M/s. True Zone Buildwell Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 246/DEL/2012

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7364 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 29-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SUSHMA SINGH
• Assessee Lawyers: MAYANK GOYAL; ABHISHEK VERMA S
• Keywords: Unexplained expenditure; Business income; Business expenditure; Search and seizure; Document seized; Deemed to accrue or arise in india; Additional evidence; Difference of opinion; Assessment record; Tax effect; Commercial expediency; Documents seized; Change of opinion; Capital expenditure
• Section: 69C; 143(3); 153A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI R.P. TOLANI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1693/DEL./2012 (ASSESSMENT YEAR : 2006-07) ACIT, CENTRAL CIRCLE 12, VS. M/S. TRUE ZONE BUILDW ELL PVT. LTD., NEW DELHI. 12, RING ROAD, LAJPAT NAGAR IV, NEW DELHI. (PAN : AABCT9812B) CO NO.246/DEL/2012 (IN ITA NO.1693/DEL./2012 (ASSESSMENT YEAR : 2006-07) M/S. TRUE ZONE BUILDWELL PVT. LTD., VS. ACIT, CENT RAL CIRCLE 12, 12, RING ROAD, LAJPAT NAGAR IV, NEW DELHI. NEW DELHI. (PAN : AABCT9812B) ITA NO.2091/DEL./2012 (ASSESSMENT YEAR : 2006-07) M/S. TRUE ZONE BUILDWELL PVT. LTD., VS. ACIT, CENT RAL CIRCLE 12, 12, RING ROAD, LAJPAT NAGAR IV, NEW DELHI. NEW DELHI. (PAN : AABCT9812B) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI RAJIV SAXENA & ABHISHEK VERMA, ADVOCATES AND SHRI MAYANK GOYAL, CA REVENUE BY : MRS. SUSHMA SINGH, CIT DR ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 2 ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THE REVENUE HAS FILED ITA NO.1693/DEL/2012 AND THE ASSESSEE FILED CROSS OBJECTION NO.246/DEL/2012 AGAINST ITA NO.1693 /DEL/2012 AND THE ASSESSEE HAS ALSO FILED ITA NO.2091/DEL/2012 AGAINS T THE ORDER OF CIT (A) DATED 31.01.2012. THE GROUNDS OF APPEAL TAKEN IN T HESE THREE MATTERS ARE AS UNDER :- ITA NO.1693/DEL/2012 1. THE ORDER OF THE LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.17,27,327/- (RS.11,65,100/- IN RESPECT OF M/S SA CHIN PROPTECH LTD RS.3,21,227/- IN RESPECT OF THE PROPER TY MART RS.2,41,000/- IN RESPECT OF M/S SURAJ BHAN PVT. LTD .) OUT OF THE TOTAL ADDITION OF RS.1,46,79,390/- MADE BY THE ASSE SSING OFFICER IN RESPECT OF DISALLOWANCE OF COMMISSION BY ADMITTI NG ADDITION EVIDENCE IN CONTRAVENTION OF RULE 46A OF INCOME TAX RULES. 1962. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.10,00,000/- OUT OF THE TOTAL ADDITION OF RS.30,1 4,662/- MADE BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF COMMISSION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE D ISALLOWANCE OF DONATION OF RS.5,37,500/- MADE BY THE ASSESSING OFF ICER. ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 3 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS IN DELE TING THE DISALLOWANCE INTEREST OF RS.28,28,130/- MADE BY THE ASSESSING OFFICER AS THE ADVANCES GIVEN BY THE OFFICE ASSESSE E TO ITS SISTER CONCERNS WAS UTILIZED FOR NON-BUSINESS PURPOSE. . 6. THE ORDER OF LD. CIT(A) IS PERVERSE IN LAW AND O N FACTS. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURS E OF THE HEARING OF THE APPEAL. CO NO.246/DEL/2012 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN F ACTS BY MERELY DISALLOWING RS.10 LAC PAID TO M/S OMWAY BUIL D ESTATES (P) LTD. AS PERTAINING TO THE JAIPUR PROJECT. . A) BECAUSE HE HAS FAILED TO NOTICE THAT EXPENSE WAS NOT CLAIMED AS REVENUE EXPENSE BUT CAPITALIZED WRONGLY IN THE KAMAL PROJECT AS AGAINST THE JAIPUR PROJECT. B) BECAUSE HE HAS NOT DIRECTED THAT SUCH EXPENSES B E ALLOWED TO BE CAPITALIZED IN THE JAIPUR PROJECT. 2. THE RESPONDENT CRAVES LEAVE FOR ADDITION, MODIFI CATION, ALTERATION, AMENDMENT OF ANY OF THE CROSS OBJECTION . ITA NO.2091/DEL/2012 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A)-XXXI IS CORRECT IN UPHOLDING THE ASSESSM ENT FRAMED OUTSIDE THE SEARCH MATERIAL AND AFTER THE CHANGE OF OPINION? 2. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT(A)-XXXI ERRED IN CONFIRMING THE ADDITION OF RS.1,29,52,063/- BEING THE AMOUNT OF OUT OF BOOKS C OMMISSION PAID BY THE ASSESSEE COMPANY U/ S 69C OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE CRAVES FOR THE ADDITION, MODIFICATI ON AND DELETION OF THE GROUNDS OF APPEAL. ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 4 2. IN THIS CASE, A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 ALONG WITH OTHER GROUP CASES ON 31.07.2008. THE PROCEEDINGS U/S 153A OF THE ACT WA S INITIATED. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO THE NOTICE U/ S 153A ON 22.03.2010. THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT OF THE R EAL ESTATE. DURING THE YEAR, VARIOUS PROJECTS WERE UNDER DEVELOPMENT. THE ASSES SEES ASSESSMENT FOR ASSESSMENT YEAR 2006-07 WAS MADE U/S 143(3) OF THE INCOME-TAX ACT, 1961 VIDE ORDER DATED 27.05.2008 WHEREIN THE RETURN INCO ME OF THE ASSESSEE WAS ACCEPTED AND THE INCOME WAS ASSESSED AT RS.11,95,10 0/-. 3. GROUND NOS.1, 6 AND 7 IN ITA NO.1693/DEL/2012, G ROUND NO.2 IN CO NO.240/DEL/2012 AND GROUND NO.3 IN ITA NO.2091/DEL/ 2012 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION, HENCE S AME ARE DISMISSED. 4. IN ASSESSEES APPEAL (ITA NO.2091/DEL/2012), IN GROUND NO.1, THE VALIDITY OF THE ASSESSMENT HAS BEEN CHALLENGED ON T HE ISSUE THAT THE ASSESSMENT HAS BEEN FRAMED OUTSIDE THE SEARCH MATER IAL AND AFTER THE CHANGE OF OPINION. LD. AR SUBMITTED THAT THE SEARCH MATER IAL WAS NOT FOUND AT THE PREMISES OF THE DIRECTOR OF THE COMPANY, THEREFORE, SUCH MATERIAL CANNOT BE TAKEN COGNIZANCE AS IT WAS ONLY A CORRESPONDENCE BU T IN THE NATURE OF INVOICE RAISED TO THE ASSESSEE. SUCH DOCUMENTS WERE NOT FO UND IN THE PREMISES OF THE ASSESSEES COMPANY DURING THE SEARCH PROCEEDINGS. HENCE THERE IS NO SEARCH MATERIAL IN THE CASE OF THE ASSESSEE. THE ASSESSEE COMPANY HAS DULY ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 5 ACCOUNTED FOR THE PAYMENTS OF COMMISSION AND NECESS ARY TDS WAS DULY DEDUCTED AND DEPOSITED TO THE GOVERNMENT. ANY DOCU MENT BY WAY OF CORRESPONDENCE CANNOT BE GIVEN COGNIZANCE UNLESS RA ISED AS A BILL AND THAT TOO APPROVED BY THE ASSESSEE. THE LD. AR HAS DRAWN OUR ATTENTION TO PAGE 40 TO 47 OF THE PAPER BOOK RELATED TO SACHIN PROPTECH PVT. L TD. ON THE BASIS OF WHICH THE ADDITION OF RS.1,46,79,390/- WAS MADE. THE TOT AL AMOUNT AS PER THESE PAPERS WAS OF RS.1,87,64,550/-. ASSESSING OFFICER REDUCED THE AMOUNT OF RS.57,54,896/- WHICH WAS ACTUALLY PAID BY ASSESSEE AND DEBITED IN BOOKS. PAGE 49 WAS THE CORRESPONDENCE RELATING TO THE PROP ERTY MART ON THE BASIS OF WHICH ADDITION OF RS.7,73,604/- WAS MADE BY MENTION ING THAT PAYMENT MADE TO NEEL KAMAL PROPERTIES. PAGE 53 OF THE PAPER BOO K IS THE CORRESPONDENCE MADE TO SURAJ BHAN PVT. LTD. ON THE BASIS OF WHICH ADDITION WAS MADE OF RS.2,41,000/-. THESE ADDITIONS HAD BEEN MADE WITHO UT ANY REASONING BY THE ASSESSING OFFICER. LD. AR SUBMITTED THAT ADDITION OF RS.55,132/- WAS ADDED BY REFERRING TO M/S. NEEL KAMAL PROPERTIES AND AT T HE LATER PART IT WAS LINKED WITH THE ADDITION OF RS.7,73,604/- RELATING TO PROP ERTY MART. THE CIT (A) HAS DELETED THOSE ADDITIONS WHICH WERE FOUND IN THE BOO KS OF ACCOUNT FOR WHICH LEDGER ACCOUNTS AND CONFIRMATIONS WERE FURNISHED BU T CONFIRMED REST OF THE ADDITION WITHOUT ANY BASIS. LD. AR SUBMITTED THAT THESE DOCUMENTS WERE ONLY CORRESPONDENCE RELATING TO THESE PARTIES. THE ASSE SSING OFFICER HIMSELF WAS CONFUSED AND MENTIONING RS.7,73,604/- TO NEEL KAMAL PROPERTIES WHILE IT WAS ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 6 RELATED TO M/S. PROPERTY MART. THIS WAS CLARIFIED BEFORE THE CIT (A), HOWEVER, HE HAS OVERLOOKED THESE SUBMISSIONS. THE LD. AR ALSO SUBMITTED THAT ORIGINAL ASSESSMENT WAS FINALIZED U/S 143(3) O F THE INCOME-TAX ACT WHERE RETURNED INCOME WAS ACCEPTED AFTER THE VERIFICATION OF THE BOOKS OF THE ACCOUNTS. LD. AR SUBMITTED THAT IN VIEW OF THE DEC ISION OF SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCI T IN ITA NOS.5018 TO 5022 & 5059/M/2010 DATED 06.07.2012, NO ADDITION CA N BE MADE WHERE NO INCRIMINATING DOCUMENTS HAVE BEEN FOUND. LD. AR SU BMITTED THAT IN VIEW OF THE SECOND PROVISO TO SECTION 153A ONLY THE PENDING ASSESSMENT ON THE DATE OF INITIATION OF THE SEARCH ABATES. IN ASSESSEE S CASE, THE ASSESSMENT WAS ALREADY COMPLETED U/S 143(3), THEREFORE, THE ASSESS MENT U/S 153A CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND A ND SEIZED IN SEARCH OPERATION. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF CIT (A) AND ALSO SUBMITTED THAT THE NEW CHAPTER FOR MAKING THE SEARC H ASSESSMENTS HAS ENHANCED THE SCOPE OF ASSESSMENT BY BRINGING ONE SI NGLE ASSESSMENT ON THE BASIS OF SEARCH MATERIAL AS WELL AS OTHERWISE. UND ER THIS SCHEME OF ASSESSMENT ONLY SUCH INCOME WHICH HAS ALREADY ASSES SED WILL BE EXCLUDED. NO OTHER INCOME WHICH IN THE COURSE OF ASSESSMENT F OUND TO BE ADDED OR EXPENSES REQUIRED TO BE DISALLOWED IS TO BE EXCLUDE D. THE SCOPE OF ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 7 ASSESSMENT UNDER SECTION 153A IS TO MAKE ASSESSMENT OF ALL SUCH INCOME WHICH IS REQUIRED TO BE ASSESSED UNDER THIS SECTION . 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON THE ISSU E AND HAS GONE THROUGH THE MATERIAL ON RECORD AND RELEVANT PAGES O F THE PAPER BOOK. IN OUR CONSIDERED VIEW, THERE WAS A SEIZED MATERIAL FOUND AT THE RESIDENCE OF THE DIRECTOR WHICH HAS TO BE CONSIDERED FOR MAKING THE ASSESSMENT U/S 153A IN THE CASE OF ASSESSEE COMPANY AND ON THE BASIS OF SU CH SEIZED MATERIAL AS FAR AS IT RELATES TO THE UNDISCLOSED INCOME OF THE ASSE SSEE THE ADDITION IS REQUIRED TO BE MADE. IT IS NOT THE MATERIAL, WHETHER THE SE IZED MATERIAL WAS FOUND AT THE PREMISES OF THE ASSESSEE OR AT THE RESIDENCE OF THE DIRECTOR. THE COMPANY IS REPRESENTED THROUGH ITS DIRECTORS, THEREFORE, MA TERIAL FOUND AT THE RESIDENCE OF THE DIRECTOR IS RELEVANT AND HAS TO BE CONSIDERE D FOR MAKING THE ASSESSMENTS U/S 153A. AS FAR AS THE SCOPE OF THE A SSESSMENT IS CONCERNED, WE HOLD THAT WHEREVER THE ISSUES HAVE BEEN CONSIDERED U/S 143(3) AND THE ASSESSMENT HAS BEEN CONCLUDED PRIOR TO THE INITIATI ON OF THE SEARCH THE SCOPE OF ASSESSMENT REMAINS LIMITED TO THE SEARCH MATERIA L AND OTHER ISSUES NOT CONSIDERED AT THE TIME OF MAKING THE ASSESSMENT U/S 143(3) OF THE ACT. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES, WE ARE UNABLE TO AGREE WITH THE CONTENTION OF THE ASSESSEE THAT ASSESSMENT U/S 153A HAS BEEN MADE ON THE BASIS OF OUTSIDE THE SEARCH MATERIAL AND AFT ER THE CHANGE OF OPINION. ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 8 7. GROUND NO.2 IN THE REVENUES APPEAL AND GROUND N O.2 IN THE ASSESSEES APPEAL ARE RELATED TO DELETION AND SUSTENANCE OF AD DITIONS MADE U/S 69C OF THE INCOME-TAX ACT, 1961 RESPECTIVELY. THE CIT (A) HAS DELETED THE ADDITION OF RS.17,27,327/- AND SUSTAINED THE ADDITION OF RS.1,2 9,52,063/-. THIS ADDITION HAS BEEN MADE U/S 69C AND THE SCOPE OF THIS SECTION RELATES TO CERTAIN UNEXPLAINED EXPENDITURE FOR WHICH ASSESSEE OFFERED NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPLANATION OR IT WAS NOT SATISFACTO RILY EXPLAINED. 8. SOME BILLS WERE FOUND AT THE TIME OF THE SEARCH AT THE RESIDENCE OF SHRI RAKESH KUMAR GARG FOR A PERIOD RELEVANT TO THE ASSE SSMENT YEAR. THE DETAILS OF WHICH ARE AS UNDER :- DETAIL OF BILLS FOUND AT THE TIME OF SEARCH AT THE RESIDENCE OF SH. RAKESH KUMAR GARG ON 31-7-2008 PERIOD 1.4.2005 31.3.2006 PARTY A-1 S.NO. ANNEXURE NO/PAGE DATE NAME OF THE PARTY AMOUNT 1 A-2/28 27.7.2005 SACHIN POPETECH LTD. 18764550 2 A-2/45 5.4.2005 THE PROPERTY MART 773604 3 A-2/46 4.4.2005 SURAJ BHAN PRIVATE LTD. 241000 4 A-2/51 25.10.2005 NEEL KAMAL PROPERTIES 55132 TOTAL 19834286 THE ASSESSEE CONTENDED THAT DURING THE RELEVANT FIN ANCIAL YEAR, THE COMMISSION OF RS.51,54,896/- WAS PAID TO SACHIN PRO PTECH (PVT.) LTD. THIS AMOUNT WAS DULY REFLECTED IN BOOKS OF ACCOUNTS OF T HE ASSESSEE. AS PER REVENUE, THE BILLS FOUND AT THE TIME OF SEARCH WAS OF RS.1,87,64,550/-. THE ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 9 DIFFERENCE WAS TREATED AS UNEXPLAINED EXPENDITURE. FURTHER, THE ASSESSING OFFICER ALSO OBSERVED THAT THE BILLS FOUND IN THE N AME OF NEEL KAMAL PROPERTIES WERE NOT IN THE LIST WHICH WAS SUBMITTED BY THE ASSESSEE ALONG WITH THE REPLY DATED 20.11.2010. FURTHER THE ASSESSING OFFICER HAS ALSO TREATED THE OTHER PAYMENTS OUT OF BOOKS AND MADE A TOTAL AD DITION OF RS.1,46,79,390/- . THE CIT (A) GRANTED THE PARTIAL RELIEF BY HOLDIN G AS UNDER :- 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION, P ERUSED THE ORDER OF ASSESSMENT AND EVIDENCE ON RECORD. THE DISPUTE, AS RAISED BY THE APPELLANT, PERTAINS TO THE ADDITIONS OF RS.1,46,79,390/- MADE BY THE AO ON ACCOUNT OF COMMISSION PAID OUT OF BOOKS U/S 69C OF THE INCOME TAX ACT. AS PER THE AO, AMOUNT PAID FOR COMMISSION DURING THE YEAR IS L ESS THAN THE AMOUNT OF BILLS OF COMMISSION SEIZED BY THE DEPARTMENT AT THE TIME OF SEARCH AND THEREFORE AN ADDITION OF DIFFERENCE AMOUNT WAS MADE BY THE AO. IN CONTENTION TO THAT THE AR HAS SUBMITTED DETAILED EX PLANATION PARTY WISE AND ALSO SUBMITTED THE RECONCILIATION FOR THE DIFFERENC E AMOUNT. AFTER CONSIDERING THE SUBMISSIONS MADE AND DOCUMENTS SUBM ITTED, I AM OF THE CONSIDERED OPINION THAT AN ADDITION OF RS.1,24,44,5 44/- IS TO BE RETAINED AGAINST RS.1,36,09,651/- OF SACHIN PROPTECH PVT. LT D. A BILL OF 1,87,64,550/- WAS RAISED BY M/S SACHIN PROPTECH (P) LTD AND THE ASSESSEE COMPANY HAS CREDITED COMMISSION AMOUNT OF RS.59,65, 452/- AFTER DEDUCTION OF TDS @ 5.61 %. IF THIS AMOUNT IS GROSS ED UP, IT COMES TO RS.63,19,996/-. THEREFORE, THE AO SHOULD HAVE ALLO WED THE DEDUCTION OF RS.63,19,996/- INSTEAD OF RS.51,54,896/-. THEREFOR E, A FURTHER DEDUCTION OF RS.11,65,100/- SHOULD BE ALLOWED TO THE APPELLANT. THE COMMISSION AMOUNT OF RS.4,52,377/- AGAINST RS.7,73,604/- OF THE PROPE RTY MART AND RS.55,132 AGAINST 55,132/- OF NEEL KAMAL PROPERTIES HAVE ALSO BEEN RETAINED BECAUSE PROPER EXPLANATION AND RECONCILIATIONS HAVE NOT BEE N PLACED BY THE AR ON RECORD. THEREFORE, THE ADDITION AMOUNTING TO RS.1,2 9,52,053. (1,24,44,544 + 4,52,377 + 55,132) IS CONFIRMED. FURTHER, AN ADDI TION OF RS.2,41,000 OF SURAJ BHAN ESTATE PVT LTD. HAS BEEN DELETED AS THE SAME HAS BEEN FOUND ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE GROUND RAISED BY THE APPELLANT IS THUS PARTLY ALLOWED. 9. THE LD. AR SUBMITTED THAT ADDITION UNDER THIS SE CTION CAN BE MADE TO CERTAIN UNEXPLAINED EXPENDITURE ONLY WHEN ASSESSEE OFFERED NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR THE EXPLANA TION IS NOT FOUND ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 10 SATISFACTORY. THIS SECTION WAS BROUGHT ON THE STAT UTE W.E.F. 1.4.1976 BY THE TAXATION LAWS (AMENDMENT) ACT, 1975. THE PROVISO T O THE SECTION WAS INSERTED BY THE FINANCE (NO.2) ACT 1998 W.E.F. 1.4. 1999. AS PER THIS PROVISO, ANY UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE T HE INCOME OF THE ASSESSEE WAS NOT TO BE ALLOWED AS DEDUCTION UNDER A NY HEAD OF INCOME. THE LD. AR SUBMITTED THAT ANY EXPENDITURE IS OTHERWISE BUSINESS EXPENDITURE AND COULD BE EASILY CLAIMED AGAINST BUSINESS INCOME CAN NOT BE TREATED INCOME UNDER THE SCOPE OF SECTION 69C OF THE INCOME-TAX AC T. UNLESS IT IS ESTABLISHED THAT SAME IS UNDISCLOSED INCOME OF THE ASSESSEE. I N SUCH CIRCUMSTANCES, CORROBORATIVE EVIDENCE OR SUPPORTING MATERIAL AND S TATEMENTS RECORDED OF THE PERSONS CONFIRMING THE SAME IS NECESSARY. THE LD. AR SUBMITTED THAT THE AO HAS NEITHER CALLED FOR ANY OF THESE PARTIES NOR SUM MONED THEM. LD. AR SUBMITTED THAT THE PAYMENT OF THE COMMISSION WAS MA DE ONLY ON THE MATURITY OF THE PROJECT OR COMPLETION OF THE DEALS. THESE P ARTIES WERE BOOKING PLOTS IN VARIOUS PROJECTS AT KARNAL, JAIPUR AND AGRA. THE B OOKINGS OF THE PLOT ARE MADE ONLY ON THE PART PAYMENT RECEIVED FROM THE PUR CHASER WHICH IS CLEAR FROM THE SEIZED MATERIAL. IN MANY CASES, THESE BOO KINGS WERE CANCELLED SUBSEQUENTLY. THE PROJECTS WERE STARTED DURING 200 5-06 AND IT TOOK AROUND 2 TO 3 YEARS FOR COMPLETION OF THE PROJECTS. THE AMO UNT WAS CAPITALIZED IN THE ASSESSMENT YEAR 2005-06 AND WHICH WAS DULY EXAMINED BY ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT. THE BROKERAGE IS PAID TO THE BROKERS ONLY ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 11 AFTER RECEIVING THE FULL PAYMENT AND THE DOCUMENTS REGISTERED IN THE NAME OF THE PURCHASERS. ONE OF THE PROJECTS AT JAIPUR HAS BEEN CANCELLED AS ASSESSEE COULD NOT GET CERTAIN PERMISSIONS FROM THE GOVERNME NT OF RAJASTHAN. THE LD. AR SUBMITTED THAT NO MATERIAL HAS BEEN BROUGHT ON R ECORD WHICH COULD SHOW THAT ANY OF THE BROKER MENTIONED RECEIPT OF ANYTHIN G MORE THAN WHAT IS RECORDED IN THE BOOKS OF ACCOUNT. WHATEVER AMOUNT OF COMMISSION PAID TO THE BROKERS HAS BEEN PAID BY ACCOUNT PAYEE CHEQUES AFTER DEDUCTING TDS ON THE SAME. THE SEIZED DOCUMENTS ITSELF SHOW THAT AM OUNT HAS BEEN ASKED BY WAY OF CHEQUES. IN VIEW OF THIS FACT, AN INFERENCE THAT ASSESSEE HAS MADE THE PAYMENTS OUT OF THE BOOKS IS COMPLETELY UNFOUNDED. MOREOVER IF IT WOULD HAVE BEEN THE CASE, THEN THIS EXPENDITURE SHALL RED UCE THE TAXABLE INCOME OF THE ASSESSEE. THEN ALSO THERE IS NO ADDITIONAL TAX LIABILITY WHICH CAN BE LEVIED ON THE TAXPAYER. LD. AR VEHEMENTLY PLEADED THAT SU CH BASELESS ADDITION DESERVES TO BE DELETED. 10. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E SEIZED MATERIAL CLEARLY LEADS TO THE INFERENCE THAT THERE WAS HIDDEN DEALS WITH THE BROKERS WHO DEMONSTRATE THEIR BROKERAGE. AS PER LD. DRS CONTE NTION, THE ASSESSEE HAD FAILED TO EXPLAIN THE DIFFERENCE IN THE AMOUNT DEBI TED IN BOOKS OF ACCOUNT AND THE AMOUNT RECORDED IN THE SEIZED MATERIAL. 11. IN THE REJOINDER, THE LD. AR SUBMITTED THAT THI S ADDITION HAS BEEN MADE WITHOUT ANY INCRIMINATING DOCUMENT SUGGESTING THAT ASSESSEE HAD MADE ANY ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 12 HIDDEN PAYMENT AS CLAIMED BY LD. DR. HE PLEADED T O SET ASIDE THE ORDER OF THE CIT (A) FOR SUSTAINING PART ADDITION. 12. ON THIS ISSUE, THE REVENUE IS IN APPEAL IN THE GROUND NO.2. THIS ADDITION HAS BEEN MADE UNDER SECTION 69C OF THE INC OME-TAX ACT, 1961. UNDER THIS SECTION, THE ADDITION CAN BE MADE WHERE AN ASSESSEE INCURS AN EXPENDITURE AND OFFERS NO EXPLANATION ABOUT THE SOU RCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED B Y HIM IS NOT SATISFACTORY. THEN ONLY SUCH EXPENDITURE OR PART THEREOF CAN BE T REATED AS DEEMED INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. 13. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE SE BILLS WERE RAISED BY BROKERS WERE FOUND DURING THE SEARCH OPERATION AT T HE RESIDENCE OF DIRECTOR OF ASSESSEE. AS PER REVENUE, THE PAYMENTS OF ALL THES E BILLS WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AS THESE CANNOT BE RECO NCILED WITH THE BOOKS OF ACCOUNT AND ONLY ON THIS BASIS, THE REVENUE PRESUMED THAT THESE PAYMENTS HAVE BEEN MADE OUT OF UNDISCLOSED SOURCE. WE HAVE PERUSED THE SEIZED MATERIAL AND THE RELEVANT PROVISIONS OF SECTION 69C OF THE ACT. THIS SEIZED MATERIAL RELATES TO CERTAIN CORRESPONDENCE BY WHICH THE BROKERS HAVE DE MANDED THEIR COMMISSION . AS PER THESE CORRESPONDENCES, THE RATE OF COMMISSIO N ASKED WAS VARYING FROM 46%. THERE IS NO DOCUMENT REFERRED BY THE AO OR BY THE CIT (A) OR EVEN BEFORE US BY THE REVENUE WHICH COULD SHOW THAT THE RATE OF COMMISSION WAS IN THE RANGE OF 46%. FURTHER THE REVENUE HAS FAILED TO ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 13 CONFIRM THE CONTENTS OF THE CORRESPONDENCE WITH THE BROKERS BY WAY OF VERIFYING THEIR BOOKS OF ACCOUNT OR RECORDING THE S TATEMENT OF CONCERNED PERSONS. THE ASSESSING OFFICER HAS NOT MADE ANY EN QUIRY IN RESPECT OF CORRECTNESS OF THE CONTENTS OF THE CORRESPONDENCE B Y THE BROKERS. THERE IS NO EVIDENCE FOUND WITH REGARD TO THE PAYMENT OF THESE BILLS FROM ANY SOURCE OF INCOME. THE ASSESSEES CLAIM THAT PAYMENTS OF COMM ISSION HAD BEEN MADE BY CHEQUES AND THE NECESSARY TDS WERE DEDUCTED HAD SOME FORCE. IN OUR CONSIDERED VIEW, NO ADDITION CAN BE MADE MERELY ON THE BASIS OF CERTAIN CORRESPONDENCE ON THE PRESUMPTION WHEN ADDITION IS TO BE MADE U/S 69C OF THE INCOME-TAX ACT WHILE MAKING THE ASSESSMENT U/S 153A OF THE INCOME-TAX ACT. NO ADDITION CAN BE MADE UNDER THE SCOPE OF SE CTION 153A ON PRESUMPTION BASIS. THE REVENUE HAS TO BRING CERTAI N CORROBORATIVE EVIDENCE OR SUPPORTING MATERIAL BY WAY OF MAKING INVESTIGATI ON OR ENQUIRIES. ALL THE BROKERS WERE LOCATED IN DELHI, HOWEVER, THE REVENUE HAS DONE NOTHING IN THIS REGARD. SOME OF THE BROKERS WERE EVEN CORPORATE AS SESSEES. THEIR RECORDS COULD HAVE BEEN EASILY VERIFIED. THE SEIZED MATERI AL RELIED UPON BY THE AO ALONE CANNOT BE MADE A BASIS FOR DRIVING ADVERSE IN FERENCE WITH REGARD TO THE UNDISCLOSED EXPENDITURE WHICH CAN BE ADDED U/S 69 O F THE INCOME-TAX ACT. IN OUR CONSIDERED VIEW, MATERIAL RELIED UPON BY THE AO FOR MAKING THE ADDITION WAS MERELY A CORRESPONDENCE WHICH ALONE CANNOT LEAD TO THE INFERENCE THAT ASSESSEE HAD INCURRED SUCH EXPENDITURE. THIS CANNO T BE MADE BASIS FOR ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 14 ADDITION MADE U/S 69 OF THE INCOME-TAX ACT WHILE FR AMING THE ASSESSMENT U/S 153A OF THE INCOME-TAX ACT, 1961. THERE IS NO EVID ENCE GATHERED BY REVENUE FROM ANYWHERE, WHICH COULD ESTABLISH A BIT OF THE F ACT THAT ASSESSEE HAS PAID ANYTHING MORE THAN WHATEVER RECORDED IN THE BOOKS O F ACCOUNT. THEREFORE, IN OUR CONSIDERED VIEW, SUCH ADDITION CANNOT BE SUSTAI NED. 13.1 THE REVENUE HAS ALSO RAISED THE ISSUE OF ADMIT TING ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A OF THE INCOME-TAX RULE S. OUR NOTICE WAS BROUGHT TO THE RELEVANT COPIES OF THE LEDGER ACCOUN T SHOWING PAYMENTS TO VARIOUS PARTIES ON WHICH TDS WAS DEDUCTED. THE CON FIRMATION OF THE ACCOUNT WAS ALSO FILED ALONG WITH LEDGER ACCOUNT. THESE EV IDENCES WERE PART OF THE ASSESSMENT RECORD AND IN OUR CONSIDERED VIEW, NOTHI NG NEW HAS BEEN BROUGHT INTO NOTICE OF CIT(A). THEREFORE, THERE WAS NO VIO LATION OF RULE 46A OF INCOME-TAX RULES, 1962. THESE DOCUMENTS WERE FILED BEFORE THE ASSESSING OFFICER AND THIS WAS NOT FILED FOR THE FIRST TIME B EFORE THE CIT (A). THEREFORE, THE REVENUES CONTENTION IS NOT TENABLE. 13.2 WE DISMISS THIS GROUND OF REVENUES APPEAL AND ALLOW THE ASSESSEES GROUND OF APPEAL. 14. THE ISSUE RAISED IN GROUND NOS.3 TO 5 OF THE RE VENUES APPEAL HAS BEEN DEALT BY THE LD. CIT (A) IN PARA 6.9 OF HIS ORDER W HEREIN THE ISSUE HAS BEEN DECIDED AS UNDER :- 6.9 I HAVE CAREFULLY CONSIDERED THE SUBMISSION, P ERUSED THE ORDER OF ASSESSMENT AND EVIDENCE ON RECORD. THE DIS PUTE, AS ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 15 RAISED BY THE APPELLANT, PERTAINS TO FOUR ISSUES (A ) COMMISSION OF RS.30,14,662/-, (B) DONATION OF RS.5,37,500/-, ( C) INCOME TAX AND INTEREST ON INCOME TAX RS.96,547/-, (D) INT EREST ON LOAN TO OTHERS RS.28,28,130/- TOTALING RS.64.76,839 /- IN THE COST OF THE PROJECT. I) IN CASE OF COMMISSION OF RS.30,14,662 , ON PERUSAL OF THE SUBMISSION AND DOCUMENTS PLACE ON RECORD, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS TRANSFERR ED COMMISSION OF RS.20,14,662 FROM THE COST OF THE KAM AL PROJECT TO THE COST OF JAIPUR PROJECT. FURTHER, AN AMOUNT OF RS.10,00,000 AS COMMISSION TO M/S OMWAY PERTAINING TO JAIPUR PROJECT HAS NOT BEEN TRANSFERRED BUT SETTLED . THIS AMOUNT OF R.10,00,000/- CANNOT BE CAPITALISED AND H ENCE DISALLOWANCE OF RS.10.00,000 OUT OF RS.30,14,662 HA S BEEN CONFIRMED AND BALANCE OF RS.20,14,662/-HAS BEEN DEL ETED. II) IN CASE OF DONATION OF RS.5,37,500/-, IT IS NOTICED THAT THE EXPENDITURE ON ACCOUNT OF DONATION IS NOT DONAT ION IN TRUE SENSE BUT IN THE NATURE OF BUSINESS PROMOTION AND ADVERTISEMENT TO FACILITATE THE PROJECT. I AM OF TH E CONSIDERED OPINION THAT AN EXPENDITURE MADE TO QUALIFY THE TES T OF COMMERCIAL EXPEDIENCY IS ONE WHICH HAS BEEN INCURRE D IN EXPECTATION THAT SUCH PAYMENT SHOULD DIRECTLY OR IN DIRECTLY BENEFIT THE BUSINESS OF THE ASSESSEE OR FACILITATE THE CARRYING ON BUSINESS OF THE APPELLANT. EVEN THOUGH IT MAY NOT BE DIRECTLY CONNECTED BUT THERE IS AN INDIRECT IMPACT OF THIS E XPENDITURE ON BUSINESS, HENCE, CANNOT BE DISREGARDED IN AS NOT FO R THE PURPOSE OF BUSINESS. THEREFORE, THE DISALLOWANCE OF RS.5,37,500 HAS BEEN DELETED. III) IN CASE OF INCOME TAX AND INTEREST ON INCOME T AX RS.96,547/-, I AM NOT CONVINCED WITH THE SUBMISSIONS MADE BY THE AR BECAUSE THERE IS A SPECIFIC SECTION OF DI SALLOWANCE. AS PER SECTION 40 (A) (II) OF THE INCOME TAX ACT, I NCOME TAX PAID AND INTEREST ON INTEREST TAX PAID IS NOT AN AL LOWABLE EXPENDITURE AND THEREFORE, DISALLOWANCE OF RS.96,54 7/- IS CONFIRMED. IV) IN CASE OF INTEREST ON LOAN TO OTHERS RS.28,28, 130/- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSI ONS MADE BY THE AR OF THE APPELLANT. IN THIS CASE THE ORIGI NAL ASSESSMENT ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 16 WAS COMPLETED U/S 143(3) OF THE I.T ACT ON 27.05.20 08 BUT NO SUCH DISALLOWANCE WAS MADE. HOWEVER, UNDER 153A ASSESSMENT THE DISALLOWANCE OF INTEREST WAS MADE WH ICH IS NOT BASED ON SEIZED MATERIAL PER SE AND APPEARS TO BE A CHANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER THE LAW. AFT ER CONSIDERING THE ARGUMENTS OF BOTH AND IN VIEW OF TH E JUDGEMENT ANNOUNCED BY THE HON'BLE DELHI HIGH COURT IN CASE OF BHARTI TELEVENTURE LTD. (2011) 51 DTR 98, I AM O F THE CONSIDERED OPINION THAT THE APPELLANT WAS FOUND TO BE HAVING ADEQUATE NON-INTEREST BEARING FUND BY WAY OF SHARE CAPITAL, RESERVES AND THE ADVANCES RECEIVED FROM THE BOOKING OF PLOTS AND THERE WAS NO NEXUS BETWEEN THE BORROWINGS OF AS SESSEE AND THE ADVANCES GIVEN. THUS, NO DISALLOWANCE WAS C ALLED FOR AND HENCE, DISALLOWANCE OF INTEREST COST FROM THE P ROJECT COST AMOUNTING TO RS.29,34,386/- IS DELETED. 15. IN THE ASSESSEE CROSS OBJECTION, THE GROUND HAS BEEN TAKEN IN RESPECT OF THE DELETION OF ADDITION OF RS.10 LACS OUT OF BALAN CE OF RS.30,14,662/-. THE REVENUE HAS RAISED ISSUE IN GROUND NO.3 FOR THE BAL ANCE OF AMOUNT. 16. THERE WERE CERTAIN ADDITIONS MADE BY THE AO BY REDUCING THE COST OF KARNAL PROJECT WHICH INCLUDES COMMISSION OF RS.30,4 0,662/- WHICH WAS ACTUALLY RELATED TO THE JAIPUR PROJECT. THE CIT (A ) DELETED THIS ADDITION AS THE SAME WAS MISTAKE OF THE ASSESSEE RECTIFIED IN THE F INANCIAL YEAR 2007-08. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SE CTION 153A. IT WILL HAVE NO TAX EFFECT AS THE AMOUNT WAS NOT CLAIMED AS REVE NUE EXPENDITURE. 17. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. RS. 10 LACS FOR WHICH THE CIT (A) HAS GRANTED THE RELIEF WAS PAID TO M/S. OMW AY BUILD ESTATES (P) LTD. AND IT WAS PERTAINING TO JAIPUR PROJECT. THIS EXPE NSE WAS NOT CLAIMED AS REVENUE BUT CAPITALIZED WRONGLY AS KARNAL PROJECT I NSTEAD OF JAIPUR PROJECT. ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 17 SINCE THIS EXPENSE WAS CAPITAL AND PERTAINING TO JA IPUR PROJECT, THEREFORE, IN OUR CONSIDERED VIEW, THIS EXPENSE SHALL BE CAPITAL EXPENDITURE IN RESPECT OF JAIPUR PROJECT AND IT IS TO BE ALLOWED TO CAPITALIZ E IN RESPECT OF THE JAIPUR PROJECT. 17.1 THE BALANCE AMOUNT OF RS.20,14,662/- WAS TRANS FERRED FROM THE COST OF KARNAL PROJECT TO THE COST OF JAIPUR PROJECT. THE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED BY THE REVENUE, TH EREFORE, IN OUR CONSIDERED VIEW, THE CIT (A) HAS RIGHTLY DELETED THIS ADDITION . 17.2 SIMILARLY, THE AMOUNT OF RS.5,37,500/- FOR WHI CH REVENUE IS IN APPEAL IN GROUND NO. 4 WAS NOT DONATION BUT IT WAS IN THE NAT URE OF BUSINESS PROMOTION AND ADVERTISEMENT TO PROMOTE THE PROJECT. SUCH EXP ENDITURE MADE BY THE ASSESSEE IS DEFINITELY MADE FOR COMMERCIAL EXPEDIEN CY. THIS EXPENDITURE IS DIRECTLY OR INDIRECTLY WAS FOR THE BENEFIT OF THE B USINESS OF THE ASSESSEE. THEREFORE, WE FIND NO FAULT IN THE ORDER OF CIT (A) AND WE SUSTAIN THE SAME. 17.3 IN GROUND NO.5 OF REVENUES APPEAL, THE ISSUE IS DELETION OF INTEREST ON LOAN TO SISTER CONCERNS. ON THIS, WE HOLD THAT THE EARLIER ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961 AN D NO SUCH DISALLOWANCE WAS MADE ON THIS ISSUE. THE ISSUE WAS CONSIDERED A T THAT TIME BY ASSESSING OFFICER AND ASKED FOR DETAILS. THERE IS NO NEW EVI DENCE OR INCRIMINATING DOCUMENT FOUND AND SEIZED DURING THE SEARCH OPERATI ON WHICH CAN MAKE THE ASSESSING OFFICER TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT ON THIS ITA NOS.1693/DEL/2012 CO NO.246/DEL/2012 ITA NO.2091/DEL/2012 18 ACCOUNT. IN SUCH CIRCUMSTANCES, IN ABSENCE OF ANY EVIDENCE OF ANY SORT, SUCH DISALLOWANCES SHALL BE ONLY ON THE BASIS OF CHANGE IN THE OPINION AND THE SAME IS NOT PERMISSIBLE IN LAW. FURTHER, ON MERITS ALSO, THE ASSESSEE WAS HAVING SUFFICIENT AND ADEQUATE NON-INTEREST BEARING FUNDS BY WAY OF SHARE CAPITAL, RESERVES AND ADVANCES RECEIVED FROM THE BO OKING OF THE PLOTS. THE REVENUE HAS FAILED TO ESTABLISH ANY NEXUS BETWEEN T HE BORROWED FUNDS AND INTEREST FREE ADVANCES GIVEN TO SISTER CONCERNS. I N SUCH CIRCUMSTANCES, WE FIND THERE WAS NO INFIRMITY IN THE ORDER OF CIT (A) AND WE SUSTAIN THE SAME ON THIS ISSUE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, CROSS OBJECTION OF THE ASSESSEE IS ALLOWED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF DECEMBER, 2012. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 31 ST DAY OF DECEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.