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TMI Blog2018 (4) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... the 3 assessment years assessee filed a chart giving appeal-wise/assessment year-issues and the said chart is extracted here as under : Mr. Shivaji B. Jadhav - summary of grounds of appeal I.T. Department's Grounds A.Y. 2008-09 ITA No.680 A.Y. 2009-10 ITA No.681 A.Y. 2010-11 ITA No.682 CIT(A) not justified in adopting Municipal Tax value for taxing Income from House property 5,35,641 6,64,082 6,40,419 CIT(A) not justified in deleting addition on account of profits earned from sale of land at GEORAI without appreciating that the said transaction was an adventure in nature of trade 5,43,85,990 Assessee's Grounds A.Y.2010-11 ITA No.699 No addition for Adhoc declaration made during statement recorded during search proceeding, which was subsequently retracted and no any corresponding material found during search 2. We shall take up the assessment year-wise issues in the following paragraphs. First, we shall take up the Cross Objection with a legal issue raised by the assessee and then the appeal by the Revenue for the A.Y. 2008-09. C.O.No.10/PUN/2018 - A.Y. 2008-09 (By Assessee) 3. Condonation of del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any incriminating material found during the course of search on 08-09-2010. 3. Assessee craves leave to add/modify/alter/delete all/any of the grounds of the grounds of cross objection." 6. Brief facts of the case for the year includes that the assessee is an individual and is engaged in execution of Irrigation Contracts and generation of energy from windmills. Assessee filed the return of income declaring total income of Rs. 25,86,730/- including agricultural income. There was search and seizure action u/s.132 of the Act related to Shraddha group of cases on 08-09-2010. Assessee disclosed Rs. 10.99 crores on account of on-money payments in purchase of lands and suppression of closing stock etc. Assessee filed the return of income in response to notice u/s.153A of the Act. AO determined the assessed income at Rs. 5,49,21,631/- which includes deemed income of Rs. 5,35,041/- on account of let out of properties. 7. During the First Appellate proceedings for the A.Y. 2008-09, CIT(A) discussed both the issues of capital gains on sale of Gevrai land as well as income on rental properties. CIT(A) held that the addition on account of Gevrai land is not sustainable and directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed at pages 114 to 116 of paper book along with English Translation. He fairly mentioned that the said documents is seized from the premises of the assessee and submitted that the said paper is not incriminating one from any point of view, i.e., ownership, value, schedule of payments. Further, bringing our attention to the entries in the balance sheet of earlier years, Ld. Counsel demonstrated that this particular land is accounted for in the books of account/financial statements of the assessee. Pages 113A to 113F of the paper book are relevant. Assessee also demonstrated the fact that the lands were acquired by the assessee and they belong to him before they were sold for earning the gains. The fact that these lands were accounted in the books of account and the same constitutes accounted transactions and the said agreement to sale does not come in the definition of incriminating material/documents. From this point of view, the said agreement to sale (the said seized document) did not constitute an incriminating material for the AO to assume jurisdiction and make addition in a completed assessment, like the present one. 10. Ld. DR for the Revenue relied heavily on the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2008-09 (By Revenue) 13. Revenue raised the following grounds : "1. On the facts and circumstances of the case, the Ld. CIT(A) was not justified in deleting the addition made by the Assessing Officer on account of business profits on sale of land in A.Y. 2008-09 by holding the same as long term capital gain to be taxed in A.Y. 2011-12 without appreciating the fact that the sale transaction was actually an adventure in the nature of trade as against the capital gain declared by the applicant in the later year. 2. On the facts and circumstances of the case, the Ld. CIT(A) was not justified in deleting the addition made by the A.O. on account of income from let out properties without appreciating that municipal value does not represent the fair rent which a property can fetch if let out. It is computed very mechanically by the corporation and is not revised periodically. 3. The order of Ld. CIT(A) may be vacated and that of the Assessing Officer be restored. 4. The appellant crave leave to add, alter, amend, and modify any of the above grounds of appeal." From the above, it is evident that the Revenue raised couple of issues, i.e. (1) adopting Municipal Tax value for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ALV should be the sum for which, the property might reasonable be expected to let from year to year. 2.5.4 Although I agree with the learned AO, however, I find that in Pune Municipal Area, property is levied u/s.127(1)A of the Maharashtra Municipal Corporation Act. The amount of the property tax payable is based on the Municipal Valuation Municipal valuation determines the Annual Rebatable Value (ARV) of the property on the basis of the locality of the property, its sq.ft. area, its nature of use (residential or commercial etc.) and type of construction (RCC, temporary etc.). Rateable Value broadly represents the annual rent that the property could have been let for on the open market. Therefore, when Municipal valuation represents the annual rental value of the property, I do not find any justification to resort to other method of determining ALV, such as % of return on the investment made in the property. According to me, the learned AO's reliance on the case of Radhika devi Dalmia misplaced. 2.5.5. However, the municipal valuation should be of the AY concerned, in absence of the municipal ARV of the relevant AY, the learned AO's action would be justified. Accordingly, I c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd one (1) year after the date of admission and hence an afterthought. 3. The appellant craves leave to add/modify/delete/amend all/any of the grounds of appeal." 24. Briefly stated relevant facts are that during the assessment AO noticed that assessee has constructed huge bungalows at Hadashi and incurred an expenditure on account of land development. When the same was confronted, assessee offered a sum of Rs. 54 lakhs towards the omissions or commissions. On finding that there is no omission or commission at the time of filing of return of income assessee did not offer the same and retracted to that extent on this issue. However, relying on the statement given by the assessee on 06-10-2010, the AO proceeded to make addition of Rs. 54 lakhs on this account and reasoned that the said retraction has been done after a year and therefore, it is an afterthought and does not have any evidentiary value. While making the said addition, the AO relied on the decision of Pune Bench of the Tribunal in the case of Hotel Kiran Vs. ACIT 82 ITD 453, Relevant discussion is given at pages 3 and 4 of the assessment order. During the First Appellate proceedings, CIT(A) confirmed the addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirm the addition of Rs. 54,00,000/-." 25. Before us, Ld. Counsel for the assessee submitted that this disclosure of Rs. 54 lakhs offered by the assessee for the year under consideration is without any basis or any incriminating material. Therefore, the retraction made by the assessee on 12-09-2011 is sustainable. It is not the case of the Revenue that there is common issue which attracts disclosure of said additional income. Ld. Counsel for the assessee relied on various High Court judgments/decisions in support of the assessee's submissions and filed a chart showing the summary of cases where retraction has been accepted. 26. Ld. DR for the Revenue relied on various decisions to suggest that the AO merely made addition stating but for the disclosure of Rs. 54 lakhs the investigation wing abruptly stopped the proceedings on the bonafide belief. With the retraction in mind, there is no sufficient time available to the AO for investigating into the issue. Therefore, Ld. DR argued that either the addition should be confirmed or the matter should be remanded to the file of AO for examining the seized material for want of any unattended issues if any that requires disclosure of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative claim of the assessee for set off of such contingencies against other disallowances u/s.14A of the Act made by the AO was also rejected despite the existence of the favourable decision of the Tribunal in the group cases of the assessee (M/s. Adurjee Brothers Pvt. Ltd.). Aggrieved with the order of CIT(A) the assessee is in appeal before us. 30. Before us, Ld. Counsel for the assessee submitted that similar issue with some variance came up for adjudication before the Tribunal in a case belonging to the same group named M/s. Adurjee Brothers Pvt. Ltd. (supra). In this case, the demand of the assessee was for set off of the other disallowances made u/s.14A of the Act against such contingency disclosure. The Tribunal allowed the argument of the assessee on this issue of set off. Contents of Para No.12 of the order of the Tribunal in ITA No.1067/PN/2014 dated 13-06-2014 are relevant and therefore we proceed to extract the same as under : "12. We find merit in the alternate contention of the Ld. Counsel for the assessee that the amount of Rs. 75 lakhs offered to tax in the statement recorded u/s.132(4) be set off against the disallowance calculated under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of this judgment is extracted as under : "However, failure or inability of the Revenue to frame a fresh assessment should not place the assessee in a more disadvantageous position than he would have been in if a fresh assessment were made. In a case where the assessee chooses to deposit, by way of abundant caution, advance tax or tax on self assessment which is in excess of his liability on the basis of the return furnished or, if there is an arithmetical error or inaccuracy, it is open to the assessee to claim refund of the excess tax paid in the course of the assessment proceedings. He can certainly make such a claim before the concerned authority calculating the refund. Similarly, if the assessee has, by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the assessing authority, which, if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the concerned authority in a case where a refund is due and payable, and the authority conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, we do not find any reason to interfere with the Tribunal's ultimate conclusion in allowing the assessee's appeal. Though some of the observations may not appeal to us, nevertheless, for the reasons somewhat different from those recorded by the Tribunal we come to the same conclusion. Decision of the Apex Court in case of Shelly Products & Others (supra), was rendered in very different background. It was a case where the assessee had filed return. Assessee had paid self assessment tax on the income disclosed in the return. Tribunal on appeal by the assessee held that the order of the assessment passed by the Assessing Officer was ab-initio void since he had no jurisdiction to deal with such proceedings. Revenue sought reference before the High Court. When such reference was pending, the assessee applied to the department for refund of the tax paid. It was in this background the Apex Court expressed the opinion that liability to pay income tax does not depend on assessment being made and failure or inability to frame fresh assessment after earlier assessment is set aside or nullified in appropriate proceedings, does not disentitle the assessee to claim refund of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue in the context of regular assessment arose for consideration before the Hon'ble Delhi High Court in the case of CIT v. Bharat General Insurance Co. Ltd. [1971] 81 ITR 303 wherein it was held by their Lordships that even if an assessee declares an income in the return, the Assessing Officer cannot assess it merely on that basis and he has to consider its taxability in the light of other circumstances de hors the admission made in the return. In the case of Narayanan v. Gopal AIR 1960 SC 235, the Hon'ble Supreme Court has held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. It is well- established that the object of an assessment is to determine the correct income and consequently the correct tax liability. In our opinion, this settled position equally holds good in the matter of block assessment also since the scope of undisclosed income assessable in the block assessment is specifically provided and the procedure for determination of such income is also clearly laid down. In these circumstances, any amount which is not assessable as undisclosed income for the block period cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , had the assessee been given an opportunity by the Assessing Officer it could have demonstrated that no additions or disallowances were called for, in view of the binding precedents of Courts and/or Tribunal in respect of each of the addition/disallowance. The observations made in the Tax Audit Report could not have formed the basis of additions/ allowances by the Assessing Officer. On this aspect of the matter the observations in the judgment of the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 being apposite are extracted hereinbelow: It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. (p. 20). 11.1 We find that the Tribunal instead of examining the matter from this angle has repeated the order passed in the first round ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (supra). Infact, it is the duty of the AO to make an assessment basing on the facts of the case and as per the provisions of the I.T. Act. In the case of Shelly Products (supra), the Hon'ble Apex Court held that the advance tax/self assessment tax paid as part of an abundant caution are required to be refunded on verification of the claim of the assessee. The Nagpur Coordinate Bench of the Tribunal in the case of DCIT Vs. Sanmukhdas Wadhwani (supra) held that the assessed income can be lower qua the returned income of the assessee. Further, the Tribunal held in this case, any amount which is not assessable as undisclosed income of the assessee cannot be assessed merely for the reason assessee declared in the return of income. There cannot be such estoppels against the statute if the assessee itself finds a patent mistake of fact while filing the return of income assessee cannot be assessed on such incorrect income merely on the basis of admission made by him in the return of income.' 40. In the instant case, considering the above settled legal propositions, we proceed to examine availability of facts relating to the present case. In the return of income, assessee merely offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the same does not amount to any voluntary disclosure in a real sense. Had it been really voluntary, the assessee would not have raised this issue before us. It is the requirement of the statute that the AO shall make assessment strictly as per the provisions of the law and determine the assessed income accordingly. For applying the said legal principles as well as the judgments and the order of the Nagpur Bench of the Tribunal, we remand this issue to the file of the AO for the limited purpose of adjudication of the issue relating to taxability of the contingency amount of Rs. 1 crore. Accordingly, this ground by the assessee is allowed pro tanto." 28. From the above, it is evident that the onus is on the AO to establish the omissions and commissions if any before taxing the buffer disclosure of Rs. 54 lakhs by the AO. As such, AO did not examine this aspect of the issue. Therefore, with similar directions to the AO, we remand the issue to the file of AO (supra). Accordingly, this issue is adjudicated pro tanto. The grounds raised by the assessee are allowed for statistical purposes. 29. In the result, appeal of the assessee is allowed for statistical purposes. 30. To sum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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