2020 (4) TMI 825 - HC - Income Tax

Addition on loose papers impounded during the survey proceedings - case was selected for scrutiny - HELD THAT - In the case in hand, once it was found that there was double addition on same papers for two assessment years for a single project, it cannot be said that the assessee had failed to explain the loose papers despite the onus was placed upon him to prove the loose papers. No benefit can be derived by the Revenue from the judgment in Chuharmals case 1988 (5) TMI 1 - SUPREME COURT which is distinguishable on facts and is not applicable in the present case. No force in the submission advanced by the appellant that at the time of survey more than one project was in progress. CIT(A) specifically observed that the AO had failed to prove that the seizure was in respect of site different from Shanti Residency project and no effort was made by him to make spot inspection to prove that at the time of survey other projects of the assessee were also running. AO had also not been able to substantiate that there was really any other project running at the same time, otherwise the Assessing Officer ought to have subjected them to tax in the assessment year 2009-10 as well, which had not been done. Addition on the basis of the expenditure made out of books of accounts - CIT(A) deleted the said addition accepting the plea of the assessee that the papers pertaining to the expenses shown in those papers were not part of his accounts but were related to the sub-contractors and the sub-contractors had also filed ITRs showing 8% NP - CIT(A) also deleted the addition on the ground that the Revenue failed to substantiate that the papers pertained to project other than Shanti Residency and there was reason to believe that when the profit was calculated on the basis of the NP/GP rate then there was nothing to separate the expenses therefrom - HELD THAT - In view the findings recorded by the CIT(A) which have been affirmed by the learned Tribunal and considering the same on the touchstone and anvil of the arguments advanced by the learned counsel for the appellant/Revenue, we find no reason to differ as no illegality or perversity has been pointed out by learned counsel for the Revenue in the aforesaid findings of fact, which may warrant interference by this Court.

Summary

Issues Involved:
1. Justification of ITAT in upholding CIT(A)'s decision to delete the addition of ?3,82,24,844/-.
2. Consideration of the Supreme Court decision in Chuharmal vs. CIT regarding the onus of proving ownership.
3. Justification of ITAT in relying on the affidavit of the assessee regarding the number of projects under construction.
4. Justification of ITAT in upholding CIT(A)'s decision regarding the impounded loose papers.
5. Justification of ITAT in deleting the addition of ?3,13,166/- for expenses incurred outside the books.
6. Justification of ITAT in deleting the addition of ?10,81,612/- for expenses incurred outside the books.

Detailed Analysis:

1. Justification of ITAT in upholding CIT(A)'s decision to delete the addition of ?3,82,24,844/-:
The Revenue's appeal challenged the deletion of the addition made by the Assessing Officer based on impounded loose papers. The CIT(A) deleted the addition on the grounds that it was a double addition for the same project across two assessment years (2009-10 and 2010-11). The CIT(A) observed that the Assessing Officer failed to prove multiple projects were ongoing and did not conduct a spot inspection to substantiate this claim. The Tribunal upheld this decision, noting that the Revenue did not provide material to rebut the CIT(A)'s findings.

2. Consideration of the Supreme Court decision in Chuharmal vs. CIT regarding the onus of proving ownership:
The appellant cited Chuharmal vs. CIT, where the Supreme Court held that the onus of proving non-ownership lies with the person in possession. However, the court found this case distinguishable. In the present case, the CIT(A) and Tribunal concluded that the additions were based on the same set of papers for two assessment years, and the assessee had adequately explained the loose papers. Therefore, the principle from Chuharmal was not applicable.

3. Justification of ITAT in relying on the affidavit of the assessee regarding the number of projects under construction:
The CIT(A) accepted the affidavit of the assessee stating that only one project, "Shanti Residency," was under construction during the relevant period. The Assessing Officer did not provide evidence to contradict this affidavit. The Tribunal upheld the CIT(A)'s reliance on the affidavit, noting the absence of positive proof from the Revenue to establish multiple projects.

4. Justification of ITAT in upholding CIT(A)'s decision regarding the impounded loose papers:
The CIT(A) found that the impounded papers were already considered in the assessment for the year 2009-10, leading to a double addition. The Tribunal affirmed this finding, emphasizing that the Revenue failed to present any material to challenge the CIT(A)'s conclusion. The CIT(A) also noted that the Assessing Officer did not cross-check the papers with the books of accounts or conduct field investigations.

5. Justification of ITAT in deleting the addition of ?3,13,166/- for expenses incurred outside the books:
The CIT(A) deleted the addition of ?3,13,166/- by accepting the assessee's explanation that the expenses were related to sub-contractors, who had filed their own income tax returns showing 8% NP. The Tribunal upheld this decision, noting that the Revenue did not provide any evidence to refute the assessee's explanation.

6. Justification of ITAT in deleting the addition of ?10,81,612/- for expenses incurred outside the books:
The CIT(A) deleted the addition of ?10,81,612/- on the grounds that the papers were labeled as estimates and there was no evidence to show they pertained to projects other than Shanti Residency. The Tribunal affirmed this finding, agreeing with the CIT(A) that once the profit was calculated using the NP/GP rate, the expenses were deemed to be accounted for.

Conclusion:
The High Court dismissed the Revenue's appeal, finding no substantial questions of law. The court upheld the findings of the CIT(A) and the Tribunal, concluding that the additions were not justified and the Revenue failed to provide sufficient evidence to challenge the deletions made by the CIT(A). The appeal was deemed to lack substance and was consequently dismissed.