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2017 (12) TMI 1708 - AT - Income TaxAddition u/s 40(a)(ia) - TDS was not deposited with the statutory period the expenditure so claimed was voluntarily added back in the computation of income as not allowable under section 40(a)(ia) - HELD THAT - Where in respect of any sum tax has been deducted in any subsequent year such sum shall be allowed as deduction in computing the income of the previous year in which such tax has been paid. In such circumstances the conclusion of CIT(A) to hold that since genuineness of expenditure stood examined in assessment year 2005-06 and tax was duly deducted in assessment year 2006-07 therefore the disallowance made in the impugned order of assessment was on account of non-genuineness of expenditure was not tenable. We also find that CIT DR has though extensively relied on enquiries conducted by learned AO but has failed to controvert the factual findings recorded by learned CIT (A) and the status of directions to the revenue authorities to take appropriate action as per law for AY 2005-06 and bring to tax the above expenditure as non genuine in AY 2005-06. As relying on SIR KIKABHAI PREMCHAND VERSUS COMMISSIONER OF INCOME-TAX (CENTRAL) BOMBAY 1953 (10) TMI 5 - SUPREME COURT we uphold the deletion of addition Addition on account of discrepancy in the books of accounts of the assessee company - HELD THAT - The fact of the matter remains that Rs. 2, 00, 00, 000/- was explained by the assessee having been paid by debiting account of the group company and such payments have been made through banking channels. The revenue has not been able to place any material to rebut the aforesaid cogent explanation tendered in the appellate proceedings. No opportunity was granted in the assessment proceedings. We also notice that identical addition had been made in the order of assessment dated 31.12.2010 u/s 153A/143(3) of the Act in pursuance to search conducted on 5.11.2009 under section 132(1). The said addition stood deleted in an order passed by CIT(A) though the revenue has preferred an appeal but such deletion of addition has not been challenged before us which also supports the aforesaid claim of the assessee company. Having regard to the aforesaid factual position we uphold the deletion of addition Addition being an expenditure incurred on payments to SCLL as compensation by the assessee company - statement of Shri S.K Gupta Director SCLL recorded in which Shri Gupta and reportedly stated that SCLL was involved in giving bogus entries that the impugned transaction with Puri Construction Ltd. was not a genuine transaction - HELD THAT - The addition so made solely on the basis of statement of Sh. S.K. Gupta s statement and without rebutting the documentary evidences so relied on by the assessee company is hereby deleted - The material available on record that the statement of arbitrator Sh. Om Prakash retired Additional Sessions Judge who acted as an arbitrator between assessee company and M/s SCLL wherein the learned judge had accepted regarding the award so granted between dispute pending between assessee and M/s SCLL and the said fact has not been rebutted by the learned counsel of Revenue and as such this fact is also important to establish and substantiate the fact that the amount so paid to M/s SCLL is genuine and justified. Addition on account of land development expense paid to M/s Manami Construction Pvt. Ltd. - HELD THAT - Documentary evidences were arbitrarily brushed aside by both learned AO and CIT (A) and further the reliance so placed on investigation carried out by learned AO was prior to the date of affidavit of director of M/s Manami Construction Co. Pvt. Ltd. wherein current address of the said concern was furnished by the assessee company and further all the details in the shape of nature of work done and payment made was also furnished before the learned AO which all remained unrebutted and uncontested by lower authorities - Thus the disallowance made and sustained is deleted and the ground raised by the appellant is allowed. Assessment u/s 153A - original assessment proceedings under section 143(3) - HELD THAT - We have noticed that AO in section 153A proceedings has merely repeated the additions so made in original assessment proceedings under section 143(3) of the Act and there was no new addition made by learned AO during section 153A proceedings. Thus on the date of search i.e. on 05.01.2009 the assessee company s assessment was finalized on 31.12.2008 and as such the proceedings were not pending on the date of search and thus additions could only have been made in proceedings under section 153A of the Act only when any incriminating material was found during the search. The only material (if any) on which reliance is placed by AO is the statement of Sh. Mohinder Puri and construing it to be incriminating in nature is also unjustified as the statement cannot be construed to be incriminating in nature and more specifically when the said statement has been retracted subsequently and has not been acted upon and as such the additions so made in an order under section 153A/143(3) of the Act for impugned assessment year are in excess of scope of assessment. Thus it is held that the additions so made under section 153A of the Act are mere repetition of additions made in assessments already made under section 143(3) of the Act and as such all the additions so made are beyond the scope of assessment of provisions of section 153A of the Act and thus the said ground raised in Rule 27 of ITAT Rules by assessee appellant is allowed.
Issues Involved:
1. Deletion of addition on account of land development expenses. 2. Deletion of addition on account of discrepancies in the books of accounts. 3. Deletion of addition on account of payments made to M/s Sino Credits & Leasing Ltd (SCLL). 4. Confirmation of disallowance on account of land development expenses paid to M/s Manami Construction Pvt. Ltd. 5. Legal plea under Rule 27 of ITAT Rules regarding the scope of assessment under section 153A of the Income Tax Act. Detailed Analysis: 1. Deletion of Addition on Account of Land Development Expenses: The assessee claimed land development expenses of Rs. 11,45,18,528/- incurred in the assessment year 2005-06 but disallowed under section 40(a)(ia) as TDS was not deposited within the due date. The CIT(A) held that the genuineness of the expenditure could only be examined in the assessment year 2005-06 and not in 2006-07. The ITAT upheld this decision, stating that the expenditure was incurred and accounted for in the books of accounts for the assessment year 2005-06, and since TDS was deposited in the assessment year 2006-07, the expenditure ought to have been allowed. 2. Deletion of Addition on Account of Discrepancies in the Books of Accounts: The Assessing Officer added Rs. 2,00,00,000/- as income from other sources due to discrepancies in the books of accounts. The CIT(A) deleted the addition, noting that the payment was made on behalf of M/s Florentine Estates of India Ltd. and M/s Mad Entertainment Network Ltd., and these payments were duly reflected in the books of accounts. The ITAT upheld the deletion, finding no rebuttal to the factual findings recorded by the CIT(A). 3. Deletion of Addition on Account of Payments Made to M/s Sino Credits & Leasing Ltd (SCLL): The AO disallowed Rs. 10,50,00,000/- paid to SCLL, considering it a non-genuine transaction based on the statement of Shri S.K. Gupta. The CIT(A) deleted the addition, noting that no opportunity for cross-examination was provided to the assessee, and the documentary evidence (MOU, Judicial Award, and Settlement Agreement) was not considered. The ITAT upheld the deletion, emphasizing that the statement of Shri S.K. Gupta was not reliable as he was not produced for cross-examination and had retracted his statement. 4. Confirmation of Disallowance on Account of Land Development Expenses Paid to M/s Manami Construction Pvt. Ltd.: The AO disallowed Rs. 2,30,11,467/- paid to M/s Manami Construction Pvt. Ltd. for land development expenses, considering the transaction non-genuine. The CIT(A) upheld the disallowance, noting the lack of independent evidence to show that the work was actually carried out. The ITAT, however, deleted the disallowance, finding that the documentary evidence provided by the assessee was arbitrarily brushed aside by the lower authorities. 5. Legal Plea Under Rule 27 of ITAT Rules Regarding the Scope of Assessment Under Section 153A: The assessee argued that the additions made under section 153A were beyond the scope of assessment as they were not based on any incriminating material found during the search. The ITAT agreed, noting that the AO merely repeated the additions made in the original assessment under section 143(3) and that no incriminating material was found during the search. The ITAT relied on various judgments, including CIT vs. Kabul Chawla and Pr. CIT vs. Meeta Gutgutia, to conclude that the additions were not maintainable. Conclusion: The ITAT upheld the deletions made by the CIT(A) on account of land development expenses, discrepancies in the books of accounts, and payments made to SCLL. It also deleted the disallowance on account of land development expenses paid to M/s Manami Construction Pvt. Ltd. Additionally, the ITAT allowed the legal plea under Rule 27, holding that the additions made under section 153A were beyond the scope of assessment as they were not based on any incriminating material found during the search. The appeals filed by the revenue were dismissed, and the appeal filed by the assessee was allowed.
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