Pratap Chandra Mohanty, Jagatsinghpur V. ITO, Ward-1, Paradeep, Paradeep

ITA 152/CTK/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3719 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Assessee Lawyers: P S PANDAK AGARWAL
• Keywords: Unexplained expenditure; Business income; Business expenditure; Income from undisclosed sources; Search and seizure; Document seized; Retrospective amendment; Additional evidence; Documents seized
• Section: 69C; 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNT ANT MEMBER AND SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO .152 /CTK/2013 ASSESSMENT YEAR: 2011 - 2012 ASTT. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), BHUBANESWAR. VS. ARSS INFRASTRUCTURE PVT. LTD. PLOT NO. 38, SECTOR - A, MANCHESWAR ESTATE, BBSR. PAN/GIR NO. AADCA4203D (APPELLANT ) .. ( RESPONDENT ) ITA NO.540/CTK/2013 ASSESSMENT YEAR: 2011 - 2012 ARSS INFRASTRUCTURE PVT. LTD. PLOT NO. 38, SECTOR - A, MANCHESWAR ESTATE, BBSR. VS. ASTT. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), BHUBANESWAR. PAN/GIR NO. AADCA4203D (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.S.PANDA/K.AGARWAL, AR REVENUE BY : SHRI KUNAL SINGH, CIT DR DATE OF HEARING : 10 /07 / 2017 DATE OF PRONOUNCEMENT : 14 /0 7 / 2017 2 ARSS INFRASTRUCTURE PVT. LTD. O R D E R PER N.S.SAINI, JUDICIAL MEMBER: THESE ARE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGAINST ORDER DATED 4.10.2013 OF THE CIT(A), - II, BHUBA NESWAR FOR THE ASSESSMENT YEAR 2011 - 2012. ITA NO.152/CTK/2013: REVENUES APPEAL 2 . IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) IS NOT JUSTIFIED IN ALLOWING DEDUCTION OF RS.31,88,99,188/ - U/S. 80IA(4) OF THE ACT. 3. T HE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION FROM PROFITS FOR CONSTRUCTION OF ROADS, BRIDGES AND RAIL ROADS. THE ASSESSING OFFICER WAS OF THE VIEW THAT MOST OF THE ROADS BUILT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION DOES NOT AMOUNT TO CREATION OF NEW INFRASTRUCTURE FACILITIES AS THE ASSESSEE HAS SIMPLY EXECUTED THE WORK FOR UPGRADATION/REPAIRING/MAINTENANCE OF OLD ROADS, AND THIS IS EVIDENT FROM THE COPY OF CONTRA C T AGREEMENTS CALLED FOR, WHICH MENTION THE NATURE OF JOB TO BE PERFORMED AS WIDENING/IMPROVEMENT OF ROADS. THEREFORE, HE HELD THAT THE ASSESSEE HAS NOT UNDERTAKEN CONSTRUCTION OF ANY NEW INFRASTRUCTURAL PROJECTS BUT MERELY IMPROVED UPON EXISTING INFRASTRUCTURES, WHICH WERE PRE - EXISTENT AND THE CONTRACTS FOR WHICH WERE PROVIDE D BY GOVERNMENT AUTHORITIES. ACCORDING TO THE ASSESSING OFFICER, IT IS A CASE OF GOVERNMENT (CONTRACTEE) GIVING WORK TO 3 ARSS INFRASTRUCTURE PVT. LTD. ASSESSEE (CONTRACTOR) AND BY NO STRETCH OF IMAGINATION CAN ASSESSEE CLAIM TO BE THE DEVELOPER AND NOT A CONTRACTOR. HENCE, HE DISALLOW ED DEDUCTION U/S.80IA(4) OF THE ACT TO THE ASSESSEE OF RS.31,38,99,188/ - . 4 . ON A PPEAL, THE CIT(A) VACATED THE DISALLOWANCE BY FOLLOWING THE ORDER DATED 13.6.2013 OF THIS BENCH OF THE TRIBUNAL PASSED IN ITA NOS. 142 AND 143/CTK/2010 AND ITA NOS.483 AND 484/CTK/2010 IN THE CASE OF THE ASSESSEE ITSELF IN ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 . 5 . LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER AND LD A.R. OF THE ASSESSEE SUP PORTED THE ORDER OF THE CIT(A). LD A.R. ALSO SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006 - 07 TO 2010 - 2011 IN ITA NOS. 147, 148, 149, 150 & 151/CTK/2013 FOR THE ASSESSMENT YEARS :2006 - 2007,2007 - 08, 2008 - 09, 2009 - 10 & 2010 - 11 VIDE ORDER DATED 28.6.2017 AND THE DISALLOWANCE DELETED BY THE CIT(A) HAS BEEN CONFIRMED BY THE TRIBUNAL. 6 . AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUT HORITIES, WE FIND THAT THE ISSUE WHICH IS INVOLVED IN THIS GROUND OF APPEAL RELATES TO ALLOWABILITY OF DEDUCTION U/S.80IA(4) OF THE ACT IN THE CASE OF THE ASSESSEE IN RESPECT OF ITS BUSINESS OF CONSTRUCTION OF ROADS, BRIDGES AND RAIL ROADS. WE FIND THAT T HIS ISSUE HAS ALREADY BEEN DECIDED AGAINST THE REVENUE BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR THE ASSESSMENT YEARS 2006 - 07 TO 2010 - 2011, WHEREIN FOLLOWING THE DECISION OF THE TRIBUNAL IN APPEAL S ARISING OUT OF ORDER DATED 13. 6.2013 PASSED 4 ARSS INFRASTRUCTURE PVT. LTD. U/S.263 OF THE ACT IN ITA NOS.142 AND 143/CTK/2010 AND ITA NOS.483 AND 484/CTK/2010 , THE TRIBUNAL HELD AS UNDER: 'ADMITTEDLY, THE AO IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT HAS CALLED FOR THE EXPLANATION OF THE ASSESSEE AS ALSO DIRECTED THE ASSESSEE TO PROVE ITS CLAIM FOR DEDUCTION U/S. 80IA(4) OF THE ACT. THE ASSESSEE HAS RESPONDED TO THE AO. THE AO AFTER CONSIDERING THE EXPLANATION AND THE PROOFS AS PRODUCED BY THE ASSESSEE FOUND THAT THE ASSESSEE WAS ELIGI BLE FOR DEDUCTION U/S. 80IA(4) OF THE ACT. A PERUSAL OF THE ORDER OF THE ID. CIT U/S. 263 OF THE ACT DOES NOT ANYWHERE SHOW AS TO WHAT IS THE SPECIFIC ERROR THAT THE AO HAS COMMITTED WHEN GRANTING THE ASSESSEE THE DEDUCTION U/S. 80IA(4) OF THE ACT. IT IS T RUE THAT THE LD. CIT HAS REFERRED TO PROVISIONS OF EXPLANATIONS SUBSTITUTED BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2000. HOWEVER, THIS EXPLANATION WAS AVAILABLE TO THE AO WHEN THE ASSESSMENT FOR A/Y. 2007 - 08 WAS BEING COMPLETED. STIL L THE AO HELD THAT THE ASSESSEE WAS ENTITLED TO THE DEDUCTION U/S. 80IA(4) OF THE ACT. THE SAID EXPLANATION ADMITTEDLY WAS NOT AVAILABLE WHEN THE ASSESSMENT FOR A/Y. 2006 - 07 WAS BEING COMPLETED U/S. 143(3) OF THE ACT. FOR THE A/Y. 2006 - 07, THE ORDER PASSED U/S. 263 OF THE ACT COULD NOT BE USED FOR MAKING ORDER TREATING AS ASSESSMENT ORDER ERRONEOUS ON ACCOUNT OF A SUBSEQUENT AMENDMENT OR SUBSTITUTION DONE TO THE PROVISION. UNDER THESE CIRCUMSTANCES, AS IT IS NOTICED THAT THE AO HAS CHOSEN ONE OF THE TWO VIE WS IN RESPECT OF THE CLAIM OF DEDUCTION U/S. 80IA(4) OF THE ACT AND IN VIEW OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF GOKULDAS EXPORTS & ORS., REFERRED TO SUPRA, WE ARE OF THE CONSIDERATION VIEW THAT THE ORDER PASSED U/S. 263 OF TH E ACT IS NOT SUSTAINABLE IN LAW AND CONSEQUENTLY, THE SAME STANDS ANNULLED. THIS VIEW OF OURS ALSO FINDS SUPPORT FROM THE DECISION OF THE HON'BLE BOMBALY HIGH COURT IN THE CASE OF RANKA JEWELLERS VS. ADDL. CIT (2010) 328 1TR 148. NOW COMING TO THE MERITS OF THE DEDUCTION U/S. 80IA(4) OF THE ACT. A PERUSAL OF THE PROVISIONS OF SECTION 80IA(4) OF THE ACT SHOWS THAT IN THE EXPLANATION 'INFRASTRUCTURE FACILITY' HAS BEEN SPECIFIED TO MEAN A ROAD INCLUDING A TOLL ROAD, A BRIDGE OR A RAIL SYSTEM. ADMITTEDLY, THE ASSESSEE IS DOING THE BUSINESS OF DEVELOPMENT OF RAILWAY TRACKS AND BRIDGES THEREOF AS ALSO ROADS. IF, WE ARE TO ACCEPT THE CONTENTION OF LD. CIT AT THE PROVISIONS OF SECTION 80IA(4) OF THE ACT AFTER THE SUBSTITUTION OF THE EXPL ANATION TO SECTION 80IA OF THE ACT WAS INTRODUCED WAS ONLY FOR THE PURPOSE OF G IVING THE BENEFIT OF BOT CONTRACTS THEN, THE EXPLANATION TO SECTION 80IA(4) OF THE ACT BEC OMES OTIOSE. THIS IS AS EXPLANATION TO SECTION 80 IA(4) OF THE ACT SPECIFICALLY PRO VIDES FOR THE ROAD TO INCLUDE TO LL ROAD, A BRIDGE OR A RAIL SYSTEM. BOT CONTRACT IN RESPECT OF THE RAILWAY SYSTEM CAN NEVER EXIST. FURTHER, A PERUSAL OF THE PROVISIONS OF SECTION 80IA OF THE ACT SHOWS THAT THE TERM 'WORKS CONTRACT' IS NOT DEFINED IN THE SAID SECTION. HOWEVER, THE TERMS ' WORKS' AND 'CONTRACT' IS DEFINED IN THE PROVISIONS OF SECTION 194C OF THE ACT. IF A PARTICULAR WORD OR TERM IS NOT DEFINED IN THE SPECIFIC SECTION THEN ONE COULD GO TO OTHER SECTIONS IN THE SAID ACT WHERE THE DEFINITION WOULD BE AVAILABLE TO DRAW A MEANING TO THE SAID TERMS. IN THE PROVISIONS O F SECTION 194C OF THE ACT, WORK HAS BEEN GIVEN AN INCLUSIVE DEFINITION BUT IN THE SUBSEQUENT PORTION IT HAS EXCLUDED THE MANUFACTURING OF SUPPLYING A PRODUCT ACCORDING TO REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. AS HAS BEEN 5 ARSS INFRASTRUCTURE PVT. LTD. SPECIFIED BY THE LD. AR, THE ASSESSEE IS DOING CONTRACT WORK BUT THAT WORK IS ACCORDING TO THE REQUIREMENT AND SPECIFICATION OF THE CUSTOMER AND THE SAME HAS BEEN DONE BY USING MA TERIALS PURCHASE FROM THIRD PARTIES OTHER THAN THE CUSTOMERS. THUS, THOUGH THE ASSESSEE IS DOING A WORKS CONTRACT THE SAME WOULD NOT FALL WITHIN THE MEANING OF THE WORD 'WORKS CONTRACT' FOR THE PURPOSE OF THE ACT DUE TO THE EXCLUSION PROVIDED IN THE MEANIN G OF 'WORK' IN SECTION 194C OF THE ACT. THE ISSUE RAISED BY THE LD. CIT THAT THE ASSESSEE IS NOT DOING THE DEVELOPMENT WORK BUT IS ONLY DOING THE CONTRACT ALSO DOES NOT STAND TO TEST AS THE ASSESSEE ADMITTEDLY IS DEVELOPING THE ROADS AND RAILWAY LINES AND THE BRIDGES THEREOF. DEVELOPMENT ENCOMPASSES WITHIN ITSELF CONTRACT WORK. THE AGREEMENT BETWEEN THE ASSESSEE AND THE CUSTOMER BEING THE GOVERNMENT IS FOR THE DEVELOPMENT OF THE INFRASTRUCTURE FACILITY BEING ROADS AND RAIL SYSTEMS AND BRIDGES BY PARTICIPATI NG IN THE TENDERS. UNDER TH ESE CIRCUMSTANCES , WE ARE O F THE VIEW THAT TH E AO WAS RIGHT IN LAW IN GRANTING THE ASSESSEE THE BENEFIT OF DEDUCTION U/S. 80IA(4 ) OF THE ACT . ON THIS GROUND ALSO, WE ARE OF THE VIEW THAT THE LD. CIT'S ORDER PASSED U/S. 263 OF THE ACT IS UNSUSTAINABLE AND IS LIABLE TO BE QUASHED AND WE DO SO. HERE, WE MAY SPECIFICALLY MENTION THAT IN VIEW OF THE FACT THAT THE EXPLANATION TO SECTION 80IA(4) OF THE ACT WHICH HAS BEEN SUBSTITUTED BY THE FINANCE, ACT 2009 WITH RETROSPECTIVE EFFECT OF 01.04.2000 IS ATTEMPTING TO TAKE AWAY THE STATUTORY BENEFIT GRANTED TO THE ASSESSEE U/S. 80IA(4) OF THE ACT WITHOUT MAKING ANY AMENDMENT TO THE EXPLANATION TO SECTION 80 IA(4) OF THE ACT, THE SAID EXPLANATION SUBSTITUTED BY THE FINANCE ACT, 2009 W.E.F. 01.04.2000 BEING HINDRANCE TO THE STATUTORY DEDUCTION AVAILABLE TO THE ASSESSEE UNDER THE PROVISION OF SECTION 80IA(4), THE SAID EXPLANATION WOULD HAVE TO STAND DOWN IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S. SUNDARM PILLAI, REFERRED TO SUPRA. CONSEQUENTLY, ON THIS GROUND ALSO THE ORDER PASSED U/S. 263 OF THE ACT BY THE ID. CIT FOR A/Y. 2006 - 07 AND 2007 - 08 STANDS QUASHED. APPEALS OF THE ASSESSEE A RE ALLOWED. RESPECTFULLY FOLLOWING THE JURISDICTIONAL ITATS ORDERS AS MENTIONED ABOVE IN THE CASE OF THE APPELLANT WHICH IS BINDING ON ME, I DIRECT THE AO TO ALLOW THE CLAIM OF DEDUCTION MADE BY THE APPELLANT U/S. 80IA(4) OF THE AT. HENCE, THE ADDITIO N MADE BY THE AO IN THIS REGARD AMOUNTING TO RS.87,38,019/ - IS DELETED. 7 . WE FIND NO GOOD REASON COULD BE GIVEN BY LD D.R. POINTING OUT THE REQUIREMENT TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS IN CONSONANCE WITH THE ABOVE ORDER OF THE TRIB UNAL. WE , THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE AND, ACCORDINGLY, SAME IS DISMISSED. 6 ARSS INFRASTRUCTURE PVT. LTD. 8 . IN GROUND NO.2 OF THE APPEAL , THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION OF RS.29,488 / - TOWARDS EMPLOYEES CONTRIBUTION TO PF U/S.36(1)(VA) OF THE ACT. 9 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE HAS NOT DEPOSITED THE EMPLOYEES CONTRIBUTION TO PF TO THE APPROPRIATE AUTHORITY WITHIN THE DUE DATE PRESCRIBED UNDER THE PF ACT AND HENCE, DISALLOWED THE DEDUCTION FOR THE SAME U/S.36(1)(VA) R.W.S. U/S. 2(24)(X) OF THE ACT . 10 . ON APPEAL, THE CIT(A) VACATED THE DISALLOWANCE OBSERVING THAT THAT IT HAS BEEN DECIDED BY THE JUDICIAL AUTHORITIES THAT THE DEP OSIT OF EMPLOYEES CONTRIBUTION TO PF IF MADE BEFORE DUE DATE OF FILING OF THE RETURN BY THE ASSESSEE SHOULD BE ALLOWED AS DEDUCTION U/S.36(1)(VA) OF THE ACT. 11 . WE FIND THAT THE ORDER OF THE CIT(A) FINDS SUPPORT FROM THE DECISION OF HONBLE DELHI HIGH CO URT IN CIT VS. AIMIL LIMITED [2010] 321 ITR 508 (DEL) , WHEREIN, IT HAS BEEN HELD THAT THE EMPLOYEES CONTRIBUTION TOWARDS EPF AND ESI ETC. DEPOSITED AFTER THE DUE DATE BUT BEFORE THE TIME ALLOWED FOR FILING THE RETURN U/S.139(1) WILL NOT CALL FOR A NY DISALLOWANCE U/S.36(1)(VA) OF THE ACT. HENCE, WE CONFIRM THE ORDER OF THE CIT(A ) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 7 ARSS INFRASTRUCTURE PVT. LTD. 12 . IN GROUND NO.3 OF THE APPEAL , THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE FINDING S OF THE ASSESSING OFFICER IN VIOLATION OF RULE 46A. 13 . AT THE TIME OF HEARING, LD D.R. COULD NOT POINT OUT ANY ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE CIT(A), WHICH WAS RELIED UPON BY THE CIT(A) WHILE PASSING THE ORDER. HENCE, WE DISMISS THIS GROUND OF APPEAL. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ITA NO.540/CTK/2013: ASSESSEES APPEAL 15 . GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND HENCE REQUIRES NO SEPARATE ADJUDICATION. 16 . IN GROUND NO.2 OF THE APPEAL , THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.9,50,000/ - . 17 . BRIEF FACTS OF THE CASE ARE THAT THE DURING THE SEARCH AND SEIZURE OPERATION U/S.132 OF THE ACT IN THE CASE OF RAMESH PRASAD AGRAWAL, PROJECT DIRECTOR OF THE ASSESSEE COMPANY, AN AMOUNT OF RS.9.50 LAKHS WAS SEIZED FROM HIM. THE ASSESSING OFFICER ADDED THE SAME TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INCOME FOR THE REASONS THAT THE ASSESSEE COULD NOT PRODUCE ANY CREDIBLE EXPLANATION REGARDING THE SOURCE OF CASH. 18 . BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT A SUM OF RS.7 LAKHS EACH WAS WITHDRAWN FROM THE STATE BANK OF INDIA , AIZAWAL, MI ZORAM ACCOUNT OF THE ASSESSEE ON 14.3.2011 AND 15.3.2011. IT WAS SUBMITTED THAT SINCE PROJECT SITES WERE IN REMOTE AREAS, SHRI AGRAWAL WAS CARRYING 8 ARSS INFRASTRUCTURE PVT. LTD. CASH WITH HIM FOR DIFFERENT EXPENS ES. IT WAS SUBMITTED THAT TRANSACTION WAS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 19. THE CIT(A) HELD THAT THE ASSESSEE FAILED TO ESTABLISH NEXUS BETWEEN THE CASH SO DRAWN AND THE CASH FOUND IN THE VEHICLE OF SHRI AGARWAL ON 17.3.2011 AND SINCE THE ASSESSEE NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE CIT(A) EXPLAINED HOW SUCH TRANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, HE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 20. BEING AGGRIEVED AGAINST THI S ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 21. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. DURING THE COURSE OF SEARCH, CASH OF RS.9,50,000/ - WAS FOUND IN THE POSSESSION OF SHRI RAMESH PRASAD AGARWAL, PROJECT DIRECTOR ON 17.3.2011. IT IS NOT IN DISPUTE THAT SAID SEIZED CASH BELONGS TO THE ASSESSEE COMPANY. BEFORE THE ASSESSING OFFICER, ASSESSEE EXPLAINED THAT SAID CASH OF RS.9,50,000/ - WAS PART OF RS.14, 00,000/ - , WHICH WAS WITHDRAWN FROM THE BANK ACCOUNT OF THE ASSESSEE COMPANY MAINTAINED WITH SBI, AIZAWAL, MIZORAM OF RS.7 LAKHS ON 14.3.2011 AND RS.7 LAKHS ON 15.3.2011. 9 ARSS INFRASTRUCTURE PVT. LTD. 22. HOWEVER, THE ASSESSING NOT ACCEPTED THE ABOVE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE NEXUS BETWEEN THE SAID CASH WITHDRAWN AND CASH OF RS.9,50,000/ - FOUND ON 17.3.2011 COULD NOT BE ESTABLISHED BY THE ASSESSEE. THE ASSESSING OFFICER, THEREFORE, ADDED RS.9,50,000/ - TO THE INCOME OF THE ASSESSEE. 23. ON APPEAL, THE CIT(A) CONFIRMED THE ABOVE ACT ION OF THE ASSESSING OFFICER. 24. WE FIND THAT IT IS NOT IN DISPUTE THAT RS.7 LAKHS WAS WITHDRAWN FROM THE REGULAR BANK ACCOUNT OF THE ASSESSEE MAINTAINED WITH SBI, AIZAWAL, MIZORAM ON 14.3.2011. FURTHER, IT IS ALSO NOT IN DISPUTE THAT A FURTHER SUM OF R S.7 LAKHS WAS WITHDRAWN IN CASH FROM THE VERY SAME BANK ACCOUNT ON 15.3.2011. THE ASSESSEES EXPLANATION THAT RS.9,50,000/ - FOUND ON 17.3.2011 AT GUWAHATI WAS PART OF THAT RS.14 LAKHS CANNOT BE REJECTED BY THE REVENUE WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. THE REVENUE COULD NOT BRING ANY MATERIAL BEFORE US TO SHOW THAT THE SAID CASH WITHDRAWAL COULD NOT HAVE BEEN THE SOURCE OF SAID CASH OF RS.9,50,000/ - . IN THE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE ADDITION OF RS.9,50,000/ - CANNOT BE SUSTAI NED. WE, THEREFORE, DELETE THE ADDITION OF RS.9,50,000/ - . THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 25. IN GROUND NO.3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.54,58,000/ - MADE BY THE 10 ARSS INFRASTRUCTURE PVT. LTD. ASSESSING OFFICER ON ACCOUNT OF ALLEGED BOGUS EXPENSES CLAIMED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. 26. IN GROUND NO.4 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,86,40,000/ - MADE BY THE ASSESSING OFFICER BASED ON THE SEIZED DOCUMENTS, WHICH IS NOT CORROBORATED BY ANY EVIDENCE. 27. GROUND NOS.3 & 4 OF THE APPEAL ARE INTERCONNECTED AND, THEREFORE, THEY ARE ADJUDICATED TOGETHER AS UNDER: 2 8 . BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION IN THE VEHICLE OF SHRI RAMESH PRASAD AGARWAL, PROJECT DIRECTOR OF THE ASSESSEE ON 17.3.2011, A CASH BOOK WAS SEIZED WHERE A SUM OF RS.54,58,000/ - WERE CREDITED TOWARDS EARTH CUTTING EXPENSES. THE ASSESSING OFFICER TREATED THIS AMOUNT AS BOGUS EXPENDITURE WHICH IS NARRATED IN THE AUXILIARY CASH BOOK OF THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT NO CONCRETE COMPLIANCE BY THE ASSESSEE WAS RECEIVED REGARDING THE EXPENDITURE RECORDED OUTSIDE THE MAIN CASH BOOK OF THE ASSESSEE. THE ASSESSING OFFICER, THEREFORE, ADDED THE AMOUNT OF RS.54,58,000/ - TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE. 2 9 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT INCIDENTAL EXPENSES ARE INHERENT PART OF ALL CIVIL CONTRACT WORKS AND ALL COSTS CANNOT 11 ARSS INFRASTRUCTURE PVT. LTD. BE ACCOUNTED FOR AS SUCH IN THE BOOKS OF ACCOUNT. THE ASSESSEE FURTHER STATED THAT SINCE PROFIT PERCENTAGE OF T HE ASSESSEE WAS MORE THAN 8% OF THE TURNOVER, NO ADVERSE REMARKS SHOULD BE TAKEN REGARDING THE EXPENDITURE. 30 . THE CIT(A) HELD THAT THE CONTENTION OF THE ASSESSEE WAS NOT TENABLE. HE OBSERVED THAT THE EXPENDITURES ARE RECORDED OUT OF THE BOOKS AND THE A SSESSEE WAS NOT ABLE TO EXPLAIN THE EXPENDITURES IN RELATION TO ITS BOOKS OF ACCOUNT. HE FURTHER OBSERVED THAT THE ASSESSEE HAS SHOWN HIGHER NET PROFIT THAN THE RATE OF 8% OF GROSS TURNOVER WHICH IS GENERALLY ACCEPTABLE PROFIT IN CIVIL CONTRACT BUSINESS, DOES NOT IMMUNE IT FROM THE ILLEGALITY THAT IT CAN INCUR EXPENDITURE OUT OF THE BOOKS OF ACCOUNT. HENCE, HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 31 . FURTHER, DURING THE SEARCH AND SEIZURE OPERATION IN THE PREMISES OF THE ASSESSEE, CERTAIN DOCUME NTS WERE SEIZED. OUT OF SUCH DOCUMENTS, PAGE 17 OF ARSS - HO - 74 INCLUDED CERTAIN DETAILS WHICH WERE REGARDED AS CASH ACCOUNT OF THE ASSESSEE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER FOUND THAT ON THE BASIS OF SUCH NOTINGS , THE INDIVIDUALS AND THE LA SSESSEE COMPANY FILED THEIR RETURNS FOR THE ASSESSMENT YEAR 2011 - 12. FURTHER, WHILE THE INDIVIDUALS SHRI SUBASH AGARWAL, SHRI ANIL AGARWAL, SHRI RAJESH AGARWAL AND SHRI SUNIL AGARWAL IN THEIR RETURNS OF INCOME HAVE SHOWN THE INCOME JUST AS PER THE NOTINGS OF THE SEIZED DOCUMENTS, THE ASSESSEE COMPANY INSTEAD OF SHOWING THE INCOME AT RS. 37.264 CRORES SHOW ED RS. 12 ARSS INFRASTRUCTURE PVT. LTD. 35.40 CRORES ONLY. THE ASSESSING OFFICER FURTHER STATED THAT THE ASSESSEE DURING INVESTIGATION AND SCRUTINY ADMITTED THAT THE AMOUNT OF RS. 37.264 CRORE IS ITS UNACCOUNTED INCOME AND , THEREFORE , THE SAME SHOULD HAVE BEEN SHOWN IN TH E RETURN OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT CONSIDER THE REASONS PROVIDED BY THE ASSESSEE THAT AMOUNT OF RS. 35.40 CRORES SHOWN AS INCOME IS NET OF EXPENDITU RE IN EARNING SUCH INC OME OF RS. 37.264 CRORES. ACCORDING TO THE ASSESSING OFFICER, THE MODUS OPERANDI THROUGH WHICH THIS UNACCOUNTED INCOME IS GENERATED SHOULD BE SIMILAR IN CASE OF INDIVIDUALS AND THE ASSESSEE COMPANY. APPARE NTLY, THE ASSESSING OFFICER H ELD THAT SUCH INCOME WAS EARNED BY COMMISSION FROM SUB - CONTRACTS AND BOGUS SUB - CONTRACTING. THEREFORE, HE HELD THAT NO FURTHER EXPENDITURE CAN BE ALLOWED FROM THIS INCOME AND ADDED THE DIFFERENCE AMOUNT OF RS. 1,86,40,000/ - TO THE TOTAL INCOME OF THE ASSE SSEE. 32 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT IT HAD ADMITTED TO THE UNACCOUNTED INCOME OF RS. 37.264 CRORE, AFTER INCURRING CERTAIN EXPENSES AN AMOUNT OF RS. 35.40 CRORES WERE SHO WN AS THE INCOME OF THE ASSESSEE. IT WAS FURTHER SUB MITTED THAT THE SEIZED PAPER HAD NO EVIDENTIARY VALUE AND BASING ON SUCH, AN ADDITION OF RS.1,86,40,000/ - IS ILLEGAL AND BAD IN LAW. 33 . THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE ASSESSEE ITSELF AGREED TO THE FINDING OF TH E INVESTIGATION BY THE INCOME TAX DEPARTMENT THAT RS.37.264 CRORE IS ITS UNACCOUNTED INCOME. 13 ARSS INFRASTRUCTURE PVT. LTD. THE ASSESSEE HAD PAID TAX ON AN INCOME OF RS.35.40 CRORES. THEREFORE, THE STATEMENT THAT THE SEIZED PAPER DOES NOT HAVE ANY EVIDENTIARY VALUE IS NOT TENABLE. TH E CIT(A) FURTHER OBSERVED THAT IT HAS BEEN WELL ESTABLISHED THAT ASSESSMENT U/S.153A AFTER SEARCH AND SEIZURE OPERATION SHOULD BE BASED ON DOCUMENTS SEIZED FROM THE PREMISES OF THE ASSESSEE AND MORE SO IF THE SAME HAS NOT BEEN RECORDED IN THE BOOKS OF ACC OUNT OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, THIS DOCUMENT AS MENTIONED ABOVE WAS FOUND DURING THE SEARCH AND SEIZURE OPERATION IN THE PREMISES OF THE ASSESSEE AND THE ASSESSEE HAS ADMI TTED THE FIGURES TO BE IN RS. C R O RES AS ITS UNACCOUNTED INCOME. THEREFORE, HE HELD THAT THERE IS NO JUSTIFICATION IN FURTHER ALLOWING EXPENDITURE ON THE UNACCOUNTED INCOME OF RS.37.264 CRORES AS FOUND OUT FROM THE DOCUMENT SEIZED FROM THE PREMISES OF THE ASSESSEE. ACCORDINGLY, HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 34. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 17.3.2011. THE UNDISPUTED FACTS OF THE CASE ARE THAT DURING THE COU RSE OF SEARCH, A DOCUMENT MARKED AS ARSS - HO - 74 WAS FOUND AND SEIZED FROM THE POSSESSION OF SHRI RAMESH PRASAD AGARWAL, PROJECT DIRECTOR ON 17.3.2011. FURTHER, A CASH BOOK WAS ALSO SEIZED FROM THE VEHICLE OF SHRI RAMESH PRASAD AGARWAL, PROJECT DIREC TOR OF THE ASSESSEE COMPANY ON 17.3.2011. THE SEIZED DOCUMENTS MARKED ARSS - HO - 74 SHOWS THAT THE ASSESSEE HAS RECEIVED RS.37.264 CRORES , WHICH WAS NOT RECORDED IN THE REGULAR BOOK. THE ASSESSEE ALSO 14 ARSS INFRASTRUCTURE PVT. LTD. ADMITTED THE AFORESAID AMOUNT AS ITS UNRECORDED INCOME. FURTHER, THE ASSESSEE IN ITS RETURN OF INCOME DISCLOSED ONLY RS.35.40 CRORES AS INCOME ON ACCOUNT OF THIS DOCUMENT. THE CLAIM OF THE ASSESSEE WAS THAT BALANCE AMOUNT OF RS.1,86,40,000/ - WAS BUSINESS EXPENDITURE WHICH WAS INCURRED OUT OF THE AFORESAID RE CEIPT OF RS.37.264 CRORES. HOWEVER, THE ASSESSING OFFICER NOT ACCEPTED THE SAME. THE ASSESSING OFFICER OBSERVED THAT IN THE VERY SAME DOCUMENT, AMOUNTS WERE WRITTEN AGAINST THE NAME OF OTHER PERSONS ALSO AND THOSE PERSONS HAVE DISCLOSED THE ENTIRE AMOUNT WRITTEN IN THE DOCUMENTS AS THEIR INCOME IN THEIR RETURN OF INCOME. THEREFORE, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE OUGHT TO HAVE ALSO DISCLOSED THE ENTIRE AMOUNT OF RECEIPT OF RS.37.264 CRORES AS ITS ADDITIONAL INCOME. THEREFORE, THE ASSESSI NG OFFICER ADDED THE BALANCE AMOUNT OF RS.1,86,40,00/ - TO THE INCOME OF THE ASSESSEE. 35. FURTHER, IT IS ALSO NOT IN DISPUTE THAT THE CASH BOOK SEIZED FROM THE COURSE OF SEARCH SHOWS THAT RS.54,58,000/ - AS BUSINESS EXPENDITURE OF THE ASSESSEE ON ACCOUNT O F EARTH CUTTIN G EXPEN SES. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THE SAID BUSINESS EXPENDITURE AND, THEREFORE, RS.54,58,000/ - WAS ADDED TO THE INCOME OF THE ASSESSEE U/S.69C OF THE ACT. THUS, THE TOTAL ADDITION O F RS.2,40,98,000/ - WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AFORESAID TWO SEIZED DOCUMENTS. 36. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 15 ARSS INFRASTRUCTURE PVT. LTD. 37. BEFORE US, LD A.R. SUBMITTED THAT THE EXPENSES OF RS.1,86,40,000/ - WAS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND, THEREFORE, THE REVENUE WAS NOT JUSTIFIED IN NOT ALLOWING THE SAME. FURTHER, THE BUSINESS EXPENDITURE OF RS.54,58,000/ - WAS PART OF BUSINESS EXPENDIT URE OF RS.1,86,40,000/ - , WHICH WAS INCURRED OUT OF ADDITIONAL INCOME OF RS.37.264 CRORES. THEREFORE, THE REVENUE WAS NOT JUSTIFIED IN MAKING SEPARATE ADDITION OF THE SAME BY IN VOKING PROVISIONS OF SECTION 69C OF THE ACT. 38. ON THE OTHER HAND, LD D.R. SU PPORTED THE ORDERS OF LOWER AUTHORITIES. 39. WE FIND THAT IT IS NOT IN DISPUTE THAT RS.54,58,000/ - WAS GENUINE BUSINESS EXPENDITURE OF THE ASSESSEE, WHICH WAS FOUND RECORDED IN THE SEIZED DOCUMENTS. WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT SAID BUSINESS EXPENDITURE OF RS.54,58,000/ - COULD NOT HAVE BEEN INCURRED OUT OF UNRECORDED BUSINESS RECEIPTS OF RS.37.264 CRORES OF THE ASSESSEE . THE CLAIM OF THE ASSESSEE THAT SAID BUSINESS EXPENDITURE S OF RS.54,58,000/ - WERE INCURRED OUT OF RECEIPTS OF RS.37.264 CRORES CANNOT BE NEGATED WITHOUT ANY MATERIAL ON RECORD TO SHOW THAT SAID EXPENDITURE COULD NOT HAVE BEEN INCURRED OUT OF SAID BUSINESS RECEIPTS OF RS.37.264 CRORES. THEREFORE, IN OUR CONSIDERE D VIEW, THE ADDITION OF RS.54,58,000/ - BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 69C IS UNTENABLE. 16 ARSS INFRASTRUCTURE PVT. LTD. 40. FURTHER, IN RESPECT OF CLAIM OF BUSINESS EXPENDITURE OF RS.1,86,40,000/ - MADE BY THE ASSESSEE, WE FIND THAT EXPENDITURE TO THE TU NE OF RS.54,58,000/ - IS EVIDENT BY THE SAID SEIZED DOCUMENTS ITSELF. HOWEVER, IN RESPECT OF BALANCE AMOUNT OF RS.1,31,82,000/ - , WE FIND THAT NO MATERIAL COULD BE BROUGHT ON RECORD BY THE ASSESSEE. IN ABSENCE OF ANY MATERIAL TO SHOW THAT FURTHER EXPENDITU RE OF RS.1,31,82,000/ - ARE INCURRED FOR BUSINESS PURPOSES, IN OUR CONSIDERED VIEW, DEDUCTION FOR THE SAME CANNOT BE ALLOWED. 41. FURTHER, WE FIND NO MERIT IN THE CONTENTION OF THE REVENUE THAT SIMPLY BECAUSE OTHER PERSONS HAVE DECLARED ENTIRE AMOUNT MENTIO NED IN THE SEIZED DOCUMENTS AS THEIR INCOME, THEREFORE, THE ASSESSEE CANNOT BE ALLOWED DEDUCTION IN RESPECT OF BUSINESS EXPENDITURE INCURRED OUT OF THE AMOUNT OF RECEIPT STATED IN THE SEIZED DOCUMENTS. 42. AS IT IS OBSERVED THAT THE OTHER SEIZED DOCUMENTS ITSELF REVEALS BUSINESS EXPENDITURE OF RS.54,58,000/ - WERE INCURRED BY THE ASSESSEE APART FROM THOSE EXPENSES, WHICH WERE RECORDED IN ITS BOOKS OF ACCOUNT, IN OUR CONSIDERED VIEW, DEDUCTION FOR THE SAME IS ALLOWABLE TO THE ASSESSEE WHEN THE SOURCE OF THE SAME IS EXPLAINABLE FROM UN RECORDED RECEIPTS FOUND DURING THE COURSE OF SEARCH. THEREFORE, ADDITION TO THE EXTENT OF RS.54,58,000/ - OUT OF RS.1,86,40,000/ - IS FOUND TO BE UNSUSTAINABLE. CONSEQUENTLY, OUT O F TOTAL ADDITION OF RS.2,40,98,000/ - (RS.1,86,40,000 + RS.54,58,000/ - ), ADDITION TO THE EXTENT OF RS.1,09,16,000/ - (RS.54,58,000 + RS.54,58,000/ - ) IS DELETED AND BALANCE ADDITION OF RS.1,31,82,000/ - , 17 ARSS INFRASTRUCTURE PVT. LTD. WHICH WAS NOT SUPPORTED BY ANY MATERIAL IS HEREBY CONFIR MED. ACCORDINGLY, GROUND NO.3 OF THE APPEAL IS ALLOWED AND GROUND NO.4 OF THE APPEAL IS PARTLY ALLOWED. 43. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER P RO NOUNCED ON 14 /07 /2017. SD/ - SD/ - (PAVAN KUMAR GADALE) ( N.S SAINI ) JUDICIAL MEMBER A CCOUNTANT MEMBER CUTTACK; DATED 14 /07 /2017 PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT/ASSESSEE: ASTT. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), BHUBANESWAR. 2. THE REVENUE: ARSS INFRASTRUCTURE PVT. LTD. PLOT NO. 38, SECTOR - A, MANCHESWAR ESTATE, BBSR. 3. THE CIT(A) - 1, BHUBANESWAR. 4. CIT , BHUBANESWAR, 5. DR, ITAT, CUTTACK 6 GUARD FILE. //TRUE COPY//