench decision in the case of (i) M/s. Gajraj Constructions (supra) and (ii) Naresh T. Wadhwani (supra). In these cases, the Tribunal granted deduction u/s 80IA of the Act in respect of the undisclosed business income of the assessee. In our view, the issue is now covered one in favour of the assessee. Therefore, we find the order of the CIT(A) is fair and reasonable and it does not call for one intervention. Accordingly, ground no.2 raised by the Revenue is dismissed. 35. In the result, the appeal of the Revenue in ITA No.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act accordingly. This was challenged before the CIT (A) who has confirmed it by stating that the liability of interest is consequential and depends on the amount of tax. 49. It is respectfully submitted that once a request has been made for appropriation of seized cash, in all fairness, the Department is bound to act upon it. The officers of the Department cannot keep the seized cash idle on the one hand and levy the interest u/s. 234B of the Act. Your Honours are aware that seized cash has to be dealt with according to the provisions of section 132B of the Act. As per sub-section 1 of that section, the asset seized u/s.132 may be utilized towards discharge of any existing liability under the Act, Therefore, once a request has been made by the assessee vide which the assessment year and nature of existing liability has been specified, the adjustment of the seized cash ought to have been carried out. In failure of doing so, the assessee cannot be said to be responsible and certainly cannot be penalised. 50. In this regard, it is respectfully submitted that Explanation 2 to section 132B has been inserted by Finance Act, 2013 w.e.f. 1-6-2013 and it reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof but the same was denied by the Assessing Officer and on further appeal, by the CIT(A) after taking into account provisions of Explanation 2 to section 132B of the Act and holding that this explanation was clarificatory in nature and hence, it covered pending cases also. The assessee filed further appeal before the Tribunal by taking, inter alia, the following grounds : [3] The learned CIT (A) failed to appreciate that - a. Explanation 2 to section 132B has been inserted w.e.f 01.06.2013 and the legislature, in its own wisdom, has not made it applicable retrospectively and hence, there is no reason to hold that the said explanation inserted w.e.f. 01.06.2013 is applicable even to the earlier years. b. When two contradictory views are possible, the view favourable to the assessee should be adopted in view of the Supreme Court decision in the case of Vegetable Products Ltd. [88 ITR 192] AND therefore, the view taken by ITAT, Ahmedabad in the case of Kanishka Prints Pvt. Ltd. [143 ITD 716] should have been followed over the view taken by ITAT, Delhi in the case of Spaze Tower Pvt. Ltd. Without prejudice to the above grounds, the assessee submits as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, the Learned CIT(A) has erred in allowing the adjustment of seized cash against self- assessment tax liability though Income Tax Act does not provide for adjustment of seized cash before determination of tax liability. 2. That the Department craves leave to add, modify or alter any of the ground(s) of appeal and/or adduce additional evidence at the time of hearing of the case. 57. The Learned DR argued that there is no provision in the Income Tax Act to adjust the seized cash towards the self-assessment tax payable by the assessee and accordingly supported the order of the Learned AO. The AR argued that the order passed u/s.153A of the Act was in accordance with law but subsequent action of the Assessing Officer revoking the adjustment of cash was illegal. 58. The Tribunal considered the provisions of the section 132B of the Act, case laws on the issue and dismissed the appeal filed by the Revenue by observing as under:- 7. We find that the subsequent action of Learned AO in revoking the credit given for seized cash towards existing tax liability under proceedings u/s 154 of the Act is illegal. The provisions of section 132B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment is in order. With regard to charging of interest u/s 234B and 234 C of the Act for non-payment and short payment of advance tax is concerned, we have already held that the amendment in section 132B of the Act is held to be prospective in operation from 1.6.2013 and accordingly not applicable for Asst Year 2006-07. Hence we hold that no interest u/s 234B and 234 C of the Act shall be charged by the Learned AO from the date of seizure of cash to the date of completion of assessment in respect of seized cash of ₹ 20,00,000/-. In the result, the appeal of the revenue is dismissed. 59. In view of the above, it is respectfully submitted that Your Honours may direct the Assessing Officer to give credit of cash seized as requested by the appellant and consequentially, work out the interest payable/refundable. 38. On hearing both the sides and also considering the above facts of the case, we find the seized cash is available for adjustment towards advance tax liability which constitutes any existing liability as defined in effect prior to the amendment by the Finance Act, 2013. This interpretation is supported by the Co-ordinate Bench of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to the present case. 4) The order of the Ld. CIT(A) may be vacated and that of the Assessing Officer be restored. 5) The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal. 42. Briefly stated the relevant facts include that the assessee is an individual and derives his income from salary, interest, etc. The assessee is also Managing Director of Laxmi Engineering Services P. Ltd. which is engaged in the business of infrastructure and other project developments. A search was carried out on 15.06.2010 u/s. 132 of the Act in the case of Laxmi Engineering Services P. Ltd. and the assessee. During the course of the search, various documents and cash amounting to ₹ 2,51,44,400/- was seized were seized. The cash seized was found in the possession of the assessee. The Assessing Officer issued a show cause to the assessee as to why cash seized should not be taxed as additional income of the assessee. In reply thereto, the assessee submitted that in the statements recorded during search, it was categorically stated that this cash was generated by inflating the expenses of Laxmi Engineering Services Ltd. and it was kept for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 80IA(4) of the I. T. Act 1961, in such circumstances, this cash of ₹ 2,51,44,400/- will become substantive income of the assessee. In view of the foregoing facts, the cash of ₹ 2,51,44,400/- is treated as unexplained money. Accordingly, the said amount of ₹ 2,51,44,400/- is hereby brought to tax for the A.Y. 2011-12. Penalty proceedings u/s. 271(1)(c) 271AAA are being initiated separately. 47. From the above, it is evident that there is no categorical finding of Assessing Officer if the said cash belongs to assessee or his company. Assessing Officer opines that the said cash is needed to be added only on protective basis. In case deduction u/s 80IA(4) is claimed by the company, in the hands of Shah, Assessing Officer opines that the addition becomes substantive . The contents of para 8 of Assessing Officer s order is relevant. The same is extracted as under :- 08. In view of the above, information, explanation submitted, and on verification of the seized materials etc. the total income of the assessee for the assessment year under the consideration is assessed as under: Salary ₹ 12,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the statement recorded during the search and post search enquiries that the impugned cash was included in additional income of the said company and its source was inflation of expenditure in the case of the said company. 14. In this respect, further reliance is placed on the statements of the employees of the said companies. It is submitted that if the evidence unearthed at the time of search and other circumstances of the case are taken note of, irresistible conclusion which would emerge is that the sole source of cash is inflated expenditure in the hands of Laxmi Civil Engineering Pvt. Ltd. In this regard, Your Honours kind attention is invited towards the statement of Anuradha Amrut Gulavani, who is looking after cash, vouchers, expenditure and other accounting function of the assessee. She was pointed out the deficiency found during the course of search in the maintenance of ledger accounts and vouchers. In this reply, she agreed that the voucher for the wage payments are prepared by her on the instructions of Shri Vijaykumar Shah and Shri Rajendra Doshi. The name of sites are also told by them. On such instructions, she used to prepare the vouchers and mentioned an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Bank details are maintained and accounted for. The payments through cheque are made by me according to the instructions of Shri Vijaykumar Shah and Shri Rajendra Doshi. The same are entered in the books immediately. The details of cash payments are received from the cashier which are also entered in books. Q. 6 Please confirm the above facts Ans. Yes, I do confirm that the facts stated by Sou. Anuradha Gulavani are true. The expenditure under the head of wages debited to the P L A/c of Laxmi Civil Engineering Services Pvt. Ltd. are accounted for in the books by me on the basis of such self-made vouchers. The actual payment against such vouchers is not made. 16. Most importantly the above statements have been confirmed and reiterated repeatedly by both the directors during the course of search itself. The spontaneous statements recorded during the course of the search has to be believed in absence of any contrary evidence. It would not be out of context to point out that subsequently the same cash has been adjusted by the Revenue towards outstanding tax demand of M/s Laxmi Civil Engineering Services P. Ltd. Thus, it can be seen that at the time of search it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Apex Court in the case of CIT v. M. Ganapathi Mulidhar [53 ITR 623]. In the said case, the issue was regarding taxability of remittances received by the assessee from abroad. The Hon ble Supreme Court, in the facts of that case, after evaluating the material on record, upheld the addition made by the Revenue. While holding so, the Hon ble Supreme Court took into account inconsistencies in the explanation offered by the assessee at different point of time Thus, the judgment given by the Supreme Court is totally based on the facts of that case and no ratio as such has been laid down. 49. On hearing both the sides and after considering the above extracted written submission of the assessee, we analyzed the following facts relating to the (i) facts seized cash from the residence of Sri Shah, (ii) the evidences gathered during the search action, (iii) statements recorded by the search team, (iv) the offer of the explanation of the assessee why the said cash is discovered at his residence, (v) the fact of offering the same as an additional income of company etc. We have also considered the fact that Shri Shah does not have any other source leave alone the business income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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