Om Shakthy Agencies (Madras) P Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1575/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7915 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 09-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 08-07-2015
• Court: TRIBUNAL
• Department Lawyers: SUNEEL VERMA
• Assessee Lawyers: K R VASUDEVAN; AN USH SHANKAR
• Keywords: Depreciation; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Source of fund; Cost of acquisition; Revised return; Reassessment proceedings; Capital expenditure
• Section: 40A(3); 143(3); 142(1); 153A; 234B; 15

Judgement Text

3 , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NOS. 1570 TO 1576/MDS/2015 / ASSESSMENT YEARS : 2005-06 TO 2011-12 OM SHAKTHY AGENCIES (MADRAS) P. LTD., T.S. 64, SIDCO INDUSTRIAL ESTATE, EKKATTUTHANGAL, CHENNAI. PAN AAACO3722E ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-III(1), CHENNAI. RESPONDENT) AND . /ITA NOS. 1998 TO 2004/MDS/2015 / ASSESSMENT YEARS : 2005-06 TO 2011-12 THE DEPUTY COMMISSIONER OF INCOME-TAX, CHENNAI. ( /APPELLANT) V. OM SHAKTHY AGENCIES (MADRAS) P. LTD., CHENNAI. RESPONDENT) / ASSESSEE BY : SHRI K.R.VASUDEVAN, ADVOCATE & SHRI ANUSH SHANKAR, CA / DEPARTMENT BY : SHRI SUNEEL VERMA, CIT ! / DATE OF HEARING : 09.12.2015 '# ! / DATE OF PRONOUNCEMENT : 19.02.2016 - - ITA 1570, 1571/15 ETC. 2 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS BY THE ASSESSEE AND BY T HE REVENUE DIRECTED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 12.6.2015 FOR THE ASSESSMENT YEARS 2005-06 TO 2011-12. SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THESE ARE CLU BBED TOGETHER, HEARD TOGETHER AND DISPOSED OFF BY THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FACTS OF THE CASE AS NARRATED IN THE ASSESSM ENT YEAR 2005-06 ARE THAT THERE WAS A SEARCH ACTION U/S.132( 1) OF THE ACT AT THE PREMISES OF THE ASSESSEE AS WELL AS RESIDENT IAL PREMISES OF THE DIRECTORS OF THE ASSESSEE ON 2.7.2010. CONS EQUENT TO THE SEARCH, NOTICE U/S.153A WAS ISSUED TO THE ASSESSEE ON 3.2.2012. THE ASSESSEE FILED THE RETURNS OF INCOME ON 31.10.2 012 DECLARING THE TOTAL INCOME AS UNDER: ASST. YEAR RETURNED INCOME (IN ` ) 2005-06 33,62,270 2006-07 1,38,85,390 2007-08 24,09,57,343 2008-09 23,13,06,353 2009-10 1,63,46,820 2010-11 2,56,68,920 2011-12 4,06,63,322 - - ITA 1570, 1571/15 ETC. 3 THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DETE RMINING THE TOTAL INCOME AS BELOW: ASST. YEAR RETURNED INCOME (IN ` ) 2005-06 1,95,51,081 2006-07 3,66,53,163 2007-08 35,56,66,484 2008-09 1,03,19,72,034 2009-10 19,41,11,104 2010-11 13,84,51,761 2011-12 71,69,58,702 2. THE AO INVOKED THE PROVISIONS OF SEC.40A(3) OF T HE ACT AND DISALLOWED 20% OF THE CASH PAYMENTS ON THE REASON THAT THEY IN EXCESS OF ` 20,000/- OTHER THAN BY CROSS CHEQUE AND DEMAND DRAFT. HE ALSO DISALLOWED 20% OF CERTAIN EXPENSES DUE TO NON-PRODUCTION OF TALLY ACC OUNTS. HE ALSO DISALLOWED DEPRECIATION ON NON-PRODUCTION O F EVIDENCE ON PURCHASE OF NEW ASSET AND VEHICLE MAINTENANCE EXPENSES, TRAVELLING EXPENSES AND TELEP HONE EXPENSES ON ACCOUNT OF PERSONAL USE. ON APPEAL, TH E CIT(APPEALS) HAS GIVEN PARTIAL RELIEF IN ALL THESE ASSESSMENT YEARS. AS SUCH, THE ASSESSEE IS IN APPE AL BEFORE US AGAINST THE SUSTENANCE OF DISALLOWANCE AN D THE - - ITA 1570, 1571/15 ETC. 4 REVENUE IS IN APPEAL BEFORE US AGAINST THE DELETION OF DISALLOWANCE. 3. THE FIRST COMMON GROUND IS WITH REGARD TO INVOKI NG THE PROVISIONS OF SEC.153A OF THE ACT AND FRAMING T HE ASSESSMENT THEREAFTER. 4. ACCORDING TO THE ASSESSEE, WHEN THE ASSESSMENT ALREADY COMPLETED U/S.143(3) OF THE ACT OR WHERE TH ERE IS NO ASSESSMENT PENDING, THERE WILL BE NO ABATEMENT O F PROCEEDINGS. IF THE ASSESSMENT IS NOT PENDING AND THERE IS NO INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH, THE ASSESSMENT U/S.153A TO BE FRAMED ONLY A S PER ORIGINAL ASSESSMENT AND THERE CANNOT BE ANY FURTHER ADDITION ON THE ALREADY ASSESSED INCOME. IN OTHER WORDS, HE SUBMITTED THAT IF THERE IS INCRIMINATING MATERIA L FOUND DURING THE SEARCH ACTION, THE ASSESSMENT IS TO BE F RAMED BY ASSESSING THE INCOME UNEARTHED + ORIGINAL ASSESSMEN T ALREADY COMPLETED U/S.143(3) OF THE ACT. 5. THE LD. DR SUBMITTED THAT THE ASSESSMENT WAS FRAMED CONSEQUENT TO SEARCH U/S.132 OF THE ACT AT T HE ASSESSEES PREMISES TOOK ON 2.7.2010 AND THE AO ISS UED - - ITA 1570, 1571/15 ETC. 5 NOTICE U/S.153A OF THE ACT AND VALIDLY THE ASSESSM ENTS WERE FRAMED IN THIS CASE FOR ALL ASSESSMENT YEARS. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CONTENTION OF THE ASSESSE S COUNSEL IS THAT FOR THE A.Y. 2005-06 AND 2006-07, T HE ORIGINAL ASSESSMENT WAS ALREADY COMPLETED AND THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTI ON U/S.132 IN THE CASE OF THE ASSESSEE AND AS SUCH, TH ERE CAN BE ASSESSMENT U/S.153A R.W.S 143(3) OF THE ACT LIMI TED TO THE ADDITION MADE IN ORIGINAL ASSESSMENT. 6.1 THERE IS NO DISPUTE THAT SECTION 153A IS APPLICABLE IN THIS CASE. HENCE, THE ASSESSING OFFICER IS OBLIGED TO ISSUE NOTICE UNDER SECTION 153A IN RESPECT OF SIX PRECEDI NG YEARS, PRECEDING THE YEAR IN WHICH SEARCH ETC. HAS BEEN IN ITIATED. THEREAFTER, HE HAS TO ASSESS OR REASSESSES THE TOTAL INCOME OF THESE SIX YEARS. IT IS OBLIGATORY ON THE PART OF TH E ASSESSING OFFICER TO ASSESS OR REASSESS TOTAL INCOME OF THE S IX YEARS AS PROVIDED IN SECTION 153A(1)(B) AND REITERATED IN T HE 1ST PROVISO TO THIS SECTION. THE SECOND PROVISO STATES THAT THE ASSESSMENT OR REASSESSMENT PENDING ON THE DATE OF INITIATION OF T HE SEARCH OR - - ITA 1570, 1571/15 ETC. 6 REQUISITION SHALL ABATE. THERE IS NO DIVERGENCE OF VIEWS IN SO FAR AS THE PROVISION CONTAINED IN SECTION 153A TILL THE 1ST PROVISO. THE DIVERGENCE STARTS FROM THE SECOND PROVISO WHICH STATES THAT PENDING ASSESSMENT OR REASSESSMENT ON THE DATE OF I NITIATION OF SEARCH SHALL ABATE. THIS MEANS THAT AN ASSESSMENT O R REASSESSMENT PENDING ON THE DATE OF INITIATION OF S EARCH SHALL CEASE TO EXIST AND NO FURTHER ACTION SHALL BE TAKEN THEREON. THE ASSESSMENT SHALL NOW BE MADE UNDER SECTION 153A. TH E CASE OF THE ASSESSEE IS THAT NECESSARY COROLLARY TO THIS P ROVISION IS THAT COMPLETED ASSESSMENT SHALL NOT ABATE. THESE ASSESSM ENTS BECOME FINAL EXCEPT IN SO FAR AND TO THE EXTENT AS UNDISCLOSED INCOME IS FOUND IN THE COURSE OF SEARCH. ON THE OTH ER HAND, IT HAS BEEN ARGUED BY THE REVENUE THAT ABATEMENT OF PE NDING ASSESSMENT IS ONLY FOR THE PURPOSE OF AVOIDING TWO ASSESSMENTS FOR THE SAME YEAR, ONE BEING REGULAR ASSESSMENT AND THE OTHER BEING ASSESSMENT UNDER SECTION 153A. IN OTHER WORDS THESE TWO ASSESSMENTS MERGE INTO ONE ASSESSMENT. THE SECOND PROVISO DOES NOT CONTAIN ANY WORD OR WORDS TO THE EFFECT TH AT NO REASSESSMENT SHALL BE MADE IN RESPECT OF A COMPLETE D ASSESSMENT. THE LANGUAGE IS CLEAR IN THIS BEHALF AN D THEREFORE - - ITA 1570, 1571/15 ETC. 7 LITERAL INTERPRETED SHOULD BE FOLLOWED. SUCH INTERP RETATION DOES NOT PRODUCE MANIFESTLY ABSURD OR UNJUST RESULTS AS SECTION 153A(I)(B) AND THE FIRST PROVISO CLEARLY PROVIDE FO R ASSESSMENT OR REASSESSMENT OF ALL SIX YEARS. IT MAY CAUSE HARDSHI P TO SOME ASSESSEES WHERE ONE OR MORE OF SUCH ASSESSMENTS HAS OR HAVE BEEN COMPLETED BEFORE THE DATE OF INITIATION OF SEA RCH. THIS IS HARDLY OF ANY RELEVANCE IN VIEW CLEAR AND UNAMBIGUO US WORDS USED BY THE LEGISLATURE. THIS INTERPRETATION DOES N OT CAUSE ANY ABSURD ETC. RESULTS. THERE IS NO CASUS OMISUS AND SUPPLYING ANY WOULD BE AGAINST THE LEGISLATIVE INTENT AND AGA INST THE VERY RULE IN THIS BEHALF THAT IT SHOULD BE SUPPLIED FOR THE PURPOSE OF ACHIEVING LEGISLATIVE INTENT. THE SUBMISSIONS ARE MANIFOLD, THE FOREMOST BEING THAT THE PROVISION UNDER SECTION. 15 3A SHOULD BE READ IN CONJUNCTION WITH THE PROVISION CONTAINED IN SECTION 132(1), THE REASON BEING THAT THE LATER DEALS WITH SEARCH AND SEIZURE AND THE FORMER DEALS WITH ASSESSMENT IN CA SE OF SEARCH ETC, THUS, THE TWO ARE INEXTRICABLY LINKED WITH EAC H OTHER. 6.2 BEFORE PROCEEDING FURTHER, ONE MAY NOW EXAMINE THE PROVISIONS CONTAINED IN SUB-SECTION (2) OF SECTION 153. IT PROVIDES THAT IF ANY ASSESSMENT MADE UNDER SUB-SECTION (1) I S ANNULLED IN - - ITA 1570, 1571/15 ETC. 8 APPEAL ETC., THEN THE ABATED ASSESSMENT REVIVES. HO WEVER, IF SUCH ANNULMENT IS FURTHER NULLIFIED, THE ASSESSMENT AGAIN ABATES. THE CASE OF THE ASSESSEE IS THAT THIS PROVISION FUR THER SHOWS THAT COMPLETED ASSESSMENTS STAND ON A DIFFERENT FOOTING FROM THE PENDING ASSESSMENTS BECAUSE APPEALS ETC. PROCEEDINGS CONTINUE TO REMAIN IN FORCE IN CASE OF COMPLETED ASSESSMENTS AND THEIR FATE DEPENDS UPON SUBSEQUENT ORDERS IN APPEAL. ON C ONSIDERATION OF THE PROVISION AND THE SUBMISSIONS, IT IS FOUND T HAT THIS PROVISION ALSO MAKES IT CLEAR THAT THE ABATEMENT OF PENDING P ROCEEDINGS IS NOT OF SUCH PERMANENT NATURE THAT THEY CEASE TO EX IST FOR ALL TIMES TO COME. THE INTERPRETATION OF THE ASSESSEE, THOUG H NOT SPECIFICALLY STATED, WOULD BE THAT ON ANNULMENT OF THE ASSESSMENT MADE UNDER SECTION 153(1), THE ASSESSING OFFICER GETS THE JURISDICTION TO ASSESS THE TOTAL INCOME WHICH WAS V ESTED IN HIM EARLIER INDEPENDENT OF THE SEARCH AND WHICH CAME TO AN END DUE TO INITIATION OF THE SEARCH. 6.3 THE PROVISION CONTAINED IN SECTION 132(1) EMPOWERS THE OFFICER TO ISSUE A WARRANT OF SEARCH OF THE PREMISE S OF A PERSON WHERE ANYONE OR MORE OF CONDITIONS MENTIONED THEREI N IS OR ARE SATISFIED, I.E. (A) SUMMONS OR NOTICE HAS BEEN ISSUED TO PRODUCE - - ITA 1570, 1571/15 ETC. 9 BOOKS OF ACCOUNT OR OTHER DOCUMENTS BUT SUCH BOOKS OF ACCOUNT OR DOCUMENTS HAVE NOT BEEN PRODUCED, (B) SUMMONS OR NOTICE HAS BEEN OR MIGHT BE ISSUED, HE WILL NOT PRODUCE TH E BOOKS OF ACCOUNT OR OTHER DOCUMENTS MENTIONED THEREIN, OR (C ) HE IS IN POSSESSION OF ANY MONEY OR BULLION ETC. WHICH REPRE SENTS WHOLLY OR PARTLY THE INCOME OR PROPERTY WHICH HAS NOT BEEN AND WHICH WOULD NOT BE DISCLOSED FOR THE PURPOSE OF ASSESSMEN T, ASSESSED AS UNDISCLOSED INCOME OR PROPERTY. THE PROVISION IN SECTION 132(1) DOES NOT USE THE WORD INCRIMINATING DOCUMENT: CLAUS ES (A) AND (B) OF SECTION 132(1) EMPLOY THE WORDS BOOKS OF ACCOUNT OR OTHER DOCUMENTS: FOR HARMONIOUS INTERPRETATION O F THIS PROVISION WITH PROVISION CONTAINED IN SECTION 153A, ALL THE THREE CONDITIONS ON SATISFACTION OF WHICH A WARRANT OF SE ARCH CAN BE ISSUED WILL HAVE TO BE TAKEN INTO ACCOUNT. 6.4 HAVING HELD SO, AN ASSESSMENT OR REASSESSMENT UNDER SECTION 153A ARISES ONLY WHEN A SEARCH HAS BEEN INI TIATED AND CONDUCTED. THEREFORE, SUCH AN ASSESSMENT HAS A VITA L LINK WITH THE INITIATION AND CONDUCT OF THE SEARCH. A SEARCH CAN BE AUTHORIZED ON SATISFACTION OF ONE OF THE THREE COND ITIONS ENUMERATED EARLIER. THEREFORE, WHILE INTERPRETING T HE PROVISION - - ITA 1570, 1571/15 ETC. 10 CONTAINED IN SECTION 153A, ALL THESE CONDITIONS WILL HAVE TO BE TAKEN INTO ACCOUNT. WITH THIS, ONE PROCEEDS TO LITE RALLY INTERPRET TO PROVISION IN SECTION 153A AS IT EXISTS AND READ IT ALONGSIDE THE PROVISION CONTAINED IN SECTION 132(1 ) OF THE ACT. 6.5 THE PROVISION COMES INTO OPERATION IF A SEARCH OR REQUISITION IS INITIATED AFTER 31.05.2003. ON SATIS FACTION OF THIS CONDITION, THE ASSESSING OFFICER IS UNDER OBLIGATIO N TO ISSUE NOTICE TO THE PERSON REQUIRING HIM TO FURNISH THE R ETURN OF INCOME OF SIX YEARS IMMEDIATELY PRECEDING THE YEAR OF SEAR CH. THE WORD USED IS SHALL AND, THUS, THERE IS NO OPTION BUT T O ISSUE SUCH A NOTICE. THEREAFTER HE HAS TO ASSESS OR REASSESS T OTAL INCOME OF THESE SIX YEARS. IN THIS RESPECT ALSO, THE WORD USE D IS SHALL' AND, THEREFORE, THE ASSESSING OFFICER HAS NO OPTION BUT TO ASSESS OR REASSESS THE TOTAL INCOME OF THESE SIX YEARS. THE P ENDING PROCEEDINGS SHALL ABATE. THIS MEANS THAT OUT OF SIX YEARS, IF ANY ASSESSMENT OR REASSESSMENT IS PENDING ON THE DATE OF INITIATION OF THE SEARCH, IT SHALL ABATE. IN OTHER WORDS PENDI NG PROCEEDINGS WILL NOT BE PROCEEDED WITH THEREAFTER. THE ASSESSME NT HAS NOW TO BE MADE UNDER SECTION 153(1)(B) AND THE FIRST P ROVISO. IT ALSO MEANS THAT ONLY ONE ASSESSMENT WILL BE MADE UNDER THE - - ITA 1570, 1571/15 ETC. 11 AFORESAID PROVISIONS AS THE TWO PROCEEDINGS I.E. AS SESSMENT OR REASSESSMENT PROCEEDINGS AND PROCEEDINGS UNDER THIS PROVISION MERGE INTO ONE. IF ASSESSMENT MADE UNDER SUB-SECTIO N (1) IS ANNULLED IN APPEAL OR OTHER LEGAL P ROCEEDINGS, THEN THE ABATED ASSESSMENT OR REASSESSMENT SHALL REVIVE. THIS MEANS THAT THE ASSESSMENT OR REASSESSMEN T, WHICH HAD ABATED, SHALL BE MADE, FOR WHICH EXTENSION OF TIME HAS BEEN PROVIDED UNDER SECTION 153B. 6.6 THE QUESTION NOW IS - WHAT IS THE SCOPE OF ASSE SSMENT OR REASSESSMENT OF TOTAL INCOME UNDER SECTION I53A(1)( B) AND THE FIRST PROVISO? FOR ANSWERING THIS QUESTION, GUIDANC E WILL HAVE TO BE SOUGHT FROM SECTION 132(1). IF ANY BOOKS OF ACCO UNT OR OTHER DOCUMENTS RELEVANT TO THE ASSESSMENT HAD NOT BEEN P RODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND FOUND IN THE COURSE OF SEARCH, SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS HA VE TO BE TAKEN INTO ACCOUNT WHILE MAKING ASSESSMENT OR REASS ESSMENT OF TOTAL INCOME UNDER T HE AFORESAID PROVISION. SIMILAR POSITION WILL OBTAIN IN A CASE WHERE UNDISCLOSED INCOME OR UNDISC LOSED PROPERTY HAS BEEN FOUND AS A CONSEQUENCE OF SEARCH. IN OTHER WORDS, HARMONIOUS INTERPRETATION WILL PRODUCE THE F OLLOWING - - ITA 1570, 1571/15 ETC. 12 RESULTS: (A) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESS MENT UNDER SECTION 153A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMENT YEAR SHALL BE MADE SEPARATELY ON THE BAS IS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE ASSESSING OFFICER, (B) IN RESP ECT OF NON- ABATED ASSESSMENTS, THE ASSESSMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISC OVERED IN THE COURSE OF SEARCH. 6.7 THE INTERPRETATION IS TO BE MADE CONSIDERING THE PRINCIPLES OF LITERAL INTERPRETATION AND READING THE RELEVANT PROVISIONS TOGETHER. THIS INTERPRETATION DOES NOT IN ANY MANNE R GIVE RESULTS WHICH CAN BE SAID TO BE ULTRA VIRES. IT ALSO DOES NOT GIVE ANY ABSURD OR UNJUST RESULTS. 6.8 THUS IN ASSESSMENT THAT ARE ABATED, THE ASSE SSING OFFICER RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON HIM UNDER SECTION 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY AND IN OTHER - - ITA 1570, 1571/15 ETC. 13 CASES, IN ADD IT ION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS BOOKS OF ACCOUNT, , OTHER DOCUMENT, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 6.9 IN VIEW OF THE ABOVE, WHEN THE ORIGINAL ASSESS MENT FOR THE ASSESSMENT YEARS 2005-06 & 2006-2007 HAS ALREAD Y BEEN COMPLETED OR TIME LIMIT TO COMPLETE THE ASSESS MENT HAS BEEN LAPSED AND NO INCRIMINATING MATERIAL FOUND DURING SEARCH OPERATION, THE ASSESSMENT U/S.153A TO BE MAD E ONLY AS PER THE ORIGINAL ASSESSMENT WHICH WAS MADE U/S.143(1) OR U/S.143(3) OF THE ACT. IT IS AN ADMI TTED FACT THAT IN THESE ASSESSMENT YEARS THERE WAS NO INCRIMI NATING MATERIAL DISCOVERED IN THE COURSE OF SEARCH ACTION. THERE WAS ALSO NO ALLEGATION THAT THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS AND DOCUMENTS IN THE COUR SE OF - - ITA 1570, 1571/15 ETC. 14 ORIGINAL ASSESSMENT. BEING SO, THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 ARE BAD IN LAW . THIS ALSO FINDS SUPPORT FROM THE DECISION OF SPECIA L BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. V. D CIT (137 ITD 287)(SB). ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED IN ASSESSMENT YEARS 2005-06 AND 2006-07. HOWEVER, IN OTHER ASSESSMENT YEARS, THERE ARE INCRIMINATED MATERIAL FOUND DURING THE COURSE OF SE ARCH OPERATION AND THE ASSESSMENTS ARE PENDING FOR THES E ASSESSMENT YEARS AND HENCE, FRAMING OF ASSESSMENT IS JUSTIFIED. 7. THE NEXT GROUND IN ALL THE ASSESSEES APPEALS IS WITH REGARD TO INVOKING THE PROVISIONS OF SEC.40A(3) OF THE ACT IN RESPECT OF CASH CREDITS IN EXCESS OF ` 20,000/- OTHERWISE THAN BY CROSS CHEQUE AND DEMAND DRAFT. 8. THE ASSESSEE IS IN THE BUSINESS OF LAND AGGREGAT ION AND IT AGGREGATE LANDS FOR BIG COMPANIES LIKE M/S. MAHINDRA WORLD CITY CORPORATION, M/S. UNITECH ETC. THE NATU RE OF THE - - ITA 1570, 1571/15 ETC. 15 ASSESSEES BUSINESS IS TO IDENTIFY BIG PARCELS OF L ANDS RUNNING INTO MORE THAN 1000 ACRES ETC., AND BUY FRO M SMALL LAND OWNERS. SINCE IT HAS TO SELL THE LANDS TO THE BIG COMPANIES WITH WHOM IT ENTERS INTO AGREEMENTS, IT D OES NOT BY THE LANDS BY REGISTERING THE PURCHASE DOCUMENTS WHICH WILL ENTAIL REGISTRATION AND STAMP DUTY CHARGES. T HE ASSESSEE HAS OBTAINED POWER OF ATTORNEY FROM THE OW NERS BY PAYING THEM CONSIDERATION IN CASH. SINCE CONSID ERATION IS NOT RECORDED IN THE POWER OF ATTORNEY, THE ASSES SEE COMPANY PREPARES A STAMPED RECEIPT AND GETS THE SIGNATURE OF THE SELLER. THE POWER OF ATTORNEY IS TAKEN IN THE NAMES OF DIRECTORS OR LOYAL EMPLOYEES. ONCE A BIG CHUNK OF LAND, SAY 100 ACRES, HAS BEEN PURCHASED, T HEN THEY EXECUTE SALE DEEDS IN FAVOUR OF THE BIG COMPAN IES. THE COMPANY GETS ITS AGREED PRICE FROM THE BIG COMP ANIES BY WAY OF CHEQUE OR DD. THERE IS A WRITTEN AGREEME NT RECORDING THE CORRECT AGREED RATE, E.G. 25 LAKHS PE R ACRE, ETC. AND THAT CANNOT BE SUPPRESSION OF RECEIPTS. ACCORDING TO THE A.O., THE ASSESSEE TRIED TO INFLATE THE PURC HASE COST OF LAND. THEREFORE, TO VERIFY THE PURCHASE COST FR OM VARIOUS - - ITA 1570, 1571/15 ETC. 16 FARMERS, THE A.O. DURING THE COURSE OF POST-PERIOD SUMMONS WERE ISSUED AND STATEMENTS WERE RECORDED U/S.131 OF THE ACT. ACCORDING TO THE AO, ENQUIRIES REVEALED THAT THE ASSESSEE HAS INFLATED PURCHASE COST OF LAN D. AS THE AO VERIFIED 283 STAMP RECEIPTS BY WAY OF ENQUIR Y U/S.133(6) OUT OF WHICH 112 WERE RETURNED UNSERVED, IN 15 CASES SIGNATURES WERE DISOWNED, IN 82 CASES AMOUNTS WERE DENIED, 56 STAMPED RECEIPTS WERE FOUND TO BE IMITATED BY THE FORENSIC DEPARTMENT. FURTHER, THE AO OBSERVED THAT EVEN THOUGH THE ASSESSEE WAS GIVEN OPPORTUNITY TO CROSS EXAMINE THE PERSONS, IT HAS NO T AVAILED THE OPPORTUNITY TO CROSS EXAMINE IN FULL EXTENT, SI NCE FIRST FOUR PERSONS WERE FAILED. REGARDING THE CASH PAY MENT IN EXCESS OF ` 20,000/- OTHERWISE THAN BY CROSS CHEQUE AND DEMAND DRAFT, THE AO INVOKED THE PROVISIONS OF SEC. 40A(3) OF THE ACT IN ALL THESE ASSESSMENT YEARS. THUS, TH E AO QUANTIFIED INFLATED PURCHASE COST OF LAND FOR ALL T HESE ASSESSMENT YEARS AS FOLLOWS : - - ITA 1570, 1571/15 ETC. 17 AY 2005- 06 AY 2006- 07 AY 2007- 08 AY 2008- 09 AY 2009- 10 AY 2010- 11 AY 2011- 12 TOTAL AMOUNT COVERED BY UNDISPUT- ED SIG- NATURE CASES 6944000 44670500 116545000 14011000 1320500 42907500 121508000 AMOUNTS CORRECTLY PAID 2868000 460000 37910200 1732500 45863500 88834200 TOTAL 9812000 45130500 49564700 15743500 1320500 88777000 210342200 DISPUTED AMOUNT 2643000 16278950 8297000 5729800 1298000 16548500 50795250 % OF DISPUTED AMOUNTS 26.94% 36.07% 16.74% 36,39% 98.30% 18.64% 24.15% SIMILARLY, THE AO QUANTIFIED THE TOTAL FOR ALL THES E SEVEN YEARS AT ` 2,05,93,10,216/-, OUT OF THIS, ` 1,60,40,16,430/- WAS MADE AS CASH PAYMENTS AND HE INVOKED THE PROVIS IONS OF SEC.40A(3) OF THE ACT. 9. BEFORE THE CIT(APPEALS), THE ASSESSEE TOOK A PLE A THAT THE ASSESSEE IS ONLY ACTED AS AN AGENT TO M/S. UNITECH LTD. AND M/S. MAHINDRA WORLD CITY DEVELOPERS LTD. A ND STATED THAT THE ASSESSEE WOULD BE COVERED UNDER RUL E 6DD(K) OF THE I.T.RULES AND THE PROVISIONS OF SEC.4 0A(3) ARE NOT APPLICABLE. THE CIT(APPEALS) OBSERVED THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND M/S. MAHINDRA WORLD CITY DEVELOPERS LTD., M/S. HALLEY DEVELOPERS PVT. LTD. AND M/S. UNITECH BUILD TECH LTD. IS NOT THAT O F PRINCIPAL - - ITA 1570, 1571/15 ETC. 18 AND AGENT RELATION. ACCORDING TO THE CIT(APPEALS), THE ASSESSEE PURCHASED THE LANDS FROM LAND OWNERS AND A FTER DEVELOPING THE SAME, WERE SOLD TO THE PROJECT DEVEL OPERS. BUT THE PROFITS THEREFROM ARE SHOWN AS COMMISSION , USING THE METHODOLOGY WHEREIN THE ASSESSEE IS CORRECTLY S HOWING THE SALE PROCEEDS AS CONSIDERATION AND THE PURCHA SE MADE OF LAND AS COST. HENCE, THE DIFFERENCE BETW EEN CONSIDERATION AND COST BECOMES THE INCOME/LOSS OF THE ASSESSEE ARISING OUT OF THE PURCHASE OF LAND, DEVEL OPING THE SAME AND SELLING THE VALUE ADDED LAND. ACCORDI NG TO THE CIT(APPEALS), THE ASSESSEE IS JUST LIKE ANY OTH ER REAL ESTATE DEVELOPER AND THERE IS NO RELATIONSHIP AS A PRINCIPAL AGENT BETWEEN THE ASSESSEE AND THE PROJECT DEVELOPE R. EVEN, HE HAS OBSERVED THAT THE ASSESSEE PROCURED LA NDS FOR PROJECT DEVELOPER, THREE INTERMEDIARIES, WHO IN TURN SELECT THE LAND, IDENTIFY THE LAND, NEGOTIATE PRICE WITH LAND OWNERS AND PURCHASE THE LANDS. THE ASSESSEE TOOK A PLEA THAT ALL THE PAYMENTS WERE MADE BY THESE INTERMEDIA RIES, WHICH ARE DULY ACCOUNTED IN THE ASSESSEES BOOKS OF ACCOUNTS AND THEY ARE AGENTS OF THE ASSESSEE AND TH E - - ITA 1570, 1571/15 ETC. 19 PAYMENTS MADE TO THESE AGENTS, WHO IN TURN MADE THE PAYMENTS TO THE LAND OWNERS ARE COVERED UNDER RULE 6DD(K). THIS PLEA OF THE ASSESSEE IS REJECTED BY T HE REVENUE AUTHORITIES ON THE REASON THAT THE INCOME-T AX RETURNS FILED BY THESE AGENTS, WHO WORKED AS INTERM EDIARIES SHOW THAT THESE INTERMEDIARIES HAVE ACTED LIKE A TR ADER AND NOT AS AN AGENT OF THE ASSESSEE. THE CIT(APPEALS) ALSO OBSERVED THAT DURING THE COURSE OF SEARCH ACTIONS O N THE FOLLOWING PERSONS PROVED THAT THERE EXISTS VARIATIO N IN THE COST OF THE LAND PURCHASES MADE FROM THE INTERMEDIA RIES VIS--VIS THE AMOUNTS SHOWN IN THE PURCHASES ACCOUN T OF THE ASSESSEE: (I) SHRI S. ASHOKAN (II) SHRI ARVIND SRINIVASAN (III) SHRI R.S.SENTHIL KUMAR AND (IV) SHRI B. VENKATARAMA REDDY. INTERMEDIARIES HAVE SHOWN THE ACTUAL AMOUNTS WHEREA S, THE ASSESSEE HAS BOOKED HIGHER AMOUNTS IN THIS REGA RD. THEREFORE, THE CIT(APPEALS) WAS OF THE OPINION THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THESE INTERMEDIARIES ALSO CANNOT BE TERMED AS PRINCIPAL A ND AGENT RELATION AND IT CAN BE LIKE PRINCIPAL TO PRIN CIPAL - - ITA 1570, 1571/15 ETC. 20 RELATION. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED T DS FROM THE PAYMENTS MADE TO THE INTERMEDIARIES AND THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THES E INTERMEDIARIES ARE ITS AGENTS FOUND NO MERIT BY THE LOWER AUTHORITIES. FURTHER, THE ASSESSEE TOOK A PLEA BEF ORE THE CIT(APPEALS) THAT THE PAYMENTS MADE IN VILLAGE/TOWN WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BA NK. TO VERIFY THIS CLAIM, THE CIT(APPEALS) CALLED FOR REMA ND REPORT FROM THE A.O. AFTER GETTING THE REMAND REPORT FROM THE AO, THE CIT(APPEALS) OBSERVED THAT ` 87,09,32,190/- WAS PAID IN CASH WHICH WAS NOT SERVED BY BANK. ACCORDING TO THE CIT(APPEALS), THIS AMOUNT OF ` 87,09,32,190/- INCLUDES 25% I.E. ` 21,77,33,047/-, WHICH IS INFLATED PURCHASE COST OF LAND AND EXCLUDING THIS, HE HAS GIVEN A RELIEF OF ` 65,31,99,143/- FOR THESE YEARS. BALANCE AMOUNT OF ` 73,30,84,240/- WAS SUSTAINED BY THE CIT(APPEALS) AS IT IS LIABLE FOR DISALLOWANCE U/S.40A(3) OF THE ACT. REGARDING CHE QUE PAYMENT OF ` 45,52,93,786/-, THE CIT(APPEALS) OBSERVED THAT THESE PAYMENTS ARE MADE BY CHEQUE AND THE SAME CANNOT BE DISALLOWED U/S.40A(3) OF THE ACT SUBJECT TO - - ITA 1570, 1571/15 ETC. 21 VERIFICATION REGARDING THE SUSTENANCE OF DISALLOWAN CE. THUS, THE CIT(A) BIFURCATED THE PURCHASE AS FOLLOW S: 1. PAYMENT BY CHEQUE ` 45,52,93,786/- 2. EXEMPTED PURCHASES ON THE REASON OF NO BANKING FACILITY ` 65,31,99,143/- 3. ADDITION U/S 40A(3) ` 73,30,84,240/- 4. ADDITION TOWARDS INFLATED PURCHASES ` 21,77,33,047/- `2, 05,93,10,216/- AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US A ND AGAINST THE DELETION, THE REVENUE IS IN APPEAL BEFO RE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN PROCURING AND AGGREGATING LAND PROPERTIES TO M/S. MAHINDRA WORLD CITY CORPORATION, M/S. UNITECH ETC.. FOR THIS PURPOSE, THE ASSESSEE HAS BROUGHT PROPERTIES F ROM VARIOUS SMALL OWNERS ON BEHALF OF M/S. MAHINDRA WOR LD CITY CORPORATION, M/S. UNITECH ETC. THOUGH THE ASSESSEE GOT THE POWER OF ATTORNEY, MOST OF THE PROPERTIES ARE REGIS TERED IN THE NAME OF M/S. MAHINDRA WORLD CITY CORPORATION, M /S. UNITECH ETC., ON WHOSE BEHALF THE ASSESSEE MAKES NEGOTIATIONS FOR PURCHASE OF PROPERTIES. WHENEVER THE ASSESSEE MAKES PAYMENTS, THE ASSESSEE COLLECTED STA MP RECEIPTS SIGNED BY THE SELLER OF THE LAND I.E. VILL AGERS. THE - - ITA 1570, 1571/15 ETC. 22 LAND OWNERS EXECUTED THE SALE DEED IN FAVOUR OF THE COMPANIES AND THEY GOT PAID THE AGREED CONSIDERATIO N. THE CONTENTION OF THE DEPARTMENT IS THAT THESE PAYM ENTS ARE MADE BY THE ASSESSEE TO THE LAND OWNERS EXCEEDI NG ` 20,000/- OTHERWISE THAN CHEQUES AND DEMAND DRAFTS, WHICH IS VIOLATION OF SEC.40A(3) OF THE ACT AND DIS ALLOWANCE IS WARRANTED. 10.1 THE FIRST PLEA OF THE ASSESSEE IS THAT THE LAND WAS PURCHASED ON BEHALF OF PRINCIPALS THROUGH AGENTS. FOR THAT PURPOSE, THE ASSESSEE ENTERED INTO AN MOU WITH THE PRINCIPAL AND THE ACTIVITIES OF THE ASSESSEE ARE PR ESCRIBED THEREIN. AS PER MOU, THE ASSESSEE RECEIVED PAYMENT S FROM THE PRINCIPALS BY CHEQUE AND ACCOUNTED THE SAM E IN ITS BOOKS OF ACCOUNTS. AS PER THE MOU AGREEMENT, T HE ASSESSEE HAS TO ACQUIRE LARGE TRACTS OF CONTIGUOUS LAND AT A PARTICULAR LOCATION. FOR THIS PURPOSE, THE ASSESSE E APPOINTED AGENTS TO NEGOTIATE THE TERMS AND CONDITI ONS WITH THE SELLERS OF THE LAND. THIS PLEA OF THE ASSESSEE WAS EXAMINED BY THE DEPARTMENT AND FOUND THAT THE AGENT S WERE CONFIRMED THE NEGOTIATIONS OF THE ASSESSEE FOR THE - - ITA 1570, 1571/15 ETC. 23 PURCHASE OF LAND. AS RECORDED IN THE ASSESSMENT OR DER FOR THE ASSESSMENT YEAR 2011-12, THE FOLLOWING PERSONS ARE EXAMINED: I) SHRI S. ASHOKAN II) SHRI ARVIND SRINIVASN III) SHRI R.S.SENTHIL IV) SHRI B. VENKATARAMA REDDY FURTHER, THE STATEMENTS WERE RECORDED FROM C. SUSHI LA, MRS. S. JAYAMANI, THANGARAJ, RAJAGAOPAL AND PRAKASHCHAND. THERE IS NO DISPUTE TO THE FACT THA T THE ASSESSEE HAS NO DIRECT DEALINGS WITH THE LAND OWNER S. THE PAYMENTS WERE MADE TO LAND OWNERS THROUGH THESE AGE NTS AND PAYMENTS ALSO RECEIVED BY THE ASSESSEE AS A PRI NCIPAL. BEING SO, AS THE PROVISIONS OF RULE 6DD(K) OF THE I .T.RULES, 1962, WHERE THE PAYMENT IS MADE BY ANY PERSON TO HI S AGENT, WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR SERVICES ON BEHALF OF SUCH PERSON, THE PROVISIONS O F SEC.40A(3) OF THE ACT CANNOT BE APPLIED SO AS TO D ISALLOW ANY PORTION OF THE EXPENDITURE. 10.2 HOWEVER, THE ABOVE FINDINGS HOLD GOOD IN RESPE CT OF LANDED PROPERTY WHICH WAS REGISTERED DIRECTLY BETWE EN THE PRINCIPALS AND VENDORS I.E. LAND OWNERS. IF ANY PR OPERTY IS - - ITA 1570, 1571/15 ETC. 24 REGISTERED IN THE NAME OF THE ASSESSEE AND THE PAYM ENT OF CONSIDERATION MADE TO THE LAND OWNER DIRECTLY BY TH E ASSESSEE, THEN WE ARE NOT IN A POSITION TO HOLD THA T THERE ARE EXCEPTIONS IN MAKING THE PAYMENT TO THE AGENTS SO AS TO APPLY RULE 6DD(K). THOSE TRANSACTIONS ARE VIEWE D SEPARATELY, UNLESS THERE EXISTS ANY SCOPE FOR PAYME NT IN BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENT. THE ASSESSEES CONTENTION IS THAT THE VENDORS HAVE INSI STED FOR CASH PAYMENT. IF CASH PAYMENTS ARE NOT MADE, IT WI LL NOT BE POSSIBLE TO MAKE THEM TO COME FOR REGISTRATION A ND SIGN THE SALE DEED. AS THE ASSESSEE HAS ALREADY PAID AD VANCE AMOUNT, THE ASSESSEE WILL BE IN HARD SHIP, IF THE V ILLAGERS DID NOT TURN UP FOR REGISTRATION ON SPECIFIED DATE. THEREFORE, WHERE THE PURCHASER DOES NOT ACCEPT CHEQUES OR DEMA ND DRAFT, IN THAT UNAVOIDABLE CIRCUMSTANCES, THE ASSES SEE MADE CASH PAYMENTS. AT THIS POINT, IT IS PERTINENT TO MENTION HERE THAT THE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH (191 ITR 667) HELD THAT : - - ITA 1570, 1571/15 ETC. 25 SEC.40A(3) MUST NOT BE READ IN ISOLATION OR TO TH E EXCLUSION OF RULE 6DD. THE SECTION MUST BE READ ALONG WITH THE RULE. IF READ TOGETHER, IT WILL BE CLEAR THAT THE PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUS INESS ACTIVITIES. THERE IS NO RESTRICTION ON THE ASSESSE E IN HIS TRADING ACTIVITIES. SECTION 40A(3) ONLY EMPOWERS T HE ASSESSING OFFICER TO DISALLOW THE DEDUCTION CLAIMED AS EXPENDITURE IN RESPECT OF WHICH PAYMENT IS NOT MADE BY CROSSED CHEQUE OR CROSSED BANK DRAFT. THE PAYMENT BY CROSSED CHEQUE OR CROSSED BANK DRAFT IS INSISTED ON TO ENABLE THE ASSESSING AUTHORITY TO ASCERTAIN WHETHER THE PAYMENT WAS GENUINE OR WHETHE R IT WAS OUT OF THE INCOME FROM UNDISCLOSED SOURCES. THE TERMS OF SEC.40A(3) ARE NOT ABSOLUTE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BON A FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICER THE CIRCUMSTA NCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SEC.40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN T O THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED TH E CASH PAYMENT. RULE 6DD PROVIDES THAT AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF SEC.40A(3) AND RULE 6DD THAT THEY ARE INTENDED TO REGULATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE T HE CHANGES TO USE BLACK MONEY FOR BUSINESS TRANSACTION S. 10.3 THUS, THE GENUINENESS OF THE PAYMENT AND THE IDENTITY OF THE PAYEE ARE THE MOST AND FOREMOST REQUIREMENTS TO INVOKE THE EXCEPTIONS CARVED OUT IN RULE 6DD OF THE IT RULES, 1962. BEING SO, IF THE ASSESS EE MADE - - ITA 1570, 1571/15 ETC. 26 THE GENUINE CASH PAYMENTS AND IF IT IS CONFIRMED BY THE RESPECTIVE VENDORS THAT THEY HAVE RECEIVED PAYMENTS AND THERE WAS COMPULSION TO THE ASSESSEE TO MAKE THE PAYMENT ON ACCOUNT OF BUSINESS EXPEDIENCY AND SIN CE THE REALISATION OF CHEQUES AND DDS TAKE LONGER TIME , THE ASSESSEE WAS FORCED TO MAKE CASH PAYMENTS TO THE LA ND OWNERS TO DRIVE THEM TO COME FOR REGISTRATION. THE SE PAYMENTS CANNOT BE CONSIDERED UNDER THE PROVISIONS OF SEC.40A(3) OF THE ACT. ACCORDINGLY, THE PAYMENT B ETWEEN THE ASSESSEE AND THE VENDORS WHICH ARE REFLECTED IN THE SALE DEED EXECUTED BY THE VENDORS IN FAVOUR OF THE ASSESSEE FOR WHICH THE ASSESSEE MADE A PAYMENT IN EXCESS OF ` 20,000/- OTHERWISE BY ISSUE OF CHEQUE OR DEMAND DRAFT, THESE PAYMENTS CANNOT BE CONSIDER FOR INVOKING THE PROVISIONS OF SEC.40A(3). TO THAT EXTE NT THE ASSESSEE GETS RELIEF, OVER AND ABOVE RELIEF GRANTED IN EARLIER PARA 10.1, AS THE EXCEPTIONS CONTAINED IN R ULE 6DD ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALLY AS HELD BY THE RAJASTHAN HIGH COURT IN THE CASE OF SMT. HARSHILA CHORDIA V. ITO (298 ITR 3 49). - - ITA 1570, 1571/15 ETC. 27 10.4 FURTHER WE MAKE IT CLEAR THAT WHERE THE PAYM ENT MADE BY THE ASSESSEE TO THE VENDORS IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON, WHO ORDINARILY RESIDES, OR IS CARRYING ON HIS BUSINESS THEREIN THAT VILLAGE OR TOWN AND TH AT PAYMENT SHOULD BE EXCLUDED BY INVOKING THE PROVISIO NS OF SEC.40A(3) IN VIEW OF RULE 6DD(J). THIS VIEW OF OU RS IS SUPPORTED BY THE DECISION OF THE TRIBUNAL, HYDERABA D BENCH IN THE CASE OF DCIT VS. ABHINANDAN HOUSING PV T. LTD. (2014) 42 CCH 75 AND IN THE CASE OF SAHITYA HO USING PVT. LTD. IN ITA NO.246/HYD/2011 DATED 24.1.2014. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WITH DIRECTION TO A.O. TO DECIDE AFRESH. 11. THE NEXT GROUND IN ALL THESE APPEALS, IS WITH R EGARD TO CONFIRMING THE ADDITION TOWARDS INFLATED PURCHAS E COST OF LAND. 12. AS DISCUSSED EARLIER, INTERMEDIARIES/LAND OWNER S HAVE RECEIVED LESSER AMOUNT THAN THE AMOUNT SHOWN I N THE PURCHASE ACCOUNT. THEREFORE, THE CIT(APPEALS) ESTI MATED - - ITA 1570, 1571/15 ETC. 28 THE INFLATED PURCHASE COST OF LAND AT ` 21,77,33,047/-. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 13. ACCORDING TO THE ASSESSEE, THE PROCUREMENT OF L AND IS DONE THROUGH INTERMEDIARIES AND ALL THE INTERMED IARIES HAVE CONFIRMED THAT THE MONEY HAD BEEN PAID OVER TO THE SELLER, WHO HAVE ACKNOWLEDGE THE RECEIPT OF MONEY T HROUGH STAMP RECEIPT. THE TRANSACTION IS ALSO EVIDENCED BY A SALE AGREEMENT AND POWER OF ATTORNEY. IT IS ALSO ESTAB LISHED THAT THE ASSESSEE FIXES THE TARGET PRICE FOR LAND T O BE PROCURED AND ENOUGH SCOPE AND SPACE IS GIVEN TO THE AGENTS TO NEGOTIATE THE PRICE WITH THE SELLER. THE AGENTS ARE NOT PAID COMMISSION IN PROCUREMENT OF LAND AND THE DIFFERENCE IF ANY BETWEEN THE MONEY RECORDED AS PURCHASES BY THE ASSESSEE AND THE SELLER COULD BE O N ACCOUNT OF ANY OR ALL OF THE FOLLOWING REASONS: (I) AGENT HAS NOT PARTED WITH ALL THE MONIES GIVEN FOR THE SPECIFIC PROPERTY. (II) THE SELLER HAS RECORDED ONLY PORTION OF THE MO NEY RECEIVED FROM THE ASSESSEE. (III) COMBINATION OF THE ABOVE. - - ITA 1570, 1571/15 ETC. 29 AS THE AGENT IN EACH OF THE ABOVE TRANSACTION HAVE CONFIRMED THE RECEIPT OF MONEY AND ACKNOWLEDGED THE SAME THROUGH STAMPED RECEIPT, SALE AGREEMENT AND PO WER, IT HAS BEEN PROVIDED BEYOND DOUBT. THESE FACTS HAV E BEEN EXAMINED DURING THE COURSE OF POST SEARCH INVESTIGA TION AND ON THE INSISTENCE OF THE DEPARTMENT AN AFFIDAVI T WAS FILED BY THE ASSESSEE OFFERING TO DECLARE THE ADDIT ION INCOME. THEREFORE, ACCORDING TO THE ASSESSEE, THE EXPENDITURE INCURRED ON PURCHASE OF LAND IS GENUINE AND DISALLOWANCE ON ACCOUNT OF DIFFERENCES BETWEEN THE STAMPED RECEIPTS AND RECORDING OF PURCHASE COST IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS COMPENSATED BY DECLARING ADDITIONAL INCOME IN THE RETURN OF INCOME FILED U/S.153A OF THE ACT. HE RELIED ON THE FOLLOWING JU DGMENTS FOR THE PROPOSITION THAT NO ESTIMATION OF INCOME IS POSSIBLE UNDER SEARCH ASSESSMENT PASSED U/S.153A/153C OF THE ACT: I) CIT V. P.V.KALYANASUNDRAM (MAD) [282 ITR 259] II) CIT V. RAJENDRA PRASAD GUPTA (RAJ.) [248 ITR 35 0] III) K.MOIDU ALIAS KUNHIPPA AND ANOTHER V. ACIT (25 6 ITR (AT) 76 (COCH) - - ITA 1570, 1571/15 ETC. 30 IV) CIT V. KHUSHLAL CHAND NIRMAL KUMAR (MP) [263 IT R 77] V) SMT. PURNIMA BERI V. DCIT (264 ITR (AT) 54 (AMRI T) VI) ACIT V. KANDASAMY SAH [38 ITR (TRIB) 392 (CHEN )] 14. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CIT(A) QUANTIFIED THE INFL ATION IN THE PURCHASE COST OF LAND AT ` 21,77,33,047/-. NOW, THE CONTENTION OF THE ASSESSEE IS THAT THERE IS NO INFL ATION IN THE PURCHASE COST OF LAND. THE RECEIPT IS SIGNED BY TH E CONCERNED RECIPIENTS AND ALSO SUPPORTED BY THE EVID ENCE FILED BY THEM. FURTHER, IT WAS SUBMITTED THAT N OTICE FOR ENHANCEMENT WAS ISSUED ON 19.2.2015 BY THE C.I.T.(APPEALS) TO ANOTHER ENHANCEMENT OF INCOME TO THE EXTENT OF ` 5,07,95,250/-. HOWEVER, ACCORDING TO THE ASSESSEE, THE ASSESSMENT WAS ENHANCED ON THE HIGHER SIDE AT ` 21,77,33,047/-. REGARDING THE ADDITION OF INCOME TOWARDS PURCHASE COST OF LAND AS SEEN FROM THE TABL E A, THERE IS ACTUAL INFLATION OF ` 5,07,95,250/-. SINCE THERE IS NO - - ITA 1570, 1571/15 ETC. 31 LIMITATION U/S.153A / 153C, THE ENQUIRY BY THE AO T O THOSE MATERIALS FOUND IN THE COURSE OF SEARCH AND SEIZURE OPERATION, THE REVENUE AUTHORITIES CAN TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABL E DURING THE SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF THE ASSESSE E. FOR THE PURPOSE OF ESTIMATION OF INCOME, WE PLACE R ELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CST V. ESUFALI (H.M.), H.M. ABDULALI (90 ITR 271), WHER EIN IT WAS OBSERVED AS UNDER: IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABLE THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUDGMENT ASSESSMENT NO DOUBT SHOULD ARRIVE AT ITS CONCLUSION WITHOUT ANY BIAS AND ON RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PROO F IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT O F ANY ONE ELSES. (EMPHASIS SUPPLIED). 15.1 WE ALSO PLACE RELIANCE ON THE JUDGMENT OF T HE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOPAL LAL BHADRUKA V. DCT (346 ITR 106), WHEREIN IT WAS HELD THAT - - ITA 1570, 1571/15 ETC. 32 FOR THE PURPOSES OF SECTIONS 153A AND 153C OF THE A CT, THE ASSESSING OFFICER CAN TAKE INTO CONSIDERATION MATER IAL OTHER THAN WHAT WAS AVAILABLE DURING THE SEARCH AND SEIZU RE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOS ED INCOME OF THE ASSESSEE. 15.2 IN THE PRESENT CASE, THE MAIN CONTENTIO N OF THE LD. AR IS THAT NOTICE FOR ENHANCEMENT WAS GIVEN ONL Y TO ENHANCE THE PURCHASE COST OF LAND AT ` 5,07,95,250/-. HOWEVER, ADDITIONAL INCOME WAS MADE ON THE HIGHER S IDE AT ` 21,77,33,047/-. IN OUR OPINION, THE CIT(APPEALS) T RAVELLED BEYOND THE NOTICE OF ENHANCEMENT ISSUED TO THE ASSE SSEE FOR ENHANCEMENT OF ASSESSMENT. HENCE, OVER AND ABO VE THIS AMOUNT, IF THE CIT(APPEALS) WANTS TO ENHANCE T HE ASSESSMENT, HE SHOULD HAVE GIVEN FRESH NOTICE AS PRESCRIBED IN SUB-SEC. (2) OF SEC.251 OF THE ACT AN D GIVEN REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. AS SEEN FROM THE NOTICE DATED 19.2.2015, THE CIT(APPEA LS) HAS GIVEN NOTICE TO ENHANCE THE INCOME TO ` 5,07,95,250/-. HENCE, WE CONSIDER THE ENHANCEMENT BY THE CIT(APPEA LS) ONLY FOR ` 5,07,95,250/-. IT WAS THE PLEA OF THE ASSESSEE - - ITA 1570, 1571/15 ETC. 33 THAT THE ASSESSEE ACTED THROUGH INTERMEDIARIES AND MOST OF THEM APPEARED BEFORE THE ASSESSING OFFICER AND CONF IRMED BY FILING AFFIDAVITS THAT THEY HAVE RECEIVED THE P AYMENT FROM THE ASSESSEE AND IN TURN, THEY MADE THE PAYMEN T TO THE VENDORS/LAND OWNERS. BEING SO, IN OUR OPINION, TO THE EXTENT OF CONFIRMATION FILED BY THE RESPECTIVE INTE RMEDIARIES WHO TRANSACTED THE PURCHASE OF LAND, CANNOT BE CONS IDERED FOR ENHANCEMENT IN THE HANDS OF THE ASSESSEE. IN R ESPECT OF OTHER AGENTS WHO HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER AND THE ASSESSEE HAS FILED AFFIDA VITS FROM THEM, WHICH ARE NOT EXAMINED BY THE ASSESSING OFFI CER, THE SAME ARE REQUIRED TO BE EXAMINED BY THE ASSESSI NG OFFICER AND WITHOUT EXAMINATION, IT CANNOT BE REJEC TED AS HELD BY THE SUPREME COURT IN THE CASE OF MEHTA PARI KH VS CIT, 30 ITR 181. 15.3 FURTHER, WE MAKE IT CLEAR THAT THE AMOUNTS CONSIDERED AS RECEIPTS IN THE HANDS OF RECIPIENTS, CANNOT BE DOUBTED IN THE HANDS OF THE ASSESSEE SO AS TO EN HANCE THE COST OF LAND AS BOGUS. ACCORDINGLY, WITH THIS OBSERVATION, WE DIRECT THE ASSESSING OFFICER ONLY T O - - ITA 1570, 1571/15 ETC. 34 CONSIDER THE PAYMENTS FOR ENHANCEMENT WHICH ARE NOT CONFIRMED/DISCLOSED BY THE RECIPIENTS IN THEIR RETU RN OF INCOME. THE ENHANCEMENT OF INCOME FOR THE ASSESSME NT YEARS 2005-06 AND 2006-07 DOES NOT SURVIVE IN VIEW OF QUASHING OF ASSESSMENT FOR THESE TWO ASSESSMENT YE ARS. THUS, THE ASSESSEE GETS RELIEF OUT OF ` 5,07,95,250/- AS ABOVE AND THE BALANCE AMOUNT ONLY TO BE CONSIDERED AS DIRECTED ABOVE. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. THE NEXT GROUND IN ALL THESE APPEALS IS WITH R EGARD TO INVOKING THE PROVISIONS OF SEC. 40(A)(IA) / 40A( 2)(B) / 37 OF THE ACT. 16.1 THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE DISALLOWANCES U/S. 40(A)(IA) / 40A(2)(B) / 37 OF THE ACT IN RESPECT OF TECHNICAL/CONSULTANCY PAID TO ASSESSE ES GROUP CONCERNS M/S. SHANTHA BUILDTECH PVT. LTD, M/S . OMSHAKTHI LANDSCAPE PVT. LTD. STATING THAT THE FOLL OWING PAYMENTS HAVE BEEN MADE WITHOUT COMPENSATING SERVIC E BEING RECEIVED. THE ASSESSING OFFICER ALSO HELD TH AT THE PAYMENTS ARE UNREASONABLE AND EXCESSIVE IN NATURE A ND - - ITA 1570, 1571/15 ETC. 35 HENCE THE PROVISIONS OF SEC.40A(2)(B) ARE ATTRACTED . THE YEAR-WISE PAYMENTS ARE AS UNDER: A.Y. DISALLOWANCE MADE BY AO U/S. 40(A)(IA)/40A(2)(B)/37 2005-06 ` 21,00,000/- 2006-07 ` 23,00,000/- 2007-08 ` 49,20,000/- 2008-09 ` 39,30,000/- 2009-10 ` 28,00,000/- 2010-11 ` 27,00,000/- 2011-12 ` 17,24,980/- 16.2 ACCORDING TO THE LD. AR, SINCE THE PAYMENT S HAVE ALREADY BEEN MADE BEFORE THE END OF THE CLOSE OF TH E YEAR, IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 136 ITD 23 (VISAKHAPATNAM) AND JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. M/S. VECTOR SHIPPING S ERVICES (P) LTD IN ITA NO.122 OF 2013 DATED 09.7.2013, DISALLOW ANCE U/S. SEC 40(A)(IA) IS NOT WARRANTED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PAYMENT IS NOT OUTSTANDING AT THE E ND OF THE CLOSE OF THE FINANCIAL YEAR AND THEREFORE, THE DISA LLOWANCE CANNOT BE WARRANTED AS HELD IN THE CASE OF SHRI N. PALANIV ELU V. ITO IN - - ITA 1570, 1571/15 ETC. 36 ITA NO.618/MDS/2015 DATED 29.4.2015 (40 ITR[TRIB] 3 25) WHEREIN HELD AS UNDER: WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. C IT [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB] AND JUDGMENT OF THE GUJARAT HI GH COURT IN THE CASE OF CIT V. VECTOR SHIPPING SERVICES (P.) LTD. IN I . T. A. NOS. 122 OF 2013 DATED JULY 9, 2013 [2013] 357 ITR 642 (ALL ) HELD THAT SECTION 40(A)(IA) IS NOT APPLICABLE WHEN THERE IS N O OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVAN T TO THE ASSESSMENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEV ER, THE ASSESSEE HAS NOT BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPENSES OR SCHEDULE OF SUNDRY CREDITORS SHOWING WH ETHER THE IMPUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CL OSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHE R IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE I NTEREST OF JUSTICE, WE ARE REMITTING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY EVIDENCE IN SUPPORT OF HIS CL AIM. IN VIEW OF THE ABOVE DECISION, THIS GROUND IS ALL OWED. 18. ON THE PAYMENT MADE TO SANTHA BUILD-TECH INDIA PVT. LTD., THE A.O. ALSO INVOKED THE PROVISIONS OF SEC.4 0A(2)(B) OF THE ACT. THE CIT(APPEALS) DELETED THIS ADDITION BY OBS ERVING THAT THE A.O. HAS NOT MADE OUT A CASE THAT THE PAYMENTS MADE TO GROUP CONCERNS ARE EXCESSIVE. HENCE, HE OBSERVED T HAT APPLICATION OF SEC.40A(2)(B) OF THE ACT IS NOT CORR ECT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) ON THE DELETION OF THE ADDITION MADE U/S.40A(2)(B OF THE ACT. THIS GROUND OF APPEAL BY THE ASSESSEE IS ALLOWED. - - ITA 1570, 1571/15 ETC. 37 19. THE NEXT GROUND IN ITA NO.1571 TO 1575/MDS/15 F OR THE ASSESSMENT YEARS 2006-07 TO 2010-11 IS WITH REGARD TO CONFIRMING THE DISALLOWANCE OF EXPENSES INCURRED RE LATING TO REGISTRATION OF THE PROPERTY. 19.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFICER RESTRICTED THE ALLOWABILITY OF VARIOUS EXPENSES INC URRED RELATING TO REGISTRATION OF THE PROPERTY. THE AO MADE THE DISA LLOWANCES AS UNDER : A.Y. DISALLOWANCE UNDER REGISTRATION EXPENSES 2006-07 ` 43,57,872/- 2007-08 ` 84,48,657/- 2008-09 ` 1,47,09,981/- 2009-10 ` 1,34,02,237/- 2010-11 ` 21,20,568/- 19.2 THE AO WHILE MAKING THE RESTRICTION FOR T HE A.Y. 2006-07 HAS OBSERVED AS UNDER : VIDE PRE-ASSESSMENT NOTICE DATED 21-3-2013 SERVED ON 21-3- 2013, IT WAS PROPOSED TO MAKE THE FOLLOWING ADDITION/DISALLOWANCE: VIDE QUESTIONNAIRE U/S 142(1) SERVED ON 28-12-2012 ASSSESSEE WAS REQUESTED TO FURNISH PROPERTY-WISE BREAK UP OF STAMP DUTY AND REGISTRATION FEE CHARGES. IT HAS NOT BEEN FURNISHED TILL DATE. DURING THE HEARING ON 18-3-201 3 IT WAS REQUESTED TO EXPLAIN AS TO HOW RS.'5101882 WHICH WORKS OUT TO MORE THAN 7% OF THE PURCHASE COST OF PROPERTIES WAS CLAIMED AS REGISTRATION AND STAMP DUTY CHARGES WHEN ALMOST ALL THE PURCHASES WERE MADE THROUGH POWER OF ATTORNEY. NO - - ITA 1570, 1571/15 ETC. 38 EXPLANATION WAS OFFERED. ONLY THE LEDGER ACCOUNT COPY OF BOTH THE ACCOUNTS FURNISHED. ON PERUSAL IT IS SEEN THAT ON 9-2- 2006 RS.65290 WAS DEBITED TO COST OF LANSON TOYOTE INNOVA CAR CHASSIS. THIS IS PROPOSED TO BE DISALLOWED AFTER DEPRECIATION. FURTHER NUMEROUS STAMP PAPERS HAVE BE EN PURCHASED AND REGISTRATION DONE ON VARIOUS DATES IN THE YEAR. ON SOME DATES ROUND AMOUNTS HAVE BEEN DEBITED TOWARDS REGISTRATION CHARGES (EG. RS. 2, 00, 000 ON 27 -2-2006 (PARUTHIPATLU), RS. 50, 000 ON 6-2-2009: RS. 50, 00 0 011 12-12- 2005, RS. 2, 00,000/- ON 27-10-2005 ELC. ON SOME DATES VERY HUGE AMOUNTS HAVE BEEN DEBITED ( EGO RS. 145310 ON 22-11- 2005(PARUTHIPALTU) RS. 260650 011 17- 10-2005 (PARUTHIPATTU), RS. 1,00,500 ON 18-1 0-2005 (PARUTHIPATTU). PARUTHIPATTU LAND WAS NOT SOLD IN THIS YEAR. SO EVEN THE COST OF STAMP DULY AND REGISTRATION EXPENSES OF PROPERTIES WHICH ARE KEPT AS LAND SLACK ARE DEBITED TOWARDS THE COST OF PURCHASE OF LANDS S OLD DURING THE YEAR. THIS IS THE REASON FOR THE EXPENSES BEING SO HIGH AS 7.3%. HENCE IT IS PROPOSED TO RESTRICT THE EXPENSES TO 1 % OF THE PURCHASE COST OF THE PROPERTIES OF THIS YEAR SINCE (OR REGISTERING POWER OF ATTORNEY, STAMP DUTY AND REGIS TRATION FEE ARE NOMINAL UNLIKE SALE DEEDS FOR WHICH IT IS 9%. VIDE REPLY DATED 25-3-2013 , THE ASSESSEE STATED AS UNDER:- COPY-OF THE LEDGER ACCOUNT HAS BEEN GIVEN. REGISTR ATION CHARGES ARE INCURRED NOT ONLY FOR THE PROPERTIES SO LD BUT ALSO FOR THE LAND STOCK HELD BY THE COMPANY. REGARDING THE AMOUNTS INCURRED FOR REGISTRATION OF PARUTHIPATTU LAND THEY HAVE BEEN REGISTERED IN THE NAME OF THE COMPANY AND YOU ARE AWARE THAT THE REGISTRATION CHARGE IS 9%. IT IS ONLY YOUR PRESUMPTION :THAT THE COST OF STAMP DUTY AND REGISTRATION/EXPENSES ARE DE BITED TO THE COST OR PURCHASE DURING THE YEAR. YOU HAVE ONLY TAK EN OUR RANDOM FIGURES WITHOUT PINPOINTING ANY SINGLE TRANS ACTION IRRELEVANT TO THE YEAR. YOUR ESTIMATION OF 7.3% AS HIGH IS IRRELEVANT AS THE REGISTRATION CHARGES IS 9%. THEREFORE, WE OBJECT TO YOUR PROPOSAL TO DISALLOW ANY EXPENDITURE UNDER THIS HEAD.' THE REPLY WAS EXAMINED. THE REGISTRATION CHARGES ARE 9% ONLY IN CASE OF PURCHASE OF PROPERTY' THROUGH SALE DEEDS FOR WHICH 8% IS THE STAMP DUTY AND 1% IS THE REGISTRATION FEE. FOR PURCHASING PROPERTY THROUGH POWER OF ATTORNEY, WHICH IS THE PR ACTICE OF THE ASSESSEE, THE STAMP DULY AND REGISTRATION FEE ARE NOMINAL (AROUND RS.500 EACH) DURING THE RELEVANT FINANCIAL YEAR. THE POWER OF ATTORNEY REGISTRATION FEE WAS HIKED TORS.1 0,000 ONLY IN - - ITA 1570, 1571/15 ETC. 39 THE F. Y 2012-13. HENCE THE REGISTRATION EXPENSES ARE RESTRI CTED TO 1 % (744010) OF THE PURCHASE COST (74401000) AND TILE BALANCE OF RS.4357872 IS DISALLOWED.' AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). 19.3 ON APPEAL, THE CIT(APPEALS) CONFIRMED T HE EXPENDITURE UNDER REGISTRATION TO 1% OF THE PURCHASE COST OF LA ND ON AD-HOC BASIS. ACCORDING TO THE LD. AR, THE ENTIRE EXPENSE S CLAIMED WERE BACKED BY EVIDENCE AND ALSO THE SAID EXPENDITURE IN CLUDES ALL OTHER EXPENSES, TILL SUCH TIME THE LAND IS ULTIMATE LY CONVEYED TO THE BUYER AND THESE EXPENDITURE INCURRED IN TERMS O F THE AGREEMENT ENTERED INTO BY THE ASSESSEE AND THE BUYE R. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN FROM THE AGREEMENT ENTERED IN OCTOBER 2005 BETWEEN THE ASSESSEE AND THE PROJECT DEVELOPER M/S. UNITECH BUILDTECH LTD. THAT THE PURCHASER SHALL BEA R ALL THE EXPENSES IN RESPECT OF THE REGISTRATION, SUCH AS ST AMP DUTY, REGISTRATION FEE, DOCUMENTATION CHARGES AND OTHER I NCIDENTAL CHARGES THERETO. AS IT IS CLEARLY MENTIONED THAT T HE PURCHASER WOULD BEAR THE COST OF REGISTRATION AND THEREFORE, THE ASSESSEE IS NOT SUPPOSE TO INCUR THE ABOVE SAID EXPENDITURE, IF THE LAND IS - - ITA 1570, 1571/15 ETC. 40 REGISTERED IN FAVOUR OF OTHER PARTIES. FURTHER, TH E EXPENSES INCURRED FOR FACILITATING REGISTRATION AND THESE EX PENSES ARE REIMBURSED BY PRINCIPAL AND SHOWN AS INCOME OF THE ASSESSEE, THEN THERE CANNOT BE ANY FURTHER ADDITION ON THIS C OUNT. OTHERWISE, IT AMOUNTS TO DOUBLE ADDITION. HOWEVER, IF THE ASSESSEE PURCHASES THE LAND IN ITS OWN NAME, THEN T HE EXPENDITURE INCURRED BY THE ASSESSEE SHOULD BE PART OF THE COST OF LAND, WHICH IS THE VALUE OF CLOSING STOCK AND DU E CREDIT TO BE GIVEN TO THE ASSESSEE. WITH THIS OBSERVATION, WE R EMIT THIS ISSUE TO THE FILE OF THE A.O TO EXAMINE, WHETHER THE EXPE NDITURE IS INCURRED BY THE ASSESSEE FOR REGISTRATION AND WHETH ER THE ASSESSEE IS PURCHASED THE LAND IN ITS OWN NAME AND DECIDE THE ISSUE ACCORDINGLY. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 21. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE OF EXPENDITURE OF ` 2,30,000/-, ` 80,74,759/- AND ` 6,13,340/- FOR THE ASSESSMENT YEARS 2006-07, 2007-08 AND 2010-11 RESPECTIVELY, AS CAPITAL IN NATURE. 22. THE AO WHILE MAKING THE DISALLOWANCE ON CAPITAL EXPENDITURE FOR THE ASSESSMENT YEAR 2006-07 OBSERVE D THAT - - ITA 1570, 1571/15 ETC. 41 DURING THE HEARING ON 18.3.2013, A LIST OF PERSONAL AND CAPITAL EXPENSES DEBITED TO ACCOUNTS WAS FURNISHED AND THE ASSESSEE WAS REQUESTED TO OFFER EXPLANATION AS TO WHY THEY S HOULD NOT BE DISALLOWED. NO EXPLANATION HAS BEEN RECEIVED AND T HEREFORE, IT IS PROPOSED TO DISALLOW THE EXPENSES. HOWEVER, VID E REPLY DATED 25.3.2013, BEFORE THE AO, THE ASSESSEE STATED THAT THE LIST OF PERSONAL AND CAPITAL EXPENDITURE HAS ALREADY BEEN F URNISHED TO THE A.O. AND REQUESTED NOT TO DISALLOW THE EXPENSES . AFTER CONSIDERING THE REPLY, AS PER THE LIST GIVEN TO THE AO DURING THE HEAR, CAPITAL EXPENSES TO THE TUNE OF ` 2,55,523/- HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT. OUT OF THE ABO VE, THE A.O. DISALLOWED ` 2,30,000/- AFTER ALLOWING DEPRECIATION TO THE TUNE OF ` 25,523/- FOR THE ASSESSMENT YEAR 2006-07. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(APPEALS) , WHO CONFIRMED THE FINDING OF THE A.O. ON THE REASON THA T THE ASSESSEE HAS NOT FURNISHED ANY COGENT EXPLANATION I N THIS REGARD DURING THE APPELLATE PROCEEDINGS ALSO. 22.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS EXPENDITURE WAS DISALLOWE D ON THE REASON THAT THEY ARE CAPITAL IN NATURE AND THE ASSE SSEE HAS NOT - - ITA 1570, 1571/15 ETC. 42 PRODUCED ANY DETAILS FOR THE SAME. IN OUR OPINION, NEITHER THE AO NOR THE CIT(APPEALS) HAVE GONE THROUGH THE NATUR E OF EXPENDITURE SPECIFICALLY, THEREFORE, IT IS APPROPR IATE TO REMIT THE ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION AND THE ASSESSEE IS DIRECTED TO PLACE NECESSARY BILLS AND VOUCHERS/RECEIPTS TO SHOW THAT THIS EXPENDITURE IS NOT IN THE NATURE OF CAPITAL AND THIS EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS EXPEDIENCY. ACCORDING LY, WE REMIT THIS ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDER ATION. THE POSITION IS SAME IN OTHER ASSESSMENT YEARS ALSO. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 23. THE NEXT GROUND FOR THE ASSESSMENT YEAR 2008-0 9 IN ITA NO.1573/MDS/2015 IS THAT THE COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN NOT ADJUDICATING THE GROUND R ELATING TO THE ADDITION OF INCOME OF ` 107,60,696/-. 24. ADMITTEDLY, THE ASSESSEE HAS RAISED THIS GROUND AS GROUND NO.35 BEFORE THE COMMISSIONER OF INCOME-TAX( APPEALS), WHICH IS AS FOLLOWS : 35. THE LEARNED ASSESSING OFFICER ERRED IN THE AD DITION OF ` 1,07,60,696/- BEING THE AMOUNT OFFERED EARLIER BY T HE ASSESSEE EVEN AFTER IT WAS EXPLAINED THAT THERE WAS A MISTAKE DURING ADMISSION. YOUR APPELLANT INITIALLY OFFERED ` - - ITA 1570, 1571/15 ETC. 43 1,07,60,696/-. ON ACCOUNT OF RECONCILIATION DIFFER ENCES BETWEEN THE PROPERTY HANDED OVER BY YOUR APPELLANT TO ITS CUSTOMER AND THE PURCHASES RECOGNIZED BY THE CUSTOM ER. LEARNED A O FAILED TO RECOGNIZE THAT PURCHASES OF Y OUR APPELLANT CUSTOMER ARE PURELY DRIVEN BY ACCOUNTING POLICIES AND PROCEDURES ADOPTED BY THE CUSTOMER WHICH HAS NO BEARING ON THE INCOME OF YOUR APPELLANT. LEARNED A O FAILED TO RECOGNIZE THAT YOUR APPELLANT RECOGNIZES INCOME WHEN THE TITLE TO THE PROPERTY GETS TRANSFERRED TO THE C USTOMER AND THE CORRESPONDING CONSIDERATIONS ARE RECEIVED. HOWEVER, THIS GROUND WAS NOT ADJUDICATED BY THE COM MISSIONER OF INCOME-TAX(APPEALS). ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE AO TO FIND OUT WHETHER THERE WAS ANY MI STAKE DURING THE ADMISSION MADE BY THE ASSESSEE BEFORE THE AUTHO RITIES AND DECIDE THE ISSUE ACCORDINGLY. 25. THE NEXT GROUND FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.1573/MDS/2015 IS THAT THE COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN ENHANCING THE INCOME TOWARDS DIFFERENCE BETWEEN INCOME ADMITTED AND INCOME RETURNED, WITHOU T CONSIDERING THE FACT THAT THERE IS NO SUCH DIFFEREN CE AND ALSO IGNORING THE SUBMISSIONS MADE IN THIS REGARD, WHICH ARE AS UNDER: I. THE LAND PURCHASE AGENTS HAD CONFIRMED THE TRANSACTIONS AS RECORDED IN THE BOOKS OF ACCOUNTS O F THE APPELLANT, AS EVIDENCED BY THE RECEIPTS. - - ITA 1570, 1571/15 ETC. 44 II. THE ALLEGED DIFFERENCES DUE TO WHICH THE ADDITI ON HAS ENHANCED IS ONLY IN THE TRANSACTION BETWEEN THE LAN D PURCHASE AGENTS AND THE LAND OWNERS AND HAS NO RELEVANCE TO THE TRANSACTION BETWEEN THE APPELLANT AND THE LAND OWNERS. 26. THE FACTS OF THE CASE ARE THAT ON VERIFICATION OF THE REVISED INCOME FILED FOR THE ASSESSMENT YEARS 2007-08 AND 2 008-09, IT WAS FOUND THAT THE ASSESSEE HAS REVISED ITS INCOME OF THE SAID ASST. YEARS TO THE TUNE OF ` 31,06,68,250/- ONLY AS AGAINST THE ADMITTED INCOME OF ` 33,02,92,134/- BEFORE THE INVESTIGATION WING OF THE DEPARTMENT. THUS, THERE IS A SHORTFALL OF ` 1,96,23,884/-. IN THIS REGARD, THE AR WAS ASKED TO EXPLAIN WHY THE ASSESSED INCOME FOR THE SAID ASSESSMENT YEARS S HOULD NOT BE ENHANCED TO THE EXTENT OF ` 1,96,23,884/-. 26.1 BEFORE THE COMMISSIONER OF INCOME-TAX(APPEAL S), THE ASSESSEE REPLIED AS UNDER : 'THE PROPOSAL CONTAINED IN YOUR NOTICE FOR ENHANCEMENT OF ASSESSED INCOME IS NOT TENABLE. THE LEARNED AO, AFTER CONSIDERING ALL THE DETAILS MENTIONED IN THE ASSESSMENT ORDER HAD CONCLUDED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN INCURRED AND HAD THEREFORE INVOKE D THE PROVISIONS OF SECTION 40A(3) OF THE ACT. HENCE, IT IS NOT APPROPRIATE FOR THE APPELLATE AUTHORITY TO PROP OSE - - ITA 1570, 1571/15 ETC. 45 DISALLOWANCE, BY RELYING ON THE DETAILS FURNISHED B Y THE AO IN THE ASSESSMENT ORDER, WITHOUT GIVING ANY REASONS, WHEN THE AO HIMSELF HAS DISREGARDED THE DETAILS MENTIONED IN THE ASSESSMENT ORDER. THI S WOULD AMOUNT TO INTRODUCE IN THE ASSESSMENT NEW SOURCES OF INCOME, WHICH IS NOT A SUBJECT MATTER OF TILE ORIGINAL ASSESSMENT, WHICH WE SUBMIT HUMBLY IS NOT TENABLE. IN THIS REGARD. YOUR KIND ATTENTION IS INVITED TO THE DECISION IN THE CASE OF NARRONDAS MANORDASS VS CIT 31 ITR 90 9 (BOM) AND CIT VS SCINDIA STEAM NAVIGATION LTD. 80 ITR 589,597 (BOM). THE LEARNED AO HAS MADE DISALLOWANCE OF THE ENTIRE PURCHASE COST OF LAND. BY INVOKING THE PROVISIONS O F SECTION 40A(3) OF THE ACT. NOW, YOUR GOODSELF HAS PROPOSED ENHANCEMENT OF INCOME BY DISALLOWING EXPENSES FOR PURCHASE OF LAND. MAKING AN ADDITION T O INCOME BY DISALLOWING A PORTION OF THE PURCHASE COS T. AFTER THE LEARNED AO HAS CONSIDERED THE ENTIRE PURCHASE COST FOR DISALLOWANCE AMOUNTS TO DOUBLE DISALLOWANCE OF THE SAME TRANSACTION TWICE, WHICH IS NOT TENABLE 26.2 THE CIT(APPEALS) HAS NOT ACCEPTED THE CONTENTIONS OF THE LD. AR, AS THE ASSESSEE HAS MADE DISCLOSURE OF ADDITIONAL INCOME OF ` 33,02,92,134/- BEFORE THE INVESTIGATION WING AND HONOURED THE COMMITMENT TO T HE EXTENT OF ` 31,06,68,250/- BY FILING THE REVISED RETURNS OF INCOME FOR THE AYS. 2007-08 AND 2008-09. SINCE. THE ASSESSEE ITSELF REVISED THE RETURNS OF INCOME BY THE AMOUNT OF ` 31,06,68,250/-, ACCORDING TO THE CIT(APPEALS), THE ASSESSEE COULD HAVE REVISED THE INCOME - - ITA 1570, 1571/15 ETC. 46 FOR THE FULL AMOUNT OF ` 33,02,92,134/-. IT IS ALSO TO BE NOTED THAT THE SAID DISCLOSURE OF ADDITIONAL INCOME MADE BY THE APPELLANT WAS DUE TO THE EFFORTS MADE BY THE INVESTIGATION WING WHEREIN THE ASSESSEE WAS FOUND TO HAVE INFLATE D THE PURCHASE COST OF LAND. THE ASSESSEE WAS CONFRONTED WITH THIS FACT AND IT ADMITTED AN ADDITIONAL INCOME OF ` 33,02,92,134/- OVER AND ABOVE THE INCOME RETURNED. THEREFORE, THE CIT(APPEALS) OBSERVED THAT THE SAID SHORTFALL OF ` 1,96,23,884/- HAS TO BE ASSESSED IN THE A.YS, ACCORDINGLY AND HE DIRECTED THE AO TO INCLUDE THE S AID AMOUNT OF ` 1,96,23,884/- FOR THE A,YS, 2007-08 AND 2008- 09 WHILE GIVING EFFECT TO THIS ORDER. AGAINST THI S, THE ASSESSEE IS IN APPEAL BEFORE US. 26.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD. A.R PLEADED BEFORE U S THAT AN OPPORTUNITY BE GIVEN TO RECONCILE THE DIFFERENCES. CONSIDERING THE REQUEST, WE REMIT THIS ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO RECONSIDER TH E ISSUE AFRESH AFTER GIVING AN OPPORTUNITY OF HEARING TO TH E ASSESSEE. - - ITA 1570, 1571/15 ETC. 47 27. THE NEXT GROUND IS WITH REGARD TO LEVY OF INTER EST U/S.234A & 234B OF THE ACT. 27.1 THE INTEREST U/S 234A IS CHARGEABLE FROM THE DATE OF EXPIRY OF THE NOTICE PERIOD GIVEN U/S 153A TO THE DATE OF COMPLETING THE ASSESSMENT U/S 143(3) R.W.S 153A AS HELD BY THE TRIBUNAL IN THE CASE OF CIT VS V.N. DEVADOSS [93 DT R 73 LUCKNOW](TRIB.). THE INTEREST U/S 234B IS TO BE L EVIED ONLY ON THE ADDITIONAL TAX LEVIED ON THE ENHANCED INCOME DE TERMINED U/S 143(3) R.W.S 153A. THEREFORE, THE PERIOD OF CH ARGING OF INTEREST SHOULD BE FROM THE DATE OF DETERMINATION O F INCOME U/S 143(3) OR 143(3) TO THE DETERMINATION OF ENHANCED INCOME U/S 143(3) R.W.S 153A OF THE ACT. 28. IN THE REVENUES APPEALS IN ITA NOS.1998 TO 2004/MDS/15 , THE FIRST GROUND IN ALL THESE APPEALS IS WITH REGARD TO REDUCING THE ADDITION TOWARDS INFLATION IN PURCH ASE COST OF THE LAND FROM 32.58% TO 25%. SINCE, WE HAVE ADJUDICATE D THIS GROUND IN ASSESSEES CASE IN EARLIER PARAGRAPH 15, IT DOES NOT REQUIRE ANY ADJUDICATION. IT IS DISMISSED. 29. THE CIT(APPEALS) ERRED IN NOT EXAMINING WHETHER THE ASSESSEE WAS FORCED TO MAKE CASH PAYMENTS OR WILLFU LLY MADE - - ITA 1570, 1571/15 ETC. 48 THE CASH PAYMENTS AND LATER SOUGHT REFUGE U/S.6DD(G ). THIS GROUND DOES NOT REQUIRE ADJUDICATION AS WE HAVE ADJ UDICATED THE SAME ISSUE IN ASSESSEES APPEAL IN PARA 10 ABOVE. 30. THE NEXT GROUND IS THAT THE CIT(APPEALS) ERRED IN GIVING RELIEF TO THE ASSESSEE BY HOLDING THAT PROVISIONS O F SEC.40A(2)(B) WOULD NOT BE APPLICABLE TO THE TECHNICAL/CONSULTANC Y CHARGES PAID TO THE GROUP CONCERN ON THE GROUND THAT THE AO HAD MADE OUT A CLEAR CASE FOR THE SAME. 31. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CIT(APPEALS) DELETED THIS ADDITION BY OBSERVING THAT THE A.O. HAS NOT MADE OUT A CASE THAT THE PAYM ENTS MADE TO GROUP CONCERNS ARE EXCESSIVE. HENCE, HE OBSERVE D THAT APPLICATION OF SEC.40A(2)(B) OF THE ACT IS NOT CORR ECT WHILE DISPOSING OF THE ASSESSEES APPEAL.. WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) ON THE D ELETION OF THE ADDITION MADE U/S.40A(2)(B OF THE ACT. THIS GROUND OF APPEAL BY THE REVENUE IS REJECTED. 32. IN THE RESULT, THE ASSESSEES APPEALS IN ITA NO S.1570 & 1571/MDS/2015 ARE ALLOWED AND OTHER APPEALS IN ITA NOS. 1572, - - ITA 1570, 1571/15 ETC. 49 1573, 1574, 1575 & 1576/MDS/2015 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE REVENUES APPEALS IN ITA NOS. 1998 TO 2004/ MDS/2015 ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 19 TH OF FEBRUARY, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED: 19 TH FEBRUARY, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.