TMI Blog2021 (1) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... en by Revenue Addition u/s. 40A(3) - cash payment made to M/s. Kokilam Foundations Pvt.Ltd. with whom assessee entered joint venture - HELD THAT:- We are of the considered view that transactions of investment in joint venture cannot be brought into ambit of provisions of section 40A(3) - CIT(A), after considering relevant facts and by following decision of ITAT., Chennai in the case of M/s. R.K.Powergen Pvt.Ltd.[ 2016 (6) TMI 1410 - ITAT CHENNAI] has rightly deleted additions made by AO towards disallowance of cash payment u/s. 40A(3) - No error or infirmity in the order of learned CIT(A) and hence, we are inclined to uphold the findings recorded by learned CIT(A) and reject ground taken by Revenue Addition towards profit and gains from business or profession - admission of revised statement of total income in absence of revised return - HELD THAT:- We find that restriction imposed by Hon ble Supreme Court in the case of M/s Goetz (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] is only on the Assessing Officer but not on the appellate authorities. Appellate authorities are empowered to admit any additional claim or ground, even if, such claim was not before Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order passed u/s 153A r.w.s 143(3) of the IT Act for AY 2008-09 in the assessee s case. 2.1 The Id. CIT (A) having deleted the disallowance on the ground that it is not on the basis of any seized documents/materials, ought to have appreciated that u/s 1 53A of the IT Act, the AO is entrusted with the duty of bringing to tax, the total income of the assessee whose case is covered by Sec. I53A of the IT Act for each assessment year falling within the six assessment years immediately preceding the previous year in which search was conducted and that even if an assessment order was passed u/s 143(1)/143(3)/147, the AO is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during search and seizure operation. 2.2 Having regard to the fact that in spite of ample opportunity accorded, the assessee failed to produce the original bills/vouchers and the details of all the expenses debited to the P L account before the AO. the Id.CIT(A) ought to have confirmed the disallowance made by the AC in the assessment order passed u/s 153A r.w.s 143(3) of the IT Act for AY 2008-09 in the assessee s case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of assessment order is also 25/3/2014 and that the said letter dt. 25/3/2014 is not available on record nor assessee has filed any photocopy of the same duly acknowledged by AO and as such production of letter dated 25/3/2014 before learned CIT(A) is an afterthought on part of the assessee. 4.2 Admitting but not accepting that the letter dt. 25/3/2014 was handed over to the AO. the ld.CIT(A) ought to have appreciated that the same was NOT considered for the simple reasons that the total income could only be revised by filing revised return of income and not by filing a reconciliation statement as laid down by the Hon ble Supreme Court in the case of M/s Goetz (India) Ltd 284 ITR 323. 3. At the outset, we find that there is a delay of 3 days in filing appeal by Revenue, for which necessary petition along with affidavit has been filed for condonation of delay. The reasons given by Revenue for not filing appeal within the time allowed under the Act is under a bonafide belief. The learned AR has no objection for condoning delay in filing the appeal. Therefore, we condone the delay in filing appeal by the Revenue and admit the same for hearing. 4. Brief facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books only ₹ 7,70,00,000/- was accounted. When asked to show cause, the assessee s A R submitted on 28.03.2014 that the unaccounted investment was from the amount of undisclosed receipt of ₹ 2,50,00,000/- from Om Shakthy Agencies in the Asstt. Yes 2007-08. However it was found that out of the total amount of Rs. I0,00,00,000/- paid to Kokilam Foundation it was found that ₹ 500,00,000/- was paid in cash. When asked to show cause why it should not ho disallowed u/s4OA(3) of the Act, the Id. A/R submitted a reply that it was an investment and not an expenditure. It was also submitted that an additional income of Rs,4,25,00,000/- on the investment was being offered for taxation in the Asstt. Year 2009-10. But the contention of the assesses is not correct and acceptable. The assessee is regularly engaged in purchase and sale of land in an organized manner, The land has been shown as stock in trade in the balance sheet, The assossee may, now claim that R,,4,25,00,000/- is the return on investment. But it is actually the profit of the assessee. Hence the payment of Rs, 10,00,00,000/- was his revenue expense even bough he is now claiming it to be investment and eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance towards similar expenditure in the assessment framed u/s.153A of the Act, without reference to any incriminating material found during the course of search. The learned CIT(A) further noted that Assessing Officer has not made any reference to search finding which warrants disallowance of expenditure on ad-hoc basis and accordingly deleted additions made towards 50% of ad-hoc disallowance of expenses. As regards additions made towards disallowance of cash payment u/s.40A(3) amounting to ₹ 5.00 crores , learned CIT(A) by taking note of various facts and also by following the decision of ITAT Chennai Bench in the case of M/s. RK Power Gen Pvt. Ltd in ITA No.1864 to 1867/Chny/2015 deleted additions made towards disallowances of expenditure u/s.40A(3) by holding that cash payment made to M/s. Kokilam Foundations Pvt.Ltd. was more like financial arrangement whereby assessee has invested a sum of ₹ 10 crores with an expectation of 24% rate of return. As per the terms of MoU and supplementary agreement dated 27.02.2013, transactions between the parties are akin to investment activity which cannot be considered as payment made for purchase of land merely for the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that assessee has maintained complete books of accounts and vouchers to back up its claim and the same were produced before Assessing Officer for verification. The learned CIT(A) after considering relevant facts has rightly deleted additions made towards 50% ad-hoc disallowance of expenses. 10. We have heard both parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from the records indicate that ad-hoc disallowances made by Assessing Officer towards various expenses have been allowed as genuine in the scrutiny assessment completed u/s.143(3) of the Act for the relevant assessment year. It is also an admitted fact that Assessing Officer has made ad-hoc/estimated disallowance of expenses without making any reference to incriminating materials found as a result of search which indicate that expenditure debited to profit loss account is not genuine expenditure and which are not incurred for the purpose of business. It is well settled principle of law that unless Assessing Officer makes out a case that expenditure debited to profit loss account is not genuine and which are not supported by necessary eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 40A(3), which can be at best said an afterthought, but not a document, which proves legitimacy of the assessee. The learned DR further submitted that as per financial statement filed along with return of income, assessee has shown investments made with joint venture as purchase of land and stock-in-trade which itself sufficient to hold that transactions between the parties are in the nature of purchase of lands and as such any cash payments made for revenue expenditure was hit by provisions of section 40A(3) of the Act. The learned CIT(A) without appreciating above facts has simply deleted additions made by Assessing Officer by considering supplementary agreement filed by assessee, which is much after the date of search. 13. The learned AR for the assessee, on the other hand, supporting order of learned CIT(A) submitted that assessee has filed necessary evidences before learned CIT(A) to prove that entries in books of account was an inadvertent error committed by Accountant and which is not detrimental to decide the nature of transaction and what is relevant is true nature of transaction as per evidences placed before authorities. In this case, MoU and supplementary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly, assessee has admitted profit as income from investments for assessment year 2009-10. From over all reading of agreement between parties, it is very clear that transactions between the assessee and M/s.Kokilam Foundations Pvt. Ltd. is only investment in joint venture which cannot be considered as payment for purchase of land. Further, in order to treat purchase of land as stock in trade, the assessee must be owner of lands and land should be registered in the name of the assessee. However, in this case Assessing Officer has failed to bring on record any evidence to prove that lands have been registered in the name of assessee. In fact, assessee has clearly proved that lands were never purchased in the name of assessee. No doubt, assessee has originally treated payment made to M/s.Kokilam Foundations Pvt. Ltd., as stock-in-trade in his books of account. But, at the time of assessment, assessee has filed revised profit and loss account excluding transactions and stated that by inadvertent error committed by Accountant, the transaction regarded as purchase of land and stock-in-trade in books of account. However, real nature of transaction between the parties was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered view that transactions of investment in joint venture cannot be brought into ambit of provisions of section 40A(3) of the Act. The learned CIT(A), after considering relevant facts and by following decision of ITAT., Chennai in the case of M/s. R.K.Powergen Pvt.Ltd.(supra) has rightly deleted additions made by Assessing Officer towards disallowance of cash payment u/s. 40A(3) of the Act. We do not find any error or infirmity in the order of learned CIT(A) and hence, we are inclined to uphold the findings recorded by learned CIT(A) and reject ground taken by Revenue. 18. The next issue that came up for our consideration from ground no.4 of Revenue appeal is deletion of addition of ₹ 58,97,318/- made by Assessing Officer towards profit and gains from business or profession. The facts with regard to impugned dispute are that assessee has declared profits from business or profession amounting to ₹ 24,40,011/-. Further, at the time of assessment proceedings, he has filed revised statement of profit loss account and declared loss of ₹ 34,57,307/- by excluding purchase of land and stock in trade from books of account which resulted in reduction of net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, but fact relating to such claim should be on record. In this case, facts with regard to claim of loss from business or profession was already on record and no new facts are required to be verified and hence, we are of the considered view that there is no merit in the ground taken by Revenue in light of Hon ble Supreme Court judgement in the case of M/s Goetz (India) Ltd. Vs. CIT (supra) and hence, the same is rejected. 22. As regards declaration of loss from business or profession as against profit in the original return filed for relevant assessment year, we find that learned CIT(A) has recorded categorical finding in light of revised profit loss account filed by assessee that after exclusion of purchase of land and stock in trade from books of account, the net profit from business or profession resulted into net loss. The facts of finding recorded by learned CIT(A) has not been controverted by Revenue with any evidences. On the other hand, assessee has filed necessary evidences to prove that transactions between the assessee and M/s. Kokilam Foundations Pvt. Ltd. was an investment transaction which has been regarded as purchase of land and stock in trade by inadvertent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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