TMI Blog2023 (4) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... put into service - this addition is not sustainable, hence it is deleted. Disallowance of provision of expenses - AO has disallowed the deduction of this provision and correspondingly did not exclude from the work-in progress - CIT(Appeals) concurred with the ld. Assessing Officer by observing that assessee had claimed certain expenses, which were found to be in the nature of provisions and being unascertained liabilities, they cannot be allowed to the assessee - HELD THAT:- A provision is being made in the accounts for contingent liability. Sometime a liability is discernible but its complete crystallization cannot be ensured on the basis of material available and therefore, a provision of certain expenses are being made and if a provision is found genuine reasonable qua need of the business based on earlier years feed back, then it can be allowed as a deduction namely in the case of assessee under Head No. 5 provision of Bank interest has been made. AO has disallowed the deduction of this provision and correspondingly did not exclude from the work-in progress. Both these things cannot be permitted simultaneously. There is no finding at the end of the ld. Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2012-13 passed under section 250 of the Income Tax Act, 1961. 2. In ITA No. 219, 222/GAU/2019, the assessee has raised the following grounds:- (1) That the ld. CIT(A) has fails to appreciate all the averments/objections taken by the appellant in its written submission dated 11.10.2018 and was in gross violation of natural justice while dismissing the case without considering the written submission filed through online on 11.10.2018. That the ld. CIT(Appeals) ought to have decided the issue raised by the appellant instead of rejecting the same without entertaining. (2) That the ld. CIT(Appeals) has erred in law and in fact while not adjudicating the addition of Rs.4,70,00,000/- (for A.Y. 2012-13), Rs.2,05,00,000/- (for A.Y. 2013-14), Rs.1,75,00,000/- (for A.Y. 2015-16) made by the Assessing Officer u/s 68 of I.T. Act, 1961 without appreciating the fact of the case mentioned in Form No. 35 itself. 3. In ITA No. 224/GAU/2019, the assessee has raised the following ground :- That the ld. CIT(Appeals) was not justified while confirming addition of Rs.2,07,20,125/- without properly appreciating the fact of the case . 4. The assessee has raised the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be excluded/ignored for the purpose of this case. (9) For that in the facts and circumstances of the case the statement of third parties on which the Ld Assessment officer relied during the course of assessment proceeding were not subjected to cross examination for the assessee, thus the third-party statement relied upon should be excluded/ignored for the purpose of this case. (10) For that the learned CIT (Appeals) erred in confirming the interest u/s 234 A/B/C the same was unjustified and hence the same be recalculated as per the applicable law. (11) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. (12) The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal. 5. The assessee has raised the following revised grounds of appeal in ITA No. 222/GAU/2019:- (1) For that in the facts and circumstances of the case the addition of Rs. 1,75,00,000 merely on the basis of disclosure made by the assessee and without any corroborative evidence is bad in law, uncalled for, unjustified a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f third parties on which the Ld Assessment ^officer relied during the course of assessment proceeding were not subjected to cross examination for the assessee, thus the third-party statement relied upon should be excluded/ignored for the purpose of this case. (11) For that the learned CIT (Appeals) erred in confirming the interest u/s 234 A/B/C the same was unjustified and hence the same be recalculated as per the applicable law. (12) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. (13) The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal. 6. The assessee has raised the following revised grounds of appeal in ITA No. 224/GAU/2019:- (1) For that in the facts and circumstances of the case the Ld Assessing Officer erred in disallowing the provision of expenses of Rs.2,07,20,125 which was part of the cost of the projects of the assessee. Thus the addition made was unjustified, illegal and deleted. (2) For that in the facts and circumstances of the case the lower authorities failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT (Appeals) erred in confirming the interest u/s 234 A/B/C the same was unjustified and hence the same be recalculated as per the applicable law. (12) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. (13) The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal. 7. Now we take ITA Nos. 219 224/GAU/2019 for A.Y. 2012-13. ITA No. 219/GAU/2019 has emerged against an assessment proceeding carried out under section 153A read with section 143(3) of the Income Tax Act. The assessment order was passed on 31.12.2017. ITA No. 224/GAU/2019 has emerged vide assessment order dated 30.03.2015 passed under section 143(3) of the Income Tax Act. 8. Before taking the grounds of appeal in a seriatim, we drew our attention to the brief facts namely, the assessee is engaged in the business of Real Estate. It has filed its original return electronically on 30.09.2012 declaring total income of Rs.53,69,210/-. A notice under section 143(2) was issued vide which case of the assessee was selected for sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee while impugning the order of ld. CIT(Appeals) dated 15.02.2019 passed on an assessment under section 153A submitted that ld. Assessing Officer has not referred discovery of any incriminating material in the assessment order. As far as the share application money received by the assessee is concerned, it is already in the books of account and assessment under section 143(3) has been passed but it was not disbelieved, no addition was made. Thus, unless some fresh material was found during the course of search, how the revenue can disturb the issue, which has already attained finality. He made reference to the assessment order dated 30.03,.2015 passed under section 143(3) before the search was carried out upon the assessee. 14. The ld. D.R., on the other hand, drew our attention towards paragraph no. 3.1 of the assessment order and submitted that during the course of search, one Inspector was deputed to carry out spot verifications at Chokhani Group, who indulged providing accommodation and his finding demonstrated that this share application money was bogus. 15. We have duly considered the rival contentions. There is no doubt that the assessee has filed the original return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person. Order of the ITAT Delhi Bench in other cases viz. Asha Rani Lakhotia vs. ACIT and Subhag Khattar Vs. ACIT are on the same line. Hon'ble Delhi High Court in the case of Subhag Khattar in Tax Appeal No.60 of 2017 has considered the following question of law: Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the additions made under Section 153A read with Section 143(3) of the Income Tax Act, 1961 in the circumstances of the case, were not justified and supportable in law? After putting reliance upon its decision in the case of CIT Vs. Kabul Chawla (supra) has replied this question as under: 6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the ITAT. The ITAT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating material, as against the finding of the Delhi High Court in Filatex India Ltd. v. CIT- IV (2015) 229 Taxman 555 wherein it is held that during the assessment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search? 35. Hon'ble Court concurred with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed. 11. It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006-07 already stood completed and the returns in these years were accepted under Section 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. 12. The position of law in other decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... progress. The ld. CIT(Appeals) observed that alleged provisions, if were included in the value of closing WIP, then it could not be proved by the assessee and, therefore, they are not to be allowed. 22. We have duly considered the rival contentions and with their assistance gone through the record carefully. The assessee has made a detailed representation on this issue. The stand of the assessee is that both the authorities have erred in disallowing the entire provision of expenses. According to the assessee, it has made provision, which was debited to the profit loss account and correspondingly enhanced the WIP. If it is disallowed to the assessee as expenditure, then its inclusion from the WIP has also to be excluded. If this exercise is not being carried out by the ld. Assessing Officer, then the profit ratio would increase at 19.12%, which is a very abnormal profit in the line of construction. 23. We have duly considered the rival contentions and gone through the record carefully. A provision is being made in the accounts for contingent liability. Sometime a liability is discernible but its complete crystallization cannot be ensured on the basis of material available an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income on 28.11.2017 declaring total income at Rs.1,76,45,,600/-. The ld. Assessing Officer has passed a very brief assessment order and has made addition of equal amount, his finding reads as under:- 28. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. 1st Appellate Authority has dismissed the appeal for want of prosecution. She has reproduced certain Interim Order-sheet entries in the impugned order and thereafter held that assessee did not file detailed submission, therefore, its appeal is dismissed. This order can never be termed as a speaking order. 29. While impugning the orders of Revenue authorities, ld. Counsel for the assessee submitted that the ld. Assessing Officer has not discussed any detail except a reference to the statement of assessee, whereby under section 132(4), he has made disclosure. The copy of such statement has been placed on the paper book from pages no. 1 to 4. On the other hand, ld. D.R. relied upon the order of ld. Assessing Officer. 30. We have duly considered the rival contentions and gone through the record carefully. We have taken note of the finding recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares through a number of paper companies. It is further stated that the shares of the scrip are then purchased from the beneficiary shareholders at very high prices through managed transactions thereby enabling the beneficiaries to book exempted LTCG against payment of equivalent amount in cash and managing to covert black money of the beneficiaries in the form of Long Term Capital Gain. I am further showing you the statements of Shri Rakesh Somani recorded under oath u/s 133A of the I.T. Act, 1961 on 30.03.2015 by DDlT(Inv) Kolkata, of Shri Sanjay Kumar Parakh recorded under oath u/s 133A of the I.T. Act, 1961 on 26.02.2015 by DDIT(Inv) Kolkata and of Shri Prateek Agarwal recorded under oath u/s 133A of the I.T. Act, 1961 on 23.12.2014 by DDIT(Inv) Kolkata wherein they have also admitted the above-stated modus operandi in respect of the scrip M/s CCL International Ltd. What do you have to say about the LTCG that you have booked in the same scrip M/s Kailash Auto Finance (P) Ltd. in the light of the above revelations? Further please see the statement of Shri Pradeep jain and its enclosure of the type of company in which LTCG entry has been done. What do you have to say on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts and documents . 31. Apart from the above disclosure statement, no other document is being referred by the ld. Assessing Officer. No doubt, the disclosure or admission made under section 132(4) of the Act during the search proceeding is an admissible evidence but not conclusive one. This presumption of admissibility of evidence is a rebuttal one and if the assessee is able to demonstrate with the help of some material that such admission was either mistaken, untrue or under some misconception of fact, then solely on the basis of such admission, no addition is required to be made. It is true that admissions being declaration against interest are good evidence but they are not conclusive and parties always at liberty to withdraw the admission by proving that they are either mistaken or untrue. In law retracted confession even may form the legal basis of addition, if ld. Assessing Officer is satisfied that it was true and was voluntarily made but basing the addition or retracted declaration solely would not be safe. It is not a strict Rule of Law but only a Rule of Prudence. As a general rule of practice, it is unsafe to ruly upon an retracted confession without corroborativ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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