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TMI Blog2015 (7) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine, and ₹ 60,00,000/- on account of section 40(a)(ia) of the Act - Held that:- When the CIT(A) has estimated the net profit, question of allowing or disallowing of any specific expenditure does not arise. The DR could explain as to why after estimation of net profit, still the disallowance of certain expenses of ₹ 1,25,00,000/- and ₹ 60,00,000/- was warranted, and how it can be held that such expense was allowed by the CIT(A). As we have already estimated the net income of the assessee of the contract work executed by the assessee, question of any further disallowance does not arise. - Decided against revenue. Addition made on the alleged ground of retraction of income admitted during the search - Held that:- merely on the basis of admission of the assessee, the additions cannot be made unless and until some corroborative evidence was found in support of such admission. Therefore, in our considered view, in the absence of any corroborative material to support the admission made during the course of search under section 132(4) of the Act addition cannot be sustained, especially when such admission was later on retracted by the assessee by filing the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's appeal, the ground no.1 reads as under: 1. The ld.CIT(A) has erred in estimating net profit at 16% of the contract receipt and making addition of difference amount of ₹ 7,41,65,209 (i.e. NP @ 16% ₹ 138882330 less NP shown by the appellant ₹ 64717221) is unjustified, unwarranted and bad in law. The assessee has also raised additional ground of appeal, which reads as under: The ld.CIT(A)-IV, Ahmedabad has erred in dismissing the appeal whereby the addition made by the Assessing Officer has disallowance u/s.40A(3) made an addition of ₹ 5,47,500/- is unwarranted, unjustified and bad in law. Since the DR had no objection for admission this additional ground of appeal of the assessee, the same was admitted and parties were allowed to make their submissions thereon. In the Revenue's appeal for the Asstt.Year 2008-09, sole ground taken in the appeal reads as under: 1. Theld.CIT(A) has erred in law and on facts in deleting the addition made of ₹ 1,25,00,000/- made on account of disallowance of bogus expenditure made to M/s.Jayshree Builders, addition of ₹ 60,00,000/- made on account of disallowance u/s.40(a)(ia) and additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts, the CIT(A) was not justified in arbitrarily estimating the net income at the rate of 16%, which is excessive and unrealistic considering the nature and volume of the business of the assessee. 8. On the other hand, the DR supported the order of the CIT(A) and submitted that the estimation of net profit at the rate of 16% by the CIT(A) was justified. 9. We find that no basis for making estimation of net income at the rate of 16% was brought on record by the CIT(A). In respect of net income of the preceding year disclosed by the assessee at the rate of 12.41%, the assessee pointed out that the said rate cannot be adopted during the year under consideration, because the nature of work in that year was quite different from the nature of work undertaken during the year. It is explained that the work executed during the preceding year was not of under-sea project, whereas, the work involved during the year was of under-sea project. In respect of tender documents, it was explained that the net profit embedded in the project was 11.11% as well as loss of 22.20%, which was verified from work order No.ED/C.E./MRW/Work-4/07/220 dated 25.4.2007 and work order no.ED/C.E./MR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34C is consequential in nature, and accordingly, dismiss this ground of appeal of the assessee. Assessment Year 2009-2010 17. The ground no.1 of the assessee's appeal reads as under: 1. The ld.CIT(A) has erred in dismissing the appeal whereby upholding the addition made by the AO of ₹ 1,74,194/- on the alleged ground of unexplained interest on cash loan is unjustified, unwarranted and bad in law. 18. Because of smallness of the amount, the AR of the assessee made no specific submission in respect of this ground of appeal, and therefore, the same is dismissed for lack of prosecution. 19. In the assessee's appeal, the ground no.2 reads as under: 2. The ld.CIT(A) has erred in estimating net profit at 16% of the contract receipt and making addition of difference amount of ₹ 6,59,28,523/- (i.e. NP @ 16% ₹ 119242720 less NP shown by the appellant ₹ 53314197) is unjustified, unwarranted and bad in law. In the Revenue's appeal for the same assessment year, the ground taken in the appeal reads as under: 1. On the facts and circumstances of the c se the ld.CIT(A) has erred in law and on facts in deleting the addition of ₹ 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO of ₹ 1,78,00,000/- on the alleged ground of retraction of income admitted during the search is unjustified, unwarranted and bad in law. 28. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, a search and seizure operation was conducted at premises of the assessee and in the premises of other persons on 24.6.2010. 29. Further, a locker of Shri Dinesh Jakasania, Director of the assessee-company maintained with HDFC Bank, Powai, Mumbai was searched on 10.8.2010 and statement of Shri Dinesh J. Jakasania was recorded under section 132(4) of the Act, wherein, in reply to question no.6, the said deponent disclosed undisclosed income of various persons including ₹ 1,78,00,000/- on account of assessee-company for the assessment year under consideration, and ₹ 7,00,00,000/- for the Asstt.Year 2011-12. Thereafter, the assessee filed return of income for the assessment year under consideration on 4.12.2012, showing total income of ₹ 53,63,900/-. The assessee also filed a letter of retraction dated 31.1.2013 wherein the assessee retracted the aforesaid disclosure of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not show how the above undisclosed income of ₹ 1,78,00,000/- of the assessee stands utilized on the date of search, it was represented by which assets, or was utilized for which expenditure. Still further, we find that DR could not controvert the submission of the assessee that no incriminating material relating to the assessee-company was found during the course of search, and even the lower authorities could not bring any corroborative material, which was found during the course of search, which could support the disclosure of income of ₹ 1,78,00,000/- for the year under consideration, or which could point out that the assessee actually earned any income either of ₹ 1,78,00,000/- or any part thereof, which was not disclosed prior to the date of search. 37. We find that the Hon'ble jurisdictional High Court in the case of Kailashben Manharlal Chokshi Vs. CIT (supra) held as under: The assessee was a partner of a firm and during the search conducted under section 132 of the Income-tax Act, 1961at the premises of the firm and the partners a statement of the assessee under section 132(4) was recorded. The assessee disclosed an unaccounted investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 for renovation after making withdrawal from the firm's account. With respect to furniture in the first floor a detailed source of investment of furniture purchased with due confirmation from the party concerned had been filed by the assessee before the Assessing Officer. Since no payment for this additional furniture was made by the assessee till the date of search, no addition could be made on this count. The explanation of the assessee was convincing but not been considered by the authorities below. Merely on the basis of the admission of the assessee the additions could not be made unless and until some corroborative evidence was found in support of such admission. The statement recorded at such odd hours could not be considered to be a voluntary statement, if it was subsequently retracted and necessary evidence was led contrary to such admission. The Tribunal was not justified in making addition of ₹ 6 lakhs. 38. Thus, we find that the Hon'ble jurisdictional High Court has categorically held that merely on the basis of admission of the assessee, the additions cannot be made unless and until some corroborative evidence was found in support of such admission. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ground no.1 of the appeal of the assessee in the Asstt.Year 2008-09, except for change in figures. 43. During the year under consideration also the assessee was engaged in the contract work of widening and deepening of Mithi River. Quantity of work done was measured and certified by the Engineer-incharge appointed by the Mumbai Metropolitan Region Development Authority. During this year, the assessee's turnover from such contract was ₹ 25,08,88,413/- and the assessee disclosed income at ₹ 53,63,900/- in the return of income which worked out to 4.57% of the turnover. As the facts and issues involved are similar, we following the decision in the case of the assessee in the Asstt.Year 2008-09, direct the AO to estimate the net profit of the assessee of the year at the rate of 8% of the turnover from contract work. Thus, this ground of appeal of the assessee is partly allowed. 44. The ground no.4 of the assessee's appeal for the Asstt.Year 2010- 11 reads as under: 4. The CIT(A) has erred in upholding decision of the AO in imposing penalty u/s.271(1)(c)/271AAA of the Act is unjustified, unwarranted and bad in law. 45. This ground of appeal is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO on the basis of admission made by the assessee. 52. The CIT(A) observed that search was carried out on 24.6.2010 i.e. within three months from the commencement of the relevant previous year, and therefore assuming that the admission was for 12 months, sustained proportionate addition for the period upto 24.6.2010 of the previous year and deleted the balance amount of addition. Further, the Revenue though filed appeal for the Asstt.Year 2011-12, but has not challenged the above deletion of addition of ₹ 4,64,00,000/- made by the CIT(A). Only the assessee has challenged the confirmation of addition to the extent of ₹ 2,35,00,000/- made only on basis of statement recorded under section 132(4) of the Act, without any corroborative material. Such admission was retracted by the assessee by filing return of income as well as by a separate retraction letter also. 53. The arguments of both the parties were exactly similar as was made for the Asstt.Year 2010-11. Therefore, we following our decision for the Asstt.Year 2010-11, for the same reasons, delete the addition of ₹ 2,35,00,000/- for the year under consideration, and thus allow this ground of appeal o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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