9911796707
TMI Blog2017 (5) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted assessment under section 153A r.w.s 143(3) of the Act after taking prior approval of competent authority, and thus, in our opinion, there is no error in the provisions of the Act under which assessment is framed Addition of expenses incurred on guest house for the purpose of business of the company - Held that:- the appellant has not discharged the onus cast on him by the provisions of Section 37(1) of the Act. No submissions/evidence is filed to rebut the presumption u/s 132(4A) of the Act regarding the expenditure mentioned in the documents seized during the search. In view of totality of facts and circumstances, the addition made by the Assessing Officer is sustained Disallowance of land development expenses - Held that:- We find that the assessee even did not furnish confirmation letters from the alleged contactors to establish the services rendered by them. This was the basic requirement, which the assessee was required to fulfill to discharge his onus particularly in the circumstances when many persons alleged to be contactors have admitted of not carrying out any contract work for the assessee. In the circumstances, we feel it appropriate to restore the issue of disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act under which the assessment order is framed is not applicable to the assessment in question and thus the assessment order passed is illegal and void ab initio. It requires to be cancelled on this ground itself. (b) In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have appreciated that assessment order passed u/s 153A by Assessing Officer is bad in law and deserves to be cancelled. 3(a) In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the addition of ₹ 5,47,350/- being expenditure in a guest house incurred for the purposes of business of company. (b) In law and in the facts and circumstances of the appellant's case, the CIT(A) ought to have appreciated that premises at B-1, Sector -30, Noida was used as guest house of company and not as residential premises and documents being Page no. 24, 26 & 28 of Ann A-6 found and seized from said premises reflects expenditure incurred by appellant for its business purpose and allowable as deduction u/s 37(1) of the Act. 4. In the law and in the facts and circumstances of the case, the appellant denies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative attended the hearing on 29/03/2017 and thus, the appeal was heard ex parte qua the assessee. 6. The facts in brief of the case are that original return of income was filed by the assessee on 31/10/2001, declaring total income of ₹ 11,43,750/. The case was selected for scrutiny and assessment was completed under section 143(3) of the Income-tax Act, 1961 (for short "the Act") on 23/03/2004 at total income of ₹ 1,05,33,140/-. On appeal, the first appellate authority confirmed all the additions except amount of ₹ 4,58,424/- made on account of disallowance under section 40A(7) of the Act. Subsequently, search action under section 132 of the Act was carried out at the premises of the assessee company on 22/09/2005. Consequently, notice under section 153A of the Act was issued asking the assessee to file return of income. In response, the assessee filed return of income on 21/08/2006. However, again the assessee was searched under section 132 of the Act on 25/08/2006 and in view of another search action, the 153A proceedings initiated in compliance to first search action dated 22/09/2005 got abetted. The Assessing Officer, again issued notice under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no such ground was taken before the Ld. CIT(A). 9.2 We have heard the submission of the Ld. CIT(DR) and perused the relevant material on record. We find that no such ground was taken before the Ld. CIT(A). Despite this, we further find that the first search under section 132 of the Act was conducted on 22/09/2005, and second search under section 132 of the Act was conducted on 25/08/2006 . The procedure for assessment of search cases w.e.f. 01/06/2003 has been laid down in section 153A , 153B and 153C of the Act. According to section 153A(1)(b) of the Act, in case of a person where a search is initiated under section 132 of the Act after 31st of May, 2003, the Assessing Officer shall assess or reassess the total income of six assessment years immediately preceding assessment year relevant to the previous year in which such searches is conducted. Since in the case of the assessee, second search was conducted on 25/08/2006, the relevant six assessment years to be assessed are from assessment year 2000-01 to 2006-07. Since the year under consideration is well within the period to be considered for assessment or reassessment, corresponding to the second search action dated 25/08/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession. One of the most important conditions for allowability of deductions under section 37(1) is that it must be laid out or expended wholly and exclusively for the purpose of the business or profession. This can be dealt in following sub-parts: First condition is that there should be business or profession. It means existence of business is pre-condition for allowability of expenditure under this section. So expenditure incurred before start of business and after close of business, are generally not allowable under this section. There are two parts of this condition. • There should be business or profession. If the person is not doing business then expenditure cannot be allowed under this section. • The business should be in existence. Next condition is that the expenditure must be laid out or expended. There are also two parts of this conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3694/Del/2010 and Cross Objection of assessee having C.O. No. 279/Del/2010 for assessment year 2007-08. The grounds of appeal reads as under: "1. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 1,57,61,800/- made by the AO against the land development expenditure claim of the company? 2. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in brushing aside the findings of the enquiries conducted by the Department? 3. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the expenditure relating to these contractors/concerns were not debited to the P&L Account despite the fact that no such plea was taken by the assessee during the course of assessment proceedings. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 14. Cross Objections raised by the assessee read as under: "1. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in the preceding Ground) was required to be granted. 6. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of Cross-Objections either before or at the time of hearing of the Cross-Objections." 15. The facts in brief of the case are that the assessee company was engaged in the business of development of farmland and sale thereof. The assessee purchased agriculture land mainly in rural areas in interior parts in various states of the country. For the year under consideration, the assessee did not file its return of income on the due date stipulated under section 139(1) of the Act. Even no tax audit report was filed by the assessee before the due date. The Assessing Officer issued notice under section 142 (1) of the Act on 14/11/2007 asking the assessee to file the return of income which was also not complied. The assessee filed return of income on 12/04/2008 declaring total income of ₹ 21,81,62,814/-. 15.1 A Notice under section 143(2) of the Act was issued on 22/07/2008 and assessment was completed on 31/12/2008 at total income of ₹ 27,32,23,810/-. The Assessing Officer made following additions to the returned income: Sl. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -07, the Assessing Officer found that the alleged contractors, against whom the assessee claimed the expenditure on land development were not found at the addresses on verification carried out by the Inspectors of the Income Tax Department. 16.2 The Assessing Officer has mentioned in the assessment order that in assessment year 2005-06, after conducting detailed enquiries the ITO Ward-1(1), New Delhi also found that the contractor M/s. AI Estate Private Limited had not carried out any work and only provided accommodation entries to the assessee. The ITO , Ward 16(1), New Delhi also held that M/s Tashi Contractors Private Limited, to whom also the assessee awarded contract, had provided accommodation entry after charging 2% commission. The Income Tax Inspector was deputed to verify addresses of as many 64 persons but none of them were found at the addresses given by the assessee. 16.3 Similarly, in assessment year 2006-07, Sh. Pradeep Kumar Jindal, in statement recorded by the Income Tax Officer, Ward-1(1) , New Delhi admitted facts of having no work done , only bills were raised, cheque were received and repaid in cash. He provided total bills amounting to ₹ 14,62,11,899/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TES 250000 MAVAI ROAD, OLD VIJAY NAGAR, GHAZIABAD 5. R.V.CONSTRUCTIONS 250000 MAVAI ROAD, OLD VIJAY NAGAR, GHAZIABAD GHAZIABAD 6. MANAMI CONSTRUCTION CO. PVT. LTD. 11641800 156A, Lenin Sarani, Kolkata TOTAL 15761800 16.6 The Ld. CIT-A deleted the addition with following observations: "3.5 The only ground of the A.O. for the disallowance of the land development expenditure is that the parties were not found on the given addresses and it created the shadow of doubt in mind of the Assessing Officer that the expenditure is not genuine and no other material or evidence is gathered or found during the search to show that the claim of the expenditure is not genuine. It is held by the Hon'ble Supreme Court in the case of Lalchand Bhagat reported in 37 ITR 288 that the suspicion however great cannot take the place of evidence. It is a matter of record that two searches were conducted at the premises of the appellant on 22.09.2005 and 25.08.2006 and no incriminating documents, books of accounts etc. were found or seized to indicate that the appellant had claimed any bogus expenditure to reduce the burden of the tax liability. One should not forget that it is a search assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. " The Hon'ble Supreme Court has laid down the proposition in this case that whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and gains of the same business, profession or vocation under section 24(2) has to be determined by the Income tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. In the light of the observations of the Hon'ble Apex Court, the Assessing Officer is directed to examine the land development expenditure of ₹ 1,57,61,800/- disallowed by him during the year under consideration in the year in which the same is debited to the books of accounts." 16.7 Further, the Ld. CIT(A) following the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Man Mohan Das, reported in 59 ITR 699 directed the Assessing Officer to examine the land development expenditure disallowed by him during the year under consideration in the year in which same was debited to the books of accounts. 16.8 The Ld. CIT(DR) before us contested that no plea was taken by the assessee during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) has not specifically adjudicated upon the general grounds. In view of contention of the Ld. CIT(DR), we do not find any specific reason in the grounds of the assessee before the Ld. CIT(A) challenging the jurisdiction and therefore the ground no. 1 is accordingly dismissed. 19. In ground No. 2 of the cross objection, the assessee has raised the issue that it's ground No. 4 before the Ld. CIT(A) has not been considered and adjudicated upon, wherein the assessee raised that in absence of providing adequate opportunity, the order of the Assessing Officer was in violation of principle of natural Justice. The Ld. CIT(DR) before us submitted that it is evident from the order of the Assessing Officer that initially, the assessee did not comply with the various notices issued by the Assessing Officer and for that purpose the Assessing Officer even issued penalty under section 271(1)(b) of the Act. In the assessment proceeding, various persons authorized by the assessee have attended the assessment proceeding from time to time and case was discussed with them and therefore there was no violation of principle of natural Justice by the Assessing Officer. 19.1 We have heard the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer, the amount declared by the assessee in the return of income against said disclosure of ₹ 1,57,24,188/-, was not found. This fact has been confirmed by the Ld. CIT-A as well. In view of this factual verification, we do not find any infirmity in the order of the Ld. CIT-A, and accordingly we uphold the same. The ground is accordingly dismissed. 21. In ground No. 4, the assessee has challenged not allowing relief on ground No. 6 to 8 raised before the Ld. CIT-A. 21.1 Before us, the Ld. CIT(DR) submitted that the Assessing Officer has considered all the undisclosed income on the basis of incriminating documents found during the course of search and after reducing the income of ₹ 23 crores declared by the assessee, addition for the balance amount of ₹ 2,35,75,009/- has only been made in the final computation of assessed income. She further submitted that in respect of factual inaccuracies, the Ld. CIT-A has already directed the Assessing Officer to take necessary remedy action and therefore there could not have been any grievance to the assessee. 18.2 We have heard the submission of the Ld. CITDR and perused the relevant material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. In view of this, it is held that the Assessing Officer has rightly made the various additions. However, the appellant vide letter dated 08.05.2010 submitted that there are factual mistakes in the order of the Assessing Officer. The submission in regard to the factual inaccuracies is reproduced below: "8. Without prejudiced to the foregoing, we beg to point out that in arriving at the quantum, the learned Assessing Officer has made the following errors which deserve to be rectified in any case: (a) The learned Assessing Officer has inadvertently omitted to consider that the deal with Jaswant Singh (first item in the table in the assessment order) had not materialized and. therefore, there was no question for making any addition on this account; accordingly, the addition to the extent of ₹ 4,71,875 (Rs. 9,28,125 minus ₹ 4,56,250) is required to be deleted; (b) That as only a bare reading of the seized paper No. 77 would show, the payment by DD in the case of Sukha Singh was ₹ 90,00,000; that, however, while tabulating in the assessment order, the learned Assessing Officer has erroneously taken that amount at only ₹ 9,00,000 i.e. he has short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43,57.22,000/- made by the AO against the land development expenditure claim of the company. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in brushing aside the findings of the enquiries conducted by the department. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the expenses relating to these contractors/ concerns were not debited to the Profit & Loss Account despite the fact that no such plea was taken by the assessee during the course of assessment proceedings and there is nothing on record to substantiate such claim of the assessee. 4. The order of the Id. CIT(A) is erroneous and is not tenable on facts and in law. 5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before during the course of the hearing of the appeal." 26. The cross objections of the assessee are as under: "1. In law and in the facts and circumstances of the appellant's case, the CIT(A) has erred in upholding that the validity of assessment order passed u/s 143(3) r.w.s 148 of the I.T Act, it has been passed in culmination of reassessment proceedings initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation from the Commissioner of income tax, Delhi-V containing the information inter alia that contracts awarded of ₹ 43,57,22,000/- for land development to various persons were actually accommodation entries and no work was carried out by those persons. No return of income was filed by the assessee in response to the notice dated 30/03/2010 issued under section 148 of the Act. The Assessing Officer further issued notice under section 142(1) of the Act along with the questionnaire, wherein the assessee was confronted with all the details and asked was asked as why the amount of ₹ 43,57,22,000/- may not be disallowed. In compliance, on 03/06/2010, Smt. Sudha Gupta, Ld. Authorized Representative of the assessee appeared before the Assessing Officer and submitted that the return of income originally filed by the assessee company might be treated as having filed in response to notice under section 148 of the Act. On the request of the Ld. AR, the Assessing Officer also provided a copy of reasons recorded for reopening of the assessment. The Ld. AR furnished photocopy of affidavits of persons who allegedly been awarded contracts for land development. The list of such per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sr. no.4 and 12) and rest of the affidavits are signed by other individuals in the capacity of Directors/ Autho. Signatories. This pattern has been highlight with an intention to point out that when single person is managing five, four or two Companies then the total volume of work which should have been performed can well be imagined. This fact further lend abundant credence to the findings given in the para 2 above, that the execution of such huge work contracts was practically impossible." 27.2 The Assessing Officer asked the assessee to produce the parties for verification, however the assessee failed in producing any of the persons for verifications of the depositions made in the affidavits. 27.3 In the circumstances, the Assessing Officer made addition of ₹ 43,57,22,000/-to the last assessed income. 27.4 Aggrieved, the assessee filed appeal before the Ld. CIT-A and challenged the legality of reassessment proceeding as well as merit of the addition. The Ld. CIT-A upheld the legality of the reassessment proceedings however allowed relief to the assessee on merit of the addition holding as under: "Since the entire disallowance in this case is based on the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored to the file of the Assessing Officer for deciding afresh in the light of the directions given in ITA No. 3694/Del/2010. It is needless to mention that the assessee shall be afforded reasonable opportunity of hearing. Accordingly, the appeal of the revenue is allowed for statistical purposes. Cross objection of the assessee 30. In the cross objection, the assessee has challenged the validity of the reassessment proceeding as being without jurisdiction. 31. The learned CIT(DR) relied on the order of the Ld. CIT-A and submitted that issue has been discussed at length by the Ld. CIT-A in view of the decisions of the Hon'ble Supreme Court and Delhi High Court. None represented on behalf of the assessee and thus the case was heard ex parte qua the assessee. 32. We have heard the submission of the Ld. CIT(DR) and perused the relevant material on record. We find that the Ld. CIT-A has decided the issue in dispute as under: " 15. Finding on Ground No. 1 & 2 I have given a careful consideration to the facts of this case which have led to the present reopening of the original assessment order, the submissions made by the appellant in the SOF against reopening and the various de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662. for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC)." Thus, at the stage of issue of notice, the only question to be considered is, whether there was relevant material on which a reasonable person could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fact of escapement of income'". It was held that, at the stage of issue of notice, "the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage". Therefore, the submission of the counsel for the appellant that, the AO had no material on record to validly issue notice u/s 148 of the I.T. Act is not acceptable and as such initiation of proceedings is upheld and, the Ground of Appeal No. 1 and 2 are dismissed." 33. The reasons to believe that income escaped assessment recorded, by the Assessing Officer has been reproduced by the Ld. CIT-A on page 4 of the impugned order. The Ld. CIT-A has taken into account all the objections of the assessee against reassessment proceedings. The Ld. CIT-A has also considered the issue racked up by the assessee that the very same issue of land development expenses had undergone the scrutiny as well as appellate proceedings and therefore it achieved finality. The arguments of the assessee that the reason to believe of the Assessing Officer actually had only reason to suspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash available in the books of accounts cannot be allowed to be utilized for making payment outside the books and therefore, working out a negative cash balance to this extent as on 26-09-2007. 3. In law and on the facts and circumstances of the case, the Ld. CIT(A) erred in sustaining following addition made under the head commission, brokerage and farm land development expenses ignoring the fact that payment is made through banking channels and genuineness of the payment is not doubted: (i) Shri Manpreet Singh Janta - ₹ 10,00,000/- (ii) M/s Associate Space Designers Pvt. Ltd. - ₹ 9,00,000/- (iii) M/s Econ Trade World - ₹ 17,50,000/- (iv) M/s Confluence Leasing and Credit Ltd. - ₹ 2,71,692/- (v) M/s Nilesh Marketing Pvt. Ltd. - ₹ 13,00,000/- 4. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal. 38. The facts in brief of the case are that for the year under consideration, the assessee filed return of income declaring total income of ₹ 20,78,86,458/- on 17/02/2009 . The year under consideration was after the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer made addition for payment of money amounting to ₹ 7,25,28,811/- reflected in the Annexure A-2 and Annexure A-6 found and impounded during the course of survey operations. The assessee contended before the Ld. CIT-A that the expenses claimed in subsequent year corresponding to the payment made in the year under consideration were reverted back and thus it was presumed that cash was received against those payments and therefore this cash was available for making payments for land purchases. The cash flow statement prepared by the assessee was examined by the Ld. CIT-A and after removing the tax deducted at source, he found negative cash on 26/09/2007 to the extent of ₹ 87,43,250/- and upheld the addition to that extent. In remand proceeding, the Assessing Officer objected to admission of the working of cash flow submitted by the assessee, however did not comment on the merit of the working of the cash flow statement. 42. With regard to another addition of commission/brokerage/farmland development to the extent of ₹ 2,30,50,000/-, during appellate proceeding before the learned CIT(A), the Authorized Representative of the assessee submitted copy of the bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-r. (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-r. (1) unless the Assessing Officer has been allowed a reasonable opportunity (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additinal evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, we are of the view that the Tribunal ought to have restored the matter to the CIT(A) with the direction to him to comply with sub-r. (3) of r. 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT(A) under sub- s. (4) of s. 250 with the powers vested in him under r. 46A. The Tribunal seems to have overlooked sub-r. (4) of r. 46A [sic-s. 250] which itself takes note of the distinction between the powers conferred by the CIT(A) under the statute while disposing of the assessee's appeal and the powers conferred upon him under r. 46A. The Tribunal erred in its interpretation of the provisions of r. 46A vis-à-vis s. 250(4). Its view that since in any case the CIT(A), by virtue of his coterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of r. 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make r. 46A otiose and it would open up the possibility of the assessees' contending that any additional evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the company. 2. On the facts and in the circumstances of the case, the CIT (A) has erred deleting the addition of ₹ 10,33,30,407/- made by the A.O. on account commission/ brokerage. 3. The order of the CIT (A) is erroneous and is not tenable on facts and in law 4. The appellant craves leave to add, alter or amend any/ all of the grounds appeal before or during the course of the hearing of the appeal." 50. Grounds of appeal raised with assessee are as under: "1. In law and on the facts and circumstances of the case, the Ld. CIT(A) erred in sustaining the addition of ₹ 53,37,600/- under the head brokerage ignoring the fact that payment is made through banking channels, genuineness of the payment is not doubted and such payment of brokerage to these parties has been allowed in earlier years. 2.(i) In law and on the facts and circumstances of the case, the Ld. CIT(A) erred in confirming an addition of ₹ 3,48,27,265/- out of total addition of ₹ 13,34,82,275/- being 10% out of expenditure of ₹ 1,33,48,22,756/- under the head commission and market development expenses. (ii) In law and on the facts and circumstances of the case, the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to concerns mentioned in Annexure -A4 not having address 53,37,600 (ii) Disallowance on estimate basis at the rate of 10% out of commission/market development expenses of ₹ 1,33,48,22,756/-, due to non-verification of cases under 133(6), parties state not mentioned, and parties PAN not mentioned 13,34,82, 275 Total 13,88,19,875 51.1 On appeal, the learned CIT-A, allowed part relief to the assessee. Aggrieved, both the Revenue and the assessee are in appeal raising the grounds as reproduced above. 52. Before us, Ld. CIT(DR) relied on the order of the Assessing Officer and submitted that Ld. CIT-A has not appreciated the finding of the Assessing Officer. She accordingly prayed that addition made by the Assessing Officer might be sustained in full. On the other hand, none represented on behalf of the assessee and therefore the case was heard ex parte qua the assessee. 53. We have heard the submission of the Ld. CIT(DR) and perused the relevant material on record. 54. In ground No.1, the Revenue has challenged addition of ₹ 4,08,80,236/- deleted by the Ld. CIT-A, out of the addition of ₹ 4,15,21,836 made by the Assessing Officer against land development exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that once entire payment made to 10 parties are reversed, the entire payment of ₹ 15,06,41,600 is not claimed in expenditure. Hence, surrender is for ₹ 15,06,41,600 & not ₹ 15 crores, I agree with the argument of Ld. AR that once entries in respect of these 10 parties are reversed, expenditure to the extent of ₹ 15,06,41,600 was not claimed, therefore surrender is for ₹ 15.06.41.600 - 00. Therefore, addition of ₹ 6,41,600 is not required. Accordingly, I direct A.O. to delete the addition of ₹ 6,41,600 on this issue." 56. We have observed that, the Assessing Officer is claiming that amount only ₹ 15 crore was credited in the profit and loss account on account of reversal of entries of land development expenses, whereas according to the Ld. CIT-A, the assessee has reversed the entire amount of ₹ 15,06,41,600/-. In our opinion, it is matter of verification from the books of accounts of the assessee company and thus, we feel it appropriate to restore the issue to the file of the Assessing Officer for verification of facts from the books of accounts of the assessee and decide the issue accordingly. The assessee is directed to prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details, the Assessing Officer was handicapped in carrying out enquiries. In the circumstances, we feel it appropriate to restore the issue to the file of the Assessing Officer and direct the assessee to provide complete addresses and other requisite details of the parties. The Assessing Officer is directed to decide the issue afresh in accordance with law. The assessee shall be afforded sufficient opportunity of hearing. The first ground of appeal of the Revenue is accordingly allowed for statistical purposes. 57. The ground No. 2 of the appeal of the Revenue and ground No. 1 and 2 of the appeal of the assessee are interconnected and related to the addition of ₹ 13,88,19,875/- made by the Assessing Officer against brokerage/commission expenses. 58. The disallowance consist of two items of ₹ 53,37,600/- and ₹ 13,34,82,275/-. 59. Regarding the disallowance of ₹ 53,37,600/- under the head brokerage and commission expenses, the Assessing Officer observed that pages 108 to 126 of documents inventorised as Annexure A4 impounded during the course of survey action, contained expenses on account of commission/brokerage made to 18 parties. The Assessing Officer ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding. Ld. AR in written submission has stated that address was given. 1 have perused the assessment record. These details were submitted on 31.03.201 i. The detail filed by appellant shows that address in respect of these 3 parties were not Jiled before A.O. Further under brokerage head, the detailed address of various persons to whom brokerage paid is less than ₹ 5 Lakhs was not provided. Therefore, before A.O. the address of total 15 parties in respect-of whom addition has been made under 'brokerage head' (3 1 12) was not furnished. Even PAN of 12 parties in respect of whom payments made less than 5 ' lakhs were not furnished. Ld. AR's argument that A.O. could have obtained the identify of 3 parties in respect of whom PAN was available through PAN directory is not convincing. T he address available in PAN directory may not be updated. Further, it is the appellant who possess the recent address & identity of parties to whom payment is made. Onus lies on appellant company to prove genuiness of expenditure by providing supporting evidence; Undisputedly, the payment has been through banking channels, but quantum & exact identification of services can only be seen e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion paid (state detail not available) S.No. FA code FA Name PAN Amount (Rs.) State 1 006355964 Brij Gopal Gupta AEOPG6187Q 699855 2 0510000236 Dhanpati Devi AKHPD1391E 1097980 3 0529650001 Shivcharan Saini AQAPS4564R 1929705 4 0639150006 Bishnu Swaroop Mishra AHZPM7744F 668715 5 0639950001 Shubha Sinha AWGPS6957C 2193961 6 0595000053 Mr. Amit Kumar AMSPK2351G 1312650 7 0597500012 Mohammad Sharif BFSPS6900P 1015287 £ 0599650001 Pradeep Kumar A UVPP3882E 700131 9 0840007347 Charan Singh S AUZPS4668M 503813 10 0840007445 Tasleem ahmad AEJPA9327H 1100936 11 0878750007 Santra Devi AGQPD8521R 593572 12 0879150002 Kamlesh Devi AQUPK9977A 991014 13 1030066818 Suman Devi CBAPS5260F 509500 14 103064868 Hemant Kumar AJVPK7639K 524162 15 0220002604 Surender Singh Chauhan BGEPS8316Q 942224 'Details of commission paid (state detail not available) S. No. FA code FA Name PAN Amount (Rs.) State 1 0140048234 Mamatha P NULL 500150 Karnataka 2 0560000031 Bhagat Singh NULL 1190585 Rajasthan 3 063035754 Shailendra Partap Yadav NULL 1235023 UP 4 063051310 Laxmi Yada NULL 1388682 UP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that work was done by these persons 2 years back. Therefore, the appellant was not having current address of these persons. I have considered the arguments of Ld. AR. However, I do not agree with the argument of Ld. AR. It is the appellant who have claimed expenditure, therefore on us lies on him to provide the address of person to whom payment is made & expenditure claimed. In absence of address or any supporting evidence, A.O. cannot examine the exact nature & quantum of services rendered. Ld. AR has further argued that these expenditure are neither proved capital or personal in nature, hence cannot be disallowed u/s 37 of I.T. Act. This argument is also not acceptable. The assessee while claiming expenditure has to prove it is a business expenditure. Even during appellate stage the fresh address in respect of these 5 persons were given. Therefore, I confirm the addition to the extent of payment made these 5 persons amounting to ₹ 47,09,396 under this head as service rendered by these persons are not proved. On the issue of non furnishing of PAN & state in respect of 30 parties, 15 under each category, Ld. AR has argued that through PAN directory, state could have been ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces rendered by the parties before the Assessing Officer. The assessee shall also be afforded sufficient opportunity of hearing on the issue in dispute by the learned AO. 69. Accordingly, the ground No. 3 of appeal of Revenue is allowed for statistical purposes and ground No. 1 of the appeal of the assessee is accordingly dismissed. The ground No. 2 of the appeal of the assessee is allowed for statistical purposes. 70. In the result, appeal of the Revenue is allowed for statistical purposes and appeal of the assessee is allowed partly for statistical purposes. ITA No. 5371/Del/2013 & 5200/Del/2013 for AY: 2010-11 71. Now we take up appeal of the Revenue and assessee for assessment year 2010-11 having ITA No. 5371/Del/2013 and ITA No. 5200/Del/2013 respectively. 72. The ground of appeal raised by the Revenue in ITA No. 5371/Del/2013 are reproduced as under: i. On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of ₹ 10.0 crore made by the AO to the declared profit of the assessee company on account of steep decline in the net profit. ii. On the facts and in the circumstances of the case, the CIT (A) has erred in restrictin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eave to add, alter or withdraw any ground of appeal." 74. The facts in brief of the case are that the assessee filed return of income for the year under consideration on 30/09/2010 declaring total income of ₹ 57,71,39,350/- which included income of ₹ 35 crore offered during the course of survey proceedings under section 133A of the income tax Act carried out at various business premises of the assessee company on 22/03/2010. The case was selected for compulsory scrutiny and notice under section 143(2) of the Act was issued and duly served. In the assessment completed under section 143(3) of the Act on 20/03/2013, the Assessing Officer made following three additions/disallowances: 1. Trading addition Rs.10,00,00,000/- 2. Disallowance on account of land/firm development expenses Rs.1,71,54,550/- 3. Disallowance out of brokerage/commission expenses Rs.22,64,08,533/- 75. On appeal, the Ld. CIT-A allowed part relief to the assessee. Aggrieved, both the Revenue and the assessee are in appeal raising the grounds as reproduced above. 76. The Ld. CIT(DR) relied on the finding of the Assessing Officer and submitted that in last many years , the assessee has been subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79. The ground No. 3 of the appeal of the Revenue and ground No. 3 and 4 of the appeal of the assessee are connected and related to the addition made by the Assessing Officer out of the brokerage and commission expenses. The Assessing Officer made addition of ₹ 22,64,08,533/- non account of disallowance of commission and marketing development expenses on estimate basis at the rate of 10% of the total expenses claimed by the assessee. On test check of the expenses, the Assessing Officer found that 15 parties to whom commission was paid but name of their state was not known and similarly 14 parties in respect of whom details of PAN was not known. In view of non-verification of the parties, the Assessing Officer disallowed 10% of expenses out of the total expenses claimed with assessee. The Ld. CIT-A sustained amount of ₹ 1,24,18,056/- in respect of the 15 persons where state was not mentioned in the details provided by the assessee and amount of ₹ 39,62,302/- in respect of 14 persons, whose PAN was not provided. Thus, total amount of ₹ 1,63,80,358/- was confirmed by the Ld. CIT-A and relief of the balance amount was allowed to the assessee. The Revenue is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any enquiries to prove his apprehension. I have considered carefully the arguments of Ld. AR. Ld. AR has argued that the assessing officer has made disallowance on ad hoc basis without finding any irregular claim or bogus claim of expenses. He argued that the books of accounts are audited under companies Act & u/s 44AB of I.T. Act. All the expenditure are properly vouched and books of accounts were produced during the assessment proceedings. The assessing officer has not pointed out any specific item of expense as bogus before making adhoc addition. He further argued that the assessing officer himself stated that land development expenses which is major expense has gone down. Therefore, assessing officer arbitrarily on the basis of percentage rise in particular expense with respect to turnover has made addition ignoring the audited books of accounts. Ld. AR has brought to my notice the comparison of net profit ratio inclusive of surrender of additional income u/s 133A. He argued that the surrender of additional income of ₹ 35- crores is on the basis of unaccounted investment i.e. application of income. Therefore, the disclosure of current year is nothing but income gene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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