2015 (11) TMI 998 - AT - Income Tax

Disallowance u/s.40A(3) - Held that - Since in the instant case, there is nothing on record to suggest that any material was unearthed during the search or in 153A proceeding which would show that non-disallowance u/s.41(1) was erroneous, therefore, we do not find any infirmity in the order of the CIT(A) deleting the addition made by the AO. Addition u/s.69B - bogus claim of expenses in the name of labour contractors - CIT(A) delted the addition - Held that - There is no dispute to the fact that the assessment in the instant case was completed u/s.143(3) prior to the date of search and the investment in purchase of lands were already declared in such return. No incriminating material whatsoever was found during the course of search to substantiate that unaccounted investment has been made by the assessee towards purchase of the lands. The addition was mainly based on the valuation report of the DVO. The Hon ble Delhi High Court in the case of Puneet Sabharwal (2010 (12) TMI 846 - Delhi High Court) has held that addition to income based solely on report of DVO is not valid in absence of any evidence of understatement of consideration. Further, the contention of the assessee before the AO as well as the CIT(A) that the agreements for purchase of lands were entered in the year 1996 and 2002 and the possession was also taken prior to 2004- 05 could not be controverted by the Ld. Departmental Representative. Under these circumstances, we find merit in the submission of the Ld. Counsel for the assessee that the DVO has erred in taking the sale instances of the year 2005 instead of taking comparable sale instances of 1996 and 2002. There is also nothing on record to indicate that land was undervalued. Under these circumstances we do not find any infirmity in the order of the CIT(A) deleting the addition made by the AO u/s.69B of the I.T. Act. - Decided in favour of assessee. Depreciation on windmill and MEDA charges - Held that - the issue stands decided against the assessee by the decision of the Tribunal in the case of J-Sons Foundry Pvt. Ltd. 2015 (11) TMI 922 - ITAT PUNE allowing higher depreciation @80% on civil work foundation and related labour cost of windmill. - Decided in favour of revenue. Addition on account of cessation of liability u/s. 41(1) in respect of creditors outstanding for a period of more than three years - Held that - No reason to hold that the liability has ceased in the hands of the assessee and such amount of old creditors constitute income u/s.41(1).- Decided in favour of assessee. Compensation received from Suzlon Energy Ltd.- whether taxable as a revenue receipt in the hands of the assessee? - Held that - Since the compensation of ₹ 40 lakhs received by the assessee from M/s. Suzlon Energy Ltd. was for delay in executing the project, therefore, respectfully following the decision of Hon ble Supreme Court in the case of Saurashtra Cement Ltd. ( 2010 (7) TMI 11 - SUPREME COURT ), we hold that the amount received by the assessee is capital in nature Interest u/s 234A - Held that - Once the search takes place on a person and the due date for filing of the return u/s.139(1) has not expired he can file the return only after the issue of notice u/s.153A. He is not required to file the return u/s.139(1). Therefore, the authorities below are not justified in levying interest u/s.234A of the I.T. Act for a period from 31-10-2009 to 20-07-2010. The ground raised by the assessee is accordingly allowed.- Decided in favour of assessee. Rework the interest chargeable u/s.234B and 234C on the balance tax liability - Held that - AO appropriated the seized cash for adjustment against tax liability in the month of March 2011. We find the CIT(A) directed the AO to give credit for such cash seized w.e.f. 30-03-2010. We find no infirmity in the order of the CIT(A) since the assessee vide letter dated 30-03-2010 had requested the AO adjust such seized cash as self assessment tax. Until and unless the assessee makes a specific request, the AO is not duty bound to appropriate such tax either towards advance tax or towards self assessment tax. He can only adjust such seized cash from the tax determined after completion of assessment. Since in the instant case, the assessee vide letter dated 30-03-2010 only has requested the AO to adjust such seized cash towards self assessment tax for A.Y. 2009-10 and since the CIT(A) has accepted this plea of the assessee, therefore, we find there should not be any grievance on the part of the assessee. Unexplained business expenses in respect of Ghodzari Project - Held that - CIT(A) allowed the claim of the assessee on the ground that an amount of ₹ 21.92 crores has already been considered in the hands of Mahalaxmi Infraprojects Ltd. on account of Ghodzari project which includes the amount of ₹ 1.4735 crores (Not ₹ 1.50 crores). Therefore, making addition of this amount in the hands of the assessee will amount to double taxation. We do not find any infirmity in the order of the CIT(A). The assessing authority is denuded of its authority to verify the correctness and completeness of the return, which authority it has while framing a regular assessment. It must accept the return as furnished and shall not in any event raise a demand for payment of further taxes. Accepting the income as disclosed in the return of income furnished by the assessee, it must refund to the assessee any tax paid in excess of the liability incurred by him on the basis of income disclosed. Even if the tax paid is found to be less than that payable, no further demand can be made for recovery of the balance amount since a fresh assessment is barred. However, if the assessee has paid more tax then the income that was returned then the excess tax to be refunded. We therefore, are of the considered opinion that the said decision is distinguishable and not applicable to the facts of the present case. The various other decisions relied on by the Ld. Departmental Representative are also not applicable to the facts of the present case. Therefore, this argument of the Ld. Departmental Representative is also without any force. In this view of the matter the ground raised by the Revenue is dismissed.

Summary

Issues Involved:
1. Disallowance under Section 40A(3)
2. Addition on account of bogus claim of expenses in the name of labor contractors
3. Addition under Section 41(1) for cessation of liability
4. Addition under Section 69B for unexplained investment
5. Depreciation on windmill and related expenses
6. Deduction under Section 80IA(4)(iv)
7. Levy of interest under Section 234A
8. Adjustment of seized cash against tax liability

Detailed Analysis:

1. Disallowance under Section 40A(3):
The AO disallowed certain cash payments exceeding Rs. 20,000, resulting in disallowances across multiple assessment years. The CIT(A) confirmed these additions due to lack of evidence from the assessee showing that the expenses were due to circumstances beyond their control.

2. Addition on account of bogus claim of expenses in the name of labor contractors:
The AO added amounts for outstanding liabilities to labor contractors, suspecting these were inflated expenses to generate unaccounted income. The CIT(A) deleted these additions as the original assessments had already verified these liabilities and no incriminating evidence was found during the search.

3. Addition under Section 41(1) for cessation of liability:
The AO added amounts for outstanding liabilities, assuming they had ceased to exist. The CIT(A) deleted these additions, citing that no incriminating evidence was found during the search, and the original assessments had already scrutinized these liabilities.

4. Addition under Section 69B for unexplained investment:
The AO added amounts based on the DVO's valuation of properties acquired by the assessee, which exceeded the declared amounts. The CIT(A) deleted these additions, noting that the agreements for purchase were made in earlier years, and the DVO had incorrectly used sale instances from later years for valuation.

5. Depreciation on windmill and related expenses:
The AO disallowed higher depreciation claimed on civil work and related expenses for windmills. The CIT(A) allowed higher depreciation on certain components of the windmill, following the Tribunal's decision in similar cases. However, the Tribunal reversed the CIT(A)'s decision regarding depreciation on civil work and related expenses, aligning with the Tribunal's decision in the case of J-Sons Foundry Pvt. Ltd.

6. Deduction under Section 80IA(4)(iv):
The AO denied the deduction, stating that the assessee ignored the provisions of Section 80IA(5). The CIT(A) allowed the deduction, following the Tribunal's decision in similar cases, which held that the initial assessment year for claiming deduction is the year in which the deduction is first claimed, not the year of installation.

7. Levy of interest under Section 234A:
The AO levied interest for delay in filing the return. The CIT(A) upheld this, but the Tribunal found that the search precluded the filing of the return under Section 139(1), and the return filed under Section 153A was within the prescribed period, thus no interest under Section 234A was justified.

8. Adjustment of seized cash against tax liability:
The AO adjusted the seized cash against tax liability in March 2011, despite the assessee's request in March 2010. The CIT(A) directed the AO to rework the interest chargeable under Sections 234B and 234C from the date of the assessee's request. The Tribunal upheld this, stating that the AO is not duty-bound to adjust seized cash without a specific request from the assessee.

Conclusion:
The Tribunal provided a comprehensive analysis of each issue, confirming the CIT(A)'s decisions where justified and reversing them where necessary, ensuring adherence to legal precedents and proper interpretation of the Income Tax Act.