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TMI Blog2020 (7) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tabulated as under :- A.Y. Dates of filing of Return of Income Returned Income Assessed Income 2009-10 31.10.2009 7,67,71,340/- 14,42,51,631/- 2010-11 18.07.2011 15,30,190/- 39,80,58,455/- 2011-12 30.09.2011 2,53,998/- 19,76,44,154/- 3. There was a search and seizure action u/s 132 of the Act at the residential as well as business premises of the assessee and the Sri Vijaykumar Rajaram Shah on 15.06.2010 (A.Y. 2009-10). The search action resulted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 7 crores as undisclosed income in the return income for that year. Otherwise, the regular income of the assessee works out to Rs. 7,22,78,057/-. The total income offered by the assessee for the year under consideration is Rs. 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 Rs. 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 2011-12. 7. Before the A.O. : During the assessment proceedings u/s 153A of the Act, a question is raised by virtue of the correctness of said claim of deduction u/s 80-IA(4) of the Act in respect of the entire total claim of Rs. 14,22,78,057/-. The Assessing Officer raised the issue relating to the "Developers" versus "Contractors" qua the claim of deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 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 Rs. 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 summary of the assessee's explanation in this regard is extracted as under :- "The Business facilitation expenses are sourced by inflating various expenses debited to Profit & Loss A/c. When source of income is generated from the profit & loss a/c it is nothing but income from business. Therefore, it is eligible for deduction U/s. 80IA(4). Without prejudice to above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 Rs. 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 Profit and Loss Account. These receipts were considered as a business receipts. On finding, these receipts are not prima-facie business receipts arising out of the business activity of the assessee, the Assessing Officer raised them as non- business income and also proposed to deny the claim u/s 80IA(4) of the Act on these Miscellaneous Receipts. 13. In response to the quer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 constitutes a developer for the purpose of claiming of deduction u/s 80IA(4) of the Act. The ld. Counsel for the assessee further submitted that the facts are identical with that of the present case i.e. undisclosed income offered by the assessee is also for the reason of inflation of expenses. The facts that the Hon'ble High Court remanded the matter in that case to the ITAT which eventua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 regular/business income of the assessee as well as the undisclosed business income offered by the assessee during the search and seizure action. 17. Regarding the addition made by the Assessing Officer u/s 14A of the Act for the assessment years 2008-09 to 2011-12, the assessee submitted that no exempt income was earned during the year under consideration. Out of the investments made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 the assessee's submissions that no exempt income earned by the assessee out of the investments made in the shares of the sister concern. 23. Before us, the argument of the ld. Counsel for the assessee is that the said investments of Rs. 90 lakhs was made out of the interest free funds. Further, the ld. Counsel for the assessee filed the written submission in this regard and the said written su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision 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 (378 ITR 33). Subsequently, Hon'ble jurisdictional High Court in the case of Ballarpur Industries in ITA No. (51 of 2016 dated 13.10.2016) considered the above decision of the Hon'ble Delhi High Court and held that no disallowance could be made were the assessee has not received any exempt income during the year under consideration. Subsequently, the Hon'ble jurisdictional High Court in the case of DCIT v. Rivian Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue 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 Rs. 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 Rs. 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 the Assessing Officer be restored. 4) The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal." 28. Ground no.1 relates to the allowability of claim of deduction u/s 80IA(4) of the Act in respect of "miscellaneous receipts" (supra), the ld. CIT(A) dealt with this issue by grouping the issues for the all three assessment years 2005-06, 2006-07 and 2007-08. Before the CIT(A), the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. It would be worthwhile to note that similar disallowance was made by the Assessing Officer in A.Y. 2008-09 in respect of following receipts which are common to the receipts during the year under consideration. Particulars of Miscellaneous Receipts Amount of AY 08-09 Amount of AY 09-10 Bank Interest & Other Interest 78,85,014.50 73,28,660.44 Other Income 4,35,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 so far as the common items for A.Y. 2008-09 and for A.Y. 2009- 10 are concerned be followed. As regards the other amounts, it is submitted these receipts are integral part of the business of the assessee as explained hereinabove. 17. Since the only activity of the assessee is of infrastructure development project and the entire business eligible for deduction, there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 80IA(4) of the Act has been claimed at Rs. 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 Rs. 14,22,78,057/-. This amount also included Rs. 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 of the assessee that it has inflated certain expenditure like wages in its books of account and thereby generated cash. The said cash has been utilized for various purposes which have been reflected in the seized page. Similarly, certain cash was found from the residential premises of the director of the assessee and it is the stand of the assessee that the said cash was also generat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. 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 the eligible business. The source of the revenue remains the same irrespective of quantum of expenditure. Thus, the whole premise of the AO is conceptually incorrect. 27. The next objection of the AO is regarding the object of the search and the scope of the consequential proceedings. While there is no dispute about the object of the search, the total income of the searched assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 disallowance of the employer's as well as the employees' contribution towards provident fund/ESIC and the only question which is canvassed on behalf of the Revenue is whether on that basis the Tribunal was justified in directing the Assessing Officer to grant the exemption under section 10A. On this position, in the present case it cannot be disputed that the net consequence of the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in accordance with the provisions of this Act i.e. the said Act. Consequently, w.e.f. 1st July, 1995 the total income/loss for the block period has to be computed in accordance with the provisions of the said Act and the same would include Chapter VI-A of the said Act. Sec. 80-IB of the said Act is a part of Chapter VI-A of the Act. In view of the above, while computing the undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced 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 Rs. 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 read cumulative though it was not the issue prevailing in the case of the assessee. (Refer Para 3 on Page No. 134 - 135 of Paperbook for Case Laws) Briefly, in the facts of the case, the assessee for the year under consideration had furnished the return of income declaring total income of Rs. 1,26,07,123/- on 31.10.2007. Search and seizure operations were carried out on the premises of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 additional income offered. Accordingly, the grounds of appeal No.1 to 4 raised by the Revenue are dismissed. (Refer Para 22 on Page No. 147 - 148 of Paperbook for Case Laws) 34. It is submitted that there are several other decisions holding that statutory deductions are admissible on additional income offered during the course of search and/or survey. However, for the sake of brevity, we refrain from entering into discussion on all su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 question has been received in the course of carrying on its business activity of developing the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80-IB(10) benefits. Therefore, in terms of the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra), the claim of the assessee is justified. 18. In fact, once it is factually explicit that the additional income in question is derived from the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh, 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 fact-position is quite different and distinct from what was before the Chandigarh Bench of the Tribunal and therefore the proposition laid down by the Chandigarh Bench of the Tribunal is not applicable to the present fact-situation. Hence, reliance placed by the learned CIT-DR on the said decision does not help the case of the Revenue. (Refer Para 36,37,38 and 39 on Page No. 169 to 174 of Paperbook for Case Laws) 40. In the result, we set aside the order of the CIT(A) and direct the Assessing Officer to allow the deduction u/s. 80IB(10) of the Act even in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the government treasury within the specified time limit. We submit that the aforesaid order runs contra to the binding judgment of the Hon'ble jurisdictional High Court in CIT v. Gem Plus Jewellery India Ltd. [330 ITR 175 (Bom)] in which a similar argument raised by the revenue that addition made on account of disallowance of PF/ESIC payments should be ignored for the purpose of granting exemption u/s. 10A of the Act was rejected. It was categorically held by the Hon'ble jurisdictional High Court that the assessee was eligible for such benefit on the assessed income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I-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 this regard, it is submitted that the AO has completely ignored the evidence and material available on the record. 39. It is submitted that if the evidence unearthed at the time of search and other circumstances of the case are taken note of, irresistible conclusion which would emerge is that the sole source of cash is inflated expenditure. 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 def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Gulavani and Swati Kulkarni to which he admitted modus operandi and also admitted that the corresponding payments were not made. Only the vouchers were made and the expenditure was debited in the books of account. The subsequent question, i.e. Q. No. 7 and its answer is also important and the same is reproduced hereinbelow. "Q. 7 This means the expenditure to this extent was inflated and the income to that extent was suppressed. Do you admit this? Ans. I admit that the income to some extent was suppressed due to such false vouchers. However, I sincerely state that not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied 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 Rs. 2,51,44,400/- was found. Please explain the source of the same along with documentary evidence. Ans. the cash of Rs. 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 Rs. 44,400/- was out of my own savings." 44. All the above statements were recorded on the date of search and, hence, these are spontaneous statements which are incriminating in nature and given in response to the hard evidence found during the course of search. The Department has not controverted any of the facts. Rather, it is the case of the Department that the assessee has generated cash. At no stage of the proceedings, the Department has ever claimed that the assessee has any other source of generating the cash. In fact, during the course of search, when the revenue come with only motive to investigate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in ITA No.1245/PUN/2015 for the assessment year 2009-10 is partly allowed for statistical purposes. ITA Nos.1178 & 1179/PUN/2015 - A.Y. 2010-11 & 2011-12 - By Assessee ITA Nos.1246 & 1247/PUN/2015 - A.Y. 2010-11 & 2011-12 - By Revenue 36. Since, in the both these cross appeals, barring assessee's ground nos.3 and 4 for the assessment year 2010-11, the grounds are common to that of the cross appeals in ITA No.1177/PUN/2015 and ITA No.1245/PUN/2015 for the assessment year 2009-10 and the arguments of both the parties are similar, our decision in ITA No.1177/PUN/2015 and ITA No.124 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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: "Explanation 2- For removal of doubts, it is hereby declared that the "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII." 51. Vide the above amendment it has been specified that the existing liability would not include advance tax liability. Firstly, it is submitted that in the present case, the assessee had requested adjustment towards self-assessment tax and not towards advance tax liability. Secondly, the above amendment is prospective in nature and hence, this amendment is not relevant in deciding the issue. 52. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 erred in holding that as per the provisions of section 132B, the seized cash cannot be adjusted against self- assessment tax liability u/s. 140A determined at the time of filing of return u/s. 139(1) for the year in which search action was conducted and hence, the computation of interest u/s. 234B made by the A.O. is correct." 55. After taking into account the various case laws referred by the parties and CBDT circular no. 20 of 2017, the Tribunal accepted the contentions of the assessee and held as under:- "12. Therefore, the issue is now settled and the expression 'any existing liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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' does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. But this amendment was brought in the statute by Finance Act 2013 with effect from 1.6.2013 only. Hence it can be safely concluded that what is precluded in the statute is adjustment of seized cash towards advance taxability only and not self-assessment tax or regular tax and that too only with effect from 1.6.2013. We hold that the action of the assessee in seeking to adjust the seized cash with self-assessment tax payable along with the return of income is in order and in accordance with section 132B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 12 of the said decision of the Tribunal in the case of Happy Home Developers (supra) is relevant and the same is extracted hereunder :- "12. Therefore, the issue is now settled and the expression 'any existing liabilities' does include the advance tax liabilities prior to 01.06.2013. The case of the assessee falls prior to the said date of 01.06.2013. The cash was seized in the search initiated on 06.01.2010. Assessee requested for adjustment of the same towards the advance tax liabilities vide his letter dated 11.03.2010. Considering the above legal position in the matter and facts of the present case, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 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, Rs. 2,51,00,000/- represented that of Laxmi Engineering Services Ltd. and balance Rs. 44,400/- represented savings of the assessee. However, the Assessing Officer did not accept the contentions of the assessee and made addition of entire cash seized i.e. Rs. 2,51,44,400/- as unexplained money. It may be noted that although in the body of the assessment order the Assessing Officer had mentioned that the said cash is being considered as protective addition in his hands. However, while computing the income vide para 7, Assessing Officer stated that "cash found at residence is added in his hands on substantive basis". Thus, Assessing Officer adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Rs. 12,00,000/- Income from business Rs. 2,18,419/- Short term capital gain Rs. 2,41,756/- Income from other sources Rs. 27,54,763/- Add : Cash found at residence discussed as per para 7 on substantive basis. Rs. 2,51,44,400/- Gross total income Rs. 2,95,59,338/- Deduction under Chapter VIA Rs. 75,000/- Total Income Rs. 2,94,84,338/- Rounder off u/s 288A Rs. 2,94,84,340/-" (Extracted from Assessment Order)" 48. Further, on the issue of protective versus substantive addition, assessee filed the written submission and the contents of para 10 to 19 of the written submission are extracted hereunder :- 10. Thus, although while recording reasons the Assessing Officer had mentioned the cash seized was considered as protective addition while computing taxable income the Assessing Officer had made addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Laxmi Civil Engineering Services Pvt. Ltd., maintained on the computer of Sou. Swati Kulkarni, Accountant, it is seen that there are two heads of expenditures namely 'wages' and 'wages a/c'. She has explained that those payments made on the basis of site reports are grouped as 'wages a/c' and those payments whose vouchers are prepared by you are grouped as 'wages'. Please explain what type of vouchers are you preparing? " Ans. The vouchers for wage - payments are prepared by me on the oral instructions of Shri Vijaykumar Shah or Shri Rajendra Doshi. The names of the sites and amounts are told by them. Accordingly, I prepared vouchers with small amounts and mentioning any name as the labourer. Suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was holding cash of Rs. 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 Officer by disapproving the reasons for such additions. 17. In the second ground, an argumentative one, the Assessing Officer has sought to rely on the provisions of section 292C(1) of the Act in support of his proposition that it is incumbent upon the assessee to prove that the cash found did not belong to him. 18. It is respectfully submitted that on perusal of section 292C(1) of the Act, the word "may" used in the section clearly indicate that the presumption is subject to the rebuttal and it is not mandatory to presume that money, bullion, etc. found during the search/survey belong the person in whose possession such money, bullion, etc. was found. It is submitted that it has been clarified to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 makes any deduction u/s 80IA(4) of the Act. This is not the reasoning for making any assessment of any assessee's income. The total income of an assessee has to be determined first based on the parameters laid down in the Income Tax Act. If the deductions are allowable as is a case in the case of LCESPL as held by us, the same should be allowed in accordance with the provisions of the Act. Therefore, seized cash belongs to the company will not become income of the assessee merely for the reason the said company claimed the deduction u/s 80IA(4) of the Act. This reasoning given by the Assessing Officer is dismissed. Accordingly, all the grounds raised including the argumentative grounds are dismissed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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