2024 (7) TMI 136 - AT - Income Tax

Deduction u/s 80IA - According to AO, the assessee herein is merely executing works contract of getting contracts - Assessment u/s 153A - AO observed that the assessee had not maintained separate books of account for its eligible and non eligible business which is evident from the Tally data found during the course of search in the premises of the assessee - HELD THAT - AO while granting deduction u/s 80IA of the Act to the assessee for AY 2009-10 u/s 143(3) of the Act on 16.12.2011 had indeed narrated the entire activity carried out by the assessee and had categorically stated that the assessee is indeed engaged in the business of development of infrastructure facility. There is absolutely no such material which has been found during the course of search to disturb this particular finding of the ld AO. All the documents issued by the concerned regulatory authorities are only favoring the assessee. Similar was the view taken by the ld AO for AY 2010-11 also u/s 143(3) of the Act on 25.03.2013. We find that the ld CIT(A) had granted relief to the assessee both on merits with regard to claim of deduction u/s 80IA of the Act and also on the aspect of absence of incriminating material found during the course of search qua this addition. The existence of incriminating material in respect of unabated assessment as mandatory has been endorsed by the Hon'ble Supreme Court in the recent decision of Pr.CIT Vs. Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT Further, we find that the ld CIT(A) had relied on the decision of Vijay Infrastructure 2015 (12) TMI 897 - ITAT LUCKNOW to give relief to the assessee on merits. We find that this decision of Lucknow Bench of Tribunal has been approved by the 2017 (7) TMI 956 - ALLAHABAD HIGH COURT , wherein, specifically, the widening of roads from 2 lanes to 4 lanes have been approved to be development of roads activity by placing reliance on the CBDT Circular No. 4/2010. We find that the Special Leave Petition preferred by the revenue against this decision of the Hon ble Allahabad High Court has been dismissed by the Hon'ble Supreme Court in Special Leave Petition (Civil) 2018 (7) TMI 1039 - SC ORDER . In any event, we find that the claim of deduction u/s 80IA of the Act is to be examined in the initial year of its claim and the same is allowed in the initial year. The same cannot be disturbed by the revenue in the subsequent years, unless there exists any contrary materials on record or fresh development in facts. In the instant case, admittedly no such contrary material or fresh development on facts, had been brought on record by the ld AO. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon'ble Bombay High Court in the case of Simple Food Products Pvt. Ltd., Nagpur 2017 (8) TMI 646 - BOMBAY HIGH COURT and International Tractors 2017 (7) TMI 822 - DELHI HIGH COURT Thus, we hold that, on merits, the assessee would be entitled for claim of deduction u/s 80IA of the Act. Apart from this, the assessee s claim of deduction u/s 80IA of the Act could not be disturbed by the ld AO up to AY 2013-14 (being unabated/ completed assessments) as there is no incriminating material at all found during the course of search. Accordingly, the ground No. 1 raised by the revenue for all the assessment years is dismissed. Illegal payments through ShriGovind Prasad Pandey - HELD THAT - Though, Shri Govind Prasad Pandey had initially stated in his statement u/s 132(4) of the Act that the payments reflected in the seized documents represent illegal gratification made to various Government officials for and on behalf of the assessee company and he had acted as per instructions of Shri Padam Singhania, the said statement stood retracted by him on 15.01.2015 before the Investigation Wing itself during the post search proceedings. This fact was further corroborated by Shri Padam Singhania s statement wherein he had categorically stated that he had not given any instructions to Shri Govind Prasad Pandey to make any payment in the form of illegal gratification to various Government officials and the assessee company had not made any illegal payments. Further, the Investigation Wing had also conducted independent enquiries with the concerned Government officials mentioned in the seized documents by recording statements on oath from them, behind the back of the assessee, wherein all the parties had denied having received any money from the assessee company directly or through Shri Govind Prasad Pandeyor through any other person. Hence, the seized documents found from Shri Govind Prasad Pandey s premises which is not supported by any corroborative evidence/material cannot be used against the assessee company for making addition in the hands of the assessee company. In view of the aforesaid observations, we have no hesitation to delete the substantive addition in the hands of the assessee company. Accordingly, the addition made on alleged illegal payments for various assessment years are hereby deleted. Addition u/s 68 in respect of share capital contribution - AO observed that the assessee had allotted shares at a premium of ₹ 40 per share to different Kolkata based companies - assessee made a preliminary objection that AY 2011-12 being unabated/ completed assessment and no incriminating material was found during the course of search qua the issue of share capital either at par or at a premium, no addition per se could be made in the hands of the assessee company in the search assessment u/s 153A - HELD THAT - During the year under consideration, the promoters of the assessee company had purchased the shares held by Kolkata based companies in the assessee company at a nominal value. This is purely a transaction that has happened between the promoters of the assessee company and the Kolkata based companies, on which, the assessee company is not at all involved and does not have any control. Hence, the assessee company cannot be impleaded at all in the entire set of transactions. Addition on account of unrecorded cash transactions - seized documents only refer to cash received from Shri Guddu Rastogi allegedly - HELD THAT - The revenue before us had not brought any evidence on record as to whether any addition has been made in this regard in the hands of Shri Guddu Rastogi. The entire addition has been made merely based on rough notings made in the seized documents and based on statement given by Shri Padam Singhania ignoring the fact that the said statement was subsequently retracted by him. As stated earlier, the seized document does not refer to any cash payment, hence there is no question of invoking provisions of section 40A(3) of the Act. The entire addition has been made only based on allegations that there was some cash payment which was not supported by any corroborative evidence. These aspects were rightly appreciated by the ld CIT(A) while granting relief to the assessee as is evident from the observations made hereinabove. In view of the aforesaid observations, we do not find any infirmity in the order of the ldCIT(A) in granting relief to the assessee. Addition on account of sub-contract payments - HELD THAT - It is a fact that the assessee had made sub-contract to Shri Sushil Singhal. It is a fact that Shri Sushil Singhal also was covered in the search based on the consequential search warrant issued in his name on 16.10.2014 and search assessments were independently framed on him by the very same ld. AO just 4 days prior to the completion of search assessments in assessee s company case. In the search assessments completed in the hands of Shri Sushil Singhal, the sub-contract payments made by the assessee company to Shri Sushil Singhal were treated as business income by the very same ld AO, meaning thereby, the ld AO had indeed accepted the fact that Shri Sushil Singhal had acted as a subcontractor to the assessee company. Having taken the said stand while framing the search assessment of Shri Sushil Singhal, the very same ld AO would not be justified in taking a divergent stand while framing the search assessment in the hands of the assessee company by stating that Shri Sushil Singhal is a man of no means and does not have capacity to execute sub-contract work for the assessee company. These facts were duly appreciated by the ld CIT(A) on merits while granting relief to the assessee company, on which, we do not find any infirmity. In any event, no addition could be made at all in the hands of the assessee company for AYs 2012- 13 and AY 2013-14, being unabated/ completed assessments, as there was absolutely no incriminating material that was found either in the course of search of assessee company or in the course of search of Shri Sushil Singhal to doubt the genuineness of sub-contract payment to Shri Sushil Singhal. Addition on account of Sale of Gitti - AO observed that the assessee company apart from civil construction works is engaged in mining of minor minerals. It excavates black basalt, Gitti , murum etc and the same are used as raw material at their construction sites and sold to others as well - HELD THAT - The addition made by the ld AO ignoring this fact and merely based on statement of Shri Padam Singhania cannot be sustained in the eyes of law. The seized document A- 1/LPS-22/page 17 is reproduced at page 90 of the assessment order. On perusal of the said seized documents, we find that the same contains the name of the party, sale of gitti made during the particular period, number of trips undergone together with the quantity sold thereon. Nowhere the said seized document contains the value of rate per metric ton. Hence, the basis of Rs. 250 per metric ton adopted by the ld AO for arriving the sale figures of Rs. 12,02,643/- is apparently devoid of merit. Further, we find from the perusal of the said seized documents that the sale has been made spread over a period of 3 FYs i.e. FY 2010-11, 2011-12 and 2012-13 relevant to AYs 2011-12, 2012-13 and 2013-14. There is absolutely no break up of quantity sold for each of the financial years in the said seized documents. Apart from these rough notings in the loose papers, no other corroborative evidence was found by the search team or any other corroborative material brought on record by the ld AO in the assessment proceedings - the said seized documents require to be considered as dumb documents based on which no addition could be made. It is pertinent to note that the addition has been made based on the statement of Shri Padam Sighania by the ld AO. But we find that the said statement had been retracted by him subsequently which fact has been ignored by the ld AO. There is absolutely no basis brought on record by the ld AO to adopt the sale rate of Rs. 250 per metric ton for arriving at the unaccounted sale of gitti. Addition on account of unaccounted cash payment - CIT(A) deleted addition - HELD THAT - The seized document based on which the addition has been made was the ledger account of various imprest cash payments made to Shri Pradeep Khare for meeting expenses for and on behalf of the assessee company. As stated earlier, the imprest cash has been paid to Shri Pradeep Khare out of sufficient cash balance available with the assessee company. On receipt of details of expenditure from Shri Pradeep Khare, the same are reflected in the books of account of the assessee company under the concerned expenditure head. Till the time Shri Pradeep Khare produces the accounts with evidence seeking for replenishment of the imprest account for day-to-day expenses incurred by him, the expenditure incurred gets reflected only in the imprest cash book maintained by him at the site. It is not disputed that the expenditure incurred by Shri Pradip Khare for and on behalf of the assessee company were duly claimed as deduction and allowed by the ld AO in the search assessment proceedings. Hence, it cannot be said that those payments are not recorded in the books of accounts of the assessee company warranting any addition. In these facts and circumstances of the case, the statement given by Shri Padam Singhania has got absolutely no relevance. In any event, the said statement stood subsequently retracted by him. Hence, the entire addition is made by the ld AO without appreciating the modus operandi adopted and the evidences on record. Addition on the basis of rough extracts of invoices - CIT(A) deleted addition -HELD THAT - We find that the ld CIT(A) had taken due cognizance of the independent verification carried out by the ld AO from the proprietor of 2 concerns i.e. Om marketing and Ishwari Industries, wherein the proprietor had categorically denied having made any cash sales in respect of those invoices to the assessee company and also denied having made any transaction qua those invoices reflected in the seized documents with the assessee company. This clearly goes to prove that the documents are merely rough notings and proforma invoices not acted upon by the parties. In fact, the corroborative material in the form of third-party independent examination goes in favour of the assessee. This fact has been duly appreciated by the ld CIT(A) while granting relief to the assessee company on which we do not find any infirmity. Addition on account of unaccounted receipts - occasion for the assessee to receive any money from Shri Ashok Singh, proceeded to add the rough notings in the loose papers as unaccounted receipts in the hands of the assessee - CIT(A) deleted addition - HELD THAT - AO having ignored the fact that there was no occasion for the assessee to receive any money from Shri Ashok Singh, proceeded to add the rough notings in the loose papers as unaccounted receipts in the hands of the assessee and had not even given the benefit of telescoping to the assessee. It is a fact that the contents in the said documents are absolutely not supported with any corroborative evidence whatsoever. We agree with the contention of the assessee that there was no occasion at all for the assessee to receive any money from Shri Ashok Singh. Hence the notings in the loose papers found in the search are to be construed only as dumb documents not supported with corroborative evidence and hence no addition per se could be made in the hands of the assessee based on such dumb documents, dehors the statement given by Shri Padam Singhania. No work was executed by the assessee to Shri Ashok Singh, so as to enable the assessee to receive any money from Shri Ashok Singh. The assessee to prove its bona fide had also given the complete address of Shri Ashok Singh before the ld. AO. A simple verification on the part of the ld AO with Shri Ashok Singh in the manner known to law, would have brought the truth present in the transaction, which was admittedly not done by the ld. AO. Hence, there is absolutely no case for the revenue to make any addition in the hands of the assessee. We find no infirmity in the order of the ld. CIT(A) granting relief thereon. Addition on account of difference in work in progress (WIP) - rough estimate relied upon - HELD THAT - It is a fact that seized documents representing closing WIP as on 31.08.2014, is a rough estimate submitted to the bank for availing the credit facility from the bank. It is also pertinent to note that in the instant case, the stock statement submitted to the bank is less by ₹ 4.14 crores than the actual WIP as on 31.08.2014. It is not the case of the revenue in the instant case that the said differential amount of ₹ 4.14 crores has been invested by the assessee towards WIP from sources outside of the books of account. No addition, whatsoever was even sought to be made as unexplained investment or unexplained expenditure by the ld AO. On the contrary, the said investment of ₹ 32.89 lakhs as on 31.08.2014 representing closing WIP as on 31.08.2014 matches with the regular books of account maintained by the assessee. Hence, the source for such investment stands duly explained from the regular books of account itself which had not been rejected by the ld AO. Hence, these facts have been duly appreciated by the ld CIT(A) while granting relief to the assessee on which we do not find any infirmity. Accordingly, we hold that there is absolutely no case for making addition in the hands of the assessee for AY 2015-16.

Summary

Issues Involved:
1. Deduction U/s 80IA of the Act.
2. Addition made on account of illegal payments through Shri Govind Prasad Pandey.
3. Addition u/s 68 in respect of share capital contribution of Rs. 1,37,56,000/-.
4. Addition on account of unrecorded cash transactions.
5. Addition on account of sub-contract payments.
6. Addition on account of sale of Gitti.
7. Addition on account of unaccounted cash payment.
8. Addition on account of difference in work in progress (WIP).

Detailed Analysis:

1. Deduction U/s 80IA of the Act:
The assessee, part of the Singhania Group, claimed deductions under Section 80IA for infrastructure development projects. The AO challenged this, arguing the assessee was merely executing works contracts, not engaged in infrastructure development. The CIT(A) and ITAT found the assessee met the criteria for a developer, noting the possession of machinery, technical expertise, and the absence of incriminating material from the search. The ITAT upheld the CIT(A)'s decision, referencing CBDT Circular No. 4/2010 and various judicial precedents, confirming the assessee's eligibility for deductions under Section 80IA.

2. Addition made on account of illegal payments through Shri Govind Prasad Pandey:
The AO added amounts based on seized documents from Shri Govind Prasad Pandey's residence, alleging illegal payments to government officials. The CIT(A) found no corroborative evidence supporting these claims and noted that statements from officials denied receiving such payments. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of incriminating material and the retraction of initial statements by Shri Govind Prasad Pandey.

3. Addition u/s 68 in respect of share capital contribution of Rs. 1,37,56,000/-:
The AO questioned the genuineness of share capital contributions from Kolkata-based companies. The CIT(A) noted that the identity and creditworthiness of these companies were established, and the transactions were through banking channels. The ITAT upheld the CIT(A)'s decision, referencing the jurisdictional High Court's ruling in People General Hospital Ltd., confirming the genuineness of the share capital contributions and the absence of incriminating material.

4. Addition on account of unrecorded cash transactions:
The AO added amounts based on seized documents indicating cash payments for cement purchases, which the assessee initially surrendered but later retracted. The CIT(A) found no evidence of such cash payments in the regular books of accounts and noted the retraction of the initial statement. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of corroborative evidence and the proper accounting of transactions in the books.

5. Addition on account of sub-contract payments:
The AO disallowed sub-contract payments to Shri Sushil Singhal, alleging he was a bogus contractor. The CIT(A) found that the AO had accepted these payments as business income in Shri Sushil Singhal's assessments. The ITAT upheld the CIT(A)'s decision, noting the absence of incriminating material and the consistency in accepting these payments in regular assessments.

6. Addition on account of sale of Gitti:
The AO added amounts based on seized documents indicating unaccounted sales of Gitti. The CIT(A) found that these documents were rough notings without corroborative evidence. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of evidence supporting these transactions and the retraction of the initial statement by the assessee.

7. Addition on account of unaccounted cash payment:
The AO added amounts based on seized documents indicating cash payments to Shri Pradeep Khare. The CIT(A) found that these were imprest cash transactions properly accounted for in the books. The ITAT upheld the CIT(A)'s decision, noting the proper accounting of these transactions and the retraction of the initial statement by the assessee.

8. Addition on account of difference in work in progress (WIP):
The AO added amounts based on differences in WIP figures in seized documents and stock statements submitted to the bank. The CIT(A) found that the actual WIP figures matched the regular books of accounts. The ITAT upheld the CIT(A)'s decision, emphasizing the proper accounting of WIP in the books and the lack of evidence supporting the AO's claims.

Conclusion:
The ITAT dismissed all appeals of the revenue for the assessment years 2007-08 to 2015-16, upholding the CIT(A)'s decisions on all issues, emphasizing the lack of corroborative evidence and the proper accounting of transactions in the regular books of accounts. The Rule 27 petition of the assessee for AY 2007-08 was dismissed as infructuous.