2022 (1) TMI 1211 - AT - Income Tax

Addition of investments not disclosed in the books of accounts as required under section 69B - addition based on the statement recorded in the course of survey operation under section 133A at the premises of the third party - HELD THAT - The impugned amount was offered to tax before the settlement commission which was accepted therein. In this regard, we note that the proceedings before the settlement commission were of M/s Phulchan Exports Pvt. Ltd. and M/s Advance Lifestyle Ltd and the assessee was not connected with such proceedings. Thus the decision of the Hon ble Settlement Commission in the case of a third party cannot bind the assessee - See VINEETA GUPTA AND ANOTHER 2014 (5) TMI 543 - DELHI HIGH COURT In the present case, admittedly, the assessee acquired the shares of M/s Advance Life Space Pvt. Ltd from M/s Advance Lifestyle Ltd for certain value. Once the transaction on hand was not connected to M/s Phulchand Export Pvt. Ltd, then there was no reason for it (M/s Phulchand Export Pvt. Ltd.) to offer the income for the same transaction before the settlement commission for the transactions in which it was not party. Thus a doubt arises why Phulchand Export Pvt. Ltd has made a disclosure before the settlement commission in the transaction in which it was not the party even if it was the majority shareholder in the advance lifestyle Ltd. Therefore, we are not convinced with the finding of the AO. There were certain loose papers/diary found during the survey operation containing certain date wise amount. On confrontation, one Shri Pradeep Aggarwal son of Shri Phulchand Aggarwal who was neither director in M/s Phulchand Export Pvt. Ltd or in M/s Advance Lifestyle Ltd stated that noting represent cash received from the assessee on hand against sale of the property at New Manik Mills. However, the name of the assessee, signature and address of the assessee was not appearing therein i.e. on the seized documents. Accordingly, we are of the view that such documents in the absence of other corroborative materials cannot substitute the evidence. Hon ble Supreme Court in case of Common Cause (A registered society) vs. Union of India 2017 (1) TMI 1164 - SUPREME COURT held that noting on loose sheet/diary does carry any evidentiary value under the provision of section 34 of the Evidence Act - Also find that Hon ble Supreme Court in CBI vs. V.C. Shukla 1998 (3) TMI 675 - SUPREME COURT held that entry can be made by any person against the name of any other person in any sheet, paper or computer, but the same cannot be the basis of making charges against the person whose name noted on sheet without corroborating the same. - Decided against revenue. Addition u/s 68 - unexplained cash credit - assessee has not filed any confirmation, addresses, PAN of the debtors except a list containing the name of the debtors/members - HELD THAT - Assessee has also furnished the booking receipts and service tax paid on such booking advance. It is also not out of place to mention that in majority of the cases the PAN of the sundry debtors representing the advance booking were available on record. As far as the details as discussed aforesaid, there is no dispute. DR at the time of hearing has also not brought anything on record contrary to the impugned details placed in the paper book. Thus, it appears that the assessee has discharged its primary onus imposed under section 68 of the Act. Thus the onus has been shifted upon the revenue to disprove the contention of the assessee and that too based on the cogent materials. It is also pertinent to note that the AO has not carried out any exercise by resorting to the provisions of section 133(6) and 131 of the Act in order to dig out the truth from the submissions filed by the assessee. As such, all the details furnished by the assessee cannot be brushed aside without assigning any reason. Accordingly, the provisions of section 68 of the Act cannot be invoked in the given facts and circumstances - Decided in favour of assessee. Addition consequent to survey proceedings - loose sheets found - Addition to sum as admitted by the assessee during survey - HELD THAT - We are of the view that there cannot be any addition merely on the basis of loose papers found during the survey operation until and unless there were some corroborating evidences found. The revenue is authorized record the statement under section 133A(3)(iii) of the Act during the survey operation. There is no provision for recording the statement under section 131(1) in survey operation except the circumstances provided under subsection 6 to the section 133A of the Act - revenue can resort to the provisions of section 131 of the Act if the assessee doesn t co-operate during the survey proceedings or tries to evade the relevant formations. However in the case on hand, we note that there is no such allegation that the assessee was not cooperating during the assessment proceedings. Thus we hold that the revenue has acted beyond the jurisdiction by recording the statement under section 131 of the Act. Accordingly, no reference can be made to such statements. There was a loose paper containing the figure of construction cost which the assessee had made for the purpose of the bank loan. Such information was improperly written on a piece of paper which is nothing but a dumb documents. Therefore, it cannot be said that such information was furnished to the bank - we disagree with the order of the authorities below. Accordingly we set aside the finding of the Ld. CIT-A, and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed whereas the ground of appeal of the Revenue is dismissed. Income recognition - sales valuation - assessee has shown revenue in the financial statements based on percentage completion method - HELD THAT - There is no reference to be made to the value of the sales - under percentage completion method, income of the assessee is computed based on cost incurred to date in proportionate with total estimated cost and total estimated revenue. This method of recognizing the profit is very well accepted by the industries engaged in the business of construction of the projects. There was no defect pointed out by the AO in the method adopted by the assessee. The assessee has shown revenue in the financial statements based on percentage completion method despite the fact that there was no actual sales made by the assessee in the year under consideration. The question of making the sale arises when the project/the property is handed over to the prospective buyer and the conveyance deed is registered in favour of the party. But no such conveyance deed has been registered in the year under consideration. This fact was brought to the notice of the AO in response to the notice issued under section 142(1) There is no whisper about the sales of the area as alleged by the AO. At the time of hearing, the learned DR has also not brought anything in support of the order of the AO. Accordingly we are not convinced with the finding of the AO. In view of the above and after considering the facts in totality, we set aside the finding of the authorities below and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition of expenses incurred for getting the property vacated from the occupants/shopkeepers - AO was not satisfied with the contention of the assessee on the reasoning that as per the agreement between the assessee and the vendor, it was the duty of the vendor to incur such expenses, as proposed by the AO that the assessee has not incurred such expenses in the course of the business - HELD THAT - From the above discussion, it also appears that the assessee was not under the obligation to incur such expenses. As such it was the duty of the other party to handover the land to the assessee free from all encumbrances. We note that the other party failed to do so. Under the situation the assessee has to incur the expenses which was supposed to be borne by the other party. Provisions of section 37 Act deals for the admissibility of the expenses which have been incurred for the purpose of the business. The expenses which are personal and capital in nature, and not incurred for the purpose of the business cannot be allowed as deduction under section 37 the Act. In such facts and circumstances, the assessee at the best of his wisdom has decided to incur the expenses which are purely for the purpose of commercial expediency. We are inclined to hold that the expenses incurred by the assessee are in course of the business and therefore the same are eligible for deduction under section 37 of the Act. Hence, we set aside the finding of the learned CIT-A, and direct the AO to delete the addition made by him. Hence the ground of appeal raised by the assessee is allowed. Addition u/s 68 of the Act on account of low creditworthiness of the loan parties - HELD THAT - The assessee has discharged its onus by furnishing the necessary details such as a copy of PAN, bank details, and ITR etc. in support of identity of the parties, genuineness of transaction and creditworthiness of the parties. Admittedly the learned CIT-A has not doubted on the identity and genuineness of transaction but doubted the credit worthiness of the all parties. Hence the learned CIT(A) sustained the addition made by the AO by holding that the assessee has not discharged the primary onus cast under section 68 . Now coming to the third condition, i.e. creditworthiness of the parties, regarding this we note that the assessee has submitted that the fund was received through the through banking channel from all the parties. In support, the assessee has submitted their bank accounts, copy of retunred and annual accounts. Once the assessee has filed primary details evidecing the identity of the party, genuineness of transaction and credit worthiness of the party, the authorities should have made enquiry from the parties who have advanced the loan to find out the sources of funds in their respective hands. As such, the assessee has explained the sources of fund in its hands by producing the identity and bank statement demonstrating that the funds were received through banking channel, which means that at the time of advancing the the laon there was suffient amount in their banks accounts. If the revenue authorities have doubt with respect to the capacity of lender then it should have carried out necessary investigation as provided under the provision of the Act. The assessee on hand is only libale to explain the sources of credit in its hand only but not labile to explain the sources of source. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition under section 69B of the IT Act.
2. Deletion of addition under section 68 of the IT Act.
3. Confirmation of addition for unexplained expenditure in work in progress.
4. Confirmation of addition under section 68 for unsecured loans.
5. Deletion of addition for bogus booking advances.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 69B of the IT Act:
The Revenue contended that the CIT(A) erred in deleting the addition of ?33.92 crores under section 69B, arguing that the promoter group had accepted receipt of unaccounted cash from the assessee. The assessee denied paying any cash and contended that there was no material evidence suggesting such payments. The CIT(A) found no tangible material indicating undisclosed investments and noted that the addition was based solely on third-party statements without corroborative evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that no incriminating material was found during the survey and the statements alone were insufficient for such additions.

2. Deletion of Addition under Section 68 of the IT Act:
The Revenue challenged the deletion of ?12,46,31,300/- added under section 68 for advances from sundry debtors, arguing that the assessee failed to prove the identity and creditworthiness of the parties. The assessee provided detailed information, including names, addresses, and service tax payments. The CIT(A) accepted the assessee's explanation, noting that the advances were received through banking channels and were duly accounted for in the books. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had discharged its onus, and the AO failed to disprove the assessee's claims.

3. Confirmation of Addition for Unexplained Expenditure in Work in Progress:
The assessee contested the addition of ?41,60,76,489/- for unexplained expenditure in work in progress. The AO based the addition on a diary found during a survey, which showed higher construction costs than recorded in the books. The assessee argued that the diary contained estimated figures for bank loan purposes. The CIT(A) partly confirmed the addition, relying on the director's admission during the survey. The Tribunal, however, found that the diary was a dumb document without corroborative evidence and held that no addition could be made based solely on such documents. The Tribunal directed the AO to delete the addition.

4. Confirmation of Addition under Section 68 for Unsecured Loans:
The assessee challenged the addition of ?14,42,90,465/- under section 68 for unsecured loans, arguing that it had provided sufficient evidence, including PAN, bank statements, and income tax returns. The AO and CIT(A) doubted the creditworthiness of the lenders. The Tribunal noted that the assessee had discharged its onus by providing primary evidence and that the revenue should have conducted further investigations to verify the lenders' creditworthiness. The Tribunal directed the AO to delete the addition.

5. Deletion of Addition for Bogus Booking Advances:
The Revenue contended that the CIT(A) erred in deleting the addition of ?38,69,50,307/- for bogus booking advances. The assessee provided details of the advances, including names, addresses, and service tax payments. The CIT(A) found the advances genuine and deleted the addition. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence, and the AO failed to disprove the genuineness of the transactions.

Conclusion:
The Tribunal dismissed the appeals filed by the Revenue and allowed the appeals filed by the assessee, directing the deletion of various additions made by the AO. The Tribunal emphasized the need for corroborative evidence and proper investigation by the revenue authorities before making additions based solely on statements or unverified documents.