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TMI Blog2024 (7) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... s the view taken by the ld AO for AY 2010-11 also u/s 143(3) of the Act on 25.03.2013. We find that the ld CIT(A) had granted relief to the assessee both on merits with regard to claim of deduction u/s 80IA of the Act and also on the aspect of absence of incriminating material found during the course of search qua this addition. The existence of incriminating material in respect of unabated assessment as mandatory has been endorsed by the Hon ble Supreme Court in the recent decision of Pr.CIT Vs. Abhisar Buildwell Pvt. Ltd.[ 2023 (4) TMI 1056 - SUPREME COURT] Further, we find that the ld CIT(A) had relied on the decision of Vijay Infrastructure [ 2015 (12) TMI 897 - ITAT LUCKNOW] to give relief to the assessee on merits. We find that this decision of Lucknow Bench of Tribunal has been approved by the [ 2017 (7) TMI 956 - ALLAHABAD HIGH COURT] , wherein, specifically, the widening of roads from 2 lanes to 4 lanes have been approved to be development of roads activity by placing reliance on the CBDT Circular No. 4/2010. We find that the Special Leave Petition preferred by the revenue against this decision of the Hon ble Allahabad High Court has been dismissed by the Hon ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Govind Prasad Pandeyor through any other person. Hence, the seized documents found from Shri Govind Prasad Pandey s premises which is not supported by any corroborative evidence/material cannot be used against the assessee company for making addition in the hands of the assessee company. In view of the aforesaid observations, we have no hesitation to delete the substantive addition in the hands of the assessee company. Accordingly, the addition made on alleged illegal payments for various assessment years are hereby deleted. Addition u/s 68 in respect of share capital contribution - AO observed that the assessee had allotted shares at a premium of 40 per share to different Kolkata based companies - assessee made a preliminary objection that AY 2011-12 being unabated/ completed assessment and no incriminating material was found during the course of search qua the issue of share capital either at par or at a premium, no addition per se could be made in the hands of the assessee company in the search assessment u/s 153A - HELD THAT:- During the year under consideration, the promoters of the assessee company had purchased the shares held by Kolkata based companies in the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search assessment in the hands of the assessee company by stating that Shri Sushil Singhal is a man of no means and does not have capacity to execute sub-contract work for the assessee company. These facts were duly appreciated by the ld CIT(A) on merits while granting relief to the assessee company, on which, we do not find any infirmity. In any event, no addition could be made at all in the hands of the assessee company for AYs 2012- 13 and AY 2013-14, being unabated/ completed assessments, as there was absolutely no incriminating material that was found either in the course of search of assessee company or in the course of search of Shri Sushil Singhal to doubt the genuineness of sub-contract payment to Shri Sushil Singhal. Addition on account of Sale of Gitti - AO observed that the assessee company apart from civil construction works is engaged in mining of minor minerals. It excavates black basalt, Gitti , murum etc and the same are used as raw material at their construction sites and sold to others as well - HELD THAT:- The addition made by the ld AO ignoring this fact and merely based on statement of Shri Padam Singhania cannot be sustained in the eyes of law. The seized doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is not disputed that the expenditure incurred by Shri Pradip Khare for and on behalf of the assessee company were duly claimed as deduction and allowed by the ld AO in the search assessment proceedings. Hence, it cannot be said that those payments are not recorded in the books of accounts of the assessee company warranting any addition. In these facts and circumstances of the case, the statement given by Shri Padam Singhania has got absolutely no relevance. In any event, the said statement stood subsequently retracted by him. Hence, the entire addition is made by the ld AO without appreciating the modus operandi adopted and the evidences on record. Addition on the basis of rough extracts of invoices - CIT(A) deleted addition -HELD THAT:- We find that the ld CIT(A) had taken due cognizance of the independent verification carried out by the ld AO from the proprietor of 2 concerns i.e. Om marketing and Ishwari Industries, wherein the proprietor had categorically denied having made any cash sales in respect of those invoices to the assessee company and also denied having made any transaction qua those invoices reflected in the seized documents with the assessee company. This clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note that in the instant case, the stock statement submitted to the bank is less by 4.14 crores than the actual WIP as on 31.08.2014. It is not the case of the revenue in the instant case that the said differential amount of 4.14 crores has been invested by the assessee towards WIP from sources outside of the books of account. No addition, whatsoever was even sought to be made as unexplained investment or unexplained expenditure by the ld AO. On the contrary, the said investment of 32.89 lakhs as on 31.08.2014 representing closing WIP as on 31.08.2014 matches with the regular books of account maintained by the assessee. Hence, the source for such investment stands duly explained from the regular books of account itself which had not been rejected by the ld AO. Hence, these facts have been duly appreciated by the ld CIT(A) while granting relief to the assessee on which we do not find any infirmity. Accordingly, we hold that there is absolutely no case for making addition in the hands of the assessee for AY 2015-16. X X X X Extracts X X X X X X X X Extracts X X X X ..... either developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. An amendment was brought by Finance Act 2007 with retrospective effect form 01.04.2000 by way of an Explanation to section 80IA(13) of the Act which reads as under:- "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of work contract awarded by any person (including the Central or State Government and executed by the undertaking or enterprise referred to in sub-section (1)." 2.2. According to the ld AO, the assessee herein is merely executing works contract of getting contracts. Even as per the Form 26AS, the company has got contracts from various state government departments like Rural Road Development, Public Works Department (PWD), Pradhan Mantri Gram Sadak Yojana (PMGSY) etc merely to complete certain projects. According to the ld AO, the assessee is not at all engaged in any infrastructure development activity. The assessee company does not bear any business risk at all and has been getting funds from concerned Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al specifications thereon. Apart from this, the assessee had enclosed the complete evidences with regard to construction/ up gradation of rural roads under PMGSY in Dindori District, Shahdol District, Umaria District. Pursuant to widening of two lanes in NH 59A (Indore-Betul Road), widening to two lanes in NH78 under NH Dn. Shahdol, widening to two lanes at NH-78 under NHDn. Shahdol and widening to two lanes at NH-78 pursuant to agreement entered into MPRRDA and PWD. The letter of acceptance and all the correspondence with MPRRDA and PWD are enclosed in pages 1 to 227 of the PB Vol-1. The assessee had also carried out asphalting and construction of bridges and culverts 26 nos at Dindori by pass road at Dindori, gross drainage work in Umaria District, widening to two lanes in Sagar-Kanpur Road, cross drainage work in Anuppur District and widening to two lanes at Tara-Premnagar pursuant to agreement entered into with PWD and Rural Engineering Services, as the case may be. The various correspondence and certificates in this regard are enclosed in pages 29 to 33 of the Paper Book Vol-1. The assessee had also carried out construction of Dureha-Kapuri-Madatola-Dharampura Road at Rewa, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2016 wherein, activity of the assessee has been certified as developer of roads. Similar certificate issued by the Executive Engineer PWD National Highway Division, Bhopal dated 17.11.2016 also states that the activity of assessee to be certified as development of roads. The assessee in the instant case has claimed deduction u/s 80IA of the Act in respect of Burhar Unit and profits derived thereon could be easily deducible from the manner in which the books of account are maintained by the assessee. Hence, the profits derived by the eligible undertaking could easily be worked out for the purpose of claiming deduction u/s 80IA(4) of the Act. 2.5. The assessee also pleaded before the ld. CIT(A) that since the deduction u/s 80IA(4) of the Act had been granted to the assessee in AY 2009-10 u/s 143(3) of the Act itself, same cannot be disturbed in the search assessment framed u/s 153A of the Act unless there is any incriminating material found during the course of search contrary to the said claim of deduction. Admittedly, there is no incriminating material found in any manner whatsoever which could assist the revenue to disturb the claim of deduction u/s 80IA(4) of the Act in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l M.P.-462 011. No.23386/FA/MPRRDA/2016 Bhopal, Date: 18/11/2016 To Whomsoever it may concern MP Rural Road Development Authority is an Agency of Govt. of MP, Panchayat & Rural; Development Department constituted for implementation of Pradhan Mantri Gram Sadak Yojna in the State. The objective of PMGSY is to provide all weather connectivity to unconnected rural habitations. M/s. Tirupati Build-Con Private Limited Burhar Distt. Shahdol (M.P.) was awarded work of construction and development of rural roads/CDs and their maintenance for five years after construction under the project in package no.MP 4404, MP 3809, MP 1208, MP 1209, MP 1251, MP 1252, MP 1253, MP 1214, MP 1215, MP 1216, MP 1217, MP 3821, MP 1231, MP 4423, MP 4424, MP 4418, MP 44-1-31 and MP 44-1-34. This certificate is issued on the request of contractor Sd/- (M.K. Gupta) Engineer-in-Chief M.P. Rural Road Development Authority Bhopal (M.P.)" The aforesaid certificate clearly indicates that the appellant company is engaged in the development of roads and its maintenance for various packages as observed in the said certificate. The receipt shown in the profit and loss account is also in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for execution of infrastructure projects. It is seen from Clause 19 of the contract data that the appellant company is responsible for the entire safety of all of the activities at site and is also responsible for loss or damage to the physical property and personal injury and death which may arise in consequence of the performance of contract during the tenure of development of infrastructure projects. The appellant company has executed the development of roads as to performance of various activities which included the development of roads and it consists of earthwork, GSB, WMM/WBM, DBM/BM/OGPC, BC/SDBC/Seal Coat and all allied culverts like Hume Pipe Culvert, Slab Culvert, Box Culverts, Minor Bridge and Major Bridge varies with the width of the road. Roadside drains, traffic signage and utility shifting etc. are the major source of road construction, which varies with the type of road. These roads generally have 3-5 years of maintenance contracts after the period of construction. It is seen from Clause 58 that appellant company after development of roads projects has to prepare the drawings and operating maintenance manual giving details of "As Built in respect to infra s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract work as observed from the assessment order. During the year under consideration, assessee has claimed deduction u/s 80-IA of the Act in respect of the following projects:- 3.1 The aforesaid projects were awarded by Central / State Government / Local Authority / Statutory Body on turnkey basis. The Assessing Officer, during the course of assessment proceedings observed that assessee is acting as a contractor. Accordingly, AO opined that assessee is executing the projects as works contractor within the meaning of Explanation to Sec. 80IA of the Act. On question by the AO for the non-deduction of deduction under section 80IA of the Act, the assessee submitted that the writ petition has been filed challenging explanation to Section 80IA of the Act in the Hon'ble jurisdictional High Court and further requested not to consider the effect of the explanation to Section 80IA of the Act till the disposal of writ petition. However, the AO observed that no further details was submitted by the assessee Hence, AO disallowed the deduction claim u/s 80-IA(4) for an amount of Rs. 1598,85,0511/- and added to the total income of assessee 4. Aggrieved, assessee preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucture facility discussed above is entitled for deduction under sec. 80-I of the Act. It is also observed that there Hon'ble jurisdictional ITAT 'B' Bench, Kolkata in the cases of M/s Simplex Som Datta Builders J.V. vs. ITO Ward 33(4), Kolkata in Appeal No. 1684/Kol/2011 for AY 2007-08 and in the case of M/s Simplex Subhas J.V. vs. ITO Ward 33(4) Kolkata in Appeal No. 1685/Kol/2011 for AY 2007-08, respectively vide their order dated 18.06.2013, held in para 11 & 12 of the order while deciding on the issue having identical set of facts of the cases that the assessee were entitled to get the benefit deduction u/s. 80IA of the Act as claimed them. In the light of the above discussion and findings, perusing the facts of the case and respectfully following the principles laid down in various factual pronouncements relied upon by the appellant on the issue as discussed above, it is held that the appellant company is engaged in development of infrastructure projects. Therefore, the appellant had acted as developer of the infrastructure facilities and has not acted merely as a work contractor, hence, it was entitled to get deduction under sec 80-IA(4) of the Act as claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. 6.1 From the above it is clear in order to avail deduction u/s 80-IA all the following conditions should be satisfied: (ii) There exists an agreement with the Central Government, State Government, Local authority or any other statutory body and (iii) Pursuant to the agreement specified in point (ii) the company engages itself in any of the following activities. (a) Development of infrastructure facility (b) Operation and maintenance of infrastructure facility (c) Development, operation and maintenance of infrastructure facility 6.2 Now the assessee in the given case is a company which, pursuant to agreements with various Government bodies, engaged itself in the development of infrastructure facility as defined in the Explanation to sub section 4 of section 80-IA These set of facts have not been disputed by the AO. The Ld. AO disallowed the claim on the ground that the assessee has challenged the provisions of explanation to section 80IA of the Act to the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer." Thus as per section 194C also, "works contract" does not include a contract wherein the contractor in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the purview of "works contract". Further, attention is invited to the judgment of the Supreme Court in case of Associated Cement Co. Ltd. vs. CIT (201 ITR 435], wherein the Hon'ble Court while interpreting the term 'work' u/s 194C held that "Words 'any work' in sub-s. (1) of s. 194C means any work including supply of labour to carry out work and is not intended to be confined to or restricted to works contract, therefore, a person who credits to the account of or pays to a contractor any sum payable on behalf of organizations specified in s. 194C(1) for carrying out any work (including supply of labour f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dernization requires a passive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract." Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work, Le., carries out the civil construction work he will be eligible for tax benefit under section 80-IA of the Act. In contrast to this, a person who enters into a contract with another person (ie, undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April 2000 and will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to employing labour it made investments, it developed an enterprise/infrastructure to support the work under the various projects. In addition to labour, it deployed its machinery, materials and did all the things necessary (Le provided an enterprise) to support the construction work undertaken under the various projects. The assessee was provided with the site alone and by putting its own inputs (not labour alone) he converted the site into an infrastructural facility. 6.5 Further, ITAT (Hyderabad) in case of Siva Swathi Constructions Pvt. Ltd. vs DCIT, Circle-3(2) in ITA No. 1008-09/Hyd/2013 for AYs 2009-10 & 2010- 11 dated 25.10.2013 held that "The next reason given by the CIT(A) is with regard to non- financial participation by the assessee, as the assessee has got mobilization advance. The mobilization advance has not been given freely. It has been given only after the assessee furnished a bank guarantee, and the bank guarantee has been given by the bank only after getting enough security from the assessee, to protect itself from any risk on account of any default on the part of the assessee. The assessee has taken financial assistance from bank and paid huge interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dministrative practice resulting in the circulars of the Central Board of Direct Taxes. The fact that in such a scheme. An enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under section 80-IA of the Act." 6.6 From the above it is clear that even if an assessee is merely developing the infrastructural facility (without operating and maintaining the same), it is entitled to deduction u/s 80-IA. Further, condition (b) laid out in sub-section 4 of section 80-IA mandates the existence of an agreement with the Government. Moreover, if section 80-IA grants deduction on profits from the activity of development carried out in pursuance of an agreement with the Government it presupposes that assessee will earn some profits from mere development (without operating and maintaining) of the infrastructure facility. Now the relevant question that arises here is that how would an assessee engaged in mere developmental activity (and no operation) pursuant to an agreement with the Government earn profits? The obvious answer is that the assessee will recover its cost of development development from the Government oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nale of the provisions of s. 80-IA(4)(i). From the asst. yr. 2000-01, deduction is available if the assessee carries on the business of any one of the three types of activities. When an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person who develops the infrastructure facility project, realise its cost ? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government Therefore, merely because the transferee has paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the Revenue authorities is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under s. 80-IA(4), which is not the intention of the law. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting and maintaining the said facility is entitled to the benefits of the deduction under s. 80-IA(4)-Patel Engineering Ltd. vs. Dy. CIT (2004) 84 TTJ (Mumbai) 646 followed. Provisions of sub-cl. (c) of cl. (i) of s 80-IA(4) are inapplicable to the assessee which is engaged in mere developing of the infrastructure facility and, therefore, an assessee who is only engaged in developing the infrastructure facility and not in 'operating and maintaining' the said facility is entitled to the benefit of deduction under s. 80-IA(4), merely because assessee is referred to as 'contractor in the agreement for development of infrastructure facility or some basic specifications are laid down, would not debar the assessee from claiming deduction under s. 80-IA(4)." If a person who only develops the infrastructure facility was not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he was not operating the infrastructure facility. Merely because the assessee was paid by the Government for development work it could not be denied deduction under section 80-IA(4). The Chennai Bench of Tribunal in case of R.R. Constructions, Chenn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in respect of infrastructure facility developed by it in terms of agreement so entered with Government. Thus, we do not find any infringement of conditions for claim of deduction" 6.7 Thus from the above, it is clear that the fact that the assessee had received payments from the Government in progress of its work has no bearing on eligibility of deduction u/s 80-IA. Further, the Revenue in all the grounds has contended that the contracts entered into by the assessee were merely construction contracts' since the assessee is not exposed to any entrepreneurial and investment risk In this regard, the AO has observed that the assessee is executing the contract against predetermined revenue w.r.t the above, it is submitted that under the impugned contracts, the assessee was merely carrying out the civil construction work. It was responsible for overall development of the infrastructure facility. It was merely provided with the site which it had to develop into an infrastructural facility by deploying his resources Le. material, plant & machinery, labour, supervisors etc. It was responsible for any damage/loss caused to any property or life in course of execution of the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the project. These are few broad qualities of a developer through which the character of a developer can be defined. " (ii) ITAT(Hyderabad) in case of Koya and Co Construction (P) Ltd. vs ACIT (51 SOT 203] held that "The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all long been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk Without any doubt, the learned counsel for the assessee clearly demonstrated before the court that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources." Thus, the fact that the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the assessee vide the agreements has clearly de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the explanation to section 80-IA. 7. From the perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor simplicitor and was a developer and hence Explanation to section 80-IA(13) does not apply to the assessee. Further, in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Thus, clearly the assessee is eligible for deduction u/s 80-IA. In our considered view do not find any reason to uphold the order of ld. CIT(A). Hence this ground of appeal of the assessee is allowed. We also find that the facts of the case of the assessee are identical as that of the above case of the assessee's own case (supra). In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. We uphold the same. Hence, this ground of Revenue's appeal is dismissed." The facts in the aforesaid case would show that it was also a case of development of roads for National Highways Authority of India apart from the other projects given in the facts in the order of Tribunal at para 3 of the judgement. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also gone through all the case laws cited by both the parties. We find that the provisions of Section 80IA (4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 80IA (4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 80IA (4A) are also made available under Section 80IA (4) itself. Further, the very fact that the legislature mentioned the words (i) "developing" or (ii) "operating and maintaining" or (iii) "developing, operating and maintaining" clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-Tax Act. We find that where an assessee incurred expenditure for purchase of materials himself and executes the development work ie, carries out the civil construction work, he will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acility It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village, provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before us that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. Further, the order of Tribunal in the case of B.T.Patil cited supra is prior to amendment to sec 80IA(4), after the amendment the section 80IA(4) read as (i) developing or (u) operating and maintaining or (ii) developing, operating and maintaining any infrastructure facility, prior to amendment the "or" between three activities was not there, after the amendment "or" has been inserted w.e.f. 1- 4-2002 by Finance Act 2001. Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act if the contracts involves des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Chennai Bench of Tribunal in I.T.A. No. 2061/Mds/2010 for assessment year 2007-08 vide order dated 3.10.2011 held as follows: 28. Being so, we are inclined to partly allow the ground relating to claiming of deduction u/s. 80IA 14.2 From the above Para of this tribunal order, it comes out that if the contracts involves design, development, operating & maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under s. 80IA and profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be accepted as development and cannot be said to be contract simplicitor to apply the explanation. In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not be controverted by learned DR of the revenue and therefore, this tribunal order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80IA(4) as allowed in the case of appellant in regular assessment. The A.O. in assessment proceeding u/s 153A has concluded that the project executed by the appellant is in the nature of works contract and appellant is contractor and not developer and in view of provisions of section 80IA(13) of Income Tax Act 1961 appellant is not eligible for grant of deduction under section 80IA of I.T. Act 1961. In the course of search no incriminating material or evidence was found which would enable A.O.to take view different from adopted in the case of appellant in regular assessment that appellant is developer. The appellant is a developer is accepted in regular assessment proceedings for the year under consideration and in earlier and subsequent assessment years. The claim of deduction u/s 80IA cannot be disturbed in section 153A proceedings in absence of incriminating material. The denial of deduction u/s 80IA by A.O. is thus without there being any incriminating material or evidence on record and is thus unjustified and unsustainable. 7.2.10 The legal position as regard to addition in 153A proceedings without there being incriminating material and evidence on record has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this Section only on the basis of seized material." v In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (ie. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07 On the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word "contractor" is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word "contractor" is statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation". In paragraph 24, their Lordships have mentioned about the prevailing practice of extracting statement by exerting undue influence or coercion by the search party. Though the above decision in the case of HarjeevAggarwal is with reference to the meaning of undisclosed income u/s 158BB of the Income-tax Act, however, in our opinion, the above observation of Hon'ble Jurisdictional High Court would be squarely applicable while considering the evidentiary value of the statement while making the assessment u/s 153A." "23. We have discussed in detail the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search. Accordingly, the addition of Rs. 3,60,00,000/- made by the Assessing Officer and sustained by learned CIT(A) for unexplained share capital is deleted." 7.2.11 The aforesaid decision of Hon'ble ITAT, Delhi Bench was challenged in appeal by revenue by filing appeal before Hon'ble Delhi High Court. The appeal filed by revenue has been dismissed in ITA No. 13/2017 vide judgment dated 01/08/2017. Perusal of assessment order shows that denial of deduction claimed u/s 80IA(4) is not on the basis of any incriminating evidence or material found in the course of search. The appellant have been held as developer in regular assessment framed has achieved finality. The ratio laid down by the aforesaid decision squarely applies to the facts in case of appellant and respectfully following the same I am of the considered opinion that the denial of deduction u/s 80IA(4) as claimed by A.O. is unjustified and unsustainable. 7.2.12 The AO by referring to form 26AS statement has observed that appellant is getting contracts from various State Government departments merely to complete certain projects. Every contractor may not be developer but every developer developin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of consumable debited in the profit and loss account. The sale of Bardana is not an independent source of income. The sale of Bardana is inextricably linked to the development of projects being that of development of infrastructure project. The aforesaid receipt shown in the profit and loss account will have no adverse bearing on the quantum, of deduction claimed under section 80IA by the appellant company in the return. The claim of the appellant company is also supported by the decision of Hon'ble Gujarat High Court in the case of DCIT vs. HarjivandasJuthabhaiZaveri&Anr reported at 258 ITR 785 in which it has been held by the Hon'ble Court that the amount received towards sale of empty bags qualifies for deduction under section 80IA of I.T. Act 1961. Respectfully following the same, I am of the opinion that there is nothing adverse from the sale of Bardana for the purpose of allowable quantum of deduction under section 80IA of I.T. Act 1961. 7.2.16 It is evident from evidence on record that no incriminating evidence or material is on record on the basis of which denial of deduction has been made by the A.O For the detailed reasons recorded hereinabove, I am of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is allowed in the initial year. The same cannot be disturbed by the revenue in the subsequent years, unless there exists any contrary materials on record or fresh development in facts. In the instant case, admittedly no such contrary material or fresh development on facts, had been brought on record by the ld AO. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon'ble Bombay High Court in the case of Simple Food Products Pvt. Ltd., Nagpur Vs. CIT Income Tax Appeal No. 27, 28, 29, 31, 36, 37 and 39/2010 dated 12.07.2017. Similar view was taken by the Hon'ble Delhi High Court in the case of CIT Vs. International Tractors in ITA Nos. 1082/2005, 690/2008, 275/2009, 1189/2009, 251/2010 dated 20.07.2017. 2.8. In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that, on merits, the assessee would be entitled for claim of deduction u/s 80IA of the Act. Apart from this, the assessee's claim of deduction u/s 80IA of the Act could not be disturbed by the ld AO up to AY 2013-14 (being unabated/ completed assessments) as there is no incriminating material at all found dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect was also recorded from Shri Govind Prasad Pandey u/s 132(4) of the Act by the search team. This statement was subsequently retracted by Shri Govind Prasad Pandey on 15.01.2015 before the Investigation Wing itself. Based on Shri Govind Prasad Pandey's statement, Shri Padam Singhania was confronted by the search team while recording his statement u/s 132(4) of the Act. Shri Padam Singhania, at the time of search itself had clarified that no illegal payments have been made by the assessee company and that he had not given any instructions to Shri Govind Prasad Pandey to make any illegal payments on behalf of the assessee company. It is pertinent to note that the Investigation Wing made post search enquiries with all the officials mentioned in the said seized documents of Shri Govind Prasad Pandey. The concerned officials were summoned by the Investigation Wing and statements on oath were recorded from them during the period 24.12.2014 to 30.12.2014. These statements are enclosed in pages 1 to 100 of volume-6 of paper book. All the concerned officials categorically denied any receipt of money from Shri Govind Prasad Pandey. It is also pertinent to note that these statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imultaneously and addition made is on the basis of statement of Shri Govind Pandey u/s 132(4) of I.T. Act 1961 which has been retracted. The seized documents are not found from the premises of assessee. The seized documents were explained to be recorded and maintained by Shri Govind Pandey for personal purpose and are not the record of appellant for which any adverse action need to be taken at the hands of appellant. It was explained before the A.O. that these notings are estimation of cost during the quality check and it is no record of Payment made by the appellant company. It is seen from the record that Shri Padam Singhania, Director of the company itself at the time of search itself had clarified that no illegal payments are made by appellant company and he had not given any instruction to Shri Govind Pandey for making any illegal payment. In the course of search no corroborative evidence or material is found on record to show that the appellant has made payment of any illegal gratification. The A.O. in the course of assessment proceedings has also not brought any material/ evidence on record to show that the appellant has made any illegal payments which are required to be bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice paid by the purchaser as profit of the assessee. In CIT vs. A. Raman & Co.: (1968) 67 ITR 11 the Supreme Court held that the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which actually accrues is taxable, but income which the assessee could have, but has not in fact earned, is not made taxable. These two judgments were noticed and applied by the Supreme Court in CIT vs. Calcutta discount Co. Ltd.: (1973) 91 ITR 8. These judgments apply to the present case discount Co. in favour of the assessee. 22. In our considered opinion, the assessing authority has no power to disturb the sale price shown except in three cases. The first is under Section 145 of the Act. Where the sale of properties is part of the business of the assessee, the Assessing Officer, if he is of the opinion that the accounts are not correct and complete, may proceed to reject the books of accounts and thereafter make a best judgment assessment of the income in the manner prescribed by Section 144. The second is the case where Section 50C of the Act is invoked on the basis of the prices fixed by the Stamp Valuation Authorities of the State Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as/ relevant evidence, still, the statement made therein shall not alone be sufficient evidence to charge any person with liability. It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value far charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfill the requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed. 27. With respect to evidentiary value of regular account book, the Hon'ble Supreme Court in the case of V.C. Shukla 1998 (3) SCC 410 has laid down :- "37. In Beni v. Bisan Dayal it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. as regard to illegal payment is unjustified and unsustainable. 7.2.5 It is seen that the appellant company has maintained regular books of account in respect to activities of business. The A.O. has found no fault with the books of account maintained by appellant. The A.O. has accepted the books of account as well as net profit as declared by appellant without adverse observation with regard to maintenance of books of account as well as transaction noted in books of account. The A.O. has made reference to withdrawal from bank account which are properly recorded in regular books of account and its utilization for incurring expenses as recorded in books of account is not disputed by the A.O. On aforesaid undisputed factual position the addition made by the A.O. on the ground that the withdrawal from bank are utilized for illegal gratification is unjustified and unsustainable. It is also not the case of the A.O. that illegal gratification expenses are recorded in regular books of account and debited in profit & loss a/c or the expenses incurred on illegal gratification remain unexplained at the hands of appellant. On above factual situation the addition made by the A.O. on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Surajmal vs. State (Supra) has expounded that it is well settled that where witnesses make two inconsistent statements in their evidence either at one stage or at two stages, the testimony of such witnesses becomes unreliable and unworthy of credence. Thus we find that in absence of any cogent evidence, this statement alone which has been duly retracted cannot be a basis for addition of share capital and share premium of these companies in the hands of the assessee. Addition has to be based upon cogent material and not mere here say. In this regard we also note that in the case of P.V. Kalyanasunderam, deletion of addition for allegation on on-money merely on the basis of conflicting statement of the seller and loose papers was upheld by the Hon'ble Madras High Court in 282 ITR 259 and by the Hon'ble Apex Court in Appeal (Civil) No. 4262 of 2007 vide judgement dated 14-09- 2007 The ratio laid down by the aforesaid decision of Hon'ble ITAT which has been rendered after following the decision of Hon'ble Apex Court in case of Surajmal Vs. State (Supra) squarely applies to the facts in the case of appellant and considering the same addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition made, the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisitioned, as the case may be, on bringing on record the material to show that there is undisclosed income of the assessee. In other words, there should be material on record to show that the income is assessed on the basis of material/ evidence in hands of the Assessing Officer. 27. Being so, in our opinion, guess work is not possible in case of search assessment framed u/s. 143(3) or u/s. 153A of the Act without any proper material. The AO shall have the basis for assuming that the expenditure incurred by the assessee is out of undisclosed income. It is not permissible to assess the undisclosed income in the absence of any other evidence on arbitrary basis. The unsubstantiated loose sheets cannot be considered as a conclusive evidence to make any addition towards undisclosed income. It was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at Rs. 16.75 lakhs is directed to be deleted. Thus, these Grounds of appeal of appellant are allowed." 3.4. We find that Shri Padam Singhania at the time of search itself had categorically stated that no illegal payments were made by the assessee company to any Government officials and that he had not given any instructions to Shri Govind Prasad Pandey to make any illegal payments to Government officials. Further, in the course of search, no corroborative evidence or material were found to show that the assessee company had made any payment of any illegal gratification. It is pertinent to note that the seized documents based on which the additions were made were not seized from the premises of the assessee company. It was seized in the independent search conducted in the case of Shri Govind Prasad Pandey. Shri Govind Prasad Pandey may be working with the assessee company but that does not mean that all documents found in his premises represent transactions carried out on behalf of the assessee company, unless there is evidence to prove the contrary. No such contrary evidence has been brought on record by the revenue in the instant case. Hence, the primary onus and presumption in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year under consideration, the shares were transferred by Kolkata based companies to the individual family members at par, pursuant to which entire 5,45,400 equity shares came to be held at a price of ₹ 10 each by the family members in the assessee company. The ldAO observed in para 6.3.3 of this assessment order that shares allotted at a premium to Kolkata based companies in earlier years and during the year under consideration, the said shares were acquired by the family members from Kolkata based companies at par and accordingly treated the issuance of shares to Kolkata based shares company shares as not genuine and merely a sham transaction. The fact of issuance of shares to Kolkata based companies at a premium were reflected in the books of accounts of the assessee company and the same was confronted at the time of search proceedings to Shri Padam Singhania who stated that he would reply after consulting his CA. Later his statement was recorded on 21.01.2015 u/s 131 of the Act wherein he came forward to surrender the difference of ₹ 38 per share (40-2) for issuance of 3,62,000 shares to Kolkata based companies and offered a sum of ₹ 1,37,56,000 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntribution of share capital including premium. The A.O. has obtained details of two such corporate shareholders from the website of Ministry of Corporate Affairs (MCA) and balance sheet of such corporate shareholders has been obtained and pasted at page 62 of assessment order. M/s. UmangVanijya Pvt. Ltd had subscribed share capital by making contribution of Rs. 5 lakhs whereas share capital and reserve & surplus of such company is Rs. 867.15 lakhs as is evident from the data of financial statement observed in assessment order. It is also seen that the share capital contributed by M/s. Aakriti Suppliers Pvt. Ltd. is Rs. 15 lakhs whereas share capital and reserve & surplus of such company is Rs. 2862.52 lakhs. The aforesaid data of corporate shareholders observed in the assessment order itself establishes the creditworthiness of the corporate shareholders as well as identity of such shareholders. The transaction of contribution of share capital is through proper banking channel and this fact is not in dispute. 7.5.4 The Hon'ble Jurisdictional High Court in case of People General Hospital Ltd. reported at 365 ITR 0065 (M.P.) had explained the onus on appellant in the case of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing & Finance Ltd. (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. 17. As the Apex Court has considered the law in Lovely Exports (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid corporate shareholders. The A.O. himself has brought on record the Balance Sheets of some corporate shareholders wherein substantial share capital and reserves and surplus of corporate shareholders are found by downloading the information from site of Ministry of Corporate Affairs (MCA) PAN of such companies is also available on record. Copy of Bank Statements of appellant company in which share capital payments are received from corporate shareholders are available on record. On above facts mere general observation in report is not enough to take any adverse view and to make addition at the hands of appellant company. The report does not dispute the identity of corporate shareholders on the contrary it has identified companies to some group of directors. It is also not the case of the A.O. nor any such evidence was found in the course of search and brought in assessment proceedings to show that money belonging to appellant has flown to corporate shareholders which has been introduced as share capital. In view of above, nothing adverse can be drawn from the aforesaid report as discussed by the A.O. The AO has also made reference to statement of Shri Padam Kumar Singhania ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material&quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments." 11. In the case of Harjeev Aggarwal (supra), Hon'ble Jurisdictional High Court considered the evidentiary value of the statement recorded during the course of search. The relevant portion is paragraph 19, 20 & 24, which are reproduced below for ready reference :- "19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... squarely applicable while considering the evidentiary value of the statement while making the assessment u/s 153A." "23. We have discussed in detail the legal position as laid down by Hon'ble Jurisdictional High Court and Hon'ble Apex Court in various cases. We have also discussed the facts of the assessee's case. Now, applying the law as laid down by Hon'ble Jurisdictional High Court and Hon'ble Apex Court to the facts of the assessee's case, the following position emerges. (i) No addition u/s 153A in respect of a completed assessment can be made unless some incriminating material was unearthed during the course of search. Admittedly, in the case of the assessee, no incriminating material with regard to issue of share capital has been found and seized during the course of search. (ii) Any statement recorded during the course of search cannot on a standalone basis without reference to any other material discovered during search and seizure operation would empower the Assessing Officer to make the addition. The words "evidence found as a result of search" would not take within its sweep statement recorded during search and seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived upto Asstt. Year 2009-10 which was shown as share application money in balance sheet for the year ended 31/03/2009. The aforesaid sum includes Rs. 181 lakhs for which shares have been issued to corporate shareholders in Asstt. Year 2010-11. In the regular assessment framed u/s 143(3) and assessment framed u/s 153A r.w.s. 143(3) of I.T. Act 1961 for Asstt. Year 2009-10 contribution of share application money has not been disputed by the A.O. In fact share application money is received at Rs. 81 lakhs in the year ending 31/03/2008 and Rs. 100 lakhs in the year ending 31/03/2009 on the basis of evidence on record. The receipt of share application money having been accepted in earlier assessment years cannot be subjected to assessment on allotment of share capital in the year under consideration. In view of above, the addition made by the AO to above extent is unjustified and unsustainable for this reason also. 7.5.9 In the assessment order, the A.O. at para 6.3.17 has observed that difference amount of share premium on issuing 362000 shares in Financial Year 2009-10 works out Rs. 1,37,56,000/- which remains unexplained in Asstt. Year 2010-11. In the computation of assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany had sufficient funds, the same was paid through e-transfer and cash amount of the same was received back from him. Shri Padam Singhania came forward to surrender this Rs. 70 lakhs as undisclosed income from AY 2012-13. Similar noting was mentioned in the seized paper A-1/LPS-6/Page35 wherein, cash payment totaling to Rs. 1,37,00,000/- was referred against cement purchase to Shri Guddu Rastogi. Shri Padam Singhania came forward and offered a sum of Rs. 97,50,000/- as undisclosed income for AY 2011-12 in this regard. The ld AO however, found that this disclosure was not honored by the assessee company while filing its return of income u/s 153A of the Act for AYs 2011- 12 and 2012-13. Accordingly, the ld. AO issued show cause notice as to why a sum of Rs. 137 lakhs and Rs. 70 lakhs be not treated as undisclosed income of assessee company for AYs 2011-12 and 2012-13 respectively. The assessee responded before the ld AO that the said seized document is merely a loose paper containing rough calculation prepared in a computer by one of the employee. It was explained that the said transactions pertain to cement purchase wherein, the assessee is dealing in contract business where work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition for both the years by observing as under:- "7.4.3. DECISION:- I have carefully considered the submission put forth& the documents furnished on behalf of the appellant, perused the facts of the case and the observation of the AO in the impugned assessment order and other material evidences brought on record. In case of appellant, the A.O. has made the impugned addition of Rs. 137 lakhs in Asstt.Year 2011-12 and Rs. 70 lacs in Asstt. Year 2012-13 for detailed discussion observed at para 6.7.1 of assessment order. The A.O has referred to the statement of Shri Padam Singhania at the time of search. The A.O. has made the addition by observing that amount paid is liable to be assessed on account of violation of the provisions of section 40A(3) of Income Tax Act 1961 7.4.4 It is noted that the appellant has maintained regular books of account in respect to above mentioned two assessment years and same are audited by Chartered Accountant and tax audit reports have been submitted in the regular assessment proceedings as well as in assessment proceedings u/s 153A of Income Tax Act 1961. The additions made by the A.O. are not finding any place in the tax audit report being payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. for making the impugned addition is the statement of Shri Padam Singhania obtained during the course of search at his premises which has been retracted and would no longer remain credible evidence on record. The aforesaid issue is amply supported by instruction issued by CBDT on 10/03/2003 and further clarification issued there upon on 18/12/2014. The CBDT has explained in the aforesaid instruction that the A.O. shall not obtain confessional statement during the course of search and rely on evidence or material found during the course of search in order to make addition at the hands of various assessee.. The confessional statement obtained de-horse any material or evidence cannot be said to be evidence or material found during the course of search in order to raise adversity for making addition at the hands of appellant. The legal position as regard to use of statement obtained during the course of search for the purpose of assessment has been dealt by various Hon'ble High Courts. Hon'ble High Court of Jharkhand in the case of Shree Ganesh Trading Co. reported at 257 CTR 0159 has held as under: 6. We are of the considered opinion that statement recorded under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of enables the authorities not only to rely upon the statement in the concerned proceedings but also in other proceedings that are pending, by the time the statement was recorded. 10. If the statement is not retracted, the same can constitute the sole basis for the authorities to pass an order of assessment. However, if it is retracted by the person from whom it was recorded, totally different considerations altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under Section 164 Cr.P.C. The evidentiary value of a retracted statement becomes diluted and it looses the strength, to stand on its own. Once the statement is retracted, the Assessing Authority has to garner some support, to the statement for passing an order of assessment. 11. In IT A No. 112 of 2003, this Court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee. 12. In the instant case, the appellants specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Shri Guddu Rastogi. Hence, addition made on account of unrecorded cash payment by the ld AO for both the years by placing reliance on the seized documents is devoid of merit. In any event, the ld AO had not resorted to make any cross verification from Shri Guddu Rastogi to ascertain the fact as to whether there was any cash transaction regarding purchase of cement between the assessee company and him. The revenue before us had not brought any evidence on record as to whether any addition has been made in this regard in the hands of Shri Guddu Rastogi. The entire addition has been made merely based on rough notings made in the seized documents and based on statement given by Shri Padam Singhania ignoring the fact that the said statement was subsequently retracted by him. As stated earlier, the seized document does not refer to any cash payment, hence there is no question of invoking provisions of section 40A(3) of the Act. The entire addition has been made only based on allegations that there was some cash payment which was not supported by any corroborative evidence. These aspects were rightly appreciated by the ld CIT(A) while granting relief to the assessee as is evident from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the very same ld. AO on 23.12.2016, wherein, the sub-contract payment made by assessee company to ShriSushilSinghal had been duly assessed as 'business income' in the hands of Shri Sushil Singhal by the very same ld AO. Further, it was reiterated before the ld. CIT(A) that there is absolutely no incriminating material found during the course of search of either Shri Sushil Singhal or the assessee company to doubt the genuineness of the sub-contract payment made to Shri Sushil Singhal and assessments for AYs 2012-13 and 2013-14 being completed assessments, no addition could be made at all in any event in the search assessment. These facts were duly appreciated by the ldCIT(A) by observing as under:- "7.3.3. DECISION:- I have carefully considered the submission put forth & the documents furnished on behalf of the appellant, perused the facts of the case and the observation of the AO in the impugned assessment order and other material evidences brought on record I find substantial force in the same. The appellant company has claimed sub contract expenses in respect to payments made to Shri Sushil Singhal. The A.O. has observed that the premise of Shri Sushil Singhal was simultane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al also indicted that substantial loans have been obtained from the financial institutions in order to acquire the fixed assets being plant and machinery for execution of civil work. The evidence on record thus fully substantiates that Shri Sushil Singhal has executed the work of sub contract of appellant company, Moreover the aforesaid facts have been accepted by A.O. in the assessment of Shri Sushil Singhal without inviting any adverse observation and thus there is no reason to come to a contrary conclusion while considering the allowability of expenditure on account of sub contract payments by the appellant company. In the case of appellant sub contract payments made in past and subsequent years has been accepted. 7.3.4 It is seen in the case of appellant sub contract payments to Sushil singhal has been accepted in regular assessment. In the course of search no incriminating material or evidence was found to impeach the genuineness of sub contract expenses incurred by appellant company. It is settled proposition of law that in assessment framed u/s 153A of I.T. Act 1961 the additions in the completed assessment have to be restricted to incriminating evidence or material found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153Ais relatable to abated proceedings (ie those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material earthed during the course of search or requisition of documents or undisclosed income or property discov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sufficient to assess the income, as disclosed by the assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a standalone basis without reference to any other material discovered during search and seizure operation would empower the Assessing Officer to make the addition The words "evidence found as a result of search" would not take within its sweер statement recorded during search and seizure operations. Therefore, the Revenue's stand that the addition u/s 153A can be made in respect of share capital on account of statement of Shri Tarun Goyal and Shri Anu Aggarwal cannot be accepted. (un) Even otherwise, the statement of ShriTarunGoyal cannot be utilized against the assessee as his statement was recorded behind the back of the assessee and the assessee was not allowed opportunity to cross-examine him. (iv) In the statement of Shri Anu Aggarwal dated 15th September, 2008, the query was raised with regard to loose papers found and seized from their premises. Admittedly, none of the loose papers was relating to issue of share capital. The loose papers were pertaining to unaccounted receipt on sale and unaccounted expenditure on construction. In the statement dated 24th October, 2008, though the query was raised with regard to issue of share capital and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subcontractor to the assessee company. Having taken the said stand while framing the search assessment of Shri Sushil Singhal, the very same ld AO would not be justified in taking a divergent stand while framing the search assessment in the hands of the assessee company by stating that Shri Sushil Singhal is a man of no means and does not have capacity to execute sub-contract work for the assessee company. These facts were duly appreciated by the ld CIT(A) on merits while granting relief to the assessee company, on which, we do not find any infirmity. In any event, no addition could be made at all in the hands of the assessee company for AYs 2012- 13 and AY 2013-14, being unabated/ completed assessments, as there was absolutely no incriminating material that was found either in the course of search of assessee company or in the course of search of Shri Sushil Singhal to doubt the genuineness of sub-contract payment to Shri Sushil Singhal. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. reported in 454 ITR 212 (SC). For AY 2014-15, the assessee though would not be covered by the decision of the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be sustained in the eyes of law. The seized document A- 1/LPS-22/page 17 is reproduced at page 90 of the assessment order. On perusal of the said seized documents, we find that the same contains the name of the party, sale of gitti made during the particular period, number of trips undergone together with the quantity sold thereon. Nowhere the said seized document contains the value of rate per metric ton. Hence, the basis of Rs. 250 per metric ton adopted by the ld AO for arriving the sale figures of Rs. 12,02,643/- is apparently devoid of merit. Further, we find from the perusal of the said seized documents that the sale has been made spread over a period of 3 FYs i.e. FY 2010-11, 2011-12 and 2012-13 relevant to AYs 2011-12, 2012-13 and 2013-14. There is absolutely no break up of quantity sold for each of the financial years in the said seized documents. Apart from these rough notings in the loose papers, no other corroborative evidence was found by the search team or any other corroborative material brought on record by the ld AO in the assessment proceedings. In these circumstances, the said seized documents require to be considered as dumb documents based on which no add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents made by the assessee on substantive basis and same was also added in the hands of M/s. Shivangi Oil Pvt Ltd. on protective basis. 8.1. The assessee submitted before the ld CIT(A) that the ld AO had not even bothered to make enquiry/ cross verification with Shri Pradeep Khare to ascertain the facts. It was submitted that the assessee had maintained regular books of account with respect to expenses incurred and claimed in profit and loss account. From the cash vouchers of Shri Pradeep Khare, it could be seen that the expenditure was incurred by Shri Pradip Khare out of imprest amount given to him and the same is also duly reflected in the petty cash book maintained by Shri Pradeep Khare. These expenses were allowed as deduction by the ld AO in the search assessment. While this is so, there was no reason to dismiss the explanation given by the assessee that the cash payments made to Shri Pradeep Khare are already reflected in the books of account of the assessee company for which the sources were drawn from the sufficient cash balance available with the assessee company. The ld CIT(A) appreciated these contentions of the assessee on examination of the cash book and petty cash bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Addition of ₹ 28,76,300 on the basis of rough extracts of invoices Ground No. 4 for AY 2014-15. We have heard the rival submissions and perused the material available on record. During the course of search, seized document A-1/LPS-1/pages 3 to 33 were seized from the office premises of the assessee company located at Burhar, containing certain bills of "Om Marketing" and "Ishwari Industries". The Search party compared the said invoices with the ledger account of Om Marketing and Ishwari Industries in the books of the assessee company and found that those invoices reflected in the seized documents were not recorded by the assessee company. Shri Padam Singhania surrendered the total of these bills to the tune of ₹ 28,76,300/- in his statement but did not honor the same while filing the return of income u/s 153A of the Act for the assessee company. In response to the show cause notice issued by the ld AO during the course of search assessment proceedings, the assessee stated these are fabricated papers and has got no relevance either with income or expenditure of the assessee and these invoices are only sample bills which were not acted upon by the assessee. The ld AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed fact on record. In view of above facts there is no justification for making any addition at the hands of appellant in as much as there is neither any claim which requires disallowance nor there is any unexplained expenditure which requires addition at the hands of appellant. The seized documents are in fact no evidence of transaction made by the appellant which requires adverse consideration at the hands of appellant. Thus explanation of appellant that the aforesaid documents are fabricated documents which have no relevance either with income or expenditure of appellant deserves acceptance. 7.5.4 The addition made by the A.O. is by referring to statement of Shri Padam Singhania. The statement obtained from Shri Padam Singhania has been retracted. The A.O. has not brought on record tatement any corroborative material or evidence to support the statement obtained. The evidentiary value and addition made on the basis of statement has been considered by Hon'ble High Court of Jharkhand in the case of Shree Ganesh Trading Co. reported at 257 CTR 0159 and Hon'ble High Court of Andhra Pradesh in the case of Gajjam Chinna Yellappa reported at 370 ITR 0671. The relevant por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h notings and proforma invoices not acted upon by the parties. In fact, the corroborative material in the form of third-party independent examination goes in favour of the assessee. This fact has been duly appreciated by the ld CIT(A) while granting relief to the assessee company on which we do not find any infirmity. Accordingly Ground No. 4 in Assessment Year 2014-15 is dismissed. 10. Addition on account of unaccounted receipts of ₹ 1,73,63,660/- Ground No. 1 for AY 2015-16 We have heard the rival submissions and perused the materials available on record. In the group of cases at the instance of Authorized Officer, a sum of ₹ 9 crores was offered for taxation with understanding that the same would be considered as a reasonable disclosure by the group as a whole. Alternatively, it was also understood by the group that the same would be available for telescoping benefit in the hands of various assessee's of the group. Accordingly, the various family members pertaining to the group offered a sum of ₹ 9 crores in total in their returns and paid taxes thereon. During the course of search, loose sheet identified as A-1/LPS-4 in page 21 was found which contained cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Right to Information (RTI) Act from PMGSY and MPRRDA asking about the work allotted to Shri Ashok Singh. The authorities confirmed that they had not given any work to Shri Ashok Singh. Based on the strength of this RTI information, the assessee pleaded that the contents in the seized documents are just rough notings not having any supportive or any corroborative evidence and hence had to be construed as dumb documents. The assessee also clarified that the said notings were made to mislead the financers/ creditors that their debts would be paid as soon as the money is received from the mentioned sources, but in reality, no such source actually existed and the said loose paper is merely fake document. The assessee pleaded that there were no transactions with Shri Ashok Singh, hence, there was no occasion at all for it to receive any cash from the said party. The ld. CIT(A) duly appreciated the contentions of the assessee by categorically observing that contents of the loose papers found in the course of search were not supported with any corroborative evidence. He also observed that the ld AO had not brought any evidence or material to show that the assessee was in receipt of money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of telescoping to the assessee. It is a fact that the contents in the said documents are absolutely not supported with any corroborative evidence whatsoever. We agree with the contention of the assessee that there was no occasion at all for the assessee to receive any money from Shri Ashok Singh. Hence the notings in the loose papers found in the search are to be construed only as dumb documents not supported with corroborative evidence and hence no addition per se could be made in the hands of the assessee based on such dumb documents, dehors the statement given by Shri Padam Singhania. No work was executed by the assessee to Shri Ashok Singh, so as to enable the assessee to receive any money from Shri Ashok Singh. The assessee to prove its bona fide had also given the complete address of Shri Ashok Singh before the ld. AO. A simple verification on the part of the ld AO with Shri Ashok Singh in the manner known to law, would have brought the truth present in the transaction, which was admittedly not done by the ld. AO. Hence, there is absolutely no case for the revenue to make any addition in the hands of the assessee. We find no infirmity in the order of the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be any concealment of income thereon. The ld AO however, ignored the said submissions and proceeded to add the difference amount of ₹ 4,14,08,000/- based on the initial statement of Shri Padam Singhania for AY 2015-16. It is pertinent to note that Shri Padam Singhania had categorically stated in his statement u/s 132(4) that one of the bunch of loose papers represent work in progress as on 31.08.2014 for the purpose of submission of stock statement to the bank to avail the credit facility from the bank and another bunch which is reflected at page 51 of the loose sheets which is 'actual' for the month of August 2014. The very same reply was given by the assessee company during the course of assessment proceedings also and the figures mentioned in page 51 of the seized documents being the actual WIP as on 31.08.2014 also matches with the regular books of account maintained by the assessee which was also examined by the ld AO and accepted in the search assessment proceedings. The regular books of account maintained by the assessee and the net profit declared thereon had not been found to be low by the ld AO. The books of accounts were not rejected by the ld AO by pointing out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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