2019 (4) TMI 267 - AT - Income Tax

Assessment u/s 153A - Addition of on-money received on sale of flats - HELD THAT - The statements of the employees, in search and seizure cases, can be used only if they are supported by some kind of collaborative evidence. However, DR could not point out the evidence proving the receipt of alleged on money. As the assessment for the AY. 2008-09 was not pending, so, without some incriminating material, AO should not have made the addition to the total income of the assessee. That the order of CIT(A) does not suffer from any legal or factual infirmity. Moreover, taking into consideration, the decision of the Coordinate Bench of ITAT in the case of group concern and also in order to maintain judicial consistency, we apply the same findings in the present case which are applicable mutatis mutandis. Resultantly this ground raised by the revenue stands dismissed. Disallowance on conveyance and telephone expenses - Disallowance made by the AO stating that the assessee was unable to establish that these expenses were incurred solely for business purposes and thus made adhoc disallowance - HELD THAT - Assessee being a company, is a separate juristic entity, therefore any element of personal expenses would therefore need to be demonstrated with reference to the directors. The said proposition has been rendered in the case of Sayaji Iron & Engeneering Co. Vrs. CIT (2001 (7) TMI 70 - GUJARAT HIGH COURT). Thus, CIT(A) had rightly deleted the disallowances while keeping in view the above judgments. Even before us, no new facts or contrary judgments have been brought on record in order to controvert or rebut the findings so recorded by CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the CIT(A). - this ground raised by the revenue stands dismissed.

Issues Involved:
1. Deletion of addition of on-money received on sale of flats.
2. Deletion of disallowance on conveyance and telephone expenses.

Issue-wise Detailed Analysis:

1. Deletion of Addition of On-Money Received on Sale of Flats:

The primary issue pertains to the deletion of the addition of ?3,87,28,680/- as on-money received on the sale of flats. The revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting this addition, which was based on the statements of the Director and key employees of the assessee group during a search operation. The search operation on the Rohan Group of entities on 26.05.2011 led to the discovery of statements indicating that on-money was received over and above the registered value of agreements. The Assessing Officer (AO) made the addition based on these statements and other evidence such as seized documents and unexplained cash and jewelry.

The assessee contended that the statements were retracted and were not corroborated by any specific evidence linking the on-money to the assessee company. The CIT(A) found that the statements did not specifically mention the assessee company or its projects and were subsequently retracted. The CIT(A) also noted that the disclosed income was related to specific entities and documents found during the search, and could not be extended to the assessee without specific evidence.

The ITAT upheld the CIT(A)’s decision, emphasizing that the retracted statements alone, without corroborative evidence, could not justify the addition. The ITAT referred to the case of ACIT vs. Janak Raj Chauhan and Maheshwari Industries vs. ACIT, which highlighted that admissions made during search are not conclusive without supporting evidence. The ITAT also referenced its own decision in a related case (DCIT vs. Silver Arch Builders and Promoters), where similar additions were deleted due to lack of incriminating material. Consequently, the ITAT dismissed the revenue’s appeal on this ground.

2. Deletion of Disallowance on Conveyance and Telephone Expenses:

For the year under consideration, the revenue also challenged the CIT(A)’s deletion of disallowance on conveyance and telephone expenses. The AO had made an ad-hoc disallowance on the grounds that the assessee could not establish that these expenses were incurred solely for business purposes.

The CIT(A) deleted the disallowance, reasoning that the assessee, being a company, is a separate juristic entity, and any personal expenses would need to be demonstrated with reference to the directors. This view was supported by precedents such as Sayaji Iron & Engineering Co. vs. CIT and CIT vs. SSP Pvt. Ltd., which held that personal expenses cannot be attributed to a company without specific evidence.

The ITAT upheld the CIT(A)’s decision, finding no new facts or contrary judgments presented by the revenue to rebut the findings. The ITAT concluded that the CIT(A)’s findings were judicious and well-reasoned, and thus dismissed the revenue’s appeal on this ground as well.

Conclusion:

Both appeals filed by the revenue were dismissed. The ITAT upheld the CIT(A)’s decisions on both issues, finding no legal or factual infirmity in the deletion of the addition of on-money and the disallowance of conveyance and telephone expenses. The judgments emphasized the necessity of corroborative evidence to support additions based on retracted statements and the principles regarding personal expenses attributed to a company.

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