9911796707
TMI Blog2020 (7) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer shall examine each of them carefully qua the business nature, nexus to the business activity of the assessee etc and allow the deduction if they are of business nature. The Assessing Officer, after giving reasonable opportunity to the assessee, shall decide the issue in accordance with the law. Accordingly, the ground no.1 is partly allowed for statistical purposes. Deduction us. 80IA(4) - income offered by the assessee during the search and seizure action u/s 132 - HELD THAT:- We find the issue of granting of deduction u/s 80IA(4) of the Act in respect of the undisclosed business income of the assessee, is a covered issue by a series of judgements. A special reference is made here to the Co-ordinate Bench decision in the case of (i) M/s. Gajraj Constructions [ 2015 (10) TMI 1858 - ITAT PUNE] and (ii) Naresh T. Wadhwani [ 2014 (11) TMI 689 - ITAT PUNE] . In these cases, the Tribunal granted deduction u/s 80IA of the Act in respect of the undisclosed business income of the assessee. In our view, the issue is now covered one in favour of the assessee. Non-appropriation of seized cash toward the advance tax liabilities and consequent levy of interest u/s 234 - HELD THAT:- We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Engineering Services Pvt. Ltd. (LCESPL). Appeals in ITA Nos.1245 to 1247/PUN/2015 are filed by Revenue. Thus, these are the cross appeals and are directed against the common orders of the CIT(A)-1 & 2, Kolhapur dated 01.06.2015 for the (three) assessment years 2009-10 to 2011-12. Further, the appeal in ITA No.608/PUN/2016 relates to Sri Vijaykumar Rajaram Shah and is filed by the Revenue against the order of the CIT(A)-11, Pune dated 05.01.2016 u/s 143(3) of the Act for the assessment year 2011-12. Sri Vijaykumar Rajaram Shah is the Managing Director of the company- LCESPL. Since the facts and issues involved in all the above 7 captioned appeals of the Revenue as well as of the assessee are interlaced, therefore, all the above 7 captioned appeals were heard together and are being disposed of by this composite order. 2. Brief Facts common to the cross appeals for three assessment years : Briefly stated the relevant facts include that the assessee is engaged in the business of executing the Civil, Electrical and Mechanical contracts. The details of dates of filing of return of income, returned income and assessed income for the respective assessment years under consideration are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed Income 70000000 179076000 42500000 291576000 4. The above extracted table indicates the offer of unaccounted income of ₹ 7 crores for the assessment year 2009-10, ₹ 17.90 crores (rounded up) for the assessment year 2010-11 and ₹ 4.25 crores for the assessment year 2011-12 respectively, totalling to ₹ 29.15 crores (rounded up). 5. In compliance of the above statement, the assessee filed the returns of income including the above stated disclosure of undisclosed income for all the assessment years under consideration. Specific to the assessment year 2009- 10, which is relied for facts, the assessee offered the said ₹ 7 crores as undisclosed income in the return income for that year. Otherwise, the regular income of the assessee works out to ₹ 7,22,78,057/-. The total income offered by the assessee for the year under consideration is ₹ 14,22,78,057/- (i.e. 7,22,78,057 + 7,00,00,000). 6. In the return of income, the assessee claimed deduction u/s 80-IA(4) of the Act in respect of the entire total income of ₹ 14,22,78,057/-. Similar claims are made by the assessee in the rest of the two assessment years i.e. A.Y. 2010-11 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no restriction on the assessee to claim any deduction which was claimed originally in the original assessment". Referring to the source of said undisclosed income of ₹ 29.15 crores, ld. Counsel for the assessee submitted that the source of the said undisclosed income is assessee's business itself. The undisclosed income is the business income of the company only. The search and seizure action resulted in discovery of the mode of inflation of various expenses to save the tax and thus, the the source of the said ₹ 29.15 crores is the assessee's business itself only. So long as the business discovered during the search and seizure action is from the actual business of the assessee, subject to the fulfilment of the conditions relating to filing of certain audit reports in Form No.10CCB, the assessee should be entitled to claim of deduction u/s 80IA(4) of the Act. In this regard, the assessee relied on the series of the decisions such as : (i) Control Touch Electronic Pvt. Ltd., 77 ITD 522; (ii) CIT vs. Suman Papers & Boards Ltd., 314 ITR 119; (iii) JK Export SB of Settlement Commission, SA No.21 dt. 29.01.1996; and, (iv) CIT vs. V. Subramaniyan (Late), 305 ITR 289. 9. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch assessment u/s 153A of the Act. The Assessing Officer discussed the same in para 14 of his order and distinguished the series of judgements relied on by the assessee. In fact, the Assessing Officer distinguished the Jurisdictional High Court's judgement in the case of CIT vs. Sheth Developers Pvt. Ltd., 254 CTR 127. The Assessing Officer opined that this is case where the assessment was made u/s 153BC of the Act and not section 153A of the Act as in the assessee's own case. In this case, the assessee made a claim of deduction u/s 80IB(10) of the Act in respect of the undisclosed income of the block period. Eventually, the Assessing Officer added the undisclosed income of ₹ 7 crores as income from other sources as per discussion given in para 18.3 of his assessment order. Similar additions were made in the other two assessment years too. The Assessing Officer also made adjustments to the claim of deduction qua the income by way of Miscellaneous Receipts. 12. Miscellaneous Receipts : On the denial of deduction u/s 80IA(4) of the Act in respect of the miscellaneous receipts, the Assessing Officer noticed that the assessee earned miscellaneous receipts and credited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and the issues were decided in favour of the assessee holding that the assessee is eligible for claim of deduction u/s 80IA(4) of the Act. 16. While deciding the issues in favour of the assessee, the Tribunal relied heavily on the Jurisdictional High Court's judgement in the case of ABG Heavy Industries Ltd. (supra). The fact that ABG Heavy Industries Ltd. is a contractor for the JNP Trust and the same is found eligible for claim of deduction u/s 80IB(4) of the Act which was considered by the Tribunal and the said decision was applicable to the facts of the present case. In the written submission, the assessee relied heavily on the order of the Tribunal in assessee's own case vide ITA No.254/PUN/2008, ITA No.431/PUN/2007, ITA No.435/PUN/2007 and ITA No.766/PUN/2009 pertaining to assessment years 2006-07, 2005-06, 2003-04 and 2004-05 dated 08.06.2011. Highlighted the requirement of following the precedent in assessee's own case (supra) and also relied on the decision of Pune Bench of the Tribunal in the case of ITO vs. M/s. Gajraj Constructions vide ITA No.2057/PUN/2013 for the assessment year 2010-11 dated 11.02.2015, ld. Counsel for the assessee submitted that a contractor con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he core issue raised in the said appeal i.e. allowability of the claim of deduction u/s 80IB(10) of the Act in respect of the income computed as undisclosed income u/s 69A of the Act. Mentioning that in both the cases i.e. assessee and the Sheth Developers Pvt. Ltd. (supra), the CIT(A) mentioned that in both the cases there was undisclosed income and only difference with reference to the claim of deduction in different sections i.e. the assessee of the present appeal made a claim u/s 80IA(4) of the Act and in Sheth Developers Pvt. Ltd. made a claim of deduction u/s 80IB(10) of the Act. The Hon'ble Bombay High Court considered the Hon'ble Madras High Court's judgement in the case of ANBU Textiles vs. ACIT, 262 ITR 684 where the deduction u/s 80IB of the Act was allowed while computing the undisclosed income for the block period in that case. Thus, the assessee is found eligible for claim of deduction on the income offered by the assessee during the search and seizure action u/s 132 of the Act. Thus, the CIT(A) found the assessee, being a contractor, constitutes a developer for the purpose of section 80IA(4) of the Act and the deduction is found eligible in respect of both the regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances of the case and in law and on careful perusal of the order passed by the A.O., it reveals that the prerequisites of such disallowance in S. 14A have been ignored which mandate that the A.O. to record satisfaction that the interest-bearing funds have been used to earn tax- free income. The satisfaction to be recorded must be based upon credible and relevant evidence and onus to prove that interest bearing funds have been used, lie squarely on the shoulders of Revenue. The A.O. failed to discharge the onus that lay upon her. The disallowance made by the A.O. and sustained by Ld. CIT(A) be quashed and set aside. 3) The appellant craves to leave, add/amend or alter any of the above grounds of appeal." 22. The only issue raised in the assessee's appeal relates to the disallowance made by the Assessing Officer and confirmed by the CIT(A) on account of provisions of section 14A r.w. Rule 8D(2) of the Rules. For the assessment year 2008-09 too, the Assessing Officer disallowed a sum of ₹ 2,87,333/-. The CIT(A) confirmed the same as per the discussion given in para 60 of the order of the CIT(A). In the process, both the Assessing Officer and the CIT(A) ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 335 - 349 for the case laws in the Paperbook for the Case Laws) 5. The above disallowance was challenged before the CIT (A) who has discussed this issue on page No. 65 of his order. The CIT (A) has held that the fact that the investment has been made in subsidiary company or assessee has not received any exempt income during the year would not lead to conclusion that the disallowance cannot be made. Following the decision of Special Bench in the case of Cheminvest Ltd. v. ITO [124 TTJ 577 (Del)] he confirmed the disallowance made by the Assessing Officer. 6. It is respectfully submitted before Your Honours that the assessee has not received any exempt income during the year. This is evident from the Profit & Loss A/c and the computation of income filed in the paper book before Your Honours. In fact, the submissions to that effect was made before both the lower authorities and remains undisputed. However, the lower authorities have relied upon the decision of Special Bench in the case of Cheminvest Ltd. v. ITO [124 TTJ 577 (Del)]. It is submitted that the above decision of the Special Bench has been reversed by the Hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the above written submission of the assessee on this issue, we are of the opinion that the grounds are required to be allowed in favour of the assessee. Accordingly, the grounds raised by the assessee are allowed. 26. In the result, the appeal of the assessee in ITA No.1177/PUN/2015 for the assessment year 2009-10 is allowed. ITA No.1245/PUN/2015 - A.Y. 2009-10 - By Revenue 27. The grounds raised by the Revenue are as under :- "1) On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred while allowing the assessees appeal or eligibility of Miscellaneous Receipts of ₹ 3,85,74,806/- without controverting the facts enumerated by the AO in his order and further erring in treating the said receipts as Profits and gains derived from eligible business as required by Section 80IA(4) of the Act. 2) On the facts and the circumstances of the case and in taw, the Ld. CIT(A) has erred in holding that the assesses is eligible for additional deduction u/s 80IA(4) of the Act of ₹ 7,00,00,000/- addition made on account of undisclosed income declared during the course of Search Action. 3) The order of the Ld. CIT(A) may be vacated and that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act in respect of such miscellaneous receipts. 9. At this juncture, we would like to mention that the Assessing Officer has initially held that various projects of the assessee are not eligible for deduction u/s. 80IA(4) of the Act on various grounds. However, this finding of the Assessing Officer has been reversed by the CIT (A) following several decisions of Tribunal and High Court including the decisions of Tribunal in the assessee's own case for earlier years. The question, as far as ground No. 1 of the Department's appeal is concerned, is regarding eligibility of miscellaneous receipts u/s. 80IA(4) of the Act. 10 The above issue has been discussed by the Assessing Officer on page No. 62 of his order. The receipts under consideration which is subject-matter of Ground No. 1 of Department's appeal are as under. Particulars of Miscellaneous Receipts Amount Bank Interest & Other Interest 73,28,660.44 Other Income 8,43,409.77 VAT Reimbursement 1,70,77,488.00 Work Insurance 1,08,85,831.00 New Item FBT (Excess Provision) 1,246.00 New Item Other Deductions from Sub-Contractor 20,21,798.00 Material Deductions Sub-Contractor 2,82,140.00 3,84,40,573.21 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce amount is also to be credited to Profit and Loss and not liable to tax. In this regard, the reliance is placed upon the decision of Delhi High Court in the case of CIT v. Sportking India Ltd. (324 ITR 283). (Refer Para 2 on Page no. 359 and Para 12 on Page 365 and No. 358 to 365 for the case law in Paperbook of Case Laws). 14. The Assessing Officer has not accepted the above receipts to be part of business income from eligible undertaking. According to the Assessing Officer, these receipts have got nothing to do with the business and they are not entitled for any deduction. 15. Elaborate submissions have been made before the CIT (A) which is recorded by him on page No. 8 to 11 of his order. The ld. CIT (A) has given a detailed finding on page No. 14 to 16 of his order. 16. The assessee relies upon the detailed submissions made before the CIT (A) and his findings as well as submissions made hereinabove. It is submitted that the assessee has undertaken various infrastructure development projects, all of which are eligible for deduction u/s. 80IA(4) of the Act and about which there is no dispute. Therefore, it is requested the finding of the Hon'ble Tribunal in A.Y. 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried out at the premises of the assessee. It may kindly be noted that since the time limit for issuing notice u/s. 143(2) of the Act was not expired on the date of search, the pending assessment proceedings were abated. Subsequently, a notice u/s. 153A of the Act was issued on 30.05.2011 in response to which the assessee filed return of income in which deduction u/s. 80IA(4) of the Act has been claimed at ₹ 14,22,78,057/- (It has been wrongly mentioned in the assessment order that the assessee has stated that return filed earlier may be treated as return in response to S. 153A of the Act.) 19. In the return of income the assessee has claimed deduction u/s. 80IA(4) of the Act of ₹ 14,22,78,057/-. This amount also included ₹ 7 crores on account of additional income declared during the course of search. The core dispute in this ground of appeal is regarding eligibility of deduction u/s. 80IA(4) of the Act. 20. It is imperative to understand the nature of transactions for which the declaration has been made during the course of search. Certain seized documents were found during the course of search which reflected certain cash expenditure. It is the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim cannot be made in the return of income filed u/s. 153A of the Act. It is submitted that the present assessment proceedings are abated proceedings and, hence, there is no such embargo on the AO so far as the issues to be considered by him. As pointed out hereinabove, on the date of search i.e. 15.06.2010, the time limit for issuing the notice u/s. 143(2) of the Act had not expired. This is in light of the fact that the return of income for the year under consideration, i.e. A.Y. 2009-10 was filed on 31.10.2009 and the time limit u/s. 143(2) of the Act as up to 30.09.2010. Once, an assessment has been abated, the AO is not only entitled to consider all issues but duty bound to do so. Various decisions relied upon by the AO are in respect of non-abated years. 26. The next objection of the AO is that the undisclosed income is not a business income. In this regard, it is submitted that the assessee has been found to have generated certain cash. The source of the cash is inflation of expenditure. Once, the expenditure has been reduced by removing the inflated portion, the profit of the business would increase. The source of such increased profit could not be anything else than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act the additions made were ignored on the ground that they were not generated out of the manufacturing activity of the assessee. In the further proceedings before the Hon'ble Court at the instance of the revenue, it was found that since the addition made on account of employer's contribution was not assailed by the assessee, the only issue for consideration pertained to allowability of deduction u/s. 10A of the Act qua the additional income due to the disallowance pertaining to employees' contribution. In answering the subject-issue in favour of the assessee, the Hon'ble Court held as under: "12. By reason of the judgment of the Supreme Court in CIT v. Alom Extrusions Limited [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the Revenue proceeds on the basis that the assessed income was enhanced due to the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed from the income computed as undisclosed income under s. 69A of the I.T. Act, 1961?" (Refer Para 2 (1) on Page No. 178 of Paperbook for Case Laws) 32. In agreeing with the decision arrived at by the Hon'ble Tribunal holding that such a claim was allowable, the Hon'ble High Court held as under: "10. Chapter XIV-B of the said Act provides for special procedure for assessment of search cases and is contained in s. 158B to s. 158BI of the said Act. Further, this chapter applies only in cases of search initiated before 31st May, 2003. In this case, the search took place in 2002 and therefore, the present case is governed by Chapter XIV-B of the said Act. Sec. 158BB of Chapter XIV-B of the Act deals with computation of undisclosed income of the block period. The above Explanation to sub-s. (1) of s. 158BB of the Act was amended by the Finance Act, 2002 with retrospective effect from 1st July, 1995. Prior to the amendment, according to the Explanation the total income or loss was to be computed in accordance with Chapter IV of the said Act. Consequent to the amendment by Finance Act, 2002 with retrospective effect from 1st July, 1995 the total income or loss has to be computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue " (Refer Para 10,11,12 on Page No. 180 - 181 of Paperbook for Case Laws) 33. Further we rely on the case of Asst. Commissioner of Income Tax Circle 1, Kolhapur vs. Mahalaxmi Infraprojects Limited ITA No. 142 - 145 / PUN / 2016 and ITA No. 146 - 147 / PUN /2016, ITAT Pune. (Refer Page No. 133 - 148 of Paperbook for Case Laws) The following grounds of appeal were raised reproduced below: 1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in allowing deduction u/s.80IA(4) of the Act of ₹ 35,98,460/- on the additional income offered on account of purchases. 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in holding that the ratio laid down by the Hon'ble Mumbai High Court in the case of CIT Vs. ABG Heavy Industries Ltd. (2010) (322 ITR 323) (Bom) is applicable to the facts and circumstances of assessee's case? Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 crores, respectively in the block period on account of inflation of expenses. He asked for set off of said disclosure while estimating the amount of non-genuine purchases. The Assessing Officer noted that the assessee had booked bogus expenses amounting to ₹ 89,79,588/- under the head 'Purchase of stilt and cement' for the year under consideration, which was added in his hands. The assessee had sought set off with the disclosure already made and also it was contended that the said income offered in respect of purchases was part of business income and infrastructural activities and was eligible for deduction under section 80IA(4) of the Act. Decision for AY 2011 - 12 : …. issue which is arising in the present appeal is whether the assessee is entitled to claim the aforesaid deduction under section 80IA(4) of the Act on additional income offered. We have already decided the said issue also in the paras hereinabove and following the same parity of reasoning as in the proceedings initiated under section 153A of the Act and order of the Tribunal dated 09.12.2015, we hold that the assessee is entitled to claim the deduction under section 80IA(4) of the Act on addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional income declared on account of on-money received on sale of flats in the project. Accordingly, the impugned sum bas been declared as unaccounted income from the housing project in question. …………………………………………………………………… 17. In-fact, the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s. 80-IB(10) of the Act in relation to the undisclosed income declared consequent to the search. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the department, but the claim of the deduction u/s. 80-IB(10) was denied in relation to such income. However, the claim was upheld by the Hon'ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. By drawing an analogy from the said precedent, it is canvassed by the Revenue that the impugned additional income is not eligible for the benefits of section 80IB(10) of the Act. 39. We have carefully perused the fact-situation in the case before the Chandigarh Bench of the Tribunal and find that the ratio of the said decision has to be understood with reference to peculiar facts of the case. In the case before the Chandigarh Bench of the Tribunal, the undisclosed income surrendered by the assessee in the course of search was in the shape of unaccounted cash, investments etc. and the material seized did not show the sources of acquisition of the undisclosed income reflected by such unaccounted cash, etc. So however, in the present case, it is factually clear that the impugned additional income is nothing but monies received by the assessee from customers against sale of flats in its housing project, Sai Nisarg Park - Mayureshwar, which was not recorded in the regular account books. Clearly, in the case before us, source of additional income is the execution of the housing project and once the source of income is established, the assessability has to be has to follow. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Construction Portal Pvt. Ltd. v. ITO for A.Ys. 2005-06 and 2006-07 in ITA Nos. 1607 and 1608/PUN/2014, dated 06.06.2018. In both the appeals, the only grievance was against the treatment given to the income declared during the course of survey as deemed income u/s. 69A of the Act as against 'business income'. Decision relied upon by Assessing Officer is distinguishable 35. In support of his decision to make the impugned disallowance, the Assessing Officer has relied upon the order of Ahmedabad Bench of the Hon'ble Tribunal in the case of DCIT v. Rameshbhai C. Prajapati for A.Y. 2006-07 in I.T.A. No. 226/Ahd/2010 dated 21.09.2012. It is submitted that the aforesaid order does not advance the case of the revenue for more than one reason as discussed hereinbelow. 36. The issue involved in the aforesaid case was as to the allowability or otherwise of deduction u/s. 80-IB(10) of the Act with respect to disallowance u/s. 40(a)(ia) of the Act. The ground on which the benefit u/s. 80-IB(10) of the Act was denied was that the impugned disallowance was made for 'infringement of law' in as much it was for lack of compliance to deposit the amount of tax deducted by the assessee to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015, May 03, 2016, Allahabad High Court. The above views have attained finality as these judgments of the High Court of Bombay, Gujarat and Allahabad have been accepted by the Department. 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance." 38. Similarly, the reliance placed by the AO on Explanation to S. 69C of the Act would not be of any relevance as S. 69C would be applicable only in a case where the source of expenditure is not established and the assessee has claimed deduction in respect of such expenditure. In the present case, the source of expenditure has been explained and the assessee has not claimed any deduction in respect of expenditure. The AO has observed that the assessee has never come forward to explain which were the expenses which were inflated and to what extent. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t make any payment against them. Q. 6 Does these transactions are entered in your cash book? Ans. No. These transactions are not entered in the cash books which are maintained manually. They are directly entered into the books maintained in Tally on the computer on the instructions of Shri Vijaykumar Shah or Shri Rajendra Doshi." 40. The above statement of Anuradha Gulavani was shown to her senior Swati Kulkarni who has also agreed and accepted the entire modus operandi and explained the booking of expenditure without making actual cash payment. Her answer to Q. No. 4 is reproduced hereinbelow: "Ans. Yes, I do confirm that the facts stated by Sou. Anuradha Gulavani are true. The expenditure under the head of 'wages' debited to the P&L A/c of Laxmi Civil Engineering Services Pvt. Ltd. are accounted for the in the books by me on the basis of such self-made vouchers. The actual payment against such vouchers is not made." 41. Attention is next invited towards the statement of Shri Rajendra Mohanlal Doshi, director of the assessee-company recorded u/s. 132(4) of the Act on the date of search itself, i.e. 15.06.2010. His attention was drawn to the statements of Anuradha Gulavan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontain various expenditures debited to various expense heads. All of the above vouchers are not genuine or fully substantiated. As explained in my earlier answer the unexplained expenditure for facilitating various projects is met out through debiting certain unsubstantiated expenses. We shall provide further details in due course of time." 43. The statement of Shri Vijaykumar Rajaram Shah was again recorded on the same day and he was asked about the source of cash of ₹ 2.51 crores found during the course of search. In answer to question he has categorically replied that the source of cash is inflation of expenditure. The relevant question and answer is reproduced herein below. "Q. 4 During the course of search at your residence on 15.06.2010, cash of ₹ 2,51,44,400/- was found. Please explain the source of the same along with documentary evidence. Ans. the cash of ₹ 2.51 crores was generated by inflating the expenses under various heads like wages etc. for which self-made vouchers were prepared. I offer the same as undisclosed income in the hands of Laxmi Civil Engineering Services Pvt. Ltd. for F.Y. 2010-11. Balance cash of ₹ 44,400/- was out of my ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O is not valid." (..... end of the extraction from the written note) 33. While the ld. AR for the assessee relies on the written submission, the ld. DR for the Revenue submitted that the order of the Assessing Officer should be approved. However, it is not the case of the Revenue supported by any direct evidences that the additional income offered by the assessee is not a business income-company. 34. After hearing both the sides, we find the issue of granting of deduction u/s 80IA(4) of the Act in respect of the undisclosed business income of the assessee, is a covered issue by a series of judgements extracted above. A special reference is made here to the Co-ordinate Bench decision in the case of (i) M/s. Gajraj Constructions (supra) and (ii) Naresh T. Wadhwani (supra). In these cases, the Tribunal granted deduction u/s 80IA of the Act in respect of the undisclosed business income of the assessee. In our view, the issue is now covered one in favour of the assessee. Therefore, we find the order of the CIT(A) is fair and reasonable and it does not call for one intervention. Accordingly, ground no.2 raised by the Revenue is dismissed. 35. In the result, the appeal of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act accordingly. This was challenged before the CIT (A) who has confirmed it by stating that the liability of interest is consequential and depends on the amount of tax. 49. It is respectfully submitted that once a request has been made for appropriation of seized cash, in all fairness, the Department is bound to act upon it. The officers of the Department cannot keep the seized cash idle on the one hand and levy the interest u/s. 234B of the Act. Your Honours are aware that seized cash has to be dealt with according to the provisions of section 132B of the Act. As per sub-section 1 of that section, the asset seized u/s.132 may be utilized towards discharge of any existing liability under the Act, Therefore, once a request has been made by the assessee vide which the assessment year and nature of existing liability has been specified, the adjustment of the seized cash ought to have been carried out. In failure of doing so, the assessee cannot be said to be responsible and certainly cannot be penalised. 50. In this regard, it is respectfully submitted that Explanation 2 to section 132B has been inserted by Finance Act, 2013 w.e.f. 1-6-2013 and it reads as under: "Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied by the Assessing Officer and on further appeal, by the CIT(A) after taking into account provisions of Explanation 2 to section 132B of the Act and holding that this explanation was clarificatory in nature and hence, it covered pending cases also. The assessee filed further appeal before the Tribunal by taking, inter alia, the following grounds : "[3] The learned CIT (A) failed to appreciate that - a. Explanation 2 to section 132B has been inserted w.e.f 01.06.2013 and the legislature, in its own wisdom, has not made it applicable retrospectively and hence, there is no reason to hold that the said explanation inserted w.e.f. 01.06.2013 is applicable even to the earlier years. b. When two contradictory views are possible, the view favourable to the assessee should be adopted in view of the Supreme Court decision in the case of Vegetable Products Ltd. [88 ITR 192] AND therefore, the view taken by ITAT, Ahmedabad in the case of Kanishka Prints Pvt. Ltd. [143 ITD 716] should have been followed over the view taken by ITAT, Delhi in the case of Spaze Tower Pvt. Ltd. Without prejudice to the above grounds, the assessee submits as under- [4] The learned CIT (A) further erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has erred in allowing the adjustment of seized cash against self- assessment tax liability though Income Tax Act does not provide for adjustment of seized cash before determination of tax liability. 2. That the Department craves leave to add, modify or alter any of the ground(s) of appeal and/or adduce additional evidence at the time of hearing of the case." 57. The Learned DR argued that there is no provision in the Income Tax Act to adjust the seized cash towards the self-assessment tax payable by the assessee and accordingly supported the order of the Learned AO. The AR argued that the order passed u/s.153A of the Act was in accordance with law but subsequent action of the Assessing Officer revoking the adjustment of cash was illegal. 58. The Tribunal considered the provisions of the section 132B of the Act, case laws on the issue and dismissed the appeal filed by the Revenue by observing as under:- "7. We find that the subsequent action of Learned AO in revoking the credit given for seized cash towards existing tax liability under proceedings u/s 154 of the Act is illegal. The provisions of section 132B of the Act makes it clear that the terms 'existing liability' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest u/s 234B and 234 C of the Act for non-payment and short payment of advance tax is concerned, we have already held that the amendment in section 132B of the Act is held to be prospective in operation from 1.6.2013 and accordingly not applicable for Asst Year 2006-07. Hence we hold that no interest u/s 234B and 234 C of the Act shall be charged by the Learned AO from the date of seizure of cash to the date of completion of assessment in respect of seized cash of ₹ 20,00,000/-. In the result, the appeal of the revenue is dismissed. " 59. In view of the above, it is respectfully submitted that Your Honours may direct the Assessing Officer to give credit of cash seized as requested by the appellant and consequentially, work out the interest payable/refundable." 38. On hearing both the sides and also considering the above facts of the case, we find the seized cash is available for adjustment towards "advance tax liability" which constitutes "any existing liability" as defined in effect prior to the amendment by the Finance Act, 2013. This interpretation is supported by the Co-ordinate Bench of the Tribunal in the case of Happy Home Developers (supra). The contents of para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Assessing Officer be restored. 5) The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal." 42. Briefly stated the relevant facts include that the assessee is an individual and derives his income from salary, interest, etc. The assessee is also Managing Director of Laxmi Engineering Services P. Ltd. which is engaged in the business of infrastructure and other project developments. A search was carried out on 15.06.2010 u/s. 132 of the Act in the case of Laxmi Engineering Services P. Ltd. and the assessee. During the course of the search, various documents and cash amounting to ₹ 2,51,44,400/- was seized were seized. The cash seized was found in the possession of the assessee. The Assessing Officer issued a show cause to the assessee as to why cash seized should not be taxed as additional income of the assessee. In reply thereto, the assessee submitted that in the statements recorded during search, it was categorically stated that this cash was generated by inflating the expenses of Laxmi Engineering Services Ltd. and it was kept for the safety purpose, in the possession of the assessee. Thus, out of cash seized, ₹ 2,51,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- will become substantive income of the assessee. In view of the foregoing facts, the cash of ₹ 2,51,44,400/- is treated as unexplained money. Accordingly, the said amount of ₹ 2,51,44,400/- is hereby brought to tax for the A.Y. 2011-12. Penalty proceedings u/s. 271(1)(c) & 271AAA are being initiated separately." 47. From the above, it is evident that there is no categorical finding of Assessing Officer if the said cash belongs to assessee or his company. Assessing Officer opines that the said cash is needed to be added only on protective basis. In case deduction u/s 80IA(4) is claimed by the company, in the hands of Shah, Assessing Officer opines that the addition becomes "substantive". The contents of para 8 of Assessing Officer's order is relevant. The same is extracted as under :- "08. In view of the above, information, explanation submitted, and on verification of the seized materials etc. the total income of the assessee for the assessment year under the consideration is assessed as under: Salary ₹ 12,00,000/- Income from business ₹ 2,18,419/- Short term capital gain ₹ 2,41,756/- Income from other sources ₹ 27,54,763/- Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the sole source of cash is inflated expenditure in the hands of Laxmi Civil Engineering Pvt. Ltd. In this regard, Your Honours' kind attention is invited towards the statement of Anuradha Amrut Gulavani, who is looking after cash, vouchers, expenditure and other accounting function of the assessee. She was pointed out the deficiency found during the course of search in the maintenance of ledger accounts and vouchers. In this reply, she agreed that the voucher for the wage payments are prepared by her on the instructions of Shri Vijaykumar Shah and Shri Rajendra Doshi. The name of sites are also told by them. On such instructions, she used to prepare the vouchers and mentioned any name as of the labourer. She used to prepare such undated vouchers and later on dates are mentioned as per the instructions. She categorically admitted that no payments are made against such vouchers. She also explained that such vouchers are not entered into the manual cash book but are entered directly in the accounts maintained on computer. The relevant questions and answers given by Anuradha Gulavani in her statement are reproduced hereinbelow :- "Q. 4 On perusal of P&L A/c for F.Y. 2009-10 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices Pvt. Ltd. are accounted for in the books by me on the basis of such self-made vouchers. The actual payment against such vouchers is not made." 16. Most importantly the above statements have been confirmed and reiterated repeatedly by both the directors during the course of search itself. The spontaneous statements recorded during the course of the search has to be believed in absence of any contrary evidence. It would not be out of context to point out that subsequently the same cash has been adjusted by the Revenue towards outstanding tax demand of M/s Laxmi Civil Engineering Services P. Ltd. Thus, it can be seen that at the time of search itself it was clarified to the Department that the assessee was holding cash of ₹ 2,51,00,000/- on behalf of the said company and its source was explained i.e. impugned cash was generated by recording inflated expenses in the books of the said company. It is submitted that no evidence to the contrary has been brought on record by the Assessing Officer to negate the explanation given during the course of the search by various persons including the assessee and hence, the CIT(A) has rightly deleted the addition made by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case and no ratio as such has been laid down." 49. On hearing both the sides and after considering the above extracted written submission of the assessee, we analyzed the following facts relating to the (i) facts seized cash from the residence of Sri Shah, (ii) the evidences gathered during the search action, (iii) statements recorded by the search team, (iv) the offer of the explanation of the assessee why the said cash is discovered at his residence, (v) the fact of offering the same as an additional income of company etc. We have also considered the fact that Shri Shah does not have any other source leave alone the business income sources to earn such huge cash. We have also noticed that the assessee company offered the said income as income of the company and the same is approved by the CIT(A) and also confirmed the same by us in the Tribunal. Therefore, met the consistency, we are of the considered opinion, the Assessing Officer's attempt to make this as protective addition appears logical and reasonable. The alternative addition made by the Assessing Officer on substantive basis is unsustainable for the reason that the addition becomes substantial if the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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