DCIT, Dehradun V. M/s. V.K.J. Builders & Contractors (P) Ltd., Dehradun

ITA 2083/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3743 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: ADITYA KUMAR; SSH ASHWANI KUMAR
• Keywords: Loose papers
• Section: 40A(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 1581/DEL/2014 ASSESSMENT YEAR: 2011-12 VKJ BUILDERS & CONTRACTORS(P) LTD., VS DY. COMMISSIO NER OF INCOME-TAX 32/9, EAST CANAL ROAD, DEHRADUN. CENTRAL CIRCLE, D EHRADUN. (PAN: AAACV7984M) I.T.A. NO.2083/DEL/2014 ASSESSMENT YEAR 2011-12 DY. COMMISSIONER OF INCOME-TAX VS VKJ BUILDERS & CON TRACTORS(P) LTD. CENTRAL CIRCLE, DEHRADUN. 32/9, EAST CANAL ROAD,D EHRADUN. (APPELLANT) (RESPONDENT) ASSESSEE BY: S/SH. ASHWANI KUMAR & ADITYA KU MAR FCA DEPARTMENT BY: SHRI VIJAY VERMA, CIT DR ORDER PER K. NARSIMHA CHARY, JM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WEL L REVENUE CHALLENGING THE ORDER DATED 24.1.2014 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-1 (FOR SHORT HEREINAFTER REFERRED TO AS THE CIT(A)) IN APPEAL NO.275/2013-14. FOR THE SAKE OF CONVENIENCE, WE PASS A COMMON ORDER. 2 2. ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATE D ON 15.3.89 AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. PUR SUANT TO THE SEARCH U/S 132 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) CONDUCTED AT THE PREMISES OF THE ASSSESSEE ON 30.3.2011, THE CHAIRMA N OF THE COMPANY MR. VINOD KUMAR JAIN DECLARED A SUM OF RS.3 CRORES. SUBSEQUE NTLY, THE ASSESSEE FILED A RETURN OF INCOME ON 7.9.2012 DECLARING AN INCOME OF RS.3,68,69,930/-. DURING THE SCRUTINY, LEARNED AO ON THE STRENGTH OF THE DOCUMENT S IDENTIFIED AS ANNEXURE 3 & 11 OBSERVED THAT OUT OF SO MANY ENTRIES CONTAINED I N THIS DOCUMENT, CERTAIN ENTRIES WERE NOT CARRIED TO THE REGULAR BOOKS OF AC COUNTS AND THE DEBIT TOTAL OF SUCH ENTRIES CAME TO RS.2,59,10,692/-. WHEN CALLED UPON TO EXPLAIN THIS DISCREPANCY, THE ASSESSEE ADMITTED THAT FEW ENTRIES IN RESPECT OF THE IMPREST ACCOUNT OF SHRI VINOD KUMAR JAIN COULD NOT BE ENTER ED IN THE REGULAR BOOKS OF ACCOUNTS AND THE ASSESSEE COMPANY SURRENDERED RS.1,6 5,60,000/-. HOWEVER, THE LEARNED AO PROCEEDED TO ADD SUM OF RS.2,59,10,692/- TO THE INCOME OF THE ASSESSEE. FURTHER BASING ON THE ENTRIES IN ANNEXU RE A3, LEARNED AO FOUND THAT AN AMOUNT OF RS.3,35,000/- IN THE IMPREST ACCOUNT O F THE ASSESSEE AND A SUM OF RS.3 LACS IN THE IMPREST ACCOUNT OF SHRI ASHISH JAI N WERE NOT EXPLAINED, AS SUCH AN AMOUNT OF RS.6,35,000/- WAS LIABLE TO BE ADDED. FU RTHER, ACCORDING TO THE AO, DURING THE COURSE OF SEARCH, ASSESSEE COMPANY SURREN DERED AN AMOUNT OF RS.42,90,000/- AS UNEXPLAINED INCOME BUT ONLY A SUM OF RS.11,70,200/- WAS DECLARED IN THE RETURN FILED U/S 153A OF THE ACT, A S SUCH THE BALANCE AMOUNT OF RS.31,19,800/- WAS ALSO ADDED. BASING ON A BUNCH O F LOOSE PAPERS IDENTIFIED AS ANNEXURE L-5, THE LEARNED AO MADE AN ADDITION OF RS .2,50,000/- AND LASTLY, STATING THAT DURING THE COURSE OF SEARCH, THE ASSESSEE DISC LOSED AN AMOUNT OF RS.31,70,200/- ON LABOUR AND OTHER PETTY SUB CONTRAC TOR EXPENSES AS UNEXPLAINED 3 ON ESTIMATE BASIS, LEARNED AO ADDED SUCH SUM ALSO. LEARNED AO CONCLUDED THE ASSESSMENT AT RS.4,99,75,420/-. 3. AGGRIEVED BY THE SAME, THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE LEARNED CIT(A), ASSESSEE CO NTENDED THAT FOR REACHING THE FIGURE OF RS.2,59,10,692/- TO BE ADDED ON ACCOUNT O F THE ENTRIES IN ANNEXURES 3 AND 11, THE LEARNED AO CONSIDERED THE ONLY DEBIT ENT RIES AND IGNORED THE CREDIT ENTRIES. AS SUCH, THERE WAS NO FAIR PLAY ON THE PART OF THE LEARNED AO. THE LEARNED CIT(A) VIDE PARA 3.3 OF HIS ORDER CONSIDERED THIS A SPECT AND AGREED THAT FOR A JUST AND FAIR VIEW IN THE MATTER, BOTH DEBIT AND CREDIT ENTRIES NEED TO BE CONSIDERED. ON THIS ASPECT, NEITHER THE ASSESSEE NOR THE REVENU E IS IN APPEAL BEFORE US. HOWEVER, HAVING OBSERVED SO, LEARNED CIT(A) PROCEED ED FURTHER AND HELD THAT ALL THE DEBIT ENTRIES AMOUNTING TO RS.2,59,10,692/- AR E TREATED AS HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT. AS SUCH TH E ADDITION WAS CONFIRMED, ALBEIT, FOR A DIFFERENT REASON. THE ASSESSEE IS C HALLENGING THIS OBSERVATION OF LEARNED CIT(A) IN ITS APPEAL. FURTHER, THE LEARNED CIT(A) DIRECTED THE LEARNED AO TO GO TO SET OFF THE SURRENDERED AMOUNT OF RS.1,65, 60,000/- AT THE TIME OF GIVING EFFECT TO SUCH ORDER. THIS OBSERVATION IS CHALLENG ED BY THE REVENUE IN THEIR APPEAL. 4. IN RESPECT OF THE ADDITION OF RS.6,35,000/- MADE ON ACCOUNT OF UNTALLIED ENTRIES OF RS.3 LACS IN THE IMPREST ACCOUNT OF MR. ASHISH JAIN AND RS.3,35,000/- IN THE IMPREST ACCOUNT OF MR. ATEN JAIN, IT WAS CONTEN DED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE MAINTAINED A MANUA L LEDGER TO RECORD DAILY TRANSACTIONS FOR THE DIRECTOR/EMPLOYEES, WHICH ARE L ATER ON RECORDED IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED ON COMPUTER BY USING TALLY SYSTEM BUT THE ENTRIES TO THE TUNE OF RS.6,35,000/- REMAINED UN-RE CONCILED BUT SINCE THE 4 ASSESSEE HAS ALREADY SURRENDERED A SUM OF RS.1,65,60 ,000/- THIS AMOUNT OF RS.6,35,000/- WILL ALSO BE TAKEN CARE BY SUCH SURREN DERED AMOUNT. FURTHER, LEARNED CIT(A) OBSERVED THAT INASMUCH AS THE ENTIRE EXPENDITURE OF RS.2,59,10,692/- WAS CONFIRMED, BEING HIT BY THE PRO VISIONS OF SECTION 40A(3) AND IN THAT RESPECT THE ENTIRE SURRENDERED AMOUNT OF RS .1,65,60,000/- WAS GIVEN THE BENEFIT OF SET OFF, NOTHING REMAINED OUT OF SUCH SU RRENDERED AMOUNT TO TAKE CARE OF THIS ADDITION OF RS.6,35,000/-. HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE AND SUSTAINED THE ADDITION. THIS FINDING OF THE LEARNED CIT(A) IS CHALLENGED BY THE ASSESSEE IN THIS APPEAL ON THE GRO UND THAT INASMUCH AS SECTION 40A(3) HAS NO APPLICATION TO THE FACTS OF THE ASSES SES CASE, THE PEAK OF SUCH REGISTERS AS WORKED OUT BY THE ASSESSEE AT RS.1,44,8 4,835/- HAS TO BE SET OFF AGAINST THE SURRENDERED AMOUNT OF RS.1,65,60,000/- LEAVING A SUFFICIENT BALANCE TO TAKE CARE OF THIS ADDITION OF RS.6,35,000/-. 5. NOW COMING TO THE ADDITION OFRS.31,98,000/- ON A CCOUNT OF DIFFERENCE IN THE SURRENDERED AND DECLARED AMOUNT AND RS.31,70,20 0/- ON ACCOUNT OF THE UNEXPLAINED LABOUR AND PETTY CONTRACTOR CHARGES, AS SESSEE CONTENDED BEFORE THE LEARNED CIT(A) THAT IN THE ABSENCE OF ANY INCRIMINAT ING MATERIAL SUBSTANTIATING THE ADDITIONS, MERE SURRENDER DOES NOT TAKE THE REVENUE TO ANYWHERE AND IT IS FOR THE REVENUE TO WORK OUT THE UNEXPLAINED INCOME BEFORE M AKING SUCH ADDITION. 6. HAVING PERUSED THE RECORD, LEARNED CIT(A) FOUND THAT WHEN THE ASSESSEE RESILES FROM THE SURRENDER AND DECLARED A LESSER AM OUNT, IT IS FOR THE LEARNED AO TO PROVE THROUGH THE SEIZED MATERIAL IN THIS CASE THAT THE SAID AMOUNT ACTUALLY REPRESENTED THE UNEXPLAINED INCOME. HOLDING SO, L EARNED CIT(A) DELETED THESE TWO AMOUNTS WHICH THE REVENUE IS CHALLENGING IN THE IR APPEAL. 5 7. HEARD THE COUNSELS ON THE EITHER SIDE AND PERUSE D THE MATERIAL ON RECORD. IN SO FAR AS THE FINDING OF THE LEARNED CIT(A) THAT FAIRNESS DEMANDS THAT THE LEARNED AO HAS TO CONSIDER BOTH THE DEBIT AND CREDI T ENTRIES IN ANNEXURE 3 & 11 TO REACH THE FIGURE FOR TAX LIABILITY OF THE ASSESSE E IS CONCERNED, IT GOES UNCHALLENGED. HOWEVER, THE SUBSEQUENT OBSERVATION OF THE LEARNED CIT(A) THAT THE AMOUNT OF RS.2,59,10,692/-, WHICH IS THE SUM TO TAL OF THE DEBIT ENTRIES THAT ARE NOT CARRIED TO THE REGULAR BOOKS OF ACCOUNTS IS HIT BY THE PROVISIONS U/S 40A(3) AND HIS FURTHER OBSERVATION THAT IN THAT RESPECT TH E ASSESSEE IS ENTITLED TO THE BENEFIT OF SET OFF OF THE SURRENDERED AMOUNT OF RS. 1,65,60,000/- ARE CHALLENGED IN THE APPEALS OF ASSESSEE AND REVENUE RESPECTIVELY. NOW, WE SHALL PROCEED TO DEAL WITH THESE TWO ASPECTS TOGETHER. IT IS THE CON TENTION OF THE LEARNED AR THAT IN ORDER TO COMPLY WITH THE PROVISIONS OF SECTION 4 0A(3) AND TO MAKE ANY DISALLOWANCE THERE-UNDER, THREE CONDITIONS ARE NECE SSARY. THOSE ARE (I) THE EXPENDITURE HAS TO BE INCURRED IN CASH; (II) SUCH A N EXPENDITURE WAS IN EXCESS OF THE PRESCRIBED LIMIT; AND (III) THE ASSESSEE SHOUL D HAVE CLAIMED THE EXPENDITURE AS ALLOWABLE EXPENDITURE. IT IS FURTHER SUBMITTED BY HIM THAT NONE OF THE ENTRIES IN THE SEIZED REGISTER OF ANNEXURE 3 & 11 ARE CLAIM ED BY THE ASSESSEE AS AN EXPENDITURE, THE INVOCATION OF THE PROVISIONS OF SE CTION 40A(3) OF THE ACT DOES NOT ARISE. ASSESSEE WORKED OUT THE PEAK AS PER THE REGISTER AS ON 31.12.2010 AT RS.1,44,84,435/- . ACCORDING TO THE ASSESSEE, AS P ER THE DIRECTIONS OF THE LEARNED CIT(A) BOTH THE CREDIT AND DEBIT ENTRIES ARE TO BE CONSIDERED, AS SUCH OUT OF THE SURRENDERED AMOUNT OF RS.1,65,60,000/- ONLY THIS PEA K OF RS.1,44,84,435/- HAS TO BE ADJUSTED LEAVING SUFFICIENT BALANCE FOR THE ADJU STMENT OF RS.6,35,000/- ON ACCOUNT OF THE UNTALLIED ENTRIES OF RS.3 LACS AND R S.3,35,000/- IN THE IMPREST ACCOUNT OF MR. ASHISH AND ATEN JAIN. WE DO NOT FIND ANY REASON NOT TO AGREE WITH 6 THE STATEMENT OF THE LEARNED AR ON THIS ASPECT OF LAW AND ADJUSTABILITY OF THE PEAK AMOUNT AND THE OTHER AMOUNT OF RS.6,35,000/- F ROM OUT OF THE SURRENDERED AMOUNT OF RS.1,65,60,000/- SUBJECT TO THE VERIFICAT ION OF SUCH AMOUNT AT THE END OF THE AO. WHETHER OR NOT THE ASSESSEE CLAIMED AN Y OF THE DEBIT ENTRIES AS ALLOWABLE EXPENDITURE HAS TO BE VERIFIED BY THE AO T O SEE WHETHER OR NOT THE PROVISIONS U/S 40A(3) ARE APPLICABLE SO ALSO THE AO HAS TO VERIFY FROM THE ENTRIES OF THE LEDGER A3 & A11 TO CALCULATE THE PEAK AMOUNT . WE, THEREFORE, DEEM IT JUST AND PROPER TO DIRECT THE LEARNED AO TO VERIFY WHETHE R ANY EXPENDITURE RELATABLE TO THE UN-CARRIED ENTRIES IN ANNEXURE 3 & 11 AND IF THERE IS ANY SUCH EXPENDITURE CLAIMED TO CALCULATE THE NET AMOUNT OF THE CREDIT A ND DEBIT ENTRIES SO AS TO ADJUST THE SAME FROM OUT OF THE SURRENDERED AMOUNT. WHILE MAKING SUCH ADJUSTMENTS, THE AO WILL CONSIDER THE POSSIBILITY OF ADJUSTING TH E AMOUNT OF RS.6,35,000/-. WE, THEREFORE, ALLOW THE GROUNDS OF APPEAL OF THE ASSES SEE FOR STATISTICAL PURPOSES. 8. NOW COMING TO THE APPEAL OF THE REVENUE, FIRSTLY, THE REVENUE IS CHALLENGING THE OBSERVATIONS OF THE LEARNED CIT(A) TO GIVE SET OFF OF THE SURRENDERED AMOUNT OF RS.1,65,60,000/-. WHEN ONCE THE ASSESSEE SURREND ERED RS.1,65,60,000/- AS UNEXPLAINED AMOUNT, IF IT IS NOT ADJUSTED TOWARDS T HE ULTIMATELY TAXABLE AMOUNT ARISING OUT OF THE ENTRIES IN ANNEXURE 3 & 11, CERT AINLY IT WOULD AMOUNT TO DOUBLE TAXATION AND THE SURRENDERED AMOUNT WOULD GO UNACCO UNTED FOR. WE, THEREFORE, FIND THAT THE OBSERVATIONS OF THE LEARNED CIT(A) TH AT THE SURRENDERED AMOUNT MUST BE ADJUSTED TOWARDS ANY AMOUNT I.E. DRAWN FROM THE ENTRIES IN ANNEXURE 3 & 11. HOWEVER, IN THE PRECEDING PARAGRAPHS, WE DIR ECT THE LEARNED AO TO VERIFY WHETHER ANY EXPENDITURE WAS CLAIMED IN RESPECT OF TH E DEBIT ENTRIES OF ANNEXURE 3 & 11 AND THEN TO DECIDE THE APPLICABILITY OF SECT ION 40A(3). THE OBSERVATIONS OF THE LEARNED CIT(A) WOULD BE SUBJECT TO SUCH FINDING OF THE LEARNED AO AFTER 7 VERIFICATION. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE CONTENTION OF THE REVENUE THAT NO SET OFF SHOULD BE ALLOWED IN RESPEC T OF THE SURRENDERED AMOUNT FROM OUT OF THE AMOUNT ULTIMATELY FOUND TO BE TAXABL E. WE REJECT THIS GROUND. 9. NOW COMING TO THE ADDITION OF RS.31,19,800/-, WE DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN THE OBSERVATIONS OF THE LEARNED CIT(A) THAT WHEN THE ASSESSEE RESILES THE SURRENDER, IT IS INCUMBENT UPON THE REV ENUE TO WORK OUT THE TAXABLE AMOUNT TO MAKE ANY ADDITION WITH REFERENCE TO THE MA TERIAL THAT WAS FOUND ON RECORD. IN THIS MATTER, IT IS NOT THE CONTENTION O F THE REVENUE THAT BESIDES ALLEGED BALD STATEMENT OF THE ASSESSEE AT THE TIME OF SURRE NDER, ANY MATERIAL HAS TO BE FOUND ON RECORD. WE, THEREFORE, DO NOT FIND ANY REA SON TO TAKE A DIFFERENT VIEW AND ACCORDINGLY, UPHOLD THE OBSERVATIONS OF THE LEAR NED CIT(A). 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2018. (G.D. AGRAWAL) (K. NARSIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: JANUARY, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER 8 ASSTT. REGISTRAR