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TMI Blog2016 (5) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... ab, which was received back, surrendered and offered for tax by the appellant during the course of search proceedings as part of the total undisclosed income of Rs. 5.50 crores. 1.2 That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in upholding the aforesaid addition of Rs. 2.56 crores on the basis of the ex parte statement of Sh. Arun Kapoor, without appreciating that (a) Mr. Kapoor, in fact, denied receiving the said amount from the appellant, (b) the ex parte statement of Mr. Kapoor, not tested by cross-examination, had no evidentiary value. 1.3 That the learned Commissioner of Income-tax (Appeals) further failed to appreciate that the aforesaid addition of Rs. 2.56 crores has resulted in double taxation of the very same amount, which is not permissible in law. 2. That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in upholding the action of the Assessing Officer in making addition of Rs. 31 lakhs under section 68 of the Act as unexplained cash introduced in the books of account. 2.1 That the learned Commissioner of Income-tax (Appeals) erred on the facts and in law in not appreciating that the above amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. which owned 10,618 square metres land at Batala Road, Amritsar. Various documents were seized from the office of the assessee indicating that the land in question was valued at Rs. 12.25 crores. Earlier there was a proposal for outright purchase of the said land but, subsequently, there was negotiation of sharing of space after the development of commercial complex on the said land and, finally, PR Infrastructure Pvt. Ltd. was taken over by the assessee and its promoters. 6. After analysing the seized papers and statements of the directors, the Assessing Officer held that the land in question at Batala Road, Amritsar, worth of Rs. 12.25 crores was purchased by the assessee for a sum of Rs. 6 lakhs only by way of transfer of the entire shareholding to the assessee- company and the group members and he treated the amount in difference of Rs. 12.19 crores paid outside the books of account as additional income under section 69B of the Act. The Assessing Officer also made other additions. The aggrieved assessee went in first appeal. The learned Commissioner of Income-tax (Appeals) has given a part relief against which parties are in appeal. 7. The assessee-company had surrendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leased properties (paragraph 4.6, pages 26 to 27) Rs. 59,04,488 (vi) Late payment of TDS (paragraph 4.7, pages 27-28) Rs. 7,98,560 Rs. 34,86,32,974 11. The learned Commissioner of Income-tax (Appeals) while giving part relief to the assessee has sustained the following additions : (i) Unexplained travelling expenditure under section 69C of the Act (paragraph 5, pages 31-32) Rs. 7,29,926 (ii) Cash received back from Mr. Ramesh Kumar Dutta under section 68 of the Act (paragraph 6.3, pages 36-37) Rs. 31,00,000 (iii) Unaccounted cash received back from Arun Kapoor, the erstwhile director of M/s. PRIL paid towards purchase of shares of M/s. PRIL (Amritsar Plot) under section 68 of the Act. (paragraph 4.11, pages 29 to 31) Rs. 2,56,00,000 (iv) Unaccounted payment in Ludhiana City Centre (paragraph 7.3, pages 55 to 57) Rs. Nil (v) Brokerage and commission paid on leased properties (paragraph 8.3, page 62) Rs. Nil (vi) Late payment of TDS (paragraph 9.3, page 64) Rs. Nil 12. Since the issue raised in ground No. 1 of the appeals preferred by the parties is common, hence, we will deal with it after adjudicating the other ground of the assessee. 13. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to Mr. Ramesh Kumar Dutta as the undisclosed income of the assessee. The Assessing Officer alleged that the impugned amount of Rs. 31 lakhs has not been received back by the assessee-company. In this regard, the Assessing Officer has placed reliance on the statement of Shri Ramesh Kumar Dutta recorded on July 17, 2007, wherein Shri Ramesh Kumar Dutta has denied to have refunded any amount to the assessee-company. The Assessing Officer has also mentioned that on the request of the assessee, Shri Ramesh Kumar Dutta, was called for cross-examination on December 26, 2007, but the assessee did not avail of this opportunity. The authorities below have held that the assessee could not establish the receiving back of the cash amounting to Rs. 31 lakhs and that the said payment of Rs. 31 lakhs made by the assessee-company to Shri Ramesh Kumar Dutta was in fact not returned by him to the assessee. 16. The learned authorised representative contended that the authorities below are in total ignorance of the statement recorded by them and the evidences produced before them. The very preliminary statement of Shri Arun Nayyar recorded during the course of the search on July 17, 2006, itself cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands corroborated as a matter of fact that the said Rs. 31 lakhs was paid to him as advance against a land deal which was later on cancelled and the refund on the same was due to the assessee. The only difference between the two statements is that where the assessee has stated that the money was received back by him, Shri Ramesh Kumar Dutta has denied the refund of the same. He submitted further that whenever a property involving a substantial amount is purchased, an advertisement is given in the newspaper by way of public notice, to call for any objection from any person who may have had any interest in the said property which could have any adverse bearing upon the deal under contemplation. The assessee in regard to the said purchase of land in Ghaziabad had given advertisement in the newspapers, copies of such newspapers showing the advertisement have been made available at pages 79, 82 and 84 of the paper book. In response to the said advertisement given by the assessee-company, some new facts were brought to the notice of the assessee in the form of one court case by S. V. P. Builders in respect of the said land, vide the honourable Allahabad High Court's order dated Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee or not and since the abovementioned facts clearly show that the transaction in question is directly related to the business of the assessee, the said non-refund of Rs. 31 lakhs was to be allowed as business loss incidental to the business and is allowable under section 28 of the Act. He placed reliance on the following decisions : (i) CIT v. Mysore Sugar Co. Ltd. [1962] 46 ITR 649 (SC) ; (ii) Mohan Meakin Ltd. v. CIT [2012] 348 ITR 109 (Delhi) ; and (iii) Harshad J. Choksi v. CIT [2012] 349 ITR 250 (Bom). 21. The learned Commissioner of Income-tax (Departmental representative) placed reliance on the orders of the authorities below. He submitted that the assessee has thoroughly failed to establish that the money of Rs. 31 lakhs advanced by the assessee to Mr. Ramesh Kumar Dutta was returned back, hence, the authorities below were justified in rejecting the above claim of the assessee. He submitted that the onus was lying upon the assessee to establish the claimed receiving back of the amount. 22. Having gone through the above submissions in view of the orders of the authorities below and the decisions relied upon by the assessee, we find that the authorities below ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital expenditure, and it being a plain case of business loss, it would certainly be allowable to be deducted under the provisions of section 37." 24. The honourable Bombay High Court in the case of Harshad J. Choksi v. CIT [2012] 349 ITR 250 (Bom) has been pleased to hold as under (headnote) : "Section 28 of the Income-tax Act, 1961, imposes a charge on the profits or gains of business or profession. The expression 'profits and gains of business or profession' is to be understood in its ordinary commercial meaning and does not mean total receipts. What has to brought to tax is the net amount earned by carrying on a profession or a business which necessarily requires deducting expenses and losses incurred in carrying on business or profession. The Supreme Court in the matter of Badridas Daga v. CIT [1958] 34 ITR 10 (SC) has held that in assessing the amount of profits and gains liable to tax, one must necessarily have regard to the accepted commercial practice that deduction of such expenses and losses is to be allowed, if it arises in carrying on business and is incidental to it. There is no bar in claiming a loss as a business loss, if it is incidental to carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the sum of Rs. 2.56 crores was also undisclosed income which was to be added separately. The Assessing Officer held that since a separate addition of Rs. 12.19 crores was being made by him for the purchase of the shares of PRIL by the assessee, therefore, no separate addition of Rs. 2.56 crores was made as the same was part of the total unaccounted consideration paid for the acquisition of the shares of PRIL. 28. The Assessing Officer alleged that for purchase of shares for PRIL, the assessee-company had paid a sum of Rs. 12.19 crores outside the books of account of the assessee over and above the actual purchase consideration of Rs. 6 lakhs towards the purchase of shares of PRIL. Thus, a sum of Rs. 12.19 crores was added as the undisclosed income of the assessee. The Assessing Officer held that the seized papers cannot be ignored as rough as has been claimed by the assessee during the assessment proceedings. The learned Commissioner of Income-tax (Appeals) concluded that the assessee-company had in the said deal paid Rs. 2.56 crores in cash and promised to allot 36,000 square feet constructed area and Rs. 6 lakhs was paid in cheque. Thus, the addition made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 crores by cheque as per detail given below, with the object to help the said company to discharge its liabilities. Date Vide Assets 3-8-2005 Ch. No. 942457 51 lakhs 9-8-2005 Pay orders 68 lakhs 30. The learned authorised representative referred page 137 of the paper book, which is a chart showing details of the payments. At pages 132 to 136 of the paper book has been shown the details of the consideration. 31. The learned authorised representative submitted that as far as the payment of Rs. 6 lakhs for purchase of shares is concerned, there is no dispute and, hence, no verification is required. Regarding the aggregate payment of Rs. 1.19 crores by cheque, the learned authorised representative submitted that the same is a matter of record and can be very much verified. He submitted that it can be seen that the total payment of Rs. 1.25 crores (Rs. 1.19 + Rs. 0.06 crores) was paid to PRIL, Rs. 1.19 crores being towards discharge of liability and Rs. 6 lakhs being towards sales consideration of shares. 32. Thus, the statement wherein Shri Arun Nayyar (page 100 of the paper book) stated that against the deal PRIL was to accept Rs. 1.25 crores and a built-up space of 36,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted the contention of the assessee that the said sum was returned back and the same was thus deposited back in the books as has been surrendered by the assessee. The source of return of cash of Rs. 2.56 crores being unexplained due to the denial by Shri Arun Kapoor, the same was added by the learned Commissioner of Income-tax (Appeals) to the income of the assessee- company under section 68 of the Act as unexplained cash credit. The learned authorised representative contended that the learned Commissioner of Income-tax (Appeals) has grossly contradicted himself in confirming this addition. The learned Commissioner of Income-tax (Appeals) without any restriction has accepted the fact of the case of the assessee whereby the said memorandum of understanding dated September 25, 2005, was duly executed, stamped, signed and sealed. The learned Commissioner of Income-tax (Appeals) has accepted that 36,000 square feet constructed area was to be delivered to PRIL as consideration for the sale of shares (impugned land of the value of Rs. 12.25 crores) in addition to Rs. 6 lakhs paid by cheque. It was on this basis that the learned Commissioner of Income-tax (Appeals) in all tightness d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of Rs. 2.56 crores being made by the assessee to PRIL, there is no evidence whatsoever anywhere in the seized papers. It is only on the basis of the surrender of the assessee that the same has been accepted as a fact and, accordingly, has been put to tax by the Assessing Officer and the learned Commissioner of Income-tax (Appeals). The assessee has already offered this amount of Rs. 2.56 crores to tax as part of the total surrendered amount of Rs. 5.50 crores. In making the said surrender, the assessee has stated that the said payment of Rs. 2.56 crores was refunded back to him by PRIL since the deal was changed and the final deal did not require the said payment. The authorities below have very conveniently chosen to rely upon the statement of Shri Arun Nayyar in parts only. Part of the statement has been relied upon and part thereof has been rejected. He submitted that if the addition of Rs. 2.56 crores to be undisclosed cash payment to PRIL is made solely on the basis of the statement of Shri Arun Nayyar, then, the fact of refund of the same as also stated by Shri Arun Nayyar in the same statement should also be relied upon. It is a matter of fact that the refund is still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per section 251 of the Act. 38. The learned authorised representative submitted further that admittedly the Assessing Officer has not made any assessment under section 68 holding the impugned amount as bogus cash credit or unexplained cash credit. The entire addition made by the Assessing Officer pertained to investment acquisition of the Amritsar plot and not against the cash credit. Thus, the action of the learned Commissioner of Income-tax (Appeals) in making the addition under section 68 of the Act without any notice to the assessee is beyond the provisions of the Act. He submitted that a perusal of the assessee's surrender of Rs. 5.50 crores and its break-up quoted above, it is apparent that the assessee had stated the following three refund payments being offered as undisclosed income and included in the said surrender : (i) Payment in cash to Mr. Ramesh Kumar Dutta against Indrapuram Plot (Ghaziabad) Rs. 31,00,000 (ii) Payment in cash against Amritsar plot to Mr. Arun Kapoor of PR Infrastructure Ltd. (PRIL) Rs. 2,56,00,000 (iii) Payment in cash to Mr. R. K. Sharma for purchase of property at Amritsar Rs. 2,00,00,000 39. The learned authorised representative ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always lies upon the claimant to establish its claim. He submitted that in the present case, the addition in question has been made on the basis of documents seized during the course of search proceedings. All these evidence revealed that there was transaction in relation to purchase of property at Amritsar and different kinds of receipts were issued by PRIL showing that different kinds of bills were under contemplation. On the basis of said seized papers, Shri Arun Nayyar, director of the assessee-company had admitted that in furtherance of the said plan/negotiation with regard to the proposed deal, the assessee has paid an aggregate cash of Rs. 2.56 crores to Shri Arun Kapoor (erstwhile director of PRIL). Thus, the assessee had made a surrender of Rs. 5.5 crores. The assessee, however, could not establish that Rs. 2.56 crores paid in cash was received back from PRIL on March 31, 2006, since the terms of negotiations were revised whereby it was agreed by Shri Arun Kapoor (PRIL) to accept Rs. 1.25 crores and a built-up space of 36,000 square feet in the proposed shopping mall at Amritsar in consideration of takeover of the company. The Assessing Officer was justified in coming to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer had made an addition of Rs. 12.19 crores. The Assessing Officer did not agree with the assessee that as per the revised terms of the negotiations, it was agreed by PRIL to accept Rs. 1.25 crores and a built-up space of 36,000 square feet in the proposed shopping mall at Amritsar in consideration of the takeover of the company and, thus, the entire amount of Rs. 2.56 crores paid in cash was received back by the assessee from PRIL on March 31, 2006, and the same money was introduced in the books as cash by the assessee. The Assessing Officer held that the cash introduced in the books of the assessee-company was not the same cash as paid by it to PRIL and, thus, observed that a sum of Rs. 2.56 crores was also undisclosed income and he added the same separately. The Assessing Officer held further that since a separate addition of Rs. 12.19 crores was being made by him for the purchase of the shares of PRIL, therefore, no separate addition of Rs. 2.56 crores was made. The Assessing Officer held that for purchase of shares of PRIL the assessee had paid a sum of Rs. 12.19 crores outside the books of the assessee over and above the actual purchase consideration of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 12.25 crores out of which Rs. 2.56 crores was paid to PRIL. Explaining the seized papers Nos. 41, 42, 50 and 51, he has clearly stated that the pages record a payment of Rs. 1 crore which included the cash payment of Rs. 49 lakhs (Rs. 42 lakhs and Rs. 7 lakhs). The said payment was included in the above payment of Rs. 2.56 crores. Shri Arun Nayyar further clarified that initially it was agreed to take over the business and the land of the company but later on it was agreed to take over the company at a revised terms, wherein the directors of PRIL agreed to accept Rs. 1.25 crores and the built-up area of 36,000 square feet in the proposed shopping mall at Amritsar, hence, the cash of Rs. 2.65 crores paid earlier was returned on March 31, 2006. The Assessing Officer has also relied upon the statement of Shri Arun Kapoor wherein he had totally denied having received the constructed area of 36,000 square feet. He stated that Ambika Resorts Pvt. Ltd., a company owned by him and his family members had booked 36,000 square feet area in the proposed mall and as part of consideration Rs. 51 lakhs had been paid to them. The contention of the assessee remained that the Assessing Officer q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial also ; (ix) regarding the locker, there was mention in some seized material about opening of a joint locker ; (x) the said memorandum of understanding was sent to the Assessing Officer for examination ; (xi) on a perusal of the memorandum of understanding, it was seen that the memorandum of understanding dated September 25, 2005, is duly signed by the assessee- company, Shri Arun Kapoor and also by two witnesses. We concur with the finding of the learned Commissioner of Income-tax (Appeals) that the existence of the memorandum of understanding duly executed by the parties cannot be ignored unless it is proved to be false. The learned Commissioner of Income-tax (Appeals) was thus justified in coming to the conclusion on the basis of the said memorandum of understanding that the assessee-company had in the said deal paid Rs. 2.56 crores in cash, promised to allot 36,000 square feet constructed area and Rs. 6 lakhs paid in cheque. He has, however, not accepted the claim of the assessee that Rs. 2.56 crores paid in cash for acquisition of shares of PRIL was returned back and the same was thus deposited back in the books. The learned Commissioner of Income-tax (Appeals) has justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities have used his part statement only which was favourable to the Revenue. Shri Arun Kapoor has in his statement categorically denied not only the refund of the cash but also its receipts. We agree with this contention of the assessee as it is an established proposition of law that a statement either can be accepted or denied wholly and in its totality. When we consider the statement of these two persons, one represented the assessee and the other PRIL in its totality keeping in mind the documents seized indicating about the ongoing negotiation regarding the acquisition of the property/PRIL ultimately settled in the memorandum of understanding dated September 25, 2005, duly executed by the parties, there is no reason to doubt the claim of the assessee that Rs. 2.56 crores was returned back which was deposited back in the books and surrendered by the assessee as a part of the total surrender of Rs. 5.50 crores, especially when the abovenoted some material facts by the learned Commissioner of Income-tax (Appeals) mentioned above in paragraph 13.3 of the present order have not been disputed. In the background of the above discussion, we hold that the learned Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer has placed reliance on the letter dated November 26, 2007, received from the ADIT (Inv.) which nowhere contains the name of the assessee or indicates to any payment being given by the assessee. The Assessing Officer has also failed to appreciate that in his statement, Shri Chetan Gupta recorded on December 18, 2007, has denied all connection with the assessee. 53. Having gone through the orders of the authorities below, we find that the learned Commissioner of Income-tax (Appeals) has deleted the addition in question on the basis that there was no evidence to establish that the payment of Rs. 21.62 crores was made by the assessee. He has held that the entire addition was made by the Assessing Officer on the basis of report of the Vigilance Bureau, Punjab Police, Ludhiana. The report of the Vigilance Bureau relied on the contents of the accounts extracted from the pen drive was recovered from Shri Chetan Gupta. Shri Chetan Gupta had denied the ownership of the pen drive before the ADIT (Inv.), Ludhiana, during his statement which was reproduced in the assessment order. The learned Commissioner of Income-tax (Appeals) while deleting the addition in question has placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer was solely based upon suspicion and surmises. The Assessing Officer has quoted the report of the Vigilance Bureau at pages 50 and 60 of his order revealing the facts that the report of the Vigilance Bureau relied on the contents of accounts was extracted from the pen drive recovered from Shri Chetan Gupta, wherein there was no mention anywhere in the accounts forwarded by the Vigilance Bureau about the name of the assessee or its director. Even the accounts forwarded by the Vigilance Bureau did not contain any reference of Citi Centre, Ludhiana. Shri Chetan Gupta had denied the ownership of the pen drive before the ADIT (Inv.), Ludhiana, during his statement which has been reproduced in the assessment order. The statement recorded during the custody of Punjab Police was not available with the Assessing Officer as it has been confirmed by him, vide letter dated May 26, 2008. Besides, the above material were never provided to the assessee by the Assessing Officer before taking any action against the assessee despite the specific request by the assessee made on December 24, 2004. There was also no statement of confirmation from the alleged recipient or h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Commissioner of Income-tax (Appeals) deleted the addition with this finding that if lease income from the renting of the mall space has been by the assessee as his business income in the subsequent years and if the same is accepted as such, then, the brokerage and commission paid on the same is to be allowed as expenditure under section 37 of the Act as has been claimed by the assessee. Against this action of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal on the issue. 56. In support of the ground, the learned Commissioner of Income-tax (Appeals) has basically placed reliance on the assessment order which we have discussed hereinabove. The learned authorised representative on the other hand tried to justify the first appellate order on the issue and reiterated the submissions of the assessee made before the authorities below and the decision cited before them. He submitted that it is the business of the assessee to lease out property and to earn lease rent out of the same, which fact has been fully accepted as such by the Assessing Officer. The properties are all held as business assets and not as house properties. The fixed assets schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [1950] 18 ITR 460 (Bom) ; (vi) CIT v. Walchand and Co. Pvt. Ltd. [1967] 65 ITR 381 (SC) ; (vii) J. K. Woollen Manufacturers v. CIT [1969] 72 ITR 612 (SC) ; (viii) Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11 (SC) ; (ix) Orissa Cement Ltd. v. CIT [1969] 73 ITR 14 (Delhi) ; (x)Travancore Rubber and Tea Co. Ltd. v. Commissioner of Agricultural Income-tax [1961] 41 ITR 751 (SC) ; and (xi)Commissioner of Agricultural Income-tax v. Calvary Mount Estates (Private) Ltd. [1961] 41 ITR 755 (SC). 57. Considering the above submission, we find that this material fact is undisputed as the Assessing Officer has accepted the factum of incurring of expenditure as well as rendering of services by the agents to whom the amount of commission/brokerage was paid during the year. The only grievance of the Assessing Officer was with respect to the amount of Rs. 59,04,788 out of the aggregate amount of Rs. 7.49 crores claimed by the assessee on account of commission/brokerage to the property dealer and the real estate agents for facilitating booking of sales of property as well as leasing out of the property which were in the process of sale by the assessee-company. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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