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TMI Blog2025 (5) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... er of convenience and are being decided by way of this consolidated order. With the consent of the parties, the appeal by the Revenue and cross-objection by the assessee for the assessment year 2011-12 are considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to other matters in the present batch. ITA No. 5709/Mum/2024 Revenue's appeal - A.Y. 2011-12 3. In this appeal, the Revenue has raised the following grounds: - "(i) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by the AO to 50% on account of bogus purchases by relying on decision of CIT(A) in the case of Samira Residences Pvt Ltd, without appreciating the fact that the genuineness of such purchases were not established by the assessee" "(ii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by the AO on account of onmoney, to 10%, received by the assessee w.r.t the Nagaon project, based on the admission of the assessee and while doing so, failed to appreciate that the assessee offered such on-money to tax for the respective years in the statement re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the Ld. CIT(A) erred in restricting the addition done by the AO u/s 14A of the Act to the extent of Exempt Income earned without appreciating the CBDT Circular No. 5 of 2014 dated 11/02/2014 which has clarified that the disallowance u/s 14A is to be made even if no exempted income had been earned by the assessee during the year under consideration?" 4. The issue arising in Ground No. (i), raised in Revenue's appeal, pertains to restricting the disallowance made on account of bogus purchases to 50%. 5. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the real estate business and is a part of the Samira Group, which is engaged in the construction and development of the real estate project. For the year under consideration, the assessee filed its return of income on 30/09/2011, declaring a total income of INR 2,37,74,450. Pursuant to the search and seizure operation conducted under section 132 of the Act in the case of Samira group on 21/03/2013, notice under section 153C of the Act was issued to the assessee on 24/09/2019. In response to the notice, the assessee filed its return of income on 09/12/2014, declari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n AY 2009-10. I have gone through CIT(A) order dated 29.12.2017 passed in case of M/s Samira Residences Pvt Limited for AY 2009-10. On perusal of the same, it is seen that the then CIT(A) has accepted the contention of the assessee wherein it was stated that 50% of alleged purchases were utilized for business purpose and in stating so, partially allowed the claim of the said company and restricted the addition to 50%. 8.2 Considering the overall factual position and the fact that parties involved in the instant case i.e. Karma Industries Ltd is similar to that of the addition made in M/s Samira Residences Pvt Limited for AY 2009-10, 1 am inclined to follow decision of the CIT(A) passed in the case of in the case of the group concern M/s Samira Residences Pvt Limited The relevant extract is reproduced as under: "6.2. The submissions filed by the Ld. Counsel has been carefully considered. It is the contention of the Ld. Counsel that at least 50% of the above mentioned bogus purchase amount was utilised by the assessee for its business purposes. The cash expenses which are unaccounted by the assessee include development expenditures in the form of levelling of land, fencing, const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everage has to be given to the assessee for application of income. The Hon'ble ITAT in the case of ACIT vs Jignesh V. Koralwala ITA No. 262/263/264/Ahd/2010 held that the whole of gross receipts of on-money cannot be taxed in the case of the assessee and only the reasonable profit earned can be taxed. The decision of AO for taxing the gross receipts is not factually collect where the evidences of expenditure incurred are available in the seized material. The assessee itself has offered 50% of the same before the Settlement Commission. As the assessee's application of income is more than 50% allowing 50% of the expenses as having incurred for business is felt reasonable. In view of the above, the AO is directed to allow Rs. 2,35,84,376/- which is 50% of the amount of bogus purchases. This ground of appeal is Partly Allowed." 8.3 In view of the above, the AO is directed to restrict the disallowance on account of bogus purchase to 50%. Further as mentioned in para 9.3 and 9.4 of the assessment order that the total purchases were debited to WIP, it is directed that the amount disallowed i.e. the balance 50% needs to be reduced from WIP and no addition is made to the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,49,665/- (ii) M/s. Samira Reality Projects P. Ltd. F.Y. 2008-09 : Rs,3813133/- F.Y. 2010-11 : Rs. 26,71,898/- (iii) M/s. Samira Residences P. Ltd. F.Y. 2008-09 : Rs. 3,71,66,037/- 8. Thus, the Director claimed that the assessee received unaccounted cash after giving the cheque for bogus expenses, which was used by it at the time of purchase of land from the farmers who insist upon cash payment over and above the agreement value. The Director of the assessee further accepted that the purchases made from entities, such as M/s Karma Ispat Ltd., M/s Vimal Sales Corporation and M/s Vastu Trading Co. by the assessee along with other sister concerns, including Samira Residence Private Limited, are not accompanied by supporting documents and in the absence of the same, the genuineness of the purchases cannot be verified. Before the learned CIT(A), the assessee submitted that 50% of the cash generated from bogus purchases was utilised for business purposes and the assessee incurred various development expenditure in the form of levelling of land, fencing, construction of compound and roads, supply of electricity and water, etc. Further, part of these expenses, such as wages paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved". As the assessee did not appear before the AO during the reassessment proceedings, and also failed to prove the genuineness of the purchase transaction, the AO made the addition of the entire amount of bogus purchases. In further appeal, the learned CIT(A) estimated 12.5% of the bogus purchases as an addition to be made instead of confirming the entire bogus purchases, placing reliance upon the decision of the Hon'ble Gujarat High Court in CIT v/s Simit P Sheth, reported in [2013] 356 ITR 451 (Guj.). The Tribunal, in further appeal, by placing reliance upon the decision of the Hon'ble Jurisdictional High Court in Mohd. Haji Adam, reported in [2019] 103 Taxmann.com 459 (Bom.), dismissed the appeal filed by the Revenue and directed the AO to restrict the addition to the extent of bringing the gross profit rate of disputed purchases to the same rate as that of the other purchases. The Hon'ble Jurisdictional High Court, allowing the appeal filed by the Revenue, held that the onus of proving the genuineness of the expenditure claimed as a deduction is on the assessee. The Hon'ble High Court held that the primary onus is on the assessee to discharge his burden to prove the purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INR 90,49,665 in the hands of the assessee for the year under consideration, which ultimately resulted in the impugned addition. Further, it is pertinent to note that the AO neither disputed payment through cheque by the assessee to M/s Karma Industries Ltd. nor brought any material on record to doubt the source of expenditure by the assessee. Therefore, we find that the facts of the present case are on a different footing from the facts that were under consideration before the Hon'ble Jurisdictional High Court in Kanak Impex (supra). Thus, we are of the considered view that the reliance placed by the learned DR on the decision of the Hon'ble Jurisdictional High Court in Kanak Impex (supra) is completely misplaced. 12. It is further worth noting that the AO made the impugned addition under the head "income from business". It is the plea of the assessee that since 50% of the cash generated from bogus purchases was utilised for business purposes, the disallowance on account of bogus purchases should be restricted to that extent. Thus, as per the assessee, as the income taxed under the head "income from business" was utilised by the assessee for business purposes only, i.e. purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash generated in the above transactions were in turn utilised by the assessee for the purpose of business only. There is no material brought by the Assessing Officer to prove contrary or utilised by the assessee in any other personal use or illegal activities. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A) and, hence, we are inclined to dismiss the grounds raised by the Revenue." 14. Therefore, respectfully following the decision of the coordinate bench of the Tribunal rendered in the case of assessee's sister concern, we do not find any infirmity in the findings of the learned CIT(A) in restricting the disallowance on account of bogus purchase to 50%. Accordingly, the same is upheld, and Ground No. (i) raised in its Revenue's appeal is dismissed. 15. The issue arising in Grounds No. (ii) to (iv), raised in Revenue's appeal, pertains to restricting the addition made on account of on-money received by the assessee. 16. The brief facts of the case pertaining to this issue, as emanating from the record, are: As one of the key findings of the search and seizure operation was that the assessee indulged in the practice of taking on-money on sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The grounds of the appeal of the assessee accordingly allowed for statistical purposes." 18. We find that the said order was modified on 11/08/2023, passed in MA No. 304/Mum/2023, arising out of ITA No. 529/Mum/2022, rectifying the typographical error in para-10 of the aforesaid order as follows: - "10. In the seized documents also reference of payment of 6,00,77,175/- for purchase of the lands. Thus, in the light of statements of the brokers and seized documents, it cannot be denied that on-money was paid while purchase of land by the assessee. We find that identical issue of addition of on-money in assessments under section 153A for search period i.e. AY 2007-08 onward has been restored back to the file of the Assessing Officer by the Tribunal wide order dated 19/0712022, therefore, in the facts and circumstances of the case, we feel it appropriate to restore the issue in dispute involving grounds raised by the assessee to the file of the Learned Assessing Officer for considering the claim of the assessee for making micend addition for undisclosed income for on-money at the rate of the 10% of the unrecorded sales after giving set off of the expenses of on-money incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egards to contention made in para 16, 18 & 19, I hold that even if the interest as computed by the AO is accepted, the same were in nature of business expenditure and paid out of alleged unaccounted cash receipts which as per AO's own assessment is far greater that interest payments. Thus, it is admitted that fact that the said expenses have been incurred out of alleged on-money / cash receipts. Hence considering the decision of Hon'ble Bombay High Court in the case of CIT vs Golani Brothers (300 CTR 245) wherein it has been held that once 'on money' was considered as revenue receipt, and addition to income was made, any expenditure out of such money could not be treated as unexplained expenditure doing so would amount to double addition." Being aggrieved, the Revenue is in appeal before us. 23. Having considered the submissions of both sides and perused the material available on record, we find that the learned CIT(A) granted the relief to the assessee on the basis that the interest expenditure incurred by the assessee is in the nature of business expenditure and the same is paid out of the alleged unaccounted cash receipts, which are far greater than the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile the entries as appearing in the ITS along with documentary proof. However, no reconciliation for the same was submitted. In the absence of any details being filed by the assessee, the AO, vide assessment order, made an addition of INR 1,06,06,000 to the total income of the assessee as deemed income in the nature of unexplained cash deposits. The learned CIT(A), vide impugned order, deleted the addition made by the AO on the basis that all the deposits were duly recorded in the books of account and the source of such cash deposit stands explained. Being aggrieved, the Revenue is in appeal before us. 26. We have considered the submissions of both sides and perused the material available on record. In the present case, on the basis of data available on the ITS, it was noticed that the assessee made cash deposits total amounting to INR 1,06,06,000 during the year under consideration. We find that during the remand proceedings before the AO, the assessee submitted the ledger account of the cash book in order to support its submission that the cash deposits made in the bank during the year under consideration were out of the cash in hand. From the perusal of para-5.5 of the remand r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining to this issue, as emanating from the record, are: During the assessment proceedings, from the information available on ITS, it was noticed that the assessee sold properties for a total consideration of INR 37,41,00,750. Accordingly, during the assessment proceedings, the assessee was asked to reconcile the same along with the necessary documentary proof. In the absence of any details/information being furnished by the assessee, the AO, vide assessment order, made an addition of INR 37,41,00,750 on account of the sale of property as per the ITS data. The learned CIT(A), vide impugned order, decided this issue in favour of the assessee, and deleted the addition made by the AO on the basis that the ledger account and sale agreements duly show that the impugned amount was already offered to tax by the assessee. Being aggrieved, the Revenue is in appeal before us. 30. Having considered the submissions of both sides and perused the material available on record, we find that during the remand proceedings before the AO, the assessee furnished copy of the sale deeds vide submission dated 28/02/2017 in respect of the property transactions, total amounting to INR 37,41,00,750 as appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Therefore, there is again no basis for the addition made by the AO. Hence, the addition of Rs. 37,41,00,750/- based on ITS data is deleted." 31. During the hearing, the Revenue did not bring any material on record to controvert the aforesaid findings of the learned CIT(A), according the same are upheld. Accordingly, Ground No. (viii) raised in Revenue's appeal is dismissed. 32. The issue arising in Ground No. (ix), raised in Revenue's appeal, pertains to the deletion of the addition made on account of unexplained expenditure as per the ITS data. 33. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, on the basis of the information available on the ITS, it was noticed that the assessee has incurred expenditure total amounting to INR 17,06,979 in respect of payments to hotels and restaurants. Since the assessee failed to furnish basic details such as party-wise breakup of expenses, etc., the AO, vide assessment order, added the sum of INR 17,60,979 to the total income of the assessee as unexplained expenditure. The learned CIT(A), vide impugned order, granted partial relief to the assessee and restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his business as per his wisdom. His arm cannot be twisted to do business as per the choice of somebody else. Thus, the AO cannot apply his hypothesis on the assessee as to how he should conduct his business. Thus, the contention of the AO to this extent is rejected. However, as payments in respect of two bills (i) Bill No. 54301 dated 16.06.2010 amounting to Rs. 6,06,650/- and (ii) Bill No. 35517 dated 14.12.2010 amounting to Rs. 1,36,439/- are not recorded in the books of accounts, the addition to the extent of Rs. 7,43,089/- (606650 plus 136439) is confirmed and the balance addition of Rs. 10,17,890/-(1760979 minus 743089) is deleted." 35. In the absence of any material contrary to the findings of the learned CIT(A), we do not find any infirmity in the impugned order on this issue. Accordingly, the same is upheld, and Ground No. (ix) raised in Revenue's appeal is dismissed. 36. The issue arising in Ground no.(x), raised in Revenue's appeal, pertains to the deletion of the disallowance of interest on delayed payment/short deduction of TDS. 37. Having considered the submissions of both sides and perused the material available on record, we find that the learned CIT(A), vide impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits and gains of the business, came up for consideration before the Hon'ble Madras High Court in CIT vs. Chennai Properties & Investment Ltd., reported in [1999] 239 ITR 435 (Madras). While answering the issue in negative and in favour of the Revenue, the Hon'ble Madras High Court, after considering the decision of the Hon'ble Supreme Court in the case of Bharat Commerce & Industries Ltd. v/s CIT, reported in [1998] 230 ITR 733 (SC), observed as follows: - "14. As already noticed, the payment of interest which takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be paid but not paid in time, which rendered (sic) the assessee liable for payment of interest, was in the nature of a direct tax and in settlement of the income-tax payable under the Income-tax Act. The interest paid under section 201(1A), therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by the learned counsel for the assessee. 15. The counsel for the assessee in support of his submission that the interest paid by the assessee was merely compensatory in character besides relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D of the Income Tax Rules, 1962 ("the Rules"). 42. The brief facts of the case are that during the assessment proceedings, it was noticed that the assessee had earned exempt dividend income amounting to INR 78,000 during the year under consideration. Further, it was noticed that expenditure such as interest is debited to the profit and loss account, however, no expenditure has been treated as attributable to the earning of exempt income by the assessee, and no disallowance under section 14A of the Act has been made. Accordingly, the assessee was asked to show cause as to why the disallowance under section 14A of the Act should not be made. In the absence of any response from the assessee, the AO, vide assessment order, computed the disallowance of INR 4,35,137 under section 14A read with Rule 8D of the Rules. The learned CIT(A), vide impugned order, following the judicial precedents, directed the AO to restrict the disallowance to the extent of exempt income earned by the assessee. The relevant findings of the learned CIT(A) on this issue are reproduced as follows: - "15.2 The appellant has earned an exempt income of Rs. 78,000/- during the year under consideration. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 14A was to be restricted to the tax-exempt income earned during the year. Therefore, following the decision of Hon'ble Apex Court and High Court, I direct the A.O to restrict the disallowance to the extent of exempt income earned by the assessee. Thus, the ground of appeal raised by the appellant is partly allowed." Being aggrieved, the Revenue is in appeal before us. 43. Having considered the submissions of both sides and perused the material available on record, we find that this issue is no longer res integra and has been decided in favour of the taxpayer. We find that the Hon'ble Supreme Court in Maxopp Investment Ltd. v/s CIT, reported in (2018) 402 ITR 604 (SC), upheld the disallowance under section 14A of the Act to the extent of exempt income earned by the taxpayer. We further find that the Hon'ble Jurisdictional High Court in Nirved Traders Pvt. Ltd. v/s DCIT, in ITA No.149 of 2017, vide judgment dated 23.4.2019, held that the disallowance under section 14A of the Act cannot be more than the exempt income. Thus, respectfully following the aforesaid decisions, we find merit in the plea of the assessee that the disallowance under section 14A of the Act is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of INR 7,43,089. During the hearing, the learned AR, apart from merely submitting that the addition is only based on the ITS data without any further enquiry, did not bring any material on record to prove the genuineness of the aforesaid expenditure. Accordingly, we do not find any infirmity in the findings of the learned CIT(A) in upholding the disallowance to an extent of INR 7,43,089, and the same is upheld. As a result, Ground No. 2 raised in assessee's cross-objection is dismissed. 49. In the result, the cross-objection by the assessee for the assessment year 2011-12 is dismissed. ITA No. 5710/Mum/2024 Revenue's appeal - A.Y. 2009-10 50. In this appeal, the Revenue has raised the following grounds: - "i "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by the AO to 50% on account of bogus purchases by relying on decision of CIT(A) in the case of Samira Residences Put Ltd, without appreciating the fact that the genuineness of such purchases were not established by the assessee" ii. " Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details regarding the genuineness of the same as business expenditure, the AO, following its approach adopted in assessment year 2007-08, made a disallowance of INR 43,529 vide order dated 27/03/2015 passed under section 144 read with section 153C of the Act. The learned CIT(A), vide impugned order, deleted the addition made on account of club expenses. Being aggrieved, the Revenue is in appeal before us. 54. We have considered the submissions of both sides and perused the material available on record. As per the assessee, the club expenditure amounting to INR 43,529 was incurred by the Directors of the assessee for the promotion of its business. We find that accepting the submission of the assessee, the learned CIT(A), vide impugned order, observed as follows: - "12.1 I have gone through the assessment order and submission filed by the appellant. On perusal of the assessment order, it is seen that the AO has stated that the appellant has failed to prove the genuineness of the transaction as business expenditure. However, in stating so, the AO failed to appreciate the appellant is a huge company and the said expenses were essential for promoting the company's business. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pressed. Accordingly, the same are dismissed as not pressed. 59. The issue arising in Ground No. 2, raised in assessee's cross-objection, pertains to the disallowance on account of the salary paid to the Director's wife. 60. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the search proceedings, it was found and admitted by the Director of the assessee that the salary was paid to Mrs Milan S. Nerurkar, i.e. the wife of the Director, without rendering any services. Accordingly, the opportunity was granted to the assessee during the assessment proceedings to make its submissions. In the absence of any response from the assessee, the AO, vide assessment order, in light of the categorical admission during the search proceedings, made an addition of INR 24 lakh being the salary paid to the Director's wife as ineligible business expenditure. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and upheld the addition made by the AO. 61. Having considered the submissions of both sides and perused the material available on record, we find that it is an admitted position that the wife of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished by the assessee?" vi. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition done by the AO on account of unexplained expenditure as per IT'S data with respect to payment made for hotels and restaurants for which no supporting evidences were submitted by the assessee w.r.t. source of such expenditure? vii "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made by the AO with respect to penal interest on short deduction/ no deduction of TDS?" viii. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by the AO u/s 14A of the Act to the extent of Exempt Income earned without appreciating the CBDT Circular No. 5 of 2014 dated 11/02/2014 which has clarified that the disallowance u/s 14A is to be made even if no exempted income had been eared by the assessee during the year under consideration?" 64. We find that the issues arising in the grounds raised by the Revenue in its appeal for the assessment year 2012-13 have already been considered by us while adjudicating Revenue's appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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