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TMI Blog2013 (9) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... elopers Pvt Ltd, Zoom Reality projects Pvt Ltd, Magnificent Constructions Pvt Ltd, Choudhary Innovative Business Pvt Ltd. and Brilliant Infrastructure Pvt Ltd. During the search, the group surrendered additional Income of Rs. 105 crores in the hands of Zoom Developers Pvt Ltd Rs.25 crores in the hands of Zoom Reality Projects Pvt Ltd; Rs5 crores each in the hands of Shri Vijay Choudhary and Smt. Manjary Choudhary. Subsequently, while filing" the returns, the surrendered income of Rs. 105 crores were offered for taxation in the cases of Zoom Developers Pvt Ltd in A.Ys. 2003-04 to 2009- 10. However, the surrender made in the hands of Zoom Reality Projects Pvt Ltd was retracted fully, while Shri Vijay Choudhary and Smt Manjary Choudhary made partial retraction and offered Rs.50 lakhs and Rs.1 crore respectively for taxation. 3. The addition in various assessment years are based on the items already shown in the original returns. The assessee claims that no incriminating documents were found during the search and therefore no addition on the regular items shown in its original returns cannot be made in the proceedings u/s. 153A pursuant to search. The additions in various assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n violation of section 40A(3), lies upon the assessee, in which the assessee has failed, it is clear that the deliberate avoidance on the part of the assessee is only to conceal the fact that the payments have been made in cash. 5. In view of the above discussion the Assessing Officer held that the payment of Rs.3,50,00,000/- for purchase of land has been made in cash and hence twenty percent of the same was disallowed u/s 40A( 3) and added back to the total income of the assessee. 6. By the impugned order, the ld. CIT(A) deleted the disallowance made u/s 40A(3) after having the following observations :- "Ground no.(3), (3.1) & (3.2): Through these grounds, the assessee has challenged the addition of Rs. 70,00,000/- u/s 40A(3). The addition has been made by the Assessing Officer considering the payment of Rs. 3.5 crore in cash towards purchase of land. On that basis, the Assessing Officer has added 20% thereof u/s 40A(3) which amounted to Rs. 70,00,000/-. During the appeal proceedings, it is submitted that payment of Rs. 3.5 crore was made through pay orders/drafts and not through cash as assumed by the Assessing Officer. It has been further submitted that the payment was made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvt. Ltd with M/s. Viral Enterprises and others. The land owned by M/s. Viral Enterprises and others was put to auction for making payment to Cameron Finance & Invt. Ltd., in full and final settlement of the dispute. The auction sale was confirmed by the Hon'ble Mr. Justice Khanvilkar on 05.02.2004 wherein Zoom Developers Pvt. Ltd. was declared as the successful auction purchaser on sale consideration amounting to Rs.3.5 crores which was deposited with the Commissioner for taking accounts, High Court, Bombay and on an application made by Zoom Developers Pvt. Ltd. to the Hon'ble High Court for an order that the conveyance should be executed in favour of the assessee company, Magnificent Constructions Pvt. Ltd., the Hon'ble High Court by its order dated 24.03.2004 granted the said prayer. In view of these facts, it is very clear that the entire payment of Rs. 3.5 crore was made to the Commissioner for taking accounts through pay orders and drafts prepared from the bank accounts of Zoom Developers Pvt. Ltd., on behalf of the assessee. Even otherwise also in such auction, which is executed by the High Court, payments through cash could not be accepted. Therefore, just because the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interfere in the order of CIT(A) for deleting disallowance of Rs. 70 lakhs ( 20% of Rs.3.50 crores) u/s 40A(3) of the Income-tax Act, 1961. 9. Similar additions have been deleted by the ld.CIT(A) in the assessment year 2008-09 amounting to Rs. 87,03,841/- and in assessment year 2009-10 Rs. 64,45,097/-. In view of the detailed findings recorded by the CIT(A) which has not been controverted by Department by bringing any positive material on record, we confirm the action of CIT(A) for deleting these disallowances made u/s 40A(3). 10. During the course of search, the Assessing Officer also found letter of M/s. Parker & Parker Associates dated 1st July, 2006, according to which the assessee was required to make payment of Rs. 3 crores by 3rd July, 2006, by DD favouring M/s. Parker and Parker. The AO has made addition of Rs.57,11,000/-in A.Y. 2006-07; Rs. 96,04,690/- in A.Y. 2007-08 and Rs. 7,94,830/- in A.Y. 2008-09 on account of payments made to the said concern on this account. The AO has considered such payments as illegal on the basis of a letter dated 01.07.2006 of Parker & Parker Associates addressed to Mr. Vijay Choudhary on the subject 'Professional fees I speed money'. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- (S.S. Parkar) 1st July, 2006 " 11. Before the CIT(A), the contention of the assessee was that the assessee had entered into MOU with Parker & Parker Associates in which the said firm was appointed as a facilitator for procurement of land at various places as mentioned in the MOU; that as per the understanding entered with them they have to procure the land and give it to the assessee at a fixed price; that the agreements were to be entered directly with the farmers/land owners in which they were also to be named as confirming party; that the payments to farmers and land owners were to be made from their account; that as such the assessee was making the payment to Parker & Parker and in turn they were making the payments to the farmers / land owners; that number of agreements were entered by them with the farmers and the assessee company, however no final conveyance deed (sale deed) could, be executed and therefore the amounts paid by the assessee company were shown in the balance sheet as advance. 12. By the impugned order, the ld. CIT(A) confirmed the disallowance only to the extent of Rs. 7 lakhs in the assessment year 2006-07, Rs. 4 lakhs in the assessment year 2007-08 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken into the cognizance of the statement given by Mr. Tanwar, who happens to be employee of other group concern, in the case of assessee company too. 4.3.3 During the appellate proceedings before me, the assessee submitted the copy of MOU dated 29.12.2005 with M/s Parkar & Parkar Associates in support of their claim. that the said concern was appointed as a facilitator for procurement of land at various places at fixed rates. As per the MOU, the said concern was also responsible to get the conversion of land-use to Non-agricultural purpose; to obtain the NOC from concerned Competent Authorities and to facilitate the assessee group to get the particular development rights on the said Scheduled Properties including clearance from Urban Land Ceiling Authorities. The assessee also filed a two page documents, which are said to have been issued during the course of search operation and placed in the loose papers seized at S-8 Annexure A-1 on page Nos. 74-80. The said documents reflects the status report on the land acquisition following the MOU with M/s Parker and Parker Associates. The status report has been prepared by Mr. Kishore A. Shivkar, an employee of Zoom Group. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts made in AY 2007-08 and 2008-09 are not available. In circumstances proportionate ( approx @ 7% i.e 7 out of 99.11) disallowances to extent of Rs. 4 Lakhs and Rs. 50,000/- are estimated in respect of the balance payment of Rs. 54 Lakhs (96.04 - 42) and 7.94 Lakhs in AYs 2007-08 and 2008- 09 respectively. To summarize, the disallowance to extent of Rs. 7 Lakh as against Rs 57.11 Lakhs in AY 2006-07; Rs. 4 Lakh as against Rs. 96.04 Lakhs in AY 2007-08 and Rs. 50,000/- as against Rs. 7.94 Lakhs are confirmed. 4.3.4 A plea has been taken by the assessee that amounts paid to M/s. Parkar & Parker Associates have not been claimed as a deduction in the P&L account and the disallowance on this account (i.e. as illegal payment) cannot be made in all these years [i.e. A.Y. 2006-07, 2007-08 and 2008-09), meaning thereby that the disallowance, if any, on this account can be made only in those years (which would fall thereafter) when expenses are claimed as a deduction in its P&L account based on project completion method. As mentioned earlier, the assessee company is in the business of property development. The land purchased by it is its stock in trade. During the relevant years under refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2006-07, Rs. 4 lakhs in assessment year 2007-08 and Rs. 50,000/- in assessment year 2008-09 is upheld. Accordingly, addition to the extent of Rs. 7 lakhs as against the disallowance of Rs. 57.11 lakhs made in the total income of the year under consideration ( i.e. assessment year 2006-07) stands confirmed. The assessee will get relief of Rs. 50.11 lakhs." 13. It is clear from the detailed findings recorded by the ld.CIT(A) that out of the total payment only a sum of Rs. 7 lakhs has been paid as speed money relevant to assessment year 2006-07, Rs. 4 lakhs in assessment year 2007-08 and Rs. 50,000/- in the assessment year 2008-09, he upheld the addition to this extent by observing that merely because the assessee has not debited this expenditure in the profit and loss account, no disallowance should be made. We found that after appreciating entire fact, the CIT(A) found that the payments to Parker & Parker was made for acquisition of land and the assessee has not claimed such payment as a deduction in the profit and loss account, therefore, he confirmed the disallowance only to the extent mentioned hereinabove. As per our considered view, the amount of disallowance so ascerta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2007-08, the Revenue is in appeal for deleting addition of Rs. 1,37,98,459/- representing undisclosed investment in land, particularly when books of account and Bank account and relevant crucial details were not produced before the Assessing Officer. 18. In this regard, we found that the Assessing Officer has made addition after having the following observations :- " During the assessment proceedings the assessee was asked to file explanation of the above document the assessee has stated that all the payments are through banking channels. However, the assessee never produced the books of accounts. The seized hard disk could not be opened for want of password. Bank statements were not filed. The assessee in its reply dated 22.12.2010 in point no. 2 stated that bank statements for A Y 2003-04 to A.Y. 2006-07 are not available and that there not much transactions during the relevant period. Inspite of repeated request hard copies of books of accounts were never produced and the soft copies were provided as late as on 24.12.2010, which also could not be opened for the reasons best known to the assessee. It seems that submission of details and explanations have been delayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult, the appeals of the assessee and Revenue are allowed in part in terms indicated hereinabove. I.T(SS).A.Nos. 89 to 94/Ind/2011 : 22. In these appeals, the assessees are aggrieved for addition made by invoking provisions of Section 2(22)(e) being advance received against sale of property. 23. By the impugned order, CIT(A) confirmed the addition after having following observations :- "The addition was made by the Assessing Officer in respect of loan/advances received from Choudhary Innovative Business Pvt.Ltd. The table below reflects the assessment year-wise addition on account of deemed dividend in the hands of Shri Vijay Choudhary and Smt. Manjiri Choudhary. S.No. Appeal No. Name A.Y. Amount of addition u/s 2(22)(e) 1. IT-435/10-11 Shri Vijay Choudhary 2005-06 682,751 2. IT-430/10-11 Smt.Manjiri Choudhary 2006-07 174,000 3. IT-436/10-11 Shri Vijay Choudhary 2007-08 545,727 4. IT-437/10-11 Shri Vijay Choudhary 2008-09 35,955 4.3.1 Shri Vijay Choudhary and Smt. Manjiri Choudhary are the shareholders of Choudhary Innovative Business Pvt.Ltd.( formerly known as Choudhary Trading Finance Pvt.Ltd.) each holding more than 10 % of the voting power. The ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. As against that Rs. 16,25,000/- was to be paid to both of them on the day of agreement and Rs.18,75,000/- on 31.03.2005. The balance amounts of Rs.46,92,500/- and Rs. 41,57,500/- was to be paid at the time of conveyance deed and handing over the possession of the constructed area. In this context, I have looked into the balance sheet of Choudhary Innovative Business Pvt. Ltd. and find that the said company has shown the amounts given to Shri Vijay Choudhary and Smt Manjiri Choudhary as pure advances during all these years. It is noted that the said company has reflected advance against land and properties separately and the amount paid to Shri Vijay Choudhary and Smt Manjiri Choudhary had not been included therein. Rather, the amount paid to both of them had been shown under the head 'other advances'. This fact was pointed out to the assessee's representative during the appeal proceedings. To this, reply dated 20.07.2011 has been filed and placed on record. In the said reply, it has accepted categorically that the company has shown the advances paid under the head 'other advances' instead of 'advance against properties' and termed such treatment merely a grouping error. It is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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