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2024 (7) TMI 80 - AT - Income TaxInadmissible expenditure relating to the Municipal Corporation of Indore site - AO made the entire addition based on the uncorroborated document seized from the premises of a third party - HELD THAT - In the present case the survey has been carried out on 25.01.2010 in the premises of the assessee prior to the passing of the intimation u/s. 143(1) dt.09.03.2010 and thereafter search and seizure operation was carried out in the premises of the assessee. We find no order u/s. 143(3) of the Act was passed by the Assessing Officer and search and seizure operation was carried out in the premises of the assessee and before that a survey action was also initiated. The argument of the assessee that the documents recovered from the premises of Mukesh Sharma cannot be taken into consideration in our view is without any basis as the Assessing Officer while passing the order was required to consider the evidences as may be produced by the assessee and after taking into account all the relevant materials which the Assessing Officer has gathered. In the present case the evidence of making the payment of 9.25% of the contract value was duly confronted by the AO the assessee. After the evidence was confronted to the assessee the assessee had admitted the amount of Rs. 7, 13, 73, 002/- and also admitted the additional amount of Rs. 1, 48, 99, 595/-. Once the assessee had admitted the disallowance of expenditure made towards sub-contracts amount based on the material available on record the Assessing Officer had made the addition of the balance amount of Rs. 13, 42, 84, 130/-. No reason to disagree with the order passed by the AO and ld.CIT(A) on this issue. The submission of the assessee that there is no corroborative evidence and the assessee was not given an opportunity to cross-examine Shri Mukhesh Sharma in our opinion is without any basis. No such demand was made at the time of assessment or passing of the order by the appellate authority. The evidence recovered from the premises of Mukhesh Sharma along with subsequent admission of unexplained expenditure / investment and accepted by the assessee during the assessment proceedings clearly shows that the assessee was not interested in cross-examining the said Mukhesh Sharma. Furthermore the money given by the assessee was illegal money (gratification) for grant of the contract of Rs. 267 crores to various persons (Minister Commissioner Urban Secretary Mayor etc.). In fact when the evidence of illegal money was found during the course of search and seizure then the necessary consequential proceedings should have also been initiated against the erring persons. In our opinion the speed money / illegal money / gratification paid by the assessee for getting the contract cannot be permitted and the Revenue Authorities had rightly made the addition in the hands of the assessee. In view of above reasons and also on account of reasons given by the Assessing Officer / ld.CIT(A) we reject this argument of the assessee. Claim the set off of the income already declared by the assessee - HELD THAT - Firstly for A.Y. 2010-11 as mentioned hereinabove the assessee has filed the revised return of income and admitted additional income of Rs. 11, 21, 87, 364/-. Once the assessee had admitted the additional income in the revised return of income then it is not permissible to claim the telescoping / set off of the same income in the assessment year under consideration. The assessee cannot be permitted to get indirectly what he cannot get directly. No set off of income is permissible against the additional income admitted by the assessee in the revised return of income. With respect to A.Y. 2011-12 the argument of the assessee is that the additional income admitted by the assessee in the F.Y. 2010-11 for an amount is to meet all the eventualities that may arise - HELD THAT - The assessee by way of the additional ground as mentioned hereinabove sought to seek the telescoping / setting off of the income of Rs. 4, 50, 55, 095/- declared in the assessment year 2011-12 for A.Y. 2008-09. In our considered opinion the same cannot be permitted for the reason that the assessment was completed for A.Y. 2011-12 and the assessee is not in appeal before us. The grounds which have attained finality and when the assessee is not in appeal cannot be disturbed for the proceedings for A.Y. 2008-09. Deduction u/s. 80IA - HELD THAT - The rule of consistency is required to be maintained in the conduct of the Revenue. Further there is no change in the facts for the A.Ys under consideration. In fact the learned CIT (A) before granting relief to the assessee had called for the remand report from the Assessing Officer which is reproduced above and the AO in the remand report had confirmed that the assessee is fulfilling the conditions as laid down for the purpose of getting deduction under the provisions of section 80IA in terms of the decision of the Tribunal passed in earlier A.Ys. In fact once the Assessing Officer had given the report saying that the assessee had fulfilled the conditions as stipulated by the Tribunal for the purpose of enabling it to claim deduction u/s. 80IA therefore we do not find any error in the order passed by the learned CIT (A) granting deduction u/s. 80IA(4) of the Act. Expenditure allowed for ESOP u/s. 37 - HELD THAT - Since the issue in the present case is covered against the Revenue by the decision of the Hon ble Karnataka High Court in the case of CIT Vs. Biocon Ltd 2020 (11) TMI 779 - KARNATAKA HIGH COURT ground No. 3 raised by the Revenue is dismissed. Based on a seized paper concerning one of the subcontractors of the assessee AO concluded that assessee has incurred certain expenditure which is not allowable - HELD THAT - The loose sheets found during the course of search from the premises of assessee clearly show that cash amount of Rs. 50, 35, 000/- was paid by the assessee for promotion to BECCPL. Though the assessee had challenged the addition sustained by the ld.CIT(A) however the assessee has not brought on record any evidence except the ledger sheet filed before us showing that the amount of Rs. 50, 35, 000/- was not forming part of the expenditure incurred by the said BECCPL. Faced with the above situation when a document is seized from the premises of assessee it has the evidentiary value u/s. 292C of the Act and the document filed by the assessee namely the trading account of BECCPL was to rebut the presumption. The statement of BECCPL was recorded by the Assessing Officer and the assessee has given a reply. From the perusal of the impounded documentsof the assessment order it is clear that the expenditure claimed by BECCPL was Rs. 1, 51, 81, 235/- and Rs. 10 lakhs towards transportation (Bangalore to Chennai) totaling to Rs. 1, 61, 81, 235/-. As against the claim of Rs. 1, 61, 81, 235/- the assessee had settled the account of BECCPL for Rs. 1.42 crores. It is a case of the assessee that the amount of Rs. 50, 35, 000/- was a bogus amount and was included by BECCPL to have an enhanced settlement. In our view if this argument is accepted then the assessee should have paid Rs. 1.12 crores (Rs.1, 61, 21, 235/- - Rs. 50, 35, 000/-) instead of paying the amount of Rs. 1.42 crores. As the assessee has paid Rs. 1.42 crores as against Rs. 1.12 crores then it can be inferred that the assessee had paid Rs. 30 lakhs towards the promotion charges which was incurred by the BECCPL in cash. In our view on account of the above the claim of revenue to the extent of 30 lakhs was in accordance with law and thus the assessee gets relief of Rs. 20, 35, 000/-. Accordingly ground nos.2 and 3 of the assessee are partly allowed. Reimbursment of certain inadmissible expenditure to the sub-contractor - HELD THAT -Even if if we apply the rate of 7.80% then also the addition made by the Assessing Officer and confirmed by the ld.CIT(A) would be much higher as 6% the contract value comes to Rs. 36, 68, 780/-. Therefore we found that only illegal payment made by the sub-contractor and reimbursed by the assessee would not be more than this amount of Rs. 36, 68, 780/- However with respect to the extra quantity payment of Rs. 71, 50, 000/- though it was mentioned as departmental expenditure but nothing was brought on record to show extra quantities grounding and earth work done by MK Constructions would form part of the department commission. In view of the above we do not find that the amount of Rs. 71, 50, 000/- can be said to be commission on illegal payment. The document which forms basis for the addition do no show that it was a commission paid by the MK Construction or by the assessee for clearance of its bills. In view of the above we are of the opinion that the commission paid by the assessee to an amount of Rs. 36, 68, 780/- is required to be sustained being illegal / gratification money and the remaining amount of Rs. 71, 50, 000/- is required to be deleted and accordingly we delete the same. Thus this ground is partly allowed.
Issues Involved:
1. Inadmissible expenditure disallowance. 2. Deduction under Section 80IA. 3. Expenditure on Employee Stock Option Plan (ESOP). 4. Telescoping of additional income. 5. Unexplained expenditure. Analysis of Judgment: Issue 1: Inadmissible Expenditure Disallowance The assessee challenged the disallowance of Rs. 13,42,84,130/- towards inadmissible expenditure related to the Municipal Corporation of Indore site. The Assessing Officer made the addition based on uncorroborated documents seized from a third party. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this disallowance, considering the circumstantial evidence and the nature of such transactions. The Tribunal upheld this disallowance, emphasizing that the evidence, even if circumstantial, was compelling and linked the payments to the contracts awarded. The Tribunal also rejected the assessee's argument that the documents from a third party should not form the basis of the addition, noting that the assessee had admitted to other undisclosed incomes during the assessment proceedings. Issue 2: Deduction under Section 80IA The Revenue contested the CIT(A)'s decision to allow the deduction under Section 80IA, arguing that the projects were in the nature of works contracts. The Tribunal upheld the CIT(A)'s decision, noting that the issue had already been settled in favor of the assessee in earlier years by the Tribunal, and the Revenue's appeal to the High Court did not stay the Tribunal's order. The Tribunal emphasized the principle of consistency and cited the remand report from the Assessing Officer, which confirmed that the assessee fulfilled the conditions for claiming the deduction under Section 80IA. Issue 3: Expenditure on Employee Stock Option Plan (ESOP) The Revenue challenged the CIT(A)'s decision to allow ESOP expenditure under Section 37(1). The Tribunal upheld the CIT(A)'s decision, relying on the Karnataka High Court's ruling in the case of Biocon Limited, which held that the discount on ESOPs is an ascertained liability and allowable as a deduction under Section 37(1). The Tribunal noted that the ESOP expenditure was recognized in accordance with the SEBI guidelines and the accounting standards. Issue 4: Telescoping of Additional Income The assessee sought to telescope the additional income admitted in the subsequent years against the disallowance made in the assessment year 2008-09. The Tribunal rejected this argument, stating that once the additional income was admitted in the revised returns for the subsequent years, it could not be set off against the disallowance made in the earlier year. The Tribunal emphasized that each assessment year is separate, and the income admitted in one year could not be used to offset the disallowance in another year. Issue 5: Unexplained Expenditure The Tribunal addressed the disallowance of Rs. 1,48,03,480/- in the assessment year 2009-10 and Rs. 1,08,18,780/- in the assessment year 2010-11 towards unexplained expenditure. The Tribunal partially allowed the assessee's appeal, reducing the disallowance to Rs. 30,00,000/- for the assessment year 2009-10 and Rs. 36,68,780/- for the assessment year 2010-11. The Tribunal found that the evidence on record did not fully support the higher disallowances made by the Assessing Officer. Conclusion: The Tribunal dismissed the assessee's appeal regarding the disallowance of inadmissible expenditure but partially allowed the appeals concerning unexplained expenditure. The Tribunal upheld the CIT(A)'s decision to allow the deduction under Section 80IA and the ESOP expenditure under Section 37(1). The Revenue's appeals were dismissed, and the principle of consistency was emphasized in the Tribunal's decision.
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