TMI Blog2021 (1) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue. Thus, the Ld.CIT(A) is not justified in rejecting the claim on such a ground which is clearly contrary to the facts on record. As regards the apprehension of the Ld. DR, that if the claim for application of income is allowed it would nullify the effect of disclosure made by the Assessee, is concerned, we find that once the income has been offered by the Assessee then the application thereof could not be denied because essentially what has been claimed by the Assessee is merely telescoping of the said income into the increase in its WIP of the project from where such receipts were generated. See S. NELLIAPPAN [ 1967 (5) TMI 6 - SUPREME COURT] . Even in the absence of direct evidence it could be inferred that cash credits reflected incomes kept out of the books by the Assessee and therefore no additions could be made in this . Claim of telescoping/application of income offered by the Assessee we observe that before the Ld.CIT(A), the Assessee has claimed that 10% of the said receipts is liable to be taxed in this year and the balance will be carried forward till the completion of the project. Only the differential amount is allowed to be telescoped i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Nirmal L Mehta[ 2004 (4) TMI 43 - BOMBAY HIGH COURT] holding there is no estoppel against statute and the assessee could claim that its income is not taxable even if the same is offered in the return of income. In the cases of Abdul Qayumme [ 1989 (12) TMI 37 - ALLAHABAD HIGH COURT] and SAIL DSP [ 2003 (2) TMI 46 - CALCUTTA HIGH COURT] it has been held that no amount of admission could lead to taxing an item if it is not otherwise taxable under the Act. In view of the above facts and judicial precedents, we find in favour of the Assessee and Grounds Nos. 2,3 and 4 are allowed. Disallowance of interest expenditure - HELD THAT:- DR has not controverted the fact that the assessee had sufficient amount of interest free funds available with it in order to advance the same to its sister concerns.Assessee as well as its sister concerns were in the same line of business. In view of the said facts and the law as laid down the disallowance made by the Assessing Officer and as affirmed by the Ld.CIT(A) deserves to be deleted. So far as the Department's appeal is concerned, admittedly the same is agitating against the relief granted by the Ld.CIT(A) relying upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant submits that the learned Commissioner of Income tax (Appeals) erred in not admitting the additional ground that only 10% of the undisclosed income ought to be subjected to tax in the year under appeal and balance be carried forward for taxation in the year of completion of project based on the accounting policy of revenue recognition consistently and regularly followed by the appellant and accepted by department in its own case. (b) The appellant submits that the additional ground involve a question of law without requiring to call for any additional facts and in the interest of natural justice ought to be admitted. 4. (a) The learned Commissioner of Income tax (Appeals) ought to have held that based on the accounting policy consistently and regularly followed by the appellant and accepted by the department only 10% of the On-money received in respect of Prabhadevi Project should be subjected to tax in the year under appeal and the remaining be taxed in the year of completion of the project by matching the total receipts with the total project cost. (b) The Learned Commissioner of Income Tax (Appeals) in arriving at the conclusion that the entire On-money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant further submits that the order passed by the AO under section 143(3) r.w.s. 153C of the Act is unsustainable also because the same has been passed without obtaining the necessary, proper and judicious approval as contemplated under section 153D of the Act which fact is also evident from the assessment records of the Appellant including the order sheet notings of the AO after framing the said assessment. 1.3 The Appellant therefore prays that the assessment so framed by the AO and as affirmed by the Ld. CIT (A) is bad in law and deserves to be quashed. 2. Without prejudice to the above grounds already raised, the Appellant submits that in the facts and circumstances of the case and in law, the Ld. CIT (A) erred in upholding the action of the AO in denying the application of income amounting to ₹ 57,16,72,184/- treated as additional project WIP cost, sourced out of the income disclosed at the time of search, merely on the ground that no explanations / supporting were furnished by the Appellant regarding the same. 2.1. While doing so the Ld. CIT (A) failed to appreciate that: (a) No specific show-cause notice was issued by the AO calling for the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in response to Q. No. 24 Mr. Ramesh Shah had also stated that he would also provide details as to the application of the said amounts in the on-going project of the Assessee at Prabhadevi known as Sumer Trinity Towers . The said details of application of such income was subsequently provided by the Assessee, vide letter dated 31.03.2011 which is furnished at page No. 52 to 56 of the Paper book filed by the Assessee. 6. At the time of Assessment, the Assessing Officer called for an explanation on the addition to work in progress [WIP] account of the assessee not only for the A.Y.2010-11 and the A.Y.2011-12 which is under appeal. The explanation in regards thereto was given by the assessee and it was stated by the Assessee that an addition of ₹.57.16 Crores to WIP Account was on account of application of income declared as on-money cash receipts by the Assessee and its sister concern, VPPL. So far as the on-money disclosure is concerned, the assessee offered the same in its return of income. However, the Assessing Officer disallowed the application of income of ₹.57.16 Crores on the ground that no evidence of expenditure was furnished by the Assessee. As such the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person who has actually offered the income. Since VPPL and the Assessee are two different entities, he held that the Assessee is not entitled to claim application of income in its hands, the income offered by VPPL. Thus, the claim of application of income as made by the assessee was denied. 9. As far as the claim of interest is concerned the same was partly allowed after relying on the remand report as furnished by the Assessing Officer. The Ld. CIT(A) however, rejected the additional grounds raised by the Assessee. The Ld. CIT(A) firstly observed that the said grounds are inadmissible and thereafter rejected the same after discussing the merits. 10. We have heard the rival contentions, perused the orders of the lower authorities and also the material on record including the paper books and written propositions filed by the Assessee, it was noticed that the Assessee filed a paper book on additional evidence before us. As such, the preliminary issue raised by the bench was as to the admissibility of the paper book on additional evidence. We therefore asked the Ld. Counsel for the Assessee to satisfy us as to the admissibility of the Paper book on additional evidence. To th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. Therefore, it was submitted that the additional evidences are filed only to counter these observations of the Ld.CIT(A) that the project was substantially completed. 13. Ld. Counsel for the assessee submitted that, during the appellate proceedings the Ld.CIT(A) had remanded certain issues in appeal to the Assessing Officer for his remand report. However, no remand report was called from the Assessing Officer as regards the claim of application of income to the extent of ₹.57.16 Crores on the only project undertaken by the assessee and on which the expenditure was incurred despite the fact that the Ld.CIT(A) had himself called details regarding the current stage of completion of the project. Therefore, it was argued that the approach of the Ld.CIT(A) was biased and it in fact led the assessee believe that the CIT(A) was convinced that the project was still under construction which required substantial quantum of work to be done. It is only because the Ld.CIT(A) neither intimated the assessee that he required some further evidences/documents nor his intention to make observations contrary to the facts on record, that the assessee had no choice but to file these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.CIT(A) has himself accepted incurring of expenditure in cash and particularly when despite the search on the entire group including residences of partners no cash was actually found or seized. 16. The Ld. Counsel for the assessee further argued that as per Rule 29 of the ITAT Rules a party is entitled to produce additional evidence if the Assessing Officer has passed the order without giving sufficient opportunity of being heard to the Assessee. Pointing out to the order of the Assessing Officer as well as the order noting s at Page No. 71 of Paper Book, it was argued that the Assessing Officer passed the order admittedly without issuing any show cause notice as regards the claim of expenditure or even without seeking any further clarification in the matter. Before the Ld.CIT(A), as well the evidences as required by him were furnished from time to time and the Ld.CIT(A) without calling for any further documents decided the issue against the assessee on observations totally contrary to the facts on record despite the fact that he himself accepted incurring of the expenditure by the assessee. As such the disallowance was made without granting a sufficient opportunity of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I had promised to submit some of the arguments in writing and this note is submitted accordingly. Matter concerning to Assessee appeal In the instant case, it can be seen that the returned income and assessed income remain same i.e ₹.48,56,82,421. The main disputed decision is in paragraph 7 and Assessing Officer has reduced WIP. Additional Ground of appeal and additional evidence: The reports of Assessing Officer (one dated 9.8.18 and other dated 29.10.18, the latter already submitted before members on 04.12.18) is enclosed and the same may kindly be considered. The additional ground of appeal may kindly be not admitted. In addition to submission of Assessing Officer, no bona fide reasons (inter alia, good and sufficient reasons as to why it is raised for first time now and why not raised before Assessing Officer) are adduced to admit the additional grounds. Also the views of Assessing Officer in regard to additional evidence may kindly be considered. 21. In reply Ld. Counsel for the assessee submitted in his written reply as under: - At the outset, it is most respectfully submitted that the above appeals have come up for hearing on vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the next date whether it is a virtual hearing or a physical hearing. It is only after the Ld. DR agreed for arguing the matter in Virtual Hearing that the same was heard by the Hon'ble Bench. As such, it is most respectfully submitted that a more than fair and reasonable opportunity of being heard is granted to the Ld. DR in the matter. Hence, the statement made by him in the first paragraph is inconsequential. 22. We have heard both the parties in detail, perused the order of the Authorities below and the additional evidences. We have also perused written submissions filed by the Ld.DR along with the reports of the Assessing Officer sent to the Office of the CIT(DR) for his assistance to present the case of the revenue. We observe that the notes sent by the Assessing Officer on admission of additional evidences as well as on merits of the additions/disallowances for the assistance of the Ld.DR to present the case is of only a repetition of averments already made in the Assessment Order. On a perusal of the application for additional evidence, the paper book containing documents on additional evidence and the arguments on both sides we observe that the Additional evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, those observations and findings are final. It is a settled law that the assessee cannot be worse off after filing an appeal before the Tribunal especially when there is no appeal by the Revenue. The Tribunal is not empowered to render even a finding adverse to the assessee on issues decided in his favour by the Ld.CIT(A) unless an appeal is preferred by the Revenue against such a finding as held in Puranmal Radhakishan v. CIT [31 ITR 294 (Bombay)], New India Assurance Co. v. CIT [31 ITR 844 (Bombay)]. We also find force in the argument of the Ld. AR that any remand at the present stage would amount to rendering an adverse finding against the assessee without any appeal from the Revenue which is also impermissible as per the Judgement of the Hon'ble Madras High Court in case of Ramaswamy v. CIT [40 ITR 377] wherein it has been held that, where decision of Commissioner is detrimental to Revenue, Revenue could appeal to Tribunal under section 33(3) of 1922 Act and in the absence of such appeal, Tribunal could only deal with only actual subject matter before it; namely appeal of assessee and where remand is intended for benefit of Respondent or where it would inevitably result i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Explanation to section 37(1) of the Act, the expenditure could not be disallowed by the Ld.CIT(A) on mere assumptions. It was further argued that once it is established that the expenditure was actually incurred, the Ld.CIT(A) erred in rejecting the same on the ground that the project was substantially completed and there was no need to incur any further expenditure. It was urged that the observation of the Ld.CIT(A) that the project is substantially completed is patently erroneous. In order to establish the same, the Assessee relied on current photographs of the project and the assessment orders of the subsequent years wherein the Assessing Officer has himself accepted that the project is under construction. Further, the Assessing Officer in the present proceedings in his assessment order observed that the project is still under construction. In fact, even the Ld.CIT(A) has merely relied on part Occupancy Certificate to render such an erroneous finding since the project is admittedly of four towers and even as per the Ld.CIT(A), the part OC is received only for two towers. As such, the basis of the Ld.CIT(A) in denying the claim is contrary to the facts on record. It was also po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on various judgements. 32. Ld. Counsel for the assessee further argued that as far as the application of income of ₹.10 Crores declared by VPPL in its returns but telescoping claimed in the hands of the Assessee are concerned, it was unjustly denied by the Ld.CIT(A) on the ground that application of income could be allowed only in the hands of the person who has offered undisclosed income. Ld. Counsel for the assessee stated that such an approach was contrary to the judicial precedents in the case of Elite Developers v. DCIT [73 ITD 379 (Nagpur)], J B Education Society v. ACIT [28 ITR (Trib) 284 (Hyderabad)] and Rajni M Patel v. DCIT [43 ITR (Trib) 628 (Ahmedabad)]. Ld. Counsel for the assessee therefore urged that the denial of application of income by the Assessing Officer and its affirmation by the Ld.CIT(A) is bad in law and such an action needs to be reversed. 33. Ld. CIT, DR argued that during the course of search no documentary evidence of expenditure was found and therefore the disallowance was justified. Ld. DR further argued that the observations of the Ld.CIT(A) have been read piecemeal and on a holistic reading of the order, the disallowance sustained by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt statutory provision has not been brought to the notice of Court. [Union on India Anr. Vs Reghubir Singh (SC) 178 ITR 548, Sri Agasthyar Trust Vs CIT (SC) 236 ITR 23]. To perpetuate an error in no heroism [Distributors (Baroda) P. Ltd. Vs Union of India ors. (SC) 155 ITR 120]. To justify that the income in dispute (unaccounted income brought out by a search under section 132, which at the primary stage itself is not a mistaken belief eventhough this is countered by assessee with the argument that the claim made in appeal is supplemental to an admitted issue and is a mistaken belief , in my view the argument may not be accepted as the genesis of issue arises from search under section 132 where unaccounted income is detected) is to be treated as income from other sources, I rely on enclosed decisions and the essence of the decisions (the decisions pertain to finance business carried out by cooperative society) is that unaccounted income falls under head as income from other sources. (i). M/S.Perungazhi Service Co-Op v. ITO Wd-2(5), TVM, Trivandrum on 09 July, 2019 I.T.A. No.158/Coch/2018. (ii). The Income Tax Officer, Ward-2(3), Range-2, Trivandrum. v. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71TD 204 (Mumbai) Kwal Pro Exports v. ACIT - (2008) 110 ITD 59 (Jodhpur) Eiscsson AB v. DD1T (Intl. Tax) - (2012) 191TR(T) 341 (Delhi) Slocum Investment (P) Ltd. v. DCIT (2017) 106 ITD 1 (Delhi) Further in the case of CIT v. Maersk Global Service Centre (I) Pvt Ltd (ITA No.692 and 693 of 2012 dated 22-08-2014 before the Hon'ble Bombay High Court) it has been held that the Revenue cannot raise grounds before the Tribunal to get over the defects and lacunas so also any discrepancies in the order of the Transfer Pricing Officer. As such the position that the Ld. DR cannot argue contrary to the Assessment Order is far too settled and does not deserve any further deliberation in the humble submission of the Assessee. 3. It is submitted that once it is so held that the income has been rightly considered under the head Profits and Gains of Business and Profession then the further argument of the Ld. DR that the application of income from the said income disclosed during search would not be permissible becomes inconsequential. In any case, it needs reiteration that the Ld. CIT(A) has himself admitted that the expenditure has been incurred and then made observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the Assessing Officer himself in the Assessment Order for the relevant year as well as subsequent years. He further stated that, if the above findings remain unchallenged then there cannot be a dispute as to the factum of incurring of expenditure. Ld. Counsel for the assessee further stated that the Revenue has not stated as to how the judgements relied on by the Assessee are not applicable to its case. Finally, it was argued that, the Application of income as claimed by the Assessee apart from being accepted in principle on facts by the Ld.CIT(A) is also supported by various judgements and must therefore be allowed. 38. However, the Ld. AR submitted without prejudice that since the assessee has sought to offer income at 10% of the on-money received of ₹.47.16 Crores its claim of application be allowed to the extent of the difference between the on-money received and the profit offered in the current year i.e. ₹.47.16 Crores minus 10% i.e. the profit offered in the current year. 39. We have heard the rival contentions, perused the judgements cited by either parties and also perused the material on record including the written synopsis of arguments fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in respect of such expenditure which is on account of search operation there can generally be no evidence and the insistence on documentary evidence regarding the claim of expenditure may not be justified. In this regard the Hon'ble Gujarat High Court has accepted the said position in the case of Panna Corporation (supra) which has been followed by the co-ordinate bench of the Tribunal in the case of Prime Developers v. DCIT in ITA Nos 175 to 178 of 2010 wherein it has been held by the Tribunal as under: - 42. Further, from the judgment in case of Panna Corporation (supra), it is settled proposition that there is no need for the assessee to demonstrate the genuineness of the claim of unaccounted expenditure in the cases of this kind. The underlined logic is that the unaccounted expenditure is always unevidenced and never maintained. Therefore, transferring onus on to the assessee in matters of this kind is not approved. Ex consequent, it is for the Assessing Officer allow necessarily reasonable deduction towards such unaccounted expenditure without demanding evidences, considering the nature of industry and also evidences relating to extents of net profits earned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee firm. During the course of such scrutiny, the Assessing Officer has found that there were shops and specific in number to be allotted to the nominees of the Municipal Council, shops to be sold in open market, all of which were located floorwise. Therefore, he ought to have carried out a proper exercise, according to the Tribunal. The 'on money' could not have been treated as uniform irrespective of the location of the shop. There are specific advantages derived by the location of the shop on the ground floor, or basement and with frontage to the road. Therefore, all these factors and test not being applied, the Tribunal modified the Assessing Officer's order. The Tribunal, to be fair to both sides, did not probe or scrutinise the source of the power of the Assessing Officer in making reference to the DVO. It proceeded on the footing that such a reference could have been made and if made, what are the consequences thereof. Thus, the consequences then have been considered, properly analysed and to the extent the law permits, the order of the Assessing Officer has been maintained. 21. When it was disturbed and interfered with, the Tribunal found that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the facts on record. It is needless to say that even otherwise the Ld.CIT(A) is not justified in siting on the judgment of the necessity or otherwise of the need for incurring expenditure by an Assessee in running his business. 43. As regards the apprehension of the Ld. DR, that if the claim for application of income is allowed it would nullify the effect of disclosure made by the Assessee, is concerned, we find that once the income has been offered by the Assessee then the application thereof could not be denied because essentially what has been claimed by the Assessee is merely telescoping of the said income into the increase in its WIP of the project from where such receipts were generated. On this we find support from the Judgement of the Honourable Supreme Court in the case of CIT v. S. Neliiappan [66 ITR 722 (SC)] in which it has been held as under: It is true that there is no direct evidence of any connection between the cash credit entries and the income withheld from the books of account by the assessees. But if the Tribunal inferred that there was a connection between the profits withheld from the books and the cash credit entries, it cannot be said that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income, then, telescopic benefit should be given to the total amount. Similar view is taken in the case of Elite Developers v. DCIT [73 ITD 379 (Nagpur)]. The Ld. DR has not cited any contrary judgements and in that view we respectfully following the above judgements of the Tribunal allow the claim of telescoping to the Assessee. 45. However, as regards the amount of claim of telescoping/application of income of ₹.47.16 Crores offered by the Assessee we observe that before the Ld.CIT(A), the Assessee has claimed that 10% of the said receipts is liable to be taxed in this year and the balance will be carried forward till the completion of the project. In that view of the matter, only the differential amount is allowed to be telescoped i.e. the claim of application is restricted to ₹.42.44 Cr (₹.47.16 Crore (-) 10%) since to the own admission of the Assessee, 10% is the estimated profit element and the balance is on account of expenditure incurred. Accordingly, Grounds Nos. 1(a) to (c) and Additional Grounds 2 to 2.1 are partly allowed. 46. Ground Nos.2, 3 and 4 are on taxability of on-money declared by the Assessee in its return of income. The Assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till such time as the project is completed irrespective of the cash received during the year. It is submitted that, the Assessing Officer himself accepted the said method in respect of the project receipts in cheque by the Assessee, but however, denied the said treatment in case of cash receipts in respect of the same project. Therefore, it is submitted that the Ld.CIT(A) erred in taxing the entire on-money in the year of receipt itself. Ld. Counsel for the assessee also relied on the judgements in the case of ACIT v. Videocon Atithi Shelters Pvt. Ltd. in ITA Nos. 3496 to 3499/Mum/2009, Wall Street Constructions Pvt. Ltd. v. JCIT [101 ITD 156 (Mum) (SB)] and JCIT v. K. Raheja Pvt. Ltd. [ 102 ITD 414 (Mumbai)] to contend that in such cases where project completion method is followed the income is to be taxed only in the year of completion of the project irrespective of the amount of receipts or expenditure during the year. 51. Ld. Counsel for the assessee further contended that the Assessee has been regularly and consistently following the Project Completion Method of accounting for Prabhadevi Project which has also been accepted by the Department in earlier as well as in subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein is liable to be taxed and not the entire receipt. For this he relied on the decisions of the Hon'ble Bombay High Court in the case of CIT v. Hariram Bhambhani in ITXA 313 of 2013 and CIT v. Prime Developers in ITXA 2452 of 2013, Hon'ble Gujarat High Court in the case of CIT v. President Industries [258 ITR 654], DCIT v. Panna Corporation in Tax Appeal Nos. 323 and 325 of 2000 and also in the case of Dhanvarsha Builders and Developers Pvt. Ltd. v. DCIT [102 ITD 375 (Pune)] and DCIT v. Prime Developers in ITA Nos. 175 to 178 and 321 to 324/Mum/2010. Ld. Counsel for the assessee therefore urged that so far as the present year is concerned the profit could not be ascertained since the project is not complete and hence the entire on-money could not be taxed in this year, except to the extent of 10% consistently offered by the assessee. 54. It was further argued as regards Ground Nos. 3 and 4 that the Prabhadevi project from which the on-money cash receipts were generated is still not complete even as on date. Further, the books of accounts of the Assessee have not been rejected by the Assessing Officer or Ld.CIT(A) and therefore, in accordance with its regularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m made by the assessee seeking taxation of the on-money at 10% in the current year is in fact a tax neutral exercise, since the same would have to be offered to tax in the year of completion of the project. Thus, it was therefore argued that the said grounds be allowed. 58. Ld. DR vehemently supported the orders of the authorities below. Ld. DR firstly contended that the Ld.CIT(A) has rightly rejected the said grounds raised by the Assessee as additional grounds before him. Ld. DR argued that the claim made by the assessee is not supported by a revised return was therefore not admissible in view of the Judgements of the Supreme Court in the case of Goetze India Ltd. [284 ITR 700 (SC)]. Ld. DR further argued that even otherwise there is no dispute about the receipt of the cash by the Assessee in the relevant year and in that view of the matter the offer has been rightly made and rightly taxed by the Assessing Officer irrespective of the year of completion of the project. Ld. DR further relied on the statement of Mr. Ramesh Shah recorded at the time of search and argued that the same has not been retracted and in view of the same, the cash receipts in respect of on- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method has been consistently followed by the Assessee and has been accepted by the Department in earlier as well as subsequent years. Further, it needs specific mention that what has been claimed by the assessee is nothing but postponing the recognition of income to the year in which the project gets completed pursuant to the method regularly followed and even accepted by the Department every year. It is also not in dispute that the on-money is nothing but part of sale consideration of the flats and parking were sold by the assessee. When once it is part of sale consideration only 10% of such on money is liable to be taxed in this assessment year as per consistent method of accounting followed by the assesse. Thus, the grounds on this issue deserve to be allowed merely on the principle of consistency as laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang [193 ITR 321, 1992 AIR 377] and CIT v. Excel Industries [358 ITR 295 (SC)]. Further, admittedly the on-money is merely receipts of sale proceeds as noted by the Assessing Officer in his order at Page No. 3 and what could be taxed is only income and not receipts. We further note that in various judgements re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have yet to be made on the basis of method of accounting followed by the assessee. No elaborate discussion has been made in this regard in the assessment order. Therefore, it would be appropriate that this matter is restored to the file of the Assessing Officer to find out the method of accounting, namely, whether the assessee has been accounting the profits-(i) on year to year basis, (ii) on sale basis or (iii) on project completion method. The impugned undisclosed income of ₹ 14.74 lakhs may be brought to tax as per the method of accounting of the assessee. Accordingly, it is held that the undisclosed income of the assessee amounted to ₹ 14.74 lakhs, which is taxable as per the method of accounting followed by the assessee for recognition of the income '. 62. This has been followed by the Mumbai Bench of the Tribunal in the case of Guruprerna Enterprises (supra), holding that on-money received is taxable in the year of completion of the project and not in the year of receipt. The said judgement has been affirmed by the Hon'ble Jurisdictional High Court in the case of CIT v. Guruprerna Enterprises. The Revenue has failed to bring on record any contrary d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. This was held relying upon the findings of the Assessing Officer himself in his remand report. The interest pertaining to the said loans was ordered to be allowed and the balance disallowance was confirmed by him. Against the part of interest expenditure allowed by the Ld.CIT(A) the Department is in appeal and against the disallowance confirmed by him the Assessee is in appeal. 65. The Ld. Counsel for the assessee at the outset referring to Page Nos. 25, 122 to 132 of paper book and relying on the judgements in the case of Hero Cycles Pvt. Ltd. v. CIT [379 ITR 347 (SC)], CIT v. Reliance Utilities and Power Ltd. [313 ITR 340 (Bombay)] and CIT v. HDFC Bank Ltd. [366 ITR 505 (Bombay)] contended that it had sufficient owned funds in order to advance the same to the sister concerns and as such no disallowance could be made u/s 36(l)(iii) of the Act on the ground of diversion of borrowed funds. He further contended that even otherwise, it was not disputed by the Assessing Officer or the Ld.CIT(A) that the assessee as well as its sister concerns are in the same line of business and that any impact or lag in any of the projects carried out by them is likely to impact the group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reason or justification to make a disallowance in respect of the deduction which is otherwise available under Section 36(l)(iii) of the Act In the present case, when the assessee advanced an amount to RIL that was with a view to furthering the business of the assessee. RIL in turn was to execute counter guarantees in favour of financial institutions for the benefit of the discharge of the EPCG obligations by the assessee. That was a security for the guarantees which those institutions were required to execute under the EPCG Scheme. The funds which were invested in the wholly owned subsidiary were again for the purposes of the business of the assessee. There is evidently a significant interest of the assessee in the business of its subsidiary since both the assessee and the subsidiary are engaged in providing telecommunication services. Consequently, we are not inclined to interfere with the order of the Tribunal. There is a finding of fact that interest free funds borrowed are not utilized for the purposes of both the transactions. But quite apart from that, the finding is that the funds were deployed as a matter of commercial expediency and to further the business of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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